Public Law 118 – 207 – Financial Management Risk Reduction Act
Enactment Date: January 31, 2025
Purpose:
The Financial Management Risk Reduction Act (FMRRA) aims to strengthen financial management practices within the federal government to mitigate risks and improve accountability.
Key Provisions:
1. Establishment of a Financial Management Risk Council:
The act establishes a Financial Management Risk Council (FMRC) within the Office of Management and Budget (OMB). The FMRC is responsible for:
- Identifying and assessing financial management risks across the federal government
- Developing and recommending policies and practices to mitigate these risks
- Providing guidance and support to agencies on financial management risk management
2. Agency Financial Management Risk Assessments:
Agencies are required to conduct financial management risk assessments (FMRAs) at least once every three years. FMRAs must identify and evaluate risks to financial reporting, internal controls, and compliance with financial laws and regulations.
3. Development of Financial Management Improvement Plans:
Based on the results of their FMRAs, agencies must develop and implement financial management improvement plans (FMIPs). FMIPs outline specific actions to address identified risks and enhance financial management practices.
4. Risk Management Reporting:
The OMB is required to submit an annual report to Congress on financial management risks and the government’s progress in mitigating these risks. The report must include:
- A summary of significant financial management risks identified by the FMRC
- The status of agencies’ FMIPs
- Recommendations for further improvements in financial management
5. Enhanced Accountability:
The act assigns clear accountability for financial management risks. Agency heads are responsible for ensuring that FMRAs and FMIPs are conducted and implemented effectively. OMB has oversight responsibilities and can take corrective actions if agencies fail to meet their obligations.
6. Training and Guidance:
The FMRRA requires the OMB to provide training and guidance to agencies on financial management risk management. This includes developing best practices, tools, and resources to support agencies in their efforts to mitigate risks.
Impact:
The Financial Management Risk Reduction Act is expected to have a significant impact on financial management practices within the federal government. By establishing a structured approach to identifying, assessing, and mitigating financial risks, the act aims to improve the accuracy and reliability of financial reporting, strengthen internal controls, and enhance the overall effectiveness of financial management. The act also promotes transparency and accountability by requiring regular reporting on financial management risks and progress in improving financial practices.
Public Law 118 – 207 – Financial Management Risk Reduction Act
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