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The Chief Financial Officers (CFO) Act, enacted in 1990, establishes a framework for improving federal financial management, which includes a specific annual requirement for the preparation and submission of audited financial statements. According to the Act, federal agencies are required to prepare financial statements that adhere to generally accepted accounting principles (GAAP) and to submit these statements for an independent audit.

The annual preparation and submission of audited financial statements ensure accountability and transparency in government financial operations, allowing for scrutiny of an agency's financial activities by external auditors. This process is critical to providing stakeholders, including Congress and the public, with a reliable view of how taxpayer dollars are being utilized and the financial position of the agency.

While reviewing budget forecasts, approving new financial policies, and assessing agency performances are all relevant aspects of financial management, they do not constitute the specific annual requirement mandated by the CFO Act. This makes the preparation and submission of audited financial statements the most direct and essential duty outlined in the legislation, reinforcing its role in promoting better financial practices within federal agencies.