Financial Audit
Restatements to the Department of Agriculture's Fiscal Year 2003 Consolidated Financial Statements Gao ID: GAO-06-254R January 25, 2006The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget (OMB), is required to annually prepare and submit audited financial statements of the U.S. government to the President and Congress. We are required to audit these consolidated financial statements (CFS) and report on the results of our work. An issue meriting concern and close scrutiny that emerged during our fiscal year 2004 CFS audit was the growing number of Chief Financial Officers (CFO) Act agencies that restated certain of their financial statements for fiscal year 2003 to correct errors. Errors in financial statements can result from mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time the financial statements were prepared. Frequent restatements to correct errors can undermine public trust and confidence in both the entity and all responsible parties. Further, when restatements do occur, it is important that financial statements clearly communicate, and readers of the restated financial statements understand, that the financial statements originally issued by management in the previous year and the opinion thereon should no longer be relied on and instead the restated financial statements and related auditor's opinion should be used. Because of the varying nature and circumstances surrounding the restatements, we are issuing a number of separate reports on the matter. This report communicates our observations regarding the Department of Agriculture's (USDA) fiscal year 2003 restatements. Going forward, we hope that the lessons learned from the fiscal year 2003 restatements, together with our recommendations, will help (1) USDA avoid the need for restatements to its future financial statements and ensure the adequacy of the disclosure and presentation of audit results and any restatements and (2) ensure that USDA's Office of Inspector General (OIG) and other auditors apply appropriate audit procedures in future audits so that similar errors, which caused the original fiscal year 2003 financial statements to be misstated, as noted in this report, are identified before the financial statements are issued. We reviewed four key areas with respect to the restatements of USDA's fiscal year 2003 financial statements: (1) the nature and cause of the errors that necessitated the restatements, including planned corrective actions by the agency and its auditors; (2) the timing of communicating the material misstatement to users of the financial statements; (3) the extent of transparency exhibited in disclosing the nature and impact of the material misstatement in the financial statements and the reissued auditor's report; and (4) audit issues that contributed to the failure to detect the errors that necessitated the restatements during the audit of the agency's fiscal year 2003 financial statements.
Material errors identified at three of USDA's component agencies led to the restatement of four of the five statements in USDA's originally issued fiscal year 2003 consolidated financial statements. The material errors resulted from the lack of or ineffective implementation of several key internal control procedures related to (1) recording appropriations, (2) the proper reporting of material items on the Statement of Financing, and (3) processing nonroutine journal vouchers. We believe that more effective audit procedures applied by USDA's auditors could have detected the material errors noted in this report. In addition, certain aspects of the footnote disclosure and financial statement presentation relating to the restatements could be misinterpreted. Specifically, the footnote disclosure related to the restatements was titled Prior Period Adjustments, which could be misinterpreted since most of the corrections discussed in the note were not prior period adjustments. USDA's presentation of its fiscal year 2004 Consolidated Statement of Changes in Net Position may also be misinterpreted because the fiscal year 2004 beginning balances did not agree with the restated fiscal year 2003 ending balances. Further, USDA asserted in its fiscal year 2004 Management Discussion and Analysis (MD&A) that the agency has sustained unqualified or "clean" opinions on its financial statements since fiscal year 2002 but did not specifically acknowledge in its MD&A that it restated both originally issued fiscal years 2003 and 2002 financial statements for material errors. In addition, USDA did not completely disclose in the MD&A the nature and extent of the restatements to its originally issued fiscal year 2003 financial statements. We believe that not including this information in the MD&A could be misleading. Although the OIG told us that it believed disclosure of such information in its audit report was not necessary, in our view, such disclosure could have reduced the potential for a reader to be misled.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-06-254R, Financial Audit: Restatements to the Department of Agriculture's Fiscal Year 2003 Consolidated Financial Statements
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January 26, 2006:
Mr. Charles R. Christopherson, Jr.
Chief Financial Officer:
Department of Agriculture:
The Honorable Phyllis K. Fong:
Inspector General:
Department of Agriculture:
Subject: Financial Audit: Restatements to the Department of
Agriculture's Fiscal Year 2003 Consolidated Financial Statements:
As you know, the Secretary of the Treasury, in coordination with the
Director of the Office of Management and Budget (OMB), is required to
annually prepare and submit audited financial statements of the U.S.
government to the President and Congress. We are required to audit
these consolidated financial statements (CFS) and report on the results
of our work.[Footnote 1] An issue meriting concern and close scrutiny
that emerged during our fiscal year 2004 CFS audit was the growing
number of Chief Financial Officers (CFO) Act agencies that
restated[Footnote 2] certain of their financial statements for fiscal
year 2003 to correct errors.[Footnote 3] Errors in financial statements
can result from mathematical mistakes, mistakes in the application of
accounting principles, or oversight or misuse of facts that existed at
the time the financial statements were prepared. Frequent restatements
to correct errors can undermine public trust and confidence in both the
entity and all responsible parties. Further, when restatements do
occur, it is important that financial statements clearly communicate,
and readers of the restated financial statements understand, that the
financial statements originally issued by management in the previous
year and the opinion thereon should no longer be relied on and instead
the restated financial statements and related auditor's opinion should
be used.
Eleven of the 23 CFO Act agencies[Footnote 4] restated certain of their
financial statements for fiscal year 2003. Five CFO Act agencies had
restatements in fiscal year 2003 covering their fiscal year 2002
financial statements. Three CFO Act agencies had restatements covering
both years. We noted that the extent of the restatements to CFO Act
agencies' fiscal year 2003 financial statements varied from agency to
agency, ranging from correcting two line items on one agency's balance
sheet to correcting numerous line items on several of another agency's
financial statements. In some cases, the net operating results of an
agency were affected by the restatement. The amounts of the agencies'
restatements ranged from several million dollars to more than $91
billion.
Nine of the 11 agencies that had restatements for fiscal year 2003
received unqualified opinions on their originally issued fiscal year
2003 financial statements. The auditors for 6 of these 9 agencies
issued unqualified opinions on the restated financial statements,
replacing the previous unqualified opinions on the respective agencies'
original fiscal year 2003 financial statements. The auditors for 2 of
these 9 withdrew their unqualified opinions on the fiscal year 2003
financial statements and issued other than unqualified opinions on the
respective agencies' restated fiscal year 2003 financial statements
because they could not determine whether there were any additional
misstatements and the effect of any such misstatements on the restated
fiscal year 2003 financial statements. For the remaining agency, the
principal auditor of the agency's fiscal year 2004 financial statements
was not the principal auditor of the agency's fiscal year 2003
financial statements, and an audit opinion on the agency's restated
fiscal year 2003 financial statements was not issued.
Our review focused on the nine agencies with restatements for fiscal
year 2003 that received unqualified opinions on their originally issued
fiscal year 2003 financial statements.[Footnote 5] These were the
Department of Agriculture (USDA), Department of State, Department of
Justice, Department of Transportation, Department of Health and Human
Services, General Services Administration, National Science Foundation,
Nuclear Regulatory Commission, and Office of Personnel Management.
Because of the varying nature and circumstances surrounding the
restatements, we are issuing a number of separate reports on the
matter. This report communicates our observations regarding USDA's
fiscal year 2003 restatements. Going forward, we hope that the lessons
learned from the fiscal year 2003 restatements, together with our
recommendations, will help (1) USDA avoid the need for restatements to
its future financial statements and ensure the adequacy of the
disclosure and presentation of audit results and any restatements and
(2) ensure that USDA's Office of Inspector General (OIG) and other
auditors apply appropriate audit procedures in future audits so that
similar errors, which caused the original fiscal year 2003 financial
statements to be misstated, as noted in this report, are identified
before the financial statements are issued.
We reviewed four key areas with respect to the restatements of USDA's
fiscal year 2003 financial statements: (1) the nature and cause of the
errors that necessitated the restatements, including planned corrective
actions by the agency and its auditors; (2) the timing of communicating
the material misstatement to users of the financial statements; (3) the
extent of transparency[Footnote 6] exhibited in disclosing the nature
and impact of the material misstatement in the financial statements and
the reissued auditor's report; and (4) audit issues that contributed to
the failure to detect the errors that necessitated the restatements
during the audit of the agency's fiscal year 2003 financial statements.
Results in Brief:
Material errors identified at three of USDA's component agencies led to
the restatement of four of the five statements in USDA's originally
issued fiscal year 2003 consolidated financial statements.[Footnote 7]
The material errors resulted from the lack of or ineffective
implementation of several key internal control procedures related to
(1) recording appropriations, (2) the proper reporting of material
items on the Statement of Financing, and (3) processing nonroutine
journal vouchers. We believe that more effective audit procedures
applied by USDA's auditors could have detected the material errors
noted in this report.
In addition, certain aspects of the footnote disclosure and financial
statement presentation relating to the restatements could be
misinterpreted. Specifically, the footnote disclosure related to the
restatements was titled Prior Period Adjustments, which could be
misinterpreted since most of the corrections discussed in the note were
not prior period adjustments.[Footnote 8] USDA's presentation of its
fiscal year 2004 Consolidated Statement of Changes in Net Position may
also be misinterpreted because the fiscal year 2004 beginning balances
did not agree with the restated fiscal year 2003 ending balances.
Further, USDA asserted in its fiscal year 2004 Management Discussion
and Analysis (MD&A) that the agency has sustained:
unqualified or "clean" opinions on its financial statements since
fiscal year 2002 but did not specifically acknowledge in its MD&A that
it restated both originally issued fiscal years 2003 and 2002 financial
statements for material errors. In addition, USDA did not completely
disclose in the MD&A the nature and extent of the restatements to its
originally issued fiscal year 2003 financial statements. We believe
that not including this information in the MD&A could be misleading.
Although the OIG told us that it believed disclosure of such
information in its audit report was not necessary, in our view, such
disclosure could have reduced the potential for a reader to be misled.
We are making three recommendations on this matter, including two
recommendations to USDA's CFO. We recommend that USDA's CFO ensure (1)
that procedures to prevent any similar errors from occurring and going
undetected in future years are effectively implemented and (2) for
future years, the adequacy of the disclosure and presentation of audit
results and any restatements. We are also making a recommendation to
USDA's Inspector General to ensure, in conjunction with the contracted
independent public accountant (IPA) if one is used, that audit
procedures are effectively implemented to test for any (1) improperly
recorded appropriations transactions in the general ledger, (2)
improperly reported material items on the Statement of Financing, and
(3) incorrect nonroutine journal vouchers.
In commenting on a draft of this report, USDA's CFO expressed
confidence that his office's current plans and efforts would ensure
that its consolidated financial statements are accurate and timely and
contain adequate disclosure. In a separate letter, the Inspector
General concurred with our recommendations.
Background:
In conducting the fiscal year 2004 audit of the CFS, we reviewed the 23
CFO Act agencies' performance and accountability reports for possible
restatements and identified 11 agencies that had restated certain of
their audited fiscal year 2003 financial statements.
The primary intended users of federal agencies' financial reports are
citizens, Congress, federal executives, and federal program
managers.[Footnote 9] Each of these groups may use federal agencies'
financial statements to satisfy their specific needs. Citizens are
interested in many aspects of the federal government, particularly
federal programs that affect their financial well-being. Congress is
interested in monitoring and assessing the efficiency and effectiveness
of federal programs. Federal executives, such as central agency
officials at OMB and the Department of the Treasury (Treasury), are
interested in federal financial statements to assist the President of
the United States. OMB assists the President in overseeing the
preparation of the federal budget by formulating the President's
spending plans, evaluating the effectiveness of agency programs,
assessing competing funding demands among agencies, and setting funding
priorities. Treasury assists the President in managing the finances of
the federal government and prepares the CFS, which are based on audited
financial statements prepared by federal agencies. We audit the CFS and
report on the results of our audit. Finally, federal program managers
use agency financial statements as tools for managing their operations
within the limits of the spending authority granted by Congress.
The primary accounting and auditing standards that apply to restatement
disclosures by federal entities are Federal Accounting Standards
Advisory Board's Statement of Federal Financial Accounting Standards
(SFFAS) No. 21, and the American Institute of Certified Public
Accountants' (AICPA) Codification of Auditing Standards, AU section
561, Subsequent Discovery of Facts Existing at the Date of the
Auditor's Report.[Footnote 10]
Objective, Scope, and Methodology:
The objective of our review of restatements of USDA's fiscal year 2003
consolidated financial statements was to determine the nature and cause
of the errors, the transparency and timing of communicating the
material misstatements, any audit issues relating to such
misstatements, and any actions being taken to help preclude similar
errors from occurring in the future.
We reviewed the nature and causes of the restatements, and we also
examined corrective actions taken by USDA to help preclude similar
errors from occurring in the future. We interviewed the preparers and
auditors of USDA's fiscal year 2003 consolidated and certain component
agencies' financial statements, including staff from the agency's OIG,
and we obtained and reviewed relevant audit documentation. Because
USDA's OIG contracted with various IPAs for the audits of certain USDA
component agencies' financial statements, such as the Forest Service
and Risk Management Agency's Federal Crop Insurance Corporation, we
also had to expand our contacts to include such IPAs. Our work was not
designed to and we did not test the accuracy or appropriateness of the
restatements.
In our review, we considered certain accounting and auditing standards,
including SFFAS No. 21; OMB Bulletin 01-09, Form and Content of Agency
Financial Statements;[Footnote 11] the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 16, Prior
Period Adjustments; and the AICPA Codification of Auditing Standards,
AU section 329, Analytical Procedures, AU section 420, Consistency of
Application of Generally Accepted Accounting Principles, AU section
508, Reports on Audited Financial Statements, and AU section 561.
We performed our review of the restatements of USDA's fiscal year 2003
consolidated financial statements from December 2004 to October 2005 in
accordance with U.S. generally accepted government auditing standards.
We requested comments on a draft of this report from USDA's CFO and
Inspector General or their designees. Written comments from USDA's CFO
and Inspector General are reprinted in enclosures I and II,
respectively, and are discussed in the Agency Comments section.
Issues Related to Restatements of USDA's Fiscal Year 2003 Consolidated
Financial Statements:
USDA restated four of the five statements in its originally issued
fiscal year 2003 consolidated financial statements to reflect material
errors detected at three of its component agencies. These errors
affected USDA's originally issued fiscal year 2003 Consolidated
Statement of Changes in Net Position, Consolidated Balance Sheet,
Combined Statement of Budgetary Resources, and Consolidated Statement
of Financing.
During our review of the restatements, we identified the following
areas that need improvement:
* internal control procedures over recording appropriations,
* internal control procedures related to the proper reporting of
material items on the Statement of Financing,
* internal control procedures over processing nonroutine journal
vouchers,
* audit procedures for detecting errors similar to those discussed
throughout this report, and:
* disclosure and presentation of the restatements.
These issues are discussed in detail below.
Material Error in Recording Certain Appropriations General Ledger
Accounts:
USDA restated its originally issued fiscal year 2003 Consolidated
Statement of Changes in Net Position and its Consolidated Balance Sheet
for an incorrect recording of Appropriations Used in fiscal year 2003
by its Food and Nutrition Service (FNS). In our view, the approximately
$4.7 billion error was not detected by FNS due to a lack of key
internal control procedures over recording appropriations.
USDA and USDA's OIG officials provided us the following perspectives on
the events that led to the needed restatements. FNS incorrectly
recorded a transfer of intragovernmental funds as Unexpended
Appropriations - Transfers - In during fiscal year 2003, expended those
moneys during the fiscal year, and incorrectly recorded the
expenditures as Unexpended Appropriations - Used in its general ledger.
FNS recorded the transfer of intragovernmental funds in such a manner
because FNS's general ledger at that time did not have the standard
general ledger account Nonexpenditure Financing Sources - Transfers -
In. Later in fiscal year 2003, the Office of the Chief Financial
Officer (OCFO) implemented this standard general ledger account to
account for transfers of intragovernmental funds. In late October 2003,
FNS discovered and corrected the transfer recording error by
reclassifying the transfer of intragovernmental funds from Unexpended
Appropriations - Transfers - In to Nonexpenditure Financing Sources -
Transfers - In.[Footnote 12] However, FNS did not correct the
accounting entries related to expending those funds, which led to the
need to restate USDA's originally issued fiscal year 2003 Consolidated
Statement of Changes in Net Position and Consolidated Balance Sheet. It
was not until October 2004, during FNS's year-end analysis of its
fiscal year 2004 financial statements that FNS determined that the
fiscal year 2003 recording errors were not fully corrected.
A USDA OIG official told us that it was first notified of the material
error by FNS at the end of fiscal year 2004 and subsequently informed
USDA's OCFO that USDA would need to restate its originally issued
fiscal year 2003 Consolidated Statement of Changes in Net Position and
Consolidated Balance Sheet for the material error detected at
FNS.[Footnote 13] The error caused the ending balances for Cumulative
Results of Operations and Unexpended Appropriations on the fiscal year
2003 Consolidated Statement of Changes in Net Position and Consolidated
Balance Sheet to be materially overstated and understated by
approximately $4.7 billion, respectively.[Footnote 14] Although Total
Net Position was unchanged, these two accounts represent distinct
components of net position. Specifically, according to Statements of
Federal Financial Accounting Concepts No. 2, Cumulative Results of
Operations generally includes the amounts accumulated over the years by
an entity from its financing sources less its expenses and losses,
while Unexpended Appropriations represents appropriations not yet
obligated or expended, including undelivered orders.
Material Error Was Not Detected Due to a Lack of Key Internal Control
Procedures over Recording Appropriations:
USDA officials told us that the FNS error was not detected during
fiscal year 2003 because the department did not have internal control
procedures requiring (1) a reconciliation of current year
appropriations reported in USDA's general ledger with Treasury's record
of USDA's appropriations accounts and (2) that any exceptions
identified during the reconciliation be adequately researched and
resolved. According to the Treasury Financial Manual (TFM),[Footnote
15] agencies (1) must compare their Fund Balance with Treasury
account[Footnote 16] in their internal ledgers with reports furnished
by Treasury[Footnote 17] and (2) should use guidelines in the TFM
supplement, Fund Balance with Treasury Reconciliation
Procedures,[Footnote 18] as a basis for tailoring procedures for their
own operations. Specifically, this supplement outlines generic
operating procedures for reconciling the Fund Balance with Treasury
account, including performing a reconciliation that involves comparing
an agency's current year appropriations reported in the agency's
general ledger to Treasury's record of the agency's appropriations
accounts. Such a reconciliation and effective research would have
identified Nonexpenditure Financing Sources - Transfers - In that were
inappropriately classified as Unexpended Appropriations - Transfers -
In, which in turn, could have led to the identification of the
recording error in Unexpended Appropriations - Used. According to the
TFM, failure to implement effective and timely reconciliation
procedures could (1) increase the risks of fraud, waste, and
mismanagement of funds; (2) affect the federal government's ability to
effectively monitor budget execution; and (3) affect the federal
government's ability to accurately measure the full cost of its
programs.
According to USDA officials, USDA formally established procedures in
June 2005 requiring monthly reconciliations of certain[Footnote 19]
current year appropriations reported in USDA's general ledger with
Treasury's record of USDA's appropriations accounts and resolution of
any identified differences. This procedure is intended to provide
reasonable assurance, on a timely basis, that USDA's appropriations
transactions are properly recorded in its general ledger, by detecting
and correcting errors similar to those that led to the fiscal year 2003
restatement.
Audit Procedures Were Not Adequately Designed to Detect the Material
Error in Certain Recorded Appropriations:
USDA's OIG officials stated that the OIG's fiscal year 2003 audit
procedures did not detect the material error in Appropriations Used. In
addition, according to an OIG official, FNS did not timely notify the
OIG that the OCFO had implemented the above-noted standard general
ledger account. The OIG official stated that FNS informed the OIG that
no changes in accounting operations were made and that the OIG's
various audit procedures did not identify any information that
contradicted what FNS had told the OIG.
According to the Financial Audit Manual (FAM),[Footnote 20] the auditor
should perform audit procedures to test for all significant
assertions[Footnote 21] in significant financial statement line items
and accounts. An OIG official stated that the OIG performed audit
procedures on funds FNS received during its fiscal year 2003 audit,
which included tracing funds to source documents, but its procedures
did not detect the material error.
The official stated that if an appropriate analytical procedure had
been performed during fiscal year 2003, then the material error would
have been detected. The FAM states that as required by AU 329,
Analytical Procedures, auditors must perform overall analytical
procedures in order to determine if the auditor has obtained an
adequate understanding of all fluctuations and relationships in the
financial statements. According to AU 329, analytical procedures
involve comparisons of recorded amounts, or ratios developed from
recorded amounts, to expectations developed by the auditor. The OIG
official stated that the analytical procedure that could have detected
this material error was not performed during fiscal year 2003, but that
the OIG included such an analytical procedure during its fiscal year
2004 and fiscal year 2005 audits. Specifically, according to an OIG
official, the OIG performed an analytical procedure to calculate the
cumulative results of operations independently and then compared the
expected results with amounts reported in the financial statements.
Material Error Due to Improperly Reported Material Items on the
Statement of Financing:
In fiscal year 2004, USDA restated its originally issued fiscal year
2003 Combined Statement of Budgetary Resources and Consolidated
Statement of Financing to address a material error that occurred at
USDA's Risk Management Agency's Federal Crop Insurance Corporation
(FCIC) when FCIC tried to correct, per OMB's advisement, the way it
recorded Obligations Incurred.
According to an FCIC official, FCIC received a letter from OMB, dated
December 19, 2002, requesting that FCIC properly record insurance fund
program obligations incurred during the fiscal year when individual
claims are approved to be paid for insured events. According to OMB's
letter, FCIC instead was recording estimated obligations during the
fiscal year in which the insured event occurred, which potentially
placed FCIC in the untenable position of violating the Anti-Deficiency
Act[Footnote 22] should actual claims exceed estimates. The FCIC
official stated that as a result of OMB's letter, FCIC modified the way
it recorded Obligations Incurred before the fiscal year 2002 financial
statements were issued; however, FCIC failed to remove all of its
estimated accrued obligations (i.e., claims not yet approved to be paid
for insured events) from the fiscal year 2002 beginning obligated
balance. The FCIC official told us that as a result, an incorrect
fiscal year 2002 ending obligated balance was carried forward to become
the fiscal year 2003 beginning balance. This material error caused the
Beginning of Period Obligated Balance, Net and Beginning of Period
Unobligated Balance on FCIC's originally issued fiscal year 2003
Statement of Budgetary Resources to be materially overstated and
understated by approximately $1.2 billion, respectively. In addition,
due to the same error, Obligations Incurred on FCIC's originally issued
fiscal year 2003 Statement of Budgetary Resources and Statement of
Financing were materially understated by approximately $1.2
billion.[Footnote 23]
According to OMB Bulletin 01-09, the Statement of Financing (1) is the
bridge between an entity's budgetary and proprietary[Footnote 24]
accounting[Footnote 25] and (2) articulates the relationships between
net obligations derived from an entity's budgetary accounts and net
cost of operations derived from the entity's proprietary accounts by
identifying and explaining key differences between the two numbers. As
stated in SFFAS No. 7, the Statement of Financing reconciles the
budgetary resources obligated for a federal entity's programs and
operations (i.e., Obligations Incurred) to the net cost of operating
that entity (i.e., Net Cost of Operations). As a result, because
Obligations Incurred was materially understated, the Net Cost of
Operations reported on FCIC's draft of its fiscal year 2003 Statement
of Financing did not match the Net Cost of Operations reported on
FCIC's draft of its fiscal year 2003 Statement of Net Cost. According
to an FCIC official, in fiscal year 2003, FCIC was aware that the Net
Cost of Operations as reported on both draft statements did not match
but did not research the issue to determine the exact accounting
entries necessary to correct the error. The official stated that
instead of researching the issue, FCIC made an unsupported adjustment
to Other Components Requiring or Generating Resources in Future Periods
on the Statement of Financing in order to force the Net Cost of
Operations reported on FCIC's draft of its fiscal year 2003 Statement
of Financing to match Net Cost of Operations reported on FCIC's draft
of its fiscal year 2003 Statement of Net Cost. While this adjustment
eliminated the imbalance between Net Cost of Operations reported on the
two statements, it also caused Other Components Requiring or Generating
Resources in Future Periods to be overstated by approximately $1.2
billion.
The material error at FCIC also affected USDA's consolidated financial
statements. Specifically, the material error caused the same line
items, as noted above, to be materially misstated on USDA's originally
issued fiscal year 2003 Combined Statement of Budgetary Resources and
Consolidated Statement of Financing. This material error resulted in
USDA's originally issued fiscal year 2003 Combined Statement of
Budgetary Resources showing that USDA had fewer budgetary resources
than it actually did.
Material Error Resulted from a Lack of Key Internal Control Procedures
Related to the Proper Reporting of Material Items on FCIC's Statement
of Financing:
FCIC's IPA's audit report, dated November 4, 2004, found that FCIC's
preparation of its Statement of Financing needed improvements.
Specifically, the IPA found that FCIC made unsupported adjustments to
its originally issued fiscal year 2003 Statement of Financing instead
of performing research and taking corrective action. In this case, the
fiscal year 2003 year-end unsupported adjustment, which was made in
order to force the Net Cost of Operations reported on FCIC's draft of
its fiscal year 2003 Statement of Financing to match Net Cost of
Operations reported on FCIC's draft of its fiscal year 2003 Statement
of Net Cost, was incorrect.
FCIC's IPA noted in its independent auditor's report that this material
error resulted from FCIC's lack of key internal control procedures
related to the proper reporting of material items on the Statement of
Financing. Specifically, the IPA noted that FCIC did not have
procedures requiring its accounting staff to research and identify why
Net Cost of Operations as reported on FCIC's draft of its fiscal year
2003 Statement of Financing did not match Net Cost of Operations as
reported on FCIC's draft of its fiscal year 2003 Statement of Net Cost.
As a result, FCIC made the unsupported manual adjustment to force the
Net Cost of Operations reported on the two draft statements to match.
If such above-noted research procedures had been performed, we believe
that FCIC could have identified and corrected the error in Beginning of
Period Obligated Balance, Net and Beginning of Period Unobligated
Balances, which caused Obligations Incurred to be materially
understated and, in turn, could have prevented the need to make an
unsupported adjustment to Other Components Requiring or Generating
Resources in Future Periods on the Statement of Financing, which
created an additional error.
According to our Internal Control Management and Evaluation
Tool,[Footnote 26] when assessing whether necessary control activities
are in place and being applied, agencies should consider if timely
action is taken on exceptions, implementation problems, or information
that requires follow-up. Such consideration may have identified that
FCIC lacked key internal control procedures requiring timely action be
taken to investigate and resolve identified exceptions, such as the
above-noted exception that led to FCIC's fiscal year 2003 material
error. Failure to timely investigate and resolve exceptions,
implementation problems, or information that requires follow-up could,
among other things, (1) increase the risks of fraud, waste, and
mismanagement of funds and (2) result in materially inaccurate
reporting of financial information.
In April 2005, FCIC established internal control procedures related to
reporting of material items on FCIC's Statement of Financing. These
procedures require FCIC's financial management staff to (1) prepare
supporting documentation for manual adjustments to FCIC's Statement of
Financing; (2) increase their review of the financial statements,
including incorporating analytical analyses of the relationships among
balances into the review process; and (3) attend additional training on
budgetary accounting and the related statements. In addition, the newly
established procedures require an accountant to review FCIC's Statement
of Financing for consistency and accuracy with other financial
statements, such as FCIC's Statement of Net Cost and Statement of
Budgetary Resources. These procedures are intended to support the
proper reporting of material line items on FCIC's Statement of
Financing so that errors, similar to those noted above, are identified
and corrected before the financial statements are issued.
Audit Procedures Did Not Detect the Material Error on FCIC's Statement
of Financing:
FCIC's IPA for fiscal year 2003 stated that its audit procedures did
not detect the material error in FCIC's fiscal year 2003 reported
unobligated and obligated beginning account balances. FCIC's IPA for
fiscal year 2003 stated that it was not the IPA for fiscal year 2002.
Accordingly, FCIC's IPA for fiscal year 2003 told us that it reviewed
the predecessor auditor's working papers to determine the nature,
timing, and extent of the fiscal year 2003 audit procedures that the
IPA would perform over opening balances. FCIC's IPA for fiscal year
2003 told us that it relied upon the work of the previous auditor with
respect to the fiscal year 2002 ending obligated and unobligated
balances that were, in turn, the beginning balances for fiscal year
2003, which were subsequently determined to be materially overstated
and understated, respectively.
In addition, FCIC's IPA for fiscal year 2003 stated that it had
designed and applied audit procedures in fiscal year 2003 to analyze
differences between budgetary and proprietary accounts. However, FCIC's
IPA for fiscal year 2003 stated that such audit procedures did not
identify the material error in Obligations Incurred, which resulted
from improperly recorded obligations in fiscal year 2002. Although we
requested FCIC's IPA's audit documentation related to its review of
FCIC's fiscal year 2003 Statement of Financing, we were not provided
with such information. Without documentation of the IPA's audit
procedures in this area, we are unable to determine whether the lack of
detection of the material error was a result of inadequate design or
implementation of audit procedures.
We believe that analytical procedures could also have detected the
error. Specifically, as previously mentioned, the FAM states that as
required by AU 329, the auditor must perform overall analytical
procedures in order to determine if the auditor has obtained an
adequate understanding of all fluctuations and relationships in the
financial statements. The FAM states that the auditor should understand
the causes of fluctuations and determine if its understanding is
consistent with other audit evidence; if the auditor is unable to do
so, the auditor should perform appropriate procedures to obtain an
understanding or to resolve any inconsistencies. According to the FAM,
one such analytical procedure involves comparing current year amounts
in the financial statements with comparative financial information
(i.e., amounts reported in prior years). We believe that this type of
analytical procedure could have identified the significant increase in
Other Components Requiring or Generating Resources in Future Periods,
which resulted from the above-noted unsupported adjustment.
Specifically, the reported balance for Other Components Requiring or
Generating Resources in Future Periods on the Statement of Financing
increased from $148 million for fiscal year 2002 to $1,520 million for
fiscal year 2003. In our view, an investigation of the cause of this
increase could have detected the above-noted material error.
Both FCIC's IPA and USDA's OIG stated that they plan to dedicate more
resources to ensure the proper reporting of material items on the
Statement of Financing. However, it is going to be important that in
future years, audit procedures are performed to identify and
investigate any material unsupported adjustments made to FCIC's as well
as USDA's consolidated financial statements.
USDA Restated Its Combined Statement of Budgetary Resources Due to an
Incorrect Nonroutine Journal Voucher:
In fiscal year 2004, USDA restated its originally issued fiscal year
2003 Combined Statement of Budgetary Resources to correct for a
material accounting error made by USDA's Forest Service (FS).[Footnote
27] According to an FS official, the restatement to USDA's fiscal year
2003 Combined Statement of Budgetary Resources corrected an
approximately $178 million overstatement of the ending unobligated
balance, an approximately $16 million overstatement of Net Transfers,
and an approximately $193 million understatement of Total Obligated
Balance, Net, End of Period. The FS official stated that the error was
caused by an incorrect, nonroutine journal vouche[Footnote 28]r
processed by FS in October 2003 and recorded in the general ledger
activity for fiscal year 2003.
Material Error Resulted from Ineffective Internal Control Procedures
over Processing Nonroutine Journal Vouchers:
FS's IPA stated that as a result of FS's fiscal year-end 2003 account
analyses, FS processed several nonroutine journal vouchers, including
one that incorrectly adjusted three budgetary accounts and led to the
restatement of USDA's originally issued fiscal year 2003 Combined
Statement of Budgetary Resources. According to an FS official,
inexperienced FS personnel used a nonroutine journal voucher to adjust
an out-of-balance condition between FS's budgetary accounts and the
corresponding financial information submitted to Treasury without
identifying the underlying cause of the out-of-balance condition and
without sufficient approval. In an FS memo to its IPA dated November
12, 2004, FS noted that it did not have properly designed and/or
effective internal control procedures to prevent and/or detect errors
in the processing of its financial transactions, primarily related to
the processing and approval of nonroutine transactions through the use
of journal vouchers.
According to our Standards for Internal Control in the Federal
Government,[Footnote 29] control activities, such as internal control
procedures, help to ensure that transactions are completely and
accurately recorded. Properly designed and effectively implemented
internal control procedures over processing nonroutine journal
vouchers, which according to FS's IPA is an inherently high-risk area,
could have prevented or detected the material error that led to the
restatement of USDA's originally issued fiscal year 2003 Combined
Statement of Budgetary Resources. Failure to have properly designed and
effective internal control procedures over processing nonroutine
journal vouchers could, among other things, (1) increase the risks of
fraud, waste, and mismanagement of funds and (2) result in materially
inaccurate reporting of financial information.
An FS official stated that during fiscal year 2004, FS established new
internal control procedures requiring multiple supervisory reviews of
nonroutine journal vouchers with final approval by FS's CFO. These
procedures, if effectively implemented, should help ensure that
nonroutine journal vouchers are appropriate. According to FS's IPA, as
of October 30, 2005, FS had not processed any nonroutine journal
vouchers during fiscal year 2005.
Audit Procedures Were Not Effectively Implemented to Detect FS's
Material Error:
According to FS's IPA, its staff selected and reviewed the nonroutine
journal voucher that resulted in the material error, but did not
identify the above-noted problems related to the material error.
According to the FAM, there are many aspects of an audit that require
technical judgments, and the auditor should ensure that persons with
adequate technical expertise are available to make such decisions. FS's
IPA stated that starting in fiscal year 2004, it has staffed the audit
with personnel more experienced in budgetary accounting and reporting
and plans to continue staffing the FS audit with similarly experienced
personnel.
In addition, FS's IPA noted in its fiscal year 2004 audit documentation
that throughout fiscal year 2004, it tested FS's new internal control
procedures for processing nonroutine journal vouchers by sampling
nonroutine journal vouchers to determine whether they were accurately
prepared, properly supported, correctly posted, and properly reviewed
and approved. As a result of its internal control testing, FS's IPA
found that (1) some journal vouchers were not accurately prepared,
properly supported, and correctly posted and (2) in some instances, FS
personnel had already identified the errors and made corrections. FS's
IPA also noted that it discussed all errors disclosed by its test work
with FS, and FS made appropriate corrections.
Disclosure and Presentation of USDA's Restatements Could Be
Misinterpreted:
Certain aspects of the footnote disclosure and financial statement
presentation relating to the restatements could be misinterpreted.
Specifically, the notes to USDA's comparative fiscal years 2004 and
2003 consolidated financial statements included a note disclosure
titled Prior Period Adjustments, which could be misinterpreted since
most of the corrections discussed in the note were not prior period
adjustments as defined by SFFAS No. 21. In addition, we found that
USDA's presentation of the restatements in its comparative fiscal years
2004 and 2003 consolidated financial statements could also be
misinterpreted. Specifically, on USDA's fiscal years 2004 and 2003
comparative Consolidated Statement of Changes in Net Position, the
fiscal year 2004 beginning balances did not agree with the restated
fiscal year 2003 ending balances, and amounts were reported in the
fiscal year 2004 column as prior period adjustments to the fiscal year
2004 beginning balances to reflect the restated fiscal year 2003 ending
balances. We believe that a clearer presentation on USDA's fiscal years
2004 and 2003 comparative Consolidated Statement of Changes in Net
Position would have been to carry forward the restated fiscal year 2003
ending balances and present them as the fiscal year 2004 beginning
balances instead of presenting prior period adjustments in the fiscal
year 2004 column.
Other Matters Related to the Disclosure of the Restatements:
According to SFFAS No. 15, Management's Discussions and Analysis,
management should have great discretion regarding what to say in its
MD&A, but the pervasive requirement is that the MD&A not be misleading.
USDA asserted in its fiscal year 2004 MD&A that an unqualified
financial statement audit opinion indicates that a department's
financial statements are free of significant errors or misstatements.
USDA also stated in its MD&A that "in fiscal year 2002, USDA--and all
its agencies--achieved their first unqualified consolidated financial
audit opinion in the Department's 140-year history — USDA's clean audit
opinion was sustained in fiscal years 2003 and 2004." However, USDA did
not specifically acknowledge in the MD&A that its fiscal year 2003 and
its fiscal year 2002 consolidated financial statements, as originally
issued, were both materially misstated and subsequently restated.
Furthermore, in its MD&A, USDA did not completely disclose the nature
and extent of the restatements to its originally issued fiscal year
2003 financial statements. Specifically, USDA disclosed in the MD&A
only one of the three restatements discussed in this report. We believe
not including the above-noted information in the MD&A could be
misleading. Although the OIG told us that it believed disclosure of
such information in its audit report was not necessary, in our view,
such disclosure could have reduced the potential for a reader to be
misled.
Conclusions:
The material errors in USDA's originally issued fiscal year 2003
consolidated financial statements could have been detected by more
effective internal controls and audit procedures. USDA corrected the
errors and issued restated financial statements. Going forward, it will
be important for USDA to ensure that corrective actions are taken to
prevent any similar errors from going undetected. In addition, for
future years, USDA should ensure the adequacy of the disclosure and
presentation of audit results and any restatements. Further, it will be
important that USDA's OIG and other auditors effectively implement
audit procedures to detect any similar errors in the future.
Recommendations for Executive Action:
We are making three recommendations on this matter, including two
recommendations to USDA's CFO. We recommend that USDA's CFO ensure (1)
that procedures to prevent any errors similar to those that resulted in
the need to restate USDA's originally issued fiscal year 2003 financial
statements are effectively implemented and (2) for future years, the
adequacy of the disclosure and presentation of audit results and any
restatements.
We also recommend that USDA's Inspector General, in conjunction with
the IPA if one is used, ensure that audit procedures are effectively
implemented to test for any (1) improperly recorded appropriations
transactions in the general ledger, (2) improperly reported material
items on the Statement of Financing, and (3) incorrect nonroutine
journal vouchers.
Agency Comments:
USDA's CFO and Inspector General provided written comments on a draft
of this report. (See encs. I and II.) The CFO expressed confidence that
his office's current plans and efforts would ensure that the financial
statements are accurate and timely and contain adequate disclosures.
The Inspector General agreed with our recommendations and stated that
her office has instituted, in conjunction with the IPAs, strengthened
quality control measures over its audit procedures.
Within 60 days of the date of this report, we would appreciate
receiving a written statement on actions taken to address these
recommendations.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Homeland Security and
Governmental Affairs; the Subcommittee on Federal Financial Management,
Government Information, and International Security, Senate Committee on
Homeland Security and Governmental Affairs; the House Committee on
Government Reform; and the Subcommittee on Government Management,
Finance and Accountability, House Committee on Government Reform. In
addition, we are sending copies to the Fiscal Assistant Secretary of
the Treasury and the Controller of OMB. This report is also available
at no charge on GAO's Web site at www.gao.gov.
We appreciate the courtesy and cooperation extended to us by your staff
throughout our work. We look forward to continuing to work with your
offices to help improve financial management in the federal government.
If you have any questions about the contents of this report, please
contact me at (202) 512-3406 or engelg@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report.
Signed by:
Gary T. Engel:
Director:
Financial Management and Assurance:
[End of section]
Enclosure I: Comments from the Chief Financial Officer, Department of
Agriculture:
United States Department of Agriculture:
Office of the Chief Financial Officer:
1400 Independence Avenue, SW:
Washington, DC 20250:
JAN 18 2006:
Mr. Gary T. Engel:
Director:
Financial Management and Assurance:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Engel:
The Department of Agriculture's Office of the Chief Financial Officer
(OCFO) appreciates the opportunity to comment on the draft audit report
no. GAO-06-254R, dated December 15, 2005, relating to your Financial
Audit: Restatements to the Department of Agriculture's Fiscal Year 2003
Consolidated Financial Statements. We have no comments regarding your
report except to thank you for your efforts.
OCFO is confident that our current plans and efforts will assure that
our consolidated financial statements are accurate and timely and will
contain clear and full disclosures in accordance with requirements.
Sincerely,
Signed by:
Charles R. Christopherson, Jr.:
Chief Financial Officer:
[End of section]
Enclosure II: Comments from the Inspector General, Department of
Agriculture:
UNITED STATES DEPARTMENT OF AGRICULTURE:
OFFICE OF INSPECTOR GENERAL:
Washington, D.C. 20250:
JAN 9 2006:
Mr. Gary T. Engel:
Director:
Financial Management and Assurance:
Government Accountability Office:
441 G Street NW.
Washington, D.C. 20548:
Dear Mr. Engel:
The following is the Department of Agriculture's (USDA) Office of
Inspector General (OIG) response to the U.S. Government Accountability
Office (GAO) draft audit report GAO-05-595R, dated December 15, 2005,
relating to your review of the fiscal year (FY) 2003 restatements to
USDA's financial statements. We generally agree with the facts as
presented.
Recommendations to OIG for Executive Action:
GAO recommended that the USDA Inspector General, in conjunction with
the independent public accountants (IPA), ensure that audit procedures
are effectively implemented to test for any (1) improperly recorded
appropriation transactions in the general ledger, (2) improperly
reported material items on the Statement of Financing, and (3)
incorrect non-routine journal vouchers.
OIG Response:
We agree with the recommendations addressed to OIG. Our office has
instituted, in conjunction with the IPAs, strengthened quality control
measures over our audit procedures. Specifically, analytical procedures
detecting fluctuations in general ledger account balances and
relationships between financial statements are being employed
extensively in all of the financial statement audits performed by OIG
and in conjunction with the IPAs.
Thank you for the opportunity to provide our comments to GAO's report
of USDA's restatements to USDA's FY 2003 consolidated financial
statements. If you have any questions, please contact me at (202) 720-
8001, or Mr. Robert W. Young, Assistant Inspector General for Audit, at
(202) 720-6945.
Sincerely,
Signed for:
Phyllis K. Fong:
Inspector General:
[End of section]
(198397):
FOOTNOTES
[1] The Government Management Reform Act of 1994 has required such
reporting, covering the executive branch of government, beginning with
financial statements prepared for fiscal year 1997. 31 U.S.C. § 331
(e). The federal government has elected to include certain financial
information on the legislative and judicial branches in the CFS as
well.
[2] A financial statement restatement occurs when an entity either
voluntarily or prompted by its auditors or regulators revises public
financial information that has previously been reported.
[3] According to Federal Accounting Standards Advisory Board, Statement
of Federal Financial Accounting Standards (SFFAS) No. 21, Reporting
Corrections of Errors and Changes in Accounting Principles, prior
period financial statements presented should be restated only to
correct errors that caused such statements to be materially misstated.
[4] The Federal Emergency Management Agency (FEMA) was transferred to
the Department of Homeland Security (DHS) effective March 1, 2003. With
this transfer, FEMA was no longer required to prepare and have audited
stand-alone financial statements under the CFO Act, leaving 23 CFO Act
agencies for the remainder of fiscal year 2003 and for fiscal year
2004. The DHS Financial Accountability Act, Pub. L. No. 108-330, 118
Stat. 1275 (Oct. 16, 2004), added DHS to the list of CFO Act agencies,
increasing the number of CFO Act agencies again to 24 beginning in
fiscal year 2005.
[5] The two agencies that had restatements for fiscal year 2003 but did
not receive unqualified opinions on their originally issued fiscal year
2003 financial statements were the Department of Defense and the Small
Business Administration.
[6] Transparency is the full, accurate, and timely disclosure of
information.
[7] USDA restated certain of its originally issued fiscal year 2003
consolidated financial statements to correct for material errors
identified at its Food and Nutrition Service, Forest Service, and Risk
Management Agency's Federal Crop Insurance Corporation. According to
USDA officials, since USDA was already restating the fiscal year 2003
financial statements for material errors, it also decided to correct
for less significant errors that had been identified. Specifically,
certain less significant errors identified at Animal and Plant Health
Inspection Service, Credit Commodity Corporation, Forest Service,
Natural Resources Conservation Service, and the departmentwide level
were also included in the restatement note disclosure.
[8] SFFAS No. 21 defines a prior period adjustment as a correction for
an error that occurred in and whose cumulative effect is attributable
to periods not presented in the current financial statements.
[9] Federal Accounting Standards Advisory Board, Statement of Federal
Financial Accounting Concepts No. 1, Objectives of Federal Financial
Reporting.
[10] Generally accepted government auditing standards incorporate AICPA
reporting standards and Statements on Auditing Standards unless the
Comptroller General of the United States excludes them by formal
announcement.
[11] Office of Management and Budget, Bulletin 01-09, Form and Content
of Agency Financial Statements (Washington, D.C.: Sept. 25, 2001).
[12] According to Treasury's U.S. Standard General Ledger (USSGL)
Supplement No. S2 Treasury Financial Manual (Hyattsville, Md.:
September 2002), the Unexpended Appropriations - Transfers - In
represents the amount of unexpended appropriations from current or
prior years that were transferred in during the fiscal year, while
Nonexpenditure Financing Sources - Transfers - In represents funds
transferred in, or to be transferred in, that occur as a result of a
nonexchange nonexpenditure transaction. According to Federal Accounting
Standards Advisory Board, Original Pronouncements, a nonexchange
transaction occurs when one party involved in a transaction (1)
receives value without giving or promising value in return or (2) gives
or promises value without receiving value in return. GAO's Glossary of
Terms Used in the Federal Budget Process, GAO-05-734SP, states that for
accounting and reporting purposes, a nonexpenditure transfer includes
transactions between appropriation and fund accounts that do not
represent payments for goods and services received or to be received
but rather serves only to adjust the amounts available in the accounts
for making payments.
[13] USDA officials stated that once notified of the error, they
researched whether other USDA component agencies had similar errors.
According to the officials, their research identified that USDA's
Animal and Plant Health Inspection Service and Natural Resources
Conservation Service had similar situations where they had improperly
recognized Appropriations Used in the approximate amounts of $311
million and $478 million, respectively.
[14] This is because the material error caused the Appropriations Used
component of Cumulative Results of Operations and the Appropriations
Used component of Unexpended Appropriations on USDA's originally issued
fiscal year 2003 Consolidated Statement of Changes in Net Position to
be materially overstated and understated by approximately $4.7 billion,
respectively.
[15] Department of the Treasury, Treasury Financial Manual, vol. 1, pt.
2, ch. 5100, I TFM 2-5100 (Hyattsville, Md.: Oct. 18, 1999).
[16] The Fund Balance with Treasury account is an asset account
representing the future economic benefits of moneys that agencies can
spend for future authorized transactions. Transactions, such as
nonexpenditure transfers, affect the Fund Balance with Treasury
account.
[17] Treasury's Financial Management Service maintains a summary
account for each appropriation and fund showing transactions relating
to appropriations. For example, at the close of each month, agencies
are furnished FMS 6653, a ledger for each appropriation and fund
account. The ledger shows the opening balance, classified transactions
for the month, and the resultant closing balance as well as
appropriation warrants issued.
[18] Department of the Treasury, Fund Balance with Treasury
Reconciliation Procedures A Supplement to the Treasury Financial
Manual, I TFM 2-5100 (November 1999).
[19] According to a USDA official, USDA's Controller Operations
Division Financial Reporting Branch performs the reconciliation for all
of the USDA component agencies it services.
[20] GAO/President's Council on Integrity and Efficiency, Financial
Audit Manual, GAO-01-765G (Washington, D.C.: July 2001), updated by GAO-
04-1015G and GAO-04-942G (July 2004).
[21] Financial statement assertions are management representations that
are embodied in financial statement components. The assertions can be
either explicit or implicit and can be classified into the following
categories: (1) existence or occurrence, (2) completeness, (3) rights
and obligations, (4) valuation or allocation, and (5) presentation and
disclosure.
[22] 31 U.S.C. § 1341.
[23] This is because there is a relationship between Beginning of
Period Obligated Balance, Net and Obligations Incurred such that if
there is an overstatement of the Beginning of Period Obligated Balance,
Net, then, provided no other errors have occurred on the Statement of
Budgetary Resources, Obligations Incurred would be understated.
[24] Proprietary accounts provide the information for the financial
statements based on Federal Accounting Standards Advisory Board
standards and are intended to provide an economic, rather than a
budgetary, measure of operations and resources.
[25] Certain transactions affect both proprietary and budgetary
accounts. Although budgetary and proprietary accounting information are
complementary, both the types of information and the timing of their
recognition are different, which is caused by differences in the basis
of accounting. For example, under budgetary accounting, a federal
entity records an obligation when it places a purchase order or signs a
contract. Under proprietary accounting, liabilities are recognized when
goods and services are received or are recognized based on an estimate
of work completed under a contract or agreement.
[26] GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G
(Washington, D.C.: August 2001).
[27] USDA's consolidated financial statements were also corrected for
less significant errors identified at FS. According to the OIG's audit
report, FS corrected errors for alignment of budgetary and proprietary
account relationships and posting errors, unsupported balances in
various suspense and deposit clearing funds, Fund Balance with Treasury
and associated custodial liability, and certain revenue transactions.
According to FS, the IPA, and the OIG, of the errors that were
corrected, only the nonroutine journal voucher, noted above, was
material.
[28] According to an FS official, FS's nonroutine journal vouchers do
not follow the USSGL posting model logic, since nonroutine journal
vouchers allow for posting increases and decreases to any account in
the general ledger. The USSGL provides basic standard posting logic for
financial events across the federal government and illustrates both
proprietary and budgetary entries for each accounting event.
[29] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
