Financial Audit

GAO and others have cited long-standing problems with federal agencies' reconciliation of their fund balances with Department of the Treasury accounts. In June 1997, GAO alerted agency inspectors general and chief financial officers to its concerns about large unreconciled differences and improper agency adjustments. (See GAO/AIMD-97-104R.) A March 1998 GAO report on the government's consolidated financial statements for fiscal year 1997 pointed out that several agencies were still not effectively reconciling their records with Treasury's records of cash disbursements. (See GAO/AIMD-98-127.) As part of its audit of the government's consolidated financial statements, GAO evaluated the overall effectiveness of agencies' reconciliation processes for fund balances with Treasury accounts. GAO also surveyed agencies on their satisfaction with Treasury's role in providing assistance and systems support in their reconciliation efforts. This report presents the results of that work.

GAO noted that: (1) auditors found reconciliation problems at 10 of 22 agencies covered by the Chief Financial Officers Act of 1990; (2) the agencies with reconciliation problems disbursed about 47 percent of the total federal dollars disbursed in FY 1997, and had billions of dollars in unreconciled differences outstanding at year-end; (3) these agencies were either not timely in reconciling their fund balances with Treasury accounts, or they were merely adjusting their accounts to match the amounts reported by Treasury; (4) these adjustments were made without adequately researching the causes of the differences and thus without knowing which number, if any, was correct; (5) auditors reported that, in general, the underlying causes of agency reconciliation problems were lack of effective internal control procedures, insufficiently trained staff to perform reconciliations, or a lack of management emphasis on performing reconciliations; (6) these reconciliation problems could affect the government's ability to effectively monitor the execution of the budget; (7) also, the lack of effective reconciliation of disbursements contributes to the overall inability of the federal government to accurately measure the full cost of its programs and increases the risk of fraud, waste, and mismanagement; (8) agencies depend on Treasury for support in fulfilling their reconciliation responsibilities; (9) several agencies reported problems with Treasury's reconciliation processes and the assistance it provides agencies in carrying out these processes; (10) specifically, these agencies cited problems with: (a) Treasury not providing them with adequate levels of detail on transactions processed; (b) the Treasury automated system they use extensively for reconciliations; and (c) Treasury's assistance in areas such as written guidance and training related to the reconciliation process; and (11) GAO found that Treasury has taken some steps that attempt to improve the reconciliation process and is considering other actions to improve its assistance to agencies.

Recommendations

Our 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.

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