Financial Audit
Material Weaknesses in Internal Control over the Processes Used to Prepare the Consolidated Financial Statements of the U.S. Government Gao ID: GAO-08-748 June 17, 2008For the past 11 years, since GAO's first audit of the consolidated financial statements of the U.S. government (CFS), certain material weaknesses in internal control and in selected accounting and financial reporting practices have prevented GAO from expressing an opinion on the CFS. GAO has consistently reported that the U.S. government did not have adequate systems, controls, and procedures to properly prepare the CFS. GAO's December 2007 disclaimer of opinion on the fiscal year 2007 accrual basis consolidated financial statements included a discussion of continuing control deficiencies related to the preparation of the CFS. The purpose of this report is to (1) provide details of continuing material weaknesses, (2) recommend improvements, and (3) provide the status of corrective actions taken to address GAO's previous 81 recommendations related to the preparation of the CFS.
GAO identified continuing and new control deficiencies during its audit of the fiscal year 2007 CFS that relate to the federal government's processes used to prepare the CFS. These control deficiencies contribute to material weaknesses in internal control regarding the U.S. government's inability to (1) adequately account for and reconcile intragovernmental activity and balances between federal agencies; (2) ensure that the CFS was consistent with the underlying audited agency financial statements, properly balanced, and in conformity with U.S. generally accepted accounting principles; and (3) identify and either resolve or explain material differences that exist between certain components of the budget deficit reported in the Department of the Treasury's records, used to prepare the Reconciliation of Net Operating Cost and Unified Budget Deficit and Statement of Changes in Cash Balance from Unified Budget and Other Activities, and related amounts reported in federal agencies' financial statements and underlying financial information and records. The control deficiencies GAO identified during its tests of the processes used to prepare the fiscal year 2007 CFS involved the following areas: documenting a key standard operating procedure for preparing the CFS, reporting in conformity with U.S. generally accepted accounting principles, reconciling distributed offsetting receipts, maintaining adequate control over spreadsheets used in preparing the CFS, monitoring internal control over the processes used to prepare the CFS, using interim financial information in the CFS preparation process, and various other control deficiencies that were identified in previous years' audits but remained in fiscal year 2007 (see app. I). Of the 81 open recommendations GAO reported in July 2007 regarding the processes used to prepare the CFS, 35 were closed and 46 remained open as of December 10, 2007, the date of our report on our audit of the fiscal year 2007 CFS. GAO will continue to monitor the status of corrective actions taken to address the 10 new recommendations and the new remaining balance of 56 open recommendations during its fiscal year 2008 audit of the CFS.
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-08-748, Financial Audit: Material Weaknesses in Internal Control over the Processes Used to Prepare the Consolidated Financial Statements of the U.S. Government
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Report to the Secretary of the Treasury and the Director of the Office
of Management and Budget:
United States Government Accountability Office:
GAO:
June 2008:
Financial Audit:
Material Weaknesses in Internal Control over the Processes Used to
Prepare the Consolidated Financial Statements of the U.S. Government:
GAO-08-748:
GAO Highlights:
Highlights of GAO-08-748, a report to the Secretary of the Treasury and
the Director of the Office of Management and Budget.
Why GAO Did This Study:
For the past 11 years, since GAO‘s first audit of the consolidated
financial statements of the U.S. government (CFS), certain material
weaknesses in internal control and in selected accounting and financial
reporting practices have prevented GAO from expressing an opinion on
the CFS. GAO has consistently reported that the U.S. government did not
have adequate systems, controls, and procedures to properly prepare the
CFS. GAO‘s December 2007 disclaimer of opinion on the fiscal year 2007
accrual basis consolidated financial statements included a discussion
of continuing control deficiencies related to the preparation of the
CFS. The purpose of this report is to (1) provide details of continuing
material weaknesses, (2) recommend improvements, and (3) provide the
status of corrective actions taken to address GAO‘s previous 81
recommendations related to the preparation of the CFS.
What GAO Found:
GAO identified continuing and new control deficiencies during its audit
of the fiscal year 2007 CFS that relate to the federal government‘s
processes used to prepare the CFS. These control deficiencies
contribute to material weaknesses in internal control regarding the
U.S. government‘s inability to (1) adequately account for and reconcile
intragovernmental activity and balances between federal agencies; (2)
ensure that the CFS was consistent with the underlying audited agency
financial statements, properly balanced, and in conformity with U.S.
generally accepted accounting principles; and (3) identify and either
resolve or explain material differences that exist between certain
components of the budget deficit reported in the Department of the
Treasury‘s records, used to prepare the Reconciliation of Net Operating
Cost and Unified Budget Deficit and Statement of Changes in Cash
Balance from Unified Budget and Other Activities, and related amounts
reported in federal agencies‘ financial statements and underlying
financial information and records.
The control deficiencies GAO identified during its tests of the
processes used to prepare the fiscal year 2007 CFS involved the
following areas:
* documenting a key standard operating procedure for preparing the CFS;
* reporting in conformity with U.S. generally accepted accounting
principles;
* reconciling distributed offsetting receipts;
* maintaining adequate control over spreadsheets used in preparing the
CFS;
* monitoring internal control over the processes used to prepare the
CFS;
* using interim financial information in the CFS preparation process,
and;
* various other control deficiencies that were identified in previous
years‘ audits but remained in fiscal year 2007 (see app. I).
Of the 81 open recommendations GAO reported in July 2007 regarding the
processes used to prepare the CFS, 35 were closed and 46 remained open
as of December 10, 2007, the date of our report on our audit of the
fiscal year 2007 CFS. GAO will continue to monitor the status of
corrective actions taken to address the 10 new recommendations and the
new remaining balance of 56 open recommendations during its fiscal year
2008 audit of the CFS.
What GAO Recommends:
GAO is making 10 new recommendations to address control deficiencies
identified during the fiscal year 2007 CFS audit. The Department of the
Treasury and the Office of Management and Budget generally agreed with
the findings and recommendations in this report.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-748]. For more
information, contact Gary Engel, (202) 512-3406, engelg@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Scope and Methodology:
Standard Operating Procedures for Preparing the CFS:
Conformity with GAAP:
Reconciling Distributed Offsetting Receipts:
Control over Spreadsheets Used to Prepare the CFS:
Monitoring Internal Control over the CFS Preparation Process:
Use of Interim Financial Information to Compile the CFS:
Agency Comments:
Appendix I: Status of Treasury's and OMB's Progress in Addressing GAO's
Prior Year Recommendations for Preparing the CFS:
Appendix II: Comments from the Department of the Treasury:
Appendix III: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Status of Treasury's and OMB's Progress in Addressing GAO's
Prior Year Recommendations for Preparing the CFS (as of Dec. 10, 2007):
Abbreviations:
CFOC: Chief Financial Officers' Council:
CFS: consolidated financial statements of the U.S. government:
DOD: Department of Defense:
FASAB: Federal Accounting Standards Advisory Board:
FASB: Federal Accounting Standards Board:
GAAP: Generally Accepted Accounting Principles:
GFRS: Governmentwide Financial Report System:
IDRC: Intragovernmental Dispute Resolution Committee:
Justice: Department of Justice:
OMB: Office of Management and Budget:
SBR: Statement of Budgetary Resources:
SCONP: Statement of Changes in Operations and Net Position:
SF: Standard Form:
SFAS: Statement of Financial Accounting Standards:
SFFAS: Statement of Federal Financial Accounting Standard:
SOP: Standard Operating Procedure:
STAR: Treasury's Central Accounting and Reporting System:
TFM: Treasury Financial Manual:
Treasury: Department of the Treasury:
TVA: Tennessee Valley Authority:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
June 17, 2008:
The Honorable Henry M. Paulson, Jr.
The Secretary of the Treasury:
The Honorable Jim Nussle Director:
Office of Management and Budget:
In our report dated December 10, 2007,[Footnote 1] we disclaimed an
opinion on the consolidated financial statements of the U.S. government
(CFS) for the fiscal years ended September 30, 2007 and 2006,[Footnote
2] except for the 2007 Statement of Social Insurance, which received an
unqualified opinion.[Footnote 3] For the past 11 years, certain
material weaknesses in financial reporting and other limitations on the
scope of our work have resulted in conditions that prevented us from
expressing an opinion on the federal government's accrual basis
consolidated financial statements.[Footnote 4] We have reported that
the federal government did not have adequate systems, controls, and
procedures for preparing the CFS. On behalf of the federal government,
the Department of the Treasury (Treasury), in coordination with the
Office of Management and Budget (OMB), prepares the CFS. Many of the
material weaknesses[Footnote 5] in internal control that have
contributed to our continuing disclaimers of opinion were identified by
auditors during their audits of federal agencies' financial statements
and were reported in detail with recommendations to the agencies in
separate reports. Additional material weaknesses were identified during
our tests of the federal government's processes used to prepare the
CFS.
The purpose of this report is to (1) discuss the details of the
material weaknesses we identified during our audit of the fiscal year
2007 CFS relating to internal control over the processes used to
prepare the CFS, (2) recommend improvements to address these
weaknesses, and (3) provide the status of corrective actions taken by
Treasury and OMB to address the 81 recommendations detailed in our
previous reports (see app. I). We have discussed each of the new
control deficiencies identified during our fiscal year 2007 audit with
your staff and have incorporated their comments as appropriate.
Results in Brief:
We identified continuing and new control deficiencies during our audit
of the fiscal year 2007 CFS that relate to the federal government's
processes used to prepare the CFS. These control deficiencies
contribute to material weaknesses in internal control relating to the
federal government's inability to (1) adequately account for and
reconcile intragovernmental activity and balances between federal
agencies; (2) ensure that the CFS was consistent with the underlying
audited agency financial statements, properly balanced, and in
conformity with U.S. generally accepted accounting principles (GAAP);
and (3) identify and either resolve or explain material differences
that exist between certain components of the budget deficit reported in
Treasury's records, used to prepare the Reconciliation of Net Operating
Cost and Unified Budget Deficit and Statement of Changes in Cash
Balance from Unified Budget and Other Activities, and related amounts
reported in federal agencies' financial statements and underlying
financial information and records.
These material weaknesses in internal control contributed to our
inability to render an opinion on the accrual basis consolidated
financial statements. During our tests of the processes used to prepare
the fiscal year 2007 CFS, we found that:
* Treasury had not fully documented its practices in its "Standard
Operating Procedures for Preparing the Financial Report of the U.S.
Government";
* Treasury had not established a process for adequately documenting its
(1) timely assessment of the relevance, usefulness, or materiality of
information reported by the federal agencies for use at the
governmentwide level; (2) consideration of relevant accounting
standards other than those issued by the Federal Accounting Standards
Advisory Board (FASAB); and (3) final decisions regarding the inclusion
or exclusion of federal agencies' disclosure information in the
existing notes to the CFS;
* Treasury and OMB had not established effective processes and
procedures for reconciling distributed offsetting receipt amounts
included in the net outlay calculation of federal agencies' Statements
of Budgetary Resources (SBR) and the amounts included in the
computation of the budget deficit in the CFS;
* Treasury had not established adequate control over the spreadsheets
it uses to summarize and array financial data for presentation in the
CFS;
* Treasury and OMB had not established processes for monitoring and
assessing the effectiveness of internal control over the preparation of
the CFS; and;
* Treasury had not established procedures necessary to obtain and use
interim agency financial information to ensure that it could provide
the final fiscal year 2007 accrual basis consolidated financial
statements and certain supporting documentation in time for us to
complete all of our planned audit procedures related to the compilation
of these financial statements.
This report includes 10 new recommendations to address control
deficiencies we identified during our audit of the fiscal year 2007
CFS. Appendix I of this report reflects the status of corrective
actions taken by Treasury and OMB as of the date of our fiscal year
2007 CFS audit report (Dec. 10, 2007), to address 81 open
recommendations from our previous reports.[Footnote 6] Our work showed
that 35 recommendations were closed and 46 recommendations contained in
our previous reports remained open. Therefore, a total of 56
recommendations were open as of the end of our fiscal year 2007 CFS
audit. We will continue to monitor the status of corrective actions to
address our open recommendations during our fiscal year 2008 audit of
the CFS.
In commenting on a draft of this report, OMB and Treasury stated that
they generally agreed with the new findings and related recommendations
in this report.
Scope and Methodology:
As part of our audit of the fiscal years 2007 and 2006 CFS, we
evaluated the federal government's financial reporting procedures and
related internal control, and we followed up on the status of
corrective actions taken by Treasury and OMB to address open
recommendations relating to the processes used to prepare the CFS that
were in our previous reports. In our audit report on the fiscal year
2007 CFS, which is included in the fiscal year 2007 Financial Report of
the United States Government, we discussed the material weaknesses
related to the federal government's processes used to prepare the CFS.
These material weaknesses contributed to our disclaimer of opinion on
the accrual basis consolidated financial statements and also
contributed to our adverse opinion on internal control. We performed
sufficient audit procedures to provide the disclaimer of opinion on the
accrual basis consolidated financial statements in accordance with U.S.
generally accepted government auditing standards. This report provides
the details of the material weaknesses we identified in performing our
fiscal year 2007 audit procedures related to the processes used to
prepare the CFS and our recommendations to correct these weaknesses, as
well as the status of corrective actions taken by Treasury and OMB to
address recommendations in our previous reports.
We requested comments on a draft of this report from the Director of
OMB and the Secretary of the Treasury or their designees. OMB provided
oral comments, which are described in the Agency Comments section of
this report. Treasury's comments are reprinted in appendix II and are
also described in the Agency Comments section.
Standard Operating Procedures for Preparing the CFS:
Over the past several years, Treasury has developed and documented
numerous standard operating procedures (SOP) for preparing the CFS,
which have substantially addressed GAO's recommendation for Treasury to
develop and document policies and procedures for preparing the CFS.
However, one of Treasury's SOPs entitled "Standard Operating Procedures
for Preparing the Financial Report of the U.S. Government" is
incomplete. For example, certain steps Treasury performs to prepare the
CFS are not documented in this SOP and, for the key practices that are
documented, the SOP is unclear as to who is responsible for performing
the procedures. In connection with its role as preparer of the CFS,
Treasury management is responsible for developing and documenting
detailed policies, procedures, and practices for preparing the CFS and
ensuring that internal control is built into and is an integral part of
the related process. GAO's Standards for Internal Control in the
Federal Government calls for clear documentation of policies and
procedures.[Footnote 7] Without adequately documented policies and
procedures, standards and practices may not be consistently followed or
followed at all. This potential for inconsistency increases the risk
that errors in the compilation process could go undetected and could
result in an incomplete and inaccurate summarization of data within the
CFS.
Recommendation for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to enhance and fully document all practices
referred to in the SOP entitled "Standard Operating Procedures for
Preparing the Financial Report of the U.S. Government" to better ensure
that practices are proper, complete, and can be consistently applied by
staff members.
Conformity with GAAP:
For many years, we have reported that Treasury had not established a
formal process to ensure that the financial statements, related notes,
stewardship information and supplemental information in the CFS were
presented in conformity with GAAP. Over the past several years,
Treasury has developed a formal process that has significantly improved
its ability to timely identify GAAP requirements, modify its closing
package requirements to obtain information needed, assess the effect of
omitted disclosures, and document decisions reached and the rationale
for such decisions. However, there continue to be some instances where
disclosures are not presented in conformity with GAAP. A contributing
factor to the continued instances of nonconformity with GAAP is that
the process Treasury developed to compile the CFS does not include
adequately documenting its (1) timely assessment of the relevance,
usefulness, or materiality of information reported by the federal
agencies for use at the governmentwide level, (2) consideration of
relevant accounting standards other than those issued by FASAB,
[Footnote 8] and (3) final decisions regarding the inclusion or
exclusion of federal agencies' disclosure information in the existing
notes to the CFS.
As part of the process Treasury developed, it created a checklist
containing FASAB requirements for use as a tool to help determine if
disclosures in the CFS are in conformity with GAAP. Due to the way the
checklist was designed, Treasury primarily used it as a planning tool
to ensure that it requested in the closing package the data that
Treasury would need from federal agencies to report in compliance with
GAAP. Although this is a useful and important first step, we found that
Treasury's checklist was limited by its design and was not used by
staff to help ensure that the published CFS was in conformity with GAAP
in all material respects. As a result, the checklist did not adequately
assist Treasury in ensuring that all GAAP required disclosures were
adequately disclosed in the CFS or documenting why certain disclosures
were excluded.
Recommendations for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to enhance its checklist or design an alternative
and use it to adequately and timely document Treasury's (1) assessment
of the relevance, usefulness, or materiality of information reported by
the federal agencies for use at the governmentwide level; (2)
consideration of relevant accounting standards other than those issued
by FASAB; and (3) final decisions regarding the inclusion or exclusion
of federal agencies' disclosure information in the existing notes to
the CFS.
Reconciling Distributed Offsetting Receipts:
The federal government reports a unified budget deficit [Footnote 9]
(budget deficit) in the Reconciliation of Net Operating Cost and the
Unified Budget Deficit and in the Statement of Changes in Cash Balance
from Unified Budget and Other Activities. The budget deficit is
calculated by subtracting actual budget outlays from actual budget
receipts.[Footnote 10] Budget outlays consist of federal agencies'
outlay amounts, that is, gross outlays net of offsetting collections
and distributed offsetting receipts[Footnote 11] at the agency level,
and undistributed offsetting receipts[Footnote 12] at the
governmentwide level. Federal agencies also report net outlays in their
SBRs.[Footnote 13] Both the net outlays as a component of the budget
deficit reported in the CFS and as reported in the federal agencies'
SBRs should generally match the budget outlays reported in the Budget
of the United States Government.
For several years, we have reported material unreconciled differences
between the total net outlays reported in selected federal agencies'
SBRs and Treasury's central accounting records used to compute the
budget deficit reported in the CFS.[Footnote 14] OMB and Treasury have
continued to work with federal agencies to reduce these material
unreconciled differences. However, in fiscal year 2007, billions of
dollars of unreconciled differences still existed in this and other
components of the budget deficit. One way OMB has been working with
federal agencies has been to require the agencies, beginning with the
first quarter in fiscal year 2007, to submit to OMB an analysis and
reconciliation, based on certain criteria, of any material differences
between the federal agency's quarterly unaudited SBR and the agency's
related quarterly Standard Form (SF) 133 Report on Budget Execution and
Budgetary Resources (SBR to SF 133 reconciliations). Agencies' SF 133s
are submitted to Treasury and serve as the main source for the CFS
budget reporting and reconciliation. Material unreconciled differences
remained at the end of fiscal year 2007 between the agencies' SBRs and
their related SF 133s. OMB conducted further analysis on the agencies'
quarterly SBR to SF 133 reconciliations and determined that many of
these differences related to the recording of distributed offsetting
receipts. Although distributed offsetting receipts are included in the
net outlay calculation in federal agencies' SBRs, as well as in the
computation of the budget deficit in the CFS, they are not included as
part of the SF 133s, and as such are not being identified and addressed
by the agencies in the quarterly reconciliation process.
OMB is aware that the reporting of distributed offsetting receipts
contributes to many of the material differences in net outlays and is
currently determining how to reconcile distributed offsetting receipts
included in the net outlay calculation of federal agencies' SBRs and
the amounts included in the computation of the budget deficit in the
CFS. Until the federal government has effective processes and
procedures in place for identifying and resolving material differences
between the total net outlays reported in federal agencies' SBRs and
the records used to prepare the CFS, the actual extent of such
differences and their effect on the CFS will be unknown.
Recommendation for Executive Action:
We recommend that the Director of OMB direct the Controller of OMB's
Office of Federal Financial Management, in coordination with Treasury's
Fiscal Assistant Secretary, to develop formal processes and procedures
for identifying and resolving any material differences in distributed
offsetting receipt amounts included in the net outlay calculation of
federal agencies' SBRs and the amounts included in the computation of
the budget deficit in the CFS.
Control over Spreadsheets Used to Prepare the CFS:
Treasury developed the Governmentwide Financial Report System (GFRS) to
collect federal agencies' audited financial statement information to
prepare the CFS. Federal agencies enter their audited financial
information into GFRS, and Treasury exports the data into a database
and then into various spreadsheets in order to compile the CFS.
Treasury did not maintain adequate control over the spreadsheets used
to summarize and array financial data for presentation in the CFS.
Specifically, Treasury's processes and procedures for management and
control of the spreadsheets were largely undocumented. In addition,
Treasury had not established adequate controls to ensure that certain
key spreadsheets were (1) protected from inadvertent change and (2)
documented to facilitate detection and tracking of changes to key
formulas and data. Further, the column headings within many
spreadsheets were either not labeled or the labels were not aligned
with the data contained in the column. GAO's Standards for Internal
Control in the Federal Government calls for controls to be in place to
safeguard financial information and help reduce the risk of errors,
misuse, or unauthorized alteration.[Footnote 15] In addition, vendor
documentation also provides guidance on maintaining and protecting
spreadsheet integrity[Footnote 16]. OMB Circular No. A-127 requires
that appropriate internal control be applied to all financial
management system inputs, processing, and output.[Footnote 17] It also
requires that financial management systems and associated instructions
for maintenance and use be clearly documented in sufficient detail to
permit an individual with appropriate background knowledge to obtain a
comprehensive understanding of the entire operation of the system.
[Footnote 18] Inadequate spreadsheet controls increase Treasury's risk
that its financial reporting data will be inaccurate, and that these
inaccuracies will not be prevented or detected in a timely manner.
Recommendations for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to establish effective internal control to ensure
the spreadsheets used to compile the CFS are (1) protected from
inadvertent change and (2) documented to facilitate detection and
tracking of changes to key formulas and data. Further, we recommend
that columns within key spreadsheets be labeled and properly aligned to
reflect the data contained within.
Monitoring Internal Control over the CFS Preparation Process:
Treasury, in coordination with OMB, has not established processes for
monitoring and assessing the effectiveness of internal control over the
processes used to prepare the CFS. According to OMB Circular No. A-123,
management has a fundamental responsibility to develop and maintain
effective internal control.[Footnote 19] Effective internal control
provides reasonable assurance that significant weaknesses in the design
or operation of internal control, that could adversely affect the
entity's ability to meet its objectives, would be prevented or detected
in a timely manner. In addition, periodic reviews, reconciliations, or
comparisons of data should be included as part of the regular assigned
duties of personnel. Periodic assessments should be integrated as part
of management's continuous monitoring of internal control, which should
be ingrained in the entity's operations. If an effective continuous
monitoring program is in place, it can leverage the resources needed to
maintain effective internal controls throughout the year. In addition,
GAO's Standards for Internal Control in the Federal Government states
that internal control is a major part of managing an organization and
should include monitoring.[Footnote 20] Without effective monitoring
and assessment of internal control, there is a risk that errors in the
compilation process could go undetected and could result in an
incomplete and inaccurate summarization of data within the CFS.
Recommendation for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB's
Office of Federal Financial Management, to develop and implement
effective processes for monitoring and assessing the effectiveness of
internal control over the processes used to prepare the CFS.
Use of Interim Financial Information to Compile the CFS:
As indicated in our most recent audit report on the CFS, and since
fiscal year 2003, there have been limitations on the scope of our work
that contribute to our disclaimer of opinion on the accrual basis
consolidated financial statements. Since fiscal year 2003, Treasury and
OMB began accelerating the time frame for preparation of the CFS.
Consequently, GAO in turn has accelerated the time frame to issue our
reports on the audits of the CFS.
For fiscal year 2007, we reported that Treasury was unable to provide
the final accrual basis consolidated financial statements and certain
supporting documentation in time for us to complete all of our planned
auditing procedures related to the compilation of these financial
statements. We also reported that personnel at Treasury's Financial
Management Service had excessive workloads that required an
extraordinary amount of effort and dedication to compile the CFS and
that quarterly compilations were not performed at the governmentwide
level. This leads to almost all the compilation effort being performed
during a condensed time period at the end of the year.
Federal agencies are required to produce unaudited quarterly financial
statements and remit them to OMB;[Footnote 21] however, Treasury does
not use these quarterly financial statements or request any other
interim financial information that would enable it to perform some of
the compilation effort before the end of the year. For example, if a
federal agency changed the manner in which it was reporting certain
information in its financial statements, by obtaining and utilizing the
agency's quarterly financial statements, Treasury would be aware of
this change and could evaluate any effect this might have on the CFS
during the year rather than during the condensed time period at the end
of the year.
Until such time that interim financial information is obtained and
utilized in some capacity to assist Treasury in overcoming the existing
resource and time constraints, we believe that Treasury will continue
to face significant challenges in being able to provide accrual basis
consolidated financial statements and supporting documentation in time
for us to complete our planned auditing procedures.
Recommendation for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary, working in coordination with the Controller of
OMB's Office of Federal Financial Management, to develop and implement
alternative solutions to performing almost all of the compilation
effort at the end of the year, including obtaining and utilizing
interim financial information from federal agencies.
Agency Comments:
OMB Comments:
In oral comments on a draft of this report, OMB stated that it
generally agreed with the new findings and related recommendations in
this report.
Treasury Comments:
In written comments on a draft of this report, which are reprinted in
appendix II, Treasury stated that it agrees with the new findings and
related recommendations.
This report contains recommendations to the Secretary of the Treasury
and the Director of OMB. The head of a federal agency is required by 31
U.S.C. § 720 to submit a written statement on actions taken on these
recommendations. You should submit your statement to the Senate
Committee on Homeland Security and Governmental Affairs and the House
Committee on Oversight and Government Reform within 60 days of the date
of this report. A written statement must also be sent to the House and
Senate Committees on Appropriations with the agency's first request for
appropriations made more than 60 days after the date of the report.
We are sending copies of this report to the Chairmen and Ranking
Members of the Senate Committee on Homeland Security and Governmental
Affairs; the Subcommittee on Federal Financial Management, Government
Information, Federal Services, and International Security, Senate
Committee on Homeland Security and Governmental Affairs; the House
Committee on Oversight and Government Reform; and the Subcommittee on
Government Management, Organization, and Procurement, House Committee
on Oversight and Government Reform. In addition, we are sending copies
to the Fiscal Assistant Secretary of the Treasury, the Deputy Director
for Management of OMB, and the Acting Controller of OMB's Office of
Federal Financial Management. Copies will be made available to others
upon request. This report is also available at no charge on GAO's Web
site at [hyperlink, http://www.gao.gov].
We acknowledge and appreciate the cooperation and assistance provided
by Treasury and OMB during our audit. If you or your staff have any
questions or wish to discuss this report, please contact me on (202)
512-3406 or engelg@gao.gov. Key contributors to this report are listed
in appendix III.
Signed by:
Gary T. Engel:
Director Financial Management and Assurance:
[End of section]
Appendix I: Status of Treasury's and OMB's Progress in Addressing GAO's
Prior Year Recommendations for Preparing the CFS:
This appendix includes recommendations that were open at the beginning
of our fiscal year 2007 audit from five of our previous reports:
* Financial Audit: Process for Preparing the Consolidated Financial
Statements of the U.S. Government Needs Improvement, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-45] (Washington, D.C.:
Oct. 30, 2003);
* Financial Audit: Process for Preparing the Consolidated Financial
Statements of the U.S. Government Needs Further Improvement, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-866] (Washington, D.C.:
Sept. 10, 2004);
* Financial Audit: Process for Preparing the Consolidated Financial
Statements of the U.S. Government Continues to Need Improvement,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-407]
(Washington, D.C.: May 4, 2005);
* Financial Audit: Significant Internal Control Weaknesses Remain in
Preparing the Consolidated Financial Statements of the U.S. Government,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-415]
(Washington, D.C.: Apr. 21, 2006); and:
* Financial Audit: Significant Internal Control Weaknesses Remain in
the Preparation of the Consolidated Financial Statements of the U.S.
Government, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-805]
(Washington, D.C.: July 23, 2007).
Recommendations that were closed in prior reports are not included in
this appendix. This appendix includes the status of the recommendations
according to the Department of the Treasury (Treasury) and the Office
of Management and Budget (OMB) as well as our own assessments.
Explanations are included in the status of recommendations per GAO when
Treasury and OMB disagreed with our recommendation or the status of a
recommendation.
Of the 81 recommendations relating to the processes used to prepare the
consolidated financial statements of the U.S. government (CFS) that are
listed in this appendix, 35 were closed and 46 remained open as of
December 10, 2007, the date of our report on the audit of the fiscal
year 2007 CFS.
Table 1: Status of Treasury's and OMB's Progress in Addressing GAO's
Prior Year Recommendations for Preparing the CFS (as of Dec. 10, 2007):
GAO-04-45; (results of the fiscal year 2002 audit):
Count: 1;
No.: 02-2;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in connection with Treasury's current compilation
process and the development of Treasury's new compilation system and
process, to develop and fully document policies and procedures for the
CFS preparation process so that they are proper, complete, and
consistently applied by staff members;
Status of recommendation: Per Treasury and OMB: Treasury further
revised and documented all of its major policies and procedures for the
fiscal year 2007 compilation process to ensure the propriety, accuracy,
and consistency of application;
Status of recommendation: Per GAO: Closed. Over the past several years,
Treasury has developed and documented numerous policies and procedures
for preparing the CFS. As such, Treasury has substantially addressed
this recommendation. However, one key standard operating procedure
(SOP) needs to be completed. See the body of this report for a
discussion of this SOP and related recommendation.
Count: 2;
No.: 02-4;
Recommendation: As Treasury is designing its new financial statement
compilation process to begin with the fiscal year 2004 CFS, the
Secretary of the Treasury should direct the Fiscal Assistant Secretary,
in coordination with the Controller of OMB, to develop reconciliation
procedures that will aid in understanding and controlling the net
position balance as well as eliminate the plugs previously associated
with compiling the CFS;
Status of recommendation: Per Treasury and OMB: To eliminate or explain
adjustments to net position, Treasury has continued to eliminate, at
the consolidated level, intragovernmental activity and balances using
formal balanced accounting entries (via Reciprocal Categories) and has
continued its analysis of transactions that contribute to the unmatched
transactions and balances adjustment. Treasury's analysis of the
reciprocal category for the General Fund (RC29) is still continuing and
in fiscal year 2007, Treasury began to extract certain General Fund
transactions into new reciprocal categories to facilitate agency
reconciliation;
Status of recommendation: Per GAO: Open. Treasury has made progress
towards developing reconciliation procedures that aid in understanding
the net position balance.
Count: 3;
No.: 02-5;
Recommendation: As Treasury is designing its new financial statement
compilation process to begin with the fiscal year 2004 CFS, the
Secretary of the Treasury should direct the Fiscal Assistant Secretary,
in coordination with the Controller of OMB, to use balanced accounting
entries to account for the change in net position rather than simple
subtraction of liabilities from assets;
Status of recommendation: Per Treasury and OMB: The process mentioned
in No. 02-4 no longer involves the simple subtraction of liabilities
from assets, as was previously done, but instead takes into account the
intragovernmental balances and activities to compute the change in net
position;
Status of recommendation: Per GAO: Closed. Treasury's process no longer
simply subtracts liabilities from assets to account for the change in
net position.
Count: 4;
No.: 02-6;
Recommendation: As OMB continues to make strides to address issues
related to intragovernmental transactions, the Director of OMB should
direct the Controller of OMB to develop policies and procedures that
document how OMB will enforce the business rules provided in OMB
Memorandum M-07-03, Business Rules for Intragovernmental Transactions;
Status of recommendation: Per Treasury and OMB: The business rules were
revised in fiscal year 2006 to expand and enhance the standard
practices for how federal agencies do business with each other. The
revised rules are published in Treasury Financial Manual (TFM) Bulletin
2007-03; OMB, Treasury, and the Chief Financial Officers' Council
(CFOC) are distributing, quarterly, a "Watchlist" of the largest dollar
imbalances between two federal agencies, or federal agencies not
reporting a trading partner, or both. Federal agencies on the
"Watchlist" meet with OMB and Treasury to discuss the root causes of
the imbalances and come to resolution on how to mitigate the root
causes. At the same time, OMB, Treasury, and the CFOC are continuing
their efforts toward establishing the Intragovernmental Dispute
Resolution Committee (IDRC), as referenced in the business rules. The
IDRC will be a vehicle for resolving accounting disputes between
federal agencies. The dispute resolution process is also predicated on
the principle that federal agencies have implemented the business rules
and will require the disputing federal agencies to provide evidence of
compliance with the business rules during arbitration;
Status of recommendation: Per GAO: Open.
Count: 5;
No.: 02-7;
Recommendation: As OMB continues to make strides to address issues
related to intragovernmental transactions, the Director of OMB should
direct the Controller of OMB to require that significant differences
noted between business partners be resolved and the resolution be
documented;
Status of recommendation: Per Treasury and OMB: OMB will continue to
work with individual federal agencies to resolve imbalances that are
referred to OMB on a case-by-case basis. As part of OMB's standard
practice, resolutions reached will be communicated to all parties. As
noted above, OMB, Treasury, and the CFOC are documenting the imbalances
identified on the "Watchlist" and subsequent resolutions. OMB,
Treasury, and the CFOC will continue to work toward establishing the
IDRC, as referenced in the business rules, and it will be used as a
vehicle for federal agencies to resolve their accounting disputes. The
IDRC will incorporate a standard practice of documenting all
resolutions and communicating the resolutions to all parties involved;
Status of recommendation: Per GAO: Open.
Count: 6;
No.: 02-9;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
design procedures that will account for the difference in
intragovernmental assets and liabilities throughout the compilation
process by means of formal consolidating and elimination accounting
entries;
Status of recommendation: Per Treasury and OMB: Treasury has designed
formal consolidating and eliminating procedures to account for these
differences and has implemented them. See the status for recommendation
No. 02-4;
Status of recommendation: Per GAO: Open. Treasury was unable to provide
GAO with evidence of formal consolidating and eliminating accounting
entries in fiscal year 2007.
Count: 7;
No.: 02-10;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop solutions for intragovernmental activity and balance issues
relating to federal agencies' accounting, reconciling, and reporting in
areas other than those OMB now requires be reconciled, primarily areas
relating to appropriations;
Status of recommendation: Per Treasury and OMB: During fiscal year
2007, Treasury made available to federal agencies information from its
Central Accounting and Reporting System (STAR) related to
appropriations, transfers, and fund balance with Treasury for their use
in reconciling this data;
Status of recommendation: Per GAO: Open. Treasury and OMB did not
provide federal agencies instructions on how to reconcile and report to
Treasury any differences between their records and Treasury's central
accounting records. Further, as noted by Treasury in the status of
recommendation No. 02-4, Treasury's analysis of the reciprocal category
for the General Fund is ongoing.
Count: 8;
No.: 02-11;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
reconcile the change in intragovernmental assets and liabilities for
the fiscal year, including the amount and nature of all changes in
intragovernmental assets or liabilities not attributable to cost and
revenue activity recognized during the fiscal year. Examples of these
differences would include capitalized purchases, such as inventory or
equipment, and deferred revenue;
Status of recommendation: Per Treasury and OMB: The current
reconciliation of intragovernmental activity accounts for differences
caused by asset capitalization and agency advances or deferred revenue.
Given current intragovernmental differences, asset capitalization and
recognition of advances and deferred revenue may be incorrect. However,
the current reconciliation analysis is expected to correctly report
this activity once intragovernmental differences are materially
resolved. See also the status of recommendation No. 02-4;
Status of recommendation: Per GAO: Open.
Count: 9;
No.: 02-12;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to develop and implement a process that adequately
identifies and reports items needed to reconcile net operating cost and
unified budget surplus (or deficit). Treasury should report "net
unreconciled differences" included in the net operating results line
item as a separate reconciling activity in the reconciliation
statement;
Status of recommendation: Per Treasury and OMB: Treasury's position is
that unmatched transactions and balances cannot be placed with
certainty either as a component of the Statement of Net Cost or as a
component of the Statement of Operations and Changes in Net Position
(SOCNP) and has chosen to reflect these unmatched transactions and
balances in the SOCNP until these differences are resolved. However,
based on its analyses of these unmatched transactions and balances, as
disclosed in the supplementary information section of the fiscal year
2007 CFS, Treasury believes that these unmatched transactions and
balances are primarily caused by unreconciled transactions that affect
the amounts reported on an accrual basis of accounting (net operating
cost) and, therefore, these unmatched transactions and balances should
not be included as a separate reconciling item on this statement,
because it is the reconciliation of the federal government's activity
between two different bases of accounting (accrual vs. cash);
Status of recommendation: Per GAO: Open. Although Treasury was unsure
if the plug (reported in fiscal year 2007 as "unmatched transactions
and balances") was a component of the Statement of Net Cost or a
component of the SOCNP, Treasury chose to reflect the plug in the SOCNP
as a component of net operating cost. Therefore, the net operating cost
included in the Reconciliation of Net Operating Cost and Unified Budget
Deficit includes the "unmatched transactions and balances" plug and
Treasury is unsure how much of this plug should be included as a
separate reconciling activity.
Count: 10;
No.: 02-13;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to develop and implement a process that adequately
identifies and reports items needed to reconcile net operating cost and
unified budget surplus (or deficit). Treasury should develop policies
and procedures to ensure completeness of reporting and document how all
the applicable components reported in the other consolidated financial
statements (and related note disclosures included in the CFS) were
properly reflected in the reconciliation statement;
Status of recommendation: Per Treasury and OMB: Treasury will continue
to improve the completeness and consistency of the information in this
reconciliation statement and will continue to resolve significant
inconsistencies, if any, to the applicable and related components
reported in the other basic financial statements, and in the related
note disclosures, included in the CFS;
Status of recommendation: Per GAO: Open. While Treasury has made
progress in developing certain SOPs, it has not fully developed
policies and procedures to ensure the completeness of reporting of
information on the reconciliation statement and to document how all
applicable components reported elsewhere in the CFS are properly
reflected in the reconciliation statement.
Count: 11;
No.: 02-14;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to develop and implement a process that adequately
identifies and reports items needed to reconcile net operating cost and
unified budget surplus (or deficit). Treasury should establish
reporting materiality thresholds for determining which agency financial
statement activities to collect and report at the governmentwide level
to assist in ensuring that the reconciliation statement is useful and
conveys meaningful information;
Status of recommendation: Per Treasury and OMB: Treasury will establish
a reporting materiality threshold related to this statement, to improve
the usefulness and understandability of the information included in
this statement;
Status of recommendation: Per GAO: Open.
Count: 12;
No.: 02-15;
Recommendation: If Treasury chooses to continue using information from
both federal agencies' financial statements and STAR, Treasury should
demonstrate how the amounts from STAR reconcile to federal agencies'
financial statements;
Status of recommendation: Per Treasury and OMB: Treasury has elected to
continue the use of information from STAR and will identify the
material areas where STAR data should reconcile to federal agencies'
financial statements;
Status of recommendation: Per GAO: Open. Once Treasury identifies
material areas, it will need to demonstrate how the amounts from STAR
for these areas reconcile to federal agencies' financial statements.
Count: 13;
No.: 02-16;
Recommendation: If Treasury chooses to continue using information from
both federal agencies' financial statements and from STAR, Treasury
should identify and document the cause of any significant differences,
if any are noted;
Status of recommendation: Per Treasury and OMB: Treasury has elected to
continue to use information from STAR. Treasury will document the cause
of significant differences as possible during fiscal year 2008. See
also status of recommendation No. 02-15;
Status of recommendation: Per GAO: Open.
Count: 14;
No.: 02-17;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop and implement a process to ensure that the Statement of Changes
in Cash Balance from Unified Budget and Other Activities properly
reflects the activities reported in federal agencies' audited financial
statements. Treasury should document the consistency of the significant
line items on this statement to federal agencies' audited financial
statements;
Status of recommendation: Per Treasury and OMB: Treasury has elected to
continue to use information from STAR. Treasury will document the
consistency of the significant line items on this statement to federal
agencies' audited financial statements as possible during fiscal year
2008. See also status of recommendation No. 02-15;
Status of recommendation: Per GAO: Open.
Count: 15;
No.: 02-18;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop and implement a process to ensure that the Statement of Changes
in Cash Balance from Unified Budget and Other Activities properly
reflects the activities reported in federal agencies' audited financial
statements. Treasury should request, through its closing package, that
federal agencies provide the net outlays reported in their Combined
Statement of Budgetary Resources and explanations for any significant
differences between net outlay amounts reported in the Combined
Statement of Budgetary Resources and the budget of the U.S. government;
Status of recommendation: Per Treasury and OMB: In accordance with the
net outlays corrective action plan, OMB requires federal agencies to
provide explanations for significant differences between the unaudited
quarterly Statement of Budgetary Resources and the quarterly SF-133
(budget execution document). This requirement is intended to assist
federal agencies in identifying and mitigating discrepancies between
the two reports throughout the fiscal year rather than only at year-
end. The number of federal agencies with significant discrepancies has
decreased in the last couple of years, and OMB continues to work with
federal agencies toward further reductions;
Status of recommendation: Per GAO: Closed. OMB has made significant
progress in explaining and resolving significant differences between
net outlay amounts reported in federal agencies' Statement of Budgetary
Resources and the budget of the U.S. government. As such, OMB has
substantially addressed this recommendation as well as recommendation
Nos. 02-19, 03-4, and 03-5. However, some differences do remain. See
the body of this report for further recommendations as OMB continues to
work with federal agencies to reconcile quarterly SF 133 data.
Count: 16;
No.: 02-19;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop and implement a process to ensure that the Statement of Changes
in Cash Balance from Unified Budget and Other Activities properly
reflects the activities reported in federal agencies' audited financial
statements. Treasury should investigate the differences between net
outlays reported in federal agencies' Combined Statement of Budgetary
Resources and Treasury's records in STAR to ensure that the proper
amounts are reported in the Statement of Changes in Cash Balance from
Unified Budget and Other Activities;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-18;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-18.
Count: 17;
No.: 02-20;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop and implement a process to ensure that the Statement of Changes
in Cash Balance from Unified Budget and Other Activities properly
reflects the activities reported in federal agencies' audited financial
statements. Treasury should explain and document the differences
between the operating revenue amount reported on the Statement of
Operations and Changes in Net Position and unified budget receipts
reported on the Statement of Changes in Cash Balance from Unified
Budget and Other Activities;
Status of recommendation: Per Treasury and OMB: Treasury will continue
with its efforts begun in fiscal year 2007 to reconcile budgetary
receipts to net operating revenue;
Status of recommendation: Per GAO: Open.
Count: 18;
No.: 02-21;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop and implement a process to ensure that the Statement of Changes
in Cash Balance from Unified Budget and Other Activities properly
reflects the activities reported in federal agencies' audited financial
statements. Treasury should provide support for how the line items in
the "other activities" section of this statement relate to either the
underlying Balance Sheet or related notes accompanying the CFS;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
Treasury was able to provide additional support for the "other
activities" section from the information provided by the underlying
agency financial records;
Status of recommendation: Per GAO: Closed.
Count: 19;
No.: 02-22;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
perform an assessment to define the reporting entity, including its
specific components, in conformity with the criteria issued by the
Federal Accounting Standards Advisory Board (FASAB). Key decisions made
in this assessment should be documented, including the reason for
including or excluding components and the basis for concluding on any
issue. Particular emphasis should be placed on demonstrating that any
financial information that should be included but is not included is
immaterial;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
Treasury implemented its policies and procedures to define and document
the reporting entity and made corresponding changes to the reporting
entity disclosure in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Open. Although Treasury began
developing criteria to assess exclusion of certain entities, the
reporting entity has not been adequately defined. In addition,
documentation of decisions by the Fiscal Assistant Secretary and the
Controller of OMB is needed regarding inclusion or exclusion of certain
entities.
Count: 20;
No.: 02-23;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
provide in the financial statements all the financial information
relevant to the defined reporting entity, in all material respects.
Such information would include, for example, the reporting entity's
assets, liabilities, and revenues;
Status of recommendation: Per Treasury and OMB: Treasury implemented
changes to the reporting entity in accordance with its related policies
and procedures. See status of recommendation No. 02-22;
Status of recommendation: Per GAO: Open. See status of recommendation
No. 02-22.
Count: 21;
No.: 02-24;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
disclose in the financial statements all information that is necessary
to inform users adequately about the reporting entity. Such disclosures
should clearly describe the reporting entity and explain the reason for
excluding any components that are not included in the defined reporting
entity;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-23;
Status of recommendation: Per GAO: Open. See status of recommendation
No. 02-22.
Count: 22;
No.: 02-25;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to establish a formal process that will allow the
financial statements, related notes, and stewardship and supplemental
information in the CFS to be presented in conformity with generally
accepted accounting principles (GAAP). The process should timely
identify GAAP requirements;
Status of recommendation: Per Treasury and OMB: Treasury enhanced the
formal process established in fiscal year 2005 and performed an
analysis of fiscal year 2007 required agency financial statement and
note disclosures and included the appropriate disclosures in the fiscal
year 2007 CFS;
Status of recommendation: Per GAO: Closed. Over the past several years,
Treasury has established a formal process that has significantly
improved its ability to present the CFS, including related notes, and
stewardship and supplemental information, in conformity with GAAP. As
such, Treasury has substantially addressed this recommendation as well
as recommendation Nos. 02-26, 02-27, and 02-28. Despite Treasury's
efforts, there continue to be some instances where disclosures are not
presented as required by the standards. See the body of this report for
a more detailed discussion of these matters and related
recommendations.
Count: 23;
No.: 02-26;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to establish a formal process that will allow the
financial statements, related notes, and stewardship and supplemental
information in the CFS to be presented in conformity with GAAP. The
process should make timely modifications to Treasury's closing package
requirements to obtain information needed;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-25;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-25.
Count: 24;
No.: 02-27;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to establish a formal process that will allow the
financial statements, related notes, and stewardship and supplemental
information in the CFS to be presented in conformity with GAAP. The
process should assess, qualitatively and quantitatively, the effect of
the omitted disclosures;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-25;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-25.
Count: 25;
No.: 02-28;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to establish a formal process that will allow the
financial statements, related notes, and stewardship and supplemental
information in the CFS to be presented in conformity with GAAP. The
process should document decisions reached and the rationale for such
decisions;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-25;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-25.
Count: 26;
No.: 02-29;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures for preparing the
governmentwide management representation letter to help ensure that it
is properly prepared and contains sufficient representations.
Specifically, these policies and procedures should require an analysis
of the agency management representations to determine if discrepancies
exist between what the agency auditor reported and the representations
made by the agency, including the resolution of such discrepancies;
Status of recommendation: Per Treasury and OMB: Treasury and OMB will
continue to revise their policies and procedures in order to improve
internal control over this process;
Status of recommendation: Per GAO: Open.
Count: 27;
No.: 02-30;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures for preparing the
governmentwide management representation letter to help ensure that it
is properly prepared and contains sufficient representations.
Specifically, these policies and procedures should require a
determination that the agency management representation letters have
been signed by the highest-level agency officials who are responsible
for and knowledgeable about the matters included in the agency
management representation letters;
Status of recommendation: Per Treasury and OMB: Treasury and OMB
revised their policies and procedures to address this finding in fiscal
year 2007;
Status of recommendation: Per GAO: Closed.
Count: 28;
No.: 02-31;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures for preparing the
governmentwide management representation letter to help ensure that it
is properly prepared and contains sufficient representations.
Specifically, these policies and procedures should require an
assessment of the materiality thresholds used by federal agencies in
their respective management representation letters;
Status of recommendation: Per Treasury and OMB: Treasury and OMB
revised their policies and procedures to address this finding in fiscal
year 2007;
Status of recommendation: Per GAO: Closed.
Count: 29;
No.: 02-32;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures for preparing the
governmentwide management representation letter to help ensure that it
is properly prepared and contains sufficient representations.
Specifically, these policies and procedures should require an
assessment of the effect, if any, of federal agencies' materiality
thresholds on the management representations made at the governmentwide
level;
Status of recommendation: Per Treasury and OMB: Treasury and OMB
revised their policies and procedures to address this finding in fiscal
year 2007;
Status of recommendation: Per GAO: Closed.
Count: 30;
No.: 02-33;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures for preparing the
governmentwide management representation letter to help ensure that it
is properly prepared and contains sufficient representations.
Specifically, these policies and procedures should require an
evaluation and assessment of the omission of representations ordinarily
included in agency management representation letters;
Status of recommendation: Per Treasury and OMB: Treasury and OMB will
continue to revise their policies and procedures in order to improve
internal control over this process;
Status of recommendation: Per GAO: Open.
Count: 31;
No.: 02-34;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures for preparing the
governmentwide management representation letter to help ensure that it
is properly prepared and contains sufficient representations.
Specifically, these policies and procedures should require an analysis
and aggregation of federal agencies' summary of unadjusted
misstatements to determine the completeness of the summaries and to
ascertain the materiality, both individually and in the aggregate, of
such unadjusted misstatements to the CFS taken as a whole;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
Treasury updated the SOP for the aggregation and analysis of federal
agencies' summary of unadjusted misstatements. Treasury also tracked
federal agencies' submissions of this information and prepared a CFS-
level summary that showed that federal agencies' unadjusted
misstatements were immaterial in the aggregate to the CFS;
Status of recommendation: Per GAO: Open. Treasury provided its SOP to
GAO for review. Our review indicated that additional changes were
needed, which were communicated to Treasury. After the issuance of our
audit report on the fiscal year 2007 CFS, Treasury provided us with its
revised SOP.
Count: 32;
No.: 02-35;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
help ensure that federal agencies provide adequate information in their
legal representation letters regarding the expected outcomes of the
cases;
Status of recommendation: Per Treasury and OMB: During fiscal year
2007, OMB and Treasury continued to work with federal agencies to
ensure that adequate information was provided in the legal
representation letters regarding the expected outcomes of the cases;
Status of recommendation: Per GAO: Open. OMB did not ensure that all
federal agencies reported adequate information relating to expected
outcomes of the cases.
Count: 33;
No.: 02-37;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures to help ensure that major
treaty and other international agreement information is properly
identified and reported in the CFS. Specifically, these policies and
procedures should require that federal agencies develop a detailed
schedule of all major treaties and other international agreements that
obligate the U.S. government to provide cash, goods, or services, or
that create other financial arrangements that are contingent on the
occurrence or nonoccurrence of future events (a starting point for
compiling these data could be the State Department's Treaties in
Force);
Status of recommendation: Per Treasury and OMB: To ensure a reasonable
approach, OMB will analyze the appropriateness of reporting "treaties"
before developing specific corrective actions. OMB has, however,
analyzed the State Department's Treaties in Force and concluded that
while it provides a comprehensive listing of treaties and international
agreements, it is not the appropriate document from which to derive
potential commitments or contingencies of the U.S. government. For
fiscal year 2008, OMB will again look at Treaties in Force and has
sought advice from GAO regarding this issue. OMB will continue working
to develop a reasonable approach for this disclosure;
Status of recommendation: Per GAO: Open.
Count: 34;
No.: 02-38;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures to help ensure that major
treaty and other international agreement information is properly
identified and reported in the CFS. Specifically, these policies and
procedures should require that federal agencies classify all such
scheduled major treaties and other international agreements as
commitments or contingencies;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-37;
Status of recommendation: Per GAO: Open.
Count: 35;
No.: 02-39;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures to help ensure that major
treaty and other international agreement information is properly
identified and reported in the CFS. Specifically, these policies and
procedures should require that federal agencies disclose in the notes
to the CFS amounts for major treaties and other international
agreements that have a reasonably possible chance of resulting in a
loss or claim as a contingency;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-37;
Status of recommendation: Per GAO: Open.
Count: 36;
No.: 02-40;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures to help ensure that major
treaty and other international agreement information is properly
identified and reported in the CFS. Specifically, these policies and
procedures should require that federal agencies disclose in the notes
to the CFS amounts for major treaties and other international
agreements that are classified as commitments and that may require
measurable future financial obligations;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-37;
Status of recommendation: Per GAO: Open.
Count: 37;
No.: 02-41;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish written policies and procedures to help ensure that major
treaty and other international agreement information is properly
identified and reported in the CFS. Specifically, these policies and
procedures should require that federal agencies take steps to prevent
major treaties and other international agreements that are classified
as remote from being recorded or disclosed as probable or reasonably
possible in the CFS;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-37;
Status of recommendation: Per GAO: Open.
Count: 38;
No.: 02-42;
Recommendation: As Treasury is designing its new compilation process,
which it expects to implement beginning with the fiscal year 2004 CFS,
the Secretary of the Treasury should direct the Fiscal Assistant
Secretary, in coordination with the Controller of OMB, to design the
new compilation process to directly link information from federal
agencies' audited financial statements to amounts reported in all the
applicable consolidated financial statements and related footnotes;
Status of recommendation: Per Treasury and OMB: Treasury used its
revised CFS compilation process, the Governmentwide Financial Reporting
System (GFRS), first implemented in fiscal year 2004, to provide more
direct linkage from the agency audited financial statements to the CFS
principal statements. With regard to note disclosures, GFRS note
references (linkages) were supplemented by additional documentation
describing in more detail the links between the CFS and agency note
disclosures;
Status of recommendation: Per GAO: Closed. Treasury has made
substantial progress in addressing this recommendation as demonstrated
by its ability to show that amounts in the Statement of Social
Insurance were consistent with the underlying federal agencies' audited
financial statements and that the Balance Sheet and the Statement of
Net Cost were consistent with federal agencies' financial statements
prior to eliminating any applicable intragovernmental activity and
balances. However, some of the principal consolidated financial
statements and notes are still not directly linked to the underlying
federal agencies' financial statements. As Treasury was designing the
closing package process, we recommended that Treasury ensure that the
closing package would demonstrate that all of the principal
consolidated financial statements and footnotes are consistent with the
underlying information in federal agencies' audited financial
statements and other financial data. See status of recommendation No.
03-11.
Count: 39;
No.: 02-43;
Recommendation: As Treasury is designing its new compilation process,
which it expects to implement beginning with the fiscal year 2004 CFS,
the Secretary of the Treasury should direct the Fiscal Assistant
Secretary, in coordination with the Controller of OMB, to consider the
other applicable recommendations in this report when designing and
implementing the new compilation process;
Status of recommendation: Per Treasury and OMB: Treasury considered all
applicable recommendations in the design, implementation, and
subsequent revisions of GFRS;
Status of recommendation: Per GAO: Closed.
Count: 40;
No.: 02-91;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for capital
leases meets the requirements of Federal Accounting Standards Board
(FASB), Statement of Financial Accounting Standards (SFAS) No. 13,
Accounting for Leases, paragraph 16, which requires future minimum
lease payments as of the date of the latest balance sheet presented, in
the aggregate and for each of the 5 succeeding fiscal years, with
separate deductions from the total for the amount representing
executory costs, including any profit thereon, included in the minimum
lease payments, and for the amount of the imputed interest necessary to
reduce the net minimum lease payments to present value;
Status of recommendation: Per Treasury and OMB: Based on analysis in
fiscal year 2007, of this specific lease-related information, Treasury
concluded that the amounts were immaterial to the CFS and therefore no
related disclosures were included in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 41;
No.: 02-92;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for capital
leases meets the requirements of FASB, SFAS No. 13, Accounting for
Leases, paragraph 16, which requires a summary of assets under capital
lease by major asset category and the related total accumulated
amortization;
Status of recommendation: Per Treasury and OMB: Based on analysis in
fiscal year 2007, of this specific lease-related information, Treasury
concluded that the amounts were immaterial to the CFS and therefore no
related disclosures were included in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 42;
No.: 02-93;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for capital
leases meets the requirements of FASB, SFAS No. 13, Accounting for
Leases, paragraph 16, which requires a general description of the
lessee's leasing arrangements, including but not limited to (1) the
basis on which contingent rental payments are determined; (2) the
existence and terms of renewal or purchase options and escalation
clauses; and (3) restrictions imposed by lease agreements, such as
those concerning dividends, additional debt, and further leasing;
Status of recommendation: Per Treasury and OMB: Based on analysis in
fiscal year 2007, of this specific lease-related information, Treasury
concluded that the amounts were immaterial to the CFS and therefore no
related disclosures were included in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 43;
No.: 02-96;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure on major
commitments and contingencies is consistent with disclosed information
in individual federal agencies' financial statements;
Status of recommendation: Per Treasury and OMB: The required
information for these items was disclosed in Note 18, Contingencies,
and Note 19, Commitments, in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 44;
No.: 02-102;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for dedicated
collections meets the requirements of Statement of Federal Financial
Accounting Standard (SFFAS) No. 7, Part I, Accounting for Revenue and
Other Financing Sources, paragraph 85, which requires inclusion of any
revenues, other financing sources, or costs attributable to the fund
under accounting standards but not legally allowable as credits or
charges to the fund;
Status of recommendation: Per Treasury and OMB: In fiscal years 2007
and 2006 dedicated collections information was immaterial to the CFS
and, therefore, were not disclosed in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 45;
No.: 02-104;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for Indian trust
funds meets the requirements of SFFAS No. 7, Part I, Accounting for
Revenue and Other Financing Sources, paragraph 85, which requires
disclosure of the sources of revenue or other financing for the period
and an explanation of the extent to which they are inflows of resources
to the government or the result of intragovernmental flows;
Status of recommendation: Per Treasury and OMB: The required
information for these items was disclosed in Note 21, Indian Trust
Funds, in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed. Although all information
required to be disclosed by SFFAS No. 7 was not presented in the note
disclosure for Indian trust funds, Treasury assessed the effect of the
omitted disclosures and documented its rationale for such decisions.
Count: 46;
No.: 02-106;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for Indian trust
funds meets the requirements of SFFAS No. 7, Part I, Accounting for
Revenue and Other Financing Sources, paragraph 85, which requires
condensed information on net cost and changes to fund balance, showing
revenues by type (exchange/nonexchange), program expenses, other
expenses, other financing sources, and other changes in fund balance;
Status of recommendation: Per Treasury and OMB: The required
information for these items was disclosed in Note 21, Indian Trust
Funds, in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-104.
Count: 47;
No.: 02-107;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for Indian trust
funds meets the requirements of SFFAS No. 7, Part I, Accounting for
Revenue and Other Financing Sources, paragraph 85, which requires
disclosure of any revenues, other financing sources, or costs
attributable to the fund under accounting standards, but not legally
allowable as credits or charges to the fund;
Status of recommendation: Per Treasury and OMB: The required
information for these items was disclosed in Note 21, Indian Trust
Funds, in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-104.
Count: 48;
No.: 02-129;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for stewardship
responsibilities related to the risk assumed for federal insurance and
guarantee programs meets the requirements of SFFAS No. 5, Accounting
for Liabilities of the Federal Government, paragraph 106, which
requires that when financial information pursuant to FASB standards on
federal insurance and guarantee programs conducted by government
corporations is incorporated in general purpose financial reports of a
larger federal reporting entity, the entity should report as required
supplementary information what amounts and periodic change in those
amounts would be reported under the "risk assumed" approach;
Status of recommendation: Per Treasury and OMB: This required
information was requested from federal agencies for disclosure in the
required supplementary information (risk assumed) section of the fiscal
year 2007 CFS. Further discussions with federal agencies will take
place in fiscal year 2008 to ensure proper and complete disclosure of
this information;
Status of recommendation: Per GAO: Open.
GAO-04-866; (results of the fiscal year 2003 audit):
Count: 49;
No.: 03-4;
Recommendation: The Director of OMB should direct the Controller of
OMB, in coordination with Treasury's Fiscal Assistant Secretary, to
work with federal agencies so that the differences between net outlays
federal agencies report in their Statement of Budgetary Resources and
the net outlay records Treasury uses to prepare the Statement of
Changes in Cash Balance are reconciled;
Status of recommendation: Per Treasury and OMB: See status of
recommendation; No. 02-18;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-18.
Count: 50;
No.: 03-5;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to determine and address the effects that any of
the differences between net outlays federal agencies report in their
Statement of Budgetary Resources and Treasury's net outlay records may
have on the CFS;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 02-18;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 02-18.
Count: 51;
No.: 03-6;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to develop a process that will allow full reporting
of the changes in cash balance of the U.S. government. Specifically,
the process should provide for reporting on the change in cash reported
on the consolidated balance sheet, which should be linked to cash
balances reported in federal agencies' audited financial statements;
Status of recommendation: Per Treasury and OMB: Treasury intends to
disclose the change in cash as reported on the Balance Sheet on the
Statement of Changes in Cash Balance. Treasury will continue its
analysis of the reconciling items from the unified budget deficit to
the overall change in cash balance to ensure their accuracy,
completeness, and consistency with federal agencies' financial
information. See also status of recommendation No. 02-17;
Status of recommendation: Per GAO: Open.
Count: 52;
No.: 03-8;
Recommendation: The Director of OMB should direct the Controller of
OMB, in coordination with Treasury's Fiscal Assistant Secretary, to
work with the Department of Justice (Justice) and certain other
executive branch federal agencies to ensure that these federal agencies
report or disclose relevant criminal debt information in conformity
with GAAP in their financial statements and have such information
subjected to audit;
Status of recommendation: Per Treasury and OMB: An interagency task
force has been established under the direction of the Attorney General
and has developed a strategic plan for improving criminal debt
collection and has provided the plan to Congress. The task force
includes representatives from Justice, Treasury, OMB, and the
Administrative Office of the U.S. Courts. OMB will work with Justice to
develop a reasonable approach for the reporting or disclosure of this
information;
Status of recommendation: Per GAO: Open.
Count: 53;
No.: 03-9;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to include relevant criminal debt information in
the CFS or document the specific rationale for excluding such
information;
Status of recommendation: Per Treasury and OMB: Treasury will include
criminal debt information in the CFS as it becomes available. See
status of recommendation No. 03-08;
Status of recommendation: Per GAO: Open.
Count: 54;
No.: 03-11;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
modify Treasury's plans for the new closing package to (1) require
federal agencies to directly link their audited financial statement
notes to the CFS notes and (2) provide the necessary information to
demonstrate that all of the five principal consolidated financial
statements are consistent with the underlying information in federal
agencies' audited financial statements and other financial data;
Status of recommendation: Per Treasury and OMB: Treasury continues to
use its revised CFS compilation process, GFRS, to provide direct
linkage from the agency audited financial statements to the CFS
principal statements. See also status of recommendation No. 02-17; With
regard to note disclosures, GFRS note references (linkages) have been
supplemented by additional documentation describing in more detail the
links between the CFS and agency note disclosures;
Status of recommendation: Per GAO: Open. Treasury has showed progress
by demonstrating that amounts in the Statement of Social Insurance were
consistent with the underlying federal agencies' audited financial
statements and that the Balance Sheet and the Statement of Net Cost
were consistent with federal agencies' financial statements prior to
eliminating intragovernmental activity and balances. However,
Treasury's closing package process did not ensure that the information
in the remaining three principal financial statements and notes were
fully consistent with the underlying information in federal agencies'
audited financial statements and other financial data.
Count: 55;
No.: 03-22;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the information in stewardship
information for research and development meets the requirements of
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 99, which
requires the reporting entity to include a narrative discussion of the
major results achieved by the program along the lines of basic
research, applied research, and development;
Status of recommendation: Per Treasury and OMB: The required
information on stewardship investments related to the reporting on
major results achieved by selected basic research, applied research, or
development program(s), was disclosed in the Stewardship Investments
section of the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
GAO-05-407; (results of the fiscal year 2004 audit):
Count: 56;
No.: 04-2;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to require and maintain appropriate supporting
documentation for all journal vouchers recorded in the CFS;
Status of recommendation: Per Treasury and OMB: Treasury will follow
its SOP that includes maintaining documentation for all recorded
journal vouchers, including notification and approval of changes from
affected federal agencies. Except in certain circumstances described
below, Treasury will seek approval from federal agencies before making
data changes. However, because of year-end time constraints, Treasury
will make changes without agency contact or approval under the
following circumstances: (1) adjustments to agree closing packages to
financial statements, (2) adjustments to ensure consistency of GAAP
between federal agencies, and (3) adjustments to conform an agency to
GAAP;
Status of recommendation: Per GAO: Open. Treasury did not have
appropriate supporting documentation for all transactions recorded in
the CFS. Recording transactions in the financial statements without
adequate underlying support increases the risk that inappropriate
adjustments to balances in the financial statements could be made. We
believe that Treasury should contact federal agencies to resolve any
discrepancies between federal agencies' audited closing packages and
audited financial statements and discuss any other situations that
require adjustments to federal agencies' audited closing package data
because Treasury could incorrectly adjust federal agencies' audited
information.
Count: 57;
No.: 04-3;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to require that Treasury employees contact and
document communications with federal agencies before recording journal
vouchers to change agency audited closing package data;
Status of recommendation: Per Treasury and OMB: Treasury's policy
related to the notification of federal agencies before making needed
data changes is described in status of recommendation No. 04-2.
Treasury agrees that changes to closing package information should be
accurate and fully supported. Where agency clarification is needed
related to complex disclosures, Treasury will continue to document
these discussions to ensure that the CFS is consistent with agency
financial statements and note disclosures;
Status of recommendation: Per GAO: Open. See status of recommendation
No. 04-2.
Count: 58;
No.: 04-4;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to require and document management reviews of all
procedures that result in data changes to the CFS;
Status of recommendation: Per Treasury and OMB: Treasury further
revised its procedures to ensure management reviews of data changes to
the CFS;
Status of recommendation: Per GAO: Open. Certain of Treasury's
procedures were not effective for fiscal year 2007.
Count: 59;
No.: 04-6;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to assess the infrastructure associated with the
compilation process and modify it as necessary to achieve a sound
internal control environment;
Status of recommendation: Per Treasury and OMB: Treasury made various
improvements to its infrastructure during fiscal year 2007, including
streamlining the compilation process to automate the production of
certain items, continuing its recruitment of qualified personnel, and
providing them with appropriate training related to the CFS compilation
process and associated internal controls, revising its policies and
procedures to improve documentation of management reviews and
approvals, and continuing cross-training on significant key compilation
processes;
Status of recommendation: Per GAO: Open. For fiscal year 2007, as had
been the case for fiscal year 2006, Treasury was unable to provide the
final accrual basis consolidated financial statements and certain
supporting documentation in time for us to complete all of our planned
auditing procedures related to the compilation of these financial
statements. In our view, a major contributing factor is that Treasury
did not have enough personnel with specialized financial reporting
experience to help ensure reliable financial reporting by the reporting
date.
Count: 60;
No.: 04-15;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for federal
employee and veteran benefits payable meets the requirements of SFFAS
No. 5, Accounting for Liabilities of the Federal Government, paragraph
110, table 9, which states that all components of the liability for
future policy benefits should be separately disclosed in a footnote
with a description of each amount and an explanation of its projected
use and any other potential uses;
Status of recommendation: Per Treasury and OMB: This required
information was disclosed in Note 11, Federal Employees and Veteran
Benefits Payable, in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 61;
No.: 04-19;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that federal agencies designate in the
note disclosure for cash and other monetary assets any amounts reported
for the "other cash" line items that are restricted with respect to the
federal government taken as a whole;
Status of recommendation: Per Treasury and OMB: This required
information was requested from federal agencies for inclusion in Note
2, Cash and Other Monetary Assets, in the fiscal year 2007 CFS. Further
discussions with federal agencies will take place in fiscal year 2008
to ensure proper and complete disclosure of this information;
Status of recommendation: Per GAO: Open.
Count: 62;
No.: 04-20;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the note disclosure for other
liabilities meets the requirements of SFFAS No. 5, paragraph 114, which
requires the reporting of indicators of the range of uncertainty around
insurance-related estimates and the sensitivity of the estimates to
changes in major assumptions;
Status of recommendation: Per Treasury and OMB: The required
information was requested from federal agencies for disclosure in the
required supplementary information (risk assumed) section of the fiscal
year 2007 CFS. Further discussions with federal agencies will take
place in fiscal year 2008 to ensure proper and complete disclosure of
this information;
Status of recommendation: Per GAO: Open.
GAO-06-415; (results of the fiscal year 2005 audit):
Count: 63;
No.: 05-2;
Recommendation: The Director of OMB should direct the Controller of the
Office of Federal Financial Management, in coordination with the
Treasury Fiscal Assistant Secretary, to develop an alternative solution
for obtaining audit assurance related to the Federal Deposit Insurance
Corporation's funds, National Credit Union Administration, and Farm
Credit System Insurance Corporation, which includes the requirement for
adequate audit procedures to be performed over significant information
included in the CFS for these federal agencies;
Status of recommendation: Per Treasury and OMB: OMB agrees with the
recommendation and is committed to working with Treasury and the
pertinent federal agencies to develop an alternative solution for
obtaining audit assurance over the significant information included in
the CFS for these federal agencies;
Status of recommendation: Per GAO: Open.
Count: 64;
No.: 05-3;
Recommendation: The Director of OMB should direct the Controller of the
Office of Federal Financial Management to consider not waiving the
closing package audit requirement for any verifying agency in future
years, such as Tennessee Valley Authority (TVA);
Status of recommendation: Per Treasury and OMB: OMB generally agrees
with the recommendation; however, it will continue to weigh the costs
against benefits of global requirements during extenuating
circumstances;
Status of recommendation: Per GAO: Open. For fiscal year 2007, TVA did
not meet the closing package requirements. OMB did not waive the
closing package requirements for any verifying agency in fiscal year
2007, however, OMB did not ensure that TVA met the closing package
requirements.
Count: 65;
No.: 05-4;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop policies and procedures for monitoring internal control to help
ensure that (1) audit findings are promptly evaluated; (2) proper
actions are determined in response to audit findings and
recommendations, such as a documented plan of action with milestones
for short-term and long-range solutions; and (3) all actions that
correct or otherwise resolve the audit findings are completed within
established time frames;
Status of recommendation: Per Treasury and OMB: OMB concurs with the
recommendation and is committed to improving the corrective action
plans and monitoring progress against those plans;
Status of recommendation: Per GAO: Open.
Count: 66;
No.: 05-5;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop an executable plan of action and milestones for short-term and
long-range solutions for certain internal control weaknesses we have
previously reported regarding the processes used to prepare the CFS;
Status of recommendation: Per Treasury and OMB: OMB developed
corrective action plans and will monitor the progress;
Status of recommendation: Per GAO: Closed. Treasury and OMB have
developed corrective action plans for certain internal control
weaknesses we have previously reported regarding the processes used to
prepare the CFS. GAO will continue to monitor the implementation of
these plans.
Count: 67;
No.: 05-6;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the TFM and any other guidance to
federal agencies provide clear instructions for providing reliable data
to Treasury for restricted cash;
Status of recommendation: Per Treasury and OMB: With regard to
restricted cash, in fiscal year 2007, Treasury reviewed agency cash
amounts designated as restricted to determine what, if any,
restrictions applied at the governmentwide level. Treasury implemented
changes based on this review to the restricted cash disclosures during
fiscal year 2007 and disclosed these restricted cash amounts in Note 2,
Cash and Other Monetary Assets, in the fiscal year 2007 CFS. Further
discussions with federal agencies will take place in fiscal year 2008
to ensure proper and complete disclosure of this information;
Status of recommendation: Per GAO: Open. Treasury did not provide clear
instructions to federal agencies for providing reliable data related to
restricted cash.
Count: 68;
No.: 05-8;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to ensure that the TFM and any other guidance to
federal agencies provide clear instructions for providing reliable data
to Treasury for summaries of unadjusted misstatements;
Status of recommendation: Per Treasury and OMB: Treasury updated the
TFM in fiscal year 2007 related to the guidance to federal agencies
concerning agency management representations and related summaries of
unadjusted misstatements and will continue to revise them as necessary
during fiscal year 2008;
Status of recommendation: Per GAO: Open. Treasury's updates to the TFM
for fiscal year 2007 did not provide clear instructions to federal
agencies for providing reliable data related to summaries of unadjusted
misstatements.
Count: 69;
No.: 05-10;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
provide clear guidance to federal agencies as to when the "confirmed
reporting" category in the intragovernmental reconciliation report
should be selected;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
Treasury revised its quarterly intragovernmental reporting process to
provide clearer guidance to federal agencies related to their
intragovernmental confirmations as well as to require that federal
agencies prepare corrective action plans for continuing "confirmed"
differences;
Status of recommendation: Per GAO: Closed. In addition to providing
clearer guidance to federal agencies, Treasury also developed a process
for obtaining clarification from federal agencies for inconsistent or
incomplete explanations provided in the "confirmed reporting" category
by requesting that federal agencies prepare corrective action plans for
these differences.
Count: 70;
No.: 05-11;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop an effective process for obtaining clarification from federal
agencies for inconsistent or incomplete explanations provided in all
material difference categories;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 05-10;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 05-10.
GAO-07-805; (results of the fiscal year 2006 audit):
Count: 71;
No.: 06-1;
Recommendation: The Director of OMB and Secretary of the Treasury
should direct the Controller of the Office of Federal Financial
Management and Fiscal Assistant Secretary, respectively, to develop
formal processes and procedures for identifying and either resolving or
explaining any material differences in undistributed offsetting receipt
amounts between Treasury's central accounting records and information
reported in agency financial statements and underlying agency financial
information and records;
Status of recommendation: Per Treasury and OMB: Treasury has policies
and procedures for identifying and either resolving or explaining any
material differences in undistributed offsetting receipt amounts
between Treasury's central accounting records and information reported
in agency financial statements and underlying agency financial
information and records, and will revise these policies and procedures
as necessary during fiscal year 2008;
Status of recommendation: Per GAO: Open. Treasury's procedures remained
incomplete as of December 10, 2007.
Count: 72;
No.: 06-2;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to develop formal processes and procedures for
ensuring that intragovernmental activity and balances, including
intragovernmental interest, are fully eliminated in the calculation of
the budget deficit;
Status of recommendation: Per Treasury and OMB: Treasury does have
formal processes and procedures for ensuring that intragovernmental
activity and balances, including intragovernmental interest, are fully
eliminated in the calculation of the budget deficit, and will revise
these policies and procedures as necessary during fiscal year 2008;
Status of recommendation: Per GAO: Open. Treasury's procedures remained
incomplete as of December 10, 2007.
Count: 73;
No.: 06-3;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB's
Office of Federal Financial Management, to develop processes and
procedures for collecting all the necessary information that would
enable the proper reporting of unexpended budget balances in the CFS;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
Treasury developed processes and procedures for collecting all the
necessary information to enable the proper reporting of unexpended
budget balances in the CFS;
Status of recommendation: Per GAO: Closed. During fiscal year 2007,
Treasury changed its disclosure for unexpended budget balances in the
CFS by reporting the fiscal years 2006 and 2005 actual amounts rather
than reporting fiscal year 2006 actual amounts and estimating the
fiscal year 2007 amounts.
Count: 74;
No.: 06-4;
Recommendation: The Director of OMB should direct the Controller of
OMB's Office of Federal Financial Management to continue to work with
federal agencies to resolve internal control issues regarding
differences and the lack of effective reconciliation between the
unexpended budget balances reported in federal agencies' financial
statements and amounts reported in federal agencies' SF-133s;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 06-3;
Status of recommendation: Per GAO: Closed. See status of recommendation
No. 06-3.
Count: 75;
No.: 06-5;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to develop and implement processes and procedures
for identifying and either resolving or explaining the differences that
exist between operating cash reported in certain federal agencies'
financial statements and the operating cash balance reported in the
CFS;
Status of recommendation: Per Treasury and OMB: With regard to
operating cash, in fiscal year 2007, Treasury removed "operating cash"
as a reporting category as such a category is not required by GAAP.
Instead, Treasury ensured that agency cash amounts were categorized as
either restricted or nonrestricted cash amounts, as only these two
categories are required by GAAP. Treasury disclosed agency cash amounts
in the two required cash categories in Note 2, Cash and Other Monetary
Assets, in the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 76;
No.: 06-6;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, working in coordination with the Controller of
OMB's Office of Federal Financial Management, to establish effective
processes and procedures to ensure that appropriate information
regarding litigation and claims is included in the governmentwide legal
representation letter;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
OMB informally discussed with GAO possible solutions for addressing
this issue. As a result of these discussions, OMB started working with
Justice on possible solutions. For fiscal year 2008, OMB will continue
working with Justice to establish effective processes and procedures so
that appropriate information regarding litigation and claims is
included in the governmentwide legal representation letter. Finally,
OMB will also continue its communications with GAO;
Status of recommendation: Per GAO: Open.
Count: 77;
No.: 06-7;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, working in coordination with the Controller of
OMB's Office of Federal Financial Management, to develop a process for
obtaining sufficient information from federal agencies to enable
Treasury and OMB to adequately monitor federal agencies' efforts to
reconcile intragovernmental activity and balances with their trading
partners. This information should include (1) the nature and a detailed
description of the significant differences that exist between trading
partners' records of intragovernmental activity and balances, (2)
detailed reasons why such differences exist, (3) details of steps taken
or being taken to work with federal agencies' trading partners to
resolve the differences, and (4) the potential outcome of such steps;
Status of recommendation: Per Treasury and OMB: During fiscal year
2007, Treasury continued a process for obtaining sufficient information
from federal agencies to enable Treasury and OMB to adequately monitor
federal agencies' efforts to reconcile intragovernmental activity and
balances with their trading partners. This information included (1) the
nature and a detailed description of the significant differences that
exist between trading partners' records of intragovernmental activity
and balances, (2) detailed reasons why such differences exist, (3)
details of steps taken or being taken to work with federal agencies'
trading partners to resolve the differences, and (4) the potential
outcome of such steps;
Status of recommendation: Per GAO: Open. Treasury and OMB's process did
not provide them with sufficient information to adequately monitor
federal agencies' efforts to reconcile intragovernmental activity and
balances with their trading partners.
Count: 78;
No.: 06-8;
Recommendation: The Director of OMB should direct the Controller of the
Office of Federal Financial Management, in coordination with the
Treasury Fiscal Assistant Secretary, to establish additional procedures
to ensure that federal agencies prepare their closing packages and have
them audited in accordance with the requirements specified in the
closing package instructions;
Status of recommendation: Per Treasury and OMB: OMB will continue to
work with federal agencies to ensure closing packages are prepared
properly and audited in accordance with the requirements;
Status of recommendation: Per GAO: Closed. During fiscal year 2007,
federal agencies prepared closing packages and had them audited in
accordance with the requirements. The procedures OMB established should
be used every year to ensure that federal agencies continue to follow
these requirements.
Count: 79;
No.: 06-9;
Recommendation: The Director of OMB should direct the Controller of the
Office of Federal Financial Management to work with the significant
agency that did not provide in its closing package the required
information that Treasury uses to allocate costs in the governmentwide
Statement of Net Cost to ensure that such information is reported by
the agency in future years;
Status of recommendation: Per Treasury and OMB: See status of
recommendation No. 06-8;
Status of recommendation: Per GAO: Closed. During fiscal year 2007, OMB
ensured the significant agency provided the information required by
Treasury.
Count: 80;
No.: 06-10;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to establish procedures to ensure that the CFS
includes required consolidated totals in the Statement of Social
Insurance or document the specific rationale for excluding such
disclosure;
Status of recommendation: Per Treasury and OMB: In fiscal year 2007,
Treasury established procedures to ensure that the CFS included
consolidated totals in the Statement of Social Insurance included in
the fiscal year 2007 CFS;
Status of recommendation: Per GAO: Closed.
Count: 81;
No.: 06-11;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to disclose the balance of foreign currencies held
at fiscal year end in the Cash and Other Monetary Assets footnote to
the CFS;
Status of recommendation: Per Treasury and OMB: With regard to foreign
currency balances, in fiscal year 2007, Treasury requested this
information from federal agencies and presented these balances in Note
2, Cash and Other Monetary Assets, in the fiscal year 2007 CFS. Further
discussions with federal agencies will take place in fiscal year 2008
to ensure proper and complete disclosure of this information;
Status of recommendation: Per GAO: Open.
Source: GAO.
[End of table]
[End of section]
Appendix II: Comments from the Department of the Treasury:
Assistant Secretary:
Department Of The Treasury:
Washington, D.C.
June 10, 2008:
Mr. Gary T. Engel:
Director, Financial Management and Assurance:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Engel:
Thank you for the opportunity to comment on the Government
Accountability Office's (GAO) draft report on the Fiscal Year (FY) 2007
audit report, GAO-08-748, Material Weaknesses in Internal Control Over
the Processes Used to Prepare the Consolidated Financial Statements of
the US. Government.
During FY 2007, we made considerable improvements, leading to the
closure of 35 of 81 recommendations outstanding from previous CFS audit
reports. In addition, the procedural and automated changes to our
reporting processes implemented during the year not only improved the
internal controls related to the preparation of the CFS, but also
enabled us to make the CFS more meaningful and usable to its readers.
While significant advancements were made in the preparation process, we
concur with GAO that the process should be continually improved, and we
look forward to working with your office in identifying and
implementing such process improvements.
The FY 2007 draft report identifies 10 new findings and their related
recommendations for improving the CFS process. We agree with GAO on
these findings and recommendations. Regarding the recommendation to use
agencies' quarterly financial information to compile the CFS, we need
to work with OMB, with input from GAO staff, to determine the
appropriate path forward for using this interim financial information
in the CFS process. We will also explore other alternative solutions to
facilitate the CFS preparation process.
We will continue to work with the agencies and OMB to address the
material weakness related to intragovernmental differences. Although
Treasury cannot solve this problem on its own, we will continue to
provide assistance to the agencies in timely reconciling this activity
and thereby reducing the out-of-balance condition.
Thank you, again, for the opportunity to review and comment on the
draft report. We look forward to working with you and your staff in
making the CFS more meaningful and usable to its readers.
Sincerely,
Signed by:
Kenneth E. Carfine:
Fiscal Assistant Secretary:
cc: Daniel Werfel, OMB:
[End of section]
Appendix III GAO Contact and Staff Acknowledgments:
GAO Contact:
Gary Engel, (202) 512-3406 or engelg@gao.gov:
Acknowledgments:
In addition to the above contact, the following individuals made key
contributions to this report: Lynda Downing, Assistant Director; Mickie
Gray; David Hayes; Sharon Kittrell; Dragan Matic; Maria Morton; and
Taya Tasse.
[End of section]
Footnotes:
[1] The fiscal year 2007 Financial Report of the United States
Government includes our audit report and was issued by the Department
of the Treasury (Treasury) on December 17, 2007, and is available
through GAO's Web site at [hyperlink,
http://www.gao.gov/financial.html] and Treasury's Web site at
[hyperlink, http://www.fms.treas.gov/fr/index.html].
[2] The consolidated financial statements for the fiscal years ended
September 30, 2007 and 2006 consist of the Statements of Net Cost,
Statements of Operations and Changes in Net Position, Reconciliations
of Net Operating Cost and Unified Budget Deficit, Statements of Changes
in Cash Balance from Unified Budget and Other Activities, Balance
Sheets, and the Statements of Social Insurance, including the related
notes to these financial statements.
[3] We disclaimed an opinion on the fiscal year 2006 consolidated
financial statements, including the Statement of Social Insurance.
[4] As used in this report, accrual basis consolidated financial
statements refer to all of the consolidated financial statements and
notes, except for those related to the Statement of Social Insurance.
[5] A material weakness is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote likelihood
that a material misstatement of the financial statements will not be
prevented or detected. A significant deficiency is a control
deficiency, or combination of control deficiencies, that adversely
affects the entity's ability to initiate, authorize, record, process,
or report financial data reliably in accordance with generally accepted
accounting principles such that there is more than a remote likelihood
that a misstatement of the entity's financial statements that is more
than inconsequential will not be prevented or detected. A control
deficiency exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their
assigned functions, to prevent or detect misstatements on a timely
basis.
[6] GAO, Financial Audit: Significant Internal Control Weaknesses
Remain in the Preparation of the Consolidated Financial Statements of
the U.S. Government, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
07-805] (Washington, D.C.: July 23, 2007).
[7] GAO, Internal Control: Standards for Internal Control in the
Federal Government, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/AIMD-00-21.3.1] (Washington, D.C.: November 1999). These
standards define the minimum level of quality acceptable for internal
control in government and provide the basis against which internal
control is to be evaluated.
[8] The American Institute of Certified Public Accountants' hierarchy
of GAAP in Statement of Auditing Standards No. 91, The Federal GAAP
Hierarchy, governs what constitutes GAAP for U.S. government reporting
entities. The hierarchy lists the priority sequence of sources that an
entity looks to for accounting and reporting guidance [hyperlink,
http://www.fasab.gov/accepted.html].
[9] Unified budget deficit is the amount by which the government's on-
budget and off-budget outlays (budget outlays) exceed the sum of its on-
budget and off-budget receipts (budget receipts) for a given period,
usually a fiscal year. Off-budget refers to those budgetary accounts
(either federal or trust funds) designated by law as excluded from
budget totals. Conversely, on-budget refers to all budgetary accounts
other than those designated by law as off-budget.
[10] The budget deficit, receipt, and outlay amounts are reported in
Treasury's Monthly Treasury Statement and the annual Budget of the
United States Government.
[11] Distributed offsetting receipts are collections by the federal
government that are offset against outlays at the agency or subfunction
level.
[12] Undistributed offsetting receipts are deducted from total outlays
for the government as a whole rather than from a single agency or
subfunction in order to avoid distortion of agency or subfunction
totals. Certain offsetting receipts that are undistributed in both
agency and functional tables include collections of employer share of
employee retirement payments. Interest received by federal trust funds
is undistributed in the agency tables but distributed in the functional
tables.
[13] The SBR provides information about how budgetary resources were
made available (i.e., appropriations, contract authority, spending
authority from offsetting collections, etc.) as well as the status of
such resources (obligated or unobligated). It also provides information
regarding obligated balances at the end of, and outlays for, the fiscal
year.
[14] See GAO's audit report on its audit of the federal government's
fiscal year 2007 financial statements that was incorporated in the 2007
Financial Report of the U.S. Government published by Treasury. Also,
see GAO, Financial Audit: Process for Preparing the Consolidated
Financial Statements of the U.S. Government Needs Improvement,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-45] (Washington,
D.C.: Oct. 30, 2003).
[15] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1]
[16] Spreadsheet Compliance in the 2007 Microsoft Office System, April
2006.
[17] OMB Circular No. A-127, Financial Management Systems (Washington,
D.C.: July 23, 1993), §7(j), Internal Controls. The financial
management systems shall include a system of internal controls that
ensure resource use is consistent with laws, regulations, and policies;
resources are safeguarded against waste, loss, and misuse; and reliable
data are obtained, maintained, and disclosed in reports. Appropriate
internal controls shall be applied to all system inputs, processing,
and outputs. Such system-related controls form a portion of the
management control structure required by OMB Circular No. A-123.
[18] OMB Circular No. A-127, §7(i), Documentation. Agency financial
management systems and processing instructions shall be clearly
documented in hard copy or electronically in accordance with (a) the
requirements contained in the Federal Financial Management Systems
Requirements documents published by the Office of Federal Financial
Management or (b) other applicable requirements. All documentation
(software, system, operations, user manuals, operating procedures,
etc.) shall be kept up-to-date and be readily available for
examination. System user documentation shall be in sufficient detail to
permit a person, knowledgeable of the agency's programs and of systems
generally, to obtain a comprehensive understanding of the entire
operation of each system. Technical systems documentation such as
requirements documents, systems specifications, and operating
instructions shall be adequate to enable technical personnel to operate
the system in an effective and efficient manner.
[19] OMB Circular No. A-123, Management's Responsibility for Internal
Control (Washington, D.C.: Dec. 21, 2004).
[20] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1].
These standards define the minimum level of quality acceptable for
internal control in the federal government and provide the basis
against which internal control is to be evaluated.
[21] OMB Circular No. A-136, Financial Reporting Requirements
(Washington, D.C.: June 29, 2007). Agencies shall submit unaudited
interim financial statements to OMB 21 days after the end of each of
the first three quarters of the fiscal year.
[End of section]
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