Financial Management
Review of the Financial Statement Audit of the White House Commission on the National Moment of Remembrance for Fiscal Year 2005 and Status of GAO Audit Recommendations Gao ID: GAO-07-61R October 26, 2006The White House Commission on the National Moment of Remembrance (Commission) was created on December 28, 2000, by the National Moment of Remembrance Act. The Commission's purpose is to sustain the American spirit through acts of remembrance, not only on Memorial Day but also throughout the year, for those who died serving our country. Congress appropriated $1.25 million to the Commission to fund its operations for fiscal years 2002 through 2005. In fiscal year 2005, the Commission received net appropriations of approximately $248,000, along with cash and in-kind donations of approximately $103,000 from individuals and businesses. In addition, it had approximately $244,000 in unexpended appropriations from prior fiscal years. The Commission expended approximately $239,000 of appropriated funds and funded costs of approximately $103,000 with cash and in-kind donations received during the fiscal year. The National Moment of Remembrance Act requires GAO to annually audit the financial transactions of the Commission. However, as reflected in an Office of Management and Budget (OMB) memorandum, the Commission is subject to the Accountability of Tax Dollars Act of 2002 which was enacted on November 7, 2002. This act requires the Commission to annually prepare and submit audited financial statements to OMB and Congress. This is the first year the Commission has prepared a complete set of financial statements and contracted with an independent public accountant (IPA) to conduct the financial statement audit. In lieu of performing an audit of the Commission's fiscal year 2005 financial transactions, which would duplicate much of the work performed by the IPA, we performed a review of the IPA's audit of the Commission's financial statements. This report provides the results of our review of the Commission's fiscal year 2005 financial statement audit and provides the status of the Commission's implementation of recommendations made by us during prior years' audits of the Commission's financial transactions.
We found no instances in which the IPA did not perform sufficient work to support its opinion and no instances in which the IPA did not comply, in all material respects, with U.S. generally accepted government auditing standards. In its audit of the Commission's fiscal year 2005 financial statements, the IPA found that (1) the financial statements were presented fairly, except for the Commission's failure to provide a legal representation letter; (2) the Commission's failure to provide a legal representation letter also resulted in a reportable condition; and (3) there was no reportable noncompliance with selected provisions of laws and regulations.
GAO-07-61R, Financial Management: Review of the Financial Statement Audit of the White House Commission on the National Moment of Remembrance for Fiscal Year 2005 and Status of GAO Audit Recommendations
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Fiscal Year 2005 and Status of GAO Audit Recommendations' which was
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October 26, 2006:
The Honorable Arlen Specter:
Chairman:
The Honorable Patrick J. Leahy:
Ranking Minority Member:
Committee on the Judiciary:
United States Senate:
The Honorable F. James Sensenbrenner, Jr. Chairman:
The Honorable John Conyers, Jr.
Ranking Minority Member:
Committee on the Judiciary:
House of Representatives:
Subject: Financial Management: Review of the Financial Statement Audit
of the White House Commission on the National Moment of Remembrance for
Fiscal Year 2005 and Status of GAO Audit Recommendations:
The White House Commission on the National Moment of Remembrance
(Commission) was created on December 28, 2000, by the National Moment
of Remembrance Act.[Footnote 1] The Commission's purpose is to sustain
the American spirit through acts of remembrance, not only on Memorial
Day but also throughout the year, for those who died serving our
country.
The National Moment of Remembrance Act requires us to annually audit
the financial transactions of the Commission. However, as reflected in
an Office of Management and Budget (OMB) memorandum,[Footnote 2] the
Commission is subject to the Accountability of Tax Dollars Act of 2002
which was enacted on November 7, 2002.[Footnote 3] This act requires
the Commission to annually prepare and submit audited financial
statements to OMB and Congress. This is the first year the Commission
has prepared a complete set of financial statements and contracted with
an independent public accountant (IPA) to conduct the financial
statement audit. In lieu of performing an audit of the Commission's
fiscal year 2005 financial transactions, which would duplicate much of
the work performed by the IPA, we performed a review of the IPA's audit
of the Commission's financial statements. This report provides the
results of our review of the Commission's fiscal year 2005 financial
statement audit and provides the status of the Commission's
implementation of recommendations made by us during prior years' audits
of the Commission's financial transactions. Our work was performed in
accordance with U.S. generally accepted government auditing standards.
Results in Brief:
We found no instances in which the IPA did not perform sufficient work
to support its opinion and no instances in which the IPA did not
comply, in all material respects, with U.S. generally accepted
government auditing standards. In its audit of the Commission's fiscal
year 2005 financial statements, the IPA found that (1) the financial
statements were presented fairly, except for the Commission's failure
to provide a legal representation letter; (2) the Commission's failure
to provide a legal representation letter also resulted in a reportable
condition;[Footnote 4] and (3) there was no reportable noncompliance
with selected provisions of laws and regulations.
In our report on our audit of the Commission's fiscal year 2004
financial transactions,[Footnote 5] we made 10 recommendations to the
Commission designed to improve its overall financial management and
internal control. Subsequently, the Commission provided a written
statement of actions it had taken or was planning to take to address
the issues we reported that gave rise to our recommendations. We
reviewed the actions taken by the Commission and found that the
Commission had effectively implemented 9 of our 10 recommendations.
We are not making any new recommendations in this report. The
Commission agreed with the results presented in this report.
Background:
The Commission's purpose is to sustain the American spirit through acts
of remembrance, not only on Memorial Day but also throughout the year,
for those who died serving our country. Congress appropriated $1.25
million to the Commission to fund its operations for fiscal years 2002
through 2005.[Footnote 6] In fiscal year 2005, the Commission received
net appropriations of approximately $248,000, along with cash and in-
kind[Footnote 7] donations of approximately $103,000 from individuals
and businesses. In addition, it had approximately $244,000 in
unexpended appropriations from prior fiscal years. The Commission
expended approximately $239,000 of appropriated funds and funded costs
of approximately $103,000 with cash and in-kind donations received
during the fiscal year.
Processing of Commission Financial Transactions:
The Commission utilizes the Department of Veterans Affairs (VA)--
through an interagency agreement--for administrative support services,
including payment of the Commission's bills and personnel and payroll
services. VA processes the Commission's obligations, expenditures, and
cash and in-kind donations recorded during the fiscal year. VA also
prepares annual financial statements and monthly standard forms on
budget execution for the Commission. During fiscal year 2005, the
Commission employed the services of a part-time bookkeeper to help
maintain its financial records.
Financial Reporting and Audit Requirements:
The Commission is required under the Accountability of Tax Dollars Act
of 2002 to annually prepare and submit audited financial statements.
OMB Circular No. A-136, Financial Reporting Requirements, as amended,
identifies the basic financial statements to include the Balance Sheet,
Statement of Net Cost, Statement of Changes in Net Position, Statement
of Budgetary Resources, and Statement of Financing. The financial
statements are to be prepared in accordance with U.S. generally
accepted accounting principles, and their production is intended, in
part, to provide for complete, reliable, timely, and consistent
financial information for use by management and Congress in the
financing, management, and evaluation of federal programs.
Federal financial statements are to be audited in accordance with U.S.
generally accepted government auditing standards.[Footnote 8] OMB's
guidance in OMB Circular No. A-136 requires agencies to prepare and
submit their performance and accountability reports, which include
agencies' audited financial statements, to OMB and Congress no later
than November 15 for agencies with a September 30 fiscal year-end. OMB
granted the Commission an exemption from the requirement to prepare
audited financial statements for fiscal year 2004[Footnote 9] but did
not exempt the Commission from this requirement in fiscal year 2005.
The Commission did not submit audited financial statements to OMB by
November 15, 2005, as required by OMB guidance, and the Commission did
not request an exemption from this requirement from OMB for fiscal year
2005.
Financial statement audits of federal departments and agencies,
performed in accordance with generally accepted government auditing
standards, are intended to provide reasonable assurance about whether
the financial statements for an audited entity present fairly, in all
material respects, its financial position, net cost, changes in net
position, budgetary status, and financing, in conformity with U.S.
generally accepted accounting principles. OMB Bulletin No. 01-02, Audit
Requirements for Federal Financial Statements, as amended, establishes
the minimum requirements for audits of federal financial
statements.[Footnote 10] OMB audit guidance requires auditors to (1)
report whether agencies' financial statements are fairly presented in
all material respects, in conformity with U.S. generally accepted
accounting principles; (2) obtain an understanding of the components of
internal controls and assess the level of control risk; and (3) test
whether agencies comply with laws and regulations that have a direct
and material effect on the financial statements.
Objectives, Scope, and Methodology:
Our objectives were to determine (1) whether the IPA performed
sufficient work to support its opinion on the fiscal year 2005
financial statements of the Commission; (2) whether the financial
statement audit was performed in accordance with appropriate auditing
standards; and (3) whether, and to what extent, the Commission
effectively implemented recommendations made by us in our prior audits
of the Commission's financial transactions.
To satisfy these objectives, we reviewed the IPA's report and related
audit documentation and, as necessary, met with IPA representatives and
the Commission's management. Our review, as differentiated from an
audit in accordance with generally accepted government auditing
standards, was not intended to enable us to express, and we do not
express, opinions on the Commission's financial statements and about
the effectiveness of its internal control or conclude on its compliance
with laws and regulations. We performed our review in accordance with
Section 650 of the GAO/President's Council on Integrity and Efficiency
Financial Audit Manual. This guidance requires us to:
˛ evaluate the IPA's independence and objectivity,
˛ evaluate the IPA's qualifications, and:
˛ review and evaluate the IPA's work.
We evaluated the IPA's independence, objectivity, and qualifications by
reviewing the following:
˛ the most recent peer review[Footnote 11] report for the IPA (dated
September 30, 2004) and the corresponding letter of response,
˛ the informal request for proposal sent out by the Commission when
seeking an audit firm to conduct the audit of its fiscal year 2005
financial statements,
˛ the engagement letter between the IPA and the Commission, and:
˛ résumés for the IPA staff assigned to the Commission's audit.
To determine whether the IPA performed sufficient work to support its
audit opinion and whether the auditor complied with U.S. generally
accepted government auditing standards, we reviewed the IPA's planning,
testing, and reporting audit documentation and made inquiries of the
IPA staff.
To determine whether, and to what extent, the Commission effectively
implemented recommendations we made during prior years' audits of the
Commission's financial transactions, we reviewed the IPA's audit
documentation, made inquiries of Commission personnel, and obtained
certain documentation from the Commission.
Because we did not audit the Commission's financial statements, we do
not express an opinion on the statements. Our work was performed from
April 2006 through October 2006 in accordance with U.S. generally
accepted government auditing standards. We provided a draft of our
report to the Commission for review and comment.
IPA Is Independent, Objective, and Qualified:
We determined the IPA to be independent and objective with respect to
the Commission. We evaluated the IPA's qualifications by reviewing
résumés for the IPA staff assigned to the Commission's audit, and
determined the IPA to be qualified to perform the audit of the
Commission.
The IPA's most recent peer review report was unqualified; however, the
report cited the need for the IPA to improve its quality control
policies and procedures. The results of our review also indicated that
the IPA's quality control policies and procedures should be further
enhanced.
Sufficient Audit Work Was Performed, and Audit Was Performed in
Accordance with Generally Accepted Government Auditing Standards:
During our preliminary review of the IPA's audit documentation, we
found areas in which further documentation was needed. In all
instances, the IPA provided the additional documentation needed. Our
final review of the audit of the Commission's financial statements
disclosed no instances in which insufficient audit work was performed
by the IPA to support its audit opinion. Our review also disclosed no
instances in which the IPA did not comply, in all material respects,
with U.S. generally accepted government auditing standards.
Commission Received a Qualified Audit Opinion:
The Commission received a qualified opinion on its fiscal year 2005
financial statements. The IPA found that the Commission's financial
statements were presented fairly, except for the Commission's failure
to obtain a legal representation letter.[Footnote 12] The Commission's
failure to obtain a legal representation letter also resulted in a
reportable condition in the IPA's report on internal control over
financial reporting. The IPA found no instances of noncompliance with
laws and regulations on the part of the Commission and noted no other
matters to be communicated to the Commission.
Commission Has Taken Action to Improve Internal Control:
In our prior work, we found that the Commission's internal control over
financial transactions needed improvement.[Footnote 13] In particular,
we found that (1) documentation for payroll, benefits, and payments to
VA was not readily available; (2) reconciliations with VA's records
were not routinely performed; (3) financial transactions were not
properly coded; (4) procurement regulations were not followed; (5)
travel reimbursements exceeded allowable rates; (6) cash and in-kind
donations were not always recorded; and (7) greater distinction between
the Commission and another nonprofit organization called No Greater
Love was needed. We made 10 recommendations to the Commission for
corrective actions to improve its overall financial management and
internal control.
Since our audit of the Commission's fiscal year 2004 financial
transactions, the Commission has taken a number of corrective actions
to improve its internal control and overall accountability.
Specifically, we found that the Commission has taken the following
actions:
˛ maintains appropriate documentation for financial transactions,
including biweekly time sheets for the Commission's employee;
˛ solicits offers from three commercial vendors before purchasing goods
or services for an amount expected to exceed the $2,500 micropurchase
threshold for federal procurements;[Footnote 14]
˛ strengthened procedures for the preparation of travel vouchers to
ensure that allowable rates established by federal regulation are not
exceeded;[Footnote 15]
˛ obtained and retained documentation for all cash and in-kind
donations; and:
˛ discontinued the listing of No Greater Love's e-mail address and fax
number on the Commission's business cards to assist in furthering the
distinction between the Commission and No Greater Love.
We have determined that through its actions, the Commission has
effectively addressed most of the issues that gave rise to our
recommendations. However, the Commission has not implemented adequate
procedures to timely reconcile the Commission's financial data to the
financial records maintained by its accounting services provider. The
enclosure provides a list of all financial management-related
recommendations we made to the Commission in our prior audits of its
financial transactions, the actions taken by the Commission in response
to our recommendations, and the status of those recommendations based
on our review.
Agency Comments:
We provided a draft of our report to the Commission for review and
comment. The Commission agreed with the results presented in the
report.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Appropriations and the
House Committee on Appropriations; the Chairman of the White House
Commission on the National Moment of Remembrance; the Secretary of
Veterans Affairs; the Director, Office of Management and Budget; and
other interested parties. This report is also available at no charge on
the GAO Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions, please contact me at (202) 512-
3406 or by e-mail at sebastians@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Contributors to this report were Julie T.
Phillips, Assistant Director, and Peggy J. Smith.
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
Enclosure:
Enclosure I: Status of GAO Recommendations from Prior Audits:
Count: 1;
Recommendations from GAO-05-791R: Prepare biweekly timesheets and
regularly submit them to the Department of Veterans Affairs (VA) for
approval and processing as evidence of actual hours worked;
Status per Commission on the National Moment of Remembrance
(Commission): As of May 2, 2005, the Commission's employees has been
submitting biweekly time sheets to the financial services provider;
Status per GAO: Closed. We verified that the Commission's employees
submitted biweekly time sheets to the financial service providers.
Count: 2;
Recommendations from GAO-05-791R: Strengthen the procedures to ensure
that appropriate documentation for all financial transactions--
including payroll, payroll-related, and intragovernmental transactions--
is maintained and readily available for review;
Status per Commission on the National Moment of Remembrance
(Commission): For fiscal year 2005, the Commission made sure to
maintain and have available in its office all appropriate documentation
related to its financial transactions. In addition, the Commission
requested from its financial services provider submission by fax on a
monthly basis of all documents supporting payroll, payroll-related, and
intragovernmental transactions;
Status per GAO: Closed. The Commission appropriately documented
financial transactions including payroll, payroll-related, and
intragovernmental transactions.
Count: 3;
Recommendations from GAO-05-791R: Assess the cost of VA's services to
determine if comparable services may be available from other sources at
a lower cost;
Status per Commission on the National Moment of Remembrance
(Commission): To ensure that the Commission was not overpaying for
services, it looked into comparable services vendors. In the meantime,
and after review of GAO's fiscal year 2004 report on the Commission, VA
Financial Services offered the Commission a contract for fiscal year
2006 with a $10,000 reduction in the annual service fee;
Status per GAO: Closed. The Commission negotiated with VA Financial
Services for a significant reduction in its annual services fee.
Count: 4;
Recommendations from GAO-05-791R: Establish procedures to (1) timely
reconcile, on a monthly basis, the Commission's financial data to the
financial records maintained by its accounting services provider, VA,
and (2)communicate all differences to VA as the provider so that the
two entities' records can be appropriately reconciled;
Status per Commission on the National Moment of Remembrance
(Commission): The Commission and VA Financial Services have now
established new procedures to reconcile records appropriately and on a
monthly basis. For fiscal year 2005, the Commission communicated all
differences to its financial services provider. In addition, all past
transactions were reconciled as noted in GAO-07-791R (p.2): "In May
2005, the Commission and VA reconciled their records and made
accounting adjustments for the differences";
Status per GAO: Open. The Commission's year-end trial balance did not
reconcile to the financial statements prepared by its accounting
services provider (VA).
Count: 5;
Recommendations from GAO-05-791R: While continuing to use VA's
services, code all invoices in accordance with VA guidelines to
indicate the type of expenditure prior to submitting them to VA for
processing;
Status per Commission on the National Moment of Remembrance
(Commission): For fiscal year 2005, the Commission has been coding all
invoices in accordance with the financial service provider's
guidelines;
Status per GAO: Closed. We verified that the Commission is now coding
all invoices in accordance with VA's guidelines.
Count: 6;
Recommendations from GAO-05-791R: Solicit offers or quotes from at
least three commercial vendors when goods or services are expected to
exceed the $2,500 micropurchase threshold for federal procurements and
when otherwise required by the Federal Acquisition Regulations (FAR);
Status per Commission on the National Moment of Remembrance
(Commission): For fiscal year 2005, the Commission solicited offers
from three commercial vendors before purchasing goods or services for
an amount expected to exceed the $2,500 micropurchase threshold for
federal procurements and when otherwise required by FAR;
Status per GAO: Closed. We verified that the Commission is now
soliciting offers from three commercial vendors before purchasing goods
or services for an amount expected to exceed the $2,500 micropurchase
threshold for federal procurements and when otherwise required by FAR.
Count: 7;
Recommendations from GAO-05-791R: Strengthen procedures over preparing
travel vouchers by (10 adhering to allowable rates in accordance with
federal regulations and (2) ensuring that travel-related overcharges
and traveler reimbursements are timely collected or offset against
amounts due;
Status per Commission on the National Moment of Remembrance
(Commission): During fiscal year 2005, the Commission worked with VA
Financial Services to strengthen its procedures for preparing travel
vouchers. Both entities now make sure the Commission adheres to
allowable rates in accordance with federal regulations while it ensures
that all travel-related overcharges and traveler reimbursements are
timely collected or offset against amounts due;
Status per GAO: Closed. The Commission's employee took one business
trip during fiscal year 2005. We reviewed the documentation for that
trip and concluded that the Commission adhered to allowable rates per
federal regulations.
Count: 8;
Recommendations from GAO-05-791R: Strengthen procedures over cash
donations by immediately obtaining and retaining documentation that
evidences the purpose and intent of the donation;
Status per Commission on the National Moment of Remembrance
(Commission): For fiscal year 2005, all cash and in-kind donations are
supported. All documents concerning cash and in-kind donations are now
immediately requested and filed with other donations made to the
Commission;
Status per GAO: Closed. We verified that the Commission is retaining
documentation that evidences the purpose and intent of donations.
Count: 9;
Recommendations from GAO-05-791R: Develop procedures to obtain and
retain supporting documentation for the estimated value of in-kind
donations and require that the financial information be recorded;
Status per Commission on the National Moment of Remembrance
(Commission): The Commission now asks for all companies donating in-
kind to provide documentation to support their donations. This
documentation is maintained in the Commission's office and recorded in
the Commission's electronic log;
Status per GAO: Closed. The Commission obtained the proper
documentation for all in-kind donations received during fiscal year
2005.
Count: 10;
Recommendations from GAO-05-791R: Discontinue listing No Greater Love's
e-mail address and fax number on the Commission's business cards to
assist in furthering the distinction of the Commission's and No Greater
Love's management and activities;
Status per Commission on the National Moment of Remembrance
(Commission): The Commission received new business cards. The
Commission would also like to reiterate what was stated in the 2004 GAO
report: "No Greater Love still donates the time of one of its employees
to the Commission; as of the end of June 2004, both entities have
separate facilities, and separate phones and fax numbers. The White
House Commission on the National Moment of Remembrance and No Greater
Love are two different entities and their purposes are different. None
of No Greater Love's programs were supported by the Commission";
Status per GAO: Closed. The Commission's business cards no longer
include the e-mail address and fax number for No Greater Love.
Source: GAO.
[End of Table]
[End of Section]
FOOTNOTES
[1] Pub. L. No. 106-579, 114 Stat. 3078 (Dec. 28, 2000) (reprinted at
36 U.S.C. § 116 note).
[2] Office of Management and Budget, Memorandum for the Heads of
Executive Departments and Agencies, Chief Financial Officers and
Inspectors General: Amendments to OMB Bulletin No. 01-02, Audit
Requirements for Federal Financial Statements, M-04-22, at 13
(Washington, D.C.: July 27, 2004).
[3] Pub. L. No. 107-289, 116 Stat. 2049 (Nov. 7, 2002) (codified, as
amended, at 31 U.S.C. § 3515).
[4] Reportable conditions are matters coming to the auditor's attention
that in the auditor's judgment should be communicated because they
represent significant deficiencies in the design or operation of
internal control, which could adversely affect the entity's ability to
meet the internal control objectives described in the report.
[5] GAO, Financial Management: Audit of the White House Commission on
the National Moment of Remembrance for Fiscal Year 2004, GAO-05-791R
(Washington, D.C.: July 21, 2005).
[6] Congress appropriated $500,000 in fiscal year 2002 and $250,000 per
year in fiscal years 2003 through 2005. See, respectively, Pub. L. No.
107-117, 115 Stat. 2230, 2299 (Jan. 10, 2002); Pub. L. No. 108-7, div.
J, title IV, 117 Stat. 11, 460 (Feb. 20, 2003); Pub. L. No. 108-199,
div. F, title IV, 118 Stat. 3, 340 (Jan. 23, 2004); and Pub. L. No.108-
447, div. I, title III, 118 Stat. 2809, 3337 (Dec. 8, 2004).
[7] In-kind donations are noncash assets and contributed services--such
as Web site hosting and the use of facilities and staff.
[8] For financial statement audits, generally accepted government
auditing standards incorporate the standards of the American Institute
of Certified Public Accountants.
[9] Under the Accountability of Tax Dollars Act of 2002, the Director
of OMB may, under certain conditions, exempt certain covered executive
agencies from the financial statement requirements of the
Accountability of Tax Dollars Act of 2002 for a particular fiscal year.
See Pub. L. No. 107-289, § 2(a)(4), 116 Stat. 2049 (Nov. 7, 2002)
(codified at 31 U.S.C. § 3515(e)).
[10] OMB requirements incorporate both generally accepted government
auditing standards and AICPA auditing standards. OMB Bulletin No. 01-02
was superseded by OMB Bulletin No. 06-03, Audit Requirements for
Federal Financial Statements, on August 23, 2006.
[11] U.S. generally accepted government auditing standards require
audit organizations to have an external peer review conducted at least
once every 3 years by reviewers independent of the organization being
reviewed. The external peer review should determine whether, during the
period under review, the reviewed audit organization's internal quality
control system was adequate and whether quality control policies and
procedures were being complied with to provide the audit organization
with reasonable assurance of conforming with applicable professional
standards.
[12] Generally accepted auditing standards require the auditor to send
a letter of audit inquiry to the entity's legal counsel. A response to
this letter is the auditor's primary means of obtaining corroboration
of the information furnished by management concerning litigation,
claims, and assessments. Evidential matter obtained from legal counsel
with whom the entity consulted during the period under audit may
provide the auditor with the necessary corroboration. Legal counsel for
the Commission did not respond to the auditor's letter of audit inquiry
because the Commission did not have a memorandum of understanding in
place with VA, which provided legal counsel during fiscal year 2005.
[13] GAO-05-791R.
[14] See the Federal Acquisition Regulation on simplified acquisition
procedures, codified, in part, at 48 C.F.R. § 13.104(b)(2004).
[15] The Federal Travel Regulation implements statutory requirements
and executive branch policies for travel by federal civilian employees.
It is promulgated by the General Services Administration and codified
at 41 C.F.R., chapters 300-304.
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