Financial Audits

This testimony discusses recent GAO reports on the American Battle Monuments Commission's fiscal year 1997 financial statements. (See GAO/AIMD-98-81, Feb. 1998, GAO/AIMD-98-130R, Apr. 1998, and GAO/AIMD-98-129R, Apr. 1998). GAO (1) describes legislative initiatives in recent years to improve financial management across the federal government and how requirements for the Commission to produce audited financial statements fit into that larger context, (2) discusses its audit reports on the Commission's financial statements and its suggestions for improving Commission operations, and (3) shares its ideas for further enhancing the Commission's accountability.

GAO noted that: (1) the Chief Financial Officers Act of 1990, as expanded by the Government Management Reform Act of 1994, requires major departments and agencies to annually produce agencywide financial statements, and, beginning with FY 1997, for the Secretary of the Treasury, in cooperation with the Director of the Office of Management and Budget (OMB), to annually prepare consolidated financial statements for the entire government; (2) three principals concerned with overall financial management in the federal government established the Federal Accounting Standards Advisory Board (FASAB) in 1990 to develop and recommend federal financial accounting standards to be used in preparing federal financial statements; (3) the legislative initiatives were designed to subject the federal government to the same fiscal discipline imposed for years on the private sector and state and local governments and to provide Congress, agency officials, and others with reliable information through audited financial statements; (4) GAO contracted with KPMG Peat Marwick LLP, an independent certified public accountant firm, to perform a financial statement audit in accordance with generally accepted government auditing standards, OMB requirements, and GAO's Financial Audit Manual; (5) GAO concurred with KPMG's report, which indicated that: (a) ABMC's balance sheet was reliable in all material respects; (b) ABMC's assertions regarding the effectiveness of its internal controls were fairly stated; and (c) no reportable instances of noncompliance with laws and regulations were found; (6) ABMC took significant strides in FY 1997 to strengthen its financial management and comply with the new financial requirements; (7) also, ABMC was one of the first agencies in the federal government to comply early with federal accounting standards recommended by FASAB which were not effective until FY 1998; (8) the audit of ABMC's financial statements, however, identified four areas of weaknesses regarding the effectiveness of ABMC's internal controls over financial reporting; (9) the weaknesses are primarily systems related and are intended to be resolved through ABMC's selection and implementation of a new financial management system; (10) preparing agencywide financial statements and attaining an unqualified opinion on its balance sheet are significant milestones for ABMC in institutionalizing sound financial management and organizational accountability; and (11) in that regard, GAO offered 2 suggestions for using the audited financial statements to further enhance ABMC's accountability.