Management Report
Improvements Needed in Controls over the Preparation of the U.S. Consolidated Financial Statements Gao ID: GAO-10-757 July 30, 2010Since GAO's first audit of the fiscal year 1997 consolidated financial statements of the U.S. government (CFS), material weaknesses in internal control and other limitations on the scope of GAO's work have prevented GAO from expressing an opinion on the consolidated financial statements, other than the Statement of Social Insurance (accrual-based consolidated financial statements). The Department of the Treasury (Treasury), in coordination with the Office of Management and Budget (OMB), is responsible for preparing the CFS. As part of the fiscal year 2009 CFS audit, GAO identified material weaknesses and other control deficiencies in Treasury's processes used to prepare the CFS that warrant management's attention and corrective action. The purpose of this report is to (1) provide details on new control deficiencies GAO identified during its audit of the fiscal year 2009 CFS that related to the preparation of the CFS, (2) recommend improvements, and (3) provide the status of corrective actions taken to address GAO's previous 44 recommendations in this area.
During its audit of the fiscal year 2009 CFS, GAO identified continuing and new control deficiencies in the federal government's processes used to prepare the CFS. The control deficiencies GAO identified involved 1) enhancing policies and procedures for identifying and analyzing federal entities' reported restatements and changes in accounting principles; 2) establishing and documenting policies and procedures for disclosing significant accounting policies and related party transactions; 3) establishing and documenting procedures to assure the accuracy of Treasury staff's work in three areas: (1) social insurance, (2) legal contingencies, and (3) analytical procedures; and 4) various other control deficiencies identified in previous years' audits. These control deficiencies contribute to material weaknesses in internal control over the federal government's ability to (1) adequately account for and reconcile intragovernmental activity and balances between federal entities; (2) ensure that the accrual-based consolidated financial statements were consistent with the underlying audited entities' financial statements, properly balanced, and in conformity with U.S. generally accepted accounting principles; and (3) identify and either resolve or explain material differences between components of the budget deficit reported in Treasury's records, which are 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 entities' financial statements and underlying financial information and records. As a result of these and other material weaknesses, the federal government did not have effective internal control over financial reporting. Of the 44 open recommendations GAO reported in April 2009, 2 were closed and 42 remained open as of February 19, 2010, the date of GAO's report on its audit of the fiscal year 2009 CFS. GAO will continue to monitor the status of corrective actions taken to address the 10 new recommendations as well as the 42 open recommendations from prior years. GAO is making 10 new recommendations to Treasury to address control deficiencies identified during the fiscal year 2009 CFS audit related to the processes used to prepare the CFS. In commenting on GAO's draft report, Treasury and OMB stated that they concurred with GAO's findings.
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: Gary T. Engel Team: Government Accountability Office: Financial Management and Assurance Phone: (202) 512-8815GAO-10-757, Management Report: Improvements Needed in Controls over the Preparation of the U.S. Consolidated Financial Statements
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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:
July 2010:
Management Report:
Improvements Needed in Controls over the Preparation of the U.S.
Consolidated Financial Statements:
GAO-10-757:
GAO Highlights:
Highlights of GAO-10-757, a report to the Secretary of the Treasury
and the Director of the Office of Management and Budget.
Why GAO Did This Study:
Since GAO‘s first audit of the fiscal year 1997 consolidated financial
statements of the U.S. government (CFS), material weaknesses in
internal control and other limitations on the scope of GAO‘s work have
prevented GAO from expressing an opinion on the consolidated financial
statements, other than the Statement of Social Insurance (accrual-
based consolidated financial statements). The Department of the
Treasury (Treasury), in coordination with the Office of Management and
Budget (OMB), is responsible for preparing the CFS. As part of the
fiscal year 2009 CFS audit, GAO identified material weaknesses and
other control deficiencies in Treasury‘s processes used to prepare the
CFS that warrant management‘s attention and corrective action. The
purpose of this report is to (1) provide details on new control
deficiencies GAO identified during its audit of the fiscal year 2009
CFS that related to the preparation of the CFS, (2) recommend
improvements, and (3) provide the status of corrective actions taken
to address GAO‘s previous 44 recommendations in this area.
What GAO Found:
During its audit of the fiscal year 2009 CFS, GAO identified
continuing and new control deficiencies in the federal government‘s
processes used to prepare the CFS. The control deficiencies GAO
identified involved:
* enhancing policies and procedures for identifying and analyzing
federal entities‘ reported restatements and changes in accounting
principles;
* establishing and documenting policies and procedures for disclosing
significant accounting policies and related party transactions;
* establishing and documenting procedures to assure the accuracy of
Treasury staff‘s work in three areas: (1) social insurance, (2) legal
contingencies, and (3) analytical procedures; and;
* various other control deficiencies identified in previous years‘
audits (see appendix I for related recommendations).
These control deficiencies contribute to material weaknesses in
internal control over the federal government‘s ability to (1)
adequately account for and reconcile intragovernmental activity and
balances between federal entities; (2) ensure that the accrual-based
consolidated financial statements were consistent with the underlying
audited entities‘ financial statements, properly balanced, and in
conformity with U.S. generally accepted accounting principles; and (3)
identify and either resolve or explain material differences between
components of the budget deficit reported in Treasury‘s records, which
are 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 entities‘ financial statements and underlying financial
information and records. As a result of these and other material
weaknesses, the federal government did not have effective internal
control over financial reporting.
Of the 44 open recommendations GAO reported in April 2009, 2 were
closed and 42 remained open as of February 19, 2010, the date of GAO‘s
report on its audit of the fiscal year 2009 CFS. GAO will continue to
monitor the status of corrective actions taken to address the 10 new
recommendations as well as the 42 open recommendations from prior
years (see appendix I).
What GAO Recommends:
GAO is making 10 new recommendations to Treasury to address control
deficiencies identified during the fiscal year 2009 CFS audit related
to the processes used to prepare the CFS. In commenting on GAO‘s draft
report, Treasury and OMB stated that they concurred with GAO‘s
findings.
View [hyperlink, http://www.gao.gov/products/GAO-10-757] or key
components. For more information, contact Gary Engel at (202) 512-3406
or engelg@gao.gov.
[End of section]
Contents:
Letter:
Scope and Methodology:
New Internal Control Deficiencies:
Status of Recommendations from Prior Reports:
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:
Abbreviations:
CFS: consolidated financial statements of the U.S. government:
GAAP: Generally accepted accounting principles:
GFRS: Governmentwide Financial Report System:
HHS: Department of Health and Human Services:
MD&A: Management's Discussion and Analysis:
OMB: Office of Management and Budget:
SFFAS: Statement of Federal Financial Accounting Standards:
SOP: Standard Operating Procedure:
SSA: Social Security Administration:
STAR: Treasury's Central Accounting and Reporting System:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
July 30, 2010:
The Honorable Timothy F. Geithner:
The Secretary of the Treasury:
The Honorable Peter Orszag:
Director, Office of Management and Budget:
In our report dated February 19, 2010,[Footnote 1] we disclaimed an
opinion on the consolidated financial statements of the U.S.
government (CFS) for the fiscal years ended September 30, 2009 and
2008,[Footnote 2] except for the 2009, 2008, and 2007 Statements of
Social Insurance, which received unqualified opinions. Since GAO's
first audit of the fiscal year 1997 CFS, 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-based consolidated
financial statements.[Footnote 3] These include material weaknesses
that relate to the federal government's processes used to prepare the
CFS. Such material weaknesses involve the federal government's
inability to (1) adequately account for and reconcile
intragovernmental activity and balances between federal entities; (2)
ensure that the accrual-based consolidated financial statements were
consistent with the underlying audited entities' financial statements,
properly balanced, and in conformity with U.S. generally accepted
accounting principles; and (3) identify and either resolve or explain
material differences between certain components of the budget deficit
reported in the Department of the Treasury's (Treasury) records, which
are 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 entities' financial statements and underlying financial
information and records.
Treasury, in coordination with the Office of Management and Budget
(OMB),[Footnote 4] prepares the CFS on behalf of the federal
government. Many of the material weaknesses[Footnote 5] in internal
control that have contributed to our continuing disclaimers of opinion
were identified by other auditors during their audits of individual
federal entities' financial statements and were reported in detail
with recommendations to the entities in separate reports.
The purpose of this report is to provide (1) more detailed information
on new control deficiencies that we identified during our audit of the
fiscal year 2009 CFS that relate to the processes used to prepare the
CFS, (2) 10 recommendations to address these control deficiencies, and
(3) the status of corrective actions by Treasury and OMB to address
the 44 recommendations relating to the processes used to prepare the
CFS that were detailed in our previous reports that remained open at
the end of the fiscal year 2008 audit (see app. I). We have discussed
each of the new control deficiencies identified during our fiscal year
2009 audit with your staff and have incorporated their comments as
appropriate.
Scope and Methodology:
As part of our audit of the fiscal years 2009 and 2008 CFS, we
evaluated the federal government's financial reporting procedures and
related internal control. Also, we determined the status of corrective
actions by Treasury and OMB to address open recommendations relating
to the processes used to prepare the CFS detailed in our previous
reports. In our audit report on the fiscal year 2009 CFS, which is
included in the fiscal year 2009 Financial Report of the United States
Government (Financial Report), 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-based consolidated financial statements and our conclusion
that the federal government did not have effective internal control
over financial reporting. We performed our audit of the fiscal years
2009 and 2008 CFS in accordance with U.S. generally accepted
government auditing standards. We believe that our audit provided a
reasonable basis for our conclusions in this report.
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 summarized in the Agency Comments section of
this report. Treasury's comments are reprinted in appendix II and are
also summarized in the Agency Comments section.
New Internal Control Deficiencies:
Standard Operating Procedures for Preparing the CFS:
Over the past several years, Treasury has made progress in developing,
documenting, and implementing internal control over the process for
preparing the CFS through numerous standard operating procedures
(SOP). However, we identified areas where SOPs were not developed,
implemented, fully documented for fiscal year 2009, or a combination
of these. Specifically, we found that SOPs were missing or inadequate
in five key areas: (1) restatements and changes in accounting
principles, (2) summary of significant accounting policies, (3) social
insurance, (4) legal contingencies, and (5) analytical 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 CFS
compilation process. Standards for Internal Control in the Federal
Government calls for clear documentation of policies and procedures.
[Footnote 6] Missing or inadequate policies and procedures increase
the risk that errors in the compilation process could go undetected
and result in misstatements in the financial statements or incomplete
and inaccurate disclosure of information within the Financial Report.
Restatements and Changes in Accounting Principles:
Treasury's SOP entitled "Analyzing Agency Restatements," which is
intended to document Treasury's procedures regarding prior period
adjustments (i.e., restatements and changes in accounting principles)
at the governmentwide level, was not adequate to help assure that
prior period adjustments are properly identified and reported in the
CFS. Specifically, we found that (1) not all procedures Treasury
performs to identify, analyze, and report restated closing package
data and changes in accounting principles in the CFS were fully
documented in the SOP; (2) for some steps listed in the SOP, it was
unclear who was responsible for performing the procedures; and (3) the
SOP did not require an analysis of the overall impact of entities'
restatements on the CFS or documentation of the analysis and related
conclusion.
Recommendations for Executive Action:
To help assure that prior period adjustments are properly identified
and reported in the CFS, we recommend that the Secretary of the
Treasury direct the Fiscal Assistant Secretary to enhance the SOP
entitled "Analyzing Agency Restatements" to (1) fully document all
procedures related to identifying, analyzing, and reporting restated
closing package data as well as changes in accounting principles; (2)
clarify who is responsible for performing the procedures contained in
the SOP; and (3) include procedures for analyzing the overall impact
of entities' restatements on the CFS and documenting the analysis and
related conclusion.
Significant Accounting Policies:
Treasury did not have written policies and procedures to help assure
that all significant accounting policies and related party
transactions were properly identified and disclosed in Note 1 -
Summary of Significant Accounting Policies (Note 1) to the CFS.
Statement of Federal Financial Accounting Standards (SFFAS) No. 32,
Consolidated Financial Report of the United States Government
Requirements: Implementing Statement of Federal Financial Accounting
Concepts 4 "Intended Audience and Qualitative Characteristics for the
Consolidated Financial Report of the United States Government",
requires that significant accounting policies be disclosed within Note
1 to the financial statements.
In accordance with SFFAS No. 32, Note 1 should, among other things,
"Summarize the accounting principles and methods of applying those
principles that management has concluded are appropriate for
presenting fairly the agencies' assets, liabilities, net cost of
operations, and changes in net position. Disclosure of accounting
policies should identify and describe the accounting principles
followed by the reporting agency and the methods of applying those
principles. In general, the disclosure should encompass important
judgments as to the valuation, recognition, and allocation of assets,
liabilities, expenses, revenues and other financing sources."
However, we identified significant accounting policies that were not
disclosed in Note 1 to the draft CFS, including accounting policies
regarding federal debt securities held by the public, beneficial
interest in trust, and certain securities and investments. In
addition, Treasury had not disclosed that certain federal entities--
primarily Treasury and the Federal Deposit Insurance Corporation along
with the Board of Governors of the Federal Reserve System and the
Federal Reserve Banks--engaged in a related party transaction
involving concurrent actions, coordinated actions, or both to help
stabilize the financial system and the housing market. We communicated
these omissions to Treasury officials who included these disclosures
in Note 1 to the fiscal year 2009 CFS.
Recommendation for Executive Action:
To help assure complete and accurate disclosure of significant
accounting policies and related party transactions in Note 1 to the
CFS, we recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to develop, implement, and document procedures for
identifying, analyzing, compiling, and reporting all significant
accounting policies and related party transactions at the
governmentwide level.
Social Insurance Information:
Treasury did not have adequate procedures to assure the accuracy of
staff's work performed in accordance with Treasury's SOP entitled
"Statement of Social Insurance, Social Insurance Note, and Required
Supplementary Information." The SOP provides detailed procedures for
Treasury personnel to perform related to the reporting and disclosure
of social insurance information. However, the SOP did not include
adequate procedures to be performed to assure the accuracy of staff's
work and we identified several errors made by Treasury personnel in
preparing the social insurance sections of the CFS.
Specifically, when reviewing the Statement of Social Insurance-related
note in the draft fiscal year 2009 CFS, we found instances where
certain social insurance-related information was inconsistent with the
related information provided by the federal entities through the
Governmentwide Financial Report System (GFRS).[Footnote 7] For
example, the Department of Health and Human Services (HHS) and the
Social Security Administration (SSA) both submitted demographic data
in GFRS showing that the ultimate fertility rate was assumed to be
reached in 2033; however, the draft CFS reported 2032. Additionally,
the beneficiary-to-worker ratio reported in GFRS by HHS and SSA for
Medicare and the Old-Age and Survivors, and Disability Insurance
programs did not agree to the amounts reported in the draft CFS
prepared by Treasury personnel. These inconsistencies were not
identified through Treasury's process to prepare the social insurance
information for the CFS. We communicated these matters to Treasury
officials who corrected this information for disclosure in the fiscal
year 2009 CFS.
Recommendations for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to (1) enhance the SOP entitled "Statement of
Social Insurance, Social Insurance Note, and Required Supplementary
Information" to include procedures for assuring the accuracy of
staff's work related to preparing the social insurance information for
the CFS and (2) implement and document such procedures.
Legal Contingencies:
Treasury did not have adequate procedures to assure the accuracy of
staff's work performed in accordance with Treasury's SOP entitled
"Federal Agency Legal Letter Analysis." The SOP has detailed
procedures for Treasury staff to perform with regard to reviewing and
analyzing entities' legal representation letters and related
management schedules.[Footnote 8] As part of the legal representation
letter process, the SOP requires Treasury staff to compare the
entities' and the Department of Justice (Justice) lawyer's assessments
of the major cases and document any differences on a Schedule of
Differences. The schedule is to be used by Treasury to identify,
research, and resolve significant inconsistencies and also to make any
adjustments to the CFS to help assure complete and accurate reporting
of legal contingencies. However, the SOP did not include adequate
procedures to be performed to assure the accuracy of staff's work and
we identified several errors made by Treasury personnel in preparing
the Schedule of Differences.
Specifically, our review of the Schedule of Differences identified
nine additional cases in fiscal year 2009 where there were significant
differences between the entities' and Justice's assessments, but such
differences were not documented on the Schedule of Differences.
Treasury did not have adequate procedures to detect that the Treasury
staff had not identified these differences. Lack of identification and
follow-up on inconsistent assessments by Justice and entity legal
counsels impairs Treasury's ability to determine the proper accounting
treatment in the CFS for the related legal cases. We communicated
these matters to Treasury officials who subsequently corrected some of
these inconsistencies in the fiscal year 2009 Schedule of Differences.
Recommendations for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to (1) enhance the SOP entitled "Federal Agency
Legal Letter Analysis" to include procedures for assuring the accuracy
of staff's work related to preparing the Schedule of Differences and
(2) implement and document such procedures.
Analytical Procedures:
Treasury's SOP entitled "Preparing the Financial Report of the U.S.
Government" provides that Treasury staff are to perform an overall
analysis of the balances reported in the CFS, including a review for
reasonableness of changes from the prior year to the current year. The
analysis should assist Treasury in identifying any significant changes
in balances from year to year that should be disclosed in the
Financial Report. The SOP did not include adequate procedures to be
performed to assure the accuracy of the overall analysis, and we
identified errors in the formulas used in the analysis and
inadequacies in the explanations provided by Treasury personnel
through performance of the analytical procedures.
Our review of the overall line item analysis covering the Balance
Sheets, Statements of Net Cost, Statements of Operations and Changes
in Net Position, and related notes identified incorrect formulas used
to calculate the percentage change from year to year.[Footnote 9]
Specifically, Treasury calculated the change using the current year
balances, rather than the prior year balances, as the denominator for
the calculation. This error in the formulas resulted in incorrect
percentage changes being used for the analysis. For example, the
percentage change between years determined for the Investments in
Government Sponsored Enterprises line item, was calculated as 89
percent, when the actual change was 824 percent. We communicated the
formula errors to Treasury officials who took action to correct the
errors. We also noted that Treasury staff's documented explanations
for certain significant fluctuations were inadequate. For example, the
Department of Veterans Affairs' (VA) gross costs in the CFS Statements
of Net Cost changed from $435 billion in 2008 to ($39) billion in
2009, a change of over $473 billion and more than 100 percent. The
significant decrease in gross cost was primarily attributable to VA's
reestimation of its actuarial liability for, and anticipated cost of,
veterans' compensation benefits. However, the explanation provided for
this change by Treasury in its documentation of the analysis included
a discussion of VA's and several other federal entities' changes in
costs and did not specifically explain the primary reasons for the
significant decrease in VA's gross cost. As a result of incorrect
formulas used in the overall analysis and inadequate explanations of
changes, the risk of Treasury failing to properly report in the
Financial Report significant changes in certain balances is increased.
Recommendations for Executive Action:
We recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to (1) enhance the SOP entitled "Preparing the
Financial Report of the U.S. Government" to include procedures for
assuring the accuracy of staff's work related to performing analytical
procedures and (2) implement and document such procedures.
Status of Recommendations from Prior Reports:
As part of our audit of the fiscal years 2009 and 2008 CFS, we
determined the status of corrective actions by Treasury and OMB to
address open recommendations detailed in our previous reports. Of the
44 recommendations that are listed in appendix I, 2 were closed and 42
remained open as of February 19, 2010, the date of our report on the
audit of the fiscal year 2009 CFS.
Appendix I includes the status of recommendations from seven prior
reports[Footnote 10] that were open at the beginning of our fiscal
year 2009 audit. Recommendations from these reports that were closed
in prior years are not included in this appendix. Appendix I includes
the status according to Treasury and 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 our assessment of the status of a recommendation. We
will continue to monitor Treasury's and OMB's progress in addressing
GAO's recommendations.
Agency Comments:
OMB Comments:
In oral comments on a draft of this report, OMB stated that it
concurred with the new findings and related recommendations in this
report.
Treasury Comments:
In July 21, 2010, written comments on a draft of this report, which
are reprinted in appendix II, Treasury's Fiscal Assistant Secretary
concurred with our findings and noted that the agency has already made
significant progress in improving its policies and procedures for the
CFS preparation since the issuance of the report. Further, Treasury
stated that it expects to implement additional recommendations by the
end of fiscal year 2010, and that it will use GAO's findings to focus
its efforts on improving the central accounting and compilation
activities associated with the CFS. Also, while noting that they may
take several years to provide measurable reductions, Treasury cited
plans it has initiated to address long-standing material issues,
including the development of an infrastructure for General Fund
accounting and plans for automating the interagency agreement process.
This report contains recommendations to the Secretary of the Treasury.
The head of a federal agency is required by 31 U.S.C. 720 to submit a
written statement on actions taken on our recommendations to the
Senate Committee on Homeland Security and Governmental Affairs and to
the House Committee on Oversight and Government Reform not later than
60 days after the date of this report. A written statement must also
be sent to the Senate and House Committees on Appropriations with the
agency's first request for appropriations made more than 60 days after
the date of that report.
We are sending copies of this report to interested congressional
committees, the Fiscal Assistant Secretary of the Treasury, the Deputy
Director for Management and Chief Performance Officer of OMB, and the
Controller of OMB's Office of Federal Financial Management. This
report also is 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 at (202)
512-3406 or engelg@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions 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:
GAO-04-45 (results of the fiscal year 2002 audit):
Count: 1;
No.: 02-4;
Recommendation: As the Department of the Treasury (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 the Office of Management and Budget (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[A]: 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.
Major contributors to the plug are transactions with the General Fund
(Reciprocal Category 29). In fiscal year 2009, a new Treasury Task
Group was formed to develop the financial statements for the General
Fund, with the goal to prepare them for financial audit. In the
interim, Treasury continues to separately identify General Fund
transactions to facilitate their agency reconciliation on a quarterly
basis. Also throughout fiscal year 2009, Treasury continued its
efforts on particular areas (fiduciary and employee benefits) and
increased its analysis and monitoring efforts on agencies'
explanations of material differences with their trading partners;
Status of recommendation[A]: Per GAO: Open. Treasury has continued
developing reconciliation procedures to aid in understanding the net
position balance but remains unable to eliminate the plugs associated
with compiling the CFS. In addition, there are hundreds of billions of
dollars of unreconciled differences between the General Fund and
federal entities related to appropriation and other intragovernmental
transactions. The ability to reconcile these transactions is hampered
because only some of the General Fund transactions are reported in
Treasury's financial statements.
Count: 2;
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[A]: Per Treasury and OMB: OMB will continue
its efforts to implement this recommendation;
Status of recommendation[A]: Per GAO: Open.
Count: 3;
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[A]: Per Treasury and OMB: OMB will continue
its efforts to implement this recommendation;
Status of recommendation[A]: Per GAO: Open.
Count: 4;
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[A]: Per Treasury and OMB: Treasury has
designed formal consolidating and eliminating procedures to account
for these differences and has implemented them. See status of
recommendation no. 02-4;
Status of recommendation[A]: Per GAO: Open. Treasury's formal
consolidating and eliminating accounting entries could not fully
account for the difference in intragovernmental assets and liabilities
during the fiscal year 2009 compilation process. For example, there
are hundreds of billions of dollars of unreconciled differences
between the General Fund and federal entities related to appropriation
and other intragovernmental transactions. These amounts are not
eliminated by Treasury's formal consolidating and elimination
accounting entries because Treasury's ability to reconcile these
transactions is hampered because not all General Fund transactions are
reported in Treasury's financial statements.
Count: 5;
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[A]: Per Treasury and OMB: Treasury continues
to provide to federal agencies information from its Central Accounting
and Reporting System (STAR) related to special and trust fund
appropriations and nonexpenditure transfers for the agencies' use in
reconciling with this centrally reported data. The agencies were
required to reconcile with this information in fiscal year 2009 on a
quarterly basis. In addition, in fiscal year 2010, the agencies will
also be required to reconcile their fund balance with Treasury and
appropriations received against STAR on a quarterly basis;
Status of recommendation[A]: Per GAO: Open. Although Treasury's
analysis of agencies' transactions with the General Fund is ongoing,
the ability to reconcile these transactions is hampered because only
some of the General Fund transactions are reported in Treasury's
financial statements.
Count: 6;
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[A]: Per Treasury and OMB: The current
reconciliation of intragovernmental activity does account for
differences caused by asset capitalization and agency advances or
deferred revenue. Given current intragovernmental differences, further
resolution of this activity is contingent on these differences being
materially resolved. See status of recommendation no. 02-4;
Status of recommendation[A]: Per GAO: Open.
Count: 7;
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[A]: Per Treasury and OMB: These unmatched
transactions and balances will continue to be reflected in the
Statements of Operations and Changes in Net Position until they are
materially resolved. However, based on its analyses of these unmatched
transactions and balances, Treasury believes that these unmatched
transactions and balances are primarily caused by unreconciled
transactions that affect only 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. Treasury will continue its
analysis in fiscal year 2010;
Status of recommendation[A]: Per GAO: Open. Treasury has not
implemented a process that demonstrates the amount, if any, of
unmatched transactions and balances that should be included as a
separate reconciling item in the reconciliation statement.
Count: 8;
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[A]: 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[A]: Per GAO: Open. Treasury has not fully
developed a process 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: 9;
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[A]: Per Treasury and OMB: Treasury will
continue to update and revise its materiality policy in fiscal year
2010 to address remaining GAO concerns;
Status of recommendation[A]: Per GAO: Open.
Count: 10;
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[A]: Per Treasury and OMB: Treasury has
elected to continue the use of information from STAR and has
identified the material areas where STAR data does not reconcile to
federal agencies' financial statements. Treasury intends to continue
working on these material areas in fiscal year 2010;
Status of recommendation[A]: Per GAO: Open.
Count: 11;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-15;
Status of recommendation[A]: Per GAO: Open.
Count: 12;
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[A]: 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 2010. See status of recommendation no. 02-
15;
Status of recommendation[A]: Per GAO: Open.
Count: 13;
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[A]: Per Treasury and OMB: Treasury will
continue with its efforts to reconcile budgetary receipts to net
operating revenue. During fiscal year 2009, Treasury made significant
progress with identifying and documenting the larger differences
between budgetary receipts and net operating revenue and automated a
portion of this reconciliation in the Governmentwide Financial Report
System (GFRS);
Status of recommendation[A]: Per GAO: Open. OMB and Treasury continue
to work toward establishing effective processes and procedures for
identifying, resolving, and explaining material differences in net
outlays and other components of the deficit between Treasury's central
accounting records and information reported in entity financial
statements and underlying entity financial information and records.
Count: 14;
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. 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[A]: Per Treasury and OMB: Treasury developed
a reporting entity policy in fiscal year 2009. Treasury will continue
to revise the policy in fiscal year 2010 to address remaining GAO
concerns;
Status of recommendation[A]: Per GAO: Open.
Count: 15;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-22;
Status of recommendation[A]: Per GAO: Open.
Count: 16;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-22;
Status of recommendation[A]: Per GAO: Open.
Count: 17;
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[A]: Per Treasury and OMB: During fiscal year
2010, Treasury and OMB will continue to work with federal agencies to
help better ensure that adequate information is provided in the legal
representation letters regarding the expected outcomes of the cases;
Status of recommendation[A]: Per GAO: Open.
Count: 18;
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[A]: Per Treasury and OMB: OMB and Treasury
undertook a number of corrective actions in fiscal year 2009 that
resulted in published policy guidance in OMB Circular A-136 and
procedural guidance in the Treasury Financial Manual regarding the
proper reporting and disclosure of treaties. OMB and Treasury will
continue to work with federal agencies in fiscal year 2010 to help
ensure proper and complete recognition and disclosure of contingencies
related to treaties and other international agreements;
Status of recommendation[A]: Per GAO: Open. As noted in Note 22,
Contingencies, a comprehensive analysis to determine any financial
obligation or possible exposure to loss and its related effect on the
CFS has not yet been performed.
Count: 19;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-37;
Status of recommendation[A]: Per GAO: Open. See status of
recommendation no. 02-37.
Count: 20;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-37;
Status of recommendation[A]: Per GAO: Open. See status of
recommendation no. 02-37.
Count: 21;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-37;
Status of recommendation[A]: Per GAO: Open. See status of
recommendation no. 02-37.
Count: 22;
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[A]: Per Treasury and OMB: See status of
recommendation no. 02-37;
Status of recommendation[A]: Per GAO: Open. See status of
recommendation no. 02-37.
Count: 23;
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 Statement of Federal
Financial Accounting Standards (SFFAS) No. 5, Accounting for
Liabilities of the Federal Government, paragraph 106, which requires
that when financial information pursuant to Financial Accounting
Standards Board 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[A]: 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 2009 CFS. In addition, Treasury completed an analysis of
the risk assumed reporting by the agencies to document agency
compliance with the applicable reporting requirements. Treasury will
continue working with the federal agencies to ensure proper and
complete disclosure of this information in fiscal year 2010;
Status of recommendation[A]: Per GAO: Open. Treasury's reporting in
this area is not complete. The CFS should include all major federal
insurance programs in the risk assumed reporting and analysis. Also,
since future events are uncertain, risk assumed information should
include indicators of the range of uncertainty around expected
estimates, including indicators of the sensitivity of the estimate to
changes in major assumptions.
Count: GAO-04-866 (results of the fiscal year 2003 audit):
Count: 24;
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[A]: Per Treasury and OMB: In fiscal year
2009, Treasury disclosed the change in cash balances as reported on
the Balance Sheet on the Statement of Changes in Cash Balance;
Status of recommendation[A]: Per GAO: Open. Treasury has not developed
a process that will allow full reporting of the changes in cash
balance. For example, Treasury had not identified some of the
significant changes in cash that we had noted as needing to be
reported in the fiscal year 2009 Statement of Changes in Cash Balance.
Count: 25;
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 generally accepted accounting principles (GAAP) in
their financial statements and have such information subjected to
audit;
Status of recommendation[A]: Per Treasury and OMB: OMB, working with
Treasury, Justice, and certain other agencies, will continue working
to address this recommendation;
Status of recommendation[A]: Per GAO: Open.
Count: 26;
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[A]: Per Treasury and OMB: Treasury will
include criminal debt information in the CFS as it becomes available.
See status of recommendation no. 03-8;
Status of recommendation[A]: Per GAO: Open.
Count: 27;
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[A]: Per Treasury and OMB: Treasury continues
to use its CFS compilation process, GFRS, to provide direct linkage
from the agency audited financial statements to most of the CFS
principal statements. However, additional work is needed related to
the two budgetary principal financial statements. See status of
recommendation no. 02-17. With regard to note disclosures, GFRS note
references (linkages), along with additional Treasury analysis, are
designed to link the CFS and agency note disclosures;
Status of recommendation[A]: Per GAO: Open. Treasury's process for
compiling the CFS demonstrated 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 also consistent with federal entities'
financial statements prior to eliminating intragovernmental activity
and balances. However, Treasury's process did not ensure that the
information in the remaining three principal financial statements was
fully consistent with the underlying information in federal entities'
audited financial statements and other financial data.
Count: GAO-05-407 (results of the fiscal year 2004 audit):
Count: 28;
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[A]: Per Treasury and OMB: During fiscal year
2009, Treasury ensured that journal vouchers included appropriate
supporting documentation;
Status of recommendation[A]: Per GAO: Closed.
Count: 29;
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[A]: Per Treasury and OMB: Treasury will
continue its efforts to ensure that all journal vouchers are
communicated to the federal agencies before recording them in GFRS;
Status of recommendation[A]: Per GAO: Open. We believe that Treasury
should be required to contact federal entities to resolve any
discrepancies between federal entities' audited closing packages and
audited financial statements and discuss any other situations that
require adjustments to federal entities' audited closing package data
because Treasury could incorrectly adjust federal entities' audited
information.
Count: 30;
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[A]: Per Treasury and OMB: During fiscal year
2009, Treasury ensured that management reviews of procedures that
resulted in data changes to the CFS were required and documented;
Status of recommendation[A]: Per GAO: Closed.
Count: 31;
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[A]: Per Treasury and OMB: Treasury continued
to make improvements to its internal control infrastructure during
fiscal year 2009. Treasury has updated its documentation to help
ensure that control procedures are in place at all critical areas of
the CFS preparation process and is working to ensure that these
controls are adequately monitored and assessed each year;
Status of recommendation[A]: Per GAO: Open. Treasury has not completed
an assessment to ensure that it has sufficient personnel with
specialized financial reporting experience to achieve a sound internal
control environment to carry out the compilation process and help
ensure reliable financial reporting by the reporting date.
Count: GAO-06-415 (results of the fiscal year 2005 audit):
Count: 32;
No.: 05-3;
Recommendation: The Director of OMB should direct the Controller of
the Office of Federal Financial Management to consider, in order to
provide audit assurance over federal agencies' closing packages, not
waiving the closing package audit requirements for any verifying
agency in future years, such as Tennessee Valley Authority (TVA);
Status of recommendation[A]: Per Treasury and OMB: OMB will continue
working with TVA so that it submits its audited closing package by the
required financial reporting deadline. Of note, TVA moved closer to
submitting its closing package by the required year-end reporting
deadline during fiscal year 2009;
Status of recommendation[A]: Per GAO: Open. OMB has not yet reasonably
ensured that audit assurance is provided over all federal agencies'
closing package information.
Count: 33;
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[A]: Per Treasury and OMB: Treasury has
designed a process to identify and execute the actions necessary to
address GAO audit findings. Efforts will continue in fiscal 2010 to
track and resolve audit findings;
Status of recommendation[A]: Per GAO: Open. Although Treasury has
developed a process, the process did not ensure that corrective action
plans were appropriately updated and monitored to help ensure
effective resolution of audit findings within established time frames.
Count: GAO-07-805 (results of the fiscal year 2006 audit):
Count: 34;
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[A]: Per Treasury and OMB: Treasury, in
coordination with OMB, will continue working 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[A]: Per GAO: Open. The federal government was
unable to provide us with adequate legal representation regarding the
accrual-based consolidated financial statements for fiscal year 2009.
Count: 35;
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[A]: Per Treasury and OMB: During fiscal year
2009, 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, (4) the potential outcome of such steps, and (5)
additional information related to their intragovernmental differences
that would allow Treasury to correct these differences within GFRS.
This effort will continue in fiscal year 2010, including following up
with any federal agencies that either did not comply or provided
incomplete information related to this new requirement;
Status of recommendation[A]: Per GAO: Open. While Treasury continued
to take action in this area, we identified instances in which the
procedures that Treasury designed to monitor intragovernmental
transactions and balances had not been implemented consistently. For
example, some review accountants did not follow up for additional
explanations as necessary with agencies that either did not respond or
had incomplete responses.
Count: GAO-08-748 (results of the fiscal year 2007 audit):
Count: 36;
No.: 07-1;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to enhance and fully document all practices
referred to in the standard operating procedure (SOP) entitled
"Preparing the Financial Report of the U.S. Government" to better
ensure that practices are proper and complete and can be consistently
applied by staff members;
Status of recommendation[A]: Per Treasury and OMB: In fiscal year
2009, Treasury updated this SOP by significantly expanding the
functions covered by this SOP and increasing the level of detail
related to all the key procedures. Treasury will work to ensure full
compliance with this SOP, as well as all other significant policies,
during fiscal year 2010, to address remaining GAO concerns;
Status of recommendation[A]: Per GAO: Open. Although Treasury made
improvements to this SOP, key practices and procedures--including
those related to preparing the budget statements--were excluded.
Count: 37;
No.: 07-2;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to enhance Treasury's checklist or design an
alternative and use it to adequately and timely document Treasury's
assessment of the relevance, usefulness, or materiality of information
reported by the federal agencies for use at the governmentwide level;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2009, Treasury enhanced its analysis procedures to take into account
agency-specific disclosures and assess their impact at the
governmentwide level. Treasury will update its checklist during fiscal
year 2010, as necessary, to comply with federal GAAP;
Status of recommendation[A]: Per GAO: Open. Although Treasury made
significant improvements in documenting its assessment of agency
information, we found that the assessment was not complete.
Count: 38;
No.: 07-5;
Recommendation: The Director of OMB should 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' Statement of Budgetary Resources and
the amounts included in the computation of the budget deficit in the
CFS;
Status of recommendation[A]: Per Treasury and OMB: OMB, working
jointly with Treasury, will enhance its efforts to implement this
recommendation;
Status of recommendation[A]: Per GAO: Open.
Count: 39;
No.: 07-9;
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 and implement
effective processes for monitoring and assessing the effectiveness of
internal control over the processes used to prepare the CFS;
Status of recommendation[A]: Per Treasury and OMB: Treasury is
currently revising its internal control procedures to formalize
monitoring and assessment of the effectiveness of internal control
over the preparation of the CFS;
Status of recommendation[A]: Per GAO: Open.
Count: 40;
No.: 07-10;
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 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;
Status of recommendation[A]: Per Treasury and OMB: Treasury will
continue to consider what information can be obtained during the
interim period to facilitate the year-end CFS preparation process;
Status of recommendation[A]: Per GAO: Open.
Count: GAO-09-387 (results of the fiscal year 2008 audit):
Count: 41;
No.: 08-01;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to design, document, and implement policies and
procedures to identify and eliminate intragovernmental payroll tax
amounts at the governmentwide level when compiling the CFS;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2009, Treasury began documenting its procedures for identifying and
eliminating intragovernmental payroll tax amounts at the
governmentwide level. Treasury will continue to update and revise the
policy in fiscal year 2010 to address remaining GAO concerns;
Status of recommendation[A]: Per GAO: Open.
Count: 42;
No.: 08-02;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop, document, and implement processes and procedures for
preparing and reviewing the Management's Discussion and Analysis
(MD&A) and "The Federal Government's Financial Health: A Citizen's
Guide to the Financial Report of the United States Government"
sections of the Financial Report of the U.S. Government (Financial
Report) to help assure that information reported in these sections is
complete, accurate, and consistent with related information reported
elsewhere in the Financial Report;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2009, Treasury prepared a new SOP pertaining to preparation of the
MD&A section of the Financial Report and the Citizen's Guide (Guide).
Treasury noted that new steps and processes were being implemented
during fiscal year 2009 to improve the efficiency and integrity of
financial analysis in the MD&A and the Guide and that it was likely
that the SOP was going to have to evolve as those steps were put into
practice and refined. During fiscal year 2010, Treasury will be
working with GAO to resolve its comments received in fiscal year 2009.
These changes notwithstanding, the SOP will have to further evolve to
accommodate the phased, 3-year implementation of SFFAS No. 36,
Reporting Comprehensive, Long-Term Fiscal Projections for the U.S.
Government. The steps that the government will be taking to comply
with SFFAS No. 36, which will ultimately be reflected in the SOP,
remain under discussion;
Status of recommendation[A]: Per GAO: Open.
Count: 43;
No.: 08-03;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
establish and document criteria to be used in identifying federal
entities as significant to the CFS for purposes of obtaining assurance
over the information being submitted by those entities for the CFS;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2009, Treasury documented its criteria for identifying significant
entities. Treasury and OMB will revise the criteria to address
remaining GAO concerns;
Status of recommendation[A]: Per GAO: Open. The criteria developed by
Treasury are in conflict with criteria developed and implemented by
OMB for identifying significant entities. In addition, implementation
of the policy as currently designed will not result in obtaining, in a
timely manner, audit assurance over the information reported by newly
identified significant entities for use in the CFS.
Count: 44;
No.: 08-04;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
develop and implement policies and procedures for assessing and
documenting, on an annual basis, which entities meet the criteria
established for identifying federal entities as significant to the CFS;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2009, Treasury documented its procedures for identifying significant
entities based on the criteria for these entities. Treasury will
document and implement the policies related to significant entities
based on the revised criteria from recommendation no. 08-03;
Status of recommendation[A]: Per GAO: Open. See status of
recommendation no. 08-03.
Source: GAO.
[A] The status of the recommendations listed in app. I is as of
February 19, 2010, the date of our report on the audit of the fiscal
year 2009 CFS.
[End of table]
[End of section]
Appendix II: Comments from the Department of the Treasury:
Department Of The Treasury:
Assistant Secretary:
Washington:
July 21, 2010:
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)
2009 audit, GA0-10-757, Management Report: Improvements Needed in
Controls Over the Preparation of the U.S. Consolidated Financial
Statements.
The 2009 draft report identifies ten new recommendations for improving
the Consolidated Financial Statements (CFS) preparation process
through changes to documented policies and enhancements to standard
operating procedures. We have made significant progress in improving
our policies and procedures since the issuance of the report and we
expect to implement additional recommendations by the end of FY 2010.
We concur with the GAO findings and will use them to focus our efforts
on improving the central accounting and compilation activities
associated with the Consolidated Statements.
Although the FY 2009 Consolidated Report and this associated report
were issued later than normal, we continued to make progress in
improving the preparation of the CFS, leading to the closing of two of
44 recommendations outstanding from the previous CFS audit reports. We
are making steady improvement on our data analysis capabilities and
improvements in the procedural and automated changes to our reporting
processes. We also strengthened the internal controls related to the
preparation of the CFS. Our efforts included improved Financial Report
disclosures, enhanced internal control processes and procedures and
development of more detailed corrective actions to address these
recommendations. This year we initiated two efforts aimed at
addressing long standing material items. We have initiated plans to:
(1) develop a General Fund accounting infrastructure and (2) automate
the interagency agreement process. While these efforts may take
several years to provide measurable reductions they are significant
efforts towards resolving a major cause of the annual disclaimer and
numerous report findings.
Thank you, again, for the opportunity to review and comment on the
final draft. We look forward to working with you and your staff in
making the CFS more meaningful and usable to its readers.
Sincerely,
Signed by:
Richard L. Gregg
Fiscal Assistant Secretary:
cc: Daniel Werfel, Comptroller, 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 contact named above, the following individuals made
key contributions to this report: Louise DiBenedetto, Assistant
Director; John Ahern; Shawkat Ahmed; William Boutboul; Darryl Chang;
Malissa Livingston; Susan Mata; Thanomsri Piyapongroj; Taya Tasse; and
Cindy Tsao.
[End of section]
Footnotes:
[1] The fiscal year 2009 Financial Report of the United States
Government includes our report and was issued by the Department of the
Treasury (Treasury) on February 26, 2010, 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, 2009 and 2008, 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] As used in this report, accrual-based consolidated financial
statements refer to all of the consolidated financial statements and
notes, except those related to the Statement of Social Insurance.
[4] The Government Management Reform Act of 1994 has required such
reporting, covering the executive branch of government, beginning with
financial statements prepared for fiscal year 1997. 31 U.S.C. 331(e).
[5] A material weakness is a deficiency, or combination of
deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the agency's financial
statements will not be prevented, or detected and corrected, on a
timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by
those charged with governance. A deficiency in internal control 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 and correct, misstatements on a
timely basis.
[6] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999). These standards define the minimum
level of quality acceptable for internal control in the government and
provide the basis against which internal control is to be evaluated.
[7] Treasury developed GFRS to collect federal entities' audited
financial statement information to prepare the CFS. The goal of GFRS
is to be able to directly link information from federal entities'
audited financial statements to amounts reported in the CFS.
[8] Generally accepted government auditing standards require that the
entity auditors obtain written legal representations as part of the
audit. Office of Management and Budget, Audit Requirements for Federal
Financial Statements, OMB-07-04 (amended Aug. 25, 2008), requires each
entity chief financial officer to prepare a management schedule that
documents how the information obtained in the legal counsel's response
was considered in preparing the entity's financial statements.
[9] Percentage change represents the change in particular accounts or
line items in the financial statements from the prior year to the
current year. It represents the change between the old value and the
new one divided by the old value. For example, if the prior year's
balance for the cash line item was $100,000 and the current year's
balance is $125,000 then the percentage change for the cash line item
would be 25 percent (i.e., $25,000 divided by $100,000).
[10] GAO, Financial Audit: Process for Preparing the Consolidated
Financial Statements of the U.S. Government Needs Improvement,
[hyperlink, http://www.gao.gov/products/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/products/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/products/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/products/GAO-06-415]
(Washington, D.C.: Apr. 21, 2006); 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/products/GAO-07-805] (Washington, D.C.: July 23,
2007); Financial Audit: Material Weaknesses in Internal Control over
the Processes Used to Prepare the Consolidated Financial Statements of
the U.S. Government, [hyperlink,
http://www.gao.gov/products/GAO-08-748] (Washington, D.C.: June 17,
2008); and Financial Audit: Material Weaknesses in Internal Control
Continue to Impact Preparation of the Consolidated Financial
Statements of the U.S. Government, [hyperlink,
http://www.gao.gov/products/GAO-09-387] (Washington, D.C.: Apr. 21,
2009).
[End of section]
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