Management Report
Improvements Needed in Controls over the Preparation of the U.S. Consolidated Financial Statements Gao ID: GAO-11-525 May 26, 2011The Department of the Treasury (Treasury), in coordination with the Office of Management and Budget (OMB), is primarily responsible for preparing the financial report of the U.S. government, which contains the consolidated financial statements of the U.S. government (CFS). Since GAO's first audit of the fiscal year 1997 CFS, certain material weaknesses in internal control and other limitations on the scope of GAO's work have prevented GAO from expressing an opinion on the CFS, exclusive of the Statement of Social Insurance (SOSI). Also, GAO was unable to express an opinion on the 2010 SOSI because of significant uncertainties primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2010 SOSI. As part of the fiscal year 2010 CFS audit, GAO identified material weaknesses and other control deficiencies in the processes used to prepare the CFS. The purpose of this report is to (1) provide details on new financial statement preparation control deficiencies GAO identified during its audit of the fiscal year 2010 CFS, (2) recommend improvements, and (3) provide the status of corrective actions taken to address GAO's recommendations in this area that remained open at the end of the fiscal year 2009 audit.
During its audit of the fiscal year 2010 CFS, GAO identified new and continuing control deficiencies in the federal government's processes used to prepare the CFS. New control deficiencies GAO identified involved (1) the need to enhance policies and procedures for carrying out and documenting that certain amounts and disclosures were reported consistently and in conformity with Statement of Federal Financial Accounting Standards No. 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates, which became effective in fiscal year 2010; and (2) the need to fully develop procedures for carrying out and documenting certain other information related to the federal government's financial management reported in appendixes to the 2010 Financial Report of the United States Government. In addition, GAO found that various other control deficiencies identified in previous years' audits with respect to the CFS preparation continued to exist. These control deficiencies contributed 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 federal government's 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 Treasury's central accounting records and related amounts reported in federal entities' financial statements and underlying financial information and records. The budget deficit reported in Treasury's central accounting records is used to prepare the Reconciliation of Net Operating Cost and Unified Budget Deficit, the Statement of Changes in Cash Balance from Unified Budget and Other Activities, and the Fiscal Projections for the U.S. Government. As a result of these and other material weaknesses, the federal government did not have effective internal control over financial reporting.
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-11-525, Management Report: Improvements Needed in Controls over the Preparation of the U.S. Consolidated Financial Statements
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United States Government Accountability Office:
GAO:
Report to the Secretary of the Treasury and the Director of the Office
of Management and Budget:
May 2011:
Management Report:
Improvements Needed in Controls over the Preparation of the U.S.
Consolidated Financial Statements:
GAO-11-525:
GAO Highlights:
Highlights of GAO-11-525, a report to the Secretary of the Treasury
and the Director of the Office of Management and Budget.
Why GAO Did This Study:
The Department of the Treasury (Treasury), in coordination with the
Office of Management and Budget (OMB), is primarily responsible for
preparing the financial report of the U.S. government, which contains
the consolidated financial statements of the U.S. government (CFS).
Since GAO‘s first audit of the fiscal year 1997 CFS, certain material
weaknesses in internal control and other limitations on the scope of
GAO‘s work have prevented GAO from expressing an opinion on the CFS,
exclusive of the Statement of Social Insurance (SOSI). Also, GAO was
unable to express an opinion on the 2010 SOSI because of significant
uncertainties primarily related to the achievement of projected
reductions in Medicare cost growth reflected in the 2010 SOSI. As part
of the fiscal year 2010 CFS audit, GAO identified material weaknesses
and other control deficiencies in the processes used to prepare the
CFS. The purpose of this report is to (1) provide details on new
financial statement preparation control deficiencies GAO identified
during its audit of the fiscal year 2010 CFS, (2) recommend
improvements, and (3) provide the status of corrective actions taken
to address GAO‘s recommendations in this area that remained open at
the end of the fiscal year 2009 audit.
What GAO Found:
During its audit of the fiscal year 2010 CFS, GAO identified new and
continuing control deficiencies in the federal government‘s processes
used to prepare the CFS.
New control deficiencies GAO identified involved:
* the need to enhance policies and procedures for carrying out and
documenting that certain amounts and disclosures were reported
consistently and in conformity with Statement of Federal Financial
Accounting Standards No. 33, Pensions, Other Retirement Benefits, and
Other Postemployment Benefits: Reporting the Gains and Losses from
Changes in Assumptions and Selecting Discount Rates and Valuation
Dates, which became effective in fiscal year 2010; and;
* the need to fully develop procedures for carrying out and
documenting certain other information related to the federal
government‘s financial management reported in appendixes to the 2010
Financial Report of the United States Government.
In addition, GAO found that various other control deficiencies
identified in previous years‘ audits with respect to the CFS
preparation continued to exist, and the related recommendations are
included in appendix I.
These control deficiencies contributed 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 federal
government‘s 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 Treasury‘s central accounting records and related amounts
reported in federal entities‘ financial statements and underlying
financial information and records. The budget deficit reported in
Treasury‘s central accounting records is used to prepare the
Reconciliation of Net Operating Cost and Unified Budget Deficit, the
Statement of Changes in Cash Balance from Unified Budget and Other
Activities, and the Fiscal Projections for the U.S. Government
(included in Supplemental Information). As a result of these and other
material weaknesses, the federal government did not have effective
internal control over financial reporting.
As summarized in appendix I, of the 52 open recommendations GAO
reported in July 2010, 6 were closed and 46 remained open as of
December 13, 2010, the date of GAO‘s report on its audit of the fiscal
year 2010 CFS. GAO will continue to monitor the status of corrective
actions taken to address the 4 new recommendations as well as the 46
open recommendations from prior years as part of our fiscal year 2011
CFS audit.
What GAO Recommends:
GAO is making four recommendations-”two each to Treasury and OMB-”to
address new control deficiencies. In commenting on GAO‘s draft report,
Treasury and OMB generally concurred with GAO‘s findings.
View [hyperlink, http://www.gao.gov/products/GAO-11-525] 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:
Abbreviations:
CFS: consolidated financial statements of the U.S. government:
FASAB: Federal Accounting Standards Advisory Board:
FEVBP: Federal Employee and Veteran Benefits Payable:
Financial Report: Financial Report of the United States Government:
FMFIA: Federal Managers' Financial Integrity Act:
GAAP: generally accepted accounting principles:
Justice: Department of Justice:
MD&A: Management's Discussion and Analysis:
OFAS: Office of the Fiscal Assistant Secretary:
OMB: Office of Management and Budget:
SFFAS: Statement of Federal Financial Accounting Standards:
SOP: standard operating procedure:
SOSI: Statement of Social Insurance:
STAR: Treasury's central accounting and reporting system:
Treasury: Department of the Treasury:
TVA: Tennessee Valley Authority:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
May 26, 2011:
The Honorable Timothy F. Geithner:
Secretary of the Treasury:
The Honorable Jacob J. Lew:
Director:
Office of Management and Budget:
In our report dated December 13, 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, 2010 and
2009, except for the 2009, 2008, and 2007 Statements of Social
Insurance (SOSI), which received unqualified opinions. Since GAO's
first audit of the fiscal year 1997 CFS, certain material weaknesses
in internal control over 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. 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:
* adequately account for and reconcile intragovernmental activity and
balances between federal entities;
* ensure that the federal government's 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:
* identify and either resolve or explain material differences between
(1) certain components of the budget deficit reported in the
Department of the Treasury's (Treasury) central accounting records
that are used to prepare the Reconciliation of Net Operating Cost and
Unified Budget Deficit, the Statement of Changes in Cash Balance from
Unified Budget and Other Activities, and the Fiscal Projections for
the U.S. Government (included in Supplemental Information) and (2)
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), prepares the CFS on behalf of the federal government. Many of
the material weaknesses 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 2010 CFS that relate to the processes used to prepare the
CFS, (2) four recommendations to address these control deficiencies,
and (3) the status of corrective actions by Treasury and OMB to
address the 52 recommendations relating to the processes used to
prepare the CFS detailed in our previous reports that remained open at
the end of the fiscal year 2009 audit. Appendix I provides a summary
of the status of actions taken to address the open recommendations
from our previous reporting. During our fiscal year 2010 audit, we
communicated each of the new control deficiencies to your staff.
Scope and Methodology:
As part of our audit of the fiscal years 2010 and 2009 CFS, we
considered 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 2010 CFS, which is
included in the 2010 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
federal government's accrual-based consolidated financial statements
and our conclusion that the federal government did not have effective
internal control over financial reporting. Based on the scope of our
work and the effects of the other limitations on the scope of our
audit noted throughout our audit report on the fiscal year 2010 CFS,
our internal control work would not necessarily identify all
deficiencies in internal control, including those that might be
material weaknesses or significant deficiencies. We performed our
audit of the fiscal year 2010 and 2009 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 Fiscal Assistant Secretary provided written
comments on May 11, 2011, which are reprinted in their entirety 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 financial
reporting related to the process for preparing the CFS through
numerous improvements to its standard operating procedures (SOP).
However, in fiscal year 2010, we identified a control deficiency
involving enhancing and documenting two SOPs. 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 appropriate 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. Deficient
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.
Treasury's SOPs entitled "Preparing the Financial Report of the U.S.
Government" and "Data Analysis" include procedures for Treasury staff
to review the CFS Statement of Net Cost and the Federal Employee and
Veteran Benefits Payable (FEVBP) note disclosure. However, the SOPs
did not include steps for assuring that amounts and disclosures were
in conformity with Statement of Federal Financial Accounting Standards
(SFFAS) No. 33, Pensions, Other Retirement Benefits, and Other
Postemployment Benefits: Reporting the Gains and Losses from Changes
in Assumptions and Selecting Discount Rates and Valuation Dates, which
became effective in fiscal year 2010. SFFAS No. 33 requires that the
governmentwide entity (1) display gains and losses related to changes
in assumptions as a separate line item or line items on the statement
of net cost and (2) disclose in the notes to the financial statements
a reconciliation of the beginning and ending liability balances that
provides the material components of the changes for pensions, other
retirement benefits, and other postemployment benefits. We identified
that the gains and losses reported on the draft statement of net cost
were not consistent with the amounts disclosed in the draft FEVBP note
for changes in assumptions. Specifically, the gains and losses
reported on the draft statement of net cost, primarily for the
Department of Veterans Affairs and Department of Defense, included
amounts from other changes in the liability balance beyond those
related to changes in assumptions. Treasury's SOPs did not include
steps for reviewing and documenting amounts and disclosures for
conformity with SFFAS No. 33. As a result, Treasury's compilation
process did not identify inconsistencies in amounts reported by these
agencies to Treasury for the draft statement of net cost and FEVBP
note disclosure. In addition, the draft FEVBP note did not include the
required disclosure of material components of the change in the
veterans compensation and burial benefits liability. Treasury adjusted
(1) the final statement of net cost to include only gains and losses
related to changes in assumptions and to ensure consistency with
amounts reported in the note disclosure, and (2) the final FEVBP note
disclosure to include the material components of veterans compensation
and burial benefits.
Recommendations for Executive Action:
To help assure that FEVBP amounts are properly reported in the CFS, we
recommend that the Secretary of the Treasury direct the Fiscal
Assistant Secretary to (1) enhance the applicable SOPs to include
required steps for assuring conformity with SFFAS No. 33 and the
consistency of amounts between the statement of net cost and the FEVBP
note disclosure, and (2) implement and document such steps.
Process for Preparing Certain Other Accompanying Information:
Beginning in the 2009 Financial Report, OMB has included several
appendixes to the Financial Report related to the federal government's
financial management, including information on (1) auditor-identified
material weaknesses, (2) agency reporting under 31 U.S.C. 3512 (c),
(d) (commonly known as the Federal Managers' Financial Integrity Act
or FMFIA), (3) government corporations required to submit audited
financial statements to OMB, (4) audit results of the Accountability
of Tax Dollars Act agencies and selected components of the Chief
Financial Officers Act agencies, and (5) agencies' compliance with the
Federal Financial Management Improvement Act. However, we identified
that OMB did not have an adequate process to assure the accuracy of
the information provided in these appendixes.
As part of our audit of the fiscal year 2010 CFS, we reviewed the
draft Financial Report appendixes to ensure that they were consistent
with agency auditors' reporting and other information presented in the
agencies' annual reports and the Financial Report. However, because
OMB has not fully developed procedures for preparing this information,
we identified errors in the draft appendixes that were not identified
through OMB's process for preparing these appendixes. For example, we
found several errors in the draft appendix related to FMFIA reporting.
Specifically, we found instances where the FMFIA assurance results
summarized in the draft appendixes were not consistent with those
reported in the agencies' annual reports. We also found errors in the
number and status of internal control material weaknesses reported by
OMB regarding four agencies in comparison with the related auditors'
reporting. For another agency, the FMFIA assurance statement on the
effectiveness of the agency's internal control over operations
reported in the draft appendix did not agree with the assurance
statement reported in the agency's annual report. Additionally, we
found errors in the calculation of FMFIA consolidated totals of
agencies' material weaknesses related to management and system
controls. Further, OMB procedures did not provide for maintaining
documentation supporting the information presented in these
appendixes. We communicated these matters to OMB, which corrected the
information for the final 2010 Financial Report.
Recommendations for Executive Action:
To help assure the accuracy of the appendixes to the Financial Report
prepared by OMB, we recommend that the Director of OMB direct the
Controller of OMB to enhance its procedures for preparing the
appendixes to include required steps to (1) assure the accuracy and
consistency of the accompanying information presented in the
appendixes to the Financial Report related to the federal government's
financial management, and (2) maintain documentation supporting such
information.
Status of Recommendations from Prior Reports:
Of our 52 recommendations open at the end of the fiscal year 2009
audit, 6 were closed and 46 remained open as of December 13, 2010, the
date of our report on the audit of the fiscal year 2010 CFS.
Appendix I summarizes the status as of December 13, 2010, for the 52
open recommendations regarding control deficiencies in the CFS
preparation process from prior years' reports. Specifically, 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's or OMB's status of
recommendation needed further clarification. We will continue to
monitor Treasury's and OMB's progress in addressing GAO's
recommendations as part of our fiscal year 2011 CFS audit work.
Agency Comments:
OMB Comments:
In oral comments on a draft of this report, OMB generally concurred
with the findings in this report. With respect to GAO's finding
relating to certain financial management information included in
appendixes to the Financial Report, OMB stated that it does not plan
to include such appendixes in future Financial Reports. :
Treasury Comments:
In written comments on a draft of this report, Treasury concurred with
our findings and noted that the agency has 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
2011, 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, Treasury stated that it has increased its
commitment to resolving material intragovernmental differences, and
plans to utilize multiple focus groups to identify and implement short-
and long-term solutions to this issue.
This report contains recommendations to the Secretary of the Treasury
and the Director of OMB. The head of a federal agency is required by
31 U.S.C. 720 to submit a written statement on actions taken on 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 this report.
We are sending copies of this report to interested congressional
committees, the Fiscal Assistant Secretary of the Treasury, the Deputy
Director for Management of OMB and Federal Chief Performance Officer,
and the Controller of OMB's Office of Federal Financial Management.
This report is also available at no charge on GAO's Web site at
[hyperlink, http://www.gao.gov].
We acknowledge and appreciate the cooperation and assistance provided
by Treasury and OMB during our audit. If you or your staff have any
questions or wish to discuss this report, please contact me 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.
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;
Number: 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 consolidated financial statements of the
U.S. government (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). A Treasury Task Group is currently
developing the financial statements for the General Fund, with the
goal to prepare them for financial audit in fiscal year 2012. In the
interim, Treasury continues to separately identify certain General
Fund transactions by providing agencies with monthly Centrally
Reporting System data to facilitate reconciliation on a quarterly
basis. Also, throughout fiscal year 2011, Treasury will continue to
identify and resolve material differences related to fiduciary,
employee benefits, buy/sell and transfer activity through the
continued efforts of Focus Groups for each of these transaction
categories;
Status of recommendation[A]: Per GAO: Open.
Count: 2;
Number: 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: Treasury has
published the updated Intragovernmental Business Rules which include
dispute resolution procedures for trading partner agencies to follow.
Treasury will continue to monitor the effectiveness of the revised
rules and the dispute resolution process during fiscal year 2011. OMB,
working with Treasury, will continue its efforts to implement this
recommendation;
Status of recommendation[A]: Per GAO: Open.
Count: 3;
Number: 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: See the status of
recommendation no. 02-6;
Status of recommendation[A]: Per GAO: Open.
Count: 4;
Number: 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 and implemented formal consolidating and eliminating
procedures with regard to intragovernmental assets and liabilities.
Final resolution is contingent on resolving material intragovernmental
differences; See status of recommendation no. 02-4;
Status of recommendation[A]: Per GAO: Open.
Count: 5;
Number: 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: See the status of
recommendation no. 02-4;
Status of recommendation[A]: Per GAO: Open.
Count: 6;
Number: 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: Treasury's
consolidating procedures request information related to asset
capitalization and agency advances or deferred revenue. However, final
resolution is contingent on resolving material intragovernmental
differences affecting revenues and receivables related to buy/sell
transactions. During fiscal year 2011, a Focus Group will work on
reconciling buy/sell differences. See status of recommendation no. 02-
4;
Status of recommendation[A]: Per GAO: Open.
Count: 7;
Number: 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 only in the
Statements of Operations and Changes in Net Position until
intragovernmental differences are materially resolved. At that point,
unresolved reconciling items, if any, needed to reconcile net
operating cost to the unified budget deficit can be separately
identified in the reconciliation statements. See status of
recommendation no. 02-13;
Status of recommendation[A]: Per GAO: Open.
Count: 8;
Number: 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 the reconciliation statements 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. Treasury
will analyze certain budgetary amounts, like loan repayments and
deposit fund transactions, and work on resolving the differences
between how they contribute to the unified budget deficit and compare
to the related amounts as reported in the agencies' financial
statements. We will also work with GAO as Treasury finalizes the
compilation approach for the CFS and the resolution of these
differences;
Status of recommendation[A]: Per GAO: Open.
Count: 9;
Number: 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: During fiscal year
2011, Treasury will continue to refine its reporting materiality
policy and work with GAO to gain consensus on an approach to determine
material vs. non-material items. See also status of recommendation no.
02-13;
Status of recommendation[A]: Per GAO: Open.
Count: 10;
Number: 02-15;
Recommendation: If Treasury chooses to continue using information from
both federal agencies' financial statements and Treasury's central
accounting and reporting system (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 material areas where STAR data does not reconcile to
federal agencies' financial statements. Treasury will work with GAO as
Treasury develops an approach during fiscal year 2011 to resolve these
reconciliation issues. See also status of recommendation no. 02-13;
Status of recommendation[A]: Per GAO: Open.
Count: 11;
Number: 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. 02-13;
Status of recommendation[A]: Per GAO: Open.
Count: 12;
Number: 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
continue to document the consistency of the significant line items on
this statement to federal agencies' audited financial statements as
much as possible during fiscal year 2011. See status of
recommendations no. 02-13 and no. 02-15;
Status of recommendation[A]: Per GAO: Open.
Count: 13;
Number: 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 in fiscal year 2011. Treasury will again work with
the agencies that contribute to the largest unreconciled differences
to identify the causes of the differences and work with the agencies
and with GAO as Treasury develops an approach for resolving these
differences;
Status of recommendation[A]: Per GAO: Open.
Count: 14;
Number: 02-22;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary, in coordination with the Controller of OMB, to
perform an assessment to define the reporting entity, including its
specific components, in conformity with the criteria issued by the
Federal Accounting Standards Advisory Board (FASAB). Key decisions
made in this assessment should be documented, including the reason for
including or excluding components and the basis for concluding on any
issue. Particular emphasis should be placed on demonstrating that any
financial information that should be included but is not included is
immaterial;
Status of recommendation[A]: Per Treasury and OMB: Treasury will
continue working in fiscal year 2011 to address GAO concerns about the
reporting entity policy. Specifically, Treasury will address some of
the specific points raised by GAO related to its Reporting Entity
White Paper presented in 2009. Furthermore, Treasury acknowledges the
work of FASAB in this area and is supporting and participating in
those efforts to help gain clarity to this issue;
Status of recommendation[A]: Per GAO: Open.
Count: 15;
Number: 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;
Number: 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;
Number: 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 continued to work with federal agencies to
ensure that adequate information was provided in the legal
representation letters regarding the expected outcomes of the cases.
This effort will continue in fiscal year 2011. During fiscal year
2011, Treasury will pursue talks with Department of Justice to
determine if a global approach and solution is available;
Status of recommendation[A]: Per GAO: Open.
Count: 18;
Number: 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: Treasury will
consider performing further analysis on these contingencies building
on the work undertaken jointly with OMB in 2009 depending on time and
resources constraints. As part of this effort, Treasury will also
discuss with OMB and the relevant agencies with material international
agreements as to what steps they could do to enforce the existing
requirements to register international agreements with the Department
of State. Treasury will also discuss with OMB to consider the
expansion and/or revision of agency audit requirements to test for
registration of treaties and 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;
Number: 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;
Number: 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;
Number: 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;
Number: 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;
Number: 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 information
was requested from federal agencies for disclosure in the fiscal year
2010 CFS. Treasury will continue to work with agencies to improve the
consistency of this disclosure in the fiscal year 2011 CFS;
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.
GAO-04-866 (results of the fiscal year 2003 audit):
Count: 24;
Number: 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
2010, Treasury disclosed the change in cash balances as reported on
the Balance Sheet on the Statement of Changes in Cash Balance.
Treasury will continue to analyze cash transactions, and work with its
Cash Policy area to ensure consistent reporting of cash transactions,
to ensure full reporting of the changes in the cash balance of the
U.S. government;
Status of recommendation[A]: Per GAO: Open. Treasury has not
established and implemented effective processes and procedures for
identifying and reporting all items needed to prepare the Statement of
Changes in Cash Balance from Unified Budget and Other Activities.
Count: 25;
Number: 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;
Number: 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, when it becomes
available in the agencies' financial statements. See status of
recommendation no. 03-8;
Status of recommendation[A]: Per GAO: Open.
Count: 27;
Number: 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's current
CFS compilation process provides for direct linkage from the 35
significant federal agencies audited financial statements to most of
the CFS principal statements and to the related note disclosures.
However, additional work is needed related to the two budgetary
principal financial statements. Treasury will work with GAO as
Treasury develops an approach during fiscal year 2011 to resolve long
standing issues regarding these statements. See status of
recommendation no. 02-15;
Status of recommendation[A]: Per GAO: Open. Treasury's process for
compiling the CFS generally demonstrated that amounts in the Statement
of Social Insurance were consistent with the underlying federal
entities' financial statements and that the Balance Sheet and the
Statement of Net Cost were also consistent with the 35 significant
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 the 35 significant federal entities' audited financial
statements and other financial data.
GAO-05-407 (results of the fiscal year 2004 audit):
Count: 28;
Number: 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: During fiscal year
2011, Treasury will revise its journal voucher procedures to ensure
that the communications to the agencies be included in the supporting
documentation;
Status of recommendation[A]: Per GAO: Open.
Count: 29;
Number: 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: During fiscal year
2010, Treasury hired a contractor to assist in areas requiring
specialized expertise related to internal controls and certain
financial reporting matters. With the assistance of this contractor,
Treasury made improvements to its internal control infrastructure
during fiscal year 2010. Treasury has updated, and will continue to
revise and improve its documentation to help ensure 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;
In addition, Treasury is in the process of restructuring the
management of the organization responsible for the CFS compilation
process to provide additional oversight and accountability over the
year-end CFS process;
Further, to assist Treasury during the year-end compilation and
preparation of the fiscal year 2011 CFS, Treasury is considering
obtaining personnel from other agencies, with additional financial
reporting expertise, to assist with the year-end process;
Status of recommendation[A]: Per GAO: Open.
GAO-06-415 (results of the fiscal year 2005 audit):
Count: 30;
Number: 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. Over the last two fiscal years
TVA has progressively moved closer to submitting its closing package
by the required financial reporting deadline. According to OMB, for
fiscal year 2010, it did not waive the closing package audit
requirements for any verifying agencies;
Status of recommendation[A]: Per GAO: Open. TVA continued to be unable
to provide its audited closing package within the required financial
reporting deadline. Until all verifying agencies are able to submit
their audited closing package by the required financial reporting
deadline, this recommendation will remain open.
Count: 31;
Number: 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 policies and procedures to identify and execute Treasury's
and OMB's actions to address findings related to GAO's audit (or
review performed by another entity reviewing the compilation and
preparation of the CFS). In addition, Treasury will continue to track
and resolve audit and/or other CFS review findings;
Status of recommendation[A]: Per GAO: Closed.
GAO-07-805 (results of the fiscal year 2006 audit):
Count: 32;
Number: 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.
Count: 33;
Number: 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
2010, 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.
The information obtained 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 Governmentwide Financial Report System. This effort will
continue in fiscal year 2011;
Status of recommendation[A]: Per GAO: Open. Treasury continues to take
steps to help resolve material differences in intragovernmental
activity and balances. However, Treasury's and OMB's process did not
provide them with sufficient information to adequately monitor federal
agencies' efforts to reconcile intragovernmental activity and balances
with trading partners. We noted that a significant number of Chief
Financial Officers' were unable to adequately explain the reasons for
the differences with their trading partners or did not provide
adequate documentation to support responses related to year-end
reconciliations.
GAO-08-748 (results of the fiscal year 2007 audit):
Count: 34;
Number: 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, complete, and can be consistently
applied by staff members;
Status of recommendation[A]: Per Treasury and OMB: Treasury will meet
with GAO to discuss in further detail their remaining concerns related
to this SOP during fiscal year 2011, and will revise the SOP, as
necessary, to address the outstanding issues;
Status of recommendation[A]: Per GAO: Open.
Count: 35;
Number: 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: Treasury will
address remaining GAO concerns related to the checklist during fiscal
year 2011, specifically the inclusion of disclosure items related to
the principal financial statements and management's discussion and
analysis;
Status of recommendation[A]: Per GAO: Open.
Count: 36;
Number: 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: Treasury will work
with OMB to perform this analysis and to develop policies and
procedures to resolve these differences. OMB, working jointly with
Treasury, will continue its efforts to implement this recommendation;
Status of recommendation[A]: Per GAO: Open.
Count: 37;
Number: 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 in the
process of reviewing and revising its internal control procedures to
formalize monitoring and assessment of the effectiveness of internal
control over the preparation of the CFS. See status of recommendation
no. 04-6;
Status of recommendation[A]: Per GAO: Open.
Count: 38;
Number: 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.
GAO-09-387 (results of the fiscal year 2008 audit):
Count: 39;
Number: 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
2011, Treasury will continue to analyze and compare the amount of
payroll taxes recorded centrally compared to the corresponding amounts
reported by the agencies in their financial statements. Policies and
procedures will be modified to reflect the results of the analysis;
Status of recommendation[A]: Per GAO: Open.
Count: 40;
Number: 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, the Office of the Fiscal Assistant Secretary (OFAS) drafted and
in fiscal year 2010 enhanced standard operating procedures (SOP)
concerning the preparation of the Management's Discussion & Analysis
(MD&A) and Citizen's Guide. As a result of implementing the enhanced
SOP in fiscal year 2010, instances of inaccuracies and inconsistency
were lower during the fiscal year 2010 reporting process than it had
been during prior years. During fiscal year 2011, OFAS will further
enhance its SOP and focus on its implementation to assure that
information reported in the MD&A and Citizen's Guide is complete,
accurate and consistent with related information reported elsewhere in
the Financial Report;
Status of recommendation[A]: Per GAO: Open.
Count: 41;
Number: 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
2010, Treasury and OMB used its documented criteria to identify all
federal entities that are significant to the CFS. Treasury and OMB are
working with the significant agencies that have not submitted Closing
Packages prior to fiscal year 2011 on the reporting and audit
requirements related to their submission to Treasury. During fiscal
year 2011, Treasury will address GAO's remaining concerns as to the
impact on the CFS of the remaining agencies that would not be required
to submit audited Closing Package data;
Status of recommendation[A]: Per GAO: Open.
Count: 42;
Number: 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
2011, Treasury will revise its policies and procedures for identifying
entities that are significant to the CFS to require them to be
performed on an annual basis;
Status of recommendation[A]: Per GAO: Open.
GAO-10-757 (results of the fiscal year 2009 audit):
Count: 43;
Number: 09-01;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to enhance the SOP entitled "Analyzing Agency
Restatements" to fully document all procedures related to identifying,
analyzing, and reporting restated closing package data as well as
changes in accounting principles;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury fully documented its procedures related to identifying,
analyzing and reporting restated closing package data as well as prior
period adjustments due to changes in accounting principles;
Status of recommendation[A]: Per GAO: Closed.
Count: 44;
Number: 09-02;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to enhance the SOP entitled "Analyzing Agency
Restatements" to clarify who is responsible for performing the
procedures contained in the SOP;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury ensured that its procedures related to identifying,
analyzing and reporting restated closing package data as well as prior
period adjustments due to changes in accounting principles, clarified
the roles and responsibilities for the assigned Treasury staff;
Status of recommendation[A]: Per GAO: Closed.
Count: 45;
Number: 09-03;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to enhance the SOP entitled "Analyzing Agency
Restatements" to include procedures for analyzing the overall impact
of entities' restatements on the CFS and documenting the analysis and
related conclusion;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury fully enhanced its procedures for analyzing the impact
of entities' restatements on the CFS and documenting its analysis and
related conclusions. During fiscal year 2011, Treasury will ensure
that the procedures are followed and the impact of the entities'
restatements is correctly incorporated into the CFS;
Status of recommendation[A]: Per GAO: Open.
Count: 46;
Number: 09-04;
Recommendation: The Secretary of the Treasury should 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;
Status of recommendation[A]: Per Treasury and OMB: Treasury will
revise its procedures for identifying, analyzing, compiling, and
reporting all significant accounting policies and related party
transactions at the governmentwide level in fiscal year 2011 to
address remaining GAO concerns concerning the completeness of these
disclosures;
Status of recommendation[A]: Per GAO: Open.
Count: 47;
Number: 09-05;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to 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;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury fully documented its procedures for assuring the
accuracy of staff's work related to preparing the social insurance
information for the CFS;
Status of recommendation[A]: Per GAO: Closed.
Count: 48;
Number: 09-06;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to enhance the SOP entitled "Statement of Social
Insurance, Social Insurance Note, and Required Supplementary
Information" to implement and document procedures for assuring the
accuracy of staff's work related to preparing the social insurance
information for the CFS;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury revised its procedures for assuring the accuracy of
staff's work related to preparing the social insurance information for
the CFS and clarified the roles and responsibilities for the assigned
Treasury staff. However, there were inconsistencies between the draft
of the fiscal year 2010 CFS and the Statement of Social Insurance-
related information included in the social insurance reporting
agencies' fiscal year 2010 Closing Packages. In fiscal year 2011,
Treasury will ensure that the procedures in the enhanced Statement of
Social Insurance SOP are effectively implemented and documented to
ensure that all the social insurance information in the CFS is
consistent with the agencies' social insurance information;
Status of recommendation[A]: Per GAO: Open.
Count: 49;
Number: 09-07;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to 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;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury included procedures for assuring the accuracy of
staff's work related to preparing the Schedule of Differences;
Status of recommendation[A]: Per GAO: Closed.
Count: 50;
Number: 09-08;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to implement and document procedures for assuring
the accuracy of staff's work related to preparing the Schedule of
Differences;
Status of recommendation[A]: Per Treasury and OMB: In fiscal year
2011, Treasury will improve the implementation and documentation of
its procedures to help assure completeness and accuracy of documenting
the inconsistencies between the amounts provided by the agencies;
Status of recommendation[A]: Per GAO: Open.
Count: 51;
Number: 09-09;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to 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;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2010, Treasury included procedures for assuring the accuracy of
staff's work related to performing analytical procedures;
Status of recommendation[A]: Per GAO: Closed.
Count: 52;
Number: 09-10;
Recommendation: The Secretary of the Treasury should direct the Fiscal
Assistant Secretary to implement and document procedures for assuring
the accuracy of staff's work related to performing analytical
procedures;
Status of recommendation[A]: Per Treasury and OMB: During fiscal year
2011 Treasury will improve the implementation and documentation of its
procedures to address remaining GAO issues related to assuring the
accuracy of staff's work related to performing analytical procedures,
specifically strengthening the explanations for all significant
variances found during the year-end analyses;
Status of recommendation[A]: Per GAO: Open.
Source: GAO, Treasury, and OMB.
[A] The status of the recommendations listed in app. I is as of
December 13, 2010, the date of our report on the audit of the fiscal
year 2010 CFS.
[End of table]
[End of section]
Appendix II: Comments from the Department of the Treasury:
Department Of The Treasury:
Assistant Secretary:
Washington:
May 11, 2011:
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)
2010 audit, GAO-11-525, Management Report: Improvements Needed in
Controls Over the Preparation of the U.S. Consolidated Financial
Statements.
The draft Management Report for the FY 2010 audit identifies four new
recommendations for improving the Consolidated Financial Statements
(CFS) preparation process through changes to documented policies and
enhancement 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 2011. We concur with GAO's findings and will use them
to focus our efforts on improving the central accounting and
compilation activities associated with the CFS.
During FY 2010 and FY 2011, we continued to make progress in improving
the preparation of the CFS, leading to the closing of 6 of 52
recommendations outstanding from the previous CFS audit reports. We
are making steady improvements in our data analysis capabilities and
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 CFS disclosures, enhanced
internal control processes and procedures, and development of more
detailed corrective actions to address the recommendations. This year,
we have increased our commitment to resolving material
intragovernmental differences. Our strategy entails utilizing multiple
focus groups to identify and implement short- and long-term solutions
to ensure that this material weakness can be closed as soon as
possible. We expect that, within the next three years, we will remove
this issue as a disclaimer.
In addition, we appreciate both OMB's and GAO's support during the
past year in helping Treasury launch an enhanced, interactive, and
more usable Financial Report website that facilitates navigation
throughout the Report and Citizen's Guide, and enables users to easily
access more detailed and additional information.
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]
Footnotes:
[1] The 2010 Financial Report of the United States Government
(Financial Report) includes our report and was issued by the
Department of the Treasury (Treasury) on December 21, 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].
[End of section]
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