Survey Results of Selected Non-CFO Act Agencies' Views on Having 
Audited Financial Statements (14-DEC-01, GAO-02-281R).		 
								 
GAO surveyed agencies not subject to the Chief Financial Officers
Act of 1990. All of the 26 agencies surveyed reported that they  
either achieved significant benefits or would anticipate	 
achieving such benefits from having audited financial statements.
The level of effort to prepare financial statements and prepare  
for an audit varied significantly with the size and other	 
characteristics of the agencies. Respondents identified a	 
combination of factors to consider, including budget authority,  
key financial statement amounts, and the type of agency 	 
operations. Irrespective of the importance of such factors, 21 of
the 26 agencies reported that federal agencies, in general,	 
should have their financial statements audited. 		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-281R					        
    ACCNO:   A02587						        
  TITLE:     Survey Results of Selected Non-CFO Act Agencies' Views on
Having Audited Financial Statements				 
     DATE:   12/14/2001 
  SUBJECT:   Financial statement audits 			 
	     Surveys						 

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GAO-02-281R
     
GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements
United States General Accounting Office

Washington, DC 20548

December 14, 2001 The Honorable Patrick J. Toomey House of Representatives

Subject: Survey Results of Selected Non- CFO Act Agencies? Views on Having
Audited Financial Statements

Dear Mr. Toomey: This letter summarizes the information we provided during a
November 30, 2001, briefing to your office. Based on your April 30, 2001,
letter to the Comptroller General and subsequent discussions with your
office, we conducted a survey of 26 agencies that are not subject to the
Chief Financial Officers Act of 1990 (CFO Act). The CFO Act, as expanded by
the Government Management Reform Act of 1994, requires 24 major executive
branch departments/ agencies to prepare annual financial statements and have
them audited. Of the 26 non- CFO Act agencies that we surveyed, 12 agencies
have prepared and had their financial statements audited within the past 5
years.

The objectives of the survey were to determine the

sect. benefits achieved or anticipated by the surveyed agencies from preparing
financial statements and having them audited;

sect. degree of effort or anticipated effort for the surveyed agencies to
prepare financial statements and have them audited;

sect. factors, including budget authority, that should be considered in
determining whether agencies should prepare financial statements and have
them audited; and

sect. surveyed agencies? views about whether, in general, agencies should have
their financial statements audited.

The enclosed briefing slides summarize the survey responses as provided to
you in the November 30, 2001, briefing. The attachment to the briefing
slides lists, by surveyed agency, the amounts of assets, liabilities,
revenue, and expenses that the agencies reported to the Department of the
Treasury for fiscal year 2000, as well as certain agency baseline
information, such as budget authority, the number of offices, and agency
functions. Pages 13 and 14 of the enclosure discuss the scope and
methodology of our work. Where appropriate, we discussed certain responses
to the questionnaire with agency officials, but we did not independently
verify the information provided by the respondents. In addition, we sent
agency- specific data presented in the slides to the respective agencies for
their review. We performed our

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
2

work from June 2001 through November 2001 in accordance with U. S. generally
accepted government auditing standards.

Results in Brief

All 26 of the surveyed agencies responded to our survey. Overall, the
surveyed agencies reported that they either achieved significant benefits or
would anticipate achieving such benefits from having audited financial
statements. The level of effort to prepare financial statements and prepare
for an audit of such statements varied significantly with the size and other
characteristics of the agencies. In determining whether agencies should
prepare financial statements and have them audited, respondents identified a
combination of factors that should be considered, including budget
authority, key financial statement amounts, and the type of agency
operations. For example, the surveyed agencies reported that an agency?s
fiduciary responsibilities and risks associated with the agency?s operations
were the most important factors to consider. Irrespective of the importance
of such factors, 21 of the 26 agencies reported that federal agencies, in
general, should have their financial statements audited.

Benefits Achieved or Anticipated by the Surveyed Agencies From Preparing
Financial Statements and Having Them Audited

The 12 surveyed agencies that have had their financial statements audited
generally reported significant benefits from those audits. The most
significant benefits cited are enhancing accountability and identifying
inefficiencies and weaknesses. Other significant benefits included improving
internal control, enhancing the public?s perception of the agency, meeting
statutory requirements, and monitoring assets and liabilities. The 14
surveyed agencies that have not had audited financial statements reported
that they would anticipate benefits from such audits, but to a much less
extent than the achieved benefits reported by the 12 surveyed agencies that
have had their financial statements audited.

We asked these 12 audited agencies whether the benefits of their first audit
and subsequent audits outweighed the costs and whether their audits were
more or less beneficial than expected. Half of the 12 agencies responded
that the benefits achieved outweighed the costs for the first audit, and
about three- fourths of the agencies responded that the benefits achieved
outweighed the costs for subsequent audits. Ten of the 12 agencies (83
percent) responded that their audits were more beneficial than or about as
beneficial as expected.

Degree of Effort or Anticipated Effort for the Surveyed Agencies to Prepare
Financial Statements and Have Them Audited

For the 12 surveyed agencies that have had their financial statements
audited, the reported level of effort to prepare financial statements and to
prepare for an audit varied significantly with the size and other
characteristics of the agencies. For example, the reported number of staff
days to prepare for the first audit ranged from 50 to 750 days, and the
estimated fiscal year 2000 audit costs ranged from $11,000 to $350,000.
Frequently reported steps that these agencies had taken to prepare for their

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
3

first and subsequent audits are (1) improving or replacing financial
management systems, (2) hiring additional financial management personnel,
(3) training financial management personnel, and (4) performing significant
manual procedures (for first audits).

For the 14 surveyed agencies that have not had their financial statements
audited, the most frequently cited anticipated steps needed to prepare for a
first audit are (1) hiring consultants, (2) training financial management
personnel, and (3) requesting additional funding.

Factors That Should Be Considered in Determining Whether Agencies Should
Prepare Financial Statements and Have Them Audited

According to the 26 surveyed agencies, the most important factors that
should be considered in determining whether agencies should have audited
financial statements are (1) whether the agency has fiduciary
responsibilities and (2) risks associated with the agency?s operations. The
surveyed agencies believe that of equal importance to the amount of budget
authority an agency receives are the amounts of an agency?s assets and
liabilities. Other important factors include whether the agency receives
nongovernmental funding and the amounts of an agency?s revenue and expenses.

Of the 14 surveyed agencies that have not had their financial statements
audited, 13 reported that the absence of a statutory requirement to do so
was a reason that they have not had such audits. Other reasons cited by 6 of
the 14 agencies include an insufficient number of financial management
personnel and insufficient funding.

General Views About Whether Agencies Should Have Their Financial Statements
Audited

Twenty- one of the 26 surveyed agencies, including all 12 agencies that have
had their financial statements audited, reported that, in general, agencies
should have their financial statements audited. The remaining 5 surveyed
agencies, which had budget authority ranging from about a quarter of a
million dollars to a third of a billion dollars, expressed the opposite
point of view.

_ _ _ _ _ The factors that the surveyed agencies considered to be important
in determining the need for having audited financial statements, such as
fiduciary responsibilities, risks associated with the agency?s operations,
and the magnitude of budget authority and key financial statement amounts,
are generally consistent with our views. Our longstanding position has been
that the preparation and audit of financial statements contribute to
reliable, timely, and useful financial information. Such information is
important in helping management ensure accountability, measure and control
costs, and make timely and fully informed decisions. Preparing audited
financial statements also leads to improvements in internal control and
financial management systems. Hence, we view much of the effort to prepare
financial statements and have them audited as an integral part of effective
financial management.

Page 4 GAO- 02- 281R Survey of Agencies? Views on Audited Financial
Statements

We are sending copies of this letter to the surveyed agencies, the Chief
Financial Officer, Executive Office of the President, the Director of the
Office of Management and Budget, and interested congressional committees.
Copies will also be made available to others upon request. This letter will
also be available on GAO?s home page at http:// www. gao. gov.

If you or your staff have any questions regarding this letter, please
contact me at (202) 512- 3406 or Kent Bowden, Assistant Director, at (202)
512- 5270. Other key contributors to this assignment were Kimberly Graham,
Casey Keplinger, Stanley Kostyla, and LaShawnda Wilson.

Sincerely yours, Gary T. Engel Director Financial Management and Assurance

Enclosure

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
5 Briefing to the Honorable Patrick J. Toomey

Survey Results of Selected Non- CFO Act Agencies? Views on Having Audited
Financial Statements

Briefing to the Honorable Patrick J. Toomey House of Representatives

November 30, 2001

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
6

2

Contents

* Introduction * Objectives * Results in Brief * Scope and Methodology *
Background * Agency Responses to Our Survey

* Benefits of Financial Statements (FS) Audits * Effort to Have FS Audits *
Factors to Consider in Determining Need for FS Audits * General Views
Regarding Whether Agencies Should Have FS Audits

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
7

3

Introduction

* The Chief Financial Officers Act of 1990 (CFO Act), as amended, requires
24 major executive departments/ agencies to prepare financial statements
annually and have them audited.

* We selected 26 agencies that are not subject to the CFO Act, as amended.
We obtained relevant data from these agencies and surveyed them regarding
their views on having audited financial statements. Of the 26 agencies that
we surveyed:

* 12 agencies have prepared and had their financial statements audited
within the past 5 years, and

* 14 agencies have not done so.

Enclosure

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4

Objectives

Based on your letter and subsequent discussions with your staff, we surveyed
selected non- CFO Act agencies to determine the

* benefits achieved or anticipated by the surveyed agencies from preparing
financial statements and having them audited;

* degree of effort or anticipated effort for the surveyed agencies to
prepare financial statements and have them audited;

* factors, including budget authority, that the surveyed agencies believe
should be considered in determining whether agencies should prepare
financial statements and have them audited; and

* surveyed agencies? views about whether, in general, agencies should have
their financial statements audited.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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5

Results in Brief

Benefits of FS Audits

ï¿½ The 12 surveyed agencies that have had their financial statements audited
generally reported significant benefits from those audits. The most
significant benefits are enhancing accountability and identifying
inefficiencies and weaknesses. Other significant benefits include improving
internal control; enhancing the public?s perception of the agency; meeting
statutory requirements; and monitoring assets, liabilities, and net
position.

ï¿½ The 14 surveyed agencies that have not had audits of their financial
statements reported anticipated benefits for such audits, but to a much less
extent than the achieved benefits reported by the 12 agencies that have had
their financial statements audited.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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6

Results in Brief

Effort to Have FS Audits

ï¿½ The level of effort required by the 12 surveyed agencies that have had
their financial statements audited to prepare financial statements and to
prepare for an audit varied significantly with the size and other
characteristics of the agencies.

ï¿½ The number of staff days to prepare for the first audit ranged from 50 to
750 days, and the estimated FY 2000 audit costs ranged from $11,000 to
$350,000.

ï¿½ Steps taken to prepare for the first and subsequent audits varied
significantly. Such steps included performing significant manual procedures,
improving or replacing financial management systems, hiring additional
financial management personnel, and training financial management personnel.

ï¿½ The most frequently anticipated steps to be taken to prepare for the first
audit, as reported by the 14 surveyed agencies that have not had their
financial statements audited, are hiring consultants, training financial
management personnel, and requesting additional funding. Other anticipated
steps reported include reorganizing business processes and performing
significant manual procedures.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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7

Results in Brief

Factors to Consider in Determining Need for FS Audits

ï¿½ According to the 26 surveyed agencies, the most important factors that
should be considered in determining whether agencies should have audited
financial statements are (1) whether the agency has fiduciary
responsibilities and (2) risks associated with the agency?s operations. Of
equal importance to the amount of budget authority an agency receives are
the amounts of agency assets and liabilities. Other important factors
include whether the agency receives nongovernmental funding and the amounts
of agency revenue and expenses.

ï¿½ Of the 14 surveyed agencies that have not had their financial statements
audited, 13 reported that the absence of a statutory requirement to do so
was a reason that they have not had such audits. Other reasons cited by 6 of
the 14 agencies for not having their financial statements audited include an
insufficient number of financial management personnel and insufficient
funding.

Enclosure

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8

Results in Brief

General Views of Surveyed Agencies Regarding Whether Agencies Should Have FS
Audits

ï¿½ 21 of the 26 surveyed agencies, including the 12 agencies that have had
their financial statements audited, reported that, in general, agencies
should have their financial statements audited.

Enclosure

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9

Scope and Methodology

To accomplish our objectives, we: * Identified 28 executive branch entities
that, based on previous work (1)

were not subject to the CFO Act, as amended, (2) had budget authority of at
least $10 million, 1 and, (3) with one exception, 2 were not required by
statute to have their financial statements audited. As agreed with your
office, we did not include the Central Intelligence Agency Retirement Fund
or the Executive Office of the President (EOP) 3 in the scope of our survey,
leaving 26 agencies for our survey.

1 In August 2000, we provided your staff a list of these 28 agencies as
requested. Each of the agencies had budget authority for fiscal year (FY)
1999 of at least $10 million. 2 The legislation establishing one of the
agencies, the U. S. Institute of Peace, requires that the Institute?s
financial statements be annually audited under private sector auditing
standards. 3 Public Law 106- 58, Treasury and General Government
Appropriations Act, 2000, established the position of Chief Financial
Officer (CFO) for EOP. The CFO, who was appointed in August 2001, and his
staff, have informed us that EOP plans to address financial systems needs,
have its auditability assessed, and then have financial statements audits.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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10

Scope and Methodology

ï¿½ Obtained and reviewed certain documents that relate to the 26 selected
executive branch agencies, including audited financial statements, where
available.

* Developed, pretested, and used a questionnaire to survey the 26 agencies,
and summarized their responses. Because many of the survey questions
requested the agencies? views, the agencies? responses to those questions
represent their perspectives and judgments. We discussed certain responses
with agency officials, but did not independently verify the reliability of
the information provided.

* Sent agency- specific data presented in the slides to the respective
agencies for their review.

* Performed our work from June 2001 through November 2001 in accordance with
U. S. generally accepted government auditing standards.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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11

Background

Key Legislation Requiring FS Audits * Securities Exchange Act of 1934 -
Requires publicly held private sector companies to file annual audited
financial statements with the Securities and Exchange Commission.

* Chapter 91 of Title 31, United States Code, commonly called the Government
Corporation Control Act - Requires government corporations, such as the
Export- Import Bank of the United States, to have their annual financial
statements audited. * Single Audit Act of 1984, as amended - Requires each
nonfederal entity that expends a total amount of federal awards equal to or
in excess of $300,000 in any fiscal year to have either a single audit or a
program- specific audit made for such fiscal year. * Chief Financial
Officers Act of 1990, as expanded by the Government Management Reform Act of
1994 - Requires 24 major executive branch departments/ agencies to prepare
financial statements annually and have them audited. * Agency- specific
legislation - Requires certain agencies, such as United States Postal
Service, to have their annual financial statements audited.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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12

Background

Types of FS Audits and Related Procedures * Full- scope audits of financial
statements, performed in accordance with

either of two relevant standards: * Generally Accepted Government Auditing
Standards (GAGAS) federal standards

* Generally Accepted Auditing Standards (GAAS) - nonfederal standards
(private sector)

* Audit scope that includes only selected financial statements (for example,
balance sheet audits)

* Targeted procedures: * Audit of certain elements or accounts * Agreed-
upon procedures applied to certain elements or accounts * Internal control
testing * Compliance testing * Test of sensitive payments * Review of
financial statements (less than an audit)

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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13

Background

Agency Information * The 26 executive branch agencies we surveyed are
generally

independent agencies that have commissions or boards appointed by the
President.

* 2 of the 26 surveyed agencies each received more budget authority than the
CFO Act agency with the least budget authority for FY 2000 (Nuclear
Regulatory Commission - $465 million).

* 12 of the 26 agencies have had their financial statements audited within
the past 5 years (these agencies are subsequently referred to in this
briefing as agencies that have had their financial statements audited). For
FY 2000, 7 of these audits were conducted under GAGAS, 3 were conducted in
accordance with GAAS, and 2 agencies did not have such audits for FY 2000.

* Only the 10 agencies that had their financial statements audited for FY
2000 prepared financial statements for that year. The remaining 16 agencies
did not do so.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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14

Background

Surveyed Agencies

Have Had FS Audits

Defense Nuclear Facilities Safety Board 1 Farm Credit System Insurance
Corporation Federal Communications Commission Federal Housing Finance Board
Federal Mediation and Conciliation Service Federal Trade Commission
International Trade Commission 2 Office of Navajo and Hopi Indian Relocation
Railroad Retirement Board U. S. Court of Appeals for Veterans Claims 3 U. S.
Holocaust Memorial Museum U. S. Institute of Peace

Have Not Had FS Audits

Commodity Futures Trading Commission Consumer Product Safety Commission
Equal Employment Opportunity Commission 4 Federal Election Commission
Federal Labor Relations Authority Institute of Museum and Library Services
Merit Systems Protection Board National Archives and Records Administration
5 National Endowment for the Arts National Endowment for the Humanities
National Labor Relations Board National Transportation Safety Board 4
Securities and Exchange Commission Selective Service System

1 Defense Nuclear Facilities Safety Board has balance- sheet- only audits
every 3 to 5 years, most recently for FY 1997. It did not prepare FY 2000
FS. 2 International Trade Commission discontinued audits of its financial
statements, effective for FY 1999. It did not prepare FY 2000 FS.

3 U. S. Court of Appeals for Veterans Claims? first audit was of its FY 2000
FS. 4 Equal Employment Opportunity Commission and National Transportation
Safety Board have indicated that they plan to have FS audits within the next
5 years. 5 National Archives and Records Administration has annual FS audits
of three trust and revolving funds.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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15

Survey Responses - Benefits

Average Ranking by Surveyed Agencies of Extent of Benefits Achieved or
Anticipated from FS Audits

Little or no extent

Moderate extent

Very great extent Increase grant funding

Facilitate external funding Identify actual costs or savings

Identify costs of providing government services Improve financial management
systems

Monitor budget status Improve reliability of financial management
information

Monitor assets, liabilities, and net position Meet statutory requirements

Enhance perception of the agency Improve internal control

Identify inefficiencies and weaknesses Enhance accountability

Agencies that have had FS audits

Agencies that have not had FS audits

Achieved or Anticipated Benefits Average Ranking

Some extent

Great extent

Enclosure

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16

Survey Responses - Benefits

Number of Agencies That Reported Having Achieved FS Audit Benefits to Very
Great or Great Extent

0 1 2 3 4 5 6 7 8 9 Increasegrant funding

Facilitate external funding Identify actual costs or savings

Improve financial management systems Improvereliability of financial
management information

Identify costs of providinggovernment services Monitor budget status

Monitor assets, liabilities, and net position Improve internal control

Meet statutoryrequirements Identify inefficiencies and weaknesses

Enhanceaccountability Enhanceperception of the agency

Agenciesthat have hadFS audits- very great extent

Agenciesthat have hadFS audits- great extent

Achieved Benefits Number of Agencies

Enclosure

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17

Survey Responses - Benefits

Number of Agencies That Reported Anticipated FS Audit Benefits to Very Great
or Great Extent

0 1 2 3 4 5 6 7 8 9 Increasegrant funding

Facilitate external funding Identify actual costs or savings

Monitor budget status Meet statutoryrequirements

Monitor assets, liabilities, and net position Identify costs of providing
government services

Enhance perception of the agency Enhanceaccountability

Improve internal control Identify inefficiencies and weaknesses

Improvereliability of financialmanagement information Improve financial
management systems

Number of Agencies

Agencies that have not had FS auditsvery great extent

Agencies that have not had FS audits great extent

Anticipated Benefits

Enclosure

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18

Survey Responses - Benefits

Benefits Achieved Versus Expectations for Surveyed Agencies That Have Had FS
Audits

Audit substantially more beneficial than expected

33% Audit about as

beneficial as expected

50% Audit substantially

less beneficial than expected

17%

Note: None of the surveyed agencies that have had FS audits responded that
the audit was somewhat more beneficial than expected, that it was somewhat
less beneficial than expected, or that they were not able to judge.

Enclosure

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19

Survey Responses - Benefits

Benefits Achieved Versus Costs for First Audit for Surveyed Agencies That
Have Had FS Audits

Benefits about equal to the costs

25% Benefits somewhat

outweigh the costs 8% Benefits substantially

outweigh the costs 42%

Not able to judge 8%

Costs substantially outweigh the benefits

17%

Note: None of the surveyed agencies that have had FS audits responded that
the costs somewhat outweigh the benefits.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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20

Survey Responses - Benefits

Benefits Achieved Versus Costs for Subsequent Audits for Surveyed Agencies
That Have Had FS Audits

Benefits substantially outweigh the costs

55% Benefits about equal

to the costs 9%

Benefits somewhat outweigh the costs

18% Costs substantially

outweigh the benefits 18%

Note: None of the surveyed agencies that have had FS audits responded that
the costs somewhat outweigh the benefits or that they were not able to
judge. One of these 12 surveyed agencies is not included in this chart
because FY 2000 was the agency?s first FS audit.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
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21

Survey Responses - Effort

Reported Level of Effort for Surveyed Agencies That Had Their First FS Audit
Within the Past 5 Years

1 Budget authority data was obtained from the FY 2002 President?s Budget.
None of the surveyed agencies that have had FS audits had FY 2000 budget
authority between $150 million and $6 billion.

Agencies that had their first FS audit within the past 5 years Range of
budget authority 1 Number of

agencies Calendar weeks to prepare for first audit Staff days to

prepare for first audit

Less than $25 million 1 4 50 (agency 1) 24 (agency 1) 120 $25 million to
$150 million 2 (agency 2) 52 (agency 2) 180 Greater than $6 billion 1 26 750

Enclosure

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22

Survey Responses - Effort

Reported Level of Effort for Surveyed Agencies That Have Had FS Audits

Agencies that have had FS audits 1 Typical number of calendar weeks to

prepare financial statements Typical number of staff days to prepare
financial statements Range of budget

authority 2 Number of agencies

Low High Average Low High Average

Less than $25 million 3 1 4 2.7 5 80 33.3 $25 million to $150 million 4 3 6
4.1 17.5 40 29.4 Greater than $6 billion 2 8 10 9 50 120 85

1 3 of the agencies that have had FS audits did not provide a response. 2
Budget authority data was obtained from the FY 2002 President?s Budget. None
of the surveyed agencies that have

had FS audits had FY 2000 budget authority between $150 million and $6
billion.

Enclosure

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23

Survey Responses - Effort

Reported Audit and Related Costs for Surveyed Agencies That Had FY 2000 FS
Audits

Estimated costs of FS audits performed by contractor or Office of

Inspector General Other estimated costs related to FS

audits Range of budget authority 1 Number

of agencies

that had FY 2000

FS audits 2

Low High Average Low High Average

Less than $25 million 4 $11,000 $54,512 $29,525 $0 $9,300 $2,325 $25 million
to $150 million 4 $26,000 $100,000 $54,000 $0 $15,000 $5,750

Greater than $6 billion 2 $220,000 $350,000 3 $285,000 $2,000 $1,218,000 3
$610,000 1 Budget authority data was obtained from the FY 2002 President?s
Budget. None of the surveyed agencies that have had FS audits had FY 2000
budget authority between $150 million and $6 billion. 2 2 of the 12 surveyed
agencies that have had FS audits, International Trade Commission and Defense
Nuclear Facilities Safety Board, did not have FS audits for FY 2000. 3 The
surveyed agency that reported FS audit costs of $350,000 also reported
related costs of $1,218,000 for consultants to assist the agency in
preparing for the FS audit. This agency reported that it took each of the
steps described on the following slide during its first or subsequent year
audits.

Enclosure

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24

Survey Responses - Effort

Steps Taken to Prepare for First and Subsequent Audits by Surveyed Agencies
That Have Had FS Audits

0 1 2 3 4 5 6 Replaced financial management systems

Obtained additional funding Hired additional financial management personnel

Increased integration of financial management systems Contracted for
financial management personnel

Obtained additional information technology support Hired more qualified
financial management personnel

Used consultants to advise in preparing for audit Reorganized business
processes

Improved existing financial management systems Trained financial management
personnel

Performed significant manual procedures

Number of Agencies

First FS audit (if within past 5 years)

Subsequent FS audits

Steps Taken

Enclosure

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25

Survey Responses - Effort

Anticipated Steps to Be Taken to Prepare for First Audit by Surveyed
Agencies That Have Not Had FS Audits

0 1 2 3 4 5 6 7 8 9 10 Improve existing financial management systems

Replace financial management systems Increase integration of financial
management systems

Hire additional financial management personnel Contract for financial
management personnel

Obtain additional information technology support Hire more qualified
financial management personnel

Perform significant manual procedures Reorganize business processes

Request additional funding Train financial management personnel

Use consultants to advise the agency in preparing for audit

Note: One surveyed agency that has not had an FS audit reported a lack of
property records as a challenge in obtaining an audit of its FS.

Anticipated Steps Number of Agencies

Enclosure

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30

26 Note: None of the 14 surveyed agencies that have not had FS audits
responded that their systems would require significant

modifications. All of these agencies responded that they use the services of
other agencies or contractors to perform financial management functions.

Survey Responses - Effort

Anticipated Systems Modifications to Prepare for First Audit by Surveyed
Agencies That Have Not Had FS Audits

Systems would have to be replaced

14% No response

14% Systems would require

some modification 14%

Systems would require a moderate level of

modification 22% Systems would require

no modification 36%

Enclosure

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27

Survey Responses - Factors

Ranking of Importance by Surveyed Agencies of Factors to Consider in
Determining Need for FS Audits

If an agency has an Office of Inspector General If an agency has a CFO

Amount of expenses Amount of revenue

Amount of budget authority Amount of assets

Amount of liabilities Receipt of nongovernmental funding

Fiduciary responsibilities Risks associated with the agency's operations

Agencies that have had FS audits

Agencies that have not had FS audits

Little or no extent

Factors to Consider

Some extent

Moderate extent

Great extent

Very great extent

Average Ranking

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
32

28

Survey Responses - Factors

Examples Provided by Surveyed Agencies of Other Factors to Consider in
Determining Need for FS Audits

* In addition to the factors listed on slide 27, agencies cited other
factors, including the following, that should be considered in determining
whether agencies, in general, should prepare and have audited financial
statements:

* Mission of the agency * Value that customers would derive from audited
financial statements * Whether an agency?s funding consists primarily of
salaries and

expense appropriations versus business- type appropriations

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
33

29

Survey Responses - Factors

Reasons for Not Having FS Audits, As Reported by Surveyed Agencies That Have
Not Had FS Audits

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Other Insufficient financial

management expertise Insufficient funding

Insufficient number of financial management

personnel Not statutorily required

Reasons Provided Number of Agencies

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
34

30

Survey Responses - General Views

General Views of Surveyed Agencies Regarding Whether Agencies Should Have FS
Audits

* 21 of the 26 surveyed agencies responded that agencies, in general, should
have their financial statements audited. These agencies consisted of * all
12 agencies that have had their financial statements audited and * 9 of the
14 agencies that have not had their financial statements

audited. * 5 surveyed agencies responded that agencies, in general, should
not have

their financial statements audited. * These agencies had budget authority
ranging from about a quarter of a

million dollars to a third of a billion dollars. * These agencies reported
that the reasons that their particular agencies

have not had their financial statements audited were as follows: * All 5
agencies reported that such audits were not statutorily required, * 4 of the
agencies reported that they had insufficient funding, and * 3 of the
agencies reported that they had an insufficient number of

financial management personnel.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
35 Attachment

FY 2000 Financial Data as Reported by Agencies to Treasury Agencies That
Have Had FS Audits

Agency Budget

authority 1 Percent Total Assets Percent Total

Liabilities Percent Total

Revenue Percent Total

Expenses Percent

Railroad Retirement Board $9,183 56 $22,703.1 57 $3,977.6 29 $9,330.2 54
$8,678.5 47 Federal Communications Commission 6,795 42 15,360.8 38 9,306.0
68 7,580.9 44 9,408.3 51 Federal Trade Commission 126 1 227.3 1 218.4 2
126.8 1 143.7 1 Farm Credit System Insurance Corporation 83 1 1,601.7 4
167.9 1 101.4 1 12.7 0 International Trade Commission 44 0 6.7 0 5.4 0 46.0
0 46.3 0 Federal Mediation and Conciliation Service 39 0 10.2 0 6.9 0 41.2 0
40.6 0 U. S. Holocaust Memorial Museum 33 0 0.9 0 0.2 0 2.6 0 2.7 0 Federal
Housing Finance Board 2 19 0 6.6 0 3.8 0 19.1 0 18.9 0 Defense Nuclear
Facilities Safety Board 17 0 10.2 0 2.8 0 0.0 0 17.4 0 U. S. Institute of
Peace 13 0 0.8 0 0.7 0 0.0 0 12.9 0 U. S. Court of Appeals for Veterans
Claims 11 0 10.4 0 2.5 0 11.5 0 11.4 0 Office of Navajo and Hopi Indian
Relocation 8 0 11.0 0 2.0 0 14.1 0 14.1 0

Total $16,371 100 $39,949.7 100 $13,694.2 100 $17,273.8 100 $18,407.5 100

1 FY 2000 budget authority data was obtained from the FY 2002 President?s
Budget. 2 The amounts reported for Federal Housing Finance Board are from
their audited financial statments and not from data reported to Treasury.

Note: All dollar amounts are in millions. The individual percentages do not
total to 100 percent due to rounding. The percentages less than one are
portrayed as zero in this chart.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
36

FY 2000 Financial Data as Reported by Agencies to Treasury Agencies That
Have Not Had FS Audits

Agency Budget

authority 1 Percent Total Assets Percent Total

Liabilities Percent Total

Revenue Percent Total

Expenses Percent

Securities and Exchange Commission $382 20 $2,790.0 71 $123.3 15 $3,638.7 74
$363.9 20 National Archives and Records Administration 323 17 252.8 6 345.4
42 280.6 6 311.5 17 Equal Employment Opportunity Commission 282 15 42.1 1
17.7 2 65.9 1 67.6 4 National Labor Relations Board 205 11 47.7 1 49.8 6 8.8
0 213.4 11 Institute of Museum and Library Services 190 10 225.5 6 0.3 0
187.0 4 187.2 10 National Endowment for the Humanities 118 6 99.8 3 1.7 0
116.3 2 116.0 6 National Endowment for the Arts 102 5 106.4 3 2.8 0 111.1 2
108.5 6 National Transportation Safety Board 82 4 34.0 1 4.7 1 2 2 2 2
Commodity Futures Trading Commission 63 3 261.2 7 251.6 30 312.6 6 310.9 17
Consumer Product Safety Commission 52 3 19.1 0 14.9 2 57.0 1 58.1 3 Federal
Election Commission 38 2 11.5 0 3.4 0 41.1 1 41.5 2 Merit System Protection
Board 29 2 7.3 0 4.2 1 31.1 1 31.1 2 Federal Labor Relations Authority 24 1
4.0 0 4.2 1 23.9 0 24.2 1 Selective Service System 24 1 15.5 0 3.8 0 21.2 0
22.5 1

Total $1,914 100 $3,916.9 100 $827.8 100 $4,895.3 100 $1,856.4 100

1 FY 2000 budget authority data was obtained from the FY 2002 President?s
Budget. 2 National Transportation Safety Board did not report data for
revenue and expenses to Treasury.

Note: All dollar amounts are in millions. The individual percentages do not
total to 100 percent due to rounding. The percentages less than one are
portrayed as zero in this chart.

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
37

Agency Baseline Information as Reported by Agencies That Have Had FS Audits

Agency FY 2000 budget authority (in millions)

FY 2000 total full time equivalents Number of offices

CFO or equivalent? Statutory Office of Inspector General?

Audit in accordance with GAGAS or GAAS? Buy/ lease real estate

Provide insurance Make loans or loan guarantees

Make grants Assess fines and penalties

Provide services for a fee Maintain retail operations

Other fiduciary/ custodial functions

Railroad Retirement Board $9,183 1,154 60 Yes Yes GAGAS X X X X Federal
Communications Commission 6,795 1,950 4 Yes Yes GAGAS X X X X X Federal
Trade Commission 126 1,007 9 Yes Yes GAGAS X X X Farm Credit System
Insurance Corporation 83 10 1 Yes No GAGAS X X International Trade
Commission 44 354 1 Yes Yes GAGAS 1 X X X Federal Mediation and Conciliation
Service 39 288 71 Yes No GAGAS X X U. S. Holocaust Memorial Museum 33 458 5
Yes No GAAS X X Federal Housing Finance Board 19 107 1 Yes Yes GAGAS X
Defense Nuclear Facilities Safety Board 17 96 7 Yes No GAAS 2 U. S.
Institute of Peace 13 65 1 No No GAAS X U. S. Court of Appeals for Veterans
Claims 11 88 1 Yes No GAGAS X X X Office of Navajo and Hopi Indian
Relocation 8 60 3 Yes No GAAS

Total $16,371 5,637 164 Average $1,364 470 14

1 International Trade Commission discontinued audits of its financial
statements, effective for FY 1999. It did not prepare FY 2000 FS. 2 Defense
Nuclear Facilities Safety Board has balance sheet only audits every 3 to 5
years, most recently for FY 1997. It did not prepare FY 2000 FS.

Note: FY 2000 budget authority data was obtained from the FY 2002
President?s Budget.

Agency Functions

Enclosure

GAO- 02- 281R Survey of Agencies? Views on Audited Financial Statements Page
38

Agency Baseline Information as Reported by Agencies That Have Not Had FS
Audits

(191004)

Agency FY 2000 budget authority (in millions)

FY 2000 total full time equivalents Number of offices

CFO or equivalent? Statutory Office of Inspector General?

FY 2000 FS prepared? Buy/ lease real estate

Provide insurance Make loans or loan guarantees

Make grants Assess fines and penalties

Provide services for a fee Maintain retail operations

Other fiduciary/ custodial functions

Securities and Exchange Commission $382 3,037 14 No Yes No X X X National
Archives and Records Administration 323 2,362 28 Yes Yes No X X X X Equal
Employment Opportunity Commission 282 2,924 52 Yes Yes No X X National Labor
Relations Board 205 1,976 52 Yes Yes No X Institute of Museum and Library
Services 190 45 1 Yes No 1 No X National Endowment for the Humanities 118
170 1 Yes Yes No X X National Endowment for the Arts 102 155 1 Yes Yes No X
X National Transportation Safety Board 82 425 11 Yes No 1 No X Commodity
Futures Trading Commission 63 546 6 Yes Yes No X X X Consumer Product Safety
Commission 52 480 43 Yes Yes No X X Federal Election Commission 38 357 2 Yes
Yes No X Merit Systems Protection Board 29 234 11 Yes No 2 No Federal Labor
Relations Authority 24 198 8 Yes Yes No X Selective Service System 24 165 5
Yes No 1 No

Total $1,914 13,074 235 Average $137 934 17

1 Institute of Museum and Library Services, National Transportation Safety
Board, and Selective Service System use the services of another agency?s
Office of Inspector General. 2 Merit Systems Protection Board's General
Counsel acts as its Inspector General for investigating fraud, waste, and
abuse. The agency also uses the services of

another agency's Office of Inspector General. Note: FY 2000 budget authority
data was obtained from the FY 2002 President?s Budget.

Agency Functions
*** End of document. ***