Financial Audit: American Battle Monuments Commission's Financial
Statements for Fiscal Years 2001 and 2000 (01-MAR-02,
GAO-02-390).
GAO reviewed the financial statement audit reports for the
American Battle Monuments Commission (ABMC) for fiscal years 2000
and 2001. GAO found that (1) the consolidated financial
statements for fiscal year 2001 and comparative consolidated
totals for fiscal year 2000 are presented fairly in conformity
with U.S. generally accepted accounting principles; (2) although
internal controls should be improved, AMBC had effective internal
control over financial reporting and compliance with laws and
regulations as of September 30, 2001; and (3) there was no
reportable noncompliance with laws and regulations.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-390
ACCNO: A02820
TITLE: Financial Audit: American Battle Monuments Commission's
Financial Statements for Fiscal Years 2001 and 2000
DATE: 03/01/2002
SUBJECT: Accounting standards
Auditing standards
Financial management
Financial records
Financial statement audits
Internal controls
Reports management
World War II Memorial Fund
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GAO-02-390
United States General Accounting Office
GAO Report to Congressional Committees
March 2002
FINANCIAL AUDIT
American Battle Monuments Commission's Financial Statements for Fiscal Years
2001 and 2000
a
GAO-02-390
Contents
Letter 1
Auditor's Report 3
Opinion on Financial Statements 3
Opinion on Internal Control 3
Reportable Condition 4
Compliance with Laws and Regulations 5
Consistency of Other Information 5
Objectives, Scope, and Methodology 5
Agency Comments and Our Evaluation 8
Appendix
Appendix I:
Report on Audit of the American Battle Monuments
Commission
ABMC Annual Financial Report
Management's Discussion and Analysis
Consolidating Balance Sheet
Consolidating Statement of Net Cost and Changes in Net
Position
Consolidating Statement of Budgetary Resources
Consolidating Statement of Financing
Notes to the Consolidating Financial Statements
Required Supplementary Stewardship Information
Statement of Heritage Assets
Note to Statement of Heritage Assets
10 10 11 18
19 20 21 22 31 32 34
Abbreviations
ABMC American Battle Monuments Commission
FMFIA Federal Managers' Financial Integrity Act of 1982
OMB Office of Management and Budget
Page i GAO-02-390 ABMC 2001 and 2000 Financial Audit Page ii GAO-02-390 ABMC
2001 and 2000 Financial Audit
A
United States General Accounting Office Washington, D.C. 20548
March 1, 2002
The Honorable John D. Rockefeller, IV
Chairman
The Honorable Arlen Specter
Ranking Minority Member
Committee on Veterans' Affairs
United States Senate
The Honorable Christopher H. Smith
Chairman
The Honorable Lane Evans
Ranking Minority Member
Committee on Veterans' Affairs
House of Representatives
This report presents the results of our audits of the American Battle
Monuments Commission's (ABMC) financial statements for the fiscal years
ended September 30, 2001 and 2000. We prepared this report in accordance
with 36 U.S.C. 2103.
We are sending copies of this report to the chairmen and ranking minority
members of the Senate Committee on Appropriations and the House
Committee on Appropriations. We are also sending copies to the secretary
of the treasury, the director of the Office of Management and Budget, the
chairman of ABMC, and other interested parties.
Should you or your staffs have any questions concerning this report, please
contact me on (202) 512-9406 or Roger R. Stoltz, Assistant Director, at
(202)
512-9408. Key contributors to this assignment were Patricia A. Summers
and Bronwyn E. Hughes.
Jeanette M. Franzel
Acting Director
Financial Management and Assurance
Page 1 GAO-02-390 ABMC 2001 and 2000 Financial Audit Page 2 GAO-02-390 ABMC
2001 and 2000 Financial Audit
A
United States General Accounting Office Washington, D.C. 20548
To the Chairman of the American Battle Monuments Commission
In accordance with 36 U.S.C. 2103, as codified by Public Law 105-225, August
12, 1998, we are responsible for conducting audits of the agencywide
financial statements of the American Battle Monuments Commission (ABMC). In
our audits of ABMC for fiscal years 2001 and 2000, we found
* the consolidating financial statements as of and for the fiscal year ended
September 30, 2001, and comparative consolidated totals as of and for the
fiscal year ended September 30, 2000, are presented fairly in conformity
with U.S. generally accepted accounting principles;
* although internal controls should be improved, ABMC had effective internal
control over financial reporting (including safeguarding assets) and
compliance with laws and regulations as of September 30, 2001; and
* no reportable noncompliance with laws and regulations we tested.
The following sections discuss in more detail (1) these conclusions and our
conclusions on Management's Discussion and Analysis and other supplementary
information and (2) the objective, scope, and methodology of our audit.
Opinion on Financial The ABMC consolidating balance sheet as of September
30, 2001, and its related consolidating statements of net cost and changes
in net position;
Statements budgetary resources; and financing, with accompanying notes for
the fiscal year then ended, and comparative consolidated totals as of and
for the fiscal year ended September 30, 2000, are presented fairly, in all
material respects, in conformity with U.S. generally accepted accounting
principles.
Opinion on Internal Control
ABMC maintained, in all material respects, effective internal control over
financial reporting (including safeguarding assets) and compliance as of
September 30, 2001, that provided reasonable assurance that misstatements,
losses, or noncompliance material in relation to the consolidating financial
statements or to stewardship information would be prevented or detected on a
timely basis. Our opinion is based upon criteria established under 31 U.S.C.
3512 (c), (d), [Federal Managers' Financial Integrity Act (FMFIA)], and
Office of Management and Budget (OMB) Circular No. A-123, Management
Accountability and Control.
Page 3 GAO-02-390 ABMC 2001 and 2000 Financial Audit
However, our work identified the need to improve certain internal control,
as described below, that we consider a reportable condition. Such a
condition is a deficiency in the design or operation of internal controls
that, in our judgment, could adversely affect ABMC's ability to meet
internal control objectives or meet OMB criteria for reporting matters under
FMFIA. We did not consider these deficiencies to be a material weakness,
which occurs when the design or operation of internal control components
does not reduce to a relatively low level the risk that misstatements in
amounts that would be material to the consolidating financial statements
being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned duties. In
addition, misstatements may occur in other ABMC financial information not
included in this report as a result of this reportable condition.
Reportable Condition During our audit we noted three deficiencies in
internal controls over information technology systems as of September 30,
2001, which are discussed below. ABMC management reported these deficiencies
in its fiscal year 2001 FMFIA report and plans corrections through the
implementation of a new accounting system on October 1, 2001, and through
efforts to be taken in tandem with the new system. Because the new
accounting system was implemented by ABMC after September 30, 2001, we did
not determine if the new system corrected these deficiencies.
Inadequate controls over information technology systems consisted of the
three following areas.
* User Documentation: There was no user documentation to support the Clipper
accounting system used by the European Regional Office and the dBase IV
accounting system used by the Mediterranean Regional Office. Also, there was
no user documentation on the payroll function of the Foxpro accounting
system used by the headquarters office that involved 14 civilian employees.
Users learned how to use the systems mainly through on-the-job training and
had limited support to explain how functions should be performed and to
answer questions. However, the age of these systems and their subsequent
replacement on October 1, 2001, did not justify the cost of developing user
documentation during fiscal year 2001.
* Security Program: The headquarters office of ABMC had not documented an
overall security planning and management program for security and privacy of
information as of September 30, 2001. OMB Circular A-130, Management of
Federal Information Resources,
Page 4 GAO-02-390 ABMC 2001 and 2000 Financial Audit
provides guidance on documenting such a program including control
objectives, areas of responsibility, system rules, training, personnel
controls, system interconnections, review of controls, and process
authorization. This program would encompass the existing automated
proprietary security program. ABMC plans to document an overall security
planning and management program for its new accounting system after October
1, 2001.
* Business Continuity Plan: The European Regional Office business continuity
plan did not contain sufficient detail to ensure successful manual
operations and timely recovery of automated processing in the event of a
business interruption. Sufficient details would include identification of
business operations and applications, personnel contacts, hardware and
software needs, space requirements, and alternative sites. The office plans
to revise its business continuity plan to include the new accounting system
after October 1, 2001.
Compliance with Laws Our tests for compliance with selected provisions of
laws and regulations for fiscal year 2001 disclosed no instances of
noncompliance reportable
and Regulations under U.S. generally accepted government auditing standards
or OMB audit guidance. However, the objective of our audit was not to
provide an opinion on overall compliance with laws and regulations.
Accordingly, we do not express such an opinion.
Consistency of Other Information
Management's Discussion and Analysis and a stewardship statement of heritage
assets with an accompanying note contain a wide range of data, some of which
are not directly related to the consolidating financial statements. We do
not express an opinion on this information. However, we compared this
information for consistency with the consolidating financial statements and
discussed the methods of measurement and presentation with ABMC officials.
Based upon this limited work, we found no material inconsistencies with the
consolidating financial statements or nonconformance with OMB guidance.
Objectives, Scope, and ABMC management is responsible for (1) preparing the
consolidating financial statements in conformity with U.S. generally
accepted accounting
Methodology principles, (2) establishing, maintaining, and assessing
internal control to provide reasonable assurance that the broad internal
control objectives of FMFIA are met, and (3) complying with applicable laws
and regulations.
Page 5 GAO-02-390 ABMC 2001 and 2000 Financial Audit
We are responsible for obtaining reasonable assurance about whether (1) ABMC
consolidating financial statements are presented fairly, in all material
respects, in conformity with U.S. generally accepted accounting principles
and (2) ABMC management maintained effective internal control that provides
reasonable, but not absolute, assurance that the following objectives were
met.
* Financial reporting: Transactions are properly recorded, processed, and
summarized to permit the preparation of consolidating financial statements
and stewardship information in conformity with U.S. generally accepted
accounting principles, and assets are safeguarded against loss from
unauthorized acquisition, use, or disposition.
* Compliance with applicable laws and regulations: Transactions are executed
in accordance with (1) laws governing the use of budgetary authority, (2)
other laws and regulations that could have a direct and material effect on
the financial statements, and (3) any other laws, regulations, or
governmentwide policies identified by OMB guidance.
We are also responsible for (1) testing compliance with selected provisions
of laws and regulations that have a direct and material effect on the
consolidating financial statements and for which OMB guidance requires
testing and (2) performing limited procedures with respect to certain other
information appearing in the ABMC annual financial report. In order to
fulfill these responsibilities, we
* examined, on a test basis, evidence supporting the amounts and disclosures
in the consolidating financial statements;
* assessed the accounting principles used and significant estimates made by
ABMC management; * evaluated the overall presentation of the consolidating
financial
statements; * obtained an understanding of internal control related to
financial reporting (including safeguarding assets) and compliance with laws
and regulations (including execution of transactions in accordance with
budget authority); * obtained an understanding of the recording, processing,
and
summarizing of performance measures as reported in Management's
Discussion and Analysis; * tested relevant internal controls over financial
reporting and compliance, and evaluated the design and operating
effectiveness of internal control;
Page 6 GAO-02-390 ABMC 2001 and 2000 Financial Audit
* considered the process for evaluating and reporting on internal control
and financial management systems under FMFIA; and
* tested compliance with selected provisions of the following laws and
regulations:
* ABMC enabling legislation codified in 36 U.S.C. Chapter 21,
* public laws applicable to the World War II Memorial Fund,
* Departments of VA and HUD and Independent Agencies Appropriations Act
2001,
* Antideficiency Act,
* Pay and Allowance System for Civilian Employees, and
* Prompt Payment Act.
We did not evaluate all internal controls relevant to operating objectives
as broadly defined by FMFIA, such as those controls relevant to preparing
statistical reports and ensuring efficient operations. We limited our
internal control testing to those controls over financial reporting and
compliance. Because of inherent limitations in internal control,
misstatements due to error or fraud, losses, or noncompliance may
nevertheless occur and not be detected. We also caution that projecting our
evaluation to future periods is subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with controls may deteriorate.
We did not test compliance with all laws and regulations applicable to ABMC.
We limited our tests of compliance to those required by OMB audit guidance
that we deemed applicable to ABMC's consolidating financial statements for
the fiscal year ended September 30, 2001. We caution that noncompliance may
occur and not be detected by these tests and that such testing may not be
sufficient for other purposes.
We performed our work in accordance with U.S. generally accepted government
auditing standards and OMB audit guidance.
Page 7 GAO-02-390 ABMC 2001 and 2000 Financial Audit
Agency Comments and ABMC management concurred with the facts and conclusions
contained in Our Evaluation a draft of this report.
Jeanette M. Franzel Acting Director Financial Management and Assurance
January 31, 2002
Page 8 GAO-02-390 ABMC 2001 and 2000 Financial Audit Page 9 GAO-02-390 ABMC
2001 and 2000 Financial Audit
Appendix I
Report on Audit of the American Battle Monuments Commission
ABMC Annual Financial Report
Appendix I Report on Audit of the American Battle Monuments Commission
Management's Discussion and Analysis
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Consolidating Balance Sheet
Appendix I Report on Audit of the American Battle Monuments Commission
Consolidating Statement of Net Cost and Changes in Net Position
Appendix I Report on Audit of the American Battle Monuments Commission
Consolidating Statement of Budgetary Resources
Appendix I Report on Audit of the American Battle Monuments Commission
Consolidating Statement of Financing
Appendix I Report on Audit of the American Battle Monuments Commission
Notes to the Consolidating Financial Statements
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Page 25 GAO-02-390 ABMC 2001 and 2000 Financial Audit
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Required Supplementary Stewardship Information
Appendix I Report on Audit of the American Battle Monuments Commission
Statement of Heritage Assets
Appendix I Report on Audit of the American Battle Monuments Commission
Appendix I Report on Audit of the American Battle Monuments Commission
Note to Statement of Heritage Assets
(194053) Page 34 GAO-02-390 ABMC 2001 and 2000 Financial Audit
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