Financial Audit: The Department of Defense's Fiscal Year 2004
Management Representation Letter on Its Financial Statements
(23-JUN-05, GAO-05-587R).
The Secretary of the Treasury, in coordination with the Director
of the Office of Management and Budget (OMB), is required to
annually prepare and submit audited financial statements of the
U.S. government to the President and the Congress. We are
required to audit these consolidated financial statements (CFS)
and report on the results of our work. In connection with
fulfilling our requirement to audit the fiscal year 2004 CFS, we
evaluated the Department of the Treasury's (Treasury) financial
reporting procedures and related internal control over the
process for compiling the CFS, including the management
representation letter provided us by Treasury and OMB. Written
representation letters from management, required by U.S.
generally accepted government auditing standards, ordinarily
confirm oral representations given to the auditor, indicate and
document the continuing appropriateness of those representations,
and reduce the possibility of a misunderstanding between
management and the auditor. The purpose of this report is to
communicate our observations on the Department of Defense's (DOD)
fiscal year 2004 management representation letter. Our objective
is to help ensure that future management representation letters
submitted by DOD are sufficient to help support Treasury and
OMB's preparation of the CFS management representation letter and
our ability to rely on the representations in that letter in
combination with individual federal agency representation
letters. We reviewed five key areas in each management
representation letter: (1) signatures, (2) materiality
thresholds, (3) representations, (4) summary of unadjusted
misstatements, and (5) reliability of representations. In
reviewing the management representation letters, we applied the
American Institute of Certified Public Accountants' (AICPA)
Codification of Auditing Standards, AU Section 333, Management
Representations; OMB Bulletin 01-02, Audit Requirements for
Federal Financial Statements; and the GAO/President's Council on
Integrity and Efficiency (PCIE) Financial Audit Manual (FAM)
section 1001, entitled "Management Representations."
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-587R
ACCNO: A27840
TITLE: Financial Audit: The Department of Defense's Fiscal Year
2004 Management Representation Letter on Its Financial Statements
DATE: 06/23/2005
SUBJECT: Audit reports
Auditing procedures
Auditing standards
Financial management
Financial records
Financial statement audits
Financial statements
Internal controls
Reporting requirements
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GAO-05-587R
A
United States Government Accountability Office Washington, D.C. 20548
June 23, 2005
The Honorable Tina W. Jonas Chief Financial Officer Department of Defense
The Honorable Joseph E. Schmitz Inspector General Department of Defense
Subject: Financial Audit: The Department of Defense's Fiscal Year 2004
Management Representation Letter on Its Financial Statements
As you know, the Secretary of the Treasury, in coordination with the
Director of the Office of Management and Budget (OMB), is required to
annually prepare and submit audited financial statements of the U.S.
government to the President and the Congress. We are required to audit
these consolidated financial statements (CFS) and report on the results of
our work.1 In connection with fulfilling our requirement to audit the
fiscal year 2004 CFS, we evaluated the Department of the Treasury's
(Treasury) financial reporting procedures and related internal control
over the process for compiling the CFS, including the management
representation letter provided us by Treasury and OMB. Written
representation letters from management, required by U.S. generally
accepted government auditing standards, ordinarily confirm oral
representations given to the auditor, indicate and document the continuing
appropriateness of those representations, and reduce the possibility of a
misunderstanding between management and the auditor.
In our report, which is included in the fiscal year 2004 Financial Report
of the United States Government,2 we reported a limitation on the scope of
our work due to identified concerns with the adequacy of certain federal
agencies' management representations on which Treasury and OMB
1The Government Management Reform Act of 1994 has required such reporting,
covering the executive branch of government, beginning with financial
statements prepared for fiscal year 1997. 31 U.S.C. S: 331 (e). The
federal government has elected to include certain financial information on
the legislative and judicial branches in the CFS as well.
2The fiscal year 2004 Financial Report of the United States Government was
completed by the Department of the Treasury on December 15, 2004, and is
available through both GAO's Web site at www.gao.gov and Treasury's Web
site at www.fms.treas.gov/fr/index.html.
depend to provide their representations to us regarding the CFS.
Specifically, Treasury and OMB stated that their representation letter to
us on the CFS was based primarily on the individual federal agency
representation letters. Consequently, our audit considered the content of
the individual federal agency letters, and the incompleteness of certain
of these letters impaired our ability to obtain sufficient evidence in
support of our audit of the CFS. This limitation contributed to our
disclaimer of opinion on the CFS. We performed sufficient audit work to
provide the disclaimer of opinion and issued our audit report, dated
December 6, 2004, in accordance with U.S. generally accepted government
auditing standards.
As part of our audit of the fiscal year 2004 CFS, we received and reviewed
selected federal agencies' management representation letters to assess
their adequacy in support of our audit of the CFS. As the federal
government gets closer to an opinion on its financial statements, it
becomes more important that the federal agencies' management
representation letters be complete and reliably prepared.
The purpose of this report is to communicate our observations on the
Department of Defense's (DOD) fiscal year 2004 management representation
letter. Our objective is to help ensure that future management
representation letters submitted by DOD are sufficient to help support
Treasury and OMB's preparation of the CFS management representation letter
and our ability to rely on the representations in that letter in
combination with individual federal agency representation letters. We
reviewed five key areas in each management representation letter: (1)
signatures, (2) materiality thresholds, (3) representations, (4) summary
of unadjusted misstatements, and (5) reliability of representations. In
reviewing the management representation letters, we applied the American
Institute of Certified Public Accountants' (AICPA) Codification of
Auditing Standards, AU Section 333, Management Representations; OMB
Bulletin 01-02, Audit Requirements for Federal Financial Statements; and
the GAO/President's Council on Integrity and Efficiency (PCIE) Financial
Audit Manual (FAM) section 1001, entitled "Management Representations."3
3GAO, GAO/PCIE: Financial Audit Manual: Update, GAO-04-1015G (Washington,
D.C.: July 30, 2004), an update to Financial Audit Manual: Volumes 1 and
2, GAO-01-765G (Washington, D.C.: Aug. 1, 2001).
Results in Brief DOD's fiscal year 2004 management representation letter
did not provide all the information necessary to support Treasury and
OMB's preparation of the CFS management representation letter. This in
turn impacted our ability to rely on the representations in the CFS
management representation letter in combination with individual federal
agency representation letters.
We identified some needed improvements in three of the five key areas we
reviewed. First, DOD's management representation letter was not signed by
the appropriate level of management. Second, DOD did not provide the
materiality thresholds used to determine, for representation purposes, any
matters that were individually or collectively material to its financial
statements. Such individual federal agency thresholds are considered by
Treasury and OMB in providing a materiality threshold for the CFS
representation letter. Finally, the letter included 22 of the 28
representations4 from the FAM that were applicable to DOD. For the other 6
representations, 4 were not fully included and 2 were not provided at all.
We believe that these matters can be easily addressed. We are making three
recommendations to DOD's Chief Financial Officer targeted to specific
changes needed. Also, we are recommending that the DOD Inspector General
work with the department to help ensure that future management
representation letters meet the key conditions noted as needing
improvements in this report.
In commenting on a draft of this report, DOD's Office of the Comptroller
concurred with the recommendations to improve DOD's future management
representation letters. The Office of the Comptroller's response stated
that they had coordinated with the Office of the Inspector General and
that the Office of the Inspector General would work with the
4The FAM lists 27 representations that are ordinarily included, if
applicable, in the management representation letter that an agency
provides to the auditor. For 4 of the representations, the agency is
required to address three separate components. As such, each agency is
ordinarily expected to make a total of 35 representations. However,
because DOD received a disclaimer of opinion on its fiscal year 2004
financial statements, DOD's auditor did not provide any unadjusted
misstatements and, therefore, DOD was not required to make the related
representation. Also, 6 of the 35 representations are not applicable
unless the agency received an opinion on its internal control. Since, for
fiscal year 2004, DOD received a disclaimer of opinion on its financial
statements and did not receive an opinion on its internal control, only 28
of the 35 representations were applicable to DOD's fiscal year 2004
management representation letter.
department to ensure that future letters contain the specific language in
the FAM, when appropriate.
Background In conducting agency financial statement audits, U.S. generally
accepted government auditing standards incorporate financial auditing
fieldwork and reporting standards issued by the AICPA. Such auditing
standards (AU Section 333) require auditors to obtain certain
representations from agency management. These representations are part of
the evidential matter to be considered by the auditor in its audit of the
agency's financial statements. The representations obtained will depend on
the circumstances of the engagement and the nature and basis of
presentation of the financial statements. AU Section 333 discusses
specific representations that should be obtained from management,
including a requirement to attach a schedule of unadjusted financial
statement misstatements for entities with uncorrected misstatements.
In addition, OMB Bulletin 01-02 and FAM section 1001 contain guidance on
preparing federal agencies' management representation letters. According
to the FAM, in addition to the representations included in AU Section 333,
the auditor generally should consider the need to obtain representations
on other matters based on the circumstances of the audited entity. FAM
section 1001A lists 35 specific representations ordinarily included in the
management representation letter and also includes a requirement to attach
a schedule of unadjusted financial statement misstatements for entities
with uncorrected misstatements. (See enc. I for these representations.)
Representations listed in FAM section 1001A should be customized to the
situation of the entity being audited or excluded if inapplicable. We
perform our audit of the CFS in accordance with the FAM and related
auditing standards.
Treasury and OMB are to receive management representation letters from
certain federal agencies. This is important because U.S. generally
accepted government auditing standards require that Treasury and OMB
provide us, as principal auditor of the CFS, a management representation
letter, and their letter depends on the information in such agencies'
management representation letters. In their representation letter to us
for the audit of the fiscal year 2004 CFS, Treasury and OMB stated that
their representations are based primarily on the representations of those
agencies covered by the Chief Financial Officers (CFO) Act and other
selected agencies that were made in connection with the preparation of
these entities' respective financial statements and provided to OMB and
Treasury. For this reason, it is important that all federal agency
representation letters be complete and reliable.
Objectives, Scope, and Methodology
In connection with our audit of the fiscal year 2004 CFS, we evaluated
Treasury's financial reporting procedures and related internal control,
including the CFS management representation letter. For the fiscal year
2004 CFS, 33 of the 35 "verifying agencies" submitted audited financial
statements along with their management representation letters to
Treasury.5 In our review of these 33 management representation letters,
our overall objective was to assess their adequacy as it relates to our
audit of the CFS. Specifically, we reviewed each agency management
representation letter to determine whether the following five key
conditions were met:
o the management representation letter was signed by appropriate agency
officials;
o the management representation letter included designation as to the
amounts above which matters were considered material (materiality
thresholds);
o the management representation letter included applicable
representations from the FAM;
o the management representation letter included a properly prepared
summary of unadjusted misstatements for agencies with uncorrected
misstatements; and
o the representations in the management representation letter were
reliable based on a review of findings in the auditor's report.
5See Treasury Financial Manual, vol. I, part 2, ch. 4700, for a list of
the 35 agencies. These agencies, for fiscal year 2004, consisted of 23 CFO
Act agencies and 12 material other agencies. The 33 agencies we reviewed
did not include the U.S. Securities and Exchange Commission and the
Smithsonian Institution because these audits were not complete before the
fiscal year 2004 Financial Report of the United States Government was
issued. The Department of Homeland Security (DHS) Financial Accountability
Act, Pub. L. No. 108-330, 118 Stat. 1275 (Oct. 16, 2004), added DHS to the
list of CFO Act agencies, increasing the number of CFO Act agencies again
to 24 for fiscal year 2005.
This report is based on the audit work we performed for the audit of the
fiscal year 2004 CFS, which was performed in accordance with U.S.
generally accepted government auditing standards.
We requested comments on a draft of this report from DOD's Chief Financial
Officer and Inspector General or their designees. Written comments from
DOD's Principal Deputy in the Office of the Comptroller are reprinted in
enclosure II and are also discussed in the Agency Comments section. The
Principal Deputy stated that the office's response was coordinated with
DOD's Office of the Inspector General.
Identified Issues with With respect to DOD's fiscal year 2004 management
representation letter,
we identified the following three areas that need some improvement:DOD's
Fiscal Year 2004 (1) providing the appropriate signatures, (2) providing
the materialityManagement thresholds used, and (3) providing or fully
including applicable Representation Letter representations from the FAM.
Details regarding these issues are as
follows.
Providing the Appropriate Signatures
The management representation letter should be obtained from the highest
level of the federal agency. Officials who sign the management
representation letter should be those who are responsible for and
knowledgeable about the matters in the representation letter. These
officials should generally be the head of the entity and the CFO or CFO
equivalent. Federal agencies' management and auditors need to ensure that
management representation letters are signed by appropriate management
officials.
DOD's fiscal year 2004 management representation letter was not signed by
the CFO. A management representation letter that is not signed by
officials at the appropriate level of management provides less assurance
than an appropriately signed letter that has been reviewed and approved by
the person or persons most knowledgeable about the matters it addresses.
The auditor cannot be certain that representations made in a letter that
has not been appropriately signed actually reflect management's position
or are complete. Letters that have not been appropriately signed impair
Treasury's and OMB's ability to rely on representations made in the
letters in order to prepare the CFS management representation letter.
Providing the Materiality Thresholds Used
Management representations may be limited to matters that are considered
individually or collectively material to the entity's financial
statements, provided that management and the auditor have reached an
understanding on the materiality thresholds to be used. Likewise, in
preparing the overall management representation letter for the CFS, which
is provided to us, Treasury and OMB limit the letter's representations to
matters that are considered to be material. While an understanding between
management and the auditor of materiality thresholds used is not
explicitly required by auditing standards to be included in the management
representation letter, Treasury and OMB use agency thresholds in providing
a materiality threshold for the governmentwide management representation
letter.
For fiscal year 2004, because the materiality thresholds used were not
included in DOD's and a number of other federal agencies' management
representation letters, or otherwise provided to Treasury and OMB,
Treasury and OMB's ability to represent that all matters material to the
CFS were properly considered and included in the overall management
representation letter for the CFS was impaired.
Providing or Fully Including Applicable Representations from the FAM
Written representations from management ordinarily confirm oral
representations made to the auditor during the audit, document the
continuing appropriateness of those representations, and reduce the
possibility of a misunderstanding. To meet auditing standards and OMB
requirements, federal agencies' management and auditors need to ensure
that management representation letters are complete and accurate.
We found that DOD's fiscal year 2004 management representation letter
included 22 of the 28 representations from the FAM that were applicable to
DOD. Of the 6 other representations, 4 were not fully included and 2 were
not provided at all. For one of the incomplete representations, the DOD
management representation letter included the following representation
intended to cover the responsibility to prevent and detect fraud
representation called for by FAM 15. (See enc. I for this representation.)
"I am responsible for establishing and overseeing the maintenance of
internal controls for financial management to prevent and detect fraud."
While this representation addresses controls to prevent and detect fraud,
it should also address programs to prevent and detect fraud as called for
by FAM 15.
For 3 of the incomplete representations, the DOD management representation
letter included the following representation intended to cover the fraud
and suspected fraud representations called for by FAM 16a, 16b, and 16c.
(See enc. I for these representations.)
"There has been no material fraud (intentional misstatements or omissions
of amounts or disclosures in financial statements and misappropriation of
assets that could have a material affect on the Principal Statements, the
RSSI or the RSI) nor any fraud involving management or employees who have
significant roles in internal control, that is not a matter of public
record."
While this representation addresses fraud, it should also address
suspected fraud as called for by FAM 16a, 16b, and 16c.
In addition, the two representations not provided were as follows.
o FAM #3b: We have made available to you all, where applicable, minutes
of meetings of the Board of Directors [or other similar bodies, such as
congressional oversight committees] or summaries of actions of recent
meetings for which minutes have not been prepared.
o FAM #17: We have no knowledge of any allegations of fraud or suspected
fraud affecting the agency received in communications from employees,
former employees, or others.
When agencies do not provide all representations or include incomplete
representations in their management representation letters, it impairs our
ability to audit the CFS and Treasury and OMB's ability to make these
types of representations in the CFS management representation letter.
Conclusions In three of the five key areas we reviewed, DOD's fiscal year
2004 management representation letter did not provide all the information
necessary to support Treasury and OMB's preparation of the CFS management
representation letter and our ability to rely on the representations in
that letter in combination with individual federal agency representation
letters, including that of DOD. The additional information needed from DOD
is straightforward and should be easy to address.
Recommendations for Executive Action
We recommend to DOD's Chief Financial Officer that in the future the
management representation letter
o be signed by the appropriate level of management;
o include materiality thresholds or such thresholds be provided
separately to Treasury and OMB; and
o fully include all representations from the FAM that are applicable to
DOD.
We recommend that the DOD Inspector General work with the department to
help ensure that future management representation letters meet the key
conditions noted as needing improvements in this report.
Agency Comments In commenting on a draft of this report, DOD's Office of
the Comptroller concurred with the recommendations to improve DOD's future
management representation letters. The Office of the Comptroller's
response stated that they had coordinated with the Office of the Inspector
General and that the Office of the Inspector General would work with the
department to ensure that future letters contain the specific language in
the FAM, when appropriate. The comments are reprinted in enclosure II.
Within 60 days of the date of this report, we would appreciate receiving a
written statement on actions taken to address these recommendations.
We are sending copies of this report to the Chairmen and Ranking Minority
Members of the Senate Committee on Homeland Security and Governmental
Affairs; the Subcommittee on Federal Financial Management, Government
Information, and International Security, Senate Committee on Homeland
Security and Governmental Affairs; the House Committee on Government
Reform; and the Subcommittee on Government Management, Finance, and
Accountability, House Committee on Government Reform. In addition, we are
sending copies to the Fiscal Assistant Secretary of the Treasury and the
Controller of OMB. Copies will be made available to others upon request.
This report is also available at no charge on GAO's Web site at
www.gao.gov.
We appreciate the courtesy and cooperation extended to us by your staff
throughout our work. We look forward to continuing to work with your
offices to help improve financial management in the federal government. If
you have any questions about the contents of this report, please contact
me
at (202) 512-3406.
Gary T. Engel
Director
Financial Management and Assurance
Enclosures - 2
Enclosure I: Representations in FAM 1001A
Guidance contained in FAM 1001 and FAM 1001A deals with the management
representations that the auditor should obtain from current management as
part of the audit. This guidance also acknowledges that judgment needs to
be exercised to obtain representations that depend on the circumstances of
the engagement and the nature and basis of presentation of the financial
statements. Representations given in FAM section 1001A should be
customized to the situation of the entity being audited, and additional
representations may need to be obtained.
FAM 1001A lists 27 representations that are ordinarily included, if
applicable, in the management representation letter that an agency
provides to the auditor. For representations 3, 11, 16, and 18, the agency
should address three separate components. As such, each agency is
ordinarily expected to make a total of 35 representations. Representations
18, 19, 20, and 21 are not applicable unless the agency received an
opinion on its internal control. In addition, representations 22, 23, and
24 address the three requirements of the Federal Financial Management
Improvement Act of 1996 and are only applicable to the 24 CFO Act
agencies. The 35 representations in FAM 1001A are as follows.
1. We are responsible for the fair presentation of the financial
statements and stewardship information in conformity with U.S. generally
accepted accounting principles.
2. The financial statements are fairly presented in conformity with U.S.
generally accepted accounting principles.
3. We have made available to you all
a. financial records and related data;
b. where applicable, minutes of meetings of the Board of Directors [or
other similar bodies, such as congressional oversight committees] or
summaries of actions of recent meetings for which minutes have not been
prepared; and
c. communications from the Office of Management and Budget (OMB)
concerning noncompliance with or deficiencies in financial reporting
practices.
Enclosure I: Representations in FAM 1001A
4. There are no material transactions that have not been properly recorded
in the accounting records underlying the financial statements or disclosed
in the notes to the financial statements.
5. We believe that the effects of the uncorrected financial statement
misstatements summarized in the accompanying schedule are immaterial, both
individually and in the aggregate, to the financial statements taken as a
whole. [If management believes that certain of the identified items are
not misstatements, management's belief may be acknowledged by adding to
the representation, for example, "We believe that items XX and XX do not
constitute misstatements because [description of reason]."]
6. The [entity] has satisfactory title to all owned assets, including
stewardship property, plant, and equipment; such assets have no liens or
encumbrances; and no assets have been pledged.
7. We have no plans or intentions that may materially affect the carrying
value or classification of assets and liabilities.
8. Guarantees under which the [entity] is contingently liable have been
properly reported or disclosed.
9. Related party transactions and related accounts receivable or payable,
including assessments, loans, and guarantees, have been properly recorded
and disclosed.
10. All intraentity transactions and balances have been appropriately
identified and eliminated for financial reporting purposes, unless
otherwise noted. All intragovernmental transactions and balances have been
appropriately recorded, reported, and disclosed. We have reconciled
intragovernmental transactions and balances with the appropriate trading
partners for the four fiduciary transactions identified in Treasury's
Intra-governmental Fiduciary Transactions Accounting Guide, and other
intragovernmental asset, liability, and revenue amounts as required by the
applicable OMB Bulletin.
Enclosure I: Representations in FAM 1001A
11. There are no
a. possible violations of laws or regulations whose effects should be
considered for disclosure in the financial statements or as a basis for
recording a loss contingency,
b. material liabilities or gain or loss contingencies that are required
to be accrued or disclosed that have not been accrued or disclosed, or
c. unasserted claims or assessments that are probable of assertion and
must be disclosed that have not been disclosed.
12. We have complied with all aspects of contractual agreements that would
have a material effect on the financial statements in the event of
noncompliance.
13. No material events or transactions have occurred subsequent to
September 30, 20X2 [or date of latest audited financial statements], that
have not been properly recorded in the financial statements and
stewardship information or disclosed in the notes.
14. We are responsible for establishing and maintaining internal control.
15. We acknowledge our responsibility for the design and implementation of
programs and controls to prevent and detect fraud (intentional
misstatements or omissions of amounts or disclosures in financial
statements and misappropriation of assets that could have a material
effect on the financial statements).
16. We have no knowledge of any fraud or suspected fraud affecting the
[entity] involving:
a. management,
b. employees who have significant roles in internal control, or
c. others where the fraud could have a material effect on the financial
statements.
[If there is knowledge of any such instances, they should be described.]
Enclosure I: Representations in FAM 1001A
17. We have no knowledge of any allegations of fraud or suspected fraud
affecting the [entity] received in communications from employees, former
employees, or others. [If there is knowledge of any such allegations, they
should be described.]
18. Pursuant to 31 U.S.C. 3512(c), (d) (commonly known as the Federal
Managers' Financial Integrity Act), we have assessed the effectiveness of
the [entity's] internal control in achieving the following objectives:
a. reliability of financial reporting-transactions are properly recorded,
processed, and summarized to permit the preparation of financial
statements and stewardship information in accordance with U.S. generally
accepted accounting principles, and assets are safeguarded against loss
from unauthorized acquisition, use or disposition;
b. compliance with applicable laws and regulations-transactions are
executed in accordance with (i) laws governing the use of budget authority
and with other laws and regulations that could have a direct and material
effect on the financial statements and (ii) any other laws, regulations,
and governmentwide policies identified by OMB in its audit guidance; and
c. reliability of performance reporting-transactions and other data that
support reported performance measures are properly recorded, processed,
and summarized to permit the preparation of performance information in
accordance with criteria stated by management.
[If the entity bases its internal control assessment on suitable criteria
other than 31 U.S.C. 3512(c), (d), this item should cite the criteria used
(for example, Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission).]
19. Those controls in place on September 30, 20X2 [or date of latest
audited financial statements], and during the years ended 20X2 and 20X1,
provided reasonable assurance that the foregoing objectives are met. [If
there are material weaknesses, the foregoing representation should be
modified to read:
Those controls in place on September 30, 20X2, and during the years ended
20X2 and 20X1, provided reasonable assurance that the
Enclosure I: Representations in FAM 1001A
foregoing objectives are met except for the effects of the material
weaknesses discussed below or in the attachment.
or: Internal controls are not effective.
or: Internal controls do not meet the foregoing objectives.]
20. We have disclosed to you all significant deficiencies in the design or
operation of internal control that could adversely affect the entity's
ability to meet the internal control objectives and identified those we
believe to be material weaknesses.
21. There have been no changes to internal control subsequent to September
30, 20X2 [or date of latest audited financial statements], or other
factors that might significantly affect it. [If there were changes,
describe them, including any corrective actions taken with regard to any
significant deficiencies or material weaknesses.]
22. We are responsible for implementing and maintaining financial
management systems that substantially comply with federal financial
management systems requirements, federal accounting standards (U.S.
generally accepted accounting principles), and the U.S. Government
Standard General Ledger at the transaction level.
23. We have assessed the financial management systems to determine whether
they substantially comply with these federal financial management systems
requirements. Our assessment was based on guidance issued by OMB.
24. The financial management systems substantially complied with federal
financial management systems requirements, federal accounting standards,
and the U.S. Government Standard General Ledger at the transaction level
as of [date of the latest financial statements].
[If the financial management systems substantially comply with only one or
two of the above elements, this representation should be modified as
follows:
As of [date of financial statements], the [entity's] financial management
systems substantially comply with [specify which of the three elements for
which there is substantial compliance (e.g., federal accounting standards
and the SGL at the transaction level)],
Enclosure I: Representations in FAM 1001A
but did not substantially comply with [specify which of the elements for
which there was a lack of substantial compliance (e.g., federal financial
management systems requirements)], as described below (or in an
attachment).]
[If the financial management systems do not substantially comply with any
of the three elements, the following paragraph should be used instead:
As of [date of financial statements], the [entity's] financial management
systems do not substantially comply with the federal financial management
systems requirements.]
[If there is a lack of substantial compliance with one or more of the
three requirements, identify herein or in an attachment all the facts
pertaining to the noncompliance, including the nature and extent of the
noncompliance and the primary reason or cause of the noncompliance.]
25. We are responsible for the [entity's] compliance with applicable laws
and regulations.
26. We have identified and disclosed to you all laws and regulations that
have a direct and material effect on the determination of financial
statement amounts.
27. We have disclosed to you all known instances of noncompliance with
laws and regulations.
Enclosure II: Comments From the Department of Defense
Enclosure II: Comments From the Department of Defense
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