Financial Audit: The Department of Agriculture's Fiscal Year 2004
Management Representation Letter on Its Financial Statements	 
(22-JUL-05, GAO-05-595R).					 
                                                                 
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 United States Department of  
Agriculture's (USDA) fiscal year 2004 management representation  
letter. Our objective is to help ensure that future management	 
representation letters submitted by USDA 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-05-595R					        
    ACCNO:   A30957						        
  TITLE:     Financial Audit: The Department of Agriculture's Fiscal  
Year 2004 Management Representation Letter on Its Financial	 
Statements							 
     DATE:   07/22/2005 
  SUBJECT:   Audit reports					 
	     Auditing procedures				 
	     Auditing standards 				 
	     Financial management				 
	     Financial records					 
	     Financial statement audits 			 
	     Financial statements				 
	     Internal controls					 
	     Reporting requirements				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-05-595R

A

United States Government Accountability Office Washington, D.C. 20548

July 22, 2005

Ms. Patricia E. Healy
Acting Chief Financial Officer
Department of Agriculture

The Honorable Phyllis K. Fong
Inspector General
Department of Agriculture

Subject: Financial Audit: The Department of Agriculture'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

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.

agencies' management representations on which Treasury and OMB 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
United States Department of Agriculture's (USDA) fiscal year 2004
management representation letter. Our objective is to help ensure that
future management representation letters submitted by USDA 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	USDA'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 two of the five key areas we
reviewed. First, the letter included 28 of the 29 representations4 from
the FAM that were applicable to USDA. The other representation was not
provided at all. Finally, USDA did not include a complete summary of
unadjusted misstatements with its management representation letter and
also did not provide a description of the misstatements.

We believe that these matters can be easily addressed. We are making two
recommendations to USDA's Acting Chief Financial Officer targeted to
specific changes needed. Also, we are recommending that the USDA 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, USDA's Acting Chief Financial
Officer and Inspector General stated that they will work to address the
conditions noted in our report. As it relates to the FAM representation
that was not provided, the Acting Chief Financial Officer noted that her
office believed that the disclosure was addressed in other parts of USDA's
management representation letter and the Inspector General noted that the
management representation letter did represent that all material instances
of noncompliance were disclosed as well as all instances of known fraud.
While USDA included representations that stated (1) there were no
instances of noncompliance with applicable laws and regulations that could
have a material effect on the financial statements and (2) all instances
of known fraud were disclosed, it did not represent that all

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. Six of the 35
representations are not applicable unless the agency received an opinion
on its internal control. Since USDA did not receive an opinion on its
internal control for fiscal year 2004, only 29 of the 35 representations
were applicable to USDA's fiscal year 2004 management representation
letter.

known instances of noncompliance were disclosed to the auditor as called
for by the FAM. As such, we continue to believe that this FAM
representation was not included in USDA's fiscal year 2004 management
representation letter and should be provided in USDA's future management
representation letters. We are pleased that USDA's Acting Chief Financial
Officer and Inspector General stated that they will work to include the
representation in future management representation letters.

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

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.

o 	the representations in the management representation letter were
reliable based on a review of findings in the auditor's report.

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 USDA's Acting Chief
Financial Officer and Inspector General or their designees. A joint letter
containing written comments from USDA's Acting Chief Financial Officer and
Inspector General is reprinted in enclosure II and discussed in the Agency
Comments and Our Evaluation section.

Identified Issues with With respect to USDA's fiscal year 2004 management
representation letter,

we identified the following two areas that need some improvement:USDA's
Fiscal Year (1) providing applicable representations from the FAM and (2)
including a2004 Management complete summary of unadjusted misstatements.
Details regarding these Representation Letter issues are as follows.

Providing 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 USDA's fiscal year 2004 management representation letter
included 28 of the 29 representations from the FAM that were applicable to
USDA. The other representation, which was not provided at all, is as
follows.

o 	FAM #27:We have disclosed to you all known instances of noncompliance
with laws and regulations.

When agencies do not provide all 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.

Including a Complete Summary of Unadjusted Misstatements

U.S. generally accepted government auditing standards require that for
each federal agency with uncorrected misstatements, a summary of
unadjusted misstatements be attached to the agency's management
representation letter. Treasury and OMB use the summaries of unadjusted
misstatements to assess the impact of federal agencies' unadjusted
misstatements on the CFS and make appropriate management representations
to us at the governmentwide level. The summaries are also used by us, as
principal auditor of the CFS, to develop an overall governmentwide summary
of unadjusted misstatements, which is then attached to the CFS management
representation letter prepared by Treasury and OMB.

Also, in a matter related to the compilation process for the CFS, in
fiscal year 2004, Treasury required agencies to submit a summary of
unadjusted misstatements as part of the closing package using the
standardized format provided for in the Treasury Financial Manual (TFM).
The TFM, however, required additional details to be added to the summary
of unadjusted misstatements than those called for by the FAM.
Specifically, agencies were to also (1) include a description of the
misstatements and (2) distinguish between misstatements affecting
intragovernmental accounts and misstatements affecting accounts with the
public. We need this additional information to develop the overall
governmentwide summary of unadjusted misstatements. In order to avoid
duplication of effort by the agencies in preparing two summaries of
unadjusted misstatements, the additional information should also be
included in the summary of unadjusted misstatements attached to the
management representation letter. As such, we plan to work with PCIE to
modify the FAM to call for these two additional disclosures to be included
in the summary of unadjusted misstatements attached to the management
representation letter.

USDA included a summary of unadjusted misstatements with its management
representation letter, but the summary did not separate "known" and
"likely" misstatements, as called for by the FAM. In addition, USDA
submitted a summary of unadjusted misstatements as part of its closing
package to Treasury as required by the TFM, but the summary did not
include a description of the misstatements.

Without a complete summary of unadjusted misstatements from each of the
verifying agencies with uncorrected misstatements, it is not possible for
us, as principal auditor of the CFS, to reasonably determine the audit
risk exposure for each of the line items in the CFS or to prepare an

adequate summary of unadjusted misstatements at the governmentwide level.

Conclusions	In two of the five key areas we reviewed, USDA'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 USDA. The additional information needed from
USDA is straightforward and should be easy to address.

                      Recommendations for Executive Action

We recommend to USDA's Acting Chief Financial Officer that in the future
the management representation letter

o 	fully include all representations from the FAM that are applicable to
USDA and

o 	include a complete summary of unadjusted misstatements, if there are
any uncorrected misstatements, that also provides a description of the
misstatements.

We recommend that the USDA 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 and Our Evaluation

In written comments on a draft of this report, which are reprinted in
enclosure II, USDA's Acting Chief Financial Officer and Inspector General
stated that they will work to address the conditions noted in our report.
Specifically, USDA's Acting Chief Financial Officer stated her office (1)
has already changed the format for USDA's fiscal year 2005 management
representation letter and all future management representation letters to
include representation #27 and (2) will ensure that the summary of
unadjusted misstatements includes component audit information on future
submissions. In addition, USDA's Inspector General stated that her office
will work with USDA management to help ensure that future management
representation letters fully include all appropriate representations from
the FAM as well as a complete summary of unadjusted misstatements.

As it relates to FAM representation #27, the Acting Chief Financial
Officer noted that her office believed that the disclosure was addressed
in other parts of USDA's management representation letter and the
Inspector General noted that the management representation letter did
represent that all material instances of noncompliance were disclosed as
well as all instances of known fraud. While USDA included representations
that stated (1) there were no instances of noncompliance with applicable
laws and regulations that could have a material effect on the financial
statements and (2) all instances of known fraud were disclosed, it did not
represent that all known instances of noncompliance were disclosed to the
auditor as called for by representation #27. As such, we continue to
believe that FAM representation #27 was not included in USDA's fiscal year
2004 management representation letter and should be provided in USDA's
future management representation letters. We are pleased that USDA's
Acting Chief Financial Officer and Inspector General stated that they will
work to include FAM representation #27 in future management representation
letters.

As it relates to the summary of unadjusted misstatements, both USDA's
Acting Chief Financial Officer and Inspector General indicated that the
adjustments included on the departmentwide summary of unadjusted
misstatements is intended to include only those adjustments identified
during the consolidated audit and not unadjusted misstatements identified
during the individual USDA component audits. They stated that they were
not aware that GAO was requesting component audit information. Our issue
was not related to the component units of USDA, but to USDA's
departmentwide summary of unadjusted misstatements. As stated in our
engagement letter dated May 3, 2004, which was issued by us to Treasury
and OMB and copied to the verifying agencies' Chief Financial Officer and
Inspector General, we were to receive a summary of unadjusted
misstatements from the applicable agencies with the management
representation letter. As noted in our report, both the summary provided
with USDA's management representation letter and the summary included with
USDA's closing package lacked certain details needed for it to be properly
used by GAO for preparing the governmentwide management representation
letter. For example, USDA's summary did not include a description of the
misstatements. USDA also noted that there were not any likely
misstatements to include on the summary. However, FAM 540.03 states that
the auditor should quantify the effects of any misstatements and classify
them as either "known misstatements" or "likely misstatements". We are
pleased that USDA's Acting Chief Financial Officer and Inspector

General stated that in the future they will provide a complete summary of
unadjusted misstatements.

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 Agriculture

Note: GAO comments supplementing those in the report text appear at the
end of this enclosure.

See comment 1.

See comment 1.

See comment 1.

Enclosure II: Comments from the Department of Agriculture

                                 See comment 1.

                         See comment 1. See comment 2.

           Enclosure II: Comments from the Department of Agriculture

The following are our comments on the Department of Agriculture's (USDA)
letter dated June 9, 2005.

GAO Comments  1. See the "Agency Comments and Our Evaluation" section of
this report.

2.	Both GAO and USDA have expressed concerns related to the overall
process of providing us the needed information for the audit of the
consolidated financial statements of the U.S. government (CFS). In a
meeting between USDA and GAO on May 25, 2005, both parties discussed how
this process could be improved for future audits. At this meeting, we told
USDA officials that we believe that we had clearly defined the
deliverables and due dates for information requested that related to our
audit of the CFS. We also noted that some of the information requested was
called for in the engagement letter dated May 3, 2004, that was issued by
us to Treasury and OMB and copied to the verifying agencies' Chief
Financial Officer and Inspector General. Regardless, we will provide a
single point of contact to work with USDA's Office of the Inspector
General to facilitate meetings and data requests. Also, USDA agreed to
appoint a single point of contact, the financial statement audit liaison,
who will coordinate and obtain for us all necessary information to help
ensure that USDA meets its deliverables and due dates.

GAO's Mission

Obtaining Copies of GAO Reports and Testimony

The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site (www.gao.gov). Each weekday, GAO posts newly
released reports, testimony, and correspondence on its Web site. To have
GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone 	The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out
to the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548

To order by Phone: 	Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

To Report Fraud, Contact:

Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: [email protected] Programs Automated answering system: (800)
424-5454 or (202) 512-7470

Gloria Jarmon, Managing Director, [email protected] (202)
512-4400Congressional U.S. Government Accountability Office, 441 G Street
NW, Room 7125 Relations Washington, D.C. 20548

Public Affairs 	Paul Anderson, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548

                           PRINTED ON RECYCLED PAPER

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
*** End of document. ***