Financial Audit: The Department of Veterans Affairs' Fiscal Year
2004 Management Representation Letter on Its Financial Statements
(22-JUL-05, GAO-05-599R).
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 Veterans
Affairs' (VA) fiscal year 2004 management representation letter.
Our objective is to help ensure that future management
representation letters submitted by VA 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-05-599R
ACCNO: A30997
TITLE: Financial Audit: The Department of Veterans Affairs'
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
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GAO-05-599R
A
United States Government Accountability Office Washington, D.C. 20548
July 22, 2005
The Honorable Tim S. McClain Acting Chief Financial Officer Department of
Veterans Affairs
The Honorable Richard J. Griffin Inspector General Department of Veterans
Affairs
Subject: Financial Audit: The Department of Veterans Affairs' 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
Department of Veterans Affairs' (VA) fiscal year 2004 management
representation letter. Our objective is to help ensure that future
management representation letters submitted by VA 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 VA'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 25 of the 29 representations4 from
the FAM that were applicable to VA. For the other 4 representations, 3
were not fully included and 1 was not provided at all. In addition, VA did
not include a complete summary of unadjusted misstatements with its
management representation letter.
We believe that these matters can be easily addressed. We are making two
recommendations to VA's Acting Chief Financial Officer targeted to
specific changes needed. Also, we are recommending that the VA Inspector
General, with the contracted independent public accountant, 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, VA's Acting Chief Financial
Officer and Inspector General, in separate letters, concurred with our
recommendations to them and stated that their offices will work to address
the conditions noted in our report.
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
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 VA did not receive an opinion on its
internal control for fiscal year 2004, only 29 of the 35 representations
were applicable to VA's fiscal year 2004 management representation letter.
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 In connection with our audit of the fiscal year
2004 CFS, we evaluated Treasury's financial reporting procedures and
related internal control,
Methodology 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.
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 VA's Acting Chief
Financial Officer and Inspector General or their designees. Written
comments from VA's Acting Chief Financial Officer and Inspector General
are reprinted in enclosures II and III, respectively, and are also
discussed in the Agency Comments and Our Evaluation section.
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.
Identified Issues with With respect to VA's fiscal year 2004 management
representation letter, we
identified the following two areas that need some improvement:VA's Fiscal
Year 2004 (1) providing or fully including applicable representations from
the FAM Management and (2) including a complete summary of unadjusted
misstatements. Representation Letter Details regarding these issues are as
follows.
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 VA's fiscal year 2004 management representation letter
included 25 of the 29 representations from the FAM that were applicable to
VA. Of the 4 other representations, 3 were not fully included and 1 was
not provided at all. For the 3 incomplete representations, the VA
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 fraud (intentional misstatements or omissions of
amounts or disclosures in Principal Statements and misappropriation of
assets) that could have a material effect on the Principal Statements or
the Required Supplemental Stewardship Information. There has been no fraud
involving management or employees who have significant roles in internal
control. We are responsible for the design and implementation of programs
and controls to prevent and detect fraud."
While this representation addresses fraud, it should also address
suspected fraud as called for by FAM 16a, 16b, and 16c.
In addition, the following representation was not provided.
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.
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 this 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.
VA included a summary of unadjusted misstatements with its management
representation letter, but the summary did not identify the financial
statements affected by the misstatements, as called for by the FAM. In
addition, VA did not submit a summary of unadjusted misstatements as part
of its closing package to Treasury as required by the TFM. However, VA
included the above noted additional information required by the TFM in the
summary of unadjusted misstatements attached to the management
representation letter.
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, VA'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 VA. The additional information needed from VA
is straightforward and should be easy to address.
Recommendations for Executive Action
We recommend to VA'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
VA and
o include a complete summary of unadjusted misstatements if there are any
uncorrected misstatements.
We recommend that the VA Inspector General, with the contracted
independent public accountant, 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 In written comments on a draft of this report, VA's
Acting Chief Financial Officer and Inspector General, in separate letters
that are reprinted in
Our Evaluation enclosures II and III, concurred with our recommendations
to them and stated that they will work with each other and the contracted
independent public accountant to ensure that future management
representation letters meet the key conditions noted as needing
improvements in our report.
Regarding the summary of unadjusted misstatements, VA's Inspector General
noted that VA made his office's suggested changes to the summary of
unadjusted misstatements and provided both his office and the contracted
independent public accountant with a complete summary, but did not send
the revised version to GAO. As discussed in our report, the summary of
unadjusted misstatements attached to the management representation letter
that was provided to us did not identify the financial statements affected
by the misstatements as called for by the FAM. VA's Acting Chief Financial
Officer stated that for fiscal year 2004, the guidance was not clear on
what GAO was to receive. It should be noted, however, that the engagement
letter issued by us to Treasury and OMB and copied to the verifying
agencies' Chief Financial Officer and Inspector General stated that we
were to receive a summary of unadjusted misstatements from the applicable
agencies with the management representation letter. In addition, the TFM
required agencies to submit a summary of unadjusted misstatements as part
of the closing package to OMB, GAO, and Treasury's Financial Management
Service. A complete summary of unadjusted misstatements is needed by GAO
from each of the verifying agencies with uncorrected misstatements to
prepare an adequate summary of unadjusted misstatements at the
governmentwide level.
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 - 3
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 Office of the Chief Financial Officer at the
Department of Veterans Affairs
Enclosure III: Comments From the Office of the Inspector General at the
Department of Veterans Affairs
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