Financial Audit: Significant Internal Control Weaknesses Remain  
in the Preparation of the Consolidated Financial Statements of	 
the U.S. Government (23-JUL-07, GAO-07-805).			 
                                                                 
For the past 10 years, since GAO's first audit of the		 
consolidated financial statements of the U.S. government (CFS),  
certain material weaknesses in internal control and in selected  
accounting and financial reporting practices have prevented GAO  
from expressing an opinion on the CFS. GAO has consistently	 
reported that the U.S. government did not have adequate systems, 
controls, and procedures to properly prepare the CFS. GAO's	 
December 2006 disclaimer of opinion on the fiscal year 2006 CFS  
included a discussion of continuing weaknesses related to the	 
preparation of the CFS. The purpose of this report is to (1)	 
provide details of continuing and new weaknesses, (2) recommend  
improvements, and (3) describe the status of corrective actions  
on GAO's previous 143 recommendations related to the preparation 
of the CFS.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-805 					        
    ACCNO:   A73087						        
  TITLE:     Financial Audit: Significant Internal Control Weaknesses 
Remain in the Preparation of the Consolidated Financial 	 
Statements of the U.S. Government				 
     DATE:   07/23/2007 
  SUBJECT:   Accounting 					 
	     Accounting procedures				 
	     Accounting standards				 
	     Audit reports					 
	     Financial records					 
	     Financial statement audits 			 
	     Financial statements				 
	     Internal audits					 
	     Internal controls					 
	     Obligated budget balances				 
	     Regulatory agencies				 
	     Reporting requirements				 
	     Unexpended budget balances 			 

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GAO-07-805

   

     * [1]Results in Brief
     * [2]Scope and Methodology
     * [3]Reconciling and Reporting Undistributed Offsetting Receipts

          * [4]Recommendations for Executive Action

     * [5]Directly Linking Audited Federal Agencies' Financial Stateme
     * [6]Reporting Unexpended Budget Balances

          * [7]Recommendations for Executive Action

     * [8]Reporting Operating Cash

          * [9]Recommendation for Executive Action

     * [10]Reporting and Disclosing Legal Contingencies

          * [11]Recommendation for Executive Action

     * [12]Reconciling Intragovernmental Activity and Balances

          * [13]Recommendation for Executive Action

     * [14]Preparing and Auditing Certain Information in Federal Agenci

          * [15]Recommendations for Executive Action

     * [16]Conformity with GAAP

          * [17]Consolidated Statement of Social Insurance
          * [18]Cash and Other Monetary Assets
          * [19]Recommendations for Executive Action

     * [20]Agency Comments and Our Evaluation

          * [21]OMB Comments
          * [22]Treasury Comments

     * [23]Appendix I: Status of Treasury's and OMB's Progress in Addre
     * [24]Appendix II: Comments from the Department of the Treasury
     * [25]Appendix III: GAO Contact and Staff Acknowledgments

          * [26]GAO Contact
          * [27]Acknowledgments

               * [28]Order by Mail or Phone

Report to the Secretary of the Treasury and the Director of the Office of
Management and Budget

United States Government Accountability Office

GAO

July 2007

FINANCIAL AUDIT

Significant Internal Control Weaknesses Remain in the Preparation of the
Consolidated Financial Statements of the U.S. Government

GAO-07-805

Contents

Letter 1

Results in Brief 2
Scope and Methodology 4
Reconciling and Reporting Undistributed Offsetting Receipts (Component of
the Budget Deficit) 5
Directly Linking Audited Federal Agencies' Financial Statements to the CFS
7
Reporting Unexpended Budget Balances 9
Reporting Operating Cash 10
Reporting and Disclosing Legal Contingencies 11
Reconciling Intragovernmental Activity and Balances 12
Preparing and Auditing Certain Information in Federal Agencies' Closing
Packages 13
Conformity with GAAP 14
Agency Comments and Our Evaluation 17
Appendix I Status of Treasury's and OMB's Progress in Addressing GAO's
Prior Year Recommendations for Preparing the CFS 20
Appendix II Comments from the Department of the Treasury 67
Appendix III GAO Contact and Staff Acknowledgments 69

Table

Table 1: Status of Treasury's and OMB's Progress in Addressing GAO's Prior
Year Recommendations for Preparing the CFS 21

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separately.

United States Government Accountability Office
Washington, DC 20548

                                                          Comptroller General
                                                         of the United States

July 23, 2007

The Honorable Henry M. Paulson, Jr.
The Secretary of the Treasury

The Honorable Robert J. Portman
Director, Office of Management and Budget

In our report dated December 1, 2006,^1 we disclaimed an opinion on the
consolidated financial statements of the U.S. government (CFS) for the
fiscal years ended September 30, 2006 and 2005.^2 For the past 10 years,
certain material weaknesses in internal control and in selected accounting
and financial reporting practices have resulted in conditions that
prevented us from expressing an opinion on the CFS. We have reported that
the federal government did not have adequate systems, controls, and
procedures for preparing the CFS. On behalf of the federal government, the
Department of the Treasury (Treasury), in coordination with the Office of
Management and Budget (OMB), prepares the CFS. Many of the weaknesses in
internal control that have contributed to our continuing disclaimers of
opinion were identified by auditors during their audits of federal
agencies' financial statements and were reported in detail with
recommendations to the agencies in separate reports. Other internal
control weaknesses were identified during our tests of the federal
government's process for preparing the CFS.

The purpose of this report is to (1) discuss the details of the weaknesses
we identified during our audit of the fiscal year 2006 CFS regarding
financial reporting procedures and internal control over the process for
preparing the CFS, (2) recommend improvements to address those weaknesses,
and (3) provide the status of corrective actions on the recommendations
detailed in our prior reports and listed in appendix I. We have discussed
each of the new weaknesses identified during our fiscal year 2006 audit
with your staff and have incorporated their comments as appropriate.

^1The fiscal year 2006 Financial Report of the United States Government
includes our report and was completed by the Department of the Treasury
(Treasury) on December 15, 2006, and is available through GAO's Web site
at [29]www.gao.gov/financial.html and Treasury's Web site at
[30]www.fms.treas.gov/fr/index.html .

^2The consolidated financial statements for the fiscal years ended
September 30, 2006 and 2005, consist of the Statements of Net Cost:
Statements of Operations and Changes in Net Position: Reconciliations of
Net Operating Cost and Unified Budget Deficit: Statements of Changes in
Cash Balance from Unified Budget and Other Activities: Balance Sheets: and
as of January 1, 2006, the Statement of Social Insurance, including the
related notes to these financial statements.

Results in Brief

We identified weaknesses in the processes used to compile and report the
fiscal year 2006 CFS. These weaknesses impair the federal government's
ability to ensure that the CFS are consistent with the underlying audited
agency financial statements, properly balanced, and in conformity with
U.S. generally accepted accounting principles (GAAP). Consequently, these
weaknesses contributed to our inability to render an opinion on the CFS.
Specifically, we found that

           o Treasury lacked effective processes and procedures for (1)
           reconciling undistributed offsetting receipts^3 to related
           information in federal agencies' financial statements and
           underlying agency information and records with Treasury's central
           accounting records and (2) demonstrating that undistributed
           offsetting receipts from intragovernmental interest were fully
           eliminated in the unified budget deficit reported in the CFS;
           o Treasury's process for compiling the CFS does not yet fully
           ensure that financial information from federal agencies' audited
           financial statements and other financial data directly link to
           amounts reported in the CFS and required supplemental information;
           o Treasury lacked effective processes and procedures for ensuring
           that unexpended balances of budget authority (unexpended budget
           balances^4) are properly reported in the supplemental information
           section of the CFS;
           o Treasury lacked effective processes and procedures for ensuring
           that the operating cash balance reported in the CFS and the
           related footnote to the financial statements was appropriate;
           o the federal government lacked effective processes and procedures
           to ensure that appropriate information regarding litigation and
           claims is included in the governmentwide legal representation
           letter;
			  
^3Undistributed offsetting receipts are deducted from total outlays for
the government as a whole rather than from a single agency or subfunction
in order to avoid distortion of agency or subfunction totals. Certain
offsetting receipts that are undistributed in both agency and functional
tables include collections of employer share of employee retirement
payments. Interests received by federal trust funds are undistributed in
the agency tables but distributed in the functional tables.

^4Unexpended budget balances represent budget authority that is the sum of
unobligated and obligated, but not yet liquidated balances.
			  
           o Treasury and OMB did not have effective processes and procedures
           in place for obtaining sufficient information from federal
           agencies to enable them to adequately monitor agencies' efforts to
           reconcile intragovernmental activity and balances with their
           trading partners;
           o auditors of several of the agencies identified by Treasury and
           OMB as significant^5 to the CFS did not perform the required audit
           procedures on certain information in the footnotes to the
           respective agencies' closing packages.^6 In addition, one of the
           significant agencies did not provide in its closing package the
           required cost allocation information used by Treasury in preparing
           the consolidated Statement of Net Cost;
           o Treasury continues to lack an adequate process to ensure that
           the financial statements, related notes, stewardship information,
           and supplemental information in the CFS are presented in
           conformity with GAAP; and
           o various other internal control weaknesses identified in previous
           years' audits still existed during fiscal year 2006 (see app. I).

           This report includes 11 new recommendations to address weaknesses
           we identified during our audit of the fiscal year 2006 CFS.
           Appendix I of this report reflects the status of actions taken (as
           of December 1, 2006, the date of completion of our fieldwork on
           our audit of the fiscal year 2006 CFS) to address 143 open
           recommendations from our previous reports.^7 Our work showed that
           70 recommendations contained in our prior reports remained open
           and 73 were closed. Of the recommendations that were closed, 53
           were closed based on the Federal Accounting Standards Advisory
           Board's (FASAB) issuance in fiscal year 2006 of Statement of
           Federal Financial Accounting Standard (SFFAS) No. 32, Consolidated
           Financial Report of the United States Government Requirements:
           Implementing Statement of Federal Financial Accounting Concepts 4
           "Intended Audience and Qualitative Characteristics for the
           Consolidated Financial Report of the United States Government."
           Specifically, this standard eliminated or lessened the disclosure
           requirements for the CFS related to certain information that
           Treasury had not been reporting. Overall, a total of 81
           recommendations remained open as of the end of our fiscal year
           2006 CFS audit. We will continue to monitor the status of
           corrective actions on our open recommendations during our fiscal
           year 2007 audit of the CFS.

^5Treasury refers to these agencies as verifying agencies and defines
these agencies as the 24 Chief Financial Officer Act agencies,
Export-Import Bank of the United States, Farm Credit System Insurance
Corporation, Federal Communications Commission, Federal Deposit Insurance
Corporation, National Credit Union Administration, U.S. Postal Service,
Pension Benefit Guaranty Corporation, Railroad Retirement Board,
Securities and Exchange Commission, Smithsonian Institution, and Tennessee
Valley Authority. In the CFS, Treasury also refers to the verifying
agencies as significant agencies.

^6The Governmentwide Financial Reporting System uses a closing package
methodology that has been developed to capture each federal agency's
information and link the agencies' audited financial statements to the
CFS.

^7GAO, Financial Audit: Significant Internal Control Weaknesses Remain in
Preparing the Consolidated Financial Statements of the U.S. Government,
[35]GAO-06-415 (Washington, D.C.: Apr. 21, 2006).

           In commenting on a draft of this report, OMB stated that it
           generally agreed with the new findings and related recommendations
           in this report. Treasury stated that it concurs with the new
           findings and related recommendations in this report with the
           exception of the nonconformity with GAAP finding and
           recommendation related to reporting a consolidated total in the
           consolidated Statement of Social Insurance (SOSI). Treasury stated
           that it does not believe that GAAP requires the reporting of a
           consolidated total in the consolidated SOSI or believe that doing
           so is especially meaningful. We do not agree with Treasury. In our
           view, GAAP requires the consolidated SOSI to include a
           consolidated total for all the social insurance programs. In
           addition, we believe that including a total is necessary to
           provide increased transparency and is meaningful to the users of
           the CFS.
			  
			  Scope and Methodology

           As part of our audit of the fiscal years 2006 and 2005 CFS, we
           evaluated the federal government's financial reporting procedures
           and related internal control, and we followed up on the status of
           Treasury and OMB corrective actions to address open
           recommendations regarding the process for preparing the CFS that
           were in our prior years' reports. In our disclaimer of opinion on
           the fiscal year 2006 CFS, which is included in the fiscal year
           2006 Financial Report of the United States Government, we
           discussed material deficiencies related to the federal
           government's process for preparing the CFS. These material
           deficiencies contributed to our disclaimer of opinion on the CFS
           and also constitute material weaknesses in internal control, which
           contributed to our adverse opinion on internal control. We
           performed sufficient audit procedures to provide the disclaimer of
           opinion in accordance with U.S. generally accepted government
           auditing standards. This report provides the details of the
           weaknesses we identified in performing our fiscal year 2006 audit
           procedures related to the process for preparing the CFS and our
           recommendations to correct those weaknesses, as well as the status
           of corrective actions taken by Treasury and OMB to address
           recommendations in our prior reports.

           We requested comments on a draft of this report from the Director
           of OMB and the Secretary of the Treasury or their designees. OMB
           provided oral comments, which are discussed in the Agency Comments
           and Our Evaluation section of this report. Treasury's comments are
           reprinted in appendix II and are also discussed in the Agency
           Comments and Our Evaluation section.
			  
			  Reconciling and Reporting Undistributed Offsetting Receipts
			  (Component of the Budget Deficit)

           The federal government reports a unified budget deficit^8 (budget
           deficit) in the Reconciliation of Net Operating Cost and the
           Unified Budget Deficit and in the Statement of Changes in Cash
           Balance from Unified Budget and Other Activities. The budget
           deficit is calculated by subtracting actual budget outlays from
           actual budget receipts. Budget outlays consist of federal
           agencies' outlay amounts^9 and undistributed offsetting
           receipts.^10

           For several years, we have been reporting material unreconciled
           differences between the total net outlays reported in selected
           federal agencies' Statements of Budgetary Resources (SBR) and
           Treasury's central accounting records used to compute the budget
           deficit^11 reported in the CFS. OMB and Treasury have been working
           with federal agencies to reduce these material unreconciled
           differences. Such efforts have resulted in significantly reducing
           the net outlay differences in fiscal year 2006. However, billions
           of dollars of differences still exist in this and other components
           of the budget deficit because the federal government does not have
           effective processes and procedures for identifying and either
           resolving or explaining material differences in the components of
           the budget deficit between Treasury's central accounting records
           and information reported in agency financial statements and
           underlying agency financial information and records. For example,
           during our audit of the 2006 CFS, we found that undistributed
           offsetting receipts related to two intragovernmental
           activities^12: both (1) federal employers' contributions to their
           employees' retirement and (2) interest received by federal trust
           funds did not always link to related amounts reported in federal
           agencies' financial statements. For fiscal year 2006, Treasury's
           central accounting records used to compute the budget deficit
           reported in the CFS showed (1) undistributed offsetting receipts
           for federal employers' contributions to their employees'
           retirement of $60.9 billion and (2) $169.3 billion of interest
           received by certain federal agencies' trust funds^13 on Treasury's
           borrowings from the trust funds. These activities, which totaled
           $230.2 billion, were material components of the budget deficit.
			  
^8Unified budget deficit is the amount by which the government's on-budget
and off-budget outlays (budget outlays) exceed the sum of its on-budget
and off-budget receipts (budget receipts) for a given period, usually a
fiscal year. Off-budget refers to those budgetary accounts (either federal
or trust funds) designated by law as excluded from budget totals.
Conversely, on-budget refers to all budgetary accounts other than those
designated by law as off-budget.

^9Federal agencies also report this information in their Statements of
Budgetary Resources (SBR) as net outlays. The SBR provides information
about how budgetary resources were made available (i.e., appropriations,
contract authority, spending authority from offsetting collections, etc.)
as well as the status of such resources (obligated or unobligated). It
also provides information regarding obligated balances at the end of and
outlays for the fiscal year.

^10See footnote 3.

^11See GAO's audit report on its audit of the federal government's fiscal
year 2005 financial statements that was incorporated in the 2005 Financial
Report of the U.S. Government published by Treasury. Also, see GAO,
Financial Audit: Process for Preparing the Consolidated Financial
Statements of the U.S. Government Needs Improvement, [36]GAO-04-45
(Washington, D.C.: Oct. 30, 2003).

           We compared components of undistributed offsetting receipts
           reflected in Treasury's central accounting records of about $54.7
           billion, or about 24 percent of the $230.2 billion balance, to
           amounts reported in certain federal agency financial statement
           information and found differences. However, neither Treasury nor
           the respective federal agencies had identified that differences
           existed. In addition, we were not able to link the remainder of
           these undistributed offsetting receipts, $175.5 billion, to
           related information in other federal agencies' financial
           statements because the information was not separately disclosed in
           such statements. Neither OMB nor Treasury was able to explain how
           undistributed offsetting receipts reflected in Treasury's central
           accounting records linked to related amounts reported in federal
           agency financial statements.

           Consolidated financial statements are intended to present the
           results of operations and financial position of the components
           that make up a reporting entity as if the entity were a single
           enterprise. When preparing consolidated financial statements, the
           preparer must eliminate intragovernmental activity and balances
           between federal agencies. For fiscal year 2006, we found that
           Treasury was unable to demonstrate that it fully eliminated
           amounts related to intragovernmental interest from the reported
           budget deficit. As noted above, for fiscal year 2006, Treasury's
           central accounting records reflected $169.3 billion of
           intragovernmental interest received by certain federal agencies'
           trust funds. Treasury's central accounting records also reflected
           outlays by Treasury to such trust funds for intragovernmental
           interest of $187.4 billion. Treasury was unable to provide support
           to demonstrate where and how the $18.1 billion difference between
           these two intragovernmental amounts was eliminated in the
           calculation of the budget deficit. Until these types of
           differences are timely reconciled by the federal government, their
           effect on the CFS will be unknown.
			  
^12Both of these activities represent outlays and receipts of the federal
government. Specifically, employers' share of employee retirement payments
are reported as outlays of federal agencies and receipts of certain
federal agencies that manage federal retirement trust funds. In addition,
intragovernmental interest payments are reported as outlays of the
Department of the Treasury and receipts of certain federal agencies' trust
funds that hold the related Treasury securities.

^13The federal government borrows money from agencies' trust funds and
pays interest on these borrowings-receipts to the trust funds.	

           Recommendations for Executive Action		  

           We recommend that the Director of OMB and Secretary of the
           Treasury direct the Controller of the Office of Federal Financial
           Management and Fiscal Assistant Secretary, respectively, to
           develop formal processes and procedures for identifying and either
           resolving or explaining any material differences in undistributed
           offsetting receipt amounts between Treasury's central accounting
           records and information reported in agency financial statements
           and underlying agency financial information and records.

           We also recommend that the Secretary of the Treasury direct the
           Fiscal Assistant Secretary to develop formal processes and
           procedures for ensuring that intragovernmental activity and
           balances, including intragovernmental interest, are fully
           eliminated in the calculation of the budget deficit.
			  
			  Directly Linking Audited Federal Agencies' Financial Statements
			  to the CFS

           As discussed in our report on our audit of the fiscal year 2006
           CFS, fiscal year 2006 was the third year that Treasury used the
           Governmentwide Financial Report System (GFRS) to collect agency
           financial statement information taken directly from federal
           agencies' audited financial statements. The goal of GFRS, which we
           strongly support, is to be able to directly link information from
           federal agencies' audited financial statements to amounts reported
           in the CFS and resolve many of the weaknesses we previously
           identified in the process for preparing the CFS. However, GFRS was
           still undergoing development and was not yet fully operational.

           As we have reported in the past, Treasury's process for compiling
           the CFS does not yet fully ensure that financial information from
           federal agencies' audited financial statements and other financial
           data directly link to amounts reported in the CFS. In our report
           on our audit of the fiscal year 2006 CFS, we noted that Treasury
           showed progress by demonstrating that amounts in the SOSI were
           consistent with the underlying federal agencies' audited financial
           statements and that the Balance Sheet and the Statement of Net
           Cost were consistent with federal agencies' audited financial
           statements prior to eliminating intragovernmental activity and
           balances. However, Treasury's process for compiling the CFS did
           not ensure that the information in the remaining three principal
           financial statements and notes was consistent with the underlying
           information in federal agencies' audited financial statements and
           other financial data.

           We reaffirm the recommendation in our prior report^14 that as
           Treasury continues to design and further implement its process for
           compiling the CFS, the Secretary of the Treasury should direct the
           Fiscal Assistant Secretary, in coordination with the Controller of
           OMB, to modify Treasury's closing package to (1) require federal
           agencies to directly link their audited financial statement notes
           to the CFS notes and (2) provide the necessary information to
           demonstrate that all of the six^15 principal consolidated
           financial statements are consistent with the underlying
           information in federal agencies' audited financial statements and
           other financial data.
			  
^14GAO, Financial Audit: Process for Preparing the Consolidated Financial
Statements of the U.S. Government Needs Further Improvement,
[37]GAO-04-866 (Washington, D.C.: Sept. 10, 2004).

^15Beginning in fiscal year 2006 with the addition of the Statement of
Social Insurance, there are six principal consolidated financial
statements.

           Reporting Unexpended Budget Balances

           Treasury lacked effective processes and procedures for ensuring
           that unexpended balances of budget authority (unexpended budget
           balances^16) are properly reported in the supplemental information
           section of the CFS.

           Instead of obtaining federal agencies' unobligated and obligated
           amounts through the closing packages, Treasury reported estimated
           amounts for unobligated and obligated balances (which comprise the
           unexpended budget balances). Specifically, in the supplemental
           information section of the fiscal year 2006 CFS, Treasury noted
           that because the President's Budget with fiscal year 2006 actual
           amounts would not be published until February 2007, it used the
           estimated fiscal year 2006 amounts from the previous fiscal year's
           President's Budget, which was issued in February 2006, to report
           unobligated and obligated budget balances for fiscal year 2006.
           Subsequent to our fiscal year 2006 CFS audit, we compared the
           fiscal year 2006 unobligated and obligated budget balances
           reported in the fiscal year 2006 CFS to the fiscal year 2006
           actual amounts reported in the President's Budget, issued in
           February 2007, and noted a material difference. Specifically, for
           fiscal year 2006, we identified an absolute difference of $118.4
           billion--an $82.2 billion understatement in unobligated balances
           and a $36.2 billion overstatement in obligated balances--between
           the estimated amounts reported by Treasury and the actual amounts
           reported in the President's Budget. Actual amounts reported in the
           President's Budget are compiled from amounts reported in agencies'
           SF-133s.^17 The SBR is an agencywide report, which aggregates
           account-level information reported in the SF-133. Agency auditors
           have also reported internal control issues regarding differences
           and the lack of effective reconciliation between the unexpended
           budget balances reported in agencies' financial statements and
           amounts reported in agencies' SF-133s. To address these reporting
           issues, OMB recently issued requirements for agencies to reconcile
           these amounts quarterly. Until agencies fully implement corrective
           actions to resolve internal control issues regarding the
           reliability of recorded and reported budgetary information, and
           Treasury develops effective processes and procedures for obtaining
           federal agencies' obligated and unobligated amounts to assist
           Treasury in reporting unexpended budget balances in the
           supplemental information section of the CFS, the effect on the CFS
           will be unknown.
			  
^16Unexpended budget balances consist of unobligated and obligated, but
unliquidated, budget balances. Unexpended budget balances generally result
in the outlays of resources and are reported in (1) the CFS, as unaudited
supplemental information; (2) the Budget of the U.S. Government (also
referred to as the President's Budget); and (3) federal agencies'
financial statements. Federal agencies report unobligated and obligated,
but unliquidated, budget balances in the SBR, which is a basic financial
statement that is required to be audited.

^17The SF-133 is the report on budget execution and budgetary resources.
The report provides detailed information for each appropriation account on
how budgetary resources were made available to a reporting entity, the
status of such resources--obligated or unobligated balances, and change in
obligated balances, including gross disbursements and offsetting
collections for the period.

           Recommendations for Executive Action

           We recommend that the Secretary of the Treasury direct the Fiscal
           Assistant Secretary, in coordination with the Controller of OMB's
           Office of Federal Financial Management, to develop processes and
           procedures for collecting all the necessary information that would
           enable the proper reporting of unexpended budget balances in the
           CFS.

           We also recommend that the Director of OMB direct the Controller
           of OMB's Office of Federal Financial Management to continue to
           work with federal agencies to resolve internal control issues
           regarding differences and the lack of effective reconciliation
           between the unexpended budget balances reported in agencies'
           financial statements and amounts reported in agencies' SF-133s.
			  
			  Reporting Operating Cash

           In the U.S. government's Statement of Changes in Cash Balance from
           Unified Budget and Other Activities for the Years Ended September
           30, 2006 and 2005, the amounts reported as "Operating Cash" agreed
           to the amounts reported in the notes to Treasury's consolidated
           agency financial statements as "Operating Cash of the Federal
           Government." However, other federal agencies reported additional
           unrestricted cash balances totaling $13.2 billion and $10.5
           billion for fiscal years 2006 and 2005, respectively. Treasury
           could not provide us with an adequate explanation of the rationale
           for excluding these amounts from the CFS "Operating Cash" balance.

           For example, in fiscal year 2006, the Pension Benefit Guaranty
           Corporation (PBGC) reported $8.5 billion in cash on hand, demand
           deposits, and cash equivalents with 1-day maturities in its
           Balance Sheet and as "Cash and cash equivalents" in its Statement
           of Cash Flows. PBGC prepares its financial statements in
           accordance with accounting principles promulgated by the Financial
           Accounting Standards Board (FASB).^18 Accordingly, "Cash and cash
           equivalents" could be considered and would conform to the
           definition of "Operating Cash" for purposes of preparing the CFS.
			  
^18FASB establishes standards of financial accounting and reporting for
the private sector.

           Recommendation for Executive Action

           We recommend that the Secretary of the Treasury direct the Fiscal
           Assistant Secretary to develop and implement processes and
           procedures for identifying and either resolving or explaining the
           differences that exist between operating cash reported in certain
           federal agencies' financial statements and the operating cash
           balance reported in the CFS.
			  
			  Reporting and Disclosing Legal Contingencies

           The Department of Justice (Justice) is charged with, among other
           things, the supervision of litigation to which the U.S. government
           is a party and providing advice and opinions to the President and
           heads of executive departments when requested. The Accounting and
           Auditing Policy Committee (AAPC)^19 guidance (Technical Release
           No. 1, Audit Legal Letter Guidance) clarifies FASAB Interpretation
           No. 2, Accounting for Treasury Judgment Fund Transactions, with
           respect to Justice's role related to legal letters in cases in
           which Justice's attorneys are handling legal matters on behalf of
           other federal reporting entities. This guidance states that a
           federal entity's management, its legal counsel, or the auditor may
           consult with Justice as well as other outside legal counsel to
           ensure completeness and accuracy of the entity's financial
           statements' presentation of matters related to litigation, claims,
           and assessments. Such consultation may include requesting a list
           of pending litigation, claims, and assessments from Justice or
           other outside legal counsel or discussion of specific cases.

           In the governmentwide legal representation letter, Justice
           represented to us that it provided us with an assessment for
           individual cases in which the potential for loss exceeded $500
           million individually and $1 billion in the aggregate. The legal
           representation letter was limited to matters with which Justice
           had been engaged and to which Justice had devoted substantial
           attention on behalf of the U.S. government. In addition, we were
           provided legal representation letters for the 35 federal agencies
           that Treasury and OMB deemed significant to the CFS. However, the
           federal government was unable to provide us with sufficient
           evidence to determine that cases below the $500 million individual
           case threshold were (1) considered by the agencies' legal counsels
           and, where appropriate, included in their legal representation
           letters and (2) in the aggregate, not material to the CFS. Until
           the federal government implements effective processes and
           procedures to ensure that all appropriate litigation and claims
           are included in the governmentwide legal representation letter and
           are appropriately considered for potential financial reporting,
           the adequacy of reporting and disclosing legal contingencies in
           the CFS will be unknown and the potential effect of these
           litigation claims on the financial condition of the federal
           government will likewise be unclear.
			  
^19The AAPC is a permanent committee established by FASAB. The mission of
the AAPC is to assist the federal government in improving financial
reporting through the timely identification, discussion, and
recommendation of solutions to accounting and auditing issues within the
framework of existing authoritative literature.

           Recommendation for Executive Action

           We recommend that the Secretary of the Treasury direct the Fiscal
           Assistant Secretary, working in coordination with the Controller
           of OMB's Office of Federal Financial Management, to establish
           effective processes and procedures to ensure that appropriate
           information regarding litigation and claims is included in the
           governmentwide legal representation letter.
			  
			  Reconciling Intragovernmental Activity and Balances

           The federal government's inability to adequately account for and
           reconcile intragovernmental activity and balances between federal
           agencies has been a long-standing problem and major impediment to
           us being able to render an opinion on the CFS. Resolving this
           difficult challenge will require, among other things, strong
           leadership and oversight by Treasury and OMB.

           Treasury and OMB require federal agencies to reconcile selected
           intragovernmental activity and balances with their "trading
           partners"^20 and report the extent and results of the
           reconciliation efforts to Treasury. However, in our view, federal
           agencies have not provided Treasury and OMB with sufficient
           information to enable them to adequately oversee and monitor
           agencies' efforts to reconcile intragovernmental activity and
           balances with their trading partners. Specifically, for fiscal
           year 2006, we found that federal agencies did not provide Treasury
           and OMB with (1) detailed information regarding the nature and
           description of the differences that exist between trading
           partners' records of intragovernmental activity and balances, (2)
           detailed reasons why such differences exist, (3) steps being taken
           to work with the agencies' trading partners to resolve the
           differences, and (4) the potential outcome of such steps.
			  
^20Trading partners are U.S. government agencies, departments, or other
components included in the CFS that do business with each other.

           Recommendation for Executive Action

           We recommend that the Secretary of the Treasury direct the Fiscal
           Assistant Secretary, working in coordination with the Controller
           of OMB's Office of Federal Financial Management, to develop a
           process for obtaining sufficient information from federal agencies
           to enable Treasury and OMB to adequately monitor agencies' efforts
           to reconcile intragovernmental activity and balances with their
           trading partners. This information should include (1) the nature
           and a detailed description of the significant differences that
           exist between trading partners' records of intragovernmental
           activity and balances, (2) detailed reasons why such differences
           exist, (3) details of steps taken or being taken to work with the
           agencies' trading partners to resolve the differences, and (4) the
           potential outcome of such steps.
			  
			  Preparing and Auditing Certain Information in Federal Agencies'
			  Closing Packages

           OMB Bulletin No. 06-03, Audit Requirements for Federal Financial
           Statements, and the Treasury Financial Manual provide guidance to
           agencies for preparing and auditing their closing packages. As
           part of the closing package process, agencies are required to
           reclassify certain of their audited financial statement line items
           to the appropriate CFS line items and enter certain of their
           financial statement notes and other requested data into GFRS. The
           35 federal agencies that Treasury and OMB determined to be
           significant to the CFS are required to have their closing packages
           audited and audit reports issued on such packages. However,
           auditors for several of these agencies did not perform the
           required audit procedures on certain information in the footnotes
           to the respective agencies' closing packages, including
           intragovernmental trading partner data, stewardship land
           information, and heritage assets information. In addition, one of
           the significant agencies did not provide in its closing package
           the required cost allocation information used by Treasury in
           preparing the consolidated Statement of Net Cost. As a result,
           Treasury's ability to prepare and our ability to audit the CFS
           were impaired.
			  
			  Recommendations for Executive Action

           We recommend that the Director of OMB direct the Controller of the
           Office of Federal Financial Management, in coordination with the
           Treasury Fiscal Assistant Secretary, to establish additional
           procedures to ensure that agencies prepare their closing packages
           and have them audited in accordance with the requirements
           specified in the closing package instructions.

           We also recommend that the Director of OMB direct the Controller
           of the Office of Federal Financial Management to work with the
           significant agency that did not provide in its closing package the
           required information that Treasury uses to allocate costs in the
           consolidated Statement of Net Cost to ensure that such information
           is reported by the agency in future years.
			  
			  Conformity with GAAP

           As we have reported in previous years, and noted during our fiscal
           year 2006 audit, Treasury lacks an adequate process to ensure that
           the financial statements, related notes, stewardship information,
           and supplemental information in the CFS are presented in
           conformity with GAAP. In our prior report,^21 we recommended that
           the Secretary of the Treasury direct the Fiscal Assistant
           Secretary to establish a formal process that will cause the
           financial statements, related notes, stewardship information, and
           supplemental information in the CFS to be presented in conformity
           with GAAP in all material respects. The process should

           o timely identify GAAP requirements;
           o make timely modifications to Treasury's closing package
           requirements to obtain information needed;
           o assess, qualitatively and quantitatively, the impact of any
           omitted disclosures;^22 and
           o document decisions reached and the rationale for such decisions.

           FASAB issued SFFAS No. 32 on September 28, 2006, which was
           effective for periods after September 30, 2005. This standard
           eliminated or lessened the disclosure requirements for the CFS
           related to certain information that Treasury had not been
           reporting. As a direct result of the requirements in SFFAS No. 32,
           53 of the 76 disclosure-related recommendations from our previous
           reports were closed during fiscal year 2006.
			  
^21 [38]GAO-04-45 .

^22FASB defined materiality in its Statement of Financial Accounting
Concepts No. 2, Qualitative Characteristics of Accounting Information, as
"the magnitude of an omission or misstatement of accounting information
that, in the light of surrounding circumstances, makes it probable that
the judgment of a reasonable person relying on the information would have
been changed or influenced by the omission or misstatement."

           However, there continued to be other disclosures required by GAAP
           that are not disclosed in the CFS. Specifically, 13 of our
           disclosure-related recommendations from previous years' audits
           have not yet been implemented by Treasury. In addition, during our
           fiscal year 2006 audit of the CFS, we identified an additional
           disclosure required by applicable standards related to including
           consolidated totals in the consolidated SOSI. Further, while there
           is no specific GAAP requirement to disclose foreign currencies in
           the CFS, we believe Treasury should separately disclose the
           balance of foreign currencies held at fiscal year end in the cash
           footnote to the CFS.
			  
			  Consolidated Statement of Social Insurance

           Beginning in fiscal year 2006, the SOSI became a principal
           financial statement. However, in our view, the fiscal year 2006
           consolidated SOSI was not fully presented in conformity with GAAP.
           Specifically, for each social insurance program included in the
           consolidated SOSI, Treasury presented the "excess of the present
           value of future expenditures less future revenues." However, the
           fiscal year 2006 consolidated SOSI did not include a consolidated
           total for all of such programs.

           Paragraph 32 (3) of SFFAS No. 17, Accounting for Social Insurance,
           as amended by SFFAS No. 25, Reclassification of Stewardship
           Responsibilities and Eliminating the Current Services Assessment,
           requires a statement combining the entity statements for all
           programs, except Unemployment Insurance, including data for the
           current year and separate estimates for each of the 4 preceding
           years. In addition, the pro forma illustrations of the SOSI shown
           in Appendix B of SFFAS No. 17^23 and in OMB Circular No. A-136,
           Financial Reporting Requirements, include a total of the "excess
           of actuarial present values of future benefit payments over future
           contributions and tax income" summarized and consolidated in
           accordance with paragraph 32. Further, each of the applicable
           component entities' respective SOSI included a total of the excess
           of actuarial present values of future benefit payments over future
           contributions and tax income. Finally, Treasury reported the
           consolidated total of the excess of the present value of future
           expenditures less future revenues for the social insurance
           programs in the Management's Discussion and Analysis section of
           the CFS.
			  
^23The Consolidated Governmentwide Entity Accounting and Reporting
Standard section of SFFAS No. 17 states that the standard applicable to
the component entities is also applicable to the consolidated
governmentwide entity.

           According to Treasury, a consolidated total was not presented on
           the consolidated SOSI because the Social Security, Medicare,
           Railroad Retirement, and Black Lung social insurance programs have
           different valuation dates, projection periods, and discount rates.
           However, our audit work found that (1) the most significant social
           insurance programs (Social Security and Medicare) have the same
           valuation dates and projection periods and (2) the key elements
           used in the projections for the social insurance programs were
           either displayed in the footnotes of the consolidated SOSI or
           disclosed in the notes to the CFS. The existence of differences
           among certain social insurance programs in the elements used in
           the projections is not, in our view, a relevant factor in deciding
           whether to present a consolidated total, especially since the
           elements are disclosed. In addition, we believe that including a
           consolidated total in the statement provides increased
           transparency.
			  
			  Cash and Other Monetary Assets

           While there is no specific GAAP requirement to disclose foreign
           currencies in the CFS, we believe that the balance of foreign
           currencies held at fiscal year end should be separately disclosed
           in the cash footnote to the CFS. In this regard, OMB Circular No.
           A-136 requires the disclosure of foreign currencies,^24 including
           the balance of foreign currencies held at fiscal year end, in the
           notes to federal agencies' financial statements. For fiscal year
           2006, we found that the Cash and Other Monetary Assets note
           included a disclosure that international monetary assets included
           official reserves of foreign currency. However, the balance of
           such foreign currency was not disclosed. OMB Circular No. A-136
           requirements do not specifically apply to the CFS. However, we
           believe that the balance of foreign currency holdings as of the
           fiscal year end should be disclosed in the CFS since (1) OMB has
           deemed this a necessary disclosure at the agency level; (2)
           foreign currencies constituted about $11.7 billion, or 12 percent,
           of the reported fiscal year 2006 Cash and Other Monetary Assets in
           the CFS; (3) foreign currency information was readily available as
           certain federal agencies, including Treasury, disclosed foreign
           currencies in the notes to their respective financial statements;
           and (4) disclosing the dollar amount of the foreign currencies
           provides increased transparency.
			  
^24Foreign currencies refer to the total U.S. dollar equivalent of
nonpurchased foreign currencies held in foreign fund accounts.

           Recommendations for Executive Action

           We reaffirm our prior recommendation regarding the establishment
           of a formal process that will cause the financial statements,
           related notes, stewardship information, and supplemental
           information in the CFS to be presented in conformity with GAAP in
           all material respects. In addition, we recommend that the
           Secretary of the Treasury direct the Fiscal Assistant Secretary to
           establish procedures to ensure that the CFS include required
           consolidated totals in the SOSI or document the specific rationale
           for excluding such disclosure.

           We also recommend that the Secretary of the Treasury direct the
           Fiscal Assistant Secretary to disclose the balance of foreign
           currencies held at fiscal year end in the Cash and Other Monetary
           Assets footnote to the CFS.
			  
           Agency Comments and Our Evaluation
			  
			  OMB Comments

           In oral comments on a draft of this report, OMB stated that it
           generally agreed with the new findings and related recommendations
           in this report. In addition, OMB provided some technical comments,
           which we have incorporated as appropriate.
			  
			  Treasury Comments

           In written comments on a draft of this report, which are reprinted
           in appendix II, Treasury stated that it concurs with the new
           findings and related recommendations with the exception of the
           nonconformity with GAAP finding and recommendation related to
           reporting a consolidated total in the consolidated SOSI. Treasury
           also stated that it concurs with GAO that the preparation process
           should continually be improved, and will continue to work with GAO
           on CFS matters where improvements need to be made.

           With respect to the SOSI GAAP finding, Treasury stated that it
           does not believe that GAAP requires the reporting of a
           consolidated total in the consolidated SOSI. In addition, Treasury
           noted that because of differences in key assumptions and other
           criteria used in preparing the different sections of the SOSI, it
           does not believe that a consolidated total is especially
           meaningful.

           We do not agree with Treasury on these matters. As stated earlier
           in the report, in our view, the consolidated SOSI was not fully
           presented in conformity with GAAP because it did not include a
           consolidated total for all the social insurance programs. In the
           body of the report, we noted that (1) the most significant social
           insurance programs (Social Security and Medicare) have the same
           valuation dates and projection periods, and (2) the key elements
           used in the projections for the social insurance programs were
           either displayed in the footnotes of the consolidated SOSI or
           disclosed in the notes to the CFS. We also noted that the
           existence of differences among certain social insurance programs
           in the elements used in the projections is not, in our view, a
           relevant factor in deciding whether to present a consolidated
           total, especially since the elements are disclosed. The
           consolidated SOSI is one of the principal financial statements
           included in the CFS and represents an important source for the
           consolidated information on federal social insurance programs. As
           such, we believe that including a total on the consolidated SOSI,
           as was included in the Management's Discussion and Analysis
           section of the CFS, is both necessary to provide increased
           transparency and is meaningful to the users of the CFS. Treasury
           also provided technical comments, which we have incorporated as
           appropriate.

           This report contains recommendations to the Secretary of the
           Treasury and the Director of OMB. The head of a federal agency is
           required by 31 U.S.C. S 720 to submit a written statement on
           actions taken on these recommendations. You should submit your
           statement to the Senate Committee on Homeland Security and
           Governmental Affairs and the House Committee on Oversight and
           Government Reform within 60 days of the date of this report. A
           written statement must also be sent to the House and Senate
           Committees on Appropriations with the agency's first request for
           appropriations made more than 60 days after the date of the
           report.

           We are sending copies of this report to the Chairmen and Ranking
           Members of the Senate Committee on Homeland Security and
           Governmental Affairs; the Subcommittee on Federal Financial
           Management, Government Information, Federal Services, and
           International Security, Senate Committee on Homeland Security and
           Governmental Affairs; the House Committee on Oversight and
           Government Reform; and the Subcommittee on Government Management,
           Organization, and Procurement, House Committee on Oversight and
           Government Reform. In addition, we are sending copies to the
           Fiscal Assistant Secretary of the Treasury, the Deputy Director
           for Management of OMB, and the Controller of OMB's Office of
           Federal Financial Management. Copies will be made available to
           others upon request. This report is also available at no charge on
           GAO's Web site at http://www.gao.gov.

           We acknowledge and appreciate the cooperation and assistance
           provided by Treasury and OMB during our audit. If you or your
           staff have any questions or wish to discuss this report, please
           contact Jeffrey C. Steinhoff, Managing Director, Financial
           Management and Assurance, on (202) 512-2600, or Gary T. Engel,
           Director, Financial Management and Assurance, on (202) 512-3406.
           Key contributors to this report are listed in appendix III.

           David M. Walker
			  Comptroller General of the United States
			  
			  Appendix I: Status of Treasury's and OMB's Progress in Addressing
			  GAO's Prior Year Recommendations for Preparing the CFS

           This appendix includes open recommendations from four of our prior
           reports: Financial Audit: Process for Preparing the Consolidated
           Financial Statements of the U.S. Government Needs Improvement,
           [31]GAO-04-45 (Washington, D.C.: Oct. 30, 2003); Financial Audit:
           Process for Preparing the Consolidated Financial Statements of the
           U.S. Government Needs Further Improvement, [32]GAO-04-866
           (Washington, D.C.: Sept. 10, 2004); Financial Audit: Process for
           Preparing the Consolidated Financial Statements of the U.S.
           Government Continues to Need Improvement, [33]GAO-05-407
           (Washington, D.C.: May 4, 2005); and Financial Audit: Significant
           Internal Control Weaknesses Remain in Preparing the Consolidated
           Financial Statements of the U.S. Government, [34]GAO-06-415
           (Washington, D.C.: Apr. 21, 2006). Recommendations that were
           closed in prior reports are not included in this appendix. This
           appendix includes the status of the recommendations according to
           the Department of the Treasury (Treasury) and the Office of
           Management and Budget (OMB) as well as our own assessments.
           Explanations are included in the status of recommendations per GAO
           when Treasury and OMB disagreed with our recommendation.

           Of the 143 recommendations regarding the process for preparing the
           consolidated financial statements of the U.S. government (CFS)
           that are listed in this appendix, 70 remained open as of December
           1, 2006, the end of GAO's fieldwork for the audit of the fiscal
           year 2006 CFS. Of the 73 recommendations that were closed, 53 were
           closed with the issuance of Statement of Federal Financial
           Accounting Standards No. 32, Consolidated Financial Report of the
           United States Government Requirements: Implementing Statement of
           Federal Financial Accounting Concepts 4 "Intended Audience and
           Qualitative Characteristics for the Consolidated Financial Report
           of the United States Government." In fiscal year 2006, the Federal
           Accounting Standards Advisory Board issued this new standard,
           which eliminated or lessened the disclosure requirements for the
           CFS related to certain information that Treasury had not been
           reporting.
			  

Table 1: Status of Treasury's and OMB's Progress in Addressing GAO's Prior
Year Recommendations for Preparing the CFS

                                               Status of recommendation
                                         Per Treasury and                     
Count No.    Recommendation           OMB                Per GAO           
[39]GAO-04-45 (results of the fiscal year 2002 audit)
1     02-2   The Secretary of the     Treasury further   Open. Treasury    
                Treasury should direct   revised and        needs to further  
                the Fiscal Assistant     documented all of  document its      
                Secretary, in connection its major policies policies and      
                with Treasury's current  and procedures for procedures.       
                compilation process and  the fiscal year                      
                the development of       2006 compilation                     
                Treasury's new           process to ensure                    
                compilation system and   the propriety,                       
                process, to develop and  accuracy, and                        
                fully document policies  consistency of                       
                and procedures for the   application.                         
                CFS preparation process                                       
                so that they are proper,                                      
                complete, and                                                 
                consistently applied by                                       
                staff members.                                                
2     02-4   As Treasury is designing To eliminate or    Open.             
                its new financial        explain                              
                statement compilation    adjustments                          
                process to begin with    (plugs) to net                       
                the fiscal year 2004     position, Treasury                   
                CFS, the Secretary of    designed a process                   
                the Treasury should      in fiscal year                       
                direct the Fiscal        2004 to eliminate,                   
                Assistant Secretary, in  at the                               
                coordination with the    consolidated                         
                Controller of OMB, to    level,                               
                develop reconciliation   intragovernmental                    
                procedures that will aid activity and                         
                in understanding and     balances using                       
                controlling the net      formal balanced                      
                position balance as well accounting entries                   
                as eliminate the plugs   (via Reciprocal                      
                previously associated    Categories) and                      
                with compiling the CFS.  developed a model                    
                                         to analyze                           
                                         unreconciled                         
                                         transactions that                    
                                         contributed to the                   
                                         plug. In fiscal                      
                                         year 2005,                           
                                         Treasury started                     
                                         an analysis to                       
                                         establish the                        
                                         reciprocal                           
                                         category for the                     
                                         General Fund                         
                                         (RC29) and that                      
                                         process is still                     
                                         continuing.                          
                                         Lastly, in fiscal                    
                                         year 2006,                           
                                         Treasury included                    
                                         the components                       
                                         contributing to                      
                                         the plug in the                      
                                         supplementary                        
                                         information                          
                                         section of the                       
                                         fiscal year 2006                     
                                         CFS.                                 
3     02-5   As Treasury is designing The process        Open.             
                its new financial        mentioned in No.                     
                statement compilation    02-4 no longer                       
                process to begin with    involves the                         
                the fiscal year 2004     simple subtraction                   
                CFS, the Secretary of    of liabilities                       
                the Treasury should      from assets, but                     
                direct the Fiscal        instead takes into                   
                Assistant Secretary, in  account the                          
                coordination with the    intragovernmental                    
                Controller of OMB, to    balances and                         
                use balanced accounting  activities to                        
                entries to account for   compute the change                   
                the change in net        in net position.                     
                position rather than     ecause of                            
                simple subtraction of    continuing                           
                liabilities from assets. intragovernmental                    
                                         differences,                         
                                         intragovernmental                    
                                         balances and                         
                                         activity cannot be                   
                                         completely                           
                                         eliminated,                          
                                         leading to                           
                                         unbalanced entries                   
                                         that constitute                      
                                         the plug.                            
4     02-6   As OMB continues to make The business rules Open. The revised 
                strides to address       were revised in    business rules    
                issues related to        fiscal year 2006   are effective     
                intragovernmental        to expand and      beginning in      
                transactions, the        enhance the        fiscal year 2007. 
                Director of OMB should   standard practices We plan to review 
                direct the Controller of for how federal    the policies and  
                OMB to develop policies  agencies do        procedures for    
                and procedures that      business with each enforcing these   
                document how OMB will    other. The revised revised business  
                enforce the business     rules are          rules as part of  
                rules provided in OMB    published in       the fiscal year   
                Memorandum M-03-01,      Treasury Financial 2007 CFS audit.   
                Business Rules for       Manual (TFM)                         
                Intragovernmental        Bulletin 2007-03.                    
                Transactions.                                                 
                                         OMB, Treasury, and                   
                                         the Chief                            
                                         Financial                            
                                         Officers' Council                    
                                         continue working                     
                                         to establish a                       
                                         performance                          
                                         metric(s) to track                   
                                         agencies' progress                   
                                         toward effectively                   
                                         reconciling                          
                                         intragovernmental                    
                                         balances, which is                   
                                         predicated on                        
                                         agencies                             
                                         implementing the                     
                                         business rules. In                   
                                         addition, OMB,                       
                                         Treasury, and the                    
                                         Chief Financial                      
                                         Officers' Council                    
                                         are continuing                       
                                         their efforts                        
                                         toward                               
                                         establishing the                     
                                         Dispute Resolution                   
                                         Committee (DRC),                     
                                         as referenced in                     
                                         the business                         
                                         rules. The DRC                       
                                         will be a vehicle                    
                                         for resolving                        
                                         accounting                           
                                         disputes between                     
                                         federal agencies.                    
                                         The dispute                          
                                         resolution process                   
                                         is also predicated                   
                                         on the principle                     
                                         that agencies have                   
                                         implemented the                      
                                         business rules and                   
                                         will require the                     
                                         disputing agencies                   
                                         to provide                           
                                         evidence of                          
                                         compliance with                      
                                         the business rules                   
                                         during                               
                                         arbitration.                         
5     02-7   As OMB continues to make OMB will continue  Open. See status  
                strides to address       to work with       of recommendation 
                issues related to        individual         No. 02-6.         
                intragovernmental        agencies to                          
                transactions, the        resolve imbalances                   
                Director of OMB should   that are referred                    
                direct the Controller of to OMB on a                          
                OMB to require that      case-by-case                         
                significant differences  basis. As part of                    
                noted between business   OMB's standard                       
                partners be resolved and practice,                            
                the resolution be        resolutions                          
                documented.              reached will be                      
                                         communicated to                      
                                         all parties.                         
                                                                              
                                         As noted above,                      
                                         OMB, Treasury, and                   
                                         the Chief                            
                                         Financial                            
                                         Officers' Council                    
                                         are continuing to                    
                                         work toward                          
                                         establishing the                     
                                         DRC, as referenced                   
                                         in the business                      
                                         rules, and it will                   
                                         be used as a                         
                                         vehicle for                          
                                         agencies to                          
                                         resolve their                        
                                         accounting                           
                                         disputes. The DRC                    
                                         will incorporate a                   
                                         standard practice                    
                                         of documenting all                   
                                         resolutions and                      
                                         communicating the                    
                                         resolutions to all                   
                                         parties involved.                    
6     02-9   The Secretary of the     Treasury designed  Open.             
                Treasury should direct   formal                               
                the Fiscal Assistant     consolidating and                    
                Secretary, in            eliminating                          
                coordination with the    procedures to                        
                Controller of OMB, to    account for these                    
                design procedures that   differences and                      
                will account for the     has implemented                      
                difference in            these procedures                     
                intragovernmental assets since fiscal year                    
                and liabilities          2004. See also the                   
                throughout the           status for                           
                compilation process by   recommendations                      
                means of formal          No. 02-4 and No.                     
                consolidating and        02-5.                                
                elimination accounting                                        
                entries.                                                      
7     02-10  The Secretary of the     During fiscal year Open. Treasury    
                Treasury should direct   2006, Treasury     will need to      
                the Fiscal Assistant     forwarded          establish a       
                Secretary, in            information from   mechanism for     
                coordination with the    its central        follow-up with    
                Controller of OMB, to    accounting system  the federal       
                develop solutions for    (STAR) related to  agencies to see   
                intragovernmental        appropriations and if they are using 
                activity and balance     fund balance with  the information   
                issues relating to       Treasury to the    Treasury will be  
                federal agencies'        agencies for their providing to      
                accounting, reconciling, use in reconciling them. In          
                and reporting in areas   these data. In     addition,         
                other than those OMB now fiscal year 2007   Treasury and OMB  
                requires be reconciled,  Treasury will      will need to      
                primarily areas relating start providing    provide federal   
                to appropriations.       transfer           agencies          
                                         information from   instructions on   
                                         STAR to the        how to reconcile  
                                         agencies to begin  and report        
                                         reconciling and    differences       
                                         reporting in the   between their     
                                         areas other than   records and       
                                         those OMB now      Treasury's        
                                         requires be        central           
                                         reconciled.        accounting        
                                                            records.          
8     02-11  The Secretary of the     The current        Open.             
                Treasury should direct   reconciliation of                    
                the Fiscal Assistant     intragovernmental                    
                Secretary, in            activity accounts                    
                coordination with the    for differences                      
                Controller of OMB, to    caused by asset                      
                reconcile the change in  capitalization and                   
                intragovernmental assets agency advanced or                   
                and liabilities for the  deferred revenue.                    
                fiscal year, including   Given current                        
                the amount and nature of intragovernmental                    
                all changes in           differences, asset                   
                intragovernmental assets capitalization and                   
                or liabilities not       recognition of                       
                attributable to cost and advanced and                         
                revenue activity         deferred revenue                     
                recognized during the    may be incorrect.                    
                fiscal year. Examples of However, the                         
                these differences would  current                              
                include capitalized      reconciliation                       
                purchases, such as       analysis is                          
                inventory or equipment,  expected to                          
                and deferred revenue.    correctly report                     
                                         this activity once                   
                                         intragovernmental                    
                                         differences are                      
                                         materially                           
                                         resolved. See also                   
                                         the status of                        
                                         recommendation No.                   
                                         02-4.                                
9     02-12  The Secretary of the     In fiscal year     Open. Although    
                Treasury should direct   2006, Treasury     Treasury was      
                the Fiscal Assistant     revised how this   unsure if the     
                Secretary to develop and reconciliation is  plug (reported in 
                implement a process that performed so that  fiscal year 2006  
                adequately identifies    all differences    as "unmatched     
                and reports items needed between the change transactions and  
                to reconcile net         in the proprietary balances") was a  
                operating cost and       basis balance      component of the  
                unified budget surplus   sheet net position Statement of Net  
                (or deficit). Treasury   (i.e., the net     Cost or a         
                should report "net       operating          component of the  
                unreconciled             revenue/cost) is   SOCNP, Treasury   
                differences" included in reconciled to the  chose to reflect  
                the net operating        change in the      the plug in the   
                results line item as a   budgetary basis    SOCNP as a        
                separate reconciling     balance sheet net  component of net  
                activity in the          position (i.e.,    operating cost.   
                reconciliation           the unified budget The               
                statement.               deficit/surplus).  Reconciliation of 
                                         Treasury's         Net Operating     
                                         position is that   Cost and Unified  
                                         the plug cannot be Budget Deficit    
                                         placed with        reconciles the    
                                         certainty either   net operating     
                                         as a component of  cost, which       
                                         the Statement of   includes the      
                                         Net Cost or as a   "unmatched        
                                         component of the   transactions and  
                                         Statement of       balances" plug,   
                                         Operations and     to the unified    
                                         Changes in Net     budget deficit.   
                                         Position (SOCNP)   As such, unless   
                                         and has chosen to  the plug is also  
                                         reflect the plug   part of the       
                                         in the SOCNP until unified budget    
                                         these differences  deficit, then the 
                                         are resolved.      plug amount       
                                         However, based on  should be         
                                         its analysis of    included as a     
                                         the plug, as       reconciling item  
                                         disclosed in the   on the            
                                         supplementary      reconciliation    
                                         information        statement.        
                                         section of the                       
                                         fiscal year 2006                     
                                         CFS, Treasury                        
                                         believes that the                    
                                         plug is primarily                    
                                         caused by                            
                                         unreconciled                         
                                         transactions that                    
                                         affect the amounts                   
                                         reported on an                       
                                         accrual basis of                     
                                         accounting (net                      
                                         operating cost)                      
                                         and, therefore,                      
                                         the "net                             
                                         unreconciled                         
                                         differences" plug                    
                                         should not be                        
                                         included as a                        
                                         separate                             
                                         reconciling item                     
                                         on this statement,                   
                                         which is the                         
                                         reconciliation of                    
                                         the federal                          
                                         government's                         
                                         activity between                     
                                         two different                        
                                         bases of                             
                                         accounting.                          
10    02-13  The Secretary of the     Treasury will      Open.             
                Treasury should direct   continue to                          
                the Fiscal Assistant     improve the                          
                Secretary to develop and completeness and                     
                implement a process that consistency of the                   
                adequately identifies    information in                       
                and reports items needed this                                 
                to reconcile net         reconciliation                       
                operating cost and       statement and will                   
                unified budget surplus   continue to                          
                (or deficit). Treasury   resolve                              
                should develop policies  significant                          
                and procedures to ensure inconsistencies,                     
                completeness of          if any, to the                       
                reporting and document   applicable and                       
                how all the applicable   related components                   
                components reported in   reported in the                      
                the other consolidated   other basic                          
                financial statements     financial                            
                (and related note        statements, and in                   
                disclosures included in  the related note                     
                the CFS) were properly   disclosures,                         
                reflected in the         included in the                      
                reconciliation           CFS.                                 
                statement.                                                    
11    02-14  The Secretary of the     As mentioned in    Open.             
                Treasury should direct   the status of                        
                the Fiscal Assistant     recommendation No.                   
                Secretary to develop and 02-12, Treasury                      
                implement a process that revised the manner                   
                adequately identifies    for producing this                   
                and reports items needed reconciliation and                   
                to reconcile net         will continue to                     
                operating cost and       improve the                          
                unified budget surplus   completeness and                     
                (or deficit). Treasury   accuracy of the                      
                should establish         various                              
                reporting materiality    reconciliation                       
                thresholds for           items. Treasury                      
                determining which agency will consider the                    
                financial statement      need for                             
                activities to collect    establishing a                       
                and report at the        reporting                            
                governmentwide level to  materiality                          
                assist in ensuring that  threshold related                    
                the reconciliation       to this statement,                   
                statement is useful and  as necessary, as                     
                conveys meaningful       part of the                          
                information.             overall process to                   
                                         improve the                          
                                         reliability of the                   
                                         information                          
                                         included in this                     
                                         statement.                           
12    02-15  If Treasury chooses to   As stated in       Open. Treasury    
                continue using           status of          needs to further  
                information from both    recommendation No. develop its       
                federal agencies'        02-12, Treasury    process for       
                financial statements and has revised the    ensuring          
                the Central Accounting   method for         reliability of    
                and Reporting System     producing this     the information   
                (STAR), Treasury should  reconciliation     in STAR and the   
                demonstrate how the      statement. In so   consistency of    
                amounts from STAR        doing, Treasury    information in    
                reconcile to federal     has elected to     STAR with         
                agencies' financial      continue the use   underlying agency 
                statements.              of information     financial         
                                         from STAR.         statements,       
                                         Treasury will      financial         
                                         focus on the       information, and  
                                         reliability of the records.          
                                         information from                     
                                         STAR to address                      
                                         GAO's concerns                       
                                         related to its                       
                                         accuracy,                            
                                         completeness and                     
                                         consistency to the                   
                                         underlying agency                    
                                         financial records.                   
13    02-16  If Treasury chooses to   For now, Treasury  Open. OMB has     
                continue using           will concentrate   been working with 
                information from both    on the reliability federal agencies  
                federal agencies'        of the information to reduce         
                financial statements and within STAR.       previously        
                from STAR, Treasury      Treasury believes  reported          
                should identify and      that with the      unreconciled      
                document the cause of    agencies           differences       
                any significant          reconciling their  between the total 
                differences, if any are  records against    net outlays       
                noted.                   the related        reported in       
                                         information        selected federal  
                                         provided from the  agencies'         
                                         central accounting Statements of     
                                         system (STAR),     Budgetary         
                                         this will improve  Resources and     
                                         the reliability    Treasury's        
                                         and accuracy of    central           
                                         the information    accounting        
                                         within STAR, as    records in STAR   
                                         well as            used to compute   
                                         demonstrate the    the budget        
                                         consistency to the deficit reported  
                                         underlying agency  in the CFS. Such  
                                         data. As this      efforts have      
                                         process matures,   resulted in       
                                         Treasury will      significantly     
                                         determine what     reducing the      
                                         further steps are  differences in    
                                         necessary to fully net outlays in    
                                         address GAO's      fiscal year 2006. 
                                         consistency and    However, billions 
                                         accuracy concerns. of dollars of     
                                                            differences still 
                                                            exist between     
                                                            this and other    
                                                            components of the 
                                                            budget deficit.   
14    02-17  The Secretary of the     See planned        Open. See status  
                Treasury should direct   direction of       of recommendation 
                the Fiscal Assistant     corrective steps   No. 02-16.        
                Secretary, in            in status of                         
                coordination with the    recommendation No.                   
                Controller of OMB, to    02-16.                               
                develop and implement a                                       
                process to ensure that                                        
                the Statement of Changes                                      
                in Cash Balance from                                          
                Unified Budget and Other                                      
                Activities properly                                           
                reflects the activities                                       
                reported in federal                                           
                agencies' audited                                             
                financial statements.                                         
                Treasury should document                                      
                the consistency of the                                        
                significant line items                                        
                on this statement to                                          
                agencies' audited                                             
                financial statements.                                         
15    02-18  The Secretary of the     In accordance with Open. This        
                Treasury should direct   the net outlays    requirement       
                the Fiscal Assistant     corrective action  became effective  
                Secretary, in            plan, OMB requires in the first      
                coordination with the    agencies to        quarter of fiscal 
                Controller of OMB, to    provide            year 2007. We     
                develop and implement a  explanations for   plan to review    
                process to ensure that   significant        the               
                the Statement of Changes differences        implementation of 
                in Cash Balance from     between the        the requirement   
                Unified Budget and Other unaudited          as part of the    
                Activities properly      quarterly          fiscal year 2007  
                reflects the activities  Statement of       CFS audit.        
                reported in federal      Budgetary                            
                agencies' audited        Resources and the                    
                financial statements.    quarterly SF-133                     
                Treasury should request, (budget execution                    
                through its closing      document). This                      
                package, that federal    requirement is                       
                agencies provide the net intended to assist                   
                outlays reported in      agencies in                          
                their Combined Statement identifying and                      
                of Budgetary Resources   mitigating                           
                and explanations for any discrepancies                        
                significant differences  between the two                      
                between net outlay       reports throughout                   
                amounts reported in the  the fiscal year                      
                Combined Statement of    rather than only                     
                Budgetary Resources and  at year-end. The                     
                the budget of the U.S.   number of federal                    
                government.              agencies with                        
                                         significant                          
                                         discrepancies has                    
                                         decreased in the                     
                                         last couple of                       
                                         years, and OMB is                    
                                         working with the                     
                                         federal agencies                     
                                         toward further                       
                                         reductions this                      
                                         year.                                
16    02-19  The Secretary of the     Treasury and OMB   Open.             
                Treasury should direct   will consider this                   
                the Fiscal Assistant     recommendation to                    
                Secretary, in            determine further                    
                coordination with the    actions needed.                      
                Controller of OMB, to                                         
                develop and implement a                                       
                process to ensure that                                        
                the Statement of Changes                                      
                in Cash Balance from                                          
                Unified Budget and Other                                      
                Activities properly                                           
                reflects the activities                                       
                reported in federal                                           
                agencies' audited                                             
                financial statements.                                         
                Treasury should                                               
                investigate the                                               
                differences between net                                       
                outlays reported in                                           
                federal agencies'                                             
                Combined Statement of                                         
                Budgetary Resources and                                       
                Treasury's records in                                         
                STAR to ensure that the                                       
                proper amounts are                                            
                reported in the                                               
                Statement of Changes in                                       
                Cash Balance from                                             
                Unified Budget and Other                                      
                Activities.                                                   
17    02-20  The Secretary of the     Treasury and OMB   Open.             
                Treasury should direct   will consider this                   
                the Fiscal Assistant     recommendation to                    
                Secretary, in            determine further                    
                coordination with the    actions needed for                   
                Controller of OMB, to    the reconciliation                   
                develop and implement a  of budgetary                         
                process to ensure that   receipts and net                     
                the Statement of Changes operating revenue.                   
                in Cash Balance from                                          
                Unified Budget and Other                                      
                Activities properly                                           
                reflects the activities                                       
                reported in federal                                           
                agencies' audited                                             
                financial statements.                                         
                Treasury should explain                                       
                and document the                                              
                differences between the                                       
                operating revenue amount                                      
                reported on the                                               
                Statement of Operations                                       
                and Changes in Net                                            
                Position and unified                                          
                budget receipts reported                                      
                on the Statement of                                           
                Changes in Cash Balance                                       
                from Unified Budget and                                       
                Other Activities.                                             
18    02-21  The Secretary of the     As referred to in  Open. See status  
                Treasury should direct   status of          of recommendation 
                the Fiscal Assistant     recommendation No. Nos. 02-15 and    
                Secretary, in            02-12, Treasury    02-16.            
                coordination with the    has revised the                      
                Controller of OMB, to    method for                           
                develop and implement a  producing this                       
                process to ensure that   statement. In so                     
                the Statement of Changes doing, Treasury                      
                in Cash Balance from     has elected to                       
                Unified Budget and Other continue the use                     
                Activities properly      of information                       
                reflects the activities  from STAR.                           
                reported in federal      Treasury will                        
                agencies' audited        focus on the                         
                financial statements.    reliability of the                   
                Treasury should provide  information from                     
                support for how the line STAR to address                      
                items in the "other      GAO's concerns                       
                activities" section of   related to its                       
                this statement relate to accuracy,                            
                either the underlying    completeness, and                    
                Balance Sheet or related consistency to the                   
                notes accompanying the   underlying agency                    
                CFS.                     financial records.                   
19    02-22  The Secretary of the     In fiscal year     Open.             
                Treasury should direct   2006, Treasury                       
                the Fiscal Assistant     drafted policies                     
                Secretary, in            and procedures to                    
                coordination with the    define and                           
                Controller of OMB, to    document the                         
                perform an assessment to reporting entity.                    
                define the reporting     These draft                          
                entity, including its    policies and                         
                specific components, in  procedures are                       
                conformity with the      still under                          
                criteria issued by the   Treasury review                      
                Federal Accounting       and any final                        
                Standards Advisory Board changes are                          
                (FASAB). Key decisions   expected to be                       
                made in this assessment  implemented in                       
                should be documented,    fiscal year 2007.                    
                including the reason for                                      
                including or excluding                                        
                components and the basis                                      
                for concluding on any                                         
                issue. Particular                                             
                emphasis should be                                            
                placed on demonstrating                                       
                that any financial                                            
                information that should                                       
                be included but is not                                        
                included is immaterial.                                       
20    02-23  The Secretary of the     Treasury will      Open.             
                Treasury should direct   implement changes                    
                the Fiscal Assistant     to the reporting                     
                Secretary, in            entity once its                      
                coordination with the    related policies                     
                Controller of OMB, to    and procedures are                   
                provide in the financial finalized. See                       
                statements all the       status of                            
                financial information    recommendation No.                   
                relevant to the defined  02-22.                               
                reporting entity, in all                                      
                material respects. Such                                       
                information would                                             
                include, for example,                                         
                the reporting entity's                                        
                assets, liabilities, and                                      
                revenues.                                                     
21    02-24  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-23.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                disclose in the                                               
                financial statements all                                      
                information that is                                           
                necessary to inform                                           
                users adequately about                                        
                the reporting entity.                                         
                Such disclosures should                                       
                clearly describe the                                          
                reporting entity and                                          
                explain the reason for                                        
                excluding any components                                      
                that are not included in                                      
                the defined reporting                                         
                entity.                                                       
22    02-25  The Secretary of the     Treasury performed Open. Treasury's  
                Treasury should direct   an analysis of     fiscal year 2006  
                the Fiscal Assistant     fiscal year 2006   process did not   
                Secretary to establish a required agency    completely        
                formal process that will financial          analyze the       
                allow the financial      statement and note fiscal year 2006  
                statements, related      disclosures and    disclosures.      
                notes, and stewardship   included the                         
                and supplemental         appropriate                          
                information in the CFS   disclosures in the                   
                to be presented in       fiscal year 2006                     
                conformity with GAAP.    CFS. For items not                   
                The process should       disclosed,                           
                timely identify GAAP     Treasury will                        
                requirements.            continue to                          
                                         analyze what                         
                                         additional data,                     
                                         if necessary, are                    
                                         needed to finalize                   
                                         these required                       
                                         disclosures.                         
                                                                              
                                         In addition, in                      
                                         September 2006,                      
                                         FASAB issued                         
                                         Statement of                         
                                         Federal Financial                    
                                         Accounting                           
                                         Standards (SFFAS)                    
                                         No. 32,                              
                                         Consolidated                         
                                         Financial Report                     
                                         of the United                        
                                         States Government                    
                                         Requirements:                        
                                         Implementing                         
                                         Statement of                         
                                         Federal Financial                    
                                         Accounting                           
                                         Concepts No. 4                       
                                         "Intended Audience                   
                                         and Qualitative                      
                                         Characteristics                      
                                         for the                              
                                         Consolidated                         
                                         Financial Report                     
                                         of the United                        
                                         States                               
                                         Government," that                    
                                         resulted in the                      
                                         elimination of or                    
                                         reduction for                        
                                         certain                              
                                         disclosures                          
                                         required by SFFAS                    
                                         issued prior to                      
                                         SFFAS No. 24,                        
                                         Selected Standards                   
                                         for the                              
                                         Consolidated                         
                                         Financial Report                     
                                         of the United                        
                                         States Government,                   
                                         and Statement of                     
                                         Federal Financial                    
                                         Accounting                           
                                         Concepts No. 4.                      
                                                                              
                                         Treasury reviewed                    
                                         the requirements                     
                                         of SFFAS No. 32                      
                                         and ensured that                     
                                         the fiscal year                      
                                         2006 CFS is in                       
                                         compliance with                      
                                         this new standard.                   
23    02-26  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25.             No. 02-25.        
                Secretary to establish a                                      
                formal process that will                                      
                allow the financial                                           
                statements, related                                           
                notes, and stewardship                                        
                and supplemental                                              
                information in the CFS                                        
                to be presented in                                            
                conformity with GAAP.                                         
                The process should make                                       
                timely modifications to                                       
                Treasury's closing                                            
                package requirements to                                       
                obtain information                                            
                needed.                                                       
24    02-27  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25.             No. 02-25.        
                Secretary to establish a                                      
                formal process that will                                      
                allow the financial                                           
                statements, related                                           
                notes, and stewardship                                        
                and supplemental                                              
                information in the CFS                                        
                to be presented in                                            
                conformity with GAAP.                                         
                The process should                                            
                assess, qualitatively                                         
                and quantitatively, the                                       
                impact of the omitted                                         
                disclosures.                                                  
25    02-28  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25.             No. 02-25.        
                Secretary to establish a                                      
                formal process that will                                      
                allow the financial                                           
                statements, related                                           
                notes, and stewardship                                        
                and supplemental                                              
                information in the CFS                                        
                to be presented in                                            
                conformity with GAAP.                                         
                The process should                                            
                document decisions                                            
                reached and the                                               
                rationale for such                                            
                decisions.                                                    
26    02-29  The Secretary of the     Treasury and OMB   Open.             
                Treasury should direct   are currently                        
                the Fiscal Assistant     revising the                         
                Secretary, in            policies and                         
                coordination with the    procedures related                   
                Controller of OMB, to    to governmentwide                    
                establish written        and agency                           
                policies and procedures  management                           
                for preparing the        representation                       

                governmentwide           letters and, when                    
                management               finalized, will                      
                representation letter to discuss with GAO                     
                help ensure that it is   these revisions                      
                properly prepared and    which address its                    
                contains sufficient      concerns.                            
                representations.                                              
                Specifically, these                                           
                policies and procedures                                       
                should require an                                             
                analysis of the agency                                        
                management                                                    
                representations to                                            
                determine if                                                  
                discrepancies exist                                           
                between what the agency                                       
                auditor reported and the                                      
                representations made by                                       
                the agency, including                                         
                the resolution of such                                        
                discrepancies.                                                
27    02-30  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-29.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                for preparing the                                             
                governmentwide                                                
                management                                                    
                representation letter to                                      
                help ensure that it is                                        
                properly prepared and                                         
                contains sufficient                                           
                representations.                                              
                Specifically, these                                           
                policies and procedures                                       
                should require a                                              
                determination that the                                        
                agency management                                             
                representation letters                                        
                have been signed by the                                       
                highest-level agency                                          
                officials who are                                             
                responsible for and                                           
                knowledgeable about the                                       
                matters included in the                                       
                agency management                                             
                representation letters.                                       
28    02-31  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-29.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                for preparing the                                             
                governmentwide                                                
                management                                                    
                representation letter to                                      
                help ensure that it is                                        
                properly prepared and                                         
                contains sufficient                                           
                representations.                                              
                Specifically, these                                           
                policies and procedures                                       
                should require an                                             
                assessment of the                                             
                materiality thresholds                                        
                used by federal agencies                                      
                in their respective                                           
                management                                                    
                representation letters.                                       
29    02-32  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-29.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                for preparing the                                             
                governmentwide                                                
                management                                                    
                representation letter to                                      
                help ensure that it is                                        
                properly prepared and                                         
                contains sufficient                                           
                representations.                                              
                Specifically, these                                           
                policies and procedures                                       
                should require an                                             
                assessment of the                                             
                impact, if any, of                                            
                federal agencies'                                             
                materiality thresholds                                        
                on the management                                             
                representations made at                                       
                the governmentwide                                            
                level.                                                        
30    02-33  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-29.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                for preparing the                                             
                governmentwide                                                
                management                                                    
                representation letter to                                      
                help ensure that it is                                        
                properly prepared and                                         
                contains sufficient                                           
                representations.                                              
                Specifically, these                                           
                policies and procedures                                       
                should require an                                             
                evaluation and                                                
                assessment of the                                             
                omission of                                                   
                representations                                               
                ordinarily included in                                        
                agency management                                             
                representation letters.                                       
31    02-34  The Secretary of the     In fiscal year     Open. Certain     
                Treasury should direct   2006, Treasury     federal agencies  
                the Fiscal Assistant     updated the        either did not    
                Secretary, in            standard operating provide a summary 
                coordination with the    procedure (SOP)    of unadjusted     
                Controller of OMB, to    for the agencies'  misstatements or  
                establish written        summary of         did not provide a 
                policies and procedures  unadjusted         complete summary  
                for preparing the        misstatements.     of unadjusted     
                governmentwide                              misstatements.    
                management                                  The SOP should be 
                representation letter to                    further revised   
                help ensure that it is                      to address these  
                properly prepared and                       issues.           
                contains sufficient                                           
                representations.                                              
                Specifically, these                                           
                policies and procedures                                       
                should require an                                             
                analysis and aggregation                                      
                of the agencies' summary                                      
                of unadjusted                                                 
                misstatements to                                              
                determine the                                                 
                completeness of the                                           
                summaries and to                                              
                ascertain the                                                 
                materiality, both                                             
                individually and in the                                       
                aggregate, of such                                            
                unadjusted misstatements                                      
                to the CFS taken as a                                         
                whole.                                                        
32    02-35  The Secretary of the     During fiscal year Open. Certain     
                Treasury should direct   2006, OMB and      federal agencies  
                the Fiscal Assistant     Treasury continued did not report    
                Secretary, in            to work with the   adequate          
                coordination with the    agencies to ensure information in    
                Controller of OMB, to    that adequate      their legal       
                help ensure that         information was    representation    
                agencies provide         provided in the    letters regarding 
                adequate information in  legal              the expected      
                their legal              representation     outcomes of       
                representation letters   letters regarding  certain pending   
                regarding the expected   the expected       cases.            
                outcomes of the cases.   outcomes of the                      
                                         cases.                               
33    02-36  The Secretary of the     OMB and Treasury   Closed.           
                Treasury should direct   followed up with                     
                the Fiscal Assistant     agencies that had                    
                Secretary, in            not provided their                   
                coordination with the    management                           
                Controller of OMB, to    schedules to                         
                help ensure that         ensure that they                     
                agencies provide related did so. Agreements                   
                management schedules.    are in place to                      
                                         receive all                          
                                         schedules in the                     
                                         future.                              
34    02-37  The Secretary of the     To ensure a        Open.             
                Treasury should direct   reasonable                           
                the Fiscal Assistant     approach, OMB will                   
                Secretary, in            analyze the                          
                coordination with the    appropriateness of                   
                Controller of OMB, to    reporting                            
                establish written        "treaties" before                    
                policies and procedures  developing                           
                to help ensure that      specific                             
                major treaty and other   corrective                           
                international agreement  actions. OMB has,                    
                information is properly  however, analyzed                    
                identified and reported  the State                            
                in the CFS.              Department's                         
                Specifically, these      Treaties in Force                    
                policies and procedures  and concluded that                   
                should require that      while it provides                    
                agencies develop a       a comprehensive                      
                detailed schedule of all listing of                           
                major treaties and other treaties and                         
                international agreements international                        
                that obligate the U.S.   agreements, it is                    
                government to provide    not the                              
                cash, goods, or          appropriate                          
                services, or that create document from                        
                other financial          which to derive                      
                arrangements that are    potential                            
                contingent on the        commitments or                       
                occurrence or            contingencies of                     
                nonoccurrence of future  the U.S.                             
                events (a starting point government. OMB                      
                for compiling these data continues to                         
                could be the State       analyze the issue.                   
                Department's Treaties in                                      
                Force).                                                       
35    02-38  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-37.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                to help ensure that                                           
                major treaty and other                                        
                international agreement                                       
                information is properly                                       
                identified and reported                                       
                in the CFS.                                                   
                Specifically, these                                           
                policies and procedures                                       
                should require that                                           
                agencies classify all                                         
                such scheduled major                                          
                treaties and other                                            
                international agreements                                      
                as commitments or                                             
                contingencies.                                                
36    02-39  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-37.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                to help ensure that                                           
                major treaty and other                                        
                international agreement                                       
                information is properly                                       
                identified and reported                                       
                in the CFS.                                                   
                Specifically, these                                           
                policies and procedures                                       
                should require that                                           
                agencies disclose in the                                      
                notes to the CFS amounts                                      
                for major treaties and                                        
                other international                                           
                agreements that have a                                        
                reasonably possible                                           
                chance of resulting in a                                      
                loss or claim as a                                            
                contingency.                                                  
37    02-40  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-37.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                to help ensure that                                           
                major treaty and other                                        
                international agreement                                       
                information is properly                                       
                identified and reported                                       
                in the CFS.                                                   
                Specifically, these                                           
                policies and procedures                                       
                should require that                                           
                agencies disclose in the                                      
                notes to the CFS amounts                                      
                for major treaties and                                        
                other international                                           
                agreements that are                                           
                classified as                                                 
                commitments and that may                                      
                require measurable                                            
                future financial                                              
                obligations.                                                  
38    02-41  The Secretary of the     See status of      Open.             
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-37.                               
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                establish written                                             
                policies and procedures                                       
                to help ensure that                                           
                major treaty and other                                        
                international agreement                                       
                information is properly                                       
                identified and reported                                       
                in the CFS.                                                   
                Specifically, these                                           
                policies and procedures                                       
                should require that                                           
                agencies take steps to                                        
                prevent major treaties                                        
                and other international                                       
                agreements that are                                           
                classified as remote                                          
                from being recorded or                                        
                disclosed as probable or                                      
                reasonably possible in                                        
                the CFS.                                                      
39    02-42  As Treasury is designing Treasury used its  Open. Treasury    
                its new compilation      revised CFS        showed progress   
                process, which it        compilation        by demonstrating  
                expects to implement     process, the       that amounts in   
                beginning with the       Governmentwide     the Statement of  
                fiscal year 2004 CFS,    Financial          Social Insurance  
                the Secretary of the     Reporting System   were consistent   
                Treasury should direct   (GFRS), first      with the          
                the Fiscal Assistant     implemented in     underlying        
                Secretary, in            fiscal year 2004,  federal agencies' 
                coordination with the    to directly link   audited financial 
                Controller of OMB, to    agency audited     statements and    
                design the new           financial          that the Balance  
                compilation process to   statements to      Sheet and the     
                directly link            three of the five  Statement of Net  
                information from federal CFS principal      Cost were         
                agencies' audited        statements. The    consistent with   
                financial statements to  exceptions are the federal agencies' 
                amounts reported in all  Reconciliation of  financial         
                the applicable           Net Operating Cost statements prior  
                consolidated financial   and Unified Budget to eliminating    
                statements and related   Deficit (or        intragovernmental 
                footnotes.               Surplus) and the   activity and      
                                         Statement of       balances.         
                                         Changes in Cash    However,          
                                         Balance. Treasury  Treasury's        
                                         does not currently process for       
                                         plan to link these compiling the CFS 
                                         statements to      did not ensure    
                                         agency financial   that the          
                                         statements (see    information in    
                                         also status of     the remaining     
                                         recommendation No. three principal   
                                         02-15). With       financial         
                                         regard to note     statements and    
                                         disclosures, GFRS  notes were fully  
                                         included a direct  consistent with   
                                         link between the   the underlying    
                                         CFS note           information in    
                                         disclosures and    federal agencies' 
                                         the related        audited financial 
                                         agencies' audited  statements and    
                                         note disclosures,  other financial   
                                         for which the      data. Also, see   
                                         links were         status of         
                                         supplemented by    recommendation    
                                         additional         Nos. 02-15 and    
                                         documentation      02-16.            
                                         describing in more                   
                                         detail the links                     
                                         between the CFS                      
                                         and agency note                      
                                         disclosures.                         
40    02-43  As Treasury is designing Treasury will      Open.             
                its new compilation      continue to                          
                process, which it        consider                             
                expects to implement     applicable                           
                beginning with the       recommendations as                   
                fiscal year 2004 CFS,    the current CFS                      
                the Secretary of the     compilation system                   
                Treasury should direct   is revised and                       
                the Fiscal Assistant     enhanced.                            
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                consider the other                                            
                applicable                                                    
                recommendations in this                                       
                report when designing                                         
                and implementing the new                                      
                compilation process.                                          
41    02-44  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraph 91,                                       
                which requires the                                            
                reporting entity to                                           
                disclose the valuation                                        
                basis for foreclosed                                          
                property.                                                     
42    02-45  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraph 91,                                       
                which requires the                                            
                reporting entity to                                           
                disclose the changes                                          
                from the prior year's                                         
                accounting methods, if                                        
                any.                                                          
43    02-46  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraph 91,                                       
                which requires the                                            
                reporting entity to                                           
                disclose the                                                  
                restrictions on the                                           
                use/disposal of                                               
                property.                                                     
44    02-47  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraph 91,                                       
                which requires the                                            
                reporting entity to                                           
                disclose the balances by                                      
                categories (i.e.,                                             
                pre-1992 and post-1991                                        
                foreclosed property).                                         
45    02-48  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraph 91,                                       
                which requires the                                            
                reporting entity to                                           
                disclose the number of                                        
                properties held and                                           
                average holding period                                        
                by type or category.                                          
46    02-49  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraph 91,                                       
                which requires the                                            
                reporting entity to                                           
                disclose the number of                                        
                properties for which                                          
                foreclosure proceedings                                       
                are in process at the                                         
                end of the period for                                         
                foreclosed assets                                             
                acquired in full or                                           
                partial settlement of a                                       
                direct or guaranteed                                          
                loan.                                                         
47    02-50  The Secretary of the     The disclosures    Closed.           
                Treasury should direct   related to direct                    
                the Fiscal Assistant     loans and loan                       
                Secretary to ensure that guarantees with                      
                the note disclosure for  regard to subsidy                    
                loans receivable and     expense is now                       
                loan guarantee           governed by SFFAS                    
                liabilities meets the    No. 32 paragraph                     
                requirements of SFFAS    27.f. As such,                       
                No. 18, Amendments to    disclosure of the                    
                Accounting Standards for two kinds of                         
                Direct Loans and Loan    subsidy                              
                Guarantees, paragraph 9, reestimates is no                    
                which requires credit    longer required                      
                programs to reestimate   for the CFS; only                    
                the subsidy cost         the total subsidy                    
                allowance for            expense is                           
                outstanding direct loans required to be                       
                and the liability for    disclosed, and it                    
                outstanding loan         was disclosed in                     
                guarantees. There are    the fiscal year                      
                two kinds of             2006 CFS.                            
                reestimates: (1)                                              
                interest rate                                                 
                reestimates and (2)                                           
                technical/default                                             
                reestimates. Entities                                         
                should measure and                                            
                disclose each program's                                       
                reestimates in these two                                      
                components separately.                                        
48    02-51  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    15.a.                                
                requirements of SFFAS                                         
                No. 18, Amendments to                                         
                Accounting Standards for                                      
                Direct Loans and Loan                                         
                Guarantees, paragraph                                         
                10, which requires the                                        
                reporting entity to                                           
                display in the notes to                                       
                the financial statements                                      
                a reconciliation between                                      
                the beginning and ending                                      
                balances of the subsidy                                       
                cost allowance for                                            
                outstanding direct loans                                      
                and the liability for                                         
                outstanding loan                                              
                guarantees reported on                                        
                the entity's balance                                          
                sheet.                                                        
49    02-52  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    15.b.                                
                requirements of SFFAS                                         
                No. 18, Amendments to                                         
                Accounting Standards for                                      
                Direct Loans and Loan                                         
                Guarantees, paragraph                                         
                11, which requires                                            
                disclosure of the total                                       
                amount of direct or                                           
                guaranteed loans                                              
                disbursed for the                                             
                current reporting year                                        
                and the preceding                                             
                reporting year.                                               
50    02-53  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    15.b.                                
                requirements of SFFAS                                         
                No. 18, Amendments to                                         
                Accounting Standards for                                      
                Direct Loans and Loan                                         
                Guarantees, paragraph                                         
                11, which requires                                            
                disclosure of the                                             
                subsidy expense by                                            
                components, recognized                                        
                for the direct or                                             
                guaranteed loans                                              
                disbursed in the current                                      
                reporting year and the                                        
                preceding reporting                                           
                year.                                                         
51    02-54  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    15.b.                                
                requirements of SFFAS                                         
                No. 18, Amendments to                                         
                Accounting Standards for                                      
                Direct Loans and Loan                                         
                Guarantees, paragraph                                         
                11, which requires                                            
                disclosure of the                                             
                subsidy reestimates by                                        
                components for the                                            
                current reporting year                                        
                and the preceding                                             
                reporting year.                                               
52    02-55  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    15.b.                                
                requirements of SFFAS                                         
                No. 18, Amendments to                                         
                Accounting Standards for                                      
                Direct Loans and Loan                                         
                Guarantees, paragraph                                         
                11, which requires                                            
                disclosure, at the                                            
                program level, of the                                         
                subsidy rates for the                                         
                total subsidy cost and                                        
                its components for the                                        
                interest subsidy costs,                                       
                default costs (net of                                         
                recoveries), fees and                                         
                other collections, and                                        
                other costs estimated                                         
                for direct loans and                                          
                loan guarantees in the                                        
                current year's budget                                         
                for the current year's                                        
                cohorts.                                                      
53    02-56  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                loans receivable and     CFS per SFFAS No.                    
                loan guarantee           32, paragraph                        
                liabilities meets the    15.b.                                
                requirements of SFFAS                                         
                No. 18, Amendments to                                         
                Accounting Standards for                                      
                Direct Loans and Loan                                         
                Guarantees, paragraph                                         
                11, which requires the                                        
                reporting entity to                                           
                disclose, discuss, and                                        
                explain events and                                            
                changes in economic                                           
                conditions, other risk                                        
                factors, legislation,                                         
                credit policies, and                                          
                subsidy estimation                                            
                methodologies and                                             
                assumptions that have                                         
                had a significant and                                         
                measurable effect on                                          
                subsidy rates, subsidy                                        
                expense, and subsidy                                          
                reestimates.                                                  
54    02-57  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosure of                    
                Secretary to ensure that the differences                      
                the note disclosure for  between the                          
                inventories and          carrying amounts                     
                operating materials and  of inventories and                   
                supplies meets the       operating                            
                requirements of SFFAS    materials and                        
                No. 3, Accounting for    their expected net                   
                Inventory and Related    realizable values                    
                Property, paragraph 30,  is no longer                         
                which requires the       applicable to the                    
                difference between the   CFS per SFFAS No.                    
                carrying amount and the  32, paragraph                        
                expected net realizable  10.b.                                
                value to be recognized                                        
                as a loss or gain and                                         
                either separately                                             
                reported or disclosed                                         
                when inventory or                                             
                operating materials and                                       
                supplies are declared                                         
                excess, obsolete, or                                          
                unserviceable.                                                
55    02-58  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                inventories and          CFS per SFFAS No.                    
                operating materials and  32, paragraph                        
                supplies meets the       10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraphs 35                                       
                and 50, which require                                         
                disclosure of inventory                                       
                and operating materials                                       
                and supplies general                                          
                composition.                                                  
56    02-59  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                inventories and          CFS per SFFAS No.                    
                operating materials and  32, paragraph                        
                supplies meets the       10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraphs 35                                       
                and 50, which require                                         
                disclosure of any                                             
                changes from the prior                                        
                year in accounting                                            
                methods for inventory                                         
                and operating materials                                       
                and supplies.                                                 
57    02-60  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                inventories and          CFS per SFFAS No.                    
                operating materials and  32, paragraph                        
                supplies meets the       10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraphs 35                                       
                and 50, which require                                         
                the disclosure of any                                         
                restrictions on the sale                                      
                of inventory and the use                                      
                of operating materials                                        
                and supplies.                                                 
58    02-61  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                inventories and          CFS per SFFAS No.                    
                operating materials and  32, paragraph                        
                supplies meets the       10.a.                                
                requirements of SFFAS                                         
                No. 3, Accounting for                                         
                Inventory and Related                                         
                Property, paragraphs 35                                       
                and 50, which require                                         
                disclosure of any                                             
                changes in the criteria                                       
                for categorizing                                              
                inventory and operating                                       
                materials and supplies.                                       
59    02-62  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                stockpile material meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 56, which                                           
                requires disclosure of                                        
                the basis for valuing                                         
                stockpile material,                                           
                including valuation                                           
                method and any cost flow                                      
                assumptions.                                                  
60    02-63  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                stockpile material meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 56, which                                           
                requires disclosure of                                        
                any changes from the                                          
                prior year's accounting                                       
                methods.                                                      
61    02-64  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                stockpile material meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 56, which                                           
                requires disclosure of                                        
                restrictions on the use                                       
                of stockpile material.                                        
62    02-66  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                stockpile material meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 56, which                                           
                requires disclosure of                                        
                the criteria for                                              
                grouping stockpile                                            
                material held for sale.                                       
63    02-67  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                stockpile material meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 56, which                                           
                requires disclosure of                                        
                changes in criteria for                                       
                categorizing stockpile                                        
                material held for sale.                                       
64    02-68  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosure of                    
                Secretary to ensure that the differences                      
                the note disclosure for  between the                          
                stockpile material meets carrying amounts                     
                the requirements of      of stockpile                         
                SFFAS No. 3, Accounting  materials held for                   
                for Inventory and        sale and their                       
                Related Property,        estimated selling                    
                paragraph 55, which      price is no longer                   
                requires disclosure of   required for the                     
                any difference between   CFS per SFFAS No.                    
                the carrying amount      32, paragraph                        
                (i.e., purchase price or 10.c.                                
                cost) of stockpile                                            
                material held for sale                                        
                and the estimated                                             
                selling price of such                                         
                assets.                                                       
65    02-69  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                seized material meets    CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 66, which                                           
                requires disclosure of                                        
                the valuation method.                                         
66    02-70  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                seized material meets    CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 66, which                                           
                requires disclosure of                                        
                any changes from the                                          
                prior year's accounting                                       
                methods.                                                      
67    02-71  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                seized material meets    CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 66, which                                           
                requires disclosure of                                        
                the analysis of change                                        
                in seized property                                            
                (including dollar value                                       
                and number of seized                                          
                properties) that is on                                        
                hand at the beginning of                                      
                the year, seized during                                       
                the year, disposed of                                         
                during the year, and on                                       
                hand at the end of the                                        
                year, as well as known                                        
                liens or other claims                                         
                against the property.                                         
                This information should                                       
                be presented by type of                                       
                seizure and method of                                         
                disposition, when                                             
                material.                                                     
68    02-72  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                forfeited property meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 78, which                                           
                requires disclosure of                                        
                the valuation method.                                         
69    02-73  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                forfeited property meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 78, which                                           
                requires disclosure of                                        
                the analysis of the                                           
                changes in forfeited                                          
                property by type and                                          
                dollar amount that                                            
                includes (1) number of                                        
                forfeitures on hand at                                        
                the beginning of the                                          
                year, (2) additions, (3)                                      
                disposals and method of                                       
                disposition, and (4)                                          
                end-of-year balances.                                         
70    02-74  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                forfeited property meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 78, which                                           
                requires disclosure of                                        
                any restriction on the                                        
                use or disposition of                                         
                the property.                                                 
71    02-75  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                forfeited property meets CFS per SFFAS No.                    
                the requirements of      32, paragraph                        
                SFFAS No. 3, Accounting  10.a.                                
                for Inventory and                                             
                Related Property,                                             
                paragraph 78, which                                           
                requires disclosure, if                                       
                available, of an                                              
                estimate of the value of                                      
                property to be                                                
                distributed to other                                          
                federal, state, and                                           
                local agencies in future                                      
                reporting periods.                                            
72    02-76  The Secretary of the     This required      Closed. Beginning 
                Treasury should direct   information was    in fiscal year    
                the Fiscal Assistant     requested from the 2006, the         
                Secretary to ensure that agencies for       disclosure        
                the note disclosure for  inclusion in Note  requirement of    
                goods held under price   18, Contingencies, SFFAS No. 3,      
                support and              in the fiscal year relating to goods 
                stabilization programs   2006 CFS. However, held under price  
                meets the requirements   no related GFRS    support and       
                of SFFAS No. 3,          data were received stabilization     
                Accounting for Inventory in fiscal year     programs, is no   
                and Related Property,    2006 or fiscal     longer applicable 
                paragraph 98, which      year 2005 from the to the CFS per    
                requires that if a       Department of      SFFAS No. 32,     
                contingent loss is not   Agriculture        paragraph 10.     
                recognized because it is (USDA), the only   However,          
                less than probable or it agency that has    disclosure        
                is not reasonably        reported this type requirements      
                measurable, disclosure   of inventory in    related to major  
                of the contingency shall both years. In     commitments and   
                be made if it is at      addition, USDA     contingencies     
                least reasonably         also did not       contained in      
                possible that a loss may disclose such a    SFFAS No. 5 were  
                occur.                   contingency in its not affected by   
                                         fiscal year 2006   SFFAS No. 32. We  
                                         or fiscal year     continue to       
                                         2005 audited       monitor the       
                                         financial          sufficiency and   
                                         statements.        accuracy of       
                                         Therefore, no      disclosures in    
                                         disclosure related the CFS relating  
                                         to this            to major          
                                         requirement was    commitments and   
                                         necessary at the   contingencies.    
                                         governmentwide                       
                                         level.                               
73    02-77  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                goods held under price   CFS per SFFAS No.                    
                support and              32, paragraph                        
                stabilization programs   10.a.                                
                meets the requirements                                        
                of SFFAS No. 3,                                               
                Accounting for Inventory                                      
                and Related Property,                                         
                paragraph 109, which                                          
                requires disclosure of                                        
                the basis for valuing                                         
                commodities, including                                        
                valuation method and                                          
                cost flow assumptions.                                        
74    02-78  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                goods held under price   CFS per SFFAS No.                    
                support and              32, paragraph                        
                stabilization programs   10.a.                                
                meets the requirements                                        
                of SFFAS No. 3,                                               
                Accounting for Inventory                                      
                and Related Property,                                         
                paragraph 109, which                                          

                requires disclosure of                                        
                any changes from the                                          
                prior year's accounting                                       
                methods.                                                      
75    02-79  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                goods held under price   CFS per SFFAS No.                    
                support and              32, paragraph                        
                stabilization programs   10.a.                                
                meets the requirements                                        
                of SFFAS No. 3,                                               
                Accounting for Inventory                                      
                and Related Property,                                         
                paragraph 109, which                                          
                requires disclosure of                                        
                any restrictions on the                                       
                use, disposal, or sale                                        
                of commodities.                                               
76    02-80  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                goods held under price   CFS per SFFAS No.                    
                support and              32, paragraph                        
                stabilization programs   10.a.                                
                meets the requirements                                        
                of SFFAS No. 3,                                               
                Accounting for Inventory                                      
                and Related Property,                                         
                paragraph 109, which                                          
                requires disclosure of                                        
                the analysis of the                                           
                change in dollar amount                                       
                and volume of                                                 
                commodities, including                                        
                those (1) on hand at the                                      
                beginning of the year,                                        
                (2) acquired during the                                       
                year, (3) disposed of                                         
                during the year listed                                        
                by method of                                                  
                disposition, (4) on hand                                      
                at the end of the year,                                       
                (5) on hand at year-end                                       
                and estimated to be                                           
                donated or transferred                                        
                during the coming                                             
                period, and (6) received                                      
                as a result of surrender                                      
                of collateral related to                                      
                nonrecourse loans                                             
                outstanding. The                                              
                analysis should also                                          
                show the dollar value                                         
                and volume of purchase                                        
                agreement commitments.                                        
77    02-81  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                property, plant, and     CFS per SFFAS No.                    
                equipment (PP&E) meets   32, paragraph                        
                the disclosure           12.a.                                
                requirements of SFFAS                                         
                No. 6, Accounting for                                         
                Property, Plant, and                                          
                Equipment, paragraph 45,                                      
                which requires                                                
                disclosure of the                                             
                estimated useful lives                                        
                for each major class of                                       
                PP&E.                                                         
78    02-82  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                PP&E meets the           CFS per SFFAS No.                    
                disclosure requirements  32, paragraph                        
                of SFFAS No. 6,          12.a.                                
                Accounting for Property,                                      
                Plant, and Equipment,                                         
                paragraph 45, which                                           
                requires disclosure of                                        
                capitalization                                                
                thresholds, including                                         
                any changes in                                                
                thresholds during the                                         
                period.                                                       
79    02-83  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                PP&E meets the           CFS per SFFAS No.                    
                disclosure requirements  32, paragraph                        
                of SFFAS No. 6,          12.a.                                
                Accounting for Property,                                      
                Plant, and Equipment,                                         
                paragraph 45, which                                           
                requires disclosure of                                        
                restrictions on the use                                       
                or convertibility of                                          
                general PP&E.                                                 
80    02-85  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                PP&E meets the           CFS per SFFAS No.                    
                disclosure requirements  32, paragraph 14.                    
                of SFFAS No. 10,                                              
                Accounting for Internal                                       
                Use Software, paragraph                                       
                35, which requires                                            
                disclosure of the                                             
                estimated useful life                                         
                for each major class of                                       
                software for internal                                         
                use software.                                                 
81    02-89  The Secretary of the     This required      Closed. The       
                Treasury should direct   information was    requirements of   
                the Fiscal Assistant     disclosed in Note  SFFAS No. 6, as   
                Secretary to ensure that 12, Environmental  they apply to the 
                the note disclosure for  and Disposal       note disclosure   
                environmental and        Liabilities, in    for environmental 
                disposal liabilities     the fiscal year    and disposal      
                meets the requirements   2006 CFS.          liabilities, were 
                of SFFAS No. 6,                             superseded by     
                Accounting for Property,                    modified          
                Plant, and Equipment,                       disclosure        
                which requires (1)                          requirements      
                estimation and                              contained in      
                recognition of cleanup                      SFFAS No. 32. The 
                costs associated with                       disclosures       
                general PP&E at the time                    provided in Note  
                the PP&E is placed in                       12, Environmental 
                service and (2)                             and Disposal      
                recognition of a                            Liabilities, of   
                liability for the                           the fiscal year   
                portion of the estimated                    2006 CFS were in  
                total cleanup cost                          conformity with   
                attributable to that                        SFFAS No. 32 as   
                portion of the physical                     they relate to    
                capacity used or that                       cleanup costs     
                portion of the estimated                    associated with   
                useful life that has                        general PP&E.     
                passed since the general                                      
                PP&E was placed in                                            
                service.                                                      
82    02-90  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                environmental and        CFS per SFFAS No.                    
                disposal liabilities     32, paragraph                        
                meets the requirements   12.g.                                
                of SFFAS No. 6,                                               
                Accounting for Property,                                      
                Plant, and Equipment,                                         
                which requires inclusion                                      
                of material changes in                                        
                total estimated cleanup                                       
                costs due to changes in                                       
                laws, technology, or                                          
                plans.                                                        
83    02-91  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25 as to the    No. 02-25.        
                Secretary to ensure that need for further                     
                the note disclosure for  analysis of                          
                capital leases meets the certain                              
                requirements of Federal  disclosures.                         
                Accounting Standards                                          
                Board (FASB), Statement                                       
                of Financial Accounting                                       
                Standards (SFAS) No. 13,                                      
                Accounting for Leases,                                        
                paragraph 16, which                                           
                requires future minimum                                       
                lease payments as of the                                      
                date of the latest                                            
                balance sheet presented,                                      
                in the aggregate and for                                      
                each of the 5 succeeding                                      
                fiscal years, with                                            
                separate deductions from                                      
                the total for the amount                                      
                representing executory                                        
                costs, including any                                          
                profit thereon, included                                      
                in the minimum lease                                          
                payments, and for the                                         
                amount of the imputed                                         
                interest necessary to                                         
                reduce the net minimum                                        
                lease payments to                                             
                present value.                                                
84    02-92  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25 as to the    No. 02-25.        
                Secretary to ensure that need for further                     
                the note disclosure for  analysis of                          
                capital leases meets the certain                              
                requirements of FASB,    disclosures.                         
                SFAS No. 13, Accounting                                       
                for Leases, paragraph                                         
                16, which requires a                                          
                summary of assets under                                       
                capital lease by major                                        
                asset category and the                                        
                related total                                                 
                accumulated                                                   
                amortization.                                                 
85    02-93  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25 as to the    No. 02-25.        
                Secretary to ensure that need for further                     
                the note disclosure for  analysis of                          
                capital leases meets the certain                              
                requirements of FASB,    disclosures.                         
                SFAS No. 13, Accounting                                       
                for Leases, paragraph                                         
                16, which requires a                                          
                general description of                                        
                the lessee's leasing                                          
                arrangements, including                                       
                but not limited to (1)                                        
                the basis on which                                            
                contingent rental                                             
                payments are determined;                                      
                (2) the existence and                                         
                terms of renewal or                                           
                purchase options and                                          
                escalation clauses; and                                       
                (3) restrictions imposed                                      
                by lease agreements,                                          
                such as those concerning                                      
                dividends, additional                                         
                debt, and further                                             
                leasing.                                                      
86    02-94  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosures                      
                Secretary to ensure that required by SFFAS                    
                the note disclosure for  No. 5, paragraph                     
                life insurance           117, are no longer                   
                liabilities meets the    applicable to the                    
                requirements of SFFAS    CFS per SFFAS No.                    
                No. 5, Accounting for    32, paragraph                        
                Liabilities of the       11.a.                                
                Federal Government,                                           
                paragraph 117, which                                          
                requires all federal                                          
                reporting entities with                                       
                whole life insurance                                          
                programs to follow                                            
                applicable standards as                                       
                prescribed in the                                             
                private sector standards                                      
                when reporting the                                            
                liability for future                                          
                policy benefits: FASB                                         
                SFAS No. 60, Accounting                                       
                and Reporting by                                              
                Insurance Enterprises;                                        
                SFAS No. 97, Accounting                                       
                and Reporting by                                              
                Insurance Enterprises                                         
                for Certain                                                   
                Long-Duration Contracts                                       
                and for Realized Gains                                        
                and Losses from the Sale                                      
                of Investments; SFAS No.                                      
                120, Accounting and                                           
                Reporting by Mutual Life                                      
                Insurance Enterprises                                         
                and by Insurance                                              
                Enterprises for Certain                                       
                Long-Duration                                                 
                Participating Contracts;                                      
                and American Institute                                        
                of Certified Public                                           
                Accountants Statement of                                      
                Position 95-1,                                                
                Accounting for Certain                                        
                Insurance Activities of                                       
                Mutual Life Insurance                                         
                Enterprises.                                                  
87    02-95  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosures                      
                Secretary to ensure that required by SFFAS                    
                the note disclosure for  No. 5, paragraph                     
                life insurance           121, are no longer                   
                liabilities meets the    applicable to the                    
                requirements of SFFAS    CFS per SFFAS No.                    
                No. 5, Accounting for    32, paragraph                        
                Liabilities of the       11.b.                                
                Federal Government,                                           
                paragraph 121, which                                          
                requires all components                                       
                of the liability for                                          
                future policy benefits                                        
                (i.e., the net-level                                          
                premium reserve for                                           
                death and endowment                                           
                policies and the                                              
                liability for terminal                                        
                dividends) to be                                              
                separately disclosed in                                       
                a footnote with a                                             
                description of each                                           
                amount and an                                                 
                explanation of its                                            
                projected use and any                                         
                other potential uses                                          
                (e.g., reducing                                               
                premiums, determining                                         
                and declaring dividends                                       
                available, and reducing                                       
                federal support in the                                        
                form of appropriations                                        
                related to                                                    
                administrative cost or                                        
                subsidies).                                                   
88    02-96  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation     of recommendation 
                the Fiscal Assistant     Nos. 02-25 and     Nos. 02-25 and    
                Secretary to ensure that 02-42 as to the    02-42.            
                the note disclosure on   need for further                     
                major commitments and    analysis of                          
                contingencies is         certain                              
                consistent with          disclosures. In                      
                disclosed information in addition, these                      
                individual agencies'     items were                           
                financial statements.    disclosed in Note                    
                                         18, Contingencies,                   
                                         and Note 19,                         
                                         Commitments, in                      
                                         the fiscal year                      
                                         2006 CFS.                            
89    02-102 The Secretary of the     See status of      Open. Treasury    
                Treasury should direct   recommendation No. expected the      
                the Fiscal Assistant     02-25 as to the    required          
                Secretary to ensure that need for further   information from  
                the note disclosure for  analysis of        applicable        
                dedicated collections    certain            agencies as       
                meets the requirements   disclosures. In    requested in the  
                of SFFAS No. 7, Part I,  addition, this     TFM. However,     
                Accounting for Revenue   required           when the          
                and Other Financing      information was    information was   
                Sources, paragraph 85,   requested from the not provided,     
                which requires inclusion agencies for       Treasury did not  
                of any revenues, other   inclusion in Note  have any policies 
                financing sources, or    21, Dedicated      and procedures    
                costs attributable to    Collections, in    for following up  
                the fund under           the fiscal year    with agencies to  
                accounting standards but 2006 CFS. However, determine why the 
                not legally allowable as no data were       information was   
                credits or charges to    received in fiscal not provided.     
                the fund.                years 2006 or                        
                                         2005, and                            
                                         therefore, no                        
                                         disclosure was                       
                                         needed related to                    
                                         this requirement.                    
                                         In addition,                         
                                         fiscal year 2006                     
                                         dedicated                            
                                         collections                          
                                         related to                           
                                         non-earmarked                        
                                         funds were                           
                                         immaterial and,                      
                                         therefore, were                      
                                         not disclosed in                     
                                         the fiscal year                      
                                         2006 CFS.                            
90    02-103 The Secretary of the     This required      Closed.           
                Treasury should direct   information was                      
                the Fiscal Assistant     disclosed in Note                    
                Secretary to ensure that 22, Indian Trust                     
                the note disclosure for  Funds, in the                        
                Indian trust funds meets fiscal year 2006                     
                the requirements of      CFS.                                 
                SFFAS No. 7, Part I,                                          
                Accounting for Revenue                                        
                and Other Financing                                           
                Sources, paragraph 85,                                        
                which requires a                                              
                description of each                                           
                fund's purpose, how the                                       
                administrative entity                                         
                accounts for and reports                                      
                the fund, and its                                             
                authority to use those                                        
                collections.                                                  
91    02-104 The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25 as to the    No. 02-25.        
                Secretary to ensure that need for further                     
                the note disclosure for  analysis of                          
                Indian trust funds meets certain                              
                the requirements of      disclosures.                         
                SFFAS No. 7, Part I,                                          
                Accounting for Revenue                                        
                and Other Financing                                           
                Sources, paragraph 85,                                        
                which requires                                                
                disclosure of the                                             
                sources of revenue or                                         
                other financing for the                                       
                period and an                                                 
                explanation of the                                            
                extent to which they are                                      
                inflows of resources to                                       
                the government or the                                         
                result of                                                     
                intragovernmental flows.                                      
92    02-106 The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25 as to the    No. 02-25.        
                Secretary to ensure that need for further                     
                the note disclosure for  analysis of                          
                Indian trust funds meets certain                              
                the requirements of      disclosures.                         
                SFFAS No. 7, Part I,                                          
                Accounting for Revenue                                        
                and Other Financing                                           
                Sources, paragraph 85,                                        
                which requires condensed                                      
                information on net cost                                       
                and changes to fund                                           
                balance, showing                                              
                revenues by type                                              
                (exchange/nonexchange),                                       
                program expenses, other                                       
                expenses, other                                               
                financing sources, and                                        
                other changes in fund                                         
                balance.                                                      
93    02-107 The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-25 as to the    No. 02-25.        
                Secretary to ensure that need for further                     
                the note disclosure for  analysis of                          
                Indian trust funds meets certain                              
                the requirements of      disclosures.                         
                SFFAS No. 7, Part I,                                          
                Accounting for Revenue                                        
                and Other Financing                                           
                Sources, paragraph 85,                                        
                which requires                                                
                disclosure of any                                             
                revenues, other                                               
                financing sources, or                                         
                costs attributable to                                         
                the fund under                                                
                accounting standards,                                         
                but not legally                                               
                allowable as credits or                                       
                charges to the fund.                                          
94    02-114 The Secretary of the     With the exception Closed.           
                Treasury should direct   of the Black Lung                    
                the Fiscal Assistant     program,                             
                Secretary to ensure that sensitivity                          
                the note disclosure for  analyses for the                     
                social insurance meets   significant social                   
                the requirements of      insurance                            
                SFFAS No. 17, Accounting programs-Social                      
                for Social Insurance,    Security, Medicare                   
                paragraph 32(4), which   Hospital Insurance                   
                requires individual      (Part A), the                        
                program sensitivity      Supplementary                        
                analyses for projection  Medical Insurance                    
                period cash flow in      Programs (Parts B                    
                present value dollars    and D), and the                      
                and annual cash flow in  Railroad                             
                nominal dollars. The CFS Retirement                           
                includes only present    Program-were                         
                value sensitivity        disclosed in the                     
                analyses for Social      required                             
                Security and Hospital    supplementary                        
                Insurance. Paragraph     information-social                   
                32(4) states that at a   insurance section                    
                minimum the summary      of the fiscal year                   
                should present Social    2006 CFS. Since                      
                Security, Hospital       the Black Lung                       
                Insurance, and           program is                           
                Supplementary Medical    immaterial in                        
                Insurance separately.    relation to the                      
                                         above social                         
                                         insurance                            
                                         programs, its                        
                                         related                              
                                         sensitivity                          
                                         analysis is not                      
                                         required to be                       
                                         disclosed.                           
95    02-118 The Secretary of the     Treasury has       Closed.           
                Treasury should direct   revised its                          
                the Fiscal Assistant     policies and                         
                Secretary to ensure that procedures to                        
                the note disclosure for  analyze component                    
                nonfederal physical      entity stewardship                   
                property included in     investment data                      
                stewardship information  and determine the                    
                meets the requirements   manner for                           
                of SFFAS No. 8,          reporting this                       
                Supplementary            information in the                   
                Stewardship Reporting,   CFS in accordance                    
                paragraph 87, which      with SFFAS No. 8,                    
                requires disclosure of   paragraph 39,                        
                the annual investment,   which is the only                    
                including a description  reporting                            
                of federally owned       requirement that                     
                physical property        relates to the                       
                transferred to state and CFS.                                 
                local governments. This                                       
                information should be    SFFAS 8, paragraph                   
                provided for the year    39, states that                      
                ended on the balance     component entity                     
                sheet date as well as    required reporting                   
                for each of the 4        for stewardship                      
                preceding years. If data investments is not                   
                for additional years     applicable to the                    
                would provide a better   CFS, but does                        
                indication of            require disclosure                   
                investment, reporting of in the CFS of such                   
                the additional years'    "summary                             
                data is encouraged.      (stewardship)                        
                Reporting should be at a information or                       
                meaningful category or   selected                             
                level.                   information as is                    
                                         feasible."                           
                                                                              
                                         The revised                          
                                         policies and                         
                                         procedures require                   
                                         the following to                     
                                         be documented: (1)                   
                                         the determination                    
                                         of what is                           
                                         considered                           
                                         feasible for CFS                     
                                         reporting of                         
                                         stewardship                          
                                         investments and                      
                                         (2) what related                     
                                         entity and/or                        
                                         program                              
                                         information is to                    
                                         be disclosed in                      
                                         the CFS and                          
                                         revised each year                    
                                         as appropriate.                      
                                                                              
                                         With regard to                       
                                         investments in                       
                                         nonfederal                           
                                         physical property,                   
                                         the revised                          
                                         policies and                         
                                         procedures only                      
                                         require narrative                    
                                         description(s) of                    
                                         the program(s)                       
                                         that was (were)                      
                                         selected for                         
                                         disclosure in the                    
                                         CFS. This required                   
                                         information is                       
                                         shown as required                    
                                         supplementary                        
                                         stewardship                          
                                         information in the                   
                                         fiscal year 2006                     
                                         CFS.                                 
96    02-119 The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-118.                              
                Secretary to ensure that                                      
                the note disclosure for  Treasury's revised                   
                nonfederal physical      policies and                         
                property included in     procedures related                   
                stewardship information  to reporting on                      
                meets the requirements   nonfederal                           
                of SFFAS No. 8,          physical property                    
                Supplementary            only require the                     
                Stewardship Reporting,   narrative                            
                paragraph 87, which      description of                       
                requires a description   noncash items                        
                of major programs        transferred to                       
                involving federal        state and local                      
                investments in           governments                          
                nonfederal physical      related to the                       
                property, including a    specific                             
                description of programs  program(s) that                      
                or policies under which  was (were)                           
                noncash assets are       selected for                         
                transferred to state and disclosure in the                    
                local governments.       CFS. This required                   
                                         information is                       
                                         shown as required                    
                                         supplementary                        
                                         stewardship                          
                                         information in the                   
                                         fiscal year 2006                     
                                         CFS.                                 
97    02-120 The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-118.                              
                Secretary to ensure that                                      
                the note disclosure for  Treasury's revised                   
                human capital included   policies and                         
                in stewardship           procedures related                   
                information meets the    to reporting on                      
                requirements of SFFAS    human capital                        
                No. 8, Supplementary     investments only                     
                Stewardship Reporting,   require cost                         
                paragraph 94, which      disclosure for the                   
                requires a narrative     program(s) that                      
                description and the full was (were)                           
                cost of the investment   selected for                         
                in human capital for the disclosure in the                    
                year being reported on   CFS. This required                   
                as well as the preceding information is                       
                4 years (if full cost    shown as required                    
                data are not available,  supplementary                        
                outlay data can be       stewardship                          
                reported).               information in the                   
                                         fiscal year 2006                     
                                         CFS.                                 
98    02-121 The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-118.                              
                Secretary to ensure that                                      
                the note disclosure for  Treasury's revised                   
                human capital included   policies and                         
                in stewardship           procedures related                   
                information meets the    to reporting on                      
                requirements of SFFAS    human capital                        
                No. 8, Supplementary     investments only                     
                Stewardship Reporting,   require cost                         
                paragraph 94, which      disclosure for the                   
                requires the full cost   program(s) that                      
                or outlay data for       was (were)                           
                investments in human     selected for                         
                capital at a meaningful  disclosure in the                    
                category or level (e.g., CFS. This required                   
                by major program,        information is                       
                agency, or department).  shown as required                    
                                         supplementary                        
                                         stewardship                          
                                         information in the                   
                                         fiscal year 2006                     
                                         CFS.                                 
99    02-122 The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-118.                              
                Secretary to ensure that                                      
                the note disclosure for  Treasury's revised                   
                human capital included   policies and                         
                in stewardship           procedures related                   
                information meets the    to reporting on                      
                requirements of SFFAS    human capital                        
                No. 8, Supplementary     investments only                     
                Stewardship Reporting,   require narrative                    
                paragraph 94, which      description(s) of                    
                requires a narrative     the program(s)                       
                description of major     that was (were)                      
                education and training   selected for                         
                programs considered      disclosure in the                    
                federal investments in   CFS. This required                   
                human capital.           information is                       
                                         shown as required                    
                                         supplementary                        
                                         stewardship                          
                                         information in the                   
                                         fiscal year 2006                     
                                         CFS.                                 
100   02-123 The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-118.                              
                Secretary to ensure that                                      
                the note disclosure for  Treasury's revised                   
                research and development policies and                         
                included in stewardship  procedures related                   
                information meets the    to reporting on                      
                requirements of SFFAS    research and                         
                No. 8, Supplementary     development                          
                Stewardship Reporting,   investments only                     
                paragraph 100, which     require narrative                    
                requires reporting of    description(s) of                    
                the annual investment    the program(s)                       
                made in the year ended   that was (were)                      
                on the balance sheet     selected for                         
                date as well as in each  disclosure in the                    
                of the 4 years preceding CFS. This required                   
                that year. (As defined   information is                       
                in this standard,        shown as required                    
                "annual investment"      supplementary                        
                includes more than the   stewardship                          
                annual expenditure       information in the                   
                reported by character    fiscal year 2006                     
                class for budget         CFS.                                 
                execution. Full cost                                          
                shall be measured and                                         
                accounted for in                                              
                accordance with SFFAS                                         
                No. 4, Managerial Cost                                        
                Accounting Standards for                                      
                the Federal Government.)                                      
                If data for additional                                        
                years would provide a                                         
                better indication of                                          
                investment, reporting of                                      
                the additional years'                                         
                data is encouraged. In                                        
                those unusual instances                                       
                when entities have no                                         
                historical data, only                                         
                current reporting year                                        
                data need be reported.                                        
                Reporting must be at a                                        
                meaningful category or                                        
                level, for example, a                                         
                major program or                                              
                department.                                                   
101   02-124 The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     02-118.                              
                Secretary to ensure that                                      
                the note disclosure for  Treasury's revised                   
                research and development policies and                         
                included in stewardship  procedures related                   
                information meets the    to reporting on                      
                requirements of SFFAS    research and                         
                No. 8, Supplementary     development                          
                Stewardship Reporting,   investments only                     
                paragraph 100, which     require narrative                    
                requires a narrative     description(s) of                    
                description of major     the program(s)                       
                research and development that was (were)                      
                programs.                selected for                         
                                         disclosure in the                    
                                         CFS. This required                   
                                         information is                       
                                         shown as required                    
                                         supplementary                        
                                         stewardship                          
                                         information in the                   
                                         fiscal year 2006                     
                                         CFS.                                 
102   02-125 The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosures                      
                Secretary to ensure that required by SFFAS                    
                the note disclosure for  No. 6, paragraphs                    
                deferred maintenance     83 and 84, are no                    
                meets the requirements   longer applicable                    
                of SFFAS No. 6,          to the CFS per                       
                Accounting for Property, SFFAS No. 32,                        
                Plant, and Equipment,    paragraphs 12.b                      
                paragraphs 83 and 84,    and 12.c,                            
                which require inclusion  respectively.                        
                of the method of                                              
                measuring deferred                                            
                maintenance for each                                          
                major class of PP&E.                                          
103   02-126 The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosures                      
                Secretary to ensure that required by SFFAS                    
                the note disclosure for  No. 6, paragraphs                    
                deferred maintenance     83 and 84, are no                    
                meets the requirements   longer applicable                    
                of SFFAS No. 6,          to the CFS per                       
                Accounting for Property, SFFAS No. 32,                        
                Plant, and Equipment,    paragraphs 12.b                      
                paragraphs 83 and 84,    and 12.c,                            
                which require that if    respectively.                        
                the condition assessment                                      
                survey method of                                              
                measuring deferred                                            
                maintenance is used, the                                      
                following should be                                           
                presented for each major                                      
                class of PP&E: (1)                                            
                description of                                                
                requirements or                                               
                standards for acceptable                                      
                operating condition, (2)                                      
                any changes in the                                            
                condition requirements                                        
                or standards, and (3)                                         
                asset condition and a                                         
                range estimate of the                                         
                dollar amount of                                              
                maintenance needed to                                         
                return the asset to its                                       
                acceptable operating                                          
                condition.                                                    
104   02-127 The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosures                      
                Secretary to ensure that required by SFFAS                    
                the note disclosure for  No. 6, paragraphs                    
                deferred maintenance     83 and 84, are no                    
                meets the requirements   longer applicable                    
                of SFFAS No. 6,          to the CFS per                       
                Accounting for Property, SFFAS No. 32,                        
                Plant, and Equipment,    paragraphs 12.b                      
                paragraphs 83 and 84,    and 12.c,                            
                which require that if    respectively.                        
                the total life-cycle                                          
                cost method is used, the                                      
                following should be                                           
                presented for each major                                      
                class of PP&E: (1) the                                        
                original date of the                                          
                maintenance forecast and                                      
                an explanation for any                                        
                changes to the forecast;                                      
                (2) prior year balance                                        
                of the cumulative                                             
                deferred maintenance                                          
                amount; (3) the dollar                                        
                amount of maintenance                                         
                that was defined by the                                       
                professionals who                                             
                designed, built, or                                           
                managed the PP&E as                                           
                required maintenance for                                      
                the reporting period;                                         
                (4) the dollar amount of                                      
                maintenance actually                                          
                performed during the                                          
                period; (5) the                                               
                difference between the                                        
                forecast and actual                                           
                maintenance; (6) any                                          
                adjustments to the                                            
                scheduled amounts deemed                                      
                necessary by the                                              
                managers of the PP&E                                         
                and (7) the ending                                            
                cumulative balance for                                        
                the reporting period for                                      
                each major class of                                           
                asset experiencing                                            
                deferred maintenance.                                         
105   02-128 The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     the disclosures                      
                Secretary, to ensure     required by SFFAS                    
                that the note disclosure No. 6, paragraphs                    
                for deferred maintenance 83 and 84, are no                    
                meets the requirements   longer applicable                    
                of SFFAS No. 6,          to the CFS per                       
                Accounting for Property, SFFAS No. 32,                        
                Plant, and Equipment,    paragraphs 12.b                      
                paragraphs 83 and 84,    and 12.c,                            
                which require that if    respectively.                        
                management elects to                                          
                disclose critical and                                         
                noncritical amounts, the                                      
                disclosure is to include                                      
                management's definition                                       
                of these categories.                                          
106   02-129 The Secretary of the     This required      Open. Treasury    
                Treasury should direct   information was    expected the      
                the Fiscal Assistant     requested from the required          
                Secretary to ensure that agencies for       information from  
                the note disclosure for  disclosure in the  applicable        
                stewardship              required           agencies as       
                responsibilities related supplementary      requested in the  
                to the risk assumed for  information (risk  TFM. However,     
                federal insurance and    assumed) section   when the          
                guarantee programs meets of the fiscal year information was   
                the requirements of      2006 CFS. However, not provided,     
                SFFAS No. 5, Accounting  no data were       Treasury did not  
                for Liabilities of the   received from some have any policies 
                Federal Government,      agencies.          and procedures    
                paragraph 106, which                        for following up  
                requires that when                          with agencies to  
                financial information                       determine why the 
                pursuant to FASB                            information was   
                standards on federal                        not provided.     
                insurance and guarantee                                       
                programs conducted by                                         
                government corporations                                       
                is incorporated in                                            
                general purpose                                               
                financial reports of a                                        
                larger federal reporting                                      
                entity, the entity                                            
                should report as                                              
                required supplementary                                        
                information what amounts                                      
                and periodic change in                                        
                those amounts would be                                        
                reported under the "risk                                      
                assumed" approach.                                            
[40]GAO-04-866 (results of the fiscal year 2003 audit)
107   03-4   The Director of OMB      See status of      Open. See status  
                should direct the        recommendation No. of recommendation 
                Controller of OMB, in    02-18.             No. 02-18.        
                coordination with                                             
                Treasury's Fiscal                                             
                Assistant Secretary, to                                       
                work with the federal                                         
                agencies so that the                                          
                differences between net                                       
                outlays the agencies                                          
                report in their                                               
                Statement of Budgetary                                        
                Resources and the net                                         
                outlay records Treasury                                       
                uses to prepare the                                           
                Statement of Changes in                                       
                Cash Balance are                                              
                reconciled.                                                   
108   03-5   The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-16.             No. 02-16.        
                Secretary to determine                                        
                and address the effects                                       
                that any of the                                               
                differences between net                                       
                outlays the agencies                                          
                report in their                                               
                Statement of Budgetary                                        
                Resources and Treasury's                                      
                net outlay records may                                        
                have on the CFS.                                              
109   03-6   The Secretary of the     The Statement of   Open. We agree    
                Treasury should direct   Changes in Cash    that SFFAS No. 24 
                the Fiscal Assistant     Balance reconciles requires the      
                Secretary to develop a   to operating cash  reconciliation of 
                process that will allow  as opposed to the  the federal       
                full reporting of the    total cash balance government's cash 
                changes in cash balance  shown in the       balance. However, 
                of the U.S. government.  Balance Sheet.     the Statement of  
                Specifically, the        SFFAS No. 24,      Changes in Cash   
                process should provide   paragraph 12,      Balance           
                for reporting on the     requires a         reconciles to     
                change in cash reported  reconciliation to  operating cash of 
                on the consolidated      the government's   $43.6 billion     
                balance sheet, which     cash balance, but  rather than the   
                should be linked to cash does not prescribe cash balance      
                balances reported in     how this           reported on the   
                federal agencies'        reconciliation     Balance Sheet of  
                audited financial        should be          $97.9 billion, as 
                statements.              presented.         of September 30,  
                                         Treasury believes  2006.             
                                         it complies with                     
                                         paragraph 12 by                      
                                         linking operating                    
                                         cash to Note 2,                      
                                         Cash and Other                       
                                         Monetary Assets,                     
                                         which then links                     
                                         operating cash to                    
                                         the total cash                       
                                         balance amount on                    
                                         the Balance Sheet.                   
110   03-7   The Secretary of the     While SFFAS No. 24 Closed. Beginning 
                Treasury should direct   shows gross        in fiscal year    
                the Fiscal Assistant     receipt and        2006, this        
                Secretary to report      disbursement       disclosure is no  
                gross amounts for        amounts for direct longer applicable 
                receipts and             loans and loan     to the CFS per    
                disbursements of cash    guarantees as an   SFFAS No. 32,     
                related to direct loans  illustration only, paragraph 15.b.   
                and loan guarantees.     it does not                          
                                         require such                         
                                         disaggregated                        
                                         disclosure in the                    
                                         CFS.                                 
111   03-8   The Director of OMB      An interagency     Open.             
                should direct the        task force has                       
                Controller of OMB, in    been established                     
                coordination with        under the                            
                Treasury's Fiscal        direction of the                     
                Assistant Secretary, to  Attorney General                     
                work with Justice and    and has developed                    
                certain other executive  a strategic plan                     
                branch agencies to       for improving                        
                ensure that these        criminal debt                        
                agencies report or       collection and has                   
                disclose relevant        provided the plan                    
                criminal debt            to Congress. The                     
                information in           task force                           
                conformity with GAAP in  includes                             
                their financial          representatives                      
                statements and have such from the                             
                information subjected to Department of                        
                audit.                   Justice (Justice),                   
                                         Treasury, OMB, and                   
                                         the Administrative                   
                                         Office of the U.S.                   
                                         Courts. The task                     
                                         force continues to                   
                                         make progress in                     
                                         implementing new                     
                                         policies and                         
                                         procedures.                          
112   03-9   The Secretary of the     Treasury will      Open.             
                Treasury should direct   include criminal                     
                the Fiscal Assistant     debt information                     
                Secretary to include     as it becomes                        
                relevant criminal debt   available. See                       
                information in the CFS   status of                            
                or document the specific recommendation No.                   
                rationale for excluding  03-08.                               
                such information.                                             
113   03-11  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     02-42.             No. 02-42.        
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                modify Treasury's plans                                       
                for the new closing                                           
                package to (1) require                                        
                federal agencies to                                           
                directly link their                                           
                audited financial                                             
                statement notes to the                                        
                CFS notes and (2)                                             
                provide the necessary                                         
                information to                                                
                demonstrate that all of                                       
                the five principal                                            
                consolidated financial                                        
                statements are                                                
                consistent with the                                           
                underlying information                                        
                in federal agencies'                                          
                audited financial                                             
                statements and other                                          
                financial data.                                               
114   03-18  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                environmental and        CFS per SFFAS No.                    
                disposal liabilities     32, paragraph                        
                meets the requirements   12.e.                                
                of SFFAS No. 6,                                               
                Accounting for Property,                                      
                Plant, and Equipment,                                         
                which requires the                                            
                reporting entity to                                           
                disclose the method for                                       
                assigning estimated                                           
                total cleanup costs to                                        
                current operating                                             
                periods.                                                      
115   03-19  The Secretary of the     The disclosure of  Closed.           
                Treasury should direct   the unrecognized                     
                the Fiscal Assistant     portion of                           
                Secretary to ensure that estimated total                      
                the note disclosure for  cleanup costs is                     
                environmental and        now governed by                      
                disposal liabilities     SFFAS No. 32,                        
                meets the requirements   paragraph 25.b.                      
                of SFFAS No. 6,          The required                         
                Accounting for Property, disclosure is                        
                Plant, and Equipment,    included in Note                     
                which requires the       12, Environmental                    
                reporting entity to      and Disposal                         
                disclose, for cleanup    Liabilities, in                      
                costs associated with    the fiscal year                      
                general property, plant, 2006 CFS.                            
                and equipment, the                                            
                unrecognized portion of                                       
                estimated total cleanup                                       
                costs be disclosed.                                           
116   03-20  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                environmental and        CFS per SFFAS No.                    
                disposal liabilities     32, paragraph                        
                meets the requirements   12.h.                                
                of SFFAS No. 6,                                               
                Accounting for Property,                                      
                Plant, and Equipment,                                         
                which requires the                                            
                reporting entity to                                           
                disclose the nature of                                        
                estimates and                                                 
                information regarding                                         
                possible changes to the                                       
                estimates resulting from                                      
                inflation, deflation,                                         
                technology, or                                                
                applicable laws and                                           
                regulations.                                                  
117   03-21  The Secretary of the     The disclosure of  Closed. Although  
                Treasury should direct   the unrecognized   there is no       
                the Fiscal Assistant     portion of         authoritative     
                Secretary to consider    estimated total    requirement to    
                whether the reader would cleanup costs is   disclose          
                be interested in         now governed by    significant or    
                understanding why the    SFFAS No. 32,      unusual changes   
                environmental and        paragraph 25,      in balances in    
                disposal liabilities     which does not     the notes to the  
                amount significantly     mandate such an    financial         
                changed during the year  explanation,       statements, the   
                and include the          although such      Management's      
                explanation for the      explanation would  Discussion and    
                change in the note       be added as        Analysis section  
                disclosure.              circumstances      of the 2006 CFS   
                                         merit.             included a        
                                                            discussion of the 
                                                            reasons for and   
                                                            the amount of     
                                                            certain           
                                                            significant       
                                                            changes relating  
                                                            to environmental  
                                                            and disposal      
                                                            liabilities.      
118   03-22  The Secretary of the     See status of      Open. Paragraph   
                Treasury should direct   recommendation No. 39 of SFFAS No.   
                the Fiscal Assistant     02-118.            8, Supplementary  
                Secretary to ensure that                    Stewardship       
                the information in       Treasury's revised Reporting,        
                stewardship information  policies and       established that  
                for research and         procedures related summary or        
                development meets the    to reporting on    selected          
                requirements of SFFAS    stewardship        stewardship       
                No. 8, Supplementary     investments only   investments       
                Stewardship Reporting,   require reporting  information, as   
                paragraph 99, which      on major results   is feasible,      
                requires the reporting   that were achieved should be         
                entity to include a      by the basic or    reported in the   
                narrative discussion of  applied research   CFS. Treasury     
                the major results        programs, and by   agreed that it    
                achieved by the program  the development    was feasible to   
                along the lines of basic program(s), that   include in the    
                research, applied        were selected for  CFS a narrative   
                research, and            disclosure in the  discussion of the 
                development.             CFS.               results achieved  
                                                            by the major      
                                                            research and      
                                                            development       
                                                            programs. As      
                                                            such, in the      
                                                            fiscal year 2006  
                                                            TFM, Treasury     
                                                            requested         
                                                            applicable        
                                                            federal agencies  
                                                            to provide        
                                                            information       
                                                            regarding results 
                                                            achieved for      
                                                            their research    
                                                            and development   
                                                            programs.         
                                                            However, the      
                                                            requested         
                                                            disclosure        
                                                            information was   
                                                            not provided in   
                                                            the closing       
                                                            packages by the   
                                                            federal agencies  
                                                            that had major    
                                                            research and      
                                                            development       
                                                            programs.         
                                                            Regardless, two   
                                                            federal agencies  
                                                            that had major    
                                                            research and      
                                                            development       
                                                            programs did      
                                                            report this type  
                                                            of information in 
                                                            their respective  
                                                            fiscal year 2006  
                                                            performance and   
                                                            accountability    
                                                            reports.          
[41]GAO-05-407 (results of the fiscal year 2004 audit)
119   04-1   The Secretary of the     Treasury further   Closed.           
                Treasury should direct   revised and                          
                the Fiscal Assistant     documented its                       
                Secretary to segregate   major procedures                     
                the duties of            in fiscal year                       
                individuals performing   2006 related to                      
                key functions in         the CFS                              
                Treasury's processes for compilation                          
                preparing governmentwide process, including                   
                adjustments to the       those related to                     
                financial statements,    the duties of the                    
                making changes to Excel  individuals with                     
                spreadsheets that        the capability to                    
                contain audited agency   enter, change, and                   
                financial information,   delete data within                   
                and accessing federal    the GFRS database,                   
                agencies' closing        and the posting of                   
                package data in          adjustments to the                   
                Treasury's new system.   CFS to address                       
                                         segregation of                       
                                         duties.                              
120   04-2   The Secretary of the     Treasury will      Open. Treasury    
                Treasury should direct   follow its         did not have      
                the Fiscal Assistant     standard operating appropriate       
                Secretary to require and procedure that     supporting        
                maintain appropriate     includes           documentation for 
                supporting documentation maintaining        all transactions  
                for all journal vouchers documentation for  recorded in the   
                recorded in the CFS.     all recorded       CFS. Recording    
                                         journal vouchers,  transactions in   
                                         including          the financial     
                                         notification and   statements        
                                         approval of        without adequate  
                                         changes from       underlying        
                                         affected agencies. support increases 
                                                            the risk that     
                                         Except in certain  inappropriate     
                                         circumstances      adjustments to    
                                         described below,   balances in the   
                                         Treasury will seek financial         
                                         approval from      statements could  
                                         agencies before    be made.          
                                         making data                          
                                         changes. However,  We believe that   
                                         because of         Treasury should   
                                         year-end time      contact agencies  
                                         constraints,       to resolve any    
                                         Treasury will make discrepancies     
                                         changes without    between agencies' 
                                         agency contact or  audited closing   
                                         approval under the packages and      
                                         following          audited financial 
                                         circumstances: (1) statements and    
                                         adjustments to     discuss any other 
                                         agree closing      situations that   
                                         packages to        require           
                                         financial          adjustments to    
                                         statements, (2)    agencies' audited 
                                         adjustments to     closing package   
                                         ensure consistency data because      
                                         of GAAP between    Treasury could    
                                         agencies, and (3)  incorrectly       
                                         adjustments to     adjust agencies'  
                                         conform an agency  audited           
                                         to GAAP.           information.      
121   04-3   The Secretary of the     Treasury policy    Open. See status  
                Treasury should direct   related to the     of recommendation 
                the Fiscal Assistant     notification of    No. 04-2.         
                Secretary to require     agencies before                      
                that Treasury employees  making needed data                   
                contact and document     changes is                           
                communications with      described in                         
                agencies before          status of                            
                recording journal        recommendation No.                   
                vouchers to change       04-2.                                
                agency audited closing                                        
                package data.            Treasury agrees                      
                                         that changes to                      
                                         closing package                      
                                         information should                   
                                         be accurate and                      
                                         fully supported.                     
                                         Nevertheless,                        
                                         errors in closing                    
                                         packages do occur,                   
                                         and Treasury and                     
                                         OMB have notified                    
                                         the agencies and                     
                                         their auditors of                    
                                         these errors in an                   
                                         effort to reduce                     
                                         such errors.                         
                                                                              
                                         With regard to                       
                                         adjustments to                       
                                         agree closing                        
                                         packages to                          
                                         financial                            
                                         statements, which                    
                                         constitute a                         
                                         significant                          
                                         portion of all                       
                                         adjustments made,                    
                                         the rebuttable                       
                                         presumption is                       
                                         that since closing                   
                                         packages must be                     
                                         consistent with                      
                                         the underlying                       
                                         agencies'                            
                                         financial                            
                                         statements, any                      
                                         inconsistencies                      
                                         found require                        
                                         adjustment to                        
                                         agree to the                         
                                         agency records.                      
                                                                              
                                         Treasury maintains                   
                                         that agency                          
                                         financial                            
                                         statements also                      
                                         serve as                             
                                         communications to                    
                                         Treasury; thus                       
                                         adjustments                          
                                         agreeing closing                     
                                         packages to                          
                                         financial                            
                                         statements are, by                   
                                         definition, fully                    
                                         supported. Where                     
                                         agency                               
                                         clarification is                     
                                         needed related to                    
                                         complex                              
                                         disclosures,                         
                                         Treasury will                        
                                         continue to                          
                                         document these                       
                                         discussions to                       
                                         ensure that the                      
                                         CFS is consistent                    
                                         with agency                          
                                         financial                            
                                         statements and                       
                                         note disclosures.                    
                                                                              
                                         Treasury                             
                                         understands the                      
                                         risk for material                    
                                         error in making                      
                                         changes without                      
                                         adequate support.                    
                                         However, Treasury                    
                                         believes that this                   
                                         risk is                              
                                         sufficiently                         
                                         minimized by                         
                                         following its                        
                                         current policies                     
                                         and procedures.                      
122   04-4   The Secretary of the     Treasury further   Open. Certain of  
                Treasury should direct   revised its        Treasury's        
                the Fiscal Assistant     procedures to      procedures were   
                Secretary to require and ensure management  not effective for 
                document management      reviews of data    fiscal year 2006. 
                reviews of all           changes to the                       
                procedures that result   CFS.                                 
                in data changes to the                                        
                CFS.                                                          
123   04-5   The Secretary of the     Treasury further   Closed.           
                Treasury should direct   revised its                          
                the Fiscal Assistant     automated                            
                Secretary to configure   processes in                         
                the GFRS database to     fiscal year 2006                     
                prevent Treasury         to prevent                           
                personnel from altering  unauthorized                         
                data submitted by        changes to                           
                federal agencies and to  agency-submitted                     
                use separate GFRS        data. Also, see                      
                databases for testing    status of                            
                and production.          recommendation No.                   
                                         04-1.                                
124   04-6   The Secretary of the     Treasury made      Open. For fiscal  
                Treasury should direct   various            year 2006, as had 
                the Fiscal Assistant     improvements to    been the case for 
                Secretary to assess the  its infrastructure fiscal year 2005, 
                infrastructure           during fiscal year Treasury was      
                associated with the      2006, including    unable to provide 
                compilation process and  streamlining the   the final CFS and 
                modify it as necessary   compilation        supporting        
                to achieve a sound       process to         documentation in  
                internal control         automate the       time for us to    
                environment.             production of      complete all of   
                                         certain items,     our planned       
                                         continuing its     auditing          
                                         recruitment of     procedures        
                                         qualified          related to the    
                                         personnel and      compilation of    
                                         providing them     these financial   
                                         with appropriate   statements. In    
                                         training related   our view, a major 
                                         to the CFS         contributing      
                                         compilation        factor is that    
                                         process and        Treasury did not  
                                         associated         have enough       
                                         internal controls, personnel with    
                                         revising its       specialized       
                                         policies and       financial         
                                         procedures to      reporting         
                                         improve            experience to     
                                         documentation of   help ensure       
                                         management reviews reliable          
                                         and approvals, and financial         
                                         continuing         reporting by the  
                                         cross-training on  reporting date.   
                                         significant key                      
                                         compilation                          
                                         processes.                           
125   04-9   The Secretary of the     Treasury updated   Closed.           
                Treasury should direct   the TFM in fiscal                    
                the Fiscal Assistant     year 2006 related                    
                Secretary to review the  to the required                      
                TFM and any other        GAAP disclosures                     
                guidance to federal      to ensure accurate                   
                agencies to ensure that  financial data                       
                they provide clear       reporting by                         
                instructions for         federal agencies.                    
                reporting accurate data                                       
                to Treasury in the area                                       
                of federal employee and                                       
                veteran benefits                                              
                payable.                                                      
126   04-14  The Secretary of the     OMB and Treasury   Closed.           
                Treasury should direct   followed their                       
                the Fiscal Assistant     policies and                         
                Secretary, working in    procedures related                   
                coordination with the    to legal letter                      
                Controller of OMB's      representations                      
                Office of Federal        and legal                            
                Financial Management, to contingency                          
                develop policies and     disclosures to                       
                procedures to determine  address                              
                the proper resolution    inconsistencies                      
                and the appropriate      between Justice                      
                legal representations to and agency                           
                GAO at the               assessments and                      
                governmentwide level     determined the                       
                when Justice's legal     proper disclosure                    
                counsel and agencies'    for the CFS.                         
                legal counsel provide                                         
                inconsistent opinions.                                        
127   04-15  The Secretary of the     This required      Open. Although no 
                Treasury should direct   information was    data were         
                the Fiscal Assistant     requested from the received, the     
                Secretary to ensure that agencies for       agency for which  
                the note disclosure for  disclosure in Note this required     
                federal employee and     11, Federal        disclosure is     
                veteran benefits payable Employees and      applicable        
                meets the requirements   Veteran Benefits   included the      
                of SFFAS No. 5,          Payable, in the    disclosure in its 
                Accounting for           fiscal year 2006   fiscal year 2006  
                Liabilities of the       CFS. However, no   performance and   
                Federal Government,      data were          accountability    
                paragraph 110, table 9,  received.          report.           
                which states that all                                         
                components of the                                             
                liability for future                                          
                policy benefits should                                        
                be separately disclosed                                       
                in a footnote with a                                          
                description of each                                           
                amount and an                                                 
                explanation of its                                            
                projected use and any                                         
                other potential uses.                                         
128   04-16  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                federal employee and     CFS per SFFAS No.                    
                veteran benefits payable 32, paragraph                        
                meets the requirements   11.a.                                
                of SFFAS No. 5,                                               
                Accounting for                                                
                Liabilities of the                                            
                Federal Government,                                           
                paragraphs 117 and 118,                                       
                which state that all                                          
                federal reporting                                             
                entities with whole life                                      
                insurance programs                                            
                should follow the                                             
                standards as prescribed                                       
                in the private sector                                         
                standards when reporting                                      
                the liability for future                                      
                policy benefits, in                                           
                addition to the                                               
                following required                                            
                disclosures: liability                                        
                for future policy                                             
                benefits relating to                                          
                participating life                                            
                insurance contracts                                           
                should be equal to the                                        
                sum of (1) the net level                                      
                premium reserve for                                           
                death and endowment                                           
                policy benefits, (2) the                                      
                liability for terminal                                        
                dividends, and (3) any                                        
                premium deficiency.                                           
129   04-17  The Secretary of the     Beginning in       Closed.           
                Treasury should direct   fiscal year 2006,                    
                the Fiscal Assistant     this disclosure is                   
                Secretary to ensure that no longer                            
                the note disclosure for  applicable to the                    
                federal employee and     CFS per SFFAS No.                    
                veteran benefits payable 32, paragraph                        
                meets the requirements   11.b.                                
                of SFFAS No. 5,                                               
                Accounting for                                                
                Liabilities of the                                            
                Federal Government,                                           
                paragraph 121, which                                          
                states that all                                               
                components of the                                             
                liability for future                                          
                policy benefits (i.e.,                                        
                the net-level premium                                         
                reserve for death and                                         
                endowment policy and the                                      
                liability for terminal                                        
                dividends) should be                                          
                separately disclosed in                                       
                a footnote with a                                             
                description of each                                           
                amount and an                                                 
                explanation of its                                            
                projected use and any                                         
                other potential uses                                          
                (e.g., reducing                                               
                premiums, determining                                         
                and declaring dividends                                       
                available, or reducing                                        
                federal support in the                                        
                form of appropriations                                        
                related to                                                    
                administrative cost or                                        
                subsidies).                                                   
130   04-19  The Secretary of the     See status of      Open. Further     
                Treasury should direct   recommendation No. clarification is  
                the Fiscal Assistant     02-25 as to the    needed in the TFM 
                Secretary to ensure that need for further   instructions      
                agencies designate in    analysis of        regarding the     
                the note disclosure for  certain            disclosure of     
                cash and other monetary  disclosures. In    cash that is      
                assets any amounts       addition, this     restricted with   
                reported for the "other  required           respect to the    
                cash" line items that    information was    federal           
                are restricted with      requested from the government taken  
                respect to the federal   agencies for       as a whole. Also, 
                government taken as a    inclusion in Note  see status of     
                whole.                   2, Cash and Other  recommendation    
                                         Monetary Assets,   No. 02-25.        
                                         in the fiscal year                   
                                         2006 CFS.                            
131   04-20  The Secretary of the     The required       Open. Treasury    
                Treasury should direct   information was    expected the      
                the Fiscal Assistant     requested from the required          
                Secretary to ensure that agencies for       information from  
                the note disclosure for  disclosure in the  applicable        
                other liabilities meets  required           agencies as       
                the requirements of      supplementary      requested in the  
                SFFAS No. 5, paragraph   information, risk  TFM. However,     
                114, which requires the  assumed section of when the          
                reporting of indicators  the fiscal year    information was   
                of the range of          2006 CFS. However, not provided,     
                uncertainty around       no data were       Treasury did not  
                insurance-related        received from some have any policies 
                estimates and the        agencies.          and procedures    
                sensitivity of the                          for following up  
                estimates to changes in                     with agencies to  
                major assumptions.                          determine why the 
                                                            information was   
                                                            not provided.     
[42]GAO-06-415 (results of the fiscal year 2005 audit)
132   05-1   The Secretary of the     Treasury revised   Closed.           
                Treasury should direct   and documented its                   
                the Fiscal Assistant     policies and                         
                Secretary to develop a   procedures in                        
                process to help ensure   fiscal year 2006                     
                that for each reporting  related to the CFS                   
                year, the 2 years of     compilation                          
                consolidated financial   process, including                   
                statements and note      those related to                     
                information presented    the consistent and                   
                are consistently and     comparable                           
                comparably reported, in  presentation of                      
                all material respects.   prior and current                    
                                         year information,                    
                                         in all material                      
                                         respects.                            
133   05-2   The Director of OMB      OMB agrees with    Open.             
                should direct the        the recommendation                   
                Controller of the Office and is committed                     
                of Federal Financial     to working with                      
                Management, in           Treasury, GAO, and                   
                coordination with the    the pertinent                        
                Treasury Fiscal          federal agencies                     
                Assistant Secretary, to  to develop an                        
                develop an alternative   alternative                          
                solution for obtaining   solution for                         
                audit assurance related  obtaining audit                      
                to the Federal Deposit   assurance over the                   
                Insurance Corporation's  significant                          
                funds, National Credit   information                          
                Union Administration,    included in the                      
                and Farm Credit System   CFS for these                        
                Insurance Corporation,   agencies.                            
                which includes the                                            
                requirement for adequate                                      
                audit procedures to be                                        
                performed over                                                
                significant information                                       
                included in the CFS for                                       
                these agencies.                                               
134   05-3   The Director of OMB      OMB generally      Open.             
                should direct the        agrees with the                      
                Controller of the Office recommendation;                      
                of Federal Financial     however, it will                     
                Management to consider   continue to weigh                    
                not waiving the closing  the costs against                    
                package audit            benefits of global                   
                requirement for any      requirements                         
                verifying agency in      during extenuating                   
                future years, such as    circumstances.                       
                Tennessee Valley                                              
                Authority.                                                    
135   05-4   The Secretary of the     OMB concurs with   Open.             
                Treasury should direct   the                                  
                the Fiscal Assistant     recommendations                      
                Secretary, in            and is committed                     
                coordination with the    to improving the                     
                Controller of OMB, to    corrective action                    
                develop policies and     plans and                            
                procedures for           monitoring                           
                monitoring internal      progress against                     
                control to help ensure   those plans.                         
                that (1) audit findings                                       
                are promptly evaluated;                                       
                (2) proper actions are                                        
                determined in response                                        
                to audit findings and                                         
                recommendations, such as                                      
                a documented plan of                                          
                action with milestones                                        
                for short-term and                                            
                long-range solutions;                                         
                and (3) all actions that                                      
                correct or otherwise                                          
                resolve the audit                                             
                findings are completed                                        
                within established time                                       
                frames.                                                       
136   05-5   The Secretary of the     OMB concurs with   Open.             
                Treasury should direct   the                                  
                the Fiscal Assistant     recommendations                      
                Secretary, in            and is committed                     
                coordination with the    to improving the                     
                Controller of OMB, to    corrective action                    
                develop an executable    plans and                            
                plan of action and       monitoring                           
                milestones for           progress against                     
                short-term and           those plans.                         
                long-range solutions for                                      
                certain internal control                                      
                weaknesses we have                                            
                previously reported                                           
                regarding the process                                         
                for preparing the CFS.                                        
137   05-6   The Secretary of the     Treasury updated   Open.             
                Treasury should direct   the TFM in fiscal                    
                the Fiscal Assistant     year 2006 related                    
                Secretary to ensure that to the required                      
                the TFM and any other    GAAP disclosures                     
                guidance to federal      to ensure accurate                   
                agencies provide clear   financial data                       
                instructions for         reporting by                         
                providing reliable data  federal agencies.                    
                to Treasury for          With regard to                       
                restricted cash.         restricted cash,                     
                                         during fiscal year                   
                                         2006, Treasury                       
                                         reviewed agency                      
                                         cash amounts                         
                                         designated as                        
                                         restricted to                        
                                         determine what, if                   
                                         any, restrictions                    
                                         applied at the                       
                                         governmentwide                       
                                         level. Treasury                      
                                         will implement                       
                                         changes based on                     
                                         this review to the                   
                                         restricted cash                      
                                         disclosures during                   
                                         fiscal year 2007.                    
138   05-7   The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     04-9.                                
                Secretary to ensure that                                      
                the TFM and any other                                         
                guidance to federal                                           
                agencies provide clear                                        
                instructions for                                              
                providing reliable data                                       
                to Treasury for accounts                                      
                payable.                                                      
139   05-8   The Secretary of the     Treasury updated   Open.             
                Treasury should direct   the TFM in fiscal                    
                the Fiscal Assistant     year 2006 related                    
                Secretary to ensure that to the guidance to                   
                the TFM and any other    agencies                             
                guidance to federal      concerning agency                    
                agencies provide clear   management                           
                instructions for         representations                      
                providing reliable data  and related                          
                to Treasury for          summaries of                         
                summaries of unadjusted  unadjusted                           
                misstatements.           misstatements and                    
                                         will continue to                     
                                         revise them as                       
                                         necessary during                     
                                         fiscal year 2007.                    
140   05-9   The Secretary of the     See status of      Closed.           
                Treasury should direct   recommendation No.                   
                the Fiscal Assistant     04-9.                                
                Secretary to ensure that                                      
                the TFM and any other                                         
                guidance to federal                                           
                agencies provide clear                                        
                instructions for                                              
                providing reliable data                                       
                to Treasury for certain                                       
                information reported by                                       
                the Office of Personnel                                       
                Management that is used                                       
                to allocate costs on the                                      
                Statement of Net Cost.                                        
141   05-10  The Secretary of the     Treasury revised   Open. A           
                Treasury should direct   its quarterly      significant       
                the Fiscal Assistant     intragovernmental  number of         
                Secretary, in            reporting process  agencies reported 
                coordination with the    to provide clearer material          
                Controller of OMB, to    guidance to        differences on    
                provide clear guidance   agencies related   their             
                to federal agencies as   to their           certification     
                to when the "confirmed   intragovernmental  documents as      
                reporting" category in   confirmations as   being confirmed,  
                the intragovernmental    well as to require and upon detailed 
                reconciliation report    that agencies      review of         
                should be selected.      prepare corrective supporting        
                                         action plans for   explanations, the 
                                         continuing         agencies provided 
                                         "confirmed"        little or no      
                                         differences.       supporting        
                                                            documentation for 
                                                            the material      
                                                            differences.      
                                                            Therefore, we     
                                                            determined that   
                                                            federal agencies  
                                                            are still not     
                                                            being provided    
                                                            clear guidance as 
                                                            to when the       
                                                            "confirmed        
                                                            reporting"        
                                                            category in the   
                                                            intragovernmental 
                                                            reconciliation    
                                                            report should be  
                                                            selected.         
142   05-11  The Secretary of the     See status of      Open. See status  
                Treasury should direct   recommendation No. of recommendation 
                the Fiscal Assistant     05-10.             No. 05-10.        
                Secretary, in                                                 
                coordination with the                                         
                Controller of OMB, to                                         
                develop an effective                                          
                process for obtaining                                         
                clarification from                                            
                federal agencies for                                          
                inconsistent or                                               
                incomplete explanations                                       
                provided in all material                                      
                difference categories.                                        
143   05-12  The Secretary of the     Treasury revised   Closed. GAO       
                Treasury should direct   the focus of the   agrees with the   
                the Fiscal Assistant     intragovernmental  alternative       
                Secretary, working in    AUP reports to     solution.         
                coordination with the    allow for                            
                Controller of OMB, to    additional work on                   
                accelerate the due date  intragovernmental                    
                for inspectors general   differences after                    
                to complete and report   the annual audit                     
                on the results of        timelines.                           
                agreed-upon procedures   Therefore, the                       
                (AUP) on the             intragovernmental                    
                intragovernmental        AUP reports were                     
                activity and balances or not accelerated as                   
                develop an alternative   they were no                         
                solution that would      longer meant to be                   
                allow Treasury           used during the                      
                sufficient time to       current years'                       
                review the results and   audits but were                      
                make any necessary       now meant for                        
                adjustments to the CFS.  prospective use                      
                                         only.                                
                                                                              
                                         As an "alternative                   
                                         solution,"                           
                                         Treasury required                    
                                         that the current                     
                                         year                                 
                                         intragovernmental                    
                                         trading partner                      
                                         balances and                         
                                         activities be                        
                                         included in the                      
                                         scope of the                         
                                         annual closing                       
                                         package audit.                       
                                         This alternative                     
                                         solution allowed                     
                                         for the agency                       
                                         audit results on                     
                                         intragovernmental                    
                                         activity and                         
                                         balances to be                       
                                         used during the                      
                                         year-end audit of                    
                                         the CFS.                             

Source: GAO.

Appendix II: Comments from the Department of the Treasury

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Gary T. Engel, (202) 512-3406 or [43][email protected]

Acknowledgments

In addition to the above contact, the following individuals made key
contributions to this report: Lynda Downing, Assistant Director; Bill
Boutboul; Darryl Chang; Mina Gusukuma; Nina Marrero; Maria Morton; Paula
Rascona; Katherine Schirano; and Taya Tasse.

(198509)

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Highlights of [51]GAO-07-805 , a report to the Secretary of the Treasury
and the Director of the Office of Management and Budget

July 2007

FINANCIAL AUDIT

Significant Internal Control Weaknesses Remain in the Preparation of the
Consolidated Financial Statements of the U.S. Government

For the past 10 years, since GAO's first audit of the consolidated
financial statements of the U.S. government (CFS), certain material
weaknesses in internal control and in selected accounting and financial
reporting practices have prevented GAO from expressing an opinion on the
CFS. GAO has consistently reported that the U.S. government did not have
adequate systems, controls, and procedures to properly prepare the CFS.
GAO's December 2006 disclaimer of opinion on the fiscal year 2006 CFS
included a discussion of continuing weaknesses related to the preparation
of the CFS. The purpose of this report is to (1) provide details of
continuing and new weaknesses, (2) recommend improvements, and (3)
describe the status of corrective actions on GAO's previous 143
recommendations related to the preparation of the CFS.

[52]What GAO Recommends

GAO is making 11 new recommendations to address weaknesses identified
during the fiscal year 2006 CFS audit. Treasury and the Office of
Management generally concurred with the findings and recommendations in
this report; however, Treasury disagreed with the finding and
recommendation related to reporting a consolidated total in the
consolidated Statement of Social Insurance. GAO believes including a total
provides increased transparency, and is meaningful to the users of the
CFS.

GAO identified continuing and new weaknesses during its audit of the
federal government's process for preparing the fiscal year 2006 CFS. Such
weaknesses impair the U.S. government's ability to ensure that the CFS is
consistent with the underlying audited agency financial statements,
properly balanced, and in conformity with U.S. generally accepted
accounting principles.

The weaknesses GAO identified during its tests of the fiscal year 2006 CFS
preparation process involved the following areas:

           o reconciling and reporting undistributed offsetting receipts
           (component of the budget deficit),
           o directly linking audited federal agencies' financial statements
           to the CFS,
           o reporting unexpended budget balances,
           o reporting operating cash,
           o reporting and disclosing legal contingencies,
           o reconciling intragovernmental activity and balances,
           o preparing and auditing certain information in federal agencies'
           closing packages,
           o conformity with U.S. generally accepted accounting principles,
           and
           o various other internal control weaknesses that were identified
           in previous years' audits but remained in fiscal year 2006 (see
           app. I).

Of the 143 open recommendations GAO reported in April 2006 regarding the
process for preparing the CFS, 70 remained open as of December 1, 2006,
when GAO completed its fieldwork for the audit of the fiscal year 2006
CFS. Of the 73 recommendations that were closed, 53 were closed based on
the issuance in fiscal year 2006 of Statement of Federal Financial
Accounting Standards No. 32, Consolidated Financial Report of the United
States Government Requirements: Implementing Statement of Federal
Financial Accounting Concepts 4 "Intended Audience and Qualitative
Characteristics for the Consolidated Financial Report of the United States
Government." This standard eliminated or lessened the disclosure
requirements for the consolidated financial statements related to certain
information that the Department of the Treasury (Treasury) had not been
reporting. GAO will continue to monitor the status of corrective actions
to address the 11 new recommendations and the new remaining balance of 81
open recommendations during its fiscal year 2007 audit of the CFS.

References

Visible links
  29. http://www.gao.gov/financial.html
  30. http://www.fms.treas.gov/fr/index.html
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-04-45
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-04-866
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-05-407
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-06-415
  35. http://www.gao.gov/cgi-bin/getrpt?GAO-06-415
  36. http://www.gao.gov/cgi-bin/getrpt?GAO-04-45
  37. http://www.gao.gov/cgi-bin/getrpt?GAO-04-866
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-04-45
  39. http://www.gao.gov/cgi-bin/getrpt?GAO-04-45
  40. http://www.gao.gov/cgi-bin/getrpt?GAO-04-866
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-05-407
  42. http://www.gao.gov/cgi-bin/getrpt?GAO-06-415
  43. fmailto:[email protected]
  44. http://www.gao.gov/
  45. http://www.gao.gov/
  46. http://www.gao.gov/fraudnet/fraudnet.htm
  47. fmailto:[email protected]
  48. fmailto:[email protected]
  49. fmailto:[email protected]
  50. http://www.gao.gov/cgi-bin/getrpt?GAO-07-805
  51. http://www.gao.gov/cgi-bin/getrpt?GAO-07-805
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