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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[50]www.gao.gov/cgi-bin/getrpt?GAO-07-805 .
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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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