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Report to Congressional Committees:

February 2003:

Financial Audit:

American Battle Monuments Commissions Financial Statements for Fiscal 

Years 2002 and 2001:

GAO-03-444:

GAO Highlights:

Highlights of GAO-03-444, a report to the Senate and House Committees 
on 

Veterans Affairs:

February 2003:

Financial Audit:

American Battle Monuments Commissions Financial Statements for Fiscal 

Years 2002 and 2001:

Why GAO Did This Study: 

In accordance with 36 U.S.C. 2103, we are responsible for conducting 
audits 

of the agencywide financial statements of the American Battle Monuments 

Commission.  We audited the financial statements of the Commission for 
the 

fiscal years ended September 30, 2002, and 2001.  The audits were done 
to 

determine whether, in all material respects, (1) the Commissions 
financial 

statements were reliable, (2) Commission management maintained 
effective 

internal control over financial reporting and compliance with laws and 

regulations, and (3) Commission management complied with applicable 
laws and 

regulations.  

The American Battle Monuments Commission was created in 1923 to 
commemorate 

the sacrifices and achievements of U.S. Armed Forces where they have 
served 

overseas since April 6, 1917, and locations within the United States as 

directed by Congress.  The Commission designs, administers, operates, 
and 

maintains 24 American military cemeteries on foreign soil and 25 
federal 

memorials, monuments, and markers, 22 of which are on foreign soil.  
The 

Commission is also responsible for designing and constructing the 
national 

World War II Memorial on the Capitol Mall in Washington, D.C., and for 

maintaining 3 nonfederal memorials with funds provided by those 
memorials 

sponsors.

What GAO Found: 

In our opinion, the financial statements of the American Battle 
Monuments 

Commission as of September 30, 2002, and 2001, and for the fiscal years 
then 

ended, are presented fairly, in all material respects, in conformity 
with U.S. 

generally accepted accounting principles.  Also in our opinion, the 
Commission 

maintained effective internal control over financial reporting 
(including 

safeguarding of assets) and compliance with laws and regulations as of 

September 30, 2002.  In addition, we found no instances of Commission 

noncompliance in fiscal year 2002 with selected provisions of laws and 

regulations we tested.

However, our work identified three deficiencies in internal controls 
over 

information technology as of September 30, 2002, that we considered to 
be a 

reportable condition.  Commission management reported these 
deficiencies in 

its fiscal year 2002 report required by the Federal Managers Financial 

Integrity Act and plans to substantially implement corrections in 
fiscal year 

2003.

For fiscal year 2002, the Commission spent $28.6 million of 
appropriated funds 

to maintain its 24 cemeteries and 25 federal memorials.  It also spent 
$29.8 

million of private contributions and investment earnings, primarily for 

construction-in-progress of the World War II Memorial that is expected 
to be 

dedicated on Memorial Day 2004.  With $11.3 million of appropriations 
from 

Congress since fiscal year 1998, the Commission was able to eliminate 
its 

backlog of over 500 deferred maintenance projects as of September 30, 
2002.

Figure: The commissions North Africa American Cemetery in Carthage, 
Tunisia:

[See PDF for image]

Source: GAO photo.

[End of figure]

 

www.gao.gov/cgi-bin/getrpt?GAO-03-444.

The full report is available by clicking the link above, which includes 

information on objectives, scope, and methodology. For additional 
information, 

contact McCoy Williams at (202) 512-6906

Contents:

Letter:

Auditors Report:

Opinion on Financial Statements:

Opinion on Internal Control:

Reportable Condition:

Compliance With Laws and Regulations:

Consistency of Other Information:

Objectives, Scope, and Methodology:

Commission Comments and Our Evaluation:

Appendix:

Appendix I: Annual Financial Report on the American Battle Monuments 
Commission:

Annual Financial Report:

Managements Discussion and Analysis:

Consolidating Balance Sheet:

Consolidating Statement of Net Cost and Changes in:

Net Position:

Consolidating Statement of Budgetary Resources:

Consolidating Statement of Financing:

Notes to the Consolidating Financial Statements:

Required Supplementary Stewardship Information:

Statement of Heritage Assets:

Note to Statement of Heritage Assets:

Abbreviations:

FMFIA: Federal Managers Financial Integrity Act of 1982:

OMB: Office of Management and Budget:

This is a work of the U.S. Government and is not subject to copyright 

protection in the United States. It may be reproduced and distributed 
in

its entirety without further permission from GAO. It may also contain

copyrighted graphics, images or other materials. Permission from the 

copyright holder may be necessary should you wish to reproduce 
copyrighted

materials separately from GAOs products. 

Letter:

February 28, 2003:

The Honorable Arlen Specter

Chairman

The Honorable Bob Graham

Ranking Minority Member

Committee on Veterans Affairs

United States Senate:

The Honorable Christopher H. Smith

Chairman

The Honorable Lane Evans

Ranking Minority Member

Committee on Veterans Affairs

House of Representatives:

As required by 36 U.S.C. 2103, this report presents the results of our 

audits of the American Battle Monuments Commissions (the Commission) 

financial statements for the fiscal years ended September 30, 2002 and 

2001.

We are sending copies of this report to the Chairmen and Ranking 

Minority Members of the Senate Committee on Appropriations and the 

House Committee on Appropriations. We are also sending copies to the 

Secretary of the Treasury, the Director of the Office of Management and 

Budget, the Chairman of the Commission, and other interested parties. 

In addition, this report will be available at no charge on the GAO web 

site at http://www.gao.gov.

Should you or your staffs have any questions concerning this report, 

please contact me on (202) 512-6906 or Roger R. Stoltz, Assistant 

Director, at (202) 512-9408. Key contributors to this assignment were 

Patricia A. Summers, Edward R. Alexander, Jr., Bronwyn E. Hughes, Polly 

Y. Cheung, and

Donell L. Ries.

McCoy Williams

Director

Financial Management and Assurance:

Signed by McCoy Williams: 

Auditors Report To the Chairman of the American Battle Monuments 

Commission:

In accordance with 36 U.S.C. 2103, we are responsible for conducting 

audits of the agencywide financial statements of the American Battle 

Monuments Commission (the Commission). In our audits of the Commission 

for fiscal years 2002 and 2001, we found:

* the consolidating financial statements as of and for the fiscal year 

ended September 30, 2002, and comparative consolidated totals as of and 

for the fiscal year ended September 30, 2001, are presented fairly in 

conformity with U.S. generally accepted accounting principles;

* although internal controls should be improved, the Commission had 

effective internal control over financial reporting (including 

safeguarding assets) and compliance with laws and regulations as of 

September 30, 2002; and:

* no reportable noncompliance with laws and regulations we tested.

The following sections discuss in more detail (1) these conclusions and 

our conclusions on Managements Discussion and Analysis and other 

supplementary information and (2) the objective, scope, and methodology 

of our audit.

Opinion on Financial Statements:

The American Battle Monuments Commissions consolidating balance sheet 

as of September 30, 2002, and its related consolidating statements of 

net cost and changes in net position; budgetary resources; and 

financing, with accompanying notes for the fiscal year then ended, and 

comparative consolidated totals as of and for the fiscal year ended 

September 30, 2001, are presented fairly, in all material respects, in 

conformity with U.S. generally accepted accounting principles.

Opinion on Internal Control:

The Commission maintained, in all material respects, effective internal 

control over financial reporting (including safeguarding assets) and 

compliance as of September 30, 2002, that provided reasonable assurance 

that misstatements, losses, or noncompliance material in relation to 

the consolidating financial statements or to stewardship information 

would be prevented or detected on a timely basis. Our opinion is based 

upon criteria established under 31 U.S.C. 3512 (c), (d) [Federal 

Managers Financial Integrity Act (FMFIA)], and Office of Management 

and Budget (OMB) Circular No. A-123, Management Accountability and 

Control.

However, our work identified the need to improve certain internal 

controls, as described below, that we consider a reportable condition. 

Such a condition is a deficiency in the design or operation of internal 

control that, in our judgment, could adversely affect the Commissions 

ability to meet internal control objectives or meet OMB criteria for 

reporting matters under FMFIA. We did not consider these deficiencies 

to be a material weakness, which occurs when the design or operation of 

internal control components does not reduce to a relatively low level 

the risk that misstatements in amounts that would be material to the 

consolidating financial statements being audited may occur and not be 

detected within a timely period by employees in the normal course of 

performing their assigned duties. In addition, misstatements may occur 

in other Commission financial information not included in this report 

as a result of this reportable condition.

Reportable Condition:

During our audit we noted three deficiencies in internal controls over 

information technology systems as of September 30, 2002. Commission 

management reported these deficiencies in its fiscal year 2002 FMFIA 

report and plans to substantially implement corrections in fiscal year 

2003. Inadequate controls over information technology systems were in 

the three following areas.

* User Documentation: While the Commissions new accounting system has 

adequate user documentation, there continued to be a lack of user 

documentation to support its old legacy systems that were still used 

during fiscal year 2002, primarily for payroll. This included the 

Clipper system used by the European Regional Office, the dBase IV 

system used by the Mediterranean Regional Office, and the Foxpro 

accounting system used by the Headquarters Office. Commission personnel 

have learned how to use these legacy systems over the years primarily 

through on-the-job training and have limited support to explain how 

systems functions should be performed and to answer questions. However, 

the age of these systems and their expected replacement did not justify 

the cost of developing user documentation during fiscal year 2002.

*  Security Program and Access Controls: Commission Headquarters had 

not completed documentation of an agencywide security planning and 

management program for security and privacy of information as of 

September 30, 2002. Also, some security controls over the computer 

system, such as passwords and access to files, were not effective at 

all Commission locations as of September 30, 2002. OMB Circular A-130, 

Management of Federal Information Resources, provides guidance on 

documenting a security program including control objectives, areas of 

responsibility, system rules, training, personnel controls, system 

interconnections, review of controls, and process authorization. This 

program would encompass the existing automated proprietary security 

program of the computer systems, plus physical and manual controls. The 

Commission expects to complete this documentation during the next 

fiscal year. In addition, we have separately provided the Commission 

detailed information on ineffective security controls. It corrected 

some of the deficiencies after September 30, 2002, and is working 

towards correcting the remaining deficiencies during fiscal year 2003.

* Business Continuity Plan: The business continuity plans of Commission 

Headquarters and its European and Mediterranean Regional Offices did 

not contain sufficient detail to ensure successful manual operations 

and timely recovery of automated processing in the event of a business 

interruption. Sufficient details would include identification of 

business operations and applications, personnel contacts, hardware and 

software needs, space requirements, and alternative sites. The 

Commission plans to revise the business continuity plans during fiscal 

year 2003.

Compliance With Laws and Regulations:

Our tests for Commission compliance with selected provisions of laws 

and regulations for fiscal year 2002 disclosed no instances of 

noncompliance reportable under U.S. generally accepted government 

auditing standards or OMB audit guidance. However, the objective of our 

audit was not to provide an opinion on overall compliance with laws and 

regulations. Accordingly, we do not express such an opinion.

Consistency of Other Information:

The Commissions Management Discussion and Analysis and stewardship 

statements of heritage assets with an accompanying note contain a wide 

range of data, some of which are not directly related to the 

consolidating financial statements. We do not express an opinion on 

this information. However, we compared this information for consistency 

with the consolidating financial statements and discussed the methods 

of measurement and presentation with officials of the Commission. Based 

upon this limited work, we found no material inconsistencies with the 

consolidating financial statements or nonconformance with OMB guidance.

Objectives, Scope, and Methodology:

Commission management is responsible for (1) preparing the 

consolidating financial statements in conformity with U.S. generally 

accepted accounting principles, (2) establishing, maintaining, and 

assessing internal control to provide reasonable assurance that the 

broad internal control objectives of FMFIA are met, and (3) complying 

with applicable laws and regulations.

We are responsible for obtaining reasonable assurance about whether 

(1) the Commissions consolidating financial statements are presented 

fairly, in all material respects, in conformity with U.S. generally 

accepted accounting principles and (2) Commission management maintained 

effective internal control that provides reasonable, but not absolute, 

assurance that the following objectives were met.

* Financial reporting: Transactions are properly recorded, processed, 

and summarized to permit the preparation of consolidating financial 

statements and stewardship information in conformity with U.S. 

generally accepted accounting principles, and assets are safeguarded 

against loss from unauthorized acquisition, use, or disposition.

* Compliance with applicable laws and regulations: Transactions are 

executed in accordance with (1) laws governing the use of budgetary 

authority, (2) other laws and regulations that could have a direct and 

material effect on the financial statements, and (3) any other laws, 

regulations, or governmentwide policies identified by OMB guidance.

We are also responsible for (1) testing compliance with selected 

provisions of laws and regulations that have a direct and material 

effect on the consolidating financial statements and for which OMB 

guidance requires testing and (2) performing limited procedures with 

respect to certain other information appearing in the Commissions 

annual financial report. In order to fulfill these responsibilities, 

we:

* examined, on a test basis, evidence supporting the amounts and 

disclosures in the consolidating financial statements;

* assessed the accounting principles used and significant estimates 

made by Commission management;

* evaluated the overall presentation of the consolidating financial 

statements;

* obtained an understanding of internal control related to financial 

reporting (including safeguarding assets) and compliance with laws and 

regulations (including execution of transactions in accordance with 

budget authority);

* obtained an understanding of the recording, processing, and 

summarizing of performance measures as reported in Managements 

Discussion and Analysis;

* tested relevant internal controls over financial reporting and 

compliance, and evaluated the design and operating effectiveness of 

internal control;

* considered the process for evaluating and reporting on internal 

control and financial management systems under FMFIA; and:

* tested compliance with selected provisions of the following laws and 

regulations:

* The Commissions enabling legislation codified in 36 U.S.C. Chapter 

21,

* public laws applicable to the World War II Memorial Fund,

* Departments of VA and HUD and Independent Agencies Appropriations Act 

2002,

* Antideficiency Act,

* Pay and Allowance System for Civilian Employees, and:

* Prompt Payment Act.

We did not evaluate all internal controls relevant to operating 

objectives as broadly defined by FMFIA, such as those controls relevant 

to preparing statistical reports and ensuring efficient operations. We 

limited our internal control testing to those controls over financial 

reporting and compliance. Because of inherent limitations in internal 

control, misstatements due to error or fraud, losses, or noncompliance 

may nevertheless occur and not be detected. We also caution that 

projecting our evaluation to future periods is subject to the risk that 

controls may become inadequate because of changes in conditions or that 

the degree of compliance with controls may deteriorate.

We did not test compliance with all laws and regulations applicable to 

the Commission. We limited our tests of compliance to those required by 

OMB audit guidance that we deemed applicable to the Commissions 

consolidating financial statements for the fiscal year ended September 

30, 2002. We caution that noncompliance may occur and not be detected 

by these tests and that such testing may not be sufficient for other 

purposes.

We performed our work in accordance with U.S. generally accepted 

government auditing standards and OMB audit guidance.

Commission Comments and Our Evaluation:

Commission management was provided with a draft of this report and 

concurred with its facts and conclusions.

Signed by McCoy Williams:

McCoy Williams

Director

Financial Management and Assurance:

January 31, 2003:

[End of section]

Appendixes:

Appendix I: Annual Financial Report on the American Battle Monuments 

Commission:

Annual Financial Report:

AMERICAN BATTLE MONUMENTS COMMISSION ANNUAL FINANCIAL REPORT 

MANAGEMENTS DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED 

SEPTEMBER 30, 2002:

History and Mission:

Prior to 1923, no federal agency was responsible for commemorating the 

sacrifices and achievements of United States Armed Forces. After World 

War I, many American military units erected monuments and markers where 

they had served in Europe. These monuments and markers came in assorted 

sizes, shapes, and descriptions. Many bore little relationship to the 

achievements of the units they represented, were poorly designed and 

constructed, erected on land not owned by the units, and had no 

provision for future maintenance.

In response to this, Congress in 1923 created the American Battle 

Monuments Commission, a small, independent agency of the Executive 

Branch of the Federal Government. Congress gave the Commission the 

responsibility of commemorating the sacrifices and achievements of 

American armed forces where they have served since April 6, 1917, the 

date of United States entry into World War I.

From appropriated funds the Commission administers, operates, and 

maintains 24 permanent American Military Cemeteries on foreign soil and 

25 stand alone memorials, monuments, and markers of which three are 

located in the United States and 22 are located on foreign soil. The 

cemeteries and memorials are located in 14 foreign countries, the 

Northern Mariana Islands, and Gibraltar. Presently, 124,917 U.S. War 

Dead are interred in these cemeteries of which 30,922 are from World 

War 1, 93,245 are from World War II, and 750 are from the Mexican War. 

Additionally, 6,010 American veterans and others are interred in the 

Mexico City and Corozal (Panama) National Cemeteries. Commemorated 

individually by name on stone tablets at the World War I and II 

cemeteries and three memorials on U.S. soil are the 94,132 U.S. 

servicemen and women who were missing in action, or lost or buried at 

sea during the World Wars and the Korean and Vietnam Wars. In addition, 

38,320 Korean War Dead are honored in the Korean War Veterans Memorial 

database that the Commission maintains.

The Commission also administers trust funds to: (1) build memorials 

authorized by Congress, but financed primarily from private 

contributions, commemorative coin proceeds, and investment earnings; 

(2) decorate grave sites with flowers from private contributions; and 

(3) maintain and repair nonfederal war memorials with private 

contributions. As of the end of fiscal year 2002, the Commission was 

responsible for the maintenance and repair of three: nonfederal 

memorials in Europe.

Organizational Structure and Operations:

The Commissions policymaking body is comprised of an 11-member Board 

of Commissioners appointed by the President for an indefinite term, and 

who serve without pay. The Commissioners establish policy and ensure 

proper staff functioning in carrying out the mission of the Commission. 

During inspections, they observe, inquire, comment upon, and make 

recommendations on any and all aspects of Commission operations. The 

Commissions daily operations are directed by a compensated Executive 

Level Secretary appointed by the President.

The Commissions headquarters office in Arlington, Virginia, provides 

oversight for two regional offices, three cemeteries, and 8 memorials, 

monuments, and markers. The European Region, headquartered near Paris, 

France, is responsible for 17 cemeteries and 15 memorials, monuments, 

and markers. The Mediterranean Region, headquartered in Rome, Italy, 

operates and maintains four cemeteries, one memorial, and one monument.

For fiscal year 2002, the Commission was authorized and employed 368 

full-time civilian employees. U.S. citizens constitute 61 staff members 

while the remaining 307 were foreign service nationals employed in the 

countries where the Commission operates.

The care of these shrines to our War Dead requires a formidable annual 

program of maintenance and repair of facilities, equipment, and 

grounds. This care includes upkeep of almost 131,000 graves and 

headstones; and 73 memorial structures (within and external to the 

cemeteries) on 1,648.8 acres of land. Additionally, the Commission 

maintains .41 quarters, utilities, and maintenance facilities; 67 miles 

of roads and walks; 911 acres of flowering plants, fine lawns and 

meadows; nearly 3 million square feet of shrubs and hedges; and over 

11,000 ornamental trees. Care and maintenance of these resources is 

exceptionally labor intensive. Therefore, personnel costs accounted for 

53 percent of the appropriation for fiscal year 2002. The remaining 47 

percent was required to fund other operating costs and currency 

exchange fluctuations in four foreign currencies.

In order to insulate the Commissions annual appropriation against 

major changes in its purchasing power due to currency exchange 

fluctuations, legislation was enacted in 1988 establishing a Commission 

currency fluctuation account in the U.S. Treasury. During fiscal year 

2002, the Commissions net foreign currency exchange loss was about 

$850 thousand. Cumulative net gains and losses in recent years have 

brought the currency account balance to $9.6 million as of September 

30, 2002.

For the last several years, the American Veterans of WWII, Korea, and 

Vietnam (AMVETS) and the Robert R. McCormick Tribune Foundation have 

generously donated chromatically tuned bells in carillons to enhance 

our overseas cemeteries. The AMVETS installed the first carillon in our 

Manila cemetery in 1985. They subsequently formed a partnership with 

the foundation, and in May 2002 delivered a carillon to the Henri-

Chapelle American Cemetery in Belgium, the twelfth they have donated 

over the years.

In fiscal year 2002, Congress added an additional $5.0 million to the 

Commissions budget for the development of an Interpretive Visitors 

Center at the Normandy American Cemetery. The Commission selected an 

architect-engineering team to assist in the design of the center and is 

currently projecting design completion in fiscal year 2004.

Performance Goals and Results:

The American Battle Monuments Commission prepared a five-year Strategic 

Performance Plan and an Annual Performance Plan in accordance with the 

Government Performance and Results Act. These plans were coordinated 

with key Congressional staffs and the Office of Management and Budget. 

While there will continue to be a number of refinements as these plans 

are implemented, the Commission feels it has developed a creditable 

road-map for the future. The following goals and results are directly 

related to our Strategic Performance Plan.

Goal 1:

Provide the best, most extensive support possible to next of kin and 

other customers who use the services of the American Battle Monuments 

Commission.

Results:

On request, the Commission provides information and assistance to 

relatives and friends of War Dead interred in or commemorated at its 

facilities. These services include burial and memorialization site 

information, a letter authorizing non-fee passports for members of the 

immediate family traveling overseas primarily to visit the cemetery, 

in-country travel and accommodation information, and upon arrival at 

the cemetery, escort to the appropriate grave or memorialization site. 

Requestors are provided with a photograph that is taken of the 

appropriate headstone or section of the Tablet of the Missing that is 

mounted on a color lithograph of the cemetery or memorial where a 

serviceman or woman is buried or commemorated by name. The Commission 

also purchases floral decorations with donor funds and the donor is 

provided with a photograph of the headstone or Tablet of the Missing 

with the decoration in place.

In addition to responding to inquiries by friends and relatives of the 

War Dead interred or memorialized at our sites, we also provide 

information to the Executive Branch, Members of Congress, other 

government agencies, historians, and other interested individuals. 

During fiscal year 2002, the Commission responded to approximately 

7,500 inquiries that required over 6,300 written responses. In 

addition, we mailed out more than 3,200 cemetery lithographs.

Some 8.5 million American and foreign citizens visited the Commissions 

cemeteries, memorials, monuments, and markers during fiscal year 2002. 

Most visitors paid homage collectively to the interred Honored War 

Dead. Many had a more personal reason for visiting a friend or relative 

who never returned home. Regardless of the visitors motivation, 

Commission employees are dedicated to making each visit gratifying and 

memorable.

Throughout the year at sites around the world, the Commission hosted a 

variety of special events and commemorations including Memorial Day, 

Independence Day, and Veterans Day. In addition, many military units 

hold ceremonies to honor their fallen comrades, and local organizations 

pay tribute to those who died while liberating the region. While some 

ceremonies received national attention and publicity, many drew local 

attention only. All ceremonies reflected a solemn respect for Americas 

Honored War Dead, and appreciation for the sacrifices of all veterans.

The Commissions Internet web site at www.abrnc.gov received about 

600,000 visitors this year and provides our customers a convenient, 

user friendly method to access information on the Commission as well as 

our cemeteries, memorials, monuments, markers, and headquarters 

operations. In addition, information on the U.S. War Dead from the 

Korean War and those interred or commemorated at our World War I and II 

cemeteries overseas are accessible on the web site.

Goal 2:

Conduct an effective Infrastructure Modernization Program at all 

Commission cemeteries, memorials, and monuments in order to modernize 

our facilities and maintain the desired standards.

Results:

During fiscal year 2000, the Commission began a review of its 

facilities to determine the most appropriate course of action to 

implement an Infrastructure Modernization Program. The first phase of 

this program involved assessing the electrical systems and analyzing 

the structural aspects of our facilities within the European and 

Mediterranean Regions. This effort identified an estimated $3.1 million 

in projects. For fiscal year 2001, Congress appropriated $1.0 million 

to fund this initiative and appropriated another $2.0 million for 

fiscal year 2002. During fiscal year 2002, we focused on the second 

phase of the program to review water and drainage systems in the 

cemeteries. During fiscal year 2002, we completed $2.0 million worth of 

improvement projects.

As a result of $11.3 million of additional funding from Congress since 

fiscal year 1998, the Commission was able to eliminate its backlog of 

over 500 deferred maintenance projects as of September 30, 2002.

Goal 3:

Determine if technology, outsourcing, and automation can improve 

efficiency and/or reduce the costs of foreign manpower.

Results:

During fiscal year 2002, the Commission continued to review business 

practices in its overseas locations. Congress provided $3.0 million of 

fiscal year 2002 funding that we used for modernization of equipment, 

development of evaluation processes, procurement of enhanced automation 

programs, and performance of deep core aerification, vertidrain, and 

sanding at selected cemeteries.

Goal 4:

Modernize the Commissions accounting systems and funding processes to 

ensure that funding is used and accounted for in the most efficient and 

effective manner.

Results:

The Commissions legacy accounting systems did not comply with current 

OMB Circular A-127 requirements to maintain a single, integrated 

financial management system. In April 2000, the Commission contracted 

with PricewaterhouseCoopers (PwC) to assist in the selection of an 

automated, integrated accounting system that conforms to regulatory and 

user requirements. PwC began the process by documenting the 

Commissions accounting and finance business processes, assessing the 

Information Technology (IT) architecture at field offices and 

headquarters, and developing both functional and technical 

requirements. PwC then identified replacement options for the 

Commissions existing systems. Commission leadership selected as a 

preferred alternative a vendor, or vendor team, that can supply 

appropriate IT infrastructure and supporting resources, as well as 

resources to maintain and upgrade the selected software package.

In August 2000, the Commission issued a Request for Proposals (RFP) to 

secure software and hosting services to replace its legacy accounting 

systems. The RFP responses were received on October 10, 2000. During 

December 2000, the vendors, USinternetworking (USi), Inc. and 

PeopleSoft Financials for Government and Education were selected as the 

application services provider and software team. Implementation began 

in calendar year 2001 with the new system going operational on October 

1, 2001. While the Commission has experienced some implementation 

problems during fiscal year 2002, the system has met expectations and 

the needs of the Commissions financial network.

The Commission has also made other significant: strides over the last 

several years to streamline its financial processes and procedures. 

Except for nine Tunisian staff, all of the Commissions employees are 

paid through electronic funds transfer (EFT). Additionally, the 

headquarters office paid approximately 76% of its vendor purchases 

through EFT during fiscal year 2002.

Goal 5:

Establish a National World War II Memorial in Washington, DC, to honor 

those who served in the Armed Forces of the United States during World 

War II and commemorate the participation of the nation in that war.

Results:

In 1993, Congress directed the Commission to establish a World War II 

Memorial in Washington, D.C. or its environs. It will be the first 

national memorial dedicated to the 16 million who served in uniform 

during the war, the more than 400,000 who gave their lives, and the 

millions who supported the war effort from the home front. Congress 

provided legislative authority for siting the memorial in the prime 

area of the capital, which includes the National Mall. The total 

estimated cost of the memorial project is currently $172 million, which 

includes site selection and design, construction, a National Park:

Service maintenance fee required by the Commemorative Works Act, 

groundbreaking and dedication ceremonies, fund raising, and 

administration of the project from its inception in 1993 through 

projected completion in 2004.

The Commission of Fine Arts (CFA), the National Capital Planning 

Commission (NCPC) and the Department of Interior approved selection of 

the Rainbow Pool site, a 7.4-acre area at the east end of the 

Reflecting Pool between the Lincoln Memorial and the Washington 

Monument. This prominent location is commensurate with the historical 

importance and lasting significance of World War II to America and the 

world. The memorial site was dedicated by President Clinton on 

Veterans Day, November 11, 1995.

Friedrich St.Florian, an architect based in Providence, Rhode Island, 

was selected to design the memorial through a two-stage, open 

competition through the General Services Administrations Design 

Excellence Program. President Clinton announced St.Florians selection 

during a White House ceremony on January 17, 1997. The CFA and NCIPC 

approved St.Florians memorial design concept in 1998, his preliminary 

design in 1999, and his final architectural design in 2000, clearing 

the way for a ceremonial groundbreaking that occurred on Veterans Day, 

November 11, 2000. The Commission subsequently approved the memorial 

ancillary elements (comfort station, information pavilion, 

contemplative area and access road) in late 2000, granite selections in 

the summer of 2001, and sculpture and inscriptions in 2002. Through 

September 30, 2002, the memorial site and design has been the subject 

of 27 public hearings since 1995.

The public fund raising began in earnest in March 1997 when the 

Commission announced that former Senator Bob Dole would serve as the 

National Chairman of the World War II Memorial Campaign. He was joined 

in this endeavor by National Co-Chairman Frederick W. Smith, founder 

and CEO of FedEx Corporation. With sufficient funds accounted for to 

cover estimated project costs, fund raising activity was curtailed in 

mid-fiscal year 2001. The campaign received $7.6 million in 

contributions during fiscal year 2002, bringing the total funds 

received from all sources, including the federal government, to $186.5 

million. Support of the campaign came from hundreds of thousands of 

individual Americans, corporations, foundations, veterans groups, 

civic, fraternal and professional organizations, states, and students 

across the country.

Congress also approved several legislative items that supported the 

memorial fund-raising efforts. Public Law 106-117, signed November 30, 

1999, authorized the Commission up to $65 million in borrowing 

authority to assure timely construction of the memorial. This 

legislation also extended the authorization for initiation of the 

memorial construction to December 31, 2005; granted the Commission 

permanent authority to solicit and receive funds and preserves any such 

funds in Commission controlled interest-bearing Treasury accounts, 

including any funds remaining after completion of the memorial; and 

increased the Commissions authority to accept volunteer services and 

to use intellectual property interests. In addition, Public Law 106-

398, signed October 30, 2000, designated $6 million of the proceeds 

expected from the sale of titanium from the National Defense Stockpile 

for completion of the design, groundbreaking, construction, 

maintenance, and dedication of the memorial.

Our greatest challenge has been to ensure that construction is 

completed so that as many of the World War II generation as possible 

will live to see and be honored by the memorial. Although the National 

Park Service issued a construction permit in January 2001, a coalition 

of groups opposed to the site and design filed a federal lawsuit to 

block the project. Construction, which should have begun in March 2001, 

was delayed by this legal action. Public Law 107-11, signed on Memorial 

Day 2001, directed that the memorial be constructed expeditiously at 

the dedicated Rainbow Pool site and provided that previous site and 

design decisions shall not be subject to judicial review. On the 

basis of this legislation, the federal lawsuit was dismissed, clearing 

the way for award of a construction contract in June 2001. Actual 

construction began in September 2001 and the memorial is expected to be 

completed and dedicated Memorial Day weekend of 2004.

Financial Statements:

The Commission is required by 36 U.S.C. 2103, as codified by Public Law 

105-225, August 12, 1998, to prepare agency wide financial statements 

annually, beginning with fiscal year 1997, and to have such financial 

statements audited by the U.S. General Accounting Office (GAO) in 

accordance with generally accepted government auditing standards.

While the financial statements have been prepared from the books and 

records of the Commission in conformity with U.S. generally accepted 

accounting principles used by the Federal Government, the statements 

are in addition to the financial reports used to monitor and control 

budgetary resources which are prepared from the same books and records. 

Also, the financial statements should be read with the realization that 

they are for a component of the U.S. Government, a sovereign entity. 

One implication of this is that liabilities cannot be liquidated 

without legislation that provides resources to do so.

For fiscal years 1997 and 1998, annual audits of the Commission were 

performed by the public accounting firm of KPMG under contract to the 

GAO. For fiscal years 1999 through 2002, annual audits of the 

Commission were conducted by GPLO. In addition, separate annual audits 

of the World War II Memorial Fund for fiscal years 1999 and 2000 were 

conducted by the public accounting firm of KPMG. Copies of the separate 

KPMG reports are available upon request.

Systems, Controls, and Legal Compliance:

The Commission is in the process of modernizing its accounting system 

as discussed in goal 4 to include controls in place over electronic 

data processing to prevent unauthorized access and computer viruses. 

The Commission has assessed its internal controls as effective in 

providing reliable financial and performance reporting, and compliance 

with applicable laws and regulations.

Future Effects on the Commission:

The Commission continues to support next of kin and others who use our 

services and to maintain the final resting places of American Honored 

War Dead on foreign soil. Despite its aging facilities, the Commission 

strives to maintain high standards of physical appearance and 

operational efficiency to honor those who have died in the service of 

our country.

Consolidating Balance Sheet:

AMERICAN BATTLE MONUMENTS COMMISSION CONSOLIDATING BALANCE SHEET As of 

September 30, 2002 (With Comparative Consolidated Total as of September 

30, 2001):

[See PDF for image]

[End of figure]

Consolidating Statement of Net Cost and Changes in Net Position:

[See PDF for image]

 

[End of figure] 

Consolidating Statement of Budgetary Resources:

[See PDF for image] 

[End of figure] 

Consolidating Statement of Financing:

[See PDF for image] 

[End of figure] 

Notes to the Consolidating Financial Statements:

NOTES TO THE CONSOLIDATING AND CONSOLIDATED FINANCIAL STATEMENTS For 

the Fiscal Years Ended September 30, 2002 and 2001:

Note 1 _ Significant Accounting ,Policies:

A. Basis of Presentation:

The accompanying consolidating and consolidated financial statements 

present the financial position, net cost of operations, changes in net 

position, budgetary resources, and financing of the American Battle 

Monuments Commission (the Commission) in conformity with U.S. generally 

accepted accounting principles as used by the federal government. There 

are no intra-entity transactions to be eliminated.

B. Reporting Entity and Funding Sources:

The Commission is an independent agency within the Executive Branch of 

the Federal Government and was created by an Act of March 4, 1923, the 

current provisions of which are now codified in 36 U.S.C. Chapter 21. 

The Commissions mission is to commemorate the sacrifices and 

achievements of U.S. Armed Forces where they have served overseas since 

April 6, 1917, the date of United States entry into World War I, and at 

locations within the United States when directed by the Congress. The 

Commission designs, administers, constructs, operates, and maintains 24 

American military cemeteries and 25 federal memorials, monuments, and 

markers (herein collectively referred to as memorials). Three of the 

memorials are located in the United States while all of the cemeteries 

and the remaining memorials are located on foreign soil in 14 foreign 

countries, the Marianas, and Gibraltar. The Commission is also 

responsible for maintaining 3 nonfederal memorials with funds received 

from the memorials sponsors. The Commission is headquartered in 

Arlington, Virginia. Field operations are conducted through regional 

offices located near Paris, France and in Rome, Italy; and cemeteries 

in Manila, the Philippines; Mexico City, Mexico; and Panama City, 

Panama.

The Commission is also responsible for designing and constructing the 

National World War II Memorial to be located on the Mall in Washington, 

D.C. In accordance with the Commemorative Works Act, the Secretary of 

Interior will assunne responsibility for maintenance of the Memorial 

after its completion. Also in accordance with the Act, the Commission 

provided $6.6 million for deposit in a separate Treasury account to 

offset the Memorials costs of perpetual maintenance.

Commission programs are funded primarily through appropriations 

available without fiscal year limitation. The Commission also 

administers several trust funds established to: (1) build memorials 

authorized by the Congress, but which are funded primarily by private 

contributions, commemorative coin sales proceeds, and investment 

earnings; (2) decorate grave sites; and (3) maintain and repair certain 

non-federal war memorials.

C. Basis of Accounting:

The Commissions proprietary accounts (assets, liabilities, equity, 

revenue, and expenses) are maintained on the accrual basis, where 

appropriated funds are accounted for by appropriation year, operating 

expenses are recorded as incurred, and depreciation is taken on 

property, plant, and equipment not otherwise classified as heritage 

assets. Commission budgetary accounts are maintained on a budgetary 

basis, which facilitates compliance with legal constraints and 

statutory funds control requirements. The functional budget 

classification is Veterans Benefits and Services.

D. Fund Balances with Treasury:

The Commissions cash receipts and disbursements are processed by the 

U.S. Treasury. Fund balances with Treasury are comprised of 

appropriated general funds and trust funds.

E. Investments:

In accordance with Public Law 103-32, the Commission is authorized to 

invest World War II Memorial Trust Fund receipts in U.S. Treasury 

securities. The Commission is also authorized under a modification to 

its original legislation to invest receipts from certain non-federal 

war memorial organizations in U.S. Treasury securities. Treasury 

investments are recorded at par value plus unamortized premium or less 

unamortized discount. Premiums and discounts are amortized using the 

interest method.

F. Foreign Currency:

The Commissions overseas offices maintain accounts of foreign 

currencies to be used in making payments in foreign countries. These 

accounts are reported at the U.S. dollar equivalent using the Treasury 

exchange rate in effect on the last day of the fiscal year.

G. Contributions and Revenue Recognition:

The Commission recognizes unrestricted contributions or unconditional 

promises to give as revenue in the period of the initial pledge when 

sufficient verifiable evidence of the pledge exists. Conditional 

promises to give are recorded as. revenue when the condition has been 

met. Unconditional promises to give may be temporarily restricted or 

permanently restricted. Temporarily restricted promises to give are 

released from restriction when the conditions have been met. 

Permanently restricted promises to give are recorded as revenue in the 

period donated, however, donors generally allow only the earned income 

to be used for general or specific purposes. In-kind contributions of 

goods and services are recognized at fair value by the Commission at 

the time the goods are received or the services are performed. 

Multiyear contributions due over a period of time are discounted to 

their present value based upon the short term Treasury interest rate.

H. Operating Materials and Supplies Inventories:

The Commission has determined that it is more cost beneficial to record 

operating materials and supplies on the purchase method of accounting 

whereby items are expensed as purchased rather than when consumed. 

Consequently, the Commission reports no operating materials or supplies 

inventories.

1. Property, Plant, and Equipment:

Purchases of general property, plant, and equipment of $25,000 or less 

are expensed in the year of acquisition. Purchases of personal property 

exceeding $25,000 are capitalized and depreciated on a straight-line 

basis over five years. Expenditures relating to real property exceeding 

$25,000 are capitalized and depreciated on a straight-line basis over 

30 years. Heritage assets are assets possessing significant cultural, 

architectural, or aesthetic characteristics. The Commission considers 

its cemeteries, and federal memorials, monuments, and markers acquired 

through purchase or transfer to be heritage assets. Heritage assets are 

acquired through purchase or transfer and are accounted for in the 

Commissions property records, and are not presented in the balance 

sheet. Withdrawals of heritage assets are recorded upon formal 

agreement with recipients. Additional unaudited information concerning 

heritage assets is found in the Statements of Heritage Assets as 

required supplementary stewardship information. Cemetery land is owned 

by the foreign countries in which cemeteries are located, and is 

provided to the United States in perpetuity.

J. Employee Benefits:

The Commissions civilian U.S. nationals hired after December 31, 1983 

are covered by the Federal Employees Retirement System (FERS), which 

was implemented on January 1, 1984. The Commissions civilian U.S. 

nationals hired on or before December 31, 1983 could elect to transfer 

to FERS, or remain with the Civil Service Retirement System (CSRS). For 

FERS employees, the Commission withholds .80 percent of base pay, and 

as employer contributes 10.7 percent of base pay to this retirement 

system. For Federal Insurance Contribution Act (FICA) tax and Medicare, 

the Commission withholds 7.65 percent from FERS employees earnings, 

matches this amount on a dollar-for-dollar basis, and remits the total 

amount to the Social Security Administration. The Commission withholds 

7.00 percent of base pay plus 1.45 percent for Medicare from CSRS 

employees earnings, and as employer contributes 8.51 percent of base 

pay plus 1.45 percent for Medicare. These deductions are then remitted 

to the Office of Personnel Management (OPM) and the Social Security 

Administration. OPM is responsible for government-wide reporting of 

FERS and CSRS assets, accumulated plan benefits, and unfunded 

liabilities.

On April 1, 1987 the Federal government instituted the Thrift Saving 

Plan (TSP), a retirement savings and investment plan for employees 

covered by FERS and CSRS. The Commission contributes a minimum of 1 

percent of FERS employees base pay to the TSP. FERS employees have the 

option of contributing up to 12 percent of their base pay on a tax-

deferred basis to TSP, which the Commission matches up to 4 percent of 

base pay. CSRS employees may contribute up to 7 percent of their base 

pay to TSP on a tax-deferred basis, and receive no matching 

contribution from the Commission.

Retirement and other benefits for the Commissions foreign national 

employees are paid by the Commission in accordance with the provisions 

of 10 host nation agreements negotiated by the U.S. Department of 

State.

Annual leave is accrued as earned, and the resulting unfunded liability 

is reduced as leave is taken. Separation pay is provided in certain 

countries according to host nation agreements. Separation pay is 

accrued as earned, and the resulting unfunded liability is reduced when 

paid to the foreign national leaving the employ of the Commission. Each 

year balances in the accrued separation pay:

and annual leave accounts are adjusted to reflect current pay rates. To 

the extent that current or prior year appropriations are not available 

to fund annual leave and separation pay, funding will be obtained from 

future financing resources. Sick leave and other types of unvested 

leave are expensed when incurred.

K. Imputed Financing:

The Commission received imputed financing for retirement and other 

benefits paid by OPM and financial audits paid by the General 

Accounting Office (GAO) during fiscal year 2002. The Commission 

recognized these expenses and related imputed financing in its 

financial statements.

L. Use of Estimates:

The preparation of financial statements requires management to make 

estimates and assumptions that affect the reported amount of assets and 

liabilities, as well as the disclosure of contingent assets and 

liabilities at the date of the financial statements, and the amount of 

revenues and expenses reported during the reporting period. Actual 

results could differ from those estimates.

M. Restatement:

Certain amounts from fiscal year 2001 have been restated to conform to 

the fiscal year 2002 presentation.

Note 2. Fund Balances with Treasury:

All undisbursed account balances with the U.S. Treasury, as reflected 

in the Commissions records, as of September 30 are available and were:

[See PDF for image]

[End of figure]

Note 3, Treacna Investmentset:

As of September 30, the Commissions investments in U.S. Treasury 

notes, which are marketable securities due within two years were:

[See PDF for image]

[End of figure]

Note 4_ Cash and Foreign Accounts:

Outside the United States the Commission makes payments in U.S. and 

foreign currencies through imprest cash funds and Treasury designated 

depository commercial bank accounts which as of September 30 were:

[See PDF for image]

[End of figure]

Note 5. Contributions Receivable:

The Commission has pledges from the private sector to be used for the 

World War 11 Memorial with substantial pledges by major corporations 

and foundations. These pledges are recorded as contribution receivables 

and revenue in the fiscal year pledged, and $5,014,127 is temporarily 

restricted until collected. Amounts due in future: years are as 

follows:

Fiscal Year Due; [Empty].

2003; $3,774,699.

2004; 816,451.

2005; 308,850.

2006; 110,000.

2007; 100,000.

After five years; 252,097.

Total amount due; 5,362,087.

Less: Discount at 5%; _(347,9.

Net Receivable; 5 014 1 27.

[End of table]

The Commission believes that all contributions receivable are fully 

collectible, and therefore, no allowance for uncollectible accounts has 

been established.

As of September 30, 2002, $562,700 of conditional promises to give to 

the Memorial were outstanding, including a pledge for in-kind services 

with a balance of $350,000 that was not included in contributions 

receivable.

Note 6_ General Property, Plantand Equip jen , and Heritage Assets,

General property, plant, and equipment with an aggregate cost basis of 

$25,000 or less and all heritage assets were expensed by the Commission 

and totaled $806,774 in fiscal year 2002. WWII Memorial equipment 

totaling $4,421 in fiscal year 2002 was also expensed.

Since the 1960s, the Commissions European regional office near Paris, 

France has occupied a residential structure owned by the United States 

government. The Commission is responsible for all utilities, 

maintenance, and repairs. While the structure has the characteristics 

of a heritage asset, it has been used as general property. However, it 

is now fully depreciated and no value is contained in the Commissions 

financial statements.

General property, plant, and equipment as of September 30 was:

[See PDF for image]

[End of figure]

There was no change in the number of physical units or acreage of 

cemeteries or memorial heritage assets in fiscal year 2002.

Note 7 Other Liabilities:

Other liabilities as of September 30 were:

[See PDF for image]

[End of figure]

Under a host nation agreement, the Commissions Italian employees earn 

separation pay for each year of service with the Commission. The 

Commission recognized an unfunded liability for separation pay for 

these employees of $878,992 as of September 30, 2002, and $773,582 as 

of September 30, 2001.

A portion of pension and other retirement benefits (ORB) expense is 

funded by an imputed financing source to recognize the amount of 

pension and ORB unfunded liabilities assumed by the OPM. These costs 

are computed in accordance with cost factors provided by OPM. For 

fiscal year 2002, the Commission incurred $878,193 of pension and ORB 

costs, $262,305 of which was imputed. For fiscal year 2001, the 

Commission incurred $705,895 of pension and ORB costs, $217,507 of 

which was imputed. Total imputed costs of $457,305 for fiscal year 2002 

and $410,507 for fiscal year 2001 included audit services provided by 

the General Accounting Office.

Note R_ Lease Agreements:

The Commission has no capital leases. The Commissions Arlington, 

Virginia headquarters, including office space for the WWII Memorial 

Project, are rented under a nine-year operating lease expiring in July 

2007. The European Directors living quarters are rented under a yearly 

agreement. The Commissions Mediterranean office occupies commercial 

office space under a six-year operating lease expiring in May 2007. The 

Mediterranean Directors living quarters are rented under a six-year 

operating lease expiring in December 2007. Rent expense for these 

fiscal year 2002 operating leases was $532,550. Future minimum payments 

due on these operating leases as of September 30, 2002, were:

[See PDF for image]

[End of figure]

Note 9_ Net Position;

Net position balances as of September 30, 2002 were:

[See PDF for image]

[End of figure]

Note 10. Trust Fund - World War 11 Memorial Fund Program:

Financial progress since the inception of the Fund in fiscal year 1993 

through fiscal year 2002 is as follows:

[See PDF for image]

[End of figure]

*The amounts for fiscal years 1993 through 2000 were audited by the 

U.S. General Accounting Office and presented in their reports GAO/AIMD-

95-9 for fiscal year 1993; GAO/AIIVID-96-24 for fiscal year 1994; GAO/

AMID-97-689 for fiscal years 1995 and 1996; GAO/AIIVID-98-1299 for 

fiscal year 1997; GAO/AMW-99-74 for fiscal year 1998; GAO/AIIVVID-00-85 

for fiscal year 1999; GAO-01-375 for fiscal year 2000; and GAO-02-390 

for fiscal year 2001.

Required Supplementary Stewardship Information:

[See PDF for image] 

[End of figure] 

Statement of Heritage Assets:

[See PDF for image] 

[End of figure] 

Note to Statement of Heritage Assets:

American Battle Monuments Commission Note to Statements of Heritage 

Assets September 30, 2002 (Unaudited):

Maintenance and Repairs:

Maintenance and repairs performed on Commission real property 

consisting of land improvements, buildings, and memorials totaled $4.4 

million in fiscal year 2002 and $3.5 million in fiscal year 2001 that 

included deferred maintenance projects. During fiscal year 2002, the 

Commission eliminated its backlog of deferred maintenance projects to 

zero as of September 30, 2002.

Condition assessment surveys, using a five point scale of one 

(excellent) to five (very poor), identify needed maintenance and repair 

projects at cemeteries and memorials in order to maintain real property 

in an acceptable condition of three (fair) or better. Using these 

condition assessment surveys, 193 engineering maintenance projects with 

an estimated cost of $3.8 million were identified as of September 30, 

2002, to be performed in future years as necessary to maintain real 

property in an acceptable condition.

[End of section]

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