GAO-05-396R DOT’s Management Representation Letter 

United States Government Accountability Office

Washington, DC 20548 

June 9, 2005 

The Honorable Ms. Phyllis Scheinberg 

Chief Financial Officer 

Department of Transportation 

The Honorable Mr. Kenneth M. Mead 

Inspector General 

Department of Transportation 

Subject: Financial Audit: The Department of Transportation’s Fiscal Year 2004 

Management Representation Letter on Its Financial Statements

As you know, the Secretary of the Treasury, in coordination with the Director of the 

Office of Management and Budget (OMB), is required to annually prepare and submit 

audited financial statements of the U.S. government to the President and the 

Congress. We are required to audit these consolidated financial statements (CFS) and 

report on the results of our work.1

 In connection with fulfilling our requirement to 

audit the fiscal year 2004 CFS, we evaluated the Department of the Treasury’s 

(Treasury) financial reporting procedures and related internal control over the 

process for compiling the CFS, including the management representation letter 

provided us by Treasury and OMB. Written representation letters from management, 

required by U.S. generally accepted government auditing standards, ordinarily 

confirm oral representations given to the auditor, indicate and document the 

continuing appropriateness of those representations, and reduce the possibility of a 

misunderstanding between management and the auditor. 

In our report, which is included in the fiscal year 2004 Financial Report of the United 

States Government,

2

 we reported a limitation on the scope of our work due to 

identified concerns with the adequacy of certain federal agencies’ management 

representations on which Treasury and OMB depend to provide their representations 

to us regarding the CFS. Specifically, Treasury and OMB stated that their 

representation letter to us on the CFS was based primarily on the individual federal 

agency representation letters. Consequently, our audit considered the content of the 

individual federal agency letters, and the incompleteness of certain of these letters 

 

1

The Government Management Reform Act of 1994 has required such reporting, covering the executive 

branch of government, beginning with financial statements prepared for fiscal year 1997. 31 U.S.C. § 

331 (e). The federal government has elected to include certain financial information on the legislative 

and judicial branches in the CFS as well. 

2

The fiscal year 2004 Financial Report of the United States Government was completed by the 

Department of the Treasury on December 15, 2004, and is available through both GAO’s Web site at 

www.gao.gov and Treasury’s Web site at www.fms.treas.gov/fr/index.html. 
Page 2 GAO-05-396R DOT’s Management Representation Letter 

impaired our ability to obtain sufficient evidence in support of our audit of the CFS. 

This limitation contributed to our disclaimer of opinion on the CFS. We performed 

sufficient audit work to provide the disclaimer of opinion and issued our audit report, 

dated December 6, 2004, in accordance with U.S. generally accepted government 

auditing standards. 

As part of our audit of the fiscal year 2004 CFS, we received and reviewed selected 

federal agencies’ management representation letters to assess their adequacy in 

support of our audit of the CFS. As the federal government gets closer to an opinion 

on its financial statements, it becomes more important that the federal agencies’ 

management representation letters be complete and reliably prepared. 

The purpose of this report is to communicate our observations on the Department of 

Transportation’s (DOT) fiscal year 2004 management representation letter. Our 

objective is to help ensure that future management representation letters submitted 

by DOT are sufficient to help support Treasury and OMB’s preparation of the CFS 

management representation letter and our ability to rely on the representations in 

that letter in combination with individual federal agency representation letters. We 

reviewed five key areas in each management representation letter: (1) signatures, 

(2) materiality thresholds, (3) representations, (4) summary of unadjusted 

misstatements, and (5) reliability of representations. In reviewing the management 

representation letters, we applied the American Institute of Certified Public 

Accountants’ (AICPA) Codification of Auditing Standards, AU Section 333, 

Management Representations; OMB Bulletin 01-02, Audit Requirements for Federal 

Financial Statements; and the GAO/President’s Council on Integrity and Efficiency 

(PCIE) Financial Audit Manual (FAM) section 1001, entitled “Management 

Representations.”3

Results in Brief 

DOT’s fiscal year 2004 management representation letter did not provide all the 

information necessary to support Treasury and OMB’s preparation of the CFS 

management representation letter. This in turn impacted our ability to rely on the 

representations in the CFS management representation letter in combination with 

individual federal agency representation letters. 

We identified some needed improvements in four of the five key areas we reviewed. 

First, DOT did not provide the materiality thresholds used to determine, for 

representation purposes, any matters that were individually or collectively material to 

its financial statements. Such individual federal agency thresholds are considered by 

Treasury and OMB in providing a materiality threshold for the CFS representation 

 

3

GAO, GAO/PCIE: Financial Audit Manual: Update, GAO-04-1015G (Washington, D.C.: July 30, 2004), 

an update to Financial Audit Manual: Volumes 1 and 2, GAO-01-765G (Washington, D.C.: Aug. 1, 

2001). 
Page 3 GAO-05-396R DOT’s Management Representation Letter 

letter. Second, the letter included 24 of the 29 representations4 from the FAM that 

were applicable to DOT. For the other 5 representations, 3 were not fully included 

and 2 were not provided at all. Next, DOT did not provide a summary of unadjusted 

misstatements that distinguishes between known and likely misstatements. Finally, 

DOT’s letter included a representation that was not consistent with an issue 

identified in the auditor’s report involving the reconciliation of intragovernmental 

transactions. 

We believe that these matters can be easily addressed. We are making four 

recommendations to DOT’s Chief Financial Officer targeted to specific changes 

needed. Also, we are recommending that the DOT Inspector General work with the 

department to help ensure that future management representation letters meet the 

key conditions noted as needing improvements in this report. 

In commenting on a draft of this report, the offices of DOT’s Chief Financial Officer 

and Inspector General, in separate letters, stated that they will work to address the 

conditions noted in our report. 

Background 

In conducting agency financial statement audits, U.S. generally accepted government 

auditing standards incorporate financial auditing fieldwork and reporting standards 

issued by the AICPA. Such auditing standards (AU Section 333) require auditors to 

obtain certain representations from agency management. These representations are 

part of the evidential matter to be considered by the auditor in its audit of the 

agency’s financial statements. The representations obtained will depend on the 

circumstances of the engagement and the nature and basis of presentation of the 

financial statements. AU Section 333 discusses specific representations that should 

be obtained from management, including a requirement to attach a schedule of 

unadjusted financial statement misstatements for entities with uncorrected 

misstatements. 

In addition, OMB Bulletin 01-02 and FAM section 1001 contain guidance on preparing 

federal agencies’ management representation letters. According to the FAM, in 

addition to the representations included in AU Section 333, the auditor generally 

should consider the need to obtain representations on other matters based on the 

circumstances of the audited entity. FAM section 1001A lists 35 specific 

representations ordinarily included in the management representation letter and also 

includes a requirement to attach a schedule of unadjusted financial statement 

misstatements for entities with uncorrected misstatements. (See enc. I for these 

representations.) Representations listed in FAM section 1001A should be customized 

 

4

The FAM lists 27 representations that are ordinarily included, if applicable, in the management 

representation letter that an agency provides to the auditor. For 4 of the representations, the agency is 

required to address three separate components. As such, each agency is ordinarily expected to make a 

total of 35 representations. Six of the 35 representations are not applicable unless the agency received 

an opinion on its internal control. Since DOT did not receive an opinion on its internal control for 

fiscal year 2004, only 29 of the 35 representations were applicable to DOT’s fiscal year 2004 

management representation letter. 
Page 4 GAO-05-396R DOT’s Management Representation Letter 

to the situation of the entity being audited or excluded if inapplicable. We perform 

our audit of the CFS in accordance with the FAM and related auditing standards. 

Treasury and OMB are to receive management representation letters from certain 

federal agencies. This is important because U.S. generally accepted government 

auditing standards require that Treasury and OMB provide us, as principal auditor of 

the CFS, a management representation letter, and their letter depends on the 

information in such agencies’ management representation letters. In their 

representation letter to us for the audit of the fiscal year 2004 CFS, Treasury and 

OMB stated that their representations are based primarily on the representations of 

those agencies covered by the Chief Financial Officers (CFO) Act and other selected 

agencies that were made in connection with the preparation of these entities’ 

respective financial statements and provided to OMB and Treasury. For this reason, 

it is important that all federal agency representation letters be complete and reliable. 

Objectives, Scope, and Methodology 

In connection with our audit of the fiscal year 2004 CFS, we evaluated Treasury’s 

financial reporting procedures and related internal control, including the CFS 

management representation letter. For the fiscal year 2004 CFS, 33 of the 35 

“verifying agencies” submitted audited financial statements along with their 

management representation letters to Treasury.5

 In our review of these 33 

management representation letters, our overall objective was to assess their 

adequacy as it relates to our audit of the CFS. Specifically, we reviewed each agency 

management representation letter to determine whether the following five key 

conditions were met: 

• the management representation letter was signed by appropriate agency 

officials; 

• the management representation letter included designation as to the amounts 

above which matters were considered material (materiality thresholds); 

• the management representation letter included applicable representations 

from the FAM; 

• the management representation letter included a properly prepared summary 

of unadjusted misstatements for agencies with uncorrected misstatements; 

and 

• the representations in the management representation letter were reliable 

based on a review of findings in the auditor’s report. 

 

5

See Treasury Financial Manual, vol. I, part 2, ch. 4700, for a list of the 35 agencies. These agencies, 

for fiscal year 2004, consisted of 23 CFO Act agencies and 12 material other agencies. The 33 agencies 

we reviewed did not include the U.S. Securities and Exchange Commission and the Smithsonian 

Institution because these audits were not complete before the fiscal year 2004 Financial Report of the 

United States Government was issued. The Department of Homeland Security (DHS) Financial 

Accountability Act, Pub. L. No. 108-330, 118 Stat.1275 (Oct. 16, 2004), added DHS to the list of CFO Act 

agencies, increasing the number of CFO Act agencies again to 24 for fiscal year 2005. 

 
Page 5 GAO-05-396R DOT’s Management Representation Letter 

This report is based on the audit work we performed for the audit of the fiscal year 

2004 CFS, which was performed in accordance with U.S. generally accepted 

government auditing standards. 

We requested comments on a draft of this report from DOT’s Chief Financial Officer 

and Inspector General or their designees. Written comments from DOT’s Deputy 

Chief Financial Officer and Assistant Inspector General for Financial and Information 

Technology Audits are reprinted in enclosures II and III and are also discussed in the 

Agency Comments section. 

Identified Issues with DOT’s Fiscal Year 2004 Management Representation 

Letter 

With respect to DOT’s fiscal year 2004 management representation letter, we 

identified the following four areas that need some improvement: (1) providing the 

materiality thresholds used, (2) providing or fully including applicable 

representations from the FAM, (3) including a complete summary of unadjusted 

misstatements, and (4) ensuring the reliability of representations. Details regarding 

these issues are as follows. 

Providing the Materiality Thresholds Used

Management representations may be limited to matters that are considered 

individually or collectively material to the entity’s financial statements, provided that 

management and the auditor have reached an understanding on the materiality 

thresholds to be used. Likewise, in preparing the overall management representation 

letter for the CFS, which is provided to us, Treasury and OMB limit the letter’s 

representations to matters that are considered to be material. While an understanding 

between management and the auditor of materiality thresholds used is not explicitly 

required by auditing standards to be included in the management representation 

letter, Treasury and OMB use agency thresholds in providing a materiality threshold 

for the governmentwide management representation letter. 

For fiscal year 2004, because the materiality thresholds used were not included in 

DOT’s and a number of other federal agencies’ management representation letters, or 

otherwise provided to Treasury and OMB, Treasury and OMB’s ability to represent 

that all matters material to the CFS were properly considered and included in the 

overall management representation letter for the CFS was impaired. 

Providing or Fully Including Applicable Representations from the FAM

Written representations from management ordinarily confirm oral representations 

made to the auditor during the audit, document the continuing appropriateness of 

those representations, and reduce the possibility of a misunderstanding. To meet 

auditing standards and OMB requirements, federal agencies’ management and 

auditors need to ensure that management representation letters are complete and 

accurate. 

We found that DOT’s fiscal year 2004 management representation letter included 24 

of the 29 representations from the FAM that were applicable to DOT. Of the 5 other 
Page 6 GAO-05-396R DOT’s Management Representation Letter 

representations, 3 were not fully included and 2 were not provided at all. For the 3 

incomplete representations, the DOT management representation letter included the 

following representation intended to cover the fraud and suspected fraud 

representations called for by FAM 16a, 16b, and 16c. (See enc. I for these 

representations.) 

“There has been no material fraud (intentional misstatements or omissions of 

amounts or disclosures in financial statements and misappropriation of assets 

that could have a material affect on the Principal Statements or Required 

Supplementary Stewardship Information) or any fraud involving management 

or employees who have significant roles in internal control.” 

While this representation addresses fraud, it should also address suspected fraud as 

called for by FAM 16a, 16b, and 16c. 

In addition, the two representations not provided were as follows. 

• FAM #15: We acknowledge our responsibility for the design and implementation 

of programs and controls to prevent and detect fraud (intentional 

misstatements or omissions of amounts or disclosures in the financial 

statements and misappropriation of assets that could have a material 

effect on the financial statements). 

• FAM #17: We have no knowledge of any allegations of fraud or suspected fraud 

affecting the agency received in communications from employees, 

former employees, or others. 

When agencies do not provide all representations or include incomplete 

representations in their management representation letters, it impairs our ability to 

audit the CFS and Treasury and OMB’s ability to make these types of representations 

in the CFS management representation letter. 

Including a Complete Summary of Unadjusted Misstatements

U.S. generally accepted government auditing standards require that for each federal 

agency with uncorrected misstatements, a summary of unadjusted misstatements be 

attached to the agency’s management representation letter. Treasury and OMB use 

the summaries of unadjusted misstatements to assess the impact of federal agencies’ 

unadjusted misstatements on the CFS and make appropriate management 

representations to us at the governmentwide level. The summaries are also used by 

us, as principal auditor of the CFS, to develop an overall governmentwide summary 

of unadjusted misstatements, which is then attached to the CFS management 

representation letter prepared by Treasury and OMB. 

Also, in a matter related to the compilation process for the CFS, in fiscal year 2004, 

Treasury required agencies to submit a summary of unadjusted misstatements as part 

of the closing package using the standardized format provided for in the Treasury 

Financial Manual (TFM). The TFM, however, required additional details to be 

added to the summary of unadjusted misstatements than those called for by the FAM. 
Page 7 GAO-05-396R DOT’s Management Representation Letter 

Specifically, agencies were to also (1) include a description of the misstatements and 

(2) distinguish between misstatements affecting intragovernmental accounts and 

misstatements affecting accounts with the public. We need this additional 

information to develop the overall governmentwide summary of unadjusted 

misstatements. In order to avoid duplication of effort by the agencies in preparing 

two summaries of unadjusted misstatements, the additional information should also 

be included in the summary of unadjusted misstatements attached to the 

management representation letter. As such, we plan to work with PCIE to modify the 

FAM to call for these two additional disclosures to be included in the summary of 

unadjusted misstatements attached to the management representation letter. 

DOT did not include a summary of unadjusted misstatements with its fiscal year 2004 

management representation letter. However, DOT did submit a summary of 

unadjusted misstatements as part of its closing package to Treasury as required by 

the TFM, but the summary did not distinguish between known and likely 

misstatements. 

Without a complete summary of unadjusted misstatements from each of the verifying 

agencies with uncorrected misstatements, it is not possible for us, as principal 

auditor of the CFS, to reasonably determine the audit risk exposure for each of the 

line items in the CFS or to prepare an adequate summary of unadjusted 

misstatements at the governmentwide level. 

Including Representations That Are Reliable 

The management representation letter should be consistent with the auditor’s report. 

As required by AU Section 333, if a representation is contradicted by other audit 

evidence, the auditor should investigate the circumstances and consider the 

reliability of the representation. The auditor should then consider whether it is 

appropriate to rely on other management representations. 

For DOT’s fiscal year 2004 management representation letter, there was a 

discrepancy between what the auditor found and reported in the auditor’s report and 

what DOT represented in its management representation letter. Specifically, 

management stated that all intragovernmental transactions and balances had been 

reconciled with the appropriate trading partners. In contrast, the agency’s auditor 

stated in its report that DOT had not identified the other agency associated with 

about $27 billion of its intragovernmental transactions processed in fiscal year 2004, 

or about half of the total of such transactions. 

This discrepancy did not impact our report on the fiscal year 2004 CFS because 

problems with intragovernmental transactions are prevalent across government and 

have contributed to our disclaimers of opinion for the past 8 fiscal years. 

Nevertheless, any identified discrepancies at the agency level need to be addressed 

and resolved so that Treasury and OMB can provide us appropriate representations at 

the governmentwide level. Treasury and OMB did not follow up with agencies to 

obtain requisite satisfaction that discrepancies between representations in the 

management representation letters and findings in the auditors’ reports were 

resolved. We have previously recommended that Treasury and OMB develop policies 
Page 8 GAO-05-396R DOT’s Management Representation Letter 

and procedures to require an analysis of the agency management representation 

letters to determine if discrepancies exist between what the agency auditor reported 

and the representations made by the agency, including the resolution of such 

discrepancies.6

Conclusions 

In four of the five key areas we reviewed, DOT’s fiscal year 2004 management 

representation letter did not provide all the information necessary to support 

Treasury and OMB’s preparation of the CFS management representation letter and 

our ability to rely on the representations in that letter in combination with individual 

federal agency representation letters, including that of DOT. The additional 

information needed from DOT is straightforward and should be easy to address. 

Recommendations for Executive Action 

We recommend to DOT’s Chief Financial Officer that in the future the management 

representation letter 

• include materiality thresholds or such thresholds be provided separately to 

Treasury and OMB; 

• fully include all representations from the FAM that are applicable to DOT; 

• include a complete summary of unadjusted misstatements, if there are any 

uncorrected misstatements; and 

• include representations that are reliable. 

We recommend that the DOT Inspector General work with the department to help 

ensure that future management representation letters meet the key conditions noted 

as needing improvements in this report. 

Agency Comments 

In commenting on a draft of this report, the offices of DOT’s Chief Financial Officer 

and Inspector General, in separate letters, stated that they will work to address the 

conditions noted in our report. Specifically, DOT’s Deputy Chief Financial Officer 

stated that DOT will incorporate our recommendations in DOT’s fiscal year 2005 

management representation letter and all future management representation letters. 

In addition, DOT’s Assistant Inspector General for Financial and Information 

Technology Audits stated that his office will work with staff of the department’s Chief 

 

6

GAO, Financial Audit: Process for Preparing the Consolidated Financial Statements of the U.S. 

Government Needs Improvement, GAO-04-45 (Washington, D.C.: Oct. 30, 2003). 
Page 9 GAO-05-396R DOT’s Management Representation Letter 

Financial Officer and ensure that future management representation letters include 

the conditions noted in this report. The comments are reprinted in enclosures II and 

III. 

Within 60 days of the date of this report, we would appreciate receiving a written 

statement on actions taken to address these recommendations. 

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

of the Senate Committee on Homeland Security and Governmental Affairs; the 

Subcommittee on Federal Financial Management, Government Information, and 

International Security, Senate Committee on Homeland Security and Governmental 

Affairs; the House Committee on Government Reform; and the Subcommittee on 

Government Management, Finance, and Accountability, House Committee on 

Government Reform. In addition, we are sending copies to the Fiscal Assistant 

Secretary of the Treasury and the Controller of OMB. Copies will be made available 

to others upon request. This report is also available at no charge on GAO’s Web site at 

www.gao.gov. 

We appreciate the courtesy and cooperation extended to us by your staff throughout 

our work. We look forward to continuing to work with your offices to help improve 

financial management in the federal government. If you have any questions about the 

contents of this report, please contact me at (202) 512-3406. 

Gary T. Engel 

Director 

Financial Management and Assurance 

Enclosures - 3
Enclosure I 

Page 10 GAO-05-396R DOT’s Management Representation Letter 

Representations in FAM 1001A 

Guidance contained in FAM 1001 and FAM 1001A deals with the management 

representations that the auditor should obtain from current management as part of 

the audit. This guidance also acknowledges that judgment needs to be exercised to 

obtain representations that depend on the circumstances of the engagement and the 

nature and basis of presentation of the financial statements. Representations given in 

FAM section 1001A should be customized to the situation of the entity being audited, 

and additional representations may need to be obtained. 

FAM 1001A lists 27 representations that are ordinarily included, if applicable, in the 

management representation letter that an agency provides to the auditor. For 

representations 3, 11, 16, and 18, the agency should address three separate 

components. As such, each agency is ordinarily expected to make a total of 35 

representations. Representations 18, 19, 20, and 21 are not applicable unless the 

agency received an opinion on its internal control. In addition, representations 22, 23, 

and 24 address the three requirements of the Federal Financial Management 

Improvement Act of 1996 and are only applicable to the 24 CFO Act agencies. The 35 

representations in FAM 1001A are as follows. 

1. We are responsible for the fair presentation of the financial statements and 

stewardship information in conformity with U.S. generally accepted 

accounting principles. 

2. The financial statements are fairly presented in conformity with U.S. generally 

accepted accounting principles. 

3. We have made available to you all 

a. financial records and related data; 

b. where applicable, minutes of meetings of the Board of Directors [or 

other similar bodies, such as congressional oversight committees] or 

summaries of actions of recent meetings for which minutes have not 

been prepared; and 

c. communications from the Office of Management and Budget (OMB) 

concerning noncompliance with or deficiencies in financial reporting 

practices. 

4. There are no material transactions that have not been properly recorded in the 

accounting records underlying the financial statements or disclosed in the 

notes to the financial statements. 
Enclosure I 

Page 11 GAO-05-396R DOT’s Management Representation Letter 

5. We believe that the effects of the uncorrected financial statement 

misstatements summarized in the accompanying schedule are immaterial, both 

individually and in the aggregate, to the financial statements taken as a whole. 

[If management believes that certain of the identified items are not 

misstatements, management’s belief may be acknowledged by adding to the 

representation, for example, ‘‘We believe that items XX and XX do not 

constitute misstatements because [description of reason].’’] 

6. The [entity] has satisfactory title to all owned assets, including stewardship 

property, plant, and equipment; such assets have no liens or encumbrances; 

and no assets have been pledged. 

7. We have no plans or intentions that may materially affect the carrying value or 

classification of assets and liabilities. 

8. Guarantees under which the [entity] is contingently liable have been properly 

reported or disclosed. 

9. Related party transactions and related accounts receivable or payable, 

including assessments, loans, and guarantees, have been properly recorded 

and disclosed. 

10. All intraentity transactions and balances have been appropriately identified 

and eliminated for financial reporting purposes, unless otherwise noted. All 

intragovernmental transactions and balances have been appropriately 

recorded, reported, and disclosed. We have reconciled intragovernmental 

transactions and balances with the appropriate trading partners for the four 

fiduciary transactions identified in Treasury’s Intra-governmental Fiduciary

Transactions Accounting Guide, and other intragovernmental asset, liability, 

and revenue amounts as required by the applicable OMB Bulletin. 

11. There are no 

a. possible violations of laws or regulations whose effects should be 

considered for disclosure in the financial statements or as a basis for 

recording a loss contingency, 

b. material liabilities or gain or loss contingencies that are required to be 

accrued or disclosed that have not been accrued or disclosed, or 

c. unasserted claims or assessments that are probable of assertion and 

must be disclosed that have not been disclosed. 

12. We have complied with all aspects of contractual agreements that would have 

a material effect on the financial statements in the event of noncompliance. 

13. No material events or transactions have occurred subsequent to September 30, 

20X2 [or date of latest audited financial statements], that have not been 

properly recorded in the financial statements and stewardship information or 

disclosed in the notes. 
Enclosure I 

Page 12 GAO-05-396R DOT’s Management Representation Letter 

14. We are responsible for establishing and maintaining internal control. 

15. We acknowledge our responsibility for the design and implementation of 

programs and controls to prevent and detect fraud (intentional misstatements 

or omissions of amounts or disclosures in financial statements and 

misappropriation of assets that could have a material effect on the financial 

statements). 

16. We have no knowledge of any fraud or suspected fraud affecting the [entity] 

involving: 

a. management, 

b. employees who have significant roles in internal control, or 

c. others where the fraud could have a material effect on the financial 

statements. 

[If there is knowledge of any such instances, they should be described.] 

17. We have no knowledge of any allegations of fraud or suspected fraud affecting 

the [entity] received in communications from employees, former employees, 

or others. [If there is knowledge of any such allegations, they should be 

described.] 

18. Pursuant to 31 U.S.C. 3512(c), (d) (commonly known as the Federal Managers’ 

Financial Integrity Act), we have assessed the effectiveness of the [entity's] 

internal control in achieving the following objectives: 

a. reliability of financial reporting------transactions are properly recorded, 

processed, and summarized to permit the preparation of financial 

statements and stewardship information in accordance with U.S. 

generally accepted accounting principles, and assets are safeguarded 

against loss from unauthorized acquisition, use or disposition; 

b. compliance with applicable laws and regulations------transactions are 

executed in accordance with (i) laws governing the use of budget 

authority and with other laws and regulations that could have a direct 

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

regulations, and governmentwide policies identified by OMB in its audit 

guidance; and 

c. reliability of performance reporting------transactions and other data that 

support reported performance measures are properly recorded, 

processed, and summarized to permit the preparation of performance 

information in accordance with criteria stated by management. 

[If the entity bases its internal control assessment on suitable criteria other 

than 31 U.S.C. 3512(c), (d), this item should cite the criteria used (for example, 

Internal Control------Integrated Framework issued by the Committee of 

Sponsoring Organizations (COSO) of the Treadway Commission).] 
Enclosure I 

Page 13 GAO-05-396R DOT’s Management Representation Letter 

19. Those controls in place on September 30, 20X2 [or date of latest audited 

financial statements], and during the years ended 20X2 and 20X1, provided 

reasonable assurance that the foregoing objectives are met. 

[If there are material weaknesses, the foregoing representation should be 

modified to read: 

Those controls in place on September 30, 20X2, and during the years ended 

20X2 and 20X1, provided reasonable assurance that the foregoing 

objectives are met except for the effects of the material weaknesses 

discussed below or in the attachment. 

or: Internal controls are not effective. 

or: Internal controls do not meet the foregoing objectives.] 

20. We have disclosed to you all significant deficiencies in the design or operation 

of internal control that could adversely affect the entity's ability to meet the 

internal control objectives and identified those we believe to be material 

weaknesses. 

21. There have been no changes to internal control subsequent to September 30, 

20X2 [or date of latest audited financial statements], or other factors that 

might significantly affect it. [If there were changes, describe them, including 

any corrective actions taken with regard to any significant deficiencies or 

material weaknesses.] 

22. We are responsible for implementing and maintaining financial management 

systems that substantially comply with federal financial management systems 

requirements, federal accounting standards (U.S. generally accepted 

accounting principles), and the U.S. Government Standard General Ledger at 

the transaction level. 

23. We have assessed the financial management systems to determine whether 

they substantially comply with these federal financial management systems 

requirements. Our assessment was based on guidance issued by OMB. 

24. The financial management systems substantially complied with federal 

financial management systems requirements, federal accounting standards, 

and the U.S. Government Standard General Ledger at the transaction level as 

of [date of the latest financial statements]. 

[If the financial management systems substantially comply with only one or 

two of the above elements, this representation should be modified as follows: 

As of [date of financial statements], the [entity’s] financial management 

systems substantially comply with [specify which of the three elements for 

which there is substantial compliance (e.g., federal accounting standards 

and the SGL at the transaction level)], but did not substantially comply 
Enclosure I 

Page 14 GAO-05-396R DOT’s Management Representation Letter 

with [specify which of the elements for which there was a lack of 

substantial compliance (e.g., federal financial management systems 

requirements)], as described below (or in an attachment).] 

[If the financial management systems do not substantially comply with any of 

the three elements, the following paragraph should be used instead: 

As of [date of financial statements], the [entity's] financial management 

systems do not substantially comply with the federal financial management 

systems requirements.] 

[If there is a lack of substantial compliance with one or more of the three 

requirements, identify herein or in an attachment all the facts pertaining to the 

noncompliance, including the nature and extent of the noncompliance and the 

primary reason or cause of the noncompliance.] 

25. We are responsible for the [entity's] compliance with applicable laws and 

regulations. 

26. We have identified and disclosed to you all laws and regulations that have a 

direct and material effect on the determination of financial statement amounts. 

27. We have disclosed to you all known instances of noncompliance with laws and 

regulations. 
Enclosure II 

Page 15 GAO-05-396R DOT’s Management Representation Letter 

Comments From the Office of the Chief Financial Officer at the Department of 

Transportation 
Enclosure III 

Page 16 GAO-05-396R DOT’s Management Representation Letter 

Comments From the Office of the Inspector General at the Department of 

Transportation 

(198363) 
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