Page 1 GAO-05-592R DOS’s Management Representation Letter

United States Government Accountability Office

Washington, D.C. 20548

A

June 23, 2005

Mr. Sid L. Kaplan

Acting Assistant Secretary and Chief Financial Officer

Department of State

The Honorable Howard J. Krongard

Inspector General

Department of State

Subject: Financial Audit: The Department of State’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 

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-05-592R DOS’s Management Representation Letter

depend to provide their representations to us regarding the CFS. 

Specifically, Treasury and OMB stated that their representation letter to us 

on the CFS was based primarily on the individual federal agency 

representation letters. Consequently, our audit considered the content of 

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

these letters impaired our ability to obtain sufficient evidence in support of 

our audit of the CFS. This limitation contributed to our disclaimer of 

opinion on the CFS. We performed sufficient audit work to provide the 

disclaimer of opinion and issued our audit report, dated December 6, 2004, 

in accordance with U.S. generally accepted government auditing standards. 

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

selected federal agencies’ management representation letters to assess 

their adequacy in support of our audit of the CFS. As the federal 

government gets closer to an opinion on its financial statements, it 

becomes more important that the federal agencies’ management 

representation letters be complete and reliably prepared.

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

Department of State’s (DOS) fiscal year 2004 management representation 

letter. Our objective is to help ensure that future management 

representation letters submitted by DOS 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

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-05-592R DOS’s Management Representation Letter

Results in Brief DOS’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 three of the five key areas we 

reviewed. First, DOS 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 letter. Second, the letter 

included 24 of the 29 representations4

 from the FAM that were applicable to 

DOS. For the other 5 representations, 3 were not fully included and 2 were 

not provided at all. Finally, DOS did not include a complete summary of 

unadjusted misstatements with its management representation letter, and 

also did not provide a description of the misstatements and distinguish 

between misstatements affecting intragovernmental accounts and 

misstatements affecting accounts with the public.

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

three recommendations to DOS’s Acting Chief Financial Officer targeted to 

specific changes needed. Also, we are recommending that the DOS 

Inspector General, with the contracted independent public accountant, 

work with the department to help ensure that future management 

representation letters meet the key conditions noted as needing 

improvements in this report.

In commenting on a draft of this report, DOS’s Acting Chief Financial 

Officer stated that his office will work to address the issues related to 

representations and the summary of unadjusted misstatements, but did not 

commit to providing materiality thresholds in DOS’s fiscal year 2005 

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 DOS did not receive an opinion on its internal control for fiscal year 2004, 

only 29 of the 35 representations were applicable to DOS’s fiscal year 2004 management 

representation letter.
Page 4 GAO-05-592R DOS’s Management Representation Letter

management representation letter because of the effort involved. We are 

unclear as to how providing materiality thresholds would entail additional 

work when these amounts are needed by the auditor for its opinion on 

DOS’s departmentwide financial statements. In addition, in order for 

Treasury and OMB to represent that all matters material to the CFS were 

properly considered and included in the overall management 

representation letter for the CFS, Treasury and OMB need to receive 

materiality thresholds from certain federal agencies, including DOS. The 

Acting Chief Financial Officer’s response also stated that the Office of the 

Inspector General has agreed to work with the department to help ensure 

that future letters include all applicable representations and provide a 

complete summary of unadjusted misstatements.

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 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. 
Page 5 GAO-05-592R DOS’s Management Representation Letter

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);

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 6 GAO-05-592R DOS’s Management Representation Letter

• 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.

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 DOS’s Chief 

Financial Officer and Inspector General or their designees. Written 

comments from DOS’s Acting Chief Financial Officer are reprinted in 

enclosure II and are also discussed in the Agency Comments and Our 

Evaluation section. The Acting Chief Financial Officer’s response referred 

to cooperative efforts with DOS’s Office of Inspector General.

Identified Issues with 

DOS’s Fiscal Year 2004 

Management 

Representation Letter 

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

we identified the following three areas that need some improvement: 

(1) providing the materiality thresholds used, (2) providing or fully 

including applicable representations from the FAM, and (3) including a 

complete summary of unadjusted misstatements. 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. 
Page 7 GAO-05-592R DOS’s Management Representation Letter

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

included in DOS’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 DOS’s fiscal year 2004 management representation letter 

included 24 of the 29 representations from the FAM that were applicable to 

DOS. Of the 5 other representations, 3 were not fully included and 2 were 

not provided at all. For the 3 incomplete representations, the DOS 

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.
Page 8 GAO-05-592R DOS’s Management Representation Letter

When agencies do not provide all representations or include incomplete 

representations in their management representation letters, it impairs our 

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

of representations in the CFS management representation letter. 

Including a Complete 

Summary of Unadjusted 

Misstatements

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

each federal agency with uncorrected misstatements, a summary of 

unadjusted misstatements be attached to the agency’s management 

representation letter. Treasury and OMB use the summaries of unadjusted 

misstatements to assess the impact of federal agencies’ unadjusted 

misstatements on the CFS and make appropriate management 

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

used by us, as principal auditor of the CFS, to develop an overall 

governmentwide summary of unadjusted misstatements, which is then 

attached to the CFS management representation letter prepared by 

Treasury and OMB. 

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

year 2004, Treasury required agencies to submit a summary of unadjusted 

misstatements as part of the closing package using the standardized format 

provided for in the Treasury Financial Manual (TFM). The TFM, 

however, required additional details to be added to this summary of 

unadjusted misstatements than those called for by the FAM. Specifically, 

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

(2) distinguish between misstatements affecting intragovernmental 

accounts and misstatements affecting accounts with the public. We need 

this additional information to develop the overall governmentwide 

summary of unadjusted misstatements. In order to avoid duplication of 

effort by the agencies in preparing two summaries of unadjusted 

misstatements, the additional information should also be included in the 

summary of unadjusted misstatements attached to the management 

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

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

summary of unadjusted misstatements attached to the management 

representation letter. 

DOS included a summary of unadjusted misstatements with its 

management representation letter, but the summary as called for by the 

FAM was incomplete. Specifically, DOS did not (1) identify the financial 

statements affected by the misstatements, (2) separately identify the carryforward effect of the prior year’s unadjusted misstatements, and 
Page 9 GAO-05-592R DOS’s Management Representation Letter

(3) separate “known” and “likely” misstatements. In addition, DOS did not 

submit a summary of unadjusted misstatements as part of its closing 

package to Treasury as required by the TFM. As such, DOS also did not 

(1) include a description of the misstatements and (2) distinguish between 

misstatements affecting intragovernmental accounts and misstatements 

affecting accounts with the public.

Without a complete summary of unadjusted misstatements from each of 

the verifying agencies with uncorrected misstatements, it is not possible 

for us, as principal auditor of the CFS, to reasonably determine the audit 

risk exposure for each of the line items in the CFS or to prepare an 

adequate summary of unadjusted misstatements at the governmentwide 

level.

Conclusions In three of the five key areas we reviewed, DOS’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 DOS. The additional information 

needed from DOS is straightforward and should be easy to address. 

Recommendations for 

Executive Action

We recommend to DOS’s Acting 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 

DOS; and

• include a complete summary of unadjusted misstatements if there are 

any uncorrected misstatements, that also (1) provides a description of 

the misstatements and (2) distinguishes between misstatements 

affecting intragovernmental accounts and misstatements affecting 

accounts with the public.

We recommend that the DOS Inspector General, with the contracted 

independent public accountant, work with the department to help ensure 
Page 10 GAO-05-592R DOS’s Management Representation Letter

that future management representation letters meet the key conditions 

noted as needing improvements in this report.

Agency Comments and 

Our Evaluation

In commenting on a draft of this report, DOS’s Acting Chief Financial 

Officer stated that his office will work to address the issues related to 

representations and the summary of unadjusted misstatements. He also 

stated that DOS will consider including materiality thresholds in future 

periods but does not plan to do so in its 2005 management representation 

letter because sufficient resources would need to be devoted to developing 

such disclosures given that materiality has many quantitative and 

qualitative aspects and his office questions the relative impact that DOS’s 

representations have on the CFS. The Acting Chief Financial Officer’s 

response, which was coordinated with the Office of the Inspector General, 

also stated that the Office of the Inspector General has agreed to work with 

the department to help ensure that future letters include all applicable 

representations and provide a complete summary of unadjusted 

misstatements.

With respect to materiality, U.S. generally accepted government auditing 

standards state that 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. As a 

result, the materiality thresholds used for the representations should be 

known by management and the auditor when the management 

representation letter is prepared. Further, materiality thresholds are 

needed by the auditor for its opinion on DOS’s departmentwide financial 

statements. Therefore, DOS should be able to provide the materiality 

thresholds to Treasury and OMB with no additional work. In addition, as 

stated in our report, Treasury and OMB use agency materiality thresholds 

in providing a materiality threshold for the governmentwide management 

representation letter. 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, which include DOS, and other selected 

agencies that were made in connection with the preparation of these 

entities’ respective financial statements and provided to OMB and Treasury. 

Treasury has defined these agencies as “verifying agencies”. Therefore, in 

order for Treasury and OMB to represent that all matters material to the 

CFS were properly considered and included in the overall management 
Page 11 GAO-05-592R DOS’s Management Representation Letter

representation letter for the CFS, Treasury and OMB need to receive 

materiality thresholds from all of the verifying agencies. 

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 – 2 
Page 12 GAO-05-592R DOS’s Management Representation Letter

Enclosure I: Representations in FAM 1001A

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

management representations that the auditor should obtain from current 

management as part of the audit. This guidance also acknowledges that 

judgment needs to be exercised to obtain representations that depend on 

the circumstances of the engagement and the nature and basis of 

presentation of the financial statements. Representations given in FAM 

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

audited, and additional representations may need to be obtained.

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

applicable, in the management representation letter that an agency 

provides to the auditor. For representations 3, 11, 16, and 18, the agency 

should address three separate components. As such, each agency is 

ordinarily expected to make a total of 35 representations. Representations 

18, 19, 20, and 21 are not applicable unless the agency received an opinion 

on its internal control. In addition, representations 22, 23, and 24 address 

the three requirements of the Federal Financial Management Improvement 

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

representations in FAM 1001A are as follows.

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

and stewardship information in conformity with U.S. generally 

accepted accounting principles.

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

generally accepted accounting principles.

3. We have made available to you all

a. financial records and related data;

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

other similar bodies, such as congressional oversight committees] or 

summaries of actions of recent meetings for which minutes have not 

been prepared; and

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

concerning noncompliance with or deficiencies in financial reporting 

practices.
Enclosure I: Representations in FAM 1001A

Page 13 GAO-05-592R DOS’s Management Representation Letter

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

recorded in the accounting records underlying the financial statements 

or disclosed in the notes to the financial statements.

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

misstatements summarized in the accompanying schedule are 

immaterial, both individually and in the aggregate, to the financial 

statements taken as a whole. [If management believes that certain of 

the identified items are not misstatements, management’s belief may be 

acknowledged by adding to the representation, for example, “We 

believe that items XX and XX do not constitute misstatements because 

[description of reason].”]

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

stewardship property, plant, and equipment; such assets have no liens 

or encumbrances; and no assets have been pledged.

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

value or classification of assets and liabilities.

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

properly reported or disclosed.

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

including assessments, loans, and guarantees, have been properly 

recorded and disclosed.

10. All intraentity transactions and balances have been appropriately 

identified and eliminated for financial reporting purposes, unless 

otherwise noted. All intragovernmental transactions and balances have 

been appropriately recorded, reported, and disclosed. We have 

reconciled intragovernmental transactions and balances with the 

appropriate trading partners for the four fiduciary transactions 

identified in Treasury’s Intra-governmental Fiduciary

Transactions Accounting Guide, and other intragovernmental 

asset, liability, and revenue amounts as required by the applicable OMB 

Bulletin.
Enclosure I: Representations in FAM 1001A

Page 14 GAO-05-592R DOS’s Management Representation Letter

11. There are no

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

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

recording a loss contingency,

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

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

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

must be disclosed that have not been disclosed.

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

would have a material effect on the financial statements in the event of 

noncompliance.

13. No material events or transactions have occurred subsequent to 

September 30, 20X2 [or date of latest audited financial statements], that 

have not been properly recorded in the financial statements and 

stewardship information or disclosed in the notes.

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

15. We acknowledge our responsibility for the design and implementation 

of programs and controls to prevent and detect fraud (intentional 

misstatements or omissions of amounts or disclosures in financial 

statements and misappropriation of assets that could have a material 

effect on the financial statements).

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

[entity] involving:

a. management,

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

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

statements. 

[If there is knowledge of any such instances, they should be described.]
Enclosure I: Representations in FAM 1001A

Page 15 GAO-05-592R DOS’s Management Representation Letter

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

affecting the [entity] received in communications from employees, 

former employees, or others. [If there is knowledge of any such 

allegations, they should be described.]

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

Managers’ Financial Integrity Act), we have assessed the effectiveness 

of the [entity's] internal control in achieving the following objectives:

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

processed, and summarized to permit the preparation of financial 

statements and stewardship information in accordance with U.S. 

generally accepted accounting principles, and assets are safeguarded 

against loss from unauthorized acquisition, use or disposition;

b. compliance with applicable laws and regulations—transactions are 

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

authority and with other laws and regulations that could have a 

direct and material effect on the financial statements and (ii) any 

other laws, regulations, and governmentwide policies identified by 

OMB in its audit guidance; and

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

support reported performance measures are properly recorded, 

processed, and summarized to permit the preparation of 

performance information in accordance with criteria stated by 

management. 

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

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

(for example, Internal Control—Integrated Framework issued by the 

Committee of Sponsoring Organizations (COSO) of the Treadway 

Commission).]

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

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

provided reasonable assurance that the foregoing objectives are met. 

[If there are material weaknesses, the foregoing representation should 

be modified to read: 

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

ended 20X2 and 20X1, provided reasonable assurance that the 
Enclosure I: Representations in FAM 1001A

Page 16 GAO-05-592R DOS’s Management Representation Letter

foregoing objectives are met except for the effects of the material 

weaknesses discussed below or in the attachment. 

or: Internal controls are not effective. 

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

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

operation of internal control that could adversely affect the entity's 

ability to meet the internal control objectives and identified those we 

believe to be material weaknesses. 

21. There have been no changes to internal control subsequent to 

September 30, 20X2 [or date of latest audited financial statements], or 

other factors that might significantly affect it. [If there were changes, 

describe them, including any corrective actions taken with regard to 

any significant deficiencies or material weaknesses.] 

22. We are responsible for implementing and maintaining financial 

management systems that substantially comply with federal financial 

management systems requirements, federal accounting standards (U.S. 

generally accepted accounting principles), and the U.S. Government 

Standard General Ledger at the transaction level. 

23. We have assessed the financial management systems to determine 

whether they substantially comply with these federal financial 

management systems requirements. Our assessment was based on 

guidance issued by OMB. 

24. The financial management systems substantially complied with federal 

financial management systems requirements, federal accounting 

standards, and the U.S. Government Standard General Ledger at the 

transaction level as of [date of the latest financial statements]. 

[If the financial management systems substantially comply with only 

one or two of the above elements, this representation should be 

modified as follows: 

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

management systems substantially comply with [specify which of the 

three elements for which there is substantial compliance (e.g., 

federal accounting standards and the SGL at the transaction level)], 
Enclosure I: Representations in FAM 1001A

Page 17 GAO-05-592R DOS’s Management Representation Letter

but did not substantially comply with [specify which of the elements 

for which there was a lack of substantial compliance (e.g., federal 

financial management systems requirements)], as described below 

(or in an attachment).] 

[If the financial management systems do not substantially comply with 

any of the three elements, the following paragraph should be used 

instead: 

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

management systems do not substantially comply with the federal 

financial management systems requirements.] 

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

three requirements, identify herein or in an attachment all the facts 

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

noncompliance and the primary reason or cause of the 

noncompliance.]

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

and regulations.

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

have a direct and material effect on the determination of financial 

statement amounts.

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

laws and regulations.
Page 18 GAO-05-592R DOS’s Management Representation Letter

Enclosure II: Comments From the Department 

of State
Enclosure II: Comments From the 

Department of State

Page 19 GAO-05-592R DOS’s Management Representation Letter
Enclosure II: Comments From the 

Department of State

(198371) Page 20 GAO-05-592R DOS’s Management Representation Letter
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