a

GAO

United States Government Accountability Office

Report to the Secretary of the Treasury 

and the Director of the Office of 

Management and Budget

May 2005 FINANCIAL AUDIT

Process for 

Preparing the 

Consolidated 

Financial 

Statements of the 

U.S. Government 

Continues to 

Need Improvement

GAO-05-407
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-407.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gary T. Engel 

at (202) 512-3406 or engelg@gao.gov. 

Highlights of GAO-05-407, a report to the 

Secretary of the Treasury and the Director 

of the Office of Management and Budget 

May 2005

FINANCIAL AUDIT

Process for Preparing the 

Consolidated Financial Statements 

of the U.S. Government Continues 

to Need Improvement 

GAO identified weaknesses during its tests of Treasury’s process for 

preparing the fiscal year 2004 CFS. Such weaknesses in the CFS preparation 

process impair the U.S. government’s ability to ensure that the CFS is 

consistent with the underlying audited agency financial statements, properly 

balanced, and in conformity with U.S. generally accepted accounting 

principles. 

The weaknesses GAO identified during the fiscal year 2004 CFS audit 

involved the following six areas: 

• directly linking audited federal agency financial statements to the CFS, 

• controls over the compilation process, 

• consolidated reporting guidance to agencies, 

• intragovernmental activity and balances—explanations for material 

unreconciled transactions, 

• consistency of the Department of Justice’s and agencies’ opinions on 

legal cases, and 

• conformity with U.S. generally accepted accounting principles. 

During fiscal year 2004, Treasury made progress in laying the foundation to 

address certain long-standing material deficiencies in preparing the CFS. 

Foremost is the ongoing development of a new system, which is intended to 

directly link information from federal agencies’ audited financial statements 

to amounts reported in the CFS. Additional actions are under way and 

planned. 

Of the 142 open recommendations that GAO reported in September 2004 

regarding the process for preparing the CFS, 135 remained open as of 

December 6, 2004, the end of GAO’s fieldwork for the fiscal year 2004 CFS 

audit. However, 86 of these 135 recommendations relate to specific 

disclosures required under U.S. generally accepted accounting principles. 

Treasury has taken action to begin addressing the conformity with 

U.S. generally accepted accounting principles issue. GAO plans to determine 

the status of corrective actions to address its open recommendations during 

its fiscal year 2005 audit of the CFS. 

For the past 8 years, since the first 

audit of the consolidated financial 

statements of the U.S. government 

(CFS), certain material weaknesses 

in internal control and in selected 

accounting and financial reporting 

practices have resulted in 

conditions that prevented GAO 

from expressing an opinion on the 

CFS. Specifically, GAO has 

reported that the U.S. government 

did not have adequate systems, 

controls, and procedures to 

properly prepare the CFS. In 

December 2004, GAO reported on 

weaknesses identified during its 

fiscal year 2004 audit of the CFS, 

including weaknesses relating to 

the Department of the Treasury’s 

(Treasury) preparation of the CFS. 

The purpose of this report is to 

(1) discuss the details of the 

weaknesses relating to Treasury’s 

preparation of the CFS, 

(2) recommend improvements to 

address those weaknesses, and 

(3) provide the status of corrective 

actions to address the 142 open 

recommendations GAO previously 

reported. 

What GAO Recommends

GAO is making 20 new 

recommendations to address 

compilation and reporting 

weaknesses identified during the 

fiscal year 2004 CFS audit. 

Treasury and the Office of 

Management and Budget stated 

that they generally concur with the 

findings in the report. Treasury also 

stated that it is addressing many of 

the recommendations from GAO’s 

prior reports. 
Page i GAO-05-407 Process for Preparing the CFS

Contents

Letter 1

Results in Brief 2

Scope and Methodology 5

Directly Linking Audited Federal Agency Financial Statements to 

the CFS 6

Controls over the Compilation Process 7

Consolidated Reporting Guidance to Agencies 12

Intragovernmental Activity and Balances—Explanations for 

Material Unreconciled Differences 14

Consistency of Justice’s and Agencies’ Opinions on Legal Cases 15

Conformity with U.S. Generally Accepted Accounting Principles 16

Agency Comments and Our Evaluation 17

Appendixes

Appendix I: Disclosure Issues 23

Appendix II: Status of Treasury’s and OMB’s Progress in Addressing 

GAO’s Prior Year Recommendations for Preparing the CFS 25

Appendix III: Comments from the Department of the Treasury 73

Abbreviations

CFS consolidated financial statements of the U.S. government

FASAB Federal Accounting Standards Advisory Board

GAAP generally accepted accounting principles

GFRS Governmentwide Financial Reporting System

Justice Department of Justice

OMB Office of Management and Budget

PBGC Pension Benefit Guaranty Corporation

SFFAS Statement of Federal Financial Accounting Standards

TFM Treasury Financial Manual

Treasury Department of the Treasury

VA Department of Veterans Affairs
Contents

Page ii GAO-05-407 Process for Preparing the CFS

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Page 1 GAO-05-407 Process for Preparing the CFS

United States Government Accountability Office

Washington, D.C. 20548

A

May 4, 2005 Letr

The Honorable John W. Snow

The Secretary of the Treasury

The Honorable Joshua B. Bolten

Director, Office of Management and Budget

In our report dated December 6, 2004, we disclaimed an opinion on the 

consolidated financial statements of the U.S. government (CFS) for the 

fiscal years ended September 30, 2004 and 2003.1

 For the past 8 years, 

certain material weaknesses in internal control and in selected accounting 

and financial reporting practices resulted in conditions that prevented us 

from expressing an opinion on the CFS. Specifically, we have reported that 

the federal government did not have adequate systems, controls, and 

procedures to properly prepare its consolidated financial statements. Many 

of these weaknesses in internal control that contributed to our continuing 

disclaimers of opinion were identified by agency financial statement 

auditors during their audits of federal agencies’ financial statements and 

were reported in detail with recommendations to the agencies in separate 

reports. However, some of the internal control weaknesses were identified 

during our tests of the Department of the Treasury’s (Treasury) process for 

preparing the CFS.

Such weaknesses in the CFS preparation process impair the federal 

government’s ability to ensure that the CFS is consistent with the 

underlying audited agency financial statements, properly balanced, and in 

conformity with U.S. generally accepted accounting principles (GAAP). 

Consequently, these weaknesses also contributed to our inability to render 

an opinion on the CFS.

The purpose of this report is to (1) discuss the details of the weaknesses 

we identified during our fiscal year 2004 audit regarding financial reporting 

procedures and internal control over the process for preparing the CFS, 

(2) recommend improvements to address those weaknesses, and 

(3) provide the status of corrective actions to address the 

1

 The fiscal year 2004 Financial Report of the United States Government includes 

our report and was completed by the Department of the Treasury (Treasury) on 

December 15, 2004, and is available through GAO’s Web site at www.gao.gov/financial.html

and Treasury’s Web site at www.fms.treas.gov/fr/index.html.
Page 2 GAO-05-407 Process for Preparing the CFS

open recommendations detailed in our prior reports and listed in appendix 

II. We have discussed each of the new weaknesses identified during our 

fiscal year 2004 audit with your staff and have incorporated their comments 

as appropriate.

Results in Brief We identified weaknesses in the compilation and reporting processes 

during our fiscal year 2004 audit. Specifically, we found that

• Treasury’s process for compiling the CFS does not yet ensure that 

financial information from federal agencies’ audited financial 

statements and other financial data directly link to amounts reported in 

the CFS;

• Treasury’s process for compiling the CFS has weaknesses in internal 

control, including a lack of adequate segregation of duties and 

management reviews of certain key data;

• Treasury did not provide clear guidance to federal agencies about 

certain financial information that they were required to provide 

Treasury to be compiled in the CFS and Treasury and the Office of 

Management and Budget (OMB) did not perform follow-up procedures 

to ensure we had all the necessary audit documentation to perform 

certain of our audit procedures relating to the compilation of the CFS;

• Treasury does not require federal agencies to provide detailed 

explanations for all material differences identified in the 

intragovernmental reconciliations that Treasury and OMB require the 

agencies to perform;

• Treasury does not have specific policies and procedures to address 

discrepancies of opinion between the Department of Justice’s (Justice) 

and applicable federal agencies’ legal counsel for purposes of providing 

legal representations to us at the governmentwide level; and

• Treasury continues to lack an adequate process to ensure that the 

financial statements, related notes, stewardship information, and 

supplementary information in the CFS are presented in conformity with 

GAAP.

During fiscal year 2004, Treasury made progress in laying the foundation to 

address certain long-standing material deficiencies in preparing the CFS. 
Page 3 GAO-05-407 Process for Preparing the CFS

Foremost is the ongoing development of a new system, which is intended 

to directly link information from federal agencies’ audited financial 

statements to amounts reported in the CFS. Additional actions are under 

way and planned.

This report includes 20 new recommendations to address the weaknesses 

we identified during our fiscal year 2004 CFS audit, including 6 related to 

three required GAAP disclosure areas identified in appendix I. Consistent 

with our position on previously identified disclosure weaknesses, we are 

recommending that the required disclosures that are not included in the 

fiscal year 2004 CFS either be included in future years’ CFS or that the 

specific basis for their exclusion be documented. Appendix II of this report 

reflects the status of actions taken as of December 6, 2004, the date of 

completion of our fieldwork on our fiscal year 2004 CFS audit, to address 

the open recommendations from our previous reports and shows that 

135 recommendations contained in our prior reports remain open and 7 

were closed during our fiscal year 2004 audit. However, 86 of these 

135 recommendations relate to specific disclosures required under GAAP. 

Treasury has taken action to begin addressing the conformity with GAAP 

issue. We plan to determine the status of corrective actions to address our 

open recommendations during our fiscal year 2005 audit of the CFS.

OMB stated that it generally agreed with the new findings and 

related recommendations in this report. Treasury stated that it agrees that 

the reporting process still needs improvement and that it is addressing 

many of the recommendations in our previous reports. Treasury also stated 

that it generally concurs with our new recommendations and that it will 

work with OMB and the federal agencies to improve reporting practices. 

Also, Treasury asked that we reconsider or modify our recommendations in 

three areas: (1) controls over the compilation process, (2) consistency of 

Justice’s and agencies’ opinions on legal cases, and (3) directly linking 

audited federal agency financial statements to the CFS. We modified 

recommendations in the first two areas.

With regard to controls over the compilation process, we found that 

Treasury did not have adequate supporting documentation for several 

journal vouchers to adjust data submitted by agencies in their audited 

closing packages. Treasury stated that it agrees that there are instances 

where it should obtain agency approvals before changing federal agencies’ 

audited data when compiling the CFS, but it needs the flexibility and 

authority to make appropriate adjustments when needed regardless of 

whether agencies agree and asked that we modify our recommendation 
Page 4 GAO-05-407 Process for Preparing the CFS

accordingly. Treasury believes that agency approval is not necessary when 

certain adjustments to agencies’ closing package data are made. Treasury is 

correct that certain circumstances may require adjustments to agency 

closing package data. In such instances, we believe that Treasury should 

contact agencies to resolve any discrepancies between agencies’ audited 

closing packages and audited financial statements and discuss any other 

situations that require adjustments to agencies’ audited closing package 

data. The purpose of our recommendation was to provide improved 

controls over adjustments made to agencies’ data and was not intended to 

limit Treasury’s flexibility in preparing the CFS. We have modified our 

recommendation to clarify our intent.

With regard to consistency of Justice’s and agencies’ opinions on legal 

cases, Treasury stated that it and OMB have agreed that Justice is the final 

authority on legal liabilities and disclosure amounts at the governmentwide 

level. Treasury also stated that it will work with OMB to develop a policy to 

eliminate any inconsistencies between Justice’s and federal agencies’ 

opinions on legal cases. We have modified our recommendation to reflect 

that Treasury and OMB will work jointly to address the issue.

With regard to directly linking audited federal agency financial statements 

to the CFS, Treasury continues to disagree that additional information 

should be collected from federal agencies’ audited financial statements to 

demonstrate consistency and completeness of reporting for both the 

Reconciliation of Net Operating Cost and Unified Budget Deficit and the 

Statement of Changes in Cash Balance from Unified Budget and Other 

Activities. For fiscal year 2004, these two financial statements included 

some amounts that Treasury could not explain or fully support or for which 

Treasury could not demonstrate the link to agencies’ audited financial 

statements. We continue to believe that the process of directly linking 

relevant audited federal agencies’ financial statement information to these 

two financial statements would be the most efficient and effective manner 

for Treasury, as the preparer of the CFS, to obtain and demonstrate the 

necessary assurance on certain information reported in such financial 

statements. As such, we have not modified our recommendations in this 

area.
Page 5 GAO-05-407 Process for Preparing the CFS

Scope and 

Methodology

As part of our audit of the fiscal years 2004 and 2003 CFS, we evaluated 

Treasury’s financial reporting procedures and related internal control and 

we followed up on the status of Treasury and OMB corrective actions to 

address open recommendations regarding the process for preparing the 

CFS that were in our prior years’ reports. In our report, which is included in 

the fiscal year 2004 Financial Report of the United States Government, we 

reported material deficiencies relating to Treasury’s preparation of 

the CFS. These material deficiencies contributed to our disclaimer of 

opinion on the CFS and also constitute material weaknesses in internal 

control, which contributed to our adverse opinion on internal control. We 

performed sufficient audit procedures to provide the disclaimer of opinion 

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

This report provides the details of the additional weaknesses we identified 

in performing our fiscal year 2004 audit procedures and our 

recommendations to correct those weaknesses, as well as the status of 

corrective actions taken by Treasury and OMB to address 

open recommendations contained in our prior years’ reports.

We requested comments on a draft of this report from the Director of OMB 

and the Secretary of the Treasury or their designees. OMB provided oral 

comments, which are discussed in the Agency Comments and Our 

Evaluation section of this report. Treasury’s comments are reprinted in 

appendix III and are also discussed in the Agency Comments and Our 

Evaluation section.
Page 6 GAO-05-407 Process for Preparing the CFS

Directly Linking 

Audited Federal 

Agency Financial 

Statements to the CFS

As we have reported in the past, Treasury’s process for compiling the CFS 

does not yet ensure that financial information from federal agencies’ 

audited financial statements and other financial data directly link to 

amounts reported in the CFS. Statement of Federal Financial Accounting 

Concepts No. 4, Intended Audience and Qualitative Characteristics for 

the Consolidated Financial Report of the United States Government, 

states that the consolidated financial report should be a general purpose 

report that is aggregated from agency reports and that it should tell users 

where to find information in other formats, both aggregated and 

disaggregated, such as in individual agency reports, on agency Web sites, 

and in the President’s Budget. In our prior report,2

 we recommended that as 

Treasury continues to design and further implement its new process for 

compiling the CFS, the Secretary of the Treasury direct the Fiscal Assistant 

Secretary, in coordination with the Controller of the OMB, to modify 

Treasury’s closing package to (1) require federal agencies to directly link 

their audited financial statement notes to the CFS notes and (2) provide the 

necessary information to demonstrate that all of the five principal 

consolidated financial statements are consistent with the underlying 

information in federal agencies’ audited financial statements and other 

financial data.

As discussed in our fiscal year 2004 audit report, Treasury made progress in 

laying the foundation to address certain long-standing material deficiencies 

in preparing the CFS. Foremost is the ongoing development of a new 

system, the Governmentwide Financial Reporting System (GFRS), to 

collect agency financial statement information taken directly from federal 

agencies’ audited financial statements rather than using federal agencies’ 

Standard General Ledger data, as Treasury had done in previous years to 

compile the CFS. The goal of the new system is to be able to directly link 

information from federal agencies’ audited financial statements to amounts 

reported in the CFS, a concept that we strongly support. Once Treasury is 

able to achieve this, a major impediment to our ability to audit the CFS 

would be eliminated.

2

 GAO, Financial Audit: Process for Preparing the Consolidated Financial Statements 

of the U.S. Government Needs Further Improvement, GAO-04-866 (Washington, D.C.: 

Sept. 10, 2004).
Page 7 GAO-05-407 Process for Preparing the CFS

Based on our review of Treasury’s new process for compiling the CFS, we 

found that Treasury was unable to demonstrate that the information in the 

fiscal year 2004 CFS directly linked to agencies’ audited financial 

statements. Even though Treasury required each significant agency3

 to 

submit its audited financial statement data in the GFRS closing package 

and certify their accuracy, the closing package does not require federal 

agencies to directly link their audited financial statement notes to the 

closing package notes and does not require the necessary information to 

compile all five of the required consolidated financial statements. In some 

cases, we found that Treasury was unable to demonstrate that the financial 

information in the CFS directly linked to federal agencies’ audited financial 

statements because federal agencies provided Treasury with incomplete 

and inaccurate financial information. Also, because of other internal 

control weaknesses over the compilation process noted in this report, 

Treasury could not fully ensure that the information in the CFS was 

consistent with underlying information in agencies’ audited financial 

statements and other financial data.

Controls over the 

Compilation Process

We continued to find that there are specific areas of internal control in 

Treasury’s process for compiling the CFS that need to be strengthened. 

Treasury had to resort to last-minute, alternative methods to gather the 

needed fiscal year 2004 information. These problems were compounded by 

Treasury’s reliance on internal controls that were dependent on procedures 

that would attempt to identify any errors after they were made by an 

agency (detective controls) rather than on internal controls that may have 

prevented or minimized the errors from occurring (preventive controls). 

Treasury had planned to perform certain tests of its new fiscal year 2004 

process and design the necessary internal controls by collecting agencies’ 

fiscal year 2003 financial information during the summer of fiscal year 

2004. Although Treasury did collect the fiscal year 2003 financial 

information, it did not perform the necessary detailed tests to identify and 

correct potential issues with its new reporting process and develop 

adequate internal control for the fiscal year 2004 reporting process.

3

 Treasury refers to the significant agencies as “verifying agencies.” They are the Chief 

Financial Officers Act agencies, the Export-Import Bank of the United States, the Farm 

Credit System Insurance Corporation, the Federal Communications Commission, the 

Federal Deposit Insurance Corporation, the National Credit Union Administration, the 

U.S. Postal Service, the Pension Benefit Guaranty Corporation, the Railroad Retirement 

Board, the Securities and Exchange Commission, the Smithsonian Institution, and the 

Tennessee Valley Authority.
Page 8 GAO-05-407 Process for Preparing the CFS

Internal control should provide, among other things, reasonable assurance 

that financial reporting is reliable. GAO’s Standards for Internal Control 

in the Federal Government4

 defines the minimum level of quality 

acceptable for internal control in the federal government and provides the 

standards against which internal control is to be evaluated. These 

standards state that internal controls should include (1) segregation of 

duties, (2) appropriate documentation of transactions and internal control, 

(3) reviews by management at the functional or activity level, and 

(4) access controls over information systems. We found many internal 

controls in place, but we also continued to identify areas that need to be 

improved, as well as the need for a strong financial reporting 

infrastructure. As Treasury continues to develop its new compilation 

process, implementing adequate internal control remains important and 

needs to be considered during the development process.

Segregation of Duties Segregation of duties is the practice of dividing the steps in a critical 

function among different individuals in order to reduce the risk of error, 

thus preventing a single individual from having full control of a transaction 

or event. Lack of proper segregation of duties for critical processes leaves 

the CFS vulnerable to errors and could result in incomplete and inaccurate 

summarization of data within these financial statements. During our fiscal 

year 2004 audit, we identified a lack of segregation of duties over 

(1) Treasury’s new process for preparing governmentwide adjustments to 

the financial statements,(2) the process for making changes to Excel 

spreadsheets that contain audited agency financial information, and 

(3) access to federal agencies’ closing package data in Treasury’s new 

system. The lack of segregation of duties over these areas allowed a single 

Treasury employee to perform functions that should have been divided 

among several employees. In each of the following examples, a single 

Treasury employee was allowed to

• determine and approve the amount of a journal voucher to adjust the 

financial statements,

• solely determine needed changes to the Excel spreadsheets and make 

the changes without obtaining any approval, and

4

 GAO, Internal Control: Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
Page 9 GAO-05-407 Process for Preparing the CFS

• have access to agency closing package data entered in Treasury’s new 

system by individual agencies and edit the same information without 

obtaining approval from the agency.

Appropriate Documentation 

of Transactions and 

Internal Control

Agency management is responsible for developing appropriate detailed 

policies, procedures, and practices to perform agency operations and 

ensuring that internal control is an integral part of operations. Although 

GAO’s Standards for Internal Control in the Federal Government calls for 

clear documentation of policies and procedures and transactions, we 

continued to find that many key policies and procedures were not 

documented in Treasury’s standard operating procedures and that Treasury 

did not have appropriate supporting documentation for all transactions 

recorded in the CFS.

In our prior report,5

 we recommended that the Secretary of the Treasury 

direct the Fiscal Assistant Secretary to develop and fully document policies 

and procedures for the consolidated financial statement preparation 

process so that they are proper, complete, and consistently applied among 

staff members. Without documented policies and procedures, staff could 

apply practices inconsistently or not perform necessary practices at all. 

However, during our fiscal year 2004 audit, we found that Treasury had not 

fully documented its policies and procedures for preparing the CFS before 

the fiscal year 2004 process began and continued to develop its policies and 

procedures throughout our audit and up to the end-of-fieldwork date. 

Treasury’s standard operating procedures did not include the following key 

procedures:

• procedures for correcting any errors identified in agencies’ closing 

packages;

• detailed and comprehensive procedures for the allocation of certain 

costs on the statement of net cost; and

• procedures for compiling information that was not collected in GFRS or 

Excel spreadsheets, such as how to properly analyze and compile 

contingency information.

5

 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 10 GAO-05-407 Process for Preparing the CFS

Also, Treasury did not have appropriate supporting documentation for all 

transactions recorded in the CFS. Recording transactions in the financial 

statements without adequate underlying support increases the risk that 

inappropriate adjustments to balances in the financial statements could be 

made. Specifically, we found that 20 of the 51 journal vouchers recorded in 

Treasury’s journal voucher log did not have adequate supporting 

documentation. Eighteen of these journal vouchers were necessary 

because agencies submitted data in their closing packages that did not 

agree to their audited financial statements. Treasury did not document 

communications with these agencies before recording such adjustments. 

For example, we found that the supporting documentation for 13 fiscal 

year 2004 journal vouchers to correct agency data was simply a printout 

from GFRS or a copy of a page from an agency’s financial statements 

without any agency confirmation of the correction. We also found that 

some significant changes were made directly to the CFS and not through 

the journal voucher process or any other formal documentation process.

Management Review During our fiscal year 2004 audit, we found that Treasury management did 

not review transactions within several key compilation processes. 

Transactions and other significant events should be authorized and 

executed only by persons acting within the scope of their authority. 

Appropriate reviews by management of key decisions and data are vital 

controls to ensure that only authorized actions occur. Inadequate 

management reviews and lack of documentation of changes, reviews, and 

approvals could allow the CFS to be manipulated or changed without any 

supervisory control or review, resulting in the possibility that agency data 

could be changed or incorrectly compiled in the CFS. For example, we 

found that some changes to the Excel spreadsheets used to compile agency 

financial information were not documented, and therefore, there was no 

documentation of review and approval from management. We also found 

that not all journal vouchers were approved by management before being 

recorded in the CFS. In some cases, the lack of management review was 

the result of improperly segregating duties as discussed above.

Access Controls over 

Information Systems

During our fiscal year 2004 audit, we found that information system control 

weaknesses, including inadequate access controls, existed within the 

segments of GFRS used during the fiscal year 2004 reporting process. 

Access controls should provide reasonable assurance that computer 

resources are protected against unauthorized modification, disclosure, 

loss, or impairment. Limiting access ensures that access to very sensitive 
Page 11 GAO-05-407 Process for Preparing the CFS

resources is limited to very few individuals and that employees are 

restricted from performing incompatible functions or functions beyond 

their responsibility. Treasury’s lack of adequate controls to prevent 

inappropriate access increases the risk of unauthorized information or 

computer resource modification, disclosure, loss, or impairment. 

Specifically, we found that inappropriate access to GFRS was granted to 

certain Treasury personnel, and the GFRS database was not configured to 

prevent the unauthorized alteration of data submitted by federal agencies. 

We also found that the GFRS production database was also used for 

testing, which could result in inadvertent alteration of the production data 

used to compile the CFS.

Financial Reporting 

Infrastructure

During our fiscal year 2004 audit, Treasury did not have the infrastructure 

to address the magnitude of the fiscal year 2004 financial reporting 

challenges it faced, such as an incomplete financial reporting system, 

compressed time frames for compiling the financial information, and 

inaccurate and incomplete information provided by certain federal 

agencies. As a result, we found that Treasury’s Financial Management 

Service personnel had excessive workloads and that an extraordinary 

amount of effort and dedication was required to compile the CFS. Also, too 

few Financial Management Service personnel had the specialized financial 

reporting experience necessary to ensure accurate and reliable financial 

reporting by the accelerated reporting date. We found that there was a 

heavy reliance on just a few personnel to perform key functions without 

any trained backup employees. If these personnel were unavailable, 

Treasury’s financial reporting process would be negatively affected.

Recommendations for 

Executive Action

In connection with Treasury’s development of its new compilation system 

and process, we recommend that the Secretary of the Treasury direct the 

Fiscal Assistant Secretary to

• segregate the duties of individuals performing key functions in 

Treasury’s processes for preparing governmentwide adjustments to the 

financial statements, making changes to Excel spreadsheets that 

contain audited agency financial information, and accessing federal 

agencies’ closing package data in Treasury’s new system;

• require and maintain appropriate supporting documentation for all 

journal vouchers recorded in the CFS;
Page 12 GAO-05-407 Process for Preparing the CFS

• require that Treasury employees contact and document 

communications with agencies before recording journal vouchers to 

change agency audited closing package data;

• require and document management reviews of all procedures that result 

in data changes to the CFS;

• configure the GFRS database to prevent Treasury personnel from 

altering data submitted by federal agencies and to use separate GFRS 

databases for testing and production; and

• assess the infrastructure associated with the compilation process and 

modify it as necessary to achieve a sound internal control environment.

Consolidated 

Reporting Guidance 

to Agencies

The Treasury Financial Manual (TFM) prescribes how federal agencies 

are to submit financial information to Treasury to be compiled in the CFS. 

While our planned audit procedures were not to review the entire TFM to 

determine if its guidance to agencies was clear, we found several areas 

where the TFM did not give clear guidance to federal agencies about the 

information that they were required to provide in the notes to the financial 

statements. Specifically, we found that the TFM did not give clear guidance 

for reporting note disclosures for loans receivable and loan guarantees; 

property, plant, and equipment; federal employee and veteran benefits 

payable; and contingencies. Also, the TFM did not provide clear guidance 

on how to consistently report debit and credit amounts throughout various 

notes so that like amounts are appropriately added and subtracted. For 

example, we noted that the TFM did not provide instructions about which 

line in the property, plant, and equipment note should include land 

improvements. As a result, agencies reported financial data inconsistently. 

This increases the risk of incomplete and inaccurate summarization of data 

in the CFS.

The TFM required federal agencies to also provide GAO, as the principal 

auditor of the CFS, a complete closing package consisting of the special 

purpose audit opinion, the management representation letter for the 

closing package, audit trail report (reclassification journal voucher report), 

closing package financial statement report, trading partner summary 

report, notes reports, and other data reports. Certain federal agencies did 

not provide us with complete closing packages. For example, many federal 

agencies did not provide the audit trail report, which is a vital report 

demonstrating the linkage between agencies’ audited financial statement 
Page 13 GAO-05-407 Process for Preparing the CFS

line items and the CFS line items. Treasury and OMB did not perform 

follow-up procedures to obtain missing information from those agencies to 

ensure that we had all the necessary audit documentation to perform our 

audit procedures.

Recommendations for 

Executive Action

We recommend that the Secretary of the Treasury direct the Fiscal 

Assistant Secretary to review the TFM and any other guidance to federal 

agencies to ensure that they provide clear instructions for reporting 

accurate data to Treasury in the following specific areas:

• loans receivable and loan guarantees;

• property, plant, and equipment;

• federal employee and veteran benefits payable;

• contingencies; and

• reporting debit and credit amounts.

We also recommend that the Director of OMB direct the Controller of the 

Office of Federal Financial Management, in coordination with the Fiscal 

Assistant Secretary, to ensure that federal agencies submit to GAO a 

complete closing package, as required by the TFM as part of the 

consolidation process, consisting of the

• special purpose audit opinion,

• management representation letter for the closing package,

• audit trail report (reclassification journal voucher report),

• closing package financial statement reports,

• trading partner summary reports,

• notes reports, and

• other data reports.
Page 14 GAO-05-407 Process for Preparing the CFS

Intragovernmental 

Activity and 

Balances—

Explanations for 

Material Unreconciled 

Differences

OMB and Treasury require federal agencies to reconcile selected 

intragovernmental activity and balances with their “trading partners”6

 and 

report on the extent and results of the reconciliation efforts to Treasury. As 

part of the reconciliation report, federal agencies were required to 

categorize any material differences, as determined by Treasury, with their 

trading partners at fiscal year-end within five categories: (1) confirmed 

reporting (in which the agency is stating that it has confirmed its balance to 

be correct); (2) accounting methodology differences; (3) accounting or 

reporting errors; (4) timing difference—current year, timing difference—

prior year; and (5) unknown/unreconciled. If a federal agency selects the 

category “accounting methodology differences,” it is also required to 

provide a detailed explanation. However, Treasury does not require federal 

agencies to provide any detailed explanations for the material differences 

reported in any other category selected. Lack of detailed explanations may 

hinder efforts to identify and correct problems that federal agencies are 

experiencing in reconciling with their trading partners.

Recommendation for 

Executive Action

As Treasury continues to make strides to address issues related to 

intragovernmental transactions, we recommend that the Secretary of the 

Treasury direct the Fiscal Assistant Secretary, working in coordination with 

the Controller of OMB, to require that federal agencies provide detailed 

explanations for all material differences identified in the intragovernmental 

reconciliations.

6

 Trading partners are U.S. government agencies, departments, or other components 

included in the CFS that do business with each other.
Page 15 GAO-05-407 Process for Preparing the CFS

Consistency of 

Justice’s and Agencies’ 

Opinions on Legal 

Cases

For each agency financial statement audit, generally accepted government 

auditing standards require that the agency auditors obtain written legal 

representations as part of the audit. Legal representation letters, along with 

related management schedules,7

 are essential to properly reporting the 

possible effects of litigation on federal agency financial statements. Legal 

counsel’s assessment of the likelihood of an unfavorable outcome and the 

estimated potential losses on its agency’s cases are the basis for reporting 

legal contingencies in the financial statements and making related 

disclosures in the notes. Inconsistent assessments on the likelihood of an 

unfavorable outcome or estimated potential losses for the same cases by 

Justice and agency legal counsel limit both the ability of management to 

determine the proper accounting treatment in the CFS in accordance with 

GAAP and GAO’s ability to audit the CFS.

Generally, Justice is charged with the supervision of litigation to which the 

U.S. government or its departments, agencies, officers, or employees are a 

party and with providing advice and opinions to the President and the 

heads of the executive departments of the U.S. government, when 

requested. Accordingly, Justice has a special role in ensuring that we 

receive legal representations to conduct our audit of the CFS in accordance 

with generally accepted government auditing standards. During our audit, 

we noted that the opinion of Justice’s legal counsel on certain agencies’ 

legal cases differed from the opinion of the respective individual federal 

agencies’ legal counsel on such cases. For example, one agency estimated 

its probable losses for certain cases, yet Justice’s legal counsel reported 

that it was not able to estimate the potential losses for the same cases. In 

another legal case involving multiple agencies, legal counsel from each of 

the agencies had a differing assessment of the legal case’s outcome, while 

Justice’s legal counsel was unable to provide an assessment. Treasury did 

not have specific policies and procedures to address discrepancies of 

opinion between Justice’s and applicable agencies’ legal counsel.

7

 Office of Management and Budget, Audit Requirements for Federal Financial 

Statements, OMB-01-02 (Washington, D.C.: Oct. 16, 2000), requires each agency chief 

financial officer to prepare a management schedule that documents how the information 

obtained in the legal counsel’s response was considered in preparing the financial 

statements. 
Page 16 GAO-05-407 Process for Preparing the CFS

Recommendation for 

Executive Action

We recommend that the Secretary of the Treasury direct the Fiscal 

Assistant Secretary, working in coordination with the Controller of OMB’s 

Office of Federal Financial Management, to develop policies and 

procedures to determine the proper resolution and the appropriate legal 

representations to GAO at the governmentwide level when Justice’s legal 

counsel and agencies’ legal counsel provide inconsistent opinions.

Conformity with 

U.S. Generally 

Accepted Accounting 

Principles

As we have reported in previous years, and noted again during our fiscal 

year 2004 audit, Treasury lacks an adequate process to ensure that the 

financial statements, related notes, stewardship information, and 

supplemental information in the CFS are presented in conformity with 

GAAP. Statement of Federal Financial Accounting Standards No. 24, 

Selected Standards for the Consolidated Financial Report of the United 

States Government, states that the Federal Accounting Standards Advisory 

Board (FASAB) standards apply to all federal agencies, including the 

U.S. government as a whole, unless provision is made for different 

accounting treatment in a current or subsequent standard. In our prior 

report,8

 we recommended that the Secretary of the Treasury direct the 

Fiscal Assistant Secretary to establish a formal process that will cause the 

financial statements, related notes, stewardship information, and 

supplemental information in the CFS to be presented in conformity with 

GAAP in all material respects. The process should

• timely identify GAAP requirements;

• make timely modifications to Treasury’s closing package requirements 

to obtain information needed;

• assess, qualitatively and quantitatively, the impact of any omitted 

disclosures;9

 and

• document decisions reached and the rationale for such decisions.

8 GAO-04-45.

9

 An item’s omission or error is considered material if the surrounding circumstances make 

it probable that the judgment of a reasonable person relying on the information would have 

been changed or influenced by the inclusion or correction of the item.
Page 17 GAO-05-407 Process for Preparing the CFS

However, during fiscal year 2004, Treasury did not implement our 

recommendations. As a result of our prior audits, recommendations related 

to 86 specific disclosures that may not have been in conformity with 

applicable standards remain open. During our fiscal year 2004 audit, we 

identified 6 additional specific disclosures required by applicable standards 

that were not included in the CFS. These additional required disclosures 

are described in appendix I. Treasury did not provide us with 

documentation of its rationale for excluding this information. As a result of 

this and certain of the material deficiencies identified during the fiscal year 

2004 audit, we were unable to determine if the missing information was 

material to the CFS. Treasury has not yet begun an annual process to 

determine the proper GAAP disclosures. However, in an effort to begin 

addressing this issue, Treasury collected certain additional note 

information required by GAAP in its new process for fiscal year 2004. 

However, due to the compressed time frames to compile the CFS and 

because GFRS is still being developed, Treasury did not analyze such 

information in preparing the fiscal year 2004 CFS. Treasury plans to analyze 

this information in fiscal year 2005 and determine how or whether to 

disclose this information in future years’ CFS.

Recommendations for 

Executive Action

With respect to the six specific disclosures related to three disclosure areas 

identified in appendix I for which information was either not included in 

the CFS or was presented in a way that did not meet GAAP standards, we 

recommend that the Secretary of the Treasury direct the Fiscal Assistant 

Secretary to include each of the six specific disclosures in the CFS or 

document the specific rationale for excluding any of them.

Agency Comments and 

Our Evaluation

OMB Comments In oral comments on a draft of this report, OMB stated that it generally 

agreed with the new findings and related recommendations in this report. 

In addition, OMB provided some technical comments, which we have 

incorporated as appropriate.
Page 18 GAO-05-407 Process for Preparing the CFS

Treasury Comments In written comments on a draft of this report, which are reprinted in 

appendix III, Treasury stated that it agrees that the reporting process still 

needs improvement and that it is addressing many of the recommendations 

in our previous reports. Treasury also stated that it generally concurs with 

our new recommendations and that it will work with OMB and the federal 

agencies to improve reporting practices. Also, Treasury asked that we 

reconsider or modify our recommendations in three areas: (1) controls 

over the compilation process, (2) consistency of Justice’s and agencies’ 

opinions on legal cases, and (3) directly linking audited federal agency 

financial statements to the CFS. We modified recommendations in the first 

two areas.

Controls over the Compilation 

Process

Treasury stated that it agrees that there are instances where it should 

obtain agency approvals before changing federal agencies’ audited data 

when compiling the CFS. However, Treasury also stated that it, as the 

preparer of the CFS, needs the flexibility and authority to make appropriate 

adjustments when needed regardless of whether federal agencies agree and 

asked that we modify our recommendation accordingly. Treasury believes 

that agency approval is not necessary when adjustments are required to 

(1) make agency closing packages agree with their financial statements, 

(2) apply a consistent application of an accounting principle between 

agencies, and (3) make an agency conform to GAAP. In this regard, the 

premise of the new compilation process is that the federal agencies’ 

audited closing package provides a direct link from agencies audited 

financial statements to the CFS. Without that link, a timely and effective 

audit is not possible. Federal agencies receive audit opinions on their 

closing packages, and therefore, any adjustments that are necessary to 

agencies’ audited closing package data should be discussed with the 

agencies. Treasury is correct that certain circumstances may require 

adjustments to agency closing package data. In such instances, Treasury 

should contact agencies to resolve any discrepancies between agencies’ 

audited closing packages and audited financial statements and to discuss 

any other situations that require adjustments to agencies’ audited closing 

package data.

These communications should be documented and maintained as 

supporting documentation for any resulting journal vouchers. This could 

be done by e-mail. During our fiscal year 2004 audit of the CFS, we found 

that Treasury did not have adequate supporting documentation for several 

journal vouchers to adjust data submitted by agencies in their audited 

closing packages. Treasury’s supporting documentation for some of these 
Page 19 GAO-05-407 Process for Preparing the CFS

journal vouchers was simply a printout from GFRS or a copy of a page from 

an agency’s financial statements. The purpose of our recommendation is to 

provide improved controls over adjustments made to federal agencies’ 

closing package data and was not intended to limit Treasury’s flexibility in 

preparing the CFS. We have modified our recommendation to clarify our 

intent that Treasury should contact and document communications with 

agencies before recording journal vouchers to change agencies’ audited 

closing package data.

Consistency of Justice’s and 

Agencies’ Opinions on Legal 

Cases

Treasury stated that with regard to the governmentwide legal letter, 

Treasury and OMB have agreed that Justice is the final authority on legal 

liabilities and disclosure amounts. Treasury also stated that it will work 

with OMB to develop a policy to eliminate any inconsistencies between 

Justice’s and the agencies’ opinions on legal cases. We have modified our 

recommendation to reflect that Treasury and OMB will work jointly to 

address the issue.

Directly Linking Audited Federal 

Agency Financial Statements to 

the CFS

Treasury stated that it recognizes the value and need for the CFS to be 

consistent with the underlying agency financial statements, and it looks to 

improve its process for compiling the CFS to allow for the expanded 

traceability of the federal agencies’ audited financial statement note data to 

the CFS notes. However, Treasury continues to disagree that additional 

information should be collected through the closing package from federal 

agencies’ audited financial statements to demonstrate consistency and 

completeness of reporting for both the Reconciliation of Net Operating 

Cost and Unified Budget Deficit and the Statement of Changes in Cash 

Balance from Unified Budget and Other Activities—two of the five 

principal financial statements.10

Treasury acknowledged that problems with these two statements need to 

be resolved, but does not believe that rolling up federal agencies’ reported 

data will help to improve these statements. Treasury stated that the FASAB 

standard related to the two statements makes clear that agency-reported 

data are not relevant to these statements. We disagree with Treasury’s 

underlying premise. While the FASAB standard does not require the CFS to 

include the Statement of Budgetary Resources and Statement of Financing, 

10 The CFS has five principal financial statements—the Balance Sheet, Statement of Net 

Cost, Statement of Operations and Changes in Net Position, Reconciliation of Net Operating 

Cost and Unified Budget Deficit, and Statement of Changes in Cash Balance from Unified 

Budget and Other Activities.
Page 20 GAO-05-407 Process for Preparing the CFS

which are required financial statements at the agency level, the standard 

should not be interpreted to mean that none of the information reported in 

federal agency financial statements is relevant to the Reconciliation of Net 

Operating Cost and Unified Budget Deficit and the Statement of Changes in 

Cash Balance from Unified Budget and Other Activities. For example, 

federal agencies report net outlays in their Statements of Budgetary 

Resources, and net outlays for all federal agencies are reflected in the 

budget deficit amount reported in the Reconciliation of Net Operating Cost 

and Unified Budget Deficit and Statement of Changes in Cash Balance from 

Unified Budget and Other Activities in the CFS. During our fiscal year 2004 

audit, we identified material differences between net outlays reported by 

the agencies and the records used by Treasury to report net outlays at the 

consolidated level, totaling about $69 billion.

When differences arise between the amounts Treasury uses to compile the 

CFS and related amounts federal agencies are reporting, it is important for 

management of the federal government to understand and be able to 

explain those differences and take corrective action where needed. For 

fiscal year 2004, the Reconciliation of Net Operating Cost and Unified 

Budget Deficit and Statement of Changes in Cash Balance from Unified 

Budget and Other Activities included some amounts that Treasury could 

not explain or fully support or for which Treasury could not demonstrate 

the link to agencies’ audited financial statements. We continue to believe 

that the process of directly linking relevant audited federal agencies’ 

financial statement information to these two financial statements would be 

the most efficient and effective manner for Treasury, as the preparer of the 

CFS, to obtain and demonstrate the necessary assurance on certain 

information reported in such financial statements. As such, we have not 

modified our recommendations in this area.

Treasury stated that it would welcome specific recommendations to 

address problems with its Reconciliation of Net Operating Cost and Unified 

Budget Deficit and Statement of Changes in Cash Balance from Unified 

Budget and Other Activities. In this regard, we have previously provided 

several specific recommendations to Treasury regarding the preparation 

and reporting of these financial statements, and these recommendations 

are included in appendix II of this report.11 Our recommendations are 

intended to allow some flexibility in developing viable solutions to address 

11 See recommendations 02-12 through 02-21 and 03-4 through 03-7 in appendix II of 

this report.
Page 21 GAO-05-407 Process for Preparing the CFS

the issues. At the same time, we believe it is crucial that Treasury develop 

corrective actions to address our recommendations now as it is still 

designing and further implementing its new system and process for 

compiling the CFS. Prolonging corrective actions could result in additional 

costs to Treasury if it decides later to modify its new system to collect and 

compile additional information.

This report contains recommendations to the Secretary of the Treasury 

and the Director of OMB. The head of a federal agency is required by 

31 U.S.C. 720 to submit a written statement on actions taken on these 

recommendations. You should submit your statement to the Senate 

Committee on Homeland Security and Governmental Affairs and the House 

Committee on Government Reform within 60 days of the date of this 

report. A written statement must also be sent to the House and Senate 

Committees on Appropriations with the agency’s first request for 

appropriations made more than 60 days after the date of the report.

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

Management 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 

http://www.gao.gov.
Page 22 GAO-05-407 Process for Preparing the CFS

We acknowledge and appreciate the cooperation and assistance provided 

by Treasury and OMB during our audit. If you or your staff have any 

questions or wish to discuss this report, please contact Jeffrey C. Steinhoff, 

Managing Director, Financial Management and Assurance, on 

(202) 512-2600 or Gary T. Engel, Director, Financial Management and 

Assurance, on (202) 512-3406.

David M. Walker

Comptroller General

of the United States
Page 23 GAO-05-407 Process for Preparing the CFS

Appendix I

Disclosure Issues ApApenednxidexiIs

U.S. generally accepted accounting principles (GAAP) require the six 

specific disclosures related to three disclosure areas described below to be 

included in the consolidated financial statements (CFS), if material. If 

management determines that the required disclosures need not be 

included, the specific rationale for their exclusion should be sufficiently 

documented. However, the Department of the Treasury (Treasury) neither 

included the disclosures in the CFS nor provided documentation with the 

rationale for exclusion of these required disclosures.

Federal Employee and 

Veteran Benefits 

Payable

Treasury did not disclose certain required information on the Department 

of Veterans Affairs’ (VA) insurance benefit liabilities in the CFS. Such 

information, as noted below, would include all components of the liability 

for future policy benefits with a description of each amount and an 

explanation of its projected use and any other potential uses for 

noncancelable or renewable VA life insurance.

For noncancelable or renewable VA life insurance, Statement of Federal 

Financial Accounting Standards (SFFAS) No. 5, Accounting for Liabilities 

of the Federal Government, paragraph 110, table 9, states that all 

components of the liability for future policy benefits should be separately 

disclosed in a footnote with a description of each amount and an 

explanation of its projected use and any other potential uses.

In accordance with SFFAS No. 5, paragraphs 117 and 118, all federal 

reporting entities with whole life insurance programs should follow the 

standards as prescribed in the private sector standards when reporting the 

liability for future policy benefits, in addition to the following required 

disclosures: liability for future policy benefits relating to participating life 

insurance contracts should be equal to the sum of (1) the net level premium 

reserve for death and endowment policy benefits, (2) the liability for 

terminal dividends, and (3) any premium deficiency.

Additionally, SFFAS No. 5, paragraph 121, states that all components of the 

liability for future policy benefits (i.e., the net-level premium reserve for 

death and endowment policy and the liability for terminal dividends) 

should be separately disclosed in a footnote with a description of each 

amount and an explanation of its projected use and any other potential 

uses (e.g., reducing premiums, determining and declaring dividends 

available, or reducing federal support in the form of appropriations related 

to administrative cost or subsidies).
Appendix I

Disclosure Issues

Page 24 GAO-05-407 Process for Preparing the CFS

Cash and Other 

Monetary Assets

The CFS note disclosure for cash and other monetary assets departed from 

the disclosure requirements of SFFAS No. 1, Accounting for Selected 

Assets and Liabilities, paragraph 30, which requires that financial reports 

disclose the reasons for and nature of restricted cash. SFFAS No. 1 defines 

restricted cash as restrictions usually imposed on cash deposits (in escrow 

or other special accounts) by law, regulation, or agreement. Treasury did 

not adequately ensure that the note disclosure relating to Cash and Other 

Monetary Assets was presented in conformity with GAAP. Specifically, 

while agencies are required by Treasury to describe in the closing package 

the nature of the amount reported in the line item Other Cash, they are not 

required to designate whether such cash is restricted.

In addition, cash held by certain agencies, although not restricted as it 

relates to the operations of those agencies, could be legally or otherwise 

restricted from a governmentwide perspective. For example, as disclosed 

by the Pension Benefit Guaranty Corporation (PBGC), the Employee 

Retirement Income Security Act of 1974 and the Pension Protection Act of 

1987 established revolving funds in which premiums collected and held are 

to be used for specific purposes related to the operations of PBGC. As 

such, at the governmentwide level, the cash held by PBGC relating to these 

revolving funds could be considered as restricted for governmentwide 

reporting purposes. However, Treasury’s process did not require agencies 

to designate any amounts reported for the “other cash” line items that are 

restricted with respect to the federal government taken as a whole.

Other Liabilities The CFS includes life insurance liabilities in the Other Liabilities line item. 

However, the CFS did not report indicators of the range of uncertainty 

around insurance-related estimates and the sensitivity of the estimates to 

changes in major assumptions, in accordance with SFFAS No. 5, 

paragraph 114.
Page 25 GAO-05-407 Process for Preparing the CFS

Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS ApendxiI

This appendix includes open recommendations from two prior 

GAO reports: Financial Audit: Process for Preparing the 

Consolidated Financial Statements of the U.S. Government Needs 

Improvement, GAO-04-45 (Oct. 30, 2003), and Financial Audit: Process 

for Preparing the Consolidated Financial Statements of the 

U.S. Government Needs Further Improvement, GAO-04-866 (Sept. 

10, 2004). Recommendations that were closed in prior reports are not 

included in this appendix. This appendix also includes the status of the 

recommendations according to Treasury and the Office of Management and 

Budget (OMB) and according to GAO. Explanations are included in the 

GAO status of recommendations when Treasury and OMB disagreed with 

our recommendation.

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO

GAO-04-45 (results of the fiscal year 2002 audit)

1 02-1 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in connection with Treasury’s current 

compilation process and the 

development of Treasury’s new 

compilation system and process, to 

segregate the duties of individuals 

who have the capability to enter, 

change, and delete data within the 

Federal Agencies’ Centralized Trial 

Balance System (FACTS I) and the 

Hyperion database and post 

adjustments to the CFS.

Treasury established significant 

policies and procedures to segregate 

duties with the new fiscal year 2004 

process. Treasury is currently 

addressing the instances identified by 

GAO and expects to address this 

recommendation completely in fiscal 

year 2005.

Closed during the fiscal year 2004 

audit for FACTS I, but there are 

segregation of duties issues with the 

new process used during fiscal year 

2004.

2 02-2 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in connection with Treasury’s current 

compilation process and the 

development of Treasury’s new 

compilation system and process, to 

develop and fully document policies 

and procedures for the CFS 

preparation process so that they are 

proper, complete, and consistently 

applied by staff members.

Treasury developed substantial 

documentation relative to our policies 

and procedures for the new fiscal year 

2004 process. Treasury is currently 

addressing the instances identified by 

GAO and expects to address this 

recommendation completely in fiscal 

year 2005.

Open.
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 26 GAO-05-407 Process for Preparing the CFS

3 02-4 As Treasury is designing its new 

financial statement compilation 

process to begin with the fiscal year 

2004 CFS, the Secretary of the 

Treasury should direct the Fiscal 

Assistant Secretary, in coordination 

with the Controller of OMB, to develop 

reconciliation procedures that will aid 

in understanding and controlling the 

net position balance as well as 

eliminate the plugs previously 

associated with compiling the CFS.

This is a long-standing problem that 

Treasury will continue analyzing. 

However, Treasury designed a 

process to eliminate 

intragovernmental activity and 

balances using formal balanced 

accounting entries and developed a 

model to provide an analysis of the 

unreconciled transactions that affect 

net position (plug) for fiscal year 2004. 

Treasury will further analyze the 

results of the 2004 process and 

continue to work on this issue in 2005 

by starting to establish the reciprocal 

category for the General Fund and 

analyzing the changes in net position 

from the beginning of the year to the 

end of the year to eliminate or explain 

the adjustments to net position.

Open.

4 02-5 As Treasury is designing its new 

financial statement compilation 

process to begin with the fiscal year 

2004 CFS, the Secretary of the 

Treasury should direct the Fiscal 

Assistant Secretary, in coordination 

with the Controller of OMB, to use 

balanced accounting entries to 

account for the change in net position 

rather than simple subtraction of 

liabilities from assets.

See status of recommendation 

No. 02-4.

Open.

5 02-6 As OMB continues to make strides to 

address issues related to 

intragovernmental transactions, the 

Director of OMB should direct the 

Controller of OMB to develop policies 

and procedures that document how 

OMB will enforce the business rules 

provided in OMB Memorandum 

M-03-01, Business Rules for 

Intragovernmental Transactions.

OMB is reviewing the business rules 

and also performing additional 

analysis on several groupings of 

intragovernmental transactions. Upon 

the conclusion of the review and 

analysis, OMB will determine how 

best to proceed with the business 

rules.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 27 GAO-05-407 Process for Preparing the CFS

6 02-7 As OMB continues to make strides to 

address issues related to 

intragovernmental transactions, the 

Director of OMB should direct the 

Controller of OMB to require that 

significant differences noted between 

business partners be resolved and the 

resolution be documented.

OMB and Treasury are performing 

additional analysis on several 

groupings of intragovernmental 

transactions and will work with 

individual agencies to resolve 

imbalances. As part of OMB’s 

standard practice, resolutions reached 

will be communicated to all parties.

Open.

7 02-8 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to implement the plan to require 

federal agencies to report in 

Treasury’s new closing package, 

beginning with fiscal year 2004, 

intragovernmental activity and 

balances by trading partner and to 

indicate amounts that have not been 

reconciled with trading partners and 

amounts, if any, that are in dispute.

Treasury is in the process of 

identifying material differences so that 

OMB and Treasury can work with 

agencies to resolve differences. Also, 

the Chief Financial Officers Council 

Financial Reporting Acceleration 

Committee has begun efforts to 

identify issues and impediments to 

intragovernmental reconciliations and 

recommend solutions to mitigate 

those issues.

Open.

8 02-9 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to design procedures that will 

account for the difference in 

intragovernmental assets and 

liabilities throughout the compilation 

process by means of formal 

consolidating and elimination 

accounting entries.

See status of recommendation 

No. 02-4.

Open.

9 02-10 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to develop solutions for 

intragovernmental activity and 

balance issues relating to federal 

agencies’ accounting, reconciling, and 

reporting in areas other than those 

OMB now requires be reconciled, 

primarily areas relating to 

appropriations.

See status of recommendation 

No. 02-4.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 28 GAO-05-407 Process for Preparing the CFS

10 02-11 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to reconcile the change in 

intragovernmental assets and 

liabilities for the fiscal year, including 

the amount and nature of all changes 

in intragovernmental assets or 

liabilities not attributable to cost and 

revenue activity recognized during the 

fiscal year. Examples of these 

differences would include capitalized 

purchases, such as inventory or 

equipment, and deferred revenue.

See status of recommendation 

No. 02-4.

Open.

11 02-12 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to develop and implement a process 

that adequately identifies and reports 

items needed to reconcile net 

operating cost and unified budget 

surplus (or deficit). Treasury should 

report “net unreconciled differences” 

included in the net operating results 

line item as a separate reconciling 

activity in the reconciliation statement.

Treasury disagrees with GAO 

on this item. No further action 

is contemplated for this 

recommendation.

Open. Treasury disagrees with all of 

our recommendations regarding the 

Statement of Changes in Cash 

Balance from Unified Budget and 

Other Activities and the 

Reconciliations of Net Operating Cost 

and Unified Budget Deficit even 

though these statements include 

some amounts that Treasury cannot 

explain or fully support or for which 

Treasury cannot demonstrate that the 

amounts clearly link to agencies’ 

audited financial statements. Treasury 

has not developed any alternative 

solutions. We continue to believe that 

implementation of our 

recommendations would result in the 

most efficient and effective manner for 

Treasury, as the preparer of the CFS, 

to obtain and demonstrate the 

necessary assurance on the 

significant amounts reported in the 

Statement of Changes in Cash 

Balance from Unified Budget and 

Other Activities and the Reconciliation 

of Net Operating Cost and Unified 

Budget Deficit.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 29 GAO-05-407 Process for Preparing the CFS

12 02-13 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to develop and implement a process 

that adequately identifies and reports 

items needed to reconcile net 

operating cost and unified budget 

surplus (or deficit). Treasury should 

develop policies and procedures to 

ensure completeness of reporting and 

document how all the applicable 

components reported in the other 

consolidated financial statements 

(and related note disclosures included 

in the CFS) were properly reflected in 

the reconciliation statement.

Treasury disagrees with GAO 

on this item. No further action 

is contemplated for this 

recommendation.

Open. In fiscal year 2004, Treasury 

developed standard operating 

procedures for preparing the 

Reconciliations of the Net Operating 

Cost and Budget Deficit and 

Statement of Changes in Cash 

Balance from Unified Budget and 

Other Activities. However, the 

procedures merely covered the 

source of the information, with no 

process for ensuring that 

(1) information obtained was correct 

and consistent with underlying agency 

audited financial statements and 

(2) reporting was complete.

13 02-14 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to develop and implement a process 

that adequately identifies and reports 

items needed to reconcile net 

operating cost and unified budget 

surplus (or deficit). Treasury should 

establish reporting materiality 

thresholds for determining which 

agency financial statement activities 

to collect and report at the 

governmentwide level to assist in 

ensuring that the reconciliation 

statement is useful and conveys 

meaningful information.

Treasury disagrees with GAO 

on this item. No further action 

is contemplated for this 

recommendation.

Open. The standard operating 

procedures that Treasury developed 

did not include considerations for 

materiality thresholds in its financial 

reporting or reconciling activities.

14 02-15 If Treasury chooses to continue using 

information from both federal 

agencies’ financial statements and the 

Central Accounting and Reporting 

System (STAR), Treasury should 

demonstrate how the amounts from 

STAR reconcile to federal agencies’ 

financial statements.

Treasury disagrees with GAO 

on this item. No further action 

is contemplated for this 

recommendation.

Open. See status of recommendation 

No. 02-12.

15 02-16 If Treasury chooses to continue using 

information from both federal 

agencies’ financial statements and 

from STAR, Treasury should identify 

and document the cause of any 

significant differences, if any are 

noted.

Treasury disagrees with GAO 

on this item. No further action 

is contemplated for this 

recommendation.

Open. See status of recommendation 

No. 02-12.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 30 GAO-05-407 Process for Preparing the CFS

16 02-17 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to develop and implement a 

process to ensure that the Statement 

of Changes in Cash Balance from 

Unified Budget and Other Activities 

properly reflects the activities reported 

in federal agencies’ audited financial 

statements. Treasury should 

document the consistency of the 

significant line items on this statement 

to agencies’ audited financial 

statements.

Treasury disagrees with GAO 

on this item. This statement is not 

prepared from the agency’s financial 

statements. As cited in GAO-04-866, 

p. 44, #3, para. 3: “It is important to 

note that the “information” [referred to 

in SFFAS 24, 9. SFFAS 7, paras. 77-

82] is not required therefore agency 

budgetary data is not used nor was 

ever contemplated to be used in our 

reports. Treasury maintains the 

source of original entry for budgetary 

information in the STAR system and 

consider the use of other data not only 

less accurate but also a waste of 

taxpayer resources to both obtain and 

then correct the balances when 

Treasury already has the information 

at their finger tips. There are no 

material differences between outlays 

reported by us and those included in 

the President’s Budget. The standard 

does not require either receipts or 

outlays.”

Open. See status of recommendation 

No. 02-12.

17 02-18 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to develop and implement a 

process to ensure that the Statement 

of Changes in Cash Balance from 

Unified Budget and Other Activities 

properly reflects the activities reported 

in federal agencies’ audited financial 

statements. Treasury should request, 

through its closing package, that 

federal agencies provide the net 

outlays reported in their Combined 

Statement of Budgetary Resources 

and explanations for any significant 

differences between net outlay 

amounts reported in the Combined 

Statement of Budgetary Resources 

and the budget of the 

U.S. government.

Treasury disagrees with GAO’s 

recommendation to collect the agency 

Statement of Budgetary Resources 

outlay data through the Closing 

Package process because Treasury 

already collects agency outlay data for 

budgetary reporting purposes. 

Treasury and OMB are working 

closely with the agencies to assure 

that the outlays reported in their 

Statement of Budgetary Resources 

match the outlays reported to 

Treasury for budgetary reporting 

purposes.

Open. See status of recommendation 

No. 02-12.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 31 GAO-05-407 Process for Preparing the CFS

18 02-19 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to develop and implement a 

process to ensure that the Statement 

of Changes in Cash Balance from 

Unified Budget and Other Activities 

properly reflects the activities reported 

in federal agencies’ audited financial 

statements. Treasury should 

investigate the differences between 

net outlays reported in federal 

agencies’ Combined Statement of 

Budgetary Resources and Treasury’s 

records in STAR to ensure that the 

proper amounts are reported in the 

Statement of Changes in Cash 

Balance from Unified Budget and 

Other Activities.

See status of recommendation 

No. 02-18.

Open. Material unexplained 

differences between net outlays 

reported by the agencies and the 

central accounting records used to 

report net outlays at the consolidated 

level remained, totaling about 

$69 billion in fiscal year 2004.

19 02-20 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to develop and implement a 

process to ensure that the Statement 

of Changes in Cash Balance from 

Unified Budget and Other Activities 

properly reflects the activities reported 

in federal agencies’ audited financial 

statements. Treasury should explain 

and document the differences 

between the operating revenue 

amount reported on the Statement of 

Operations and Changes in Net 

Position and unified budget receipts 

reported on the Statement of 

Changes in Cash Balance from 

Unified Budget and Other Activities.

See status of recommendation 

No. 02-17.

Open. In fiscal year 2004, there was a 

$34.5 billion unexplained or 

unreported difference between the 

unified budget receipts as a 

component of the deficit and the 

modified cash operating revenue on 

the Statement of Operations and 

Changes in Net Position.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 32 GAO-05-407 Process for Preparing the CFS

20 02-21 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to develop and implement a 

process to ensure that the Statement 

of Changes in Cash Balance from 

Unified Budget and Other Activities 

properly reflects the activities reported 

in federal agencies’ audited financial 

statements. Treasury should provide 

support for how the line items in the 

“other activities” section of this 

statement relate to either the 

underlying Balance Sheet or related 

notes accompanying the CFS.

Treasury disagrees with GAO 

on this item. However, further 

research and discussion will take 

place in fiscal year 2005.

Open. See status of recommendation 

No. 02-12.

21 02-22 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to perform an assessment to 

define the reporting entity, including its 

specific components, in conformity 

with the criteria issued by the Federal 

Accounting Standards Advisory 

Board. Key decisions made in this 

assessment should be documented, 

including the reason for including or 

excluding components and the basis 

for concluding on any issue. Particular 

emphasis should be placed on 

demonstrating that any financial 

information that should be included 

but is not included is immaterial.

Treasury’s Office of the Fiscal 

Assistant Secretary (OFAS) has 

developed an action plan for defining 

the reporting entity. Treasury will 

determine the relevant information not 

currently received, and the Financial 

Management Service will implement 

changes OFAS identifies.

Open.

22 02-23 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to provide in the financial 

statements all the financial 

information relevant to the defined 

reporting entity, in all material 

respects. Such information would 

include, for example, the reporting 

entity’s assets, liabilities, and 

revenues.

See status of recommendation 

No. 02-22.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 33 GAO-05-407 Process for Preparing the CFS

23 02-24 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to disclose in the financial 

statements all information that is 

necessary to inform users adequately 

about the reporting entity. Such 

disclosures should clearly describe 

the reporting entity and explain the 

reason for excluding any components 

that are not included in the defined 

reporting entity.

See status of recommendation 

No. 02-22.

Open.

24 02-25 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to establish a formal process that will 

allow the financial statements, related 

notes, and stewardship and 

supplemental information in the CFS 

to be presented in conformity with 

GAAP. The process should timely 

identify GAAP requirements.

Treasury developed and documented 

a process to compare federal 

accounting standards and the closing 

package to ensure that all disclosures 

are requested from federal agencies. 

Treasury is currently analyzing the 

reporting and modifying the CFS to 

include GAAP requirements. Treasury 

expects to address the majority of 

these items in the 2005 CFS by 

including the appropriate disclosures 

in the CFS or documenting the 

rationale for excluding inappropriate 

disclosures.

Open.

25 02-26 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to establish a formal process that will 

allow the financial statements, related 

notes, and stewardship and 

supplemental information in the CFS 

to be presented in conformity with 

GAAP. The process should make 

timely modifications to Treasury’s 

closing package requirements to 

obtain information needed.

See status of recommendation 

No. 02-25.

Open.

26 02-27 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to establish a formal process that will 

allow the financial statements, related 

notes, and stewardship and 

supplemental information in the CFS 

to be presented in conformity with 

GAAP. The process should assess, 

qualitatively and quantitatively, the 

impact of the omitted disclosures.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 34 GAO-05-407 Process for Preparing the CFS

27 02-28 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to establish a formal process that will 

allow the financial statements, related 

notes, and stewardship and 

supplemental information in the CFS 

to be presented in conformity with 

GAAP. The process should document 

decisions reached and the rationale 

for such decisions.

See status of recommendation 

No. 02-25.

Open.

28 02-29 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures for preparing the 

governmentwide management 

representation letter to help ensure 

that it is properly prepared and 

contains sufficient representations. 

Specifically, these policies and 

procedures should require an analysis 

of the agency management 

representations to determine if 

discrepancies exist between what the 

agency auditor reported and the 

representations made by the agency, 

including the resolution of such 

discrepancies.

Discussions are ongoing with GAO as 

to the use of the agencies’ 

management representation letters, 

supplemented with other procedures.

Open.

29 02-30 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures for preparing the 

governmentwide management 

representation letter to help ensure 

that it is properly prepared and 

contains sufficient representations. 

Specifically, these policies and 

procedures should require a 

determination that the agency 

management representation letters 

have been signed by the highest-level 

agency officials who are responsible 

for and knowledgeable about the 

matters included in the agency 

management representation letters.

Treasury and OMB’s policy includes 

the following sentence: “Items 

included or not included in the 

agencies’ rep letters will generally not 

be challenged by Treasury and OMB 

since they were obviously not a factor 

in that agency’s audit and, therefore, 

should not then rise to the 

consolidated governmentwide audit 

level.” Discussions are ongoing with 

GAO as to the use of the agencies’ 

management representation letters, 

supplemented with other procedures.

Open. The policies and procedures 

discuss signatures on agency 

management representation letters, 

but do not include steps for Treasury’s 

review of the signatures to determine 

if the letters have been signed by the 

highest-level agency officials who are 

responsible for and knowledgeable 

about the matters included in the 

agency management representation 

letters.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 35 GAO-05-407 Process for Preparing the CFS

30 02-31 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures for preparing the 

governmentwide management 

representation letter to help ensure 

that it is properly prepared and 

contains sufficient representations. 

Specifically, these policies and 

procedures should require an 

assessment of the materiality 

thresholds used by federal agencies in 

their respective management 

representation letters.

When preparing the governmentwide 

management representation letter, 

Treasury follows the guidance in 

GAO’s Financial Audit Manual (FAM) 

to calculate an amount for materiality. 

The FAM is GAO’s guidance for those 

entities that are performing audits of 

federal entities. Treasury then 

executes the following step, which is 

written in Treasury and OMB’s policy: 

“We check to ensure that the 

materiality amounts cited by those 

agencies who do quantitatively 

discuss materiality are not larger than 

the materiality cited in the FR 

management representation letter.”

Open. In the fiscal years 2003 and 

2004 audits, 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. These concerns 

included the omission of materiality 

thresholds. The policies and 

procedures do not include steps to 

obtain and assess materiality 

thresholds from agencies that do not 

quantitatively cite the amounts in their 

management representation letters.

31 02-32 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures for preparing the 

governmentwide management 

representation letter to help ensure 

that it is properly prepared and 

contains sufficient representations. 

Specifically, these policies and 

procedures should require an 

assessment of the impact, if any, of 

federal agencies’ materiality 

thresholds on the management 

representations made at the 

governmentwide level.

When preparing the governmentwide 

management representation letter, 

Treasury follows the guidance in 

GAO’s FAM to calculate an amount for 

materiality. The FAM is GAO’s 

guidance for those entities that are 

performing audits of federal entities. 

Treasury then executes the following 

step, which is written in Treasury and 

OMB’s policy: “We check to ensure 

that the materiality amounts cited by 

those agencies who do quantitatively 

discuss materiality are not larger than 

the materiality cited in the FR 

management representation letter.”

Open. In the fiscal years 2003 and 

2004 audits, 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. These concerns 

included the omission of materiality 

thresholds. The policies and 

procedures do not include steps to 

obtain and assess materiality 

thresholds from agencies that do not 

quantitatively cite the amounts in their 

management representation letters. In 

addition, the policies and procedures 

are not sufficient to assess the impact 

of agencies’ materiality thresholds on 

the management representations 

made at the governmentwide level.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 36 GAO-05-407 Process for Preparing the CFS

32 02-33 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures for preparing the 

governmentwide management 

representation letter to help ensure 

that it is properly prepared and 

contains sufficient representations. 

Specifically, these policies and 

procedures should require an 

evaluation and assessment of the 

omission of representations ordinarily 

included in agency management 

representation letters.

Treasury and OMB’s policy includes 

the following sentence: “Items 

included or not included in the 

agencies’ rep letters will generally not 

be challenged by Treasury and OMB 

since they were obviously not a factor 

in that agency’s audit and, therefore, 

should not then rise to the 

consolidated governmentwide audit 

level.” Discussions are ongoing with 

GAO as to the use of the agencies’ 

management representation letters, 

supplemented with other procedures.

Open. In the fiscal years 2003 and 

2004 audits, 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. These concerns 

included the omission and 

incompleteness of required 

representations. The policies and 

procedures do not include steps to 

review the agencies’ management 

representation letters for omitted or 

incomplete representations. In 

addition, the policies and procedures 

do not include steps to assess the 

impact of omitted or incomplete 

representations on the 

governmentwide management 

representation letter.

33 02-34 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures for preparing the 

governmentwide management 

representation letter to help ensure 

that it is properly prepared and 

contains sufficient representations. 

Specifically, these policies and 

procedures should require an analysis 

and aggregation of the agencies’ 

summary of unadjusted 

misstatements to determine the 

completeness of the summaries and 

to ascertain the materiality, both 

individually and in the aggregate, of 

such unadjusted misstatements to the 

CFS taken as a whole.

Financial Management Service is 

currently updating the standard 

operating procedures for the 

summaries of unadjusted 

misstatements.

Open. In the fiscal years 2003 and 

2004 audits, 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. These concerns 

included the omission and 

incompleteness of the summaries of 

unadjusted misstatements, which are, 

attached to the agencies 

management representation letters. 

The policies and procedures do not 

include steps to ensure that all 

summaries of unadjusted 

misstatements have been received 

from the agencies. In addition, the 

policies and procedures do not 

include steps to obtain information 

missing from summaries submitted by 

the agencies in order to adequately 

prepare the governmentwide 

summary of unadjusted 

misstatements.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 37 GAO-05-407 Process for Preparing the CFS

34 02-35 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to help ensure that agencies 

provide adequate information in their 

legal representation letters regarding 

the expected outcome of the cases.

OMB and Treasury will work to ensure 

that adequate information is provided 

in the legal representation letters 

regarding the expected outcome of 

cases.

Open.

35 02-36 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to help ensure that agencies 

provide related management 

schedules.

OMB and Treasury will follow up with 

agencies that have not provided their 

management schedules to ensure 

they do so.

Open.

36 02-37 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures to help ensure that major 

treaty and other international 

agreement information is properly 

identified and reported in the CFS. 

Specifically, these policies and 

procedures should require that 

agencies develop a detailed schedule 

of all major treaties and other 

international agreements that obligate 

the U.S. government to provide cash, 

goods, or services, or that create 

other financial arrangements that are 

contingent on the occurrence or 

nonoccurrence of future events (a 

starting point for compiling these data 

could be the State Department’s 

Treaties in Force).

OMB will analyze the appropriateness 

of reporting “treaties” before 

developing specific corrective actions.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 38 GAO-05-407 Process for Preparing the CFS

37 02-38 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures to help ensure that major 

treaty and other international 

agreement information is properly 

identified and reported in the CFS. 

Specifically, these policies and 

procedures should require that 

agencies classify all such scheduled 

major treaties and other international 

agreements as commitments or 

contingencies.

OMB will analyze the appropriateness 

of reporting “treaties” before 

developing specific corrective actions.

Open.

38 02-39 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures to help ensure that major 

treaty and other international 

agreement information is properly 

identified and reported in the CFS. 

Specifically, these policies and 

procedures should require that 

agencies disclose in the notes to the 

CFS amounts for major treaties and 

other international agreements that 

have a reasonably possible chance of 

resulting in a loss or claim as a 

contingency.

OMB will analyze the appropriateness 

of reporting “treaties” before 

developing specific corrective actions.

Open.

39 02-40 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures to help ensure that major 

treaty and other international 

agreement information is properly 

identified and reported in the CFS. 

Specifically, these policies and 

procedures should require that 

agencies disclose in the notes to the 

CFS amounts for major treaties and 

other international agreements that 

are classified as commitments and 

that may require measurable future 

financial obligations.

OMB will analyze the appropriateness 

of reporting “treaties” before 

developing specific corrective actions.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 39 GAO-05-407 Process for Preparing the CFS

40 02-41 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to establish written policies and 

procedures to help ensure that major 

treaty and other international 

agreement information is properly 

identified and reported in the CFS. 

Specifically, these policies and 

procedures should require that 

agencies take steps to prevent major 

treaties and other international 

agreements that are classified as 

remote from being recorded or 

disclosed as probable or reasonably 

possible in the CFS.

OMB will analyze the appropriateness 

of reporting “treaties” before 

developing specific corrective actions.

Open.

41 02-42 As Treasury is designing its new 

compilation process, which it expects 

to implement beginning with the fiscal 

year 2004 CFS, the Secretary of the 

Treasury should direct the Fiscal 

Assistant Secretary, in coordination 

with the Controller of OMB, to design 

the new compilation process to 

directly link information from federal 

agencies’ audited financial statements 

to amounts reported in all the 

applicable CFS and related footnotes.

Treasury developed and implemented 

the new compilation process, which 

directly links agency audited financial 

statements to the CFS except for 

Reconciliation of Net Operating Cost 

and Statements of Changes in Cash 

Balance for fiscal year 2004. For fiscal 

year 2005, for completeness, Treasury 

will establish traceability from agency 

audited financial statement footnotes 

to the CFS footnotes.

Open. Treasury’s goal for the new 

system is to directly link financial 

information from federal agencies’ 

audited financial statements to 

amounts reported in the CFS, a 

concept that we strongly support. 

However, based on our review of 

Treasury’s new process, Treasury was 

unable to demonstrate that the 

information in the CFS directly linked 

to agencies’ audited financial 

statements.

42 02-43 As Treasury is designing its new 

compilation process, which it expects 

to implement beginning with the fiscal 

year 2004 CFS, the Secretary of the 

Treasury should direct the Fiscal 

Assistant Secretary, in coordination 

with the Controller of OMB, to 

consider the other 

applicable recommendations in this 

report when designing and 

implementing the new compilation 

process.

Treasury will continue to consider 

applicable recommendations as the 

new compilation system is enhanced.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 40 GAO-05-407 Process for Preparing the CFS

43 02-44 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

Statement of Federal Financial 

Accounting Standards (SFFAS) No. 3, 

Accounting for Inventory and Related 

Property, paragraph 91, which 

requires the reporting entity to 

disclose the valuation basis for 

foreclosed property.

See status of recommendation 

No. 02-25.

Open.

44 02-45 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraph 91, which requires the 

reporting entity to disclose the 

changes from the prior year’s 

accounting methods, if any.

See status of recommendation 

No. 02-25.

Open.

45 02-46 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraph 91, which requires the 

reporting entity to disclose the 

restrictions on the use/disposal of 

property.

See status of recommendation 

No. 02-25.

Open.

46 02-47 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraph 91, which requires the 

reporting entity to disclose the 

balances by categories (i.e., pre-1992 

and post-1991 foreclosed property).

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 41 GAO-05-407 Process for Preparing the CFS

47 02-48 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraph 91, which requires the 

reporting entity to disclose the number 

of properties held and average 

holding period by type or category.

See status of recommendation 

No. 02-25.

Open.

48 02-49 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraph 91, which requires the 

reporting entity to disclose the number 

of properties for which foreclosure 

proceedings are in process at the end 

of the period for foreclosed assets 

acquired in full or partial settlement of 

a direct or guaranteed loan.

See status of recommendation 

No. 02-25.

Open.

49 02-50 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 9, which requires credit 

programs to reestimate the subsidy 

cost allowance for outstanding direct 

loans and the liability for outstanding 

loan guarantees. There are two kinds 

of reestimates: (1) interest rate 

reestimates and (2) technical/default 

reestimates. Entities should measure 

and disclose each program’s 

reestimates in these two components 

separately.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 42 GAO-05-407 Process for Preparing the CFS

50 02-51 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 10, which requires the 

reporting entity to display in the notes 

to the financial statements a 

reconciliation between the beginning 

and ending balances of the subsidy 

cost allowance for outstanding direct 

loans and the liability for outstanding 

loan guarantees reported on the 

entity’s balance sheet.

See status of recommendation 

No. 02-25.

Open.

51 02-52 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 11, which requires 

disclosure of the total amount of direct 

or guaranteed loans disbursed for the 

current reporting year and the 

preceding reporting year.

See status of recommendation 

No. 02-25.

Open.

52 02-53 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 11, which requires 

disclosure of the subsidy expense by 

components, recognized for the direct 

or guaranteed loans disbursed in the 

current reporting year and the 

preceding reporting year.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 43 GAO-05-407 Process for Preparing the CFS

53 02-54 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 11, which requires 

disclosure of the subsidy reestimates 

by components for the current 

reporting year and the preceding 

reporting year.

See status of recommendation 

No. 02-25.

Open.

54 02-55 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 11, which requires 

disclosure, at the program level, of the 

subsidy rates for the total subsidy cost 

and its components for the interest 

subsidy costs, default costs (net of 

recoveries), fees and other 

collections, and other costs estimated 

for direct loans and loan guarantees in 

the current year’s budget for the 

current year’s cohorts.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 44 GAO-05-407 Process for Preparing the CFS

55 02-56 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

loans receivable and loan guarantee 

liabilities meets the requirements of 

SFFAS No. 18, Amendments to 

Accounting Standards for Direct 

Loans and Loan Guarantees, 

paragraph 11, which requires the 

reporting entity to disclose, discuss, 

and explain events and changes in 

economic conditions, other risk 

factors, legislation, credit policies, and 

subsidy estimation methodologies and 

assumptions that have had a 

significant and measurable effect on 

subsidy rates, subsidy expense, and 

subsidy reestimates.

See status of recommendation 

No. 02-25.

Open.

56 02-57 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

inventories and operating materials 

and supplies meets the requirements 

of SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraph 30, which requires the 

difference between the carrying 

amount and the expected net 

realizable value to be recognized as a 

loss or gain and either separately 

reported or disclosed when inventory 

or operating materials and supplies 

are declared excess, obsolete, or 

unserviceable.

See status of recommendation 

No. 02-25.

Open.

57 02-58 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

inventories and operating materials 

and supplies meets the requirements 

of SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraphs 35 and 50, which require 

disclosure of inventory and operating 

materials and supplies general 

composition.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 45 GAO-05-407 Process for Preparing the CFS

58 02-59 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

inventories and operating materials 

and supplies meets the requirements 

of SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraphs 35 and 50, that require 

disclosure of any changes from the 

prior year in accounting methods for 

inventory and operating materials and 

supplies.

See status of recommendation 

No. 02-25.

Open.

59 02-60 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

inventories and operating materials 

and supplies meets the requirements 

of SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraphs 35 and 50, which require 

the disclosure of any restrictions on 

the sale of inventory and the use of 

operating materials and supplies.

See status of recommendation 

No. 02-25.

Open.

60 02-61 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

inventories and operating materials 

and supplies meets the requirements 

of SFFAS No. 3, Accounting for 

Inventory and Related Property, 

paragraphs 35 and 50, which requires 

disclosure of any changes in the 

criteria for categorizing inventory and 

operating materials and supplies.

See status of recommendation 

No. 02-25.

Open.

61 02-62 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 56, which 

requires disclosure of the basis for 

valuing stockpile material, including 

valuation method and any cost flow 

assumptions.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 46 GAO-05-407 Process for Preparing the CFS

62 02-63 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 56, which 

requires disclosure of any changes 

from the prior year’s accounting 

methods.

See status of recommendation 

No. 02-25.

Open.

63 02-64 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 56, which 

requires disclosure of restrictions on 

the use of stockpile material.

See status of recommendation 

No. 02-25.

Open.

64 02-65 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 56, which 

requires disclosure of the balances in 

each category of stockpile material 

(i.e., stockpile material held and held 

for sale).

See status of recommendation 

No. 02-25.

Open.

65 02-66 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 56, which 

requires disclosure of the criteria for 

grouping stockpile material held 

for sale.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 47 GAO-05-407 Process for Preparing the CFS

66 02-67 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 56, which 

requires disclosure of changes in 

criteria for categorizing stockpile 

material held for sale.

See status of recommendation 

No. 02-25.

Open.

67 02-68 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stockpile material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 55, which 

requires disclosure of any difference 

between the carrying amount (i.e., 

purchase price or cost) of stockpile 

material held for sale and the 

estimated selling price of such assets.

See status of recommendation 

No. 02-25.

Open.

68 02-69 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

seized material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 66, which 

requires disclosure of the valuation 

method.

See status of recommendation 

No. 02-25.

Open.

69 02-70 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

seized material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 66, which 

requires disclosure of any changes 

from the prior year’s accounting 

methods.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 48 GAO-05-407 Process for Preparing the CFS

70 02-71 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

seized material meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 66, which 

requires disclosure of the analysis of 

change in seized property (including 

dollar value and number of seized 

properties) that is on hand at the 

beginning of the year, seized during 

the year, disposed of during the year, 

and on hand at the end of the year, as 

well as known liens or other claims 

against the property. This information 

should be presented by type of 

seizure and method of disposition, 

when material.

See status of recommendation 

No. 02-25.

Open.

71 02-72 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

forfeited property meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 78, which 

requires disclosure of the valuation 

method.

See status of recommendation 

No. 02-25.

Open.

72 02-73 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

forfeited property meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 78, which 

requires disclosure of the analysis of 

the changes in forfeited property by 

type and dollar amount that includes 

(1) number of forfeitures on hand at 

the beginning of the year, 

(2) additions, (3) disposals and 

method of disposition, and (4) end-ofyear balances.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 49 GAO-05-407 Process for Preparing the CFS

73 02-74 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

forfeited property meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 78, which 

requires disclosure of any restriction 

on the use or disposition of the 

property.

See status of recommendation 

No. 02-25.

Open.

74 02-75 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

forfeited property meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 78, which 

requires disclosure, if available, of an 

estimate of the value of property to be 

distributed to other federal, state, and 

local agencies in future reporting 

periods.

See status of recommendation 

No. 02-25.

Open.

75 02-76 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

goods held under price support and 

stabilization programs meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 98, which 

requires that if a contingent loss is not 

recognized because it is less than 

probable or it is not reasonably 

measurable, disclosure of the 

contingency shall be made if it is at 

least reasonably possible that a loss 

may occur.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

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Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 50 GAO-05-407 Process for Preparing the CFS

76 02-77 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

goods held under price support and 

stabilization programs meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 109, which 

requires disclosure of the basis for 

valuing commodities, including 

valuation method and cost flow 

assumptions.

See status of recommendation 

No. 02-25.

Open.

77 02-78 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

goods held under price support and 

stabilization programs meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 109, which 

requires disclosure of any changes 

from the prior year’s accounting 

methods.

See status of recommendation 

No. 02-25.

Open.

78 02-79 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

goods held under price support and 

stabilization programs meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 109, which 

requires disclosure of any restrictions 

on the use, disposal, or sale of 

commodities.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 51 GAO-05-407 Process for Preparing the CFS

79 02-80 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

goods held under price support and 

stabilization programs meets the 

requirements of SFFAS No. 3, 

Accounting for Inventory and Related 

Property, paragraph 109, which 

requires disclosure of the analysis of 

the change in dollar amount and 

volume of commodities, including 

those (1) on hand at the beginning of 

the year, (2) acquired during the year, 

(3) disposed of during the year listed 

by method of disposition, (4) on hand 

at the end of the year, (5) on hand at 

year-end and estimated to be donated 

or transferred during the coming 

period, and (6) received as a result of 

surrender of collateral related to 

nonrecourse loans outstanding. The 

analysis should also show the dollar 

value and volume of purchase 

agreement commitments.

See status of recommendation 

No. 02-25.

Open.

80 02-81 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

property, plant, and equipment 

(PP&E) meets the disclosure 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraph 45, which 

requires disclosure of the estimated 

useful lives for each major class of 

PP&E.

See status of recommendation 

No. 02-25.

Open.

81 02-82 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

PP&E meets the disclosure 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraph 45, which 

requires disclosure of capitalization 

thresholds, including any changes in 

thresholds during the period.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 52 GAO-05-407 Process for Preparing the CFS

82 02-83 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

PP&E meets the disclosure 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraph 45, which 

requires disclosure of restrictions on 

the use or convertibility of general 

PP&E.

See status of recommendation 

No. 02-25.

Open.

83 02-85 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

PP&E meets the disclosure 

requirements of SFFAS No. 10, 

Accounting for Internal Use Software, 

paragraph 35, which requires 

disclosure of the estimated useful life 

for each major class of software for 

internal use software.

See status of recommendation 

No. 02-25.

Open.

84 02-86 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

PP&E meets the disclosure 

requirements of SFFAS No. 10, 

Accounting for Internal Use Software, 

paragraph 35, which requires 

disclosure of the method of 

amortization for internal use software.

See status of recommendation 

No. 02-25.

Open.

85 02-87 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

PP&E meets the disclosure 

requirements of SFFAS No. 16, 

Amendments to Accounting for 

Property, Plant, and Equipment, 

paragraph 9, which requires an 

appropriate PP&E note disclosure to 

explain that “physical quantity” 

information for the multiuse heritage 

assets is included in supplemental 

stewardship reporting for heritage 

assets.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 53 GAO-05-407 Process for Preparing the CFS

86 02-88 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

federal employee and veteran benefits 

payable is completely and properly 

reported, specifically, that (1) it 

include a line for the valuation of plan 

amendments that occurred during the 

year and (2) the liability for military 

pensions and note disclosure related 

to the “change in actuarial accrued 

pension liability and components of 

related expenses” agree with the 

information presented in the 

Department of Defense’s financial 

statements.

See status of recommendation 

No. 02-25.

Open.

87 02-89 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

environmental and disposal liabilities 

meets the requirements of SFFAS 

No. 6, Accounting for Property, Plant, 

and Equipment, which requires 

(1) estimation and recognition of 

cleanup costs associated with general 

PP&E at the time the PP&E is placed 

in service and (2) recognition of a 

liability for the portion of the estimated 

total cleanup cost attributable to that 

portion of the physical capacity used 

or that portion of the estimated useful 

life that has passed since the general 

PP&E was placed in service.

See status of recommendation 

No. 02-25.

Open.

88 02-90 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

environmental and disposal liabilities 

meets the requirements of SFFAS 

No. 6, Accounting for Property, Plant, 

and Equipment, which requires 

inclusion of material changes in total 

estimated cleanup costs due to 

changes in laws, technology, or plans.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

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Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 54 GAO-05-407 Process for Preparing the CFS

89 02-91 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

capital leases meets the requirements 

of Federal Accounting Standards 

Board (FASB), Statement of Financial 

Accounting Standards (SFAS) No. 13, 

Accounting for Leases, paragraph 16, 

which requires future minimum lease 

payments as of the date of the latest 

balance sheet presented, in the 

aggregate and for each of the 5 

succeeding fiscal years, with separate 

deductions from the total for the 

amount representing executory costs, 

including any profit thereon, included 

in the minimum lease payments, and 

for the amount of the imputed interest 

necessary to reduce the net minimum 

lease payments to present value.

See status of recommendation 

No. 02-25.

Open.

90 02-92 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

capital leases meets the requirements 

of FASB, SFAS No. 13, Accounting for 

Leases, paragraph 16, which requires 

a summary of assets under capital 

lease by major asset category and the 

related total accumulated 

amortization.

See status of recommendation 

No. 02-25.

Open.

91 02-93 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

capital leases meets the requirements 

of FASB, SFAS No. 13, Accounting for 

Leases, paragraph 16, which requires 

a general description of the lessee’s 

leasing arrangements, including but 

not limited to (1) the basis on which 

contingent rental payments are 

determined; (2) the existence and 

terms of renewal or purchase options 

and escalation clauses; and 

(3) restrictions imposed by lease 

agreements, such as those 

concerning dividends, additional debt, 

and further leasing.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 55 GAO-05-407 Process for Preparing the CFS

92 02-94 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

life insurance liabilities meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 117, 

which requires all federal reporting 

entities with whole life insurance 

programs to follow applicable 

standards as prescribed in the private 

sector standards when reporting the 

liability for future policy benefits: FASB 

SFAS No. 60, Accounting and 

Reporting by Insurance Enterprises; 

SFAS No. 97, Accounting and 

Reporting by Insurance Enterprises 

for Certain Long-Duration Contracts 

and for Realized Gains and Losses 

from the Sale of Investments; SFAS 

No. 120, Accounting and Reporting by 

Mutual Life Insurance Enterprises and 

by Insurance Enterprises for Certain 

Long-Duration Participating 

Contracts; and American Institute of 

Certified Public Accountants 

Statement of Position 95-1, 

Accounting for Certain Insurance 

Activities of Mutual Life Insurance 

Enterprises.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 56 GAO-05-407 Process for Preparing the CFS

93 02-95 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

life insurance liabilities meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 5, 

which requires all components of the 

liability for future policy benefits (i.e., 

the net-level premium reserve for 

death and endowment policies and 

the liability for terminal dividends) to 

be separately disclosed in a footnote 

with a description of each amount and 

an explanation of its projected use 

and any other potential uses (e.g., 

reducing premiums, determining and 

declaring dividends available, and 

reducing federal support in the form of 

appropriations related to 

administrative cost or subsidies).

See status of recommendation 

No. 02-25.

Open.

94 02-96 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure on 

major commitments and 

contingencies is consistent with 

disclosed information in individual 

agencies’ financial statements.

See status of recommendation 

No. 02-25.

Open.

95 02-97 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure on 

major commitments and 

contingencies discloses sufficient 

information (detailed discussion) 

regarding certain major commitments 

and contingencies.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 57 GAO-05-407 Process for Preparing the CFS

96 02-99 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

collections and refunds of federal 

revenue meets the requirements of 

SFFAS No. 7, Concepts for 

Reconciling Budgetary and Financial 

Accounting, paragraph 69.2, which 

requires collecting entities to provide 

in the other accompanying information 

any relevant estimates of the annual 

tax gap that become available as a 

result of federal government surveys 

or studies.

See status of recommendation 

No. 02-25.

Open.

97 02-100 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

dedicated collections meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires inclusion of condensed 

information about assets and liabilities 

showing investments in Treasury 

securities, other assets, liabilities due 

and payable to beneficiaries, other 

liabilities, and fund balance.

See status of recommendation 

No. 02-25.

Open.

98 02-101 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

dedicated collections meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires inclusion of condensed 

information on net cost and changes 

to fund balance, showing revenues by 

type (exchange/nonexchange), 

program expenses, other expenses, 

other financing sources, and other 

changes in fund balance.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 58 GAO-05-407 Process for Preparing the CFS

99 02-102 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

dedicated collections meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires inclusion of any 

revenues, other financing sources, or 

costs attributable to the fund under 

accounting standards but not legally 

allowable as credits or charges to 

the fund.

See status of recommendation 

No. 02-25.

Open.

100 02-103 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

Indian trust funds meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires a description of each 

fund’s purpose, how the administrative 

entity accounts for and reports the 

fund, and its authority to use those 

collections.

See status of recommendation 

No. 02-25.

Open.

101 02-104 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

Indian trust funds meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires disclosure of the 

sources of revenue or other financing 

for the period and an explanation of 

the extent to which they are inflows of 

resources to the government or the 

result of intragovernmental flows.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 59 GAO-05-407 Process for Preparing the CFS

102 02-105 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

Indian trust funds meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires condensed information 

about assets and liabilities showing 

investments in Treasury securities, 

other assets, liabilities due and 

payable to beneficiaries, and other 

liabilities.

See status of recommendation 

No. 02-25.

Open.

103 02-106 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

Indian trust funds meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires condensed information 

on net cost and changes to fund 

balance, showing revenues by type 

(exchange/nonexchange), program 

expenses, other expenses, other 

financing sources, and other changes 

in fund balance.

See status of recommendation 

No. 02-25.

Open.

104 02-107 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

Indian trust funds meets the 

requirements of SFFAS No. 7, Part I, 

Accounting for Revenue and Other 

Financing Sources, paragraph 85, 

which requires disclosure of any 

revenues, other financing sources, or 

costs attributable to the fund under 

accounting standards, but not legally 

allowable as credits or charges to 

the fund.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 60 GAO-05-407 Process for Preparing the CFS

105 02-114 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

social insurance meets the 

requirements of SFFAS No. 17, 

Accounting for Social Insurance, 

paragraph 32(4), which requires 

individual program sensitivity 

analyses for projection period cash 

flow in present value dollars and 

annual cash flow in nominal dollars. 

The CFS includes only present value 

sensitivity analyses for Social Security 

and Hospital Insurance. Paragraph 

32(4) states that at a minimum the 

summary should present Social 

Security, Hospital Insurance, and 

Supplementary Medical Insurance 

separately.

See status of recommendation 

No. 02-25.

Open.

106 02-115 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

social insurance meets the 

requirements of SFFAS No. 17, 

Accounting for Social Insurance, 

paragraph 27(4)(a), which requires 

the individual program sensitivity 

analyses for Social Security and 

Hospital Insurance to include an 

analysis of assumptions regarding net 

immigration.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 61 GAO-05-407 Process for Preparing the CFS

107 02-118 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

nonfederal physical property included 

in stewardship information meets the 

requirements of SFFAS No. 8, 

Supplementary Stewardship 

Reporting, paragraph 87, which 

requires disclosure of the annual 

investment, including a description of 

federally owned physical property 

transferred to state and local 

governments. This information should 

be provided for the year ended on the 

balance sheet date as well as for each 

of the 4 preceding years. If data for 

additional years would provide a 

better indication of investment, 

reporting of the additional years’ data 

is encouraged. Reporting should be at 

a meaningful category or level.

See status of recommendation 

No. 02-25.

Open.

108 02-119 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

nonfederal physical property included 

in stewardship information meets the 

requirements of SFFAS No. 8, 

Supplementary Stewardship 

Reporting, paragraph 87, which 

requires a description of major 

programs involving federal 

investments in nonfederal physical 

property, including a description of 

programs or policies under which 

noncash assets are transferred to 

state and local governments.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 62 GAO-05-407 Process for Preparing the CFS

109 02-120 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

human capital included in stewardship 

information meets the requirements of 

SFFAS No. 8, Supplementary 

Stewardship Reporting, paragraph 94, 

which requires a narrative description 

and the full cost of the investment in 

human capital for the year being 

reported on as well as the preceding 

4 years (if full cost data are not 

available, outlay data can be 

reported).

See status of recommendation 

No. 02-25.

Open.

110 02-121 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

human capital included in stewardship 

information meets the requirements of 

SFFAS No. 8, Supplementary 

Stewardship Reporting, paragraph 94, 

which requires the full cost or outlay 

data for investments in human capital 

at a meaningful category or level (e.g., 

by major program, agency, or 

department).

See status of recommendation 

No. 02-25.

Open.

111 02-122 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

human capital included in stewardship 

information meets the requirements of 

SFFAS No. 8, Supplementary 

Stewardship Reporting, paragraph 94, 

which requires a narrative description 

of major education and training 

programs considered federal 

investments in human capital.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 63 GAO-05-407 Process for Preparing the CFS

112 02-123 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

research and development included in 

stewardship information meets the 

requirements of SFFAS No. 8, 

Supplementary Stewardship 

Reporting, paragraph 94, which 

requires reporting of the annual 

investment made in the year ended on 

the balance sheet date as well as in 

each of the 4 years preceding that 

year. (As defined in this standard, 

“annual investment” includes more 

than the annual expenditure reported 

by character class for budget 

execution. Full cost shall be measured 

and accounted for in accordance with 

SFFAS No. 4, Managerial Cost 

Accounting Standards for the Federal 

Government.) If data for 

additional years would provide a 

better indication of investment, 

reporting of the additional years’ data 

is encouraged. In those unusual 

instances when entities have no 

historical data, only current reporting 

year data need be reported. 

Reporting must be at a meaningful 

category or level, for example, a major 

program or department.

See status of recommendation 

No. 02-25.

Open.

113 02-124 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

research and development included in 

stewardship information meets the 

requirements of SFFAS No. 8, 

Supplementary Stewardship 

Reporting, paragraph 94, which 

requires a narrative description of 

major research and development 

programs.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 64 GAO-05-407 Process for Preparing the CFS

114 02-125 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

deferred maintenance meets the 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraphs 83 and 84, 

which requires inclusion of the method 

of measuring deferred maintenance 

for each major class of PP&E.

See status of recommendation 

No. 02-25.

Open.

115 02-126 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

deferred maintenance meets the 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraphs 83 and 84, 

which requires that if the condition 

assessment survey method of 

measuring deferred maintenance is 

used, the following should be 

presented for each major class of 

PP&E: (1) description of requirements 

or standards for acceptable operating 

condition, (2) any changes in the 

condition requirements or standards, 

and (3) asset condition and a range 

estimate of the dollar amount of 

maintenance needed to return the 

asset to its acceptable operating 

condition.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 65 GAO-05-407 Process for Preparing the CFS

116 02-127 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

deferred maintenance meets the 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraphs 83 and 84, 

which requires that if the total lifecycle cost method is used, the 

following should be presented for 

each major class of PP&E: (1) the 

original date of the maintenance 

forecast and an explanation for any 

changes to the forecast; (2) prior year 

balance of the cumulative deferred 

maintenance amount; (3) the dollar 

amount of maintenance that was 

defined by the professionals who 

designed, built, or managed the PP&E 

as required maintenance for the 

reporting period; (4) the dollar amount 

of maintenance actually performed 

during the period; (5) the difference 

between the forecast and actual 

maintenance; (6) any adjustments to 

the scheduled amounts deemed 

necessary by the managers of the 

PP&E; and (7) the ending cumulative 

balance for the reporting period for 

each major class of asset 

experiencing deferred maintenance.

See status of recommendation 

No. 02-25.

Open.

117 02-128 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

to ensure that the note disclosure for 

deferred maintenance meets the 

requirements of SFFAS No. 6, 

Accounting for Property, Plant, and 

Equipment, paragraphs 83 and 84, 

which requires that if management 

elects to disclose critical and 

noncritical amounts, the disclosure is 

to include management’s definition of 

these categories.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 66 GAO-05-407 Process for Preparing the CFS

118 02-129 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

stewardship responsibilities related to 

the risk assumed for federal insurance 

and guarantee programs meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 106, 

which requires that when financial 

information pursuant to FASB 

standards on federal insurance and 

guarantee programs conducted by 

government corporations is 

incorporated in general purpose 

financial reports of a larger federal 

reporting entity, the entity should 

report as required supplementary 

information what amounts and 

periodic change in those amounts 

would be reported under the “risk 

assumed” approach.

See status of recommendation 

No. 02-25.

Open.

GAO-04-866 (results of the fiscal year 2003 audit)

119 03-1 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that if full-time equivalents 

(FTE) are used as part of Treasury’s 

methodology for allocating Office of 

Personnel Management (OPM) costs, 

the FTEs used for the agencies listed 

on the Statement of Net Cost agree 

with the FTEs listed in the Analytical 

Perspectives, Budget of the United 

States Government as currently 

stated in Treasury’s methodology.

Closed. Closed during the fiscal year 2004 

audit. Treasury changed its 

methodology and did not use the 

FTEs listed in the Analytical 

Perspectives, Budget of the United 

States Government.

120 03-2 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to document any changes to the 

stated methodology for allocating 

OPM costs and the rationale for these 

changes.

Closed. Closed during the fiscal year 2004 

audit. Treasury changed its 

methodology and did not use the 

FTEs listed in the Analytical 

Perspectives, Budget of the United 

States Government.

121 03-3 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to require reviews by Treasury 

management of the accuracy of the 

allocated OPM costs.

Closed. Closed during the fiscal year 2004 

audit. Treasury changed its 

methodology and did not use the 

FTEs listed in the Analytical 

Perspectives, Budget of the United 

States Government.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 67 GAO-05-407 Process for Preparing the CFS

122 03-4 The Director of OMB should direct the 

Controller of OMB, in coordination 

with Treasury’s Fiscal Assistant 

Secretary, to work with the federal 

agencies so that the differences 

between net outlays the agencies 

report in their Statement of Budgetary 

Resources and the net outlay records 

Treasury uses to prepare the 

Statement of Changes in Cash 

Balance are reconciled.

See status of recommendation 

No. 02-18.

Open.

123 03-5 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to determine and address the effects 

that any of the differences between 

net outlays the agencies report in their 

Statement of Budgetary Resources 

and Treasury’s net outlay records may 

have on the CFS.

Treasury will wait to see the results of 

the work between Treasury, OMB, and 

the agencies to address GAO’s 

recommendation for No. 02-18. 

Pending the results of that work and 

analysis, this step may not be 

necessary.

Open.

124 03-6 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to develop a process that will allow full 

reporting of the changes in cash 

balance of the U.S. government. 

Specifically, the process should 

provide for reporting on the change in 

cash reported on the consolidated 

balance sheet, which should be linked 

to cash balances reported in federal 

agencies’ audited financial 

statements.

Treasury disagrees with GAO. The 

total operating cash reported in the 

2004 CFS was linked to the amounts 

reported in the agencies’ audited 

financial statements. The Statement 

of Changes in Cash Balance 

reconciles to Operating Cash, which is 

in accordance with SFFAS 24. SFFAS 

24, paras. 12-13, requires 

reconciliation to the Government 

Cash balance. It also references an 

illustration that is not prescriptive.

Open. The Statement of Changes in 

Cash Balance reported only the 

changes in the “operating” cash of the 

U.S. government of $19.8 billion 

rather than the change in all cash 

reported on the U.S. government’s 

Balance Sheet of $22.6 billion, as of 

September 30, 2004.

125 03-7 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to report gross amounts for receipts 

and disbursements of cash related to 

direct loans and loan guarantees.

Treasury disagrees with GAO 

on this item. However, further 

research and discussion will take 

place in fiscal year 2005.

Open. See status of recommendation 

No. 02-12.

126 03-8 The Director of OMB should direct the 

Controller of OMB, in coordination 

with Treasury’s Fiscal Assistant 

Secretary, to work with Justice and 

certain other executive branch 

agencies to ensure that these 

agencies report or disclose relevant 

criminal debt information in conformity 

with GAAP in their financial 

statements and have such information 

subjected to audit.

OMB is participating in a multi-agency 

task force that will begin to address 

the issues related to criminal debt.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 68 GAO-05-407 Process for Preparing the CFS

127 03-9 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to include relevant criminal debt 

information in the CFS or document 

the specific rationale for excluding 

such information.

See status of recommendation 

No. 03-8.

Open.

128 03-10 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to include in the new system a request 

for federal agencies to provide 

contingency loss information to assist 

Treasury in disclosing contingencies 

in the CFS in accordance with GAAP.

Treasury plans to modify the new 

system to request contingency loss 

information for fiscal year 2005.

Open.

129 03-11 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

in coordination with the Controller of 

OMB, to modify Treasury’s plans for 

the new closing package to (1) require 

federal agencies to directly link their 

audited financial statement notes to 

the CFS notes and (2) provide the 

necessary information to demonstrate 

that all of the five principal 

consolidated financial statements are 

consistent with the underlying 

information in federal agencies’ 

audited financial statements and other 

financial data.

See status of recommendation 

No. 02-42.

Open.

130 03-12 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to report prior period adjustments in 

accordance with SFFAS No. 21 by 

(1) restating the prior year for 

corrections of material errors and 

adjusting the beginning balance of 

cumulative results of operations and 

disclosing the nature of the errors in 

the notes to the CFS and (2) including 

corrections of immaterial errors in the 

current year and not citing them as 

prior period adjustments on the 

Statement of Changes in Net Position 

and not disclosing them in the notes to 

the CFS.

Closed. Closed during the fiscal year 2004 

audit.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 69 GAO-05-407 Process for Preparing the CFS

131 03-13 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to include in Treasury’s new closing 

package a process that will allow 

federal agencies to clearly distinguish 

between prior period adjustments and 

changes in accounting principles in 

accordance with SFFAS No. 21.

Closed. Closed during the fiscal year 2004 

audit.

132 03-14 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

to ensure that the note disclosure for 

federal employees and veterans 

benefits payable meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 65, 

which requires that the actuarial 

assumptions be the basis of the actual 

experience of the covered group, to 

the extent that credible experience 

data are available, but should 

emphasize expected long-term future 

trends rather than give undue weight 

to recent experience.

Closed. Closed during the fiscal year 2004 

audit.

133 03-15 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary, 

to ensure that the note disclosure for 

federal employees and veterans 

benefits payable meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 83, 

which requires the reporting entity to 

disclose the assumptions used for 

veterans compensation and burial 

benefits.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 70 GAO-05-407 Process for Preparing the CFS

134 03-16 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

federal employees and veterans 

benefits payable meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 72, 

which requires the reporting entity to 

disclose prior service costs from plan 

amendments as a separate 

component.

See status of recommendation 

No. 02-25.

Open.

135 03-17 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

federal employees and veterans 

benefits payable meets the 

requirements of SFFAS No. 5, 

Accounting for Liabilities of the 

Federal Government, paragraph 88, 

which requires the reporting entity to 

disclose gains or losses due to a 

change in the medical inflation rate 

assumption for health benefits as a 

separate component.

See status of recommendation 

No. 02-25.

Open.

136 03-18 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

environmental and disposal liabilities 

meets the requirements of SFFAS 

No. 6, Accounting for Property, Plant, 

and Equipment, which requires the 

reporting entity to disclose the method 

for assigning estimated total cleanup 

costs to current operating periods.

See status of recommendation 

No. 02-25.

Open.

137 03-19 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

environmental and disposal liabilities 

meets the requirements of SFFAS 

No. 6, Accounting for Property, Plant, 

and Equipment, which requires the 

reporting entity to disclose, for 

cleanup costs associated with general 

property, plant, and equipment, the 

unrecognized portion of estimated 

total cleanup costs be disclosed.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 71 GAO-05-407 Process for Preparing the CFS

138 03-20 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the note disclosure for 

environmental and disposal liabilities 

meets the requirements of SFFAS 

No. 6, Accounting for Property, Plant, 

and Equipment, which requires the 

reporting entity to disclose the nature 

of estimates and information 

regarding possible changes to the 

estimates resulting from inflation, 

deflation, technology, or applicable 

laws and regulations.

See status of recommendation 

No. 02-25.

Open.

139 03-21 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to consider whether the reader would 

be interested in understanding why 

the environmental and disposal 

liabilities amount significantly changed 

during the year and include the 

explanation for the change in the note 

disclosure.

See status of recommendation 

No. 02-25.

Open.

140 03-22 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the information in 

stewardship information for research 

and development meets the 

requirements of SFFAS No. 8, 

Supplementary Stewardship 

Reporting, paragraph 99, which 

requires the reporting entity to include 

a narrative discussion of the major 

results achieved by the program along 

the lines of basic research, applied 

research, and development.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Appendix II

Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 72 GAO-05-407 Process for Preparing the CFS

Source: GAO.

141 03-23 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the information in 

stewardship information for research 

and development meets the 

requirements of SFFAS No. 8, 

Supplementary Stewardship 

Reporting, paragraph 99, which 

requires the reporting entity to include 

a narrative description of the major 

results achieved through the 

investments in basic research, applied 

research, and development.

See status of recommendation 

No. 02-25.

Open.

142 03-24 The Secretary of the Treasury should 

direct the Fiscal Assistant Secretary 

to ensure that the required 

supplemental information for deferred 

maintenance meets the requirements 

of SFFAS No. 6, Accounting for 

Property, Plant, and Equipment, 

paragraph 83, which requires the 

reporting entity to disclose the 

identification of each major class of 

asset (i.e., building and structures, 

furniture and fixtures, equipment, 

vehicles, and land) for which 

maintenance has been deferred.

See status of recommendation 

No. 02-25.

Open.

(Continued From Previous Page)

Status of recommendations

Count No. Recommendations Per Treasury and OMB Per GAO
Page 73 GAO-05-407 Process for Preparing the CFS

Appendix III

Comments from the Department of the 

Treasury ApendxiI
Appendix III

Comments from the Department of the 

Treasury

(198358) Page 74 GAO-05-407 Process for Preparing the CFS
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