a

GAO

United States Government Accountability Office

Report to the Secretary of the Treasury 

and the Director of the Office of 

Management and Budget

April 2006 FINANCIAL AUDIT

Significant Internal 

Control Weaknesses 

Remain in Preparing 

the Consolidated 

Financial Statements 

of the U.S. 

Government

GAO-06-415
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

FINANCIAL AUDIT

Significant Internal Control Weaknesses 

Remain in Preparing the Consolidated 

Financial Statements of the U.S. 

Government 

Highlights of GAO-06-415, a report to the 

Secretary of the Treasury and the Director

of the Office of Management and Budget 

For the past 9 years, since our 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. Included

with GAO’s December 2005 

disclaimer of opinion on the fiscal 

year 2005 CFS was its discussion of

continuing weaknesses relating to

the Department of the Treasury’s

(Treasury) preparation of the CFS. 

The purpose of this report is to 

(1) provide details of those 

additional weaknesses, 

(2) recommend improvements, and 

(3) describe the status of corrective 

actions on GAO’s previous 154 

recommendations. 

What GAO Recommends

GAO is making 12 new 

recommendations to address 

compilation and reporting 

weaknesses identified during the 

fiscal year 2005 CFS audit. The

Office of Management and Budget

stated that it generally agreed with 

the new findings in this report. 

Treasury stated that it concurs with

11 of our recommendations. For 

the twelfth recommendation, 

Treasury offered an alternative

solution that we believe should 

address our concern if it is 

effectively implemented. 

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

preparing the fiscal year 2005 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 2005 CFS audit 

involved the following areas: 

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

• comparability of financial statements, 

• audit assurance over certain federal agencies’ closing packages,

• internal control monitoring, 

• consolidated reporting guidance to federal agencies, 

• reconciling of intragovernmental activity and balances, and 

• various other internal control weaknesses that were identified in 

previous years’ audits but remained in fiscal year 2005 (see app. I). 

Of the 154 recommendations GAO reported in May 2005 regarding the 

process for preparing the CFS, 131 remained open as of December 2, 2005, 

when GAO completed its fieldwork for the audit of the fiscal year 2005 CFS. 

However, 76 of these 131 recommendations relate to specific disclosures

required under U.S. generally accepted accounting principles. Treasury has 

submitted a proposal to the Federal Accounting Standards Advisory Board 

(FASAB) seeking to amend previously issued standards and eliminate or 

lessen the disclosure requirements for the consolidated financial statements 

so that U.S. generally accepted accounting principles would no longer 

require certain of the information Treasury has not been reporting. 

Comments on the exposure draft of a proposed FASAB standard, based on 

the Treasury proposal, were due March 1, 2006. GAO will continue to 

monitor the status of corrective actions to address open recommendations 

during its fiscal year 2006 audit of the CFS. 

www.gao.gov/cgi-bin/getrpt?GAO-06-415.

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. 
Page i GAO-06-415 Significant Internal Control Weaknesses

Contents

Letter 1

Results in Brief 2

Scope and Methodology 4

Directly Linking Audited Federal Agency Financial Statements to 

the CFS 5

Comparability of Financial Statements 6

Audit Assurance over Certain Federal Agencies’ Closing 

Packages 7

Internal Control Monitoring 8

Consolidated Reporting Guidance to Federal Agencies 9

Reconciling of Intragovernmental Activity and Balances 10

Agency Comments and Our Evaluation 12

Appendixes

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

GAO’s Prior Year Recommendations for Preparing the CFS 14

Appendix II: Comments from the Department of the Treasury 62

Appendix III: GAO Contacts and Staff Acknowledgments 65

Table Table 1: Status of Treasury’s and OMB’s Progress in Addressing 

GAO’s Prior Year Recommendations for Preparing the 

CFS 15

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Page 1 GAO-06-415 Significant Internal Control Weaknesses

United States Government Accountability Office

Washington, D.C. 20548

Comptroller General A of the United States

April 21, 2006 Letr

The Honorable John W. Snow

The Secretary of the Treasury

The Honorable Clay Johnson III

Acting Director, Office of Management and Budget 

In our report dated December 2, 2005, we disclaimed an opinion on the 

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

fiscal years ended September 30, 2005, and 2004.1

 For the past 9 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. 

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

weaknesses we identified during our audit of the fiscal year 2005 CFS 

regarding financial reporting procedures and internal control over the 

process for preparing the CFS, (2) recommend improvements to address 

those weaknesses, and (3) provide the status of corrective actions on the 

recommendations detailed in our prior reports and listed in appendix I. We 

have discussed each of the new weaknesses identified during our fiscal 

year 2005 audit with your staff and have incorporated their comments as 

appropriate. We also assessed Treasury’s ongoing effort to develop and 

implement the Governmentwide Financial Report System (GFRS) and are

1

The fiscal year 2005 Financial Report of the United States Government includes our report 

and was completed by the Department of the Treasury (Treasury) on December 15, 2005, 

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-06-415 Significant Internal Control Weaknesses

providing the results of our assessment along with our recommendations in 

a separate report.2

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

during our audit of the fiscal year 2005 CFS. Such weaknesses impair the 

federal government’s ability to ensure that the CFS are consistent with the 

underlying audited agency financial statements, 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. Specifically, we found that 

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

financial information from federal agencies’ audited financial 

statements and other financial data directly link to amounts reported in 

the CFS.

• Treasury lacked a process to ensure that fiscal years 2005 and 2004 

consolidated financial statements and notes were comparable.

• Treasury and the Office of Management and Budget (OMB) did not have 

audit assurance on closing packages received from 4 of the 35 agencies 

that they have identified as significant to the CFS.

• Treasury, in coordination with OMB, had not developed policies and 

procedures for monitoring internal control or provided us with adequate 

documentation evidencing an executable plan of action and milestones 

for short-term and long-range solutions for certain internal control 

weaknesses we have previously reported regarding the process for 

preparing the CFS, which may result in the findings of audits not being 

properly and timely resolved and internal control weaknesses 

continuing to exist.

• Treasury did not provide clear guidance to federal agencies about 

certain financial information that agencies were required to provide in 

the closing package and as a result agencies reported certain financial 

2

GAO, Financial Management Systems: Lack of Disciplined Processes Puts Effective 

Implementation of FMS’ Governmentwide Financial Report System at Risk, GAO-06-413

(Washington, D.C.: Apr. 21, 2006).
Page 3 GAO-06-415 Significant Internal Control Weaknesses

information inconsistently, which increased the risk of incomplete and 

inaccurate summarization of data in the CFS. 

• As part of the intragovernmental reconciliation reporting process, 

Treasury and OMB have not provided sufficiently clear guidance for 

selecting the “confirmed reporting” category of the intragovernmental 

reconciliation report and do not have an effective process to obtain 

clarification for inconsistent explanations provided by federal agencies 

in this category. Also, Treasury and OMB did not require federal 

agencies’ Inspectors General (IGs) to complete and report on the results 

of intragovernmental agreed-upon procedures until over 2 weeks after 

federal agencies’ audited financial statements were required to be 

issued to OMB, which did not optimize their value to the preparation of 

the agencies’ financial statements or the CFS.

• Various other internal control weaknesses identified in previous years’ 

audits still existed during fiscal year 2005 (see app. I). 

This report includes 12 new recommendations to address the additional 

weaknesses we identified during our audit of the fiscal year 2005 CFS. 

Appendix I of this report reflects the status of actions taken as of 

December 2, 2005, the date of completion of our fieldwork on our audit of 

the fiscal year 2005 CFS, to address the recommendations from our 

previous reports. Our work showed that 131 recommendations contained 

in our prior reports remained open and 23 were closed. Of the 131 open 

recommendations, 76 relate to specific disclosures required under GAAP. 

Treasury has submitted a proposal to the Federal Accounting Standards 

Advisory Board (FASAB) seeking to amend previously issued standards 

and eliminate or lessen the disclosure requirements for the consolidated 

financial statements so that GAAP would no longer require certain of the 

information Treasury has not been reporting. Comments on the exposure 

draft of a proposed FASAB standard, based on the Treasury proposal, were 

due March 1, 2006. Treasury stated that it is waiting for FASAB approval 

and issuance of this proposed standard to determine the disclosures that 

will be required in future consolidated financial statements. We will 

continue to determine the status of corrective actions on our open 

recommendations during our fiscal year 2006 audit of the CFS. 

In commenting on a draft of this report, OMB stated that it generally agreed 

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

stated that it concurs with all of the new recommendations in this report 

except for the recommendation to accelerate the due date for IGs to 
Page 4 GAO-06-415 Significant Internal Control Weaknesses

complete the agreed-upon procedures on the intragovernmental activity 

and balances. For fiscal year 2006, Treasury does not plan to accelerate the 

due date for completing these intragovernmental agreed-upon procedures. 

However, Treasury stated that for fiscal year 2006, it plans to expand the 

audit coverage for intragovernmental activity and balances by requiring the 

IGs to opine on such information in their audit of the closing package, 

which is due to Treasury by November 17, 2006. This is an appropriate 

alternative solution to accelerating the due date for the IGs to complete the 

intragovernmental agreed-upon procedures. We have modified our 

recommendation to also include developing an alternative solution to 

address this finding.

Scope and 

Methodology

As part of our audit of the fiscal years 2005 and 2004 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 disclaimer of opinion on 

the fiscal year 2005 CFS, which is included in the fiscal year 2005 Financial 

Report of the United States Government, we discussed 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 a material weakness 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 2005 audit procedures related to the process for preparing the 

CFS and our recommendations to correct those weaknesses, as well as the 

status of corrective actions taken by Treasury and OMB to address 

recommendations in our prior reports. 

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

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

comments, which are discussed in the Agency Comments and Our 

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

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

Evaluation section.
Page 5 GAO-06-415 Significant Internal Control Weaknesses

Directly Linking 

Audited Federal 

Agency Financial 

Statements to the CFS 

As discussed in our fiscal year 2005 audit report, fiscal year 2005 was the 

second year that Treasury used GFRS to collect agency financial statement 

information taken directly from federal agencies’ audited financial 

statements. The goal of GFRS is to be able to directly link information from 

federal agencies’ audited financial statements to amounts reported in the 

consolidated financial statements and resolve many of the weaknesses we 

previously identified in the process for preparing the consolidated financial 

statements, a goal we strongly support. For both the fiscal year 2005 and 

2004 reporting processes, GFRS was able to capture agency financial 

information submitted to Treasury, but GFRS is still under development 

and not at the stage that it could be used to fully compile the consolidated 

financial statements from the information captured. 

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

does not yet fully ensure that financial information from federal agencies’ 

audited financial statements and other financial data directly link to 

amounts reported in the CFS. In our fiscal year 2005 audit report, we noted 

that Treasury made progress in demonstrating amounts in the Balance 

Sheet and the Statement of Net Cost were consistent with federal agencies’ 

audited financial statements prior to eliminating intragovernmental activity 

and balances. However, about 25 percent of the significant3

 federal 

agencies’ auditors reported internal control weaknesses related to the 

processes the agencies perform to provide financial statement information 

to Treasury for preparing the consolidated financial statements.

In our prior report,4 we recommended that as Treasury continues to design 

and further implement its new process for compiling the CFS, the Secretary 

of the Treasury should direct the Fiscal Assistant Secretary, in coordination 

with the Controller of OMB, to modify Treasury’s closing package to 

(1) require federal agencies to directly link their audited financial 

3

Treasury defines the verifying agencies as the 24 Chief Financial Officer (CFO) Act 

agencies, Export-Import Bank of the United States, Farm Credit System Insurance 

Corporation, Federal Communications Commission, Federal Deposit Insurance 

Corporation, National Credit Union Administration, U.S. Postal Service, Pension Benefit 

Guaranty Corporation, Railroad Retirement Board, Securities and Exchange Commission, 

Smithsonian Institution, and Tennessee Valley Authority. FMS considers the verifying 

agencies to be significant agencies to the CFS.

4

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 6 GAO-06-415 Significant Internal Control Weaknesses

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.

Progress was made during fiscal year 2005. Treasury has been continuing to 

design and further implement its new process for compiling the CFS with 

the development of GFRS. We continue, though, to be concerned that the 

disciplined processes necessary to reduce risks to acceptable levels have 

not yet been effectively implemented. For example, Treasury moved 

forward with the project before ensuring that certain key elements, such as 

a concept of operations, were developed or even defining and documenting 

the financial reporting weaknesses that were expected to be addressed by 

the system. Not effectively implementing such disciplined processes 

creates an unnecessary risk that the system will cost more and take longer 

than expected to deploy, while not providing all of the intended system 

functionality. The implementation of any major system, such as GFRS, is 

not without risk; however, organizations that follow and effectively 

implement accepted best practices in systems development and 

implementation have been shown to reduce these risks to acceptable 

levels. A more detailed discussion of our assessment of Treasury’s ongoing 

effort to develop and implement GFRS, along with recommendations to 

reduce the risk noted above, can be found in a separate report.5

 

Comparability of 

Financial Statements

The CFS includes 2 years of financial information. Because comparative 

financial statements are intended to furnish useful data about the 

differences in activity and balances between the 2 years shown, 

consistency in how amounts are reported for the 2 years is a major factor in 

creating comparability. We found that Treasury lacked a process to ensure 

that consolidated financial statements and notes for fiscal years 2005 and 

2004 were consistently reported and therefore comparable. During fiscal 

year 2005, Treasury requested that agencies resubmit fiscal year 2004 

financial information along with their fiscal year 2005 financial 

information. Some agencies resubmitted fiscal year 2004 amounts in fiscal 

year 2005 that differed from what Treasury published in fiscal year 2004. 

Also, certain information reported for fiscal 2004 may have required 

reclassification to be comparable to the fiscal year 2005 amounts. Treasury 

5

GAO-06-413.
Page 7 GAO-06-415 Significant Internal Control Weaknesses

did not analyze the fiscal year 2004 information submitted in fiscal year 

2005 or reclassify amounts within various financial statement line items 

and notes to achieve comparability and chose to continue to report what 

was published for fiscal year 2004. For example, the Reconciliations of Net 

Operating Cost and Unified Budget Deficit showed $47.8 billion and $.2 

billion for property, plant, and equipment disposals and revaluations for 

fiscal years 2005 and 2004, respectively. However, based on the audited 

financial information provided by agencies to Treasury in GFRS in fiscal 

year 2005, the fiscal year 2004 amount should be $25.4 billion, rather than 

$.2 billion. The difference should have been reclassified from the Net 

Amount of All Other Differences line item on the Reconciliations of Net 

Operating Cost and Unified Budget Deficit.

Recommendation for 

Executive Action

We recommend that the Secretary of the Treasury direct the Fiscal 

Assistant Secretary to develop a process to help ensure that, for each 

reporting year, the 2 years of consolidated financial statements and note 

information presented are consistently and comparably reported, in all 

material respects. 

Audit Assurance over 

Certain Federal 

Agencies’ Closing 

Packages

Treasury and OMB did not require closing packages from 4 of the 35 

verifying agencies to be audited. Specifically, the Treasury Financial 

Manual (TFM) states that the Inspector General or a contracted 

independent public accountant for each federal verifying agency—except 

those agencies whose fiscal year ends on a date other than September 30—

must opine on the closing package data entered by the Chief Financial 

Officer into GFRS. Because of these year-end differences, the TFM does not 

require the Federal Deposit Insurance Corporation’s Funds, National Credit 

Union Administration, and Farm Credit System Insurance Corporation—all 

of which have a year end other than September 30—to have their closing 

package data be audited. In addition, for fiscal years 2004 and 2005, OMB 

waived the closing package audit requirement for the Tennessee Valley 

Authority (TVA), which does have a September 30 fiscal year end.6

 In these 

four cases, Treasury and OMB did not develop any alternative solutions 

that include the requirement for adequate audit procedures to be 

6

OMB stated that for fiscal year 2005 TVA was faced with challenges in obtaining an audit 

opinion on its closing package, and therefore OMB instead required TVA to perform agreedupon procedures on TVA’s closing package data. However, these procedures did not provide 

audit assurance over certain significant information included in the CFS for this agency. 
Page 8 GAO-06-415 Significant Internal Control Weaknesses

performed over significant information included in the CFS. As a result, 

unaudited September 30 information was included in the CFS for 4 

agencies that Treasury and OMB consider to be significant. Treasury, 

therefore, has less assurance that the information included in the CFS for 

these agencies is fairly stated and directly links to the agencies’ audited 

financial statements. 

Recommendation for 

Executive Action 

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

of Federal Financial Management, in coordination with the Treasury Fiscal 

Assistant Secretary, to develop an alternative solution for obtaining audit 

assurance related to the Federal Deposit Insurance Corporation’s Funds, 

National Credit Union Administration, and Farm Credit System Insurance 

Corporation, which includes the requirement for adequate audit 

procedures to be performed over significant information included in the 

CFS for these agencies. 

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

Office of Federal Financial Management to consider not waiving the 

closing package audit requirement for any verifying agency in future years, 

such as TVA. 

Internal Control 

Monitoring

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

that internal control is a major part of managing an organization and should 

include monitoring.7

 Monitoring of internal control should include 

assessing the quality of performance over time and implementing policies 

and procedures for the timely follow-up and resolution of findings of audits 

and other reviews. The goal of these policies and procedures is to ensure 

that managers (1) promptly evaluate findings from audits and other 

reviews, including those showing deficiencies and recommendations 

reported by auditors and others who evaluate agencies’ operations; 

(2) determine proper actions in response to findings and recommendations 

from audits and reviews; and (3) complete, within established time frames, 

all actions that correct or otherwise resolve the matters brought to 

management’s attention. However, Treasury, in coordination with OMB, 

7

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

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). These standards define the 

minimum level of quality acceptable for internal control in the federal government and 

provide the standards against which internal control is to be evaluated.
Page 9 GAO-06-415 Significant Internal Control Weaknesses

had not developed policies and procedures for monitoring internal control 

or provided us with adequate documentation evidencing an executable 

plan of action and milestones for short-term and long-range solutions for 

certain internal control weaknesses we have previously reported regarding 

the process for preparing the CFS. Without effective monitoring of internal 

control, findings of audits may not be resolved timely and properly.

Recommendation for 

Executive Action

We recommend that the Secretary of the Treasury direct the Fiscal 

Assistant Secretary, in coordination with the Controller of OMB, to develop 

• policies and procedures for monitoring internal control to help ensure 

that (1) audit findings are promptly evaluated, (2) proper actions are 

determined in response to audit findings and recommendations such as 

a documented plan of action with milestones for short-term and longrange solutions, and (3) all actions that correct or otherwise resolve the 

audit findings are completed within established time frames; and 

• an executable plan of action and milestones for short-term and longrange solutions for certain internal control weaknesses we have 

previously reported regarding the process for preparing the CFS.

Consolidated 

Reporting Guidance to 

Federal Agencies

The TFM prescribes how federal agencies are to submit financial 

information to Treasury to be used in compiling 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 to Treasury, GAO, and OMB. Specifically, we 

found that the TFM did not give clear guidance for (1) reporting note 

disclosures for restricted cash, (2) reporting note disclosures for accounts 

payable, (3) preparing summaries of unadjusted misstatements to be 

included with federal agencies’ closing package management 

representation letters, and (4) certain information to be reported by OPM 

to Treasury that is used to allocate costs on the Statement of Net Cost. For 

example, the TFM defines restricted cash as “amounts of cash that an 

entity holds and does not have authority to spend” and cash that is not 

restricted as “amounts of cash that an entity holds for which it has the 

authority to spend.” Although these definitions are accurate at the agency 

level, these definitions are not accurate at the CFS level. For example, an 

agency may hold cash that it does not have the authority to spend because 
Page 10 GAO-06-415 Significant Internal Control Weaknesses

of a certain law or regulation, but when this cash is consolidated at the 

governmentwide level, the federal government as a whole may have the 

authority to spend the cash. Therefore, this cash would appropriately be 

restricted at the agency level, but not at the governmentwide level. As a 

result of the unclear guidance, agencies reported certain financial 

information inconsistently. This increases the risk of incomplete and 

inaccurate summarization of data in the CFS.

Recommendations for 

Executive Action 

We recommend that the Secretary of the Treasury direct the Fiscal 

Assistant Secretary to ensure that the TFM and any other guidance to 

federal agencies provide clear instructions for providing reliable data to 

Treasury in the following specific areas:

• restricted cash,

• accounts payable, 

• summaries of unadjusted misstatements, and

• certain information reported by OPM that is used to allocate costs on 

the Statement of Net Cost.

Reconciling of 

Intragovernmental 

Activity and Balances

OMB and Treasury require federal agencies to reconcile selected 

intragovernmental activity and balances with their “trading partners”8

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

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

prior year; and (5) unknown/unreconciled. According to Treasury, 

confirmed reporting, the first category listed above, is intended to indicate 

that the agency has verified that the amount it has reported is accurate. The 

TFM requires a federal agency that selects the category “confirmed 

reporting” to provide a detailed explanation to support its response. 

8

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

included in the CFS that do business with each other. 
Page 11 GAO-06-415 Significant Internal Control Weaknesses

However, we found that in many cases where a federal agency selected the 

“confirmed reporting” category, the agency did not provide detailed 

explanations. We also found cases where both trading partners selected 

“confirmed reporting” for the same material difference and the agencies did 

not provide detailed explanations for how both trading partners’ amounts 

could be accurate when the material difference remained. When this 

situation occurs, we found that Treasury and OMB do not have an effective 

process to obtain clarification for inconsistent explanations provided and 

that agencies may be unclear as to when to select this category. Incorrect 

use of the confirmed reporting category and lack of detailed explanations 

may hinder efforts to identify and correct problems that federal agencies 

are experiencing in reconciling with their trading partners.

Further, Treasury received the closing packages that contained each 

agency’s intragovernmental activity and balances amounts on November 

18, 2005, and provided agencies with reconciliation reports that showed 

material differences with their trading partners on November 21, 2005. 

Treasury and OMB also require federal agencies’ IGs to annually perform 

agreed-upon procedures on the intragovernmental activity and balances 

reported in the closing package. For fiscal year 2005, Treasury required 

agency IGs for the 35 verifying agencies to complete and report on these 

agreed-upon procedures by December 2, 2005. The timing of these 

procedures did not optimize their value because (1) this reporting date is 

over 2 weeks after federal agencies’ audited financial statements were 

required to be issued to OMB, and (2) did not allow Treasury sufficient time 

to review the results and make any necessary adjustments to 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, to 

• provide clear guidance to federal agencies as to when the “confirmed 

reporting” category in the intragovernmental reconciliation report 

should be selected,

• develop an effective process for obtaining clarification from federal 

agencies for inconsistent or incomplete explanations provided in all 

material difference categories, and 

• accelerate the due date for IGs to complete and report on the results of 

agreed-upon procedures on the intragovernmental activity and balances 

or develop an alternative solution that would allow Treasury sufficient 
Page 12 GAO-06-415 Significant Internal Control Weaknesses

time to review the results and make any necessary adjustments to the 

CFS. 

Agency Comments and 

Our Evaluation

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

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

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

incorporated as appropriate. 

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

appendix II, Treasury stated that it agrees that the preparation process still 

needs improvement and that it is addressing many of the recommendations 

in our previous reports. Treasury also stated that it concurs with all of the 

new recommendations in this report except for the recommendation to 

accelerate the due date for IGs to complete the agreed-upon procedures on 

the intragovernmental activity and balances. For fiscal year 2006, Treasury 

does not plan to accelerate the due date for completing these 

intragovernmental agreed-upon procedures. However, Treasury stated that 

for fiscal year 2006, it plans to expand the audit coverage for 

intragovernmental activity and balances by requiring the IGs to opine on 

such information in their audit of the closing package, which is due to 

Treasury by November 17, 2006. This is an appropriate alternative solution 

to accelerating the due date for the IGs to complete the intragovernmental 

agreed-upon procedures. We have modified our recommendation to also 

include developing an alternative solution to address this finding.

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 
Page 13 GAO-06-415 Significant Internal Control Weaknesses

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.

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. Staff contacts and other key contributors to 

this report are listed in appendix II. 

David M. Walker

Comptroller General 

of the United States
Page 14 GAO-06-415 Significant Internal Control Weaknesses

Appendix I

Status of Treasury’s and OMB’s Progress in Apendxies

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS ApendxiI

This appendix includes open recommendations from three of our prior 

reports: Financial Audit: Process for Preparing the Consolidated 

Financial Statements of the U.S. Government Needs Improvement, GAO04-45 (Washington, D.C.: Oct. 30, 2003); 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); and Financial Audit: Process for Preparing the Consolidated 

Financial Statements of the U.S. Government Continues to Need 

Improvement, GAO-05-407 (Washington, D.C.: May 4, 2005). 

Recommendations that were closed in prior reports are not included in this 

appendix. This appendix includes the status of the recommendations 

according to the Department of the Treasury (Treasury) and the Office of 

Management and Budget (OMB) as well as our own assessments. 

Explanations are included in the status of recommendations per GAO when 

Treasury and OMB disagreed with our recommendation. 

Of the 154 recommendations regarding the process for preparing the CFS 

that are listed in this appendix, 131 remained open as of December 2, 2005, 

the end of GAO’s fieldwork for the audit of the fiscal year 2005 CFS. Of 

these 131 recommendations, 76 relate to specific disclosures required 

under U.S. generally accepted accounting principles (GAAP). Treasury has 

submitted a proposal to the Federal Accounting Standards Advisory Board 

(FASAB) seeking to amend previously issued standards and eliminate or 

lessen the disclosure requirements for the consolidated financial 

statements so that GAAP would no longer require certain of the 

information Treasury has not been reporting. Comments on the exposure 

draft of a proposed FASAB standard, based on the Treasury proposal, are 

due March 1, 2006. Treasury stated that it is waiting for FASAB approval 

and issuance of this proposed standard to determine the disclosures that 

will be required in future consolidated financial statements. 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 15 GAO-06-415 Significant Internal Control Weaknesses

Table 1: Status of Treasury’s and OMB’s Progress in Addressing GAO’s Prior Year Recommendations for Preparing the CFS

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 

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

1 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 further revised and documented 

all of its major policies and procedures for 

the fiscal year 2005 compilation process 

to ensure the propriety, accuracy, and 

consistency of application.

Open. Treasury needs to 

further document its policies 

and procedures. 

2 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.

To eliminate or explain adjustments 

(plugs) to net position, Treasury designed 

a process to eliminate, at the consolidated 

level, intragovernmental activity and 

balances using formal balanced 

accounting entries and developed a model 

to analyze unreconciled transactions that 

affected net position (i.e., contributed to 

the plug). Based on fiscal year 2005 data, 

the model disclosed the magnitude of the 

intragovernmental elimination differences, 

by reciprocal category that contributed to 

the net position elimination plug. In fiscal 

year 2005, Treasury also started an 

analysis to establish the reciprocal 

category for the General Fund.

Open. 

3 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. 

4 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, Treasury, and the Chief Financial 

Officers' Council are reviewing the 

business rules and are also performing 

additional analysis on several groupings of 

intragovernmental transactions. Upon the 

conclusion of the review and analysis, a 

determination will be made how best to 

proceed with and enforce the business 

rules.

Open. 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 16 GAO-06-415 Significant Internal Control Weaknesses

5 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 will continue to work with individual 

agencies to resolve imbalances that are 

referred to OMB on a case-by-case basis. 

As part of OMB’s standard practice, 

resolutions reached will be communicated 

to all parties.

Open. 

6 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.

Beginning in fiscal year 2004, Treasury 

has continued to identify material 

differences on a quarterly basis and work 

with OMB and the agencies to resolve 

differences. Treasury has provided and 

discussed with OMB a list of items in 

dispute. Treasury is working with the 

agencies to resolve these differences. 

Also, the Chief Financial Officers Council 

Intragovernmental Subcommittee has 

begun efforts to identify and resolve or 

mitigate issues or practices that result in 

significant differences.

Closed. 

7 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. 

8 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 recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 17 GAO-06-415 Significant Internal Control Weaknesses

9 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. 

10 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 this 

recommendation. Treasury's position is 

that the unknown nature of the plug 

argues for placement in net position, not 

net cost. Treasury also does not believe 

that these unreconciled transactions 

affecting the change in net position are 

also differences between the two (accrual 

and budget) bases of accounting being 

reconciled in this statement. Therefore, 

the “net unreconciled differences” plug 

should not be included as a separate 

reconciling item on this statement.

Open. Treasury currently 

reports on the Statement of 

Operations and Changes in 

Net Position the plug as part 

of net operating cost, not as a 

separate component of net 

position. In addition, the 

reconciliation statement 

begins with the net operating 

cost amount and ends with 

the budget deficit amount. As 

such, unless the plug is also 

part of the unified budget 

deficit, then the plug amount 

should be included as a 

reconciling item on the 

reconciliation statement. 

11 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 will continue to improve the 

completeness and consistency of the 

information in this reconciliation statement 

and will continue to resolve significant 

inconsistencies, if any, to the applicable 

and related components reported in the 

other basic financial statements, and in 

the related note disclosures, included in 

the CFS.

Open. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 18 GAO-06-415 Significant Internal Control Weaknesses

12 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 communicated its disagreement 

with GAO on the need to report items at a 

lower level of detail. However, Treasury 

will consider the need for establishing a 

materiality threshold related to this 

statement as part of the overall process to 

eventually eliminate the "net amount of all 

other differences (plug)" included in this 

statement.

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. Consistent 

reporting throughout the 

federal government is an 

important goal.

13 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 has previously communicated its 

disagreement with GAO on the need for 

this reconciliation. Treasury does not use 

agency results in preparing this statement.

Open. See status of 

recommendation No. 02-14. 

14 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 has previously communicated its 

disagreement with GAO on the need for 

this reconciliation. Treasury does not use 

agency results in preparing this statement.

Open. See status of 

recommendation No. 02-14. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 19 GAO-06-415 Significant Internal Control Weaknesses

15 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 has previously communicated its 

disagreement with GAO related to the use 

of data other than from STAR in the 

preparation of this statement. There are 

no material differences between outlays 

reported by us and those included in the 

President’s Budget, nor is there a need to 

reconcile to agency financial statements. 

Also, GAAP does not require the 

disclosure of either receipts or outlays in 

this statement. 

Open. GAO’s 

recommendation does not 

dictate the source of data 

Treasury should use to 

compile the Statement of 

Changes in Cash Balance 

from Unified Budget and 

Other Activities, but does 

recommend Treasury ensure 

consistency in reporting 

between significant line items 

on the statement to agencies’ 

audited financial statements. 

We agree that GAAP does 

not specifically require the 

disclosure of receipts and 

outlays in the Statement of 

Changes in Cash Balance 

from Unified Budget or Other 

Activities. In previous years, 

this statement reported 

budget outlays and budget 

receipts. However, beginning 

in fiscal year 2004, the 

federal government chose not 

to disclose budget outlays 

and budget receipts in this 

financial statement and only 

included the budget deficit. 

As we have reported since 

fiscal year 2003, we found 

material differences between 

the total net outlays reported 

in selected federal agencies’ 

Statements of Budgetary 

Resources (SBR) and 

Treasury’s central accounting 

record, which Treasury uses 

to prepare the Statement of 

Changes in Cash Balance 

from Unified Budget and 

Other Activities. Consistent 

reporting throughout the 

federal government is an 

important goal.

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 20 GAO-06-415 Significant Internal Control Weaknesses

16 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 

SBR outlay data through the closing 

package process because Treasury 

already collects agency outlay data for 

budgetary reporting purposes. In addition, 

there is no requirement to disclose outlays 

in this statement. Treasury and OMB are 

working closely with the agencies to 

assure that the outlays reported in agency 

SBRs match the outlays reported to 

Treasury for budgetary reporting 

purposes. 

Open. See status of 

recommendation 

No.’s 02-14 and 02-17. 

17 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.’s 02-17 

and 02-18.

Open. See status of 

recommendation 

No.’s 02-14 and 02-17. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 21 GAO-06-415 Significant Internal Control Weaknesses

18 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.’s 02-17 

and 02-18.

Open. See status of 

recommendation 

No.’s 02-14 and 02-17. 

19 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 as to the 

need to link all the items in the “other 

activities” section of this statement to 

other components of the CFS. With the 

exception of loan-related items and total 

operating cash, the source for these items 

is STAR, and Treasury believes that the 

use of any other data would be less 

accurate.

Open. See status of 

recommendation 

No.’s 02-14 and 02-17. 

20 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 (FASAB). 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 defined and documented the 

reporting entity for fiscal year 2005. 

Open. Documentation was 

not provided to GAO as part 

of the fiscal year 2005 audit. 

GAO plans to review such 

documentation during its 

audit of the fiscal year 2006 

CFS. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 22 GAO-06-415 Significant Internal Control Weaknesses

21 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.

Treasury will implement changes to the 

reporting entity. See status of 

recommendation No. 02-22.

Open. 

22 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. 02-23.

Open. 

23 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 established a formal process and 

completed an analysis of fiscal year 2005 

required agency financial statement and 

note disclosures and made the 

appropriate disclosures in the fiscal 

year 2005 CFS. For items not disclosed, 

Treasury will discuss with agency 

personnel and GAO any additional data 

needed to finalize the required 

disclosures. In addition, in October 2005, 

FASAB issued an exposure draft specific 

to the CFS that would result in the 

elimination or reduction for certain 

disclosures. Treasury plans no further 

action on these specific disclosures 

pending the outcome of this proposed 

standard.

Open. Treasury’s fiscal year 

2005 process did not 

completely analyze the fiscal 

year 2005 disclosures. 

Treasury stated that they 

planned no further action 

pending the outcome of a 

proposed FASAB standard. 

24 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. See status of 

recommendation

No. 02-25. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 23 GAO-06-415 Significant Internal Control Weaknesses

25 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. See status of 

recommendation

No. 02-25. 

26 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. See status of 

recommendation

No. 02-25. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 24 GAO-06-415 Significant Internal Control Weaknesses

27 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.

Treasury and OMB’s policy and 

procedures include 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. Any 

discrepancies found are listed as 

exceptions on an enclosure that is 

submitted with the governmentwide 

management representation letter. 

Open. Treasury's policies and 

procedures are not adequate 

to identify all possible 

discrepancies between the 

agencies' management 

representation letters and the 

auditors' findings. 

Specifically, the policies and 

procedures only identify and 

report discrepancies that 

relate to material 

weaknesses. In addition, 

Treasury's policies and 

procedures state that items 

that resulted in an agency 

disclaimer of opinion or 

qualification will be included 

in an enclosure to the CFS 

management representation 

letter. However, the 

governmentwide 

representation letter prepared 

by Treasury is based 

primarily on the individual 

federal agency 

representation letters. Any 

identified discrepancies at the 

agency level, whether they 

affected the opinion or not, 

need to be considered so that 

Treasury and OMB can 

adequately provide us 

representations at the 

governmentwide level.

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 25 GAO-06-415 Significant Internal Control Weaknesses

28 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.

OMB Bulletin No. 01-02, Audit 

Requirements for Federal Financial 

Statements references the audit guidance 

on management representation letters 

provided in the AICPA auditing standard 

AU § 333, Management Representations; 

these are authoritative for audits of federal 

financial statements. The AU § 333.09 

instructs that the management 

representation letters should be signed by 

management with the overall 

responsibility and knowledge about the 

items covered by the representations. 

Unless explicitly noted by an agency’s 

auditor, Treasury and OMB infer from the 

auditors’ acceptance of agencies’ 

management representation letters that 

the proper signatures are included. 

Treasury and OMB’s policy is to rely on 

the integrity of the agency audits, 

including the determination of the 

adequacy of the agencies’ signatories.

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. Letters 

that have not been 

appropriately signed impair 

Treasury’s and OMB’s ability 

to provide representation at 

the governmentwide level. In 

connection with our audit of 

the fiscal year 2004 CFS, we 

issued reports to 24 federal 

agencies discussing areas, 

including signatures, where 

the agencies’ fiscal year 2004 

management representation 

letters did not provide all the 

information necessary to 

support Treasury’s and 

OMB’s preparation of the 

CFS management 

representation letter. For 

example, in the report we 

issued to one of the 

significant agencies, we 

made a recommendation 

regarding signatures. In this 

agency’s response to the 

report, it represented that it 

would include the appropriate 

signatures on future letters. 

However, the agency’s fiscal 

year 2005 management 

representation letter did not 

include such signatures.

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 26 GAO-06-415 Significant Internal Control Weaknesses

29 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.

Neither OMB Bulletin No. 01-02, Audit 

Requirements for Federal Financial 

Statements, nor OMB Circular A-136, 

Financial Reporting Requirements, Part B, 

requires agencies to quantitatively 

disclose its materiality in the management 

representation letters; these are 

authoritative for audits of federal financial 

statements. This practice is consistent 

with the AICPA auditing standard AU § 

333 Management Representations. 

Treasury continues to calculate the 

materiality threshold for the 

governmentwide management 

representation letter using the guidance 

provided in the PCIE/GAO Financial Audit 

Manual (FAM). This guidance does not 

include consideration of component 

entities’ materiality thresholds. 

Open. In preparing the 

governmentwide 

management representation 

letter, Treasury and OMB limit 

certain representations in the 

letter to matters that are 

considered to be material. In 

doing so, OMB, Treasury, and 

GAO should confer on the 

materiality level to be used at 

the governmentwide level. 

Treasury and OMB need the 

agency thresholds in 

providing a materiality 

threshold for the 

governmentwide 

management representation 

letter to represent that all 

matters material to the CFS 

were properly considered and 

included. This situation 

contributed to our scope 

limitation relating to the fiscal 

year 2005 governmentwide 

management representation 

letter. Specifically, one of the 

significant federal entities 

used a materiality threshold 

in its management 

representation letter that far 

exceeded what would be in 

conformity with the FAM, 

which in turn negatively 

impacted Treasury’s and 

OMB’s ability to provide us 

with representations at the 

governmentwide level within 

the materiality threshold we 

had established for the 

governmentwide letter. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 27 GAO-06-415 Significant Internal Control Weaknesses

30 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.

See status of recommendation No. 02-31. Open. See status of 

recommendation No. 02-31.

31 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.

OMB Bulletin No. 01-02, Audit 

Requirements for Federal Financial 

Statements references the audit guidance 

on management representation letters 

provided in the AICPA auditing standard 

AU § 333, Management Representations; 

these are authoritative for audits of federal 

financial statements. The AU § 333.08 

allows for the management 

representations to be limited to items that 

are material to the financial statements, 

with noted exceptions, provided that 

management has reached an 

understanding with its auditors on 

materiality. Unless explicitly noted by an 

agency’s auditor, Treasury and OMB infer 

from the auditors’ acceptance of agencies’ 

management representation letters that 

the representations omitted from the 

agencies’ letters are not material to the 

respective agencies’ financial statements. 

It is Treasury and OMB’s policy to rely on 

the integrity of the agency audits, 

including the determination of the 

adequacy of the agencies’ management 

representation letters.

Open. Treasury’s 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. When agencies do not 

provide all representations or 

include incomplete 

representations in their 

management representation 

letter, it impairs GAO’s ability 

to audit the CFS and 

Treasury’s and OMB’s ability 

to make these types of 

representations in the 

governmentwide 

management representation 

letter. As noted above, we 

issued reports to 24 federal 

agencies in which we cited 

issues with such agencies’ 

fiscal year 2004 management 

representation letters. These 

issues included omitted or 

incomplete representations. 

(Continued From Previous Page)

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Count No. Recommendation Per Treasury and OMB Per GAO 
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Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 28 GAO-06-415 Significant Internal Control Weaknesses

32 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.

In fiscal year 2005, Treasury updated the 

standard operating procedure (SOP) for 

the summaries of unadjusted 

misstatements.

Open. Although Treasury did 

update its SOP, it was not 

clear that these procedures 

called for Treasury to review 

both the summaries of 

unadjusted misstatements 

included with agencies’ 

management representation 

letters and the summaries of 

unadjusted misstatements 

submitted with the agencies’ 

closing packages. This 

analysis is necessary to 

ensure that all unadjusted 

misstatements applicable to 

the CFS are aggregated. In 

addition, Treasury did not 

include unadjusted 

misstatements for three 

significant agencies in its 

fiscal year 2005 analysis.

33 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 with agencies 

to ensure that adequate information is 

provided in the legal representation letters 

regarding the expected outcome of the 

cases.

Open. 

34 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. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 29 GAO-06-415 Significant Internal Control Weaknesses

35 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).

To ensure a reasonable approach, OMB 

will analyze the appropriateness of 

reporting “treaties” before developing 

specific corrective actions.

Open. 

36 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.

See status of recommendation No. 02-37. Open. 

37 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.

See status of recommendation No. 02-37. Open. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 30 GAO-06-415 Significant Internal Control Weaknesses

38 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.

See status of recommendation No. 02-37. Open. 

39 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.

See status of recommendation No. 02-37. Open. 

40 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 consolidated financial 

statements and related footnotes.

Treasury used its revised CFS compilation 

process, first implemented in fiscal year 

2004, to directly link agency audited 

financial statements to three of the five 

CFS principal statements. The exceptions 

are the Reconciliation of Net Operating 

Cost and Unified Budget Deficit (or 

Surplus) and the Statement of Changes in 

Cash Balance, which Treasury does not 

plan to link to agency financial statements. 

With regard to note disclosures, the 

revised compilation process included 

direct linkage between the CFS note 

disclosures and the related agencies’ 

audited note disclosures.

Open. Treasury’s process for 

compiling the consolidated 

financial statements did not 

ensure that the information in 

all of the five principal 

financial statements and 

notes were fully consistent 

with the underlying 

information in federal 

agencies’ audited financial 

statements and other 

financial data. Treasury made 

progress in demonstrating 

amounts in the Balance 

Sheet and the Statement of 

Net Cost were consistent with 

federal agencies’ audited 

financial statements prior to 

eliminating intragovernmental 

activity and balances. 

(Continued From Previous Page)

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Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 31 GAO-06-415 Significant Internal Control Weaknesses

41 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 

current CFS compilation system is revised 

and enhanced.

Open. 

42 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

43 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

44 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

45 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 32 GAO-06-415 Significant Internal Control Weaknesses

46 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

47 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

48 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 

02-25.

Open. See status of 

recommendation 

No. 02-25. 

(Continued From Previous Page)

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Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 33 GAO-06-415 Significant Internal Control Weaknesses

49 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

50 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

51 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

52 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 34 GAO-06-415 Significant Internal Control Weaknesses

53 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

54 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

55 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

(Continued From Previous Page)

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Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 35 GAO-06-415 Significant Internal Control Weaknesses

56 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

57 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

58 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

59 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

60 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 36 GAO-06-415 Significant Internal Control Weaknesses

61 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

62 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

63 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).

This required information was disclosed in 

Note 5, Inventories and Related Property, 

Net, in the fiscal year 2005 CFS.

Closed.

64 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

65 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 37 GAO-06-415 Significant Internal Control Weaknesses

66 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

67 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

68 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

69 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

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70 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

71 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-of-year 

balances.

See status of recommendation No. 02-25. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

72 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

73 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

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74 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. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 19, Contingencies, in the fiscal 

year 2005 CFS. However, no related data 

were received in fiscal year 2005; 

therefore, there is no disclosure related to 

this requirement.

Open. See status of 

recommendation 

No. 02-25. 

75 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

76 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

77 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

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78 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

79 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

80 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

81 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

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82 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation 

No. 02-25. 

83 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.

This required information was disclosed in 

Note 6, Property, Plant, and Equipment, 

Net, in the fiscal year 2005 CFS.

Closed.

84 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.

This information was disclosed in the 

required supplementary stewardship 

information section of the fiscal year 2005 

CFS.

Closed.

85 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.

This required information was disclosed in 

Note 11, Federal Employee and Veteran 

Benefits Payable, in the fiscal year 2005 

CFS.

Closed.

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86 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. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 12, Environmental and Disposal 

Liabilities, in the fiscal year 2005 CFS. 

However, further data are needed from 

one agency with significant environmental 

and disposal liabilities as of September 

30, 2005, to fully comply with this specific 

disclosure requirement.

Open. 

87 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

88 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. 

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89 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. 

90 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. 

91 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 LongDuration 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

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92 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 121, 

which requires all components of the 

liability for future policy benefits (i.e., the 

net-level premium reserve for death and 

endowment policies and the liability for 

terminal dividends) to be separately 

disclosed in a footnote with a description of 

each amount and an explanation of its 

projected use and any other potential uses 

(e.g., reducing premiums, determining and 

declaring dividends available, and reducing 

federal support in the form of 

appropriations related to administrative 

cost or subsidies).

See status of recommendation No. 02-25. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25. 

93 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.’s 02-25 

and 02-42. In addition, this required 

information was disclosed in Note 19, 

Contingencies, and Note 20, 

Commitments, in the fiscal year 2005 

CFS.

Open. See status of 

recommendation No.’s 02-25 

and 02-42. 

94 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. 02-96. Closed.

95 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.

This information was disclosed in the 

required supplementary information 

section of the fiscal year 2005 CFS.

Closed.

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96 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.

This required information was disclosed in 

Note 21, Dedicated Collections, in the 

fiscal year 2005 CFS.

Closed.

97 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.

This required information was disclosed in 

Note 21, Dedicated Collections, in the 

fiscal year 2005 CFS.

Closed.

98 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. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 21, Dedicated Collections, in the 

fiscal year 2005 CFS. However, no data 

were received in fiscal year 2005, and 

therefore, no disclosure was needed 

related to this requirement.

Open. Treasury expected the 

required information from 

applicable agencies as 

requested in the TFM. When 

no disclosure information was 

provided by such agencies, 

Treasury did not have any 

policies and procedures for 

following up with agencies to 

determine why the 

information was not provided.

99 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. 

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100 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. 

101 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.

This required information was disclosed in 

Note 22, Indian Trust Funds, in the fiscal 

year 2005 CFS.

Closed.

102 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. 

103 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. 

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104 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. 

105 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.

This information was disclosed in the 

required supplementary stewardship 

information section of the fiscal year 2005 

CFS.

Closed.

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106 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.

Treasury reports stewardship assets and 

stewardship investments in accordance 

with SFFAS No. 8, paragraph 39 which 

requires the disclosure in the CFS of such 

“summary (stewardship) information or 

selected information as is feasible.” 

Therefore, the component entity required 

reporting for stewardship assets and 

stewardship investments is not applicable 

to the CFS and the current CFS reporting 

of this stewardship information is in 

accordance with GAAP.

Furthermore, SFFAS No. 24, Selected 

Standards for the Consolidated Financial 

Report of the United States Government, 

did not change this situation since SFFAS 

No. 24, paragraph 8 indicates that 

provisions for different accounting 

treatments made in current or subsequent 

SFFAS override the general rule of 

universal applicability. For example, until 

SFFAS No 29, Heritage Assets and 

Stewardship Land, becomes effective, 

CFS reporting for stewardship heritage 

assets will be done in accordance with the 

requirements of SFFAS No. 8, paragraph 

39. Similarly, until FASAB provides 

specific CFS disclosure requirements for 

stewardship investments, CFR reporting 

for stewardship investments will be done 

in accordance with the requirements of 

SFFAS No. 8, paragraph 39.

As Treasury has disclosed the 

stewardship information deemed feasible 

to present, no further related disclosure is 

required.

Open. SFFAS No. 8, 

paragraph 39 also states that 

until further FASAB 

deliberations, the CFS should 

include such summary or 

selected information as is 

feasible and that 

experimentation is 

encouraged, as is the 

reporting of such additional 

information as will enhance 

the CFS. Treasury has not 

documented in its policies or 

procedures how stewardship 

information should be 

reported in the CFS or the 

basis for its determination 

that the disclosure of the 

stewardship information in 

accordance with the related 

paragraph in SFFAS No. 8 is 

not feasible. In addition, 

Treasury requests 

information on stewardship 

investments in the TFM and 

certain agencies report such 

information in their 

Performance and 

Accountability Reports.

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107 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-

118.

Open. See status of 

recommendation No. 02-118.

108 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-

118.

Open. See status of 

recommendation No. 02-118.

109 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-

118.

Open. See status of 

recommendation No. 02-118.

110 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-

118.

Open. See status of 

recommendation No. 02-118.

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111 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 100, 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-

118.

Open. See status of 

recommendation No. 02-118.

112 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 100, which requires 

a narrative description of major research 

and development programs.

See status of recommendation No. 02-

118.

Open. See status of 

recommendation No. 02-118.

113 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

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114 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

115 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 life-cycle 

cost method is used, the following should 

be presented for each major class of 

PP&E: (1) the original date of the 

maintenance forecast and an explanation 

for any changes to the forecast; (2) prior 

year balance of the cumulative deferred 

maintenance amount; (3) the dollar amount 

of maintenance that was defined by the 

professionals who designed, built, or 

managed the PP&E as required 

maintenance for the reporting period; (4) 

the dollar amount of maintenance actually 

performed during the period; (5) the 

difference between the forecast and actual 

maintenance; (6) any adjustments to the 

scheduled amounts deemed necessary by 

the managers of the PP&E; and (7) the 

ending cumulative balance for the reporting 

period for each major class of asset 

experiencing deferred maintenance.

See status of recommendation No. 02-25. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

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116 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

117 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)

118 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. See status of 

recommendation No.’s 02-14 

and 02-17. 

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119 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.

See status of recommendation No. 02-18. Open. See status of 

recommendation No.’s 02-14 

and 02-17. 

120 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 this 

recommendation. Total operating cash 

reported in the fiscal year 2005 CFS was 

linked to amounts reported in agencies’ 

audited financial statements. The 

Statement of Changes in Cash Balance 

reconciles to Operating Cash. SFFAS No. 

24, paragraphs 12 and 13, require 

reconciliation to the government’s cash 

balance. It also references an illustration 

that is not prescriptive. 

Open. We agree that SFFAS 

No. 24 requires the 

reconciliation of the federal 

government’s cash balance. 

However, the Statement of 

Changes in Cash Balance 

reconciles to operating cash 

of $28.3 billion rather than the 

cash reported on the Balance 

Sheet of $85.8 billion, as of 

September 30, 2005. 

121 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 this 

recommendation. SFFAS No. 24 shows 

gross receipt and disbursement amounts 

as an illustration, but does not require 

their disclosure.

Open. See status of 

recommendation No. 02-14.

122 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.

An interagency task force has been 

established under the direction of the 

Attorney General and has developed a 

strategic plan for improving criminal debt 

collection and has provided the plan to 

Congress. The task force includes 

representatives from DOJ, Treasury, OMB, 

and the Administrative Office of the U.S. 

Courts. The task force continues to make 

progress in implementing new policies 

and procedures.

Open. 

123 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.

Treasury will include criminal debt 

information as it becomes available. See 

status of recommendation No. 03-08.

Open. 

124 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.

This required information was disclosed in 

Note 19, Contingencies, in the fiscal year 

2005 CFS.

Closed.

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125 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. See status of 

recommendation No. 02-42. 

126 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.

This required information was disclosed in 

Note 11, Federal Employee and Veteran 

Benefits Payable, in the fiscal year 2005 

CFS.

Closed. 

127 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.

This required information was disclosed in 

Note 11, Federal Employee and Veteran 

Benefits Payable, in the fiscal year 2005 

CFS.

Closed. 

128 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.

This required information was disclosed in 

Note 11, Federal Employee and Veteran 

Benefits Payable, in the fiscal year 2005 

CFS.

Closed.

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129 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25. 

130 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. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 12, Environmental and Disposal 

Liabilities, in the fiscal year 2005 CFS. 

However, further data are needed from 

one agency with significant environmental 

and disposal liabilities as of September 

30, 2005, to fully comply with this specific 

disclosure requirement.

Open. 

131 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. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25. 

132 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. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 12, Environmental and Disposal 

Liabilities, in the fiscal year 2005 CFS. 

However, no data were received in fiscal 

year 2005, and therefore, there was no 

disclosure related to this requirement.

Open. Treasury expected the 

required information from 

applicable agencies as 

requested in the TFM. When 

no disclosure information was 

provided by such agencies, 

Treasury did not have any 

policies and procedures for 

following up with agencies to 

determine why the 

information was not provided.

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133 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-

118.

Open. See status of 

recommendation No. 02-118. 

134 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.

This information was disclosed in the 

required supplementary information 

section of the fiscal year 2005 CFS.

Closed. 

GAO-05-407 (results of the fiscal year 2004 audit)

135 04-1 The Secretary of the Treasury should 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.

Treasury further revised and documented 

its major procedures in fiscal year 2005 

related to the CFS compilation process, 

including those related to the duties of the 

individuals with the capability to enter, 

change, and delete data within the GFRS 

database and the posting of adjustments 

to the CFS to address segregation of 

duties.

Open. Treasury’s procedures 

were not effective for fiscal 

year 2005. Treasury was 

unable to explain why 

numerous GFRS users 

appeared to have 

inappropriate access to 

GFRS agency information or 

demonstrate that the 

appropriate segregation of 

duties exists.

136 04-2 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to require 

and maintain appropriate supporting 

documentation for all journal vouchers 

recorded in the CFS.

Treasury will follow its standard operating 

procedure that includes maintaining 

documentation for all recorded journal 

vouchers, except in certain circumstances 

described in the status of 

recommendation 

04-3.

Open. 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.

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137 04-3 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to require 

that Treasury employees contact and 

document communications with agencies 

before recording journal vouchers to 

change agency audited closing package 

data.

Treasury policy is to notify agencies before 

making needed data changes. However, 

due to time constraints, Treasury needs 

the flexibility to make changes without 

prior agency contact. Nevertheless, as 

time permits, Treasury will make an effort 

to contact the agencies prior to making 

changes. Treasury believes that agency 

approval is not needed when making the 

following types of changes: (1) 

adjustments to agree closing packages to 

financial statements, (2) adjustments to 

ensure consistency of GAAP between 

agencies, and (3) adjustments to conform 

an agency to GAAP.

Open. 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 because 

Treasury could incorrectly 

adjust agencies’ audited 

information.

138 04-4 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to require 

and document management reviews of all 

procedures that result in data changes to 

the CFS.

Treasury further revised its procedures to 

ensure management reviews of data 

changes to the CFS. Also, see status of 

recommendation No. 04-1.

Open. Treasury’s procedures 

were not effective for fiscal 

year 2005. Undetected errors 

occurred in key templates 

used to compile the CFS. 

139 04-5 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to 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. 

Treasury revised its automated processes 

in fiscal year 2005 to prevent unauthorized 

changes to agency-submitted data.

Open. Information system 

weaknesses existed within 

the segments of GFRS that 

were used during the fiscal 

years 2005 and 2004 

reporting processes. We 

found that the GFRS 

database (1) was not 

configured to prevent the 

alteration of data submitted 

by federal agencies and (2) 

was used for both production 

and testing during the 

reporting processes. 

Therefore, information 

submitted by federal 

agencies within GFRS is not 

adequately protected against 

unauthorized modification or 

loss.

140 04-6 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to assess 

the infrastructure associated with the 

compilation process and modify it as 

necessary to achieve a sound internal 

control environment.

Treasury has recruited and is currently 

recruiting highly qualified personnel to be 

trained in the CFS compilation process 

and in the associated internal controls 

related to the CFS compilation.

Open. 

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141 04-7 The Secretary of the Treasury should 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 area of loans receivable 

and loan guarantees.

Treasury updated the TFM in fiscal year 

2005 related to the required GAAP 

disclosures to ensure accurate financial 

data reporting by federal agencies.

Closed. 

142 04-8 The Secretary of the Treasury should 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 area of property, plant, and 

equipment.

See status of recommendation No. 04-7. Closed.

143 04-9 The Secretary of the Treasury should 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 area of federal employee 

and veteran benefits payable.

See status of recommendation No. 04-7. Open. The TFM continues to 

need updates in this area. 

144 04-10 The Secretary of the Treasury should 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 area of contingencies.

See status of recommendation No. 04-7. Closed. 

145 04-11 The Secretary of the Treasury should 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 debit 

and credit amounts to Treasury.

See status of recommendation No. 04-7. Closed. 

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146 04-12 The Director of OMB should 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 (1) special 

purpose audit opinion, (2) management 

representation letter for the closing 

package, (3) audit trail report 

(reclassification journal voucher report), (4) 

closing package financial statement 

reports, (5) trading partner summary 

reports, (6) notes reports, and (7) other 

data reports.

Treasury updated the TFM instructions 

requiring agencies to submit a complete 

closing package to GAO. OMB also 

referenced the TFM, in OMB Circular A136, Part B, for a listing of the required 

documents to be submitted with the 

closing package.

Closed. 

147 04-13 As Treasury continues to make strides to 

address issues related to 

intragovernmental transactions, the 

Secretary of the Treasury should 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.

Treasury updated the TFM with 

instructions requiring agencies to provide 

detailed explanations for material 

differences.

Closed. 

148 04-14 The Secretary of the Treasury should 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.

OMB and Treasury will work with 

Department of Justice to discuss possible 

solutions to this issue.

Open. 

149 04-15 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to ensure 

that the note disclosure for federal 

employee and veteran benefits payable 

meets the requirements of SFFAS No. 5, 

Accounting for Liabilities of the Federal 

Government, paragraph 110, table 9, which 

states that all components of the liability for 

future policy benefits should be separately 

disclosed in a footnote with a description of 

each amount and an explanation of its 

projected use and any other potential uses.

See status of recommendation No. 02-25. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 11, Federal Employee and Veteran 

Benefits Payable, in the fiscal year 2005 

CFS. However, no data were received in 

fiscal year 2005, and therefore, there was 

no disclosure related to this requirement. 

Treasury plans to discuss these disclosure 

requirements further with the agencies 

and with GAO during fiscal year 2006 to 

ensure that all relevant data are being 

received from the agencies.

Open. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 60 GAO-06-415 Significant Internal Control Weaknesses

150 04-16 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to ensure 

that the note disclosure for federal 

employee and veteran benefits payable 

meets the requirements of SFFAS No. 5, 

Accounting for Liabilities of the Federal 

Government, paragraphs 117 and 118, 

which states that all federal reporting 

entities with whole life insurance programs 

should follow the standards as prescribed 

in the private sector standards when 

reporting the liability for future policy 

benefits, in addition to the following 

required disclosures: liability for future 

policy benefits relating to participating life 

insurance contracts should be equal to the 

sum of (1) the net level premium reserve 

for death and endowment policy benefits, 

(2) the liability for terminal dividends, and 

(3) any premium deficiency.

See status of recommendation No. 02-25. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

151 04-17 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to ensure 

that the note disclosure for federal 

employee and veteran benefits payable 

meets the requirements of SFFAS No. 5, 

Accounting for Liabilities of the Federal 

Government, paragraph 121, which states 

that all components of the liability for future 

policy benefits (i.e., the net-level premium 

reserve for death and endowment policy 

and the liability for terminal dividends) 

should be separately disclosed in a 

footnote with a description of each amount 

and an explanation of its projected use and 

any other potential uses (e.g., reducing 

premiums, determining and declaring 

dividends available, or reducing federal 

support in the form of appropriations 

related to administrative cost or subsidies).

See status of recommendation No. 02-25. 

In addition, this disclosure would be 

directly affected by the implementation of 

the FASAB exposure draft mentioned in 

the status of recommendation No. 02-25.

Open. See status of 

recommendation No. 02-25.

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Appendix I

Status of Treasury’s and OMB’s Progress in 

Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS

Page 61 GAO-06-415 Significant Internal Control Weaknesses

Source: GAO.

152 04-18 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to ensure 

that the note disclosure for cash and other 

monetary assets meets the 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.

This required information was disclosed in 

Note 2, Cash and Other Monetary Assets, 

in the fiscal year 2005 CFS.

Closed. 

153 04-19 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to ensure 

that agencies designate in the note 

disclosure for cash and other monetary 

assets any amounts reported for the “other 

cash” line items that are restricted with 

respect to the federal government taken as 

a whole. 

See status of recommendation No. 02-25. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 2, Cash and Other Monetary 

Assets, in the fiscal year 2005 CFS. 

Treasury plans to discuss these disclosure 

requirements further with the agencies 

and with GAO during fiscal year 2006 to 

ensure that all relevant data are being 

received from the agencies.

Open. 

154 04-20 The Secretary of the Treasury should direct 

the Fiscal Assistant Secretary to ensure 

that the note disclosure for other liabilities 

meets the requirements of SFFAS No. 5, 

paragraph 114, which requires the 

reporting of indicators of the range of 

uncertainty around insurance-related 

estimates and the sensitivity of the 

estimates to changes in major 

assumptions. 

See status of recommendation No. 02-25. 

In addition, this required information was 

requested from the agencies for inclusion 

in Note 15, Other Liabilities, in the fiscal 

year 2005 CFS. However, no data were 

received in fiscal year 2005, and therefore, 

there was no disclosure related to this 

requirement. Treasury plans to discuss 

these disclosure requirements further with 

the agencies and with GAO during fiscal 

year 2006 to ensure that all relevant data 

are being received from the agencies.

Open. 

(Continued From Previous Page)

Status of recommendation

Count No. Recommendation Per Treasury and OMB Per GAO 
Page 62 GAO-06-415 Significant Internal Control Weaknesses

Appendix II

Comments from the Department of the 

Treasury ApendxiI

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.

See comment 1.

See comment 2.
Appendix II

Comments from the Department of the 

Treasury

Page 63 GAO-06-415 Significant Internal Control Weaknesses
Appendix II

Comments from the Department of the 

Treasury

Page 64 GAO-06-415 Significant Internal Control Weaknesses

GAO Comments 1. See “Agency Comments and Our Evaluation” section. 

2. We continue to believe that our recommendations relating to the 

Statement of Changes in Cash Balance from Unified Budget and Other 

Activities, Reconciliations of Net Operating Cost and Unified Budget 

Deficit, and the adjustment process are sound. Our recommendations 

are intended to allow flexibility in developing viable solutions to 

address the issues. We will consider any alternative action that 

Treasury may take to satisfactorily address the recommendations with 

which it has disagreed. See appendix I for the status of related 

recommendations. 
Page 65 GAO-06-415 Significant Internal Control Weaknesses

Appendix III

GAO Contacts and Staff Acknowledgments ApendxiI

GAO Contacts Gary Engel, (202) 512-3406, engelg@gao.gov

Staff 

Acknowledgments 

In addition to the above contact, the following individuals made key 

contributions to this report: Lynda Downing, Assistant Director; Keith 

Kronin; Katherine Schirano; and Taya Tasse. 

(198414)
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