SPECIAL-PURPOSE FINANCIAL 

STATEMENTS FOR 

FISCAL YEARS 2007 AND 2006 

Department of Transportation 

Report Number: FI-2008-012 

Date Issued: November 15, 2007 
U.S. Department of 

Memorandum

Transportation 

Office of the Secretary 

of Transportation 

Office of Inspector General 

Subject: ACTION: Report on Special-Purpose 

Financial Statements for Fiscal 

Years 2007 and 2006, DOT 

Date: November 15, 2007 

FI-2008-012 

From: Rebecca C. Leng 

Assistant Inspector General for Financial 

 and Information Technology Audits 

Reply to 

Attn. of: JA-20 

To: The Secretary 

I respectfully submit the Office of Inspector General report on the U.S. 

Department of Transportation (DOT) Special-Purpose Financial Statements for 

Fiscal Years 2007 and 2006 (Attachment 1). The Special-Purpose Financial 

Statements and accompanying notes contained in the closing package 

(Attachment 2) have been prepared to comply with the requirements of the U.S. 

Department of the Treasury’s Financial Manual Volume I, Part 2, Chapter 4700. 

Their purpose is solely to provide financial information for the U.S. Department of 

the Treasury and U.S. Government Accountability Office to use in preparing and 

auditing the Financial Report of the U.S. Government. They are not intended to 

be a complete presentation of DOT’s financial statements. 

Our audit concludes that DOT’s Special-Purpose Financial Statements present 

fairly, in all material respects, the financial position of DOT as of 

September 30, 2007, and September 30, 2006, and its net costs and changes in net 

position for the years then ended in conformity with accounting principles 

generally accepted in the United States and the presentation requirements 

prescribed in the U.S. Department of the Treasury’s Financial Manual Volume I, 

Part 2, Chapter 4700. 

Last year we expressed a qualified opinion on the FY 2006 DOT’s SpecialPurpose Financial Statements because the CIP balance presented by the Federal 

Aviation Administration (FAA) contained material errors, and FAA was not able 

to develop a reliable and supportable CIP balance. FAA has completed its review 

of the CIP balance. Accordingly, our opinion is different from that expressed in 

our previous report. 

 
2

We found no material weaknesses in internal controls over the financial reporting 

process for the special-purpose financial statements, and our tests of compliance 

with U.S. Department of the Treasury’s Financial Manual Volume I, Part 2, 

Chapter 4700 requirements disclosed no instances of noncompliance that are 

required to be reported under Generally Accepted Government Auditing Standards

and Office of Management and Budget Bulletin No. 07-04. 

We have also attached the management representation letter for the DOT fiscal 

year 2007 financial statements (Attachment 3). 

We appreciate the cooperation and assistance of the Office of Financial 

Management. If we can answer any questions, please call me at (202) 366-1496 or 

Earl Hedges, Program Director, at (410) 962-3612. 

Attachments (3) 

# 

cc: Office of Management and Budget, Office of Federal Financial 

 Management 

Department of the Treasury, Financial Management Service 

 U.S. Government Accountability Office 
Attachment 1 

Page 1 of 4

DEPARTMENT OF TRANSPORTATION 

INSPECTOR GENERAL’S REPORT ON SPECIAL-PURPOSE 

FINANCIAL STATEMENTS FOR FISCAL YEARS 2007 AND 2006 

The Department of Transportation (DOT) Office of Inspector General audited the 

accompanying reclassified balance sheet as of September 30, 2007, and September 

30, 2006, and the related reclassified statements of net cost and changes in net 

position for the years then ended (hereinafter referred to as the special-purpose 

financial statements) contained in the special-purpose closing package of DOT. 

These special-purpose financial statements are the responsibility of DOT 

management. Our responsibility is to express an opinion on these financial 

statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted 

in the United States and the standards applicable to financial audits contained in 

Generally Accepted Government Auditing Standards issued by the Comptroller 

General of the United States, and Office of Management and Budget (OMB) 

Bulletin No. 07-04, “Audit Requirements for Federal Financial Statements.” 

These standards require that we plan and perform the audit to obtain reasonable 

assurance about whether the special-purpose financial statements are free of 

material misstatement. An audit includes examining, on a test basis, evidence 

supporting the amounts and disclosures in the special-purpose financial 

statements. An audit also includes assessing the accounting principles used and 

significant estimates made by management, as well as evaluating the overall 

special-purpose financial statement presentation. We believe that our audit 

provides a reasonable basis for our opinion. 

The accompanying special-purpose financial statements and accompanying notes 

(Attachment 2) contained in the special-purpose closing package have been 

prepared for the purpose of complying with the requirements of the U.S. 

Department of the Treasury’s Financial Manual (TFM) Volume I, Part 2, Chapter 

4700. Their purpose is solely to provide financial information to the U.S. 

Department of the Treasury and U.S. Government Accountability Office to use in 

preparing and auditing the Financial Report of the U.S. Government and are not 
Attachment 1 

Page 2 of 4

intended to be a complete presentation of the Department of Transportation’s 

financial statements.1

In our report dated, November 17, 2006, we expressed a qualified opinion on the 

FY 2006 DOT’s Special-Purpose Financial Statements because the CIP balance 

presented by FAA contained material errors, and FAA was not able to develop a 

reliable and supportable CIP balance prior to the issuance of the Special-Purpose 

Financial Statements. Because FAA’s Property, Plant, and Equipment balance 

represented 95 percent of DOT’s property as of September 30, 2006, potential 

errors in FAA’s CIP balance could have had a material impact on DOT’s 

consolidated financial statements. FAA has completed its review of the CIP 

balance (as discussed in FR note 17) and related transactions, and as a result, DOT 

restated the FY 2006 consolidated financial statements to correct the error in 

accounting for FAA CIP. Accordingly, our opinion on the DOT Special-Purpose 

financial statements is different from that expressed in our previous report. 

In our opinion, the special-purpose financial statements referred to above present 

fairly, in all material respects, the financial position of DOT as of September 30, 

2007, and September 30, 2006; its net costs and changes in net position for the 

years then ended in conformity with accounting principles generally accepted in 

the United States; and the presentation requirements prescribed in TFM Chapter 

4700. 

The supplementary information required by TFM Chapter 4700 and included in 

Other Data is presented for the purpose of additional analysis only and is not a 

required part of the special-purpose financial statements. We have applied certain 

limited procedures, consisting principally of inquiries of management regarding 

methodology and presentation of this information. We also reviewed such 

information for consistency with related information presented in DOT’s financial 

statements. However, we did not audit this information, and, accordingly, we 

express no opinion on it. 

In accordance with Generally Accepted Government Auditing Standards and 

OMB Bulletin No. 07-04, we have also issued a report on DOT’s consolidated 

 

1

 The Budget and Accounting Procedures Act of 1950 allows the Secretary of the Treasury to stipulate the format and 

requirements of executive agencies in furnishing financial and operational information to the President and the 

Congress to comply with the Government Management Reform Act of 1994 (GMRA). The Secretary of the 

Treasury developed guidance in TFM Chapter 4700 to provide agencies with instructions to meet the requirements of 

GMRA. TFM Chapter 4700 requires agencies to reclassify all items and amounts on the comparative audited 

financial statements to the closing statement financial statements, list closing package line item amounts identified as 

Federal by trading partner and amount, report footnotes required by Balance Sheet line items and other footnotes 

required in the Financial Report of the U.S. Government, and disclose other information not contained in the primary 

Financial Report of the U.S. Government financial statement and footnotes required to meet generally accepted 

accounting principles requirements. 
Attachment 1 

Page 3 of 4

financial statements for fiscal years 2007 and 2006, which included our reports on 

DOT’s internal controls over financial reporting and its compliance with certain 

provisions of laws and regulations.2

 These reports are an integral part of the audit 

of general-purpose financial statement reporting performed in accordance with 

Generally Accepted Government Auditing Standards and OMB Bulletin 

No. 07-04, and should be read in conjunction with this report in considering the 

results of our audit. 

In planning and performing our audit of the special-purpose financial statements, 

we also considered DOT’s internal controls over the financial reporting process 

for the special-purpose financial statements and compliance with TFM Chapter 

4700. Management is responsible for establishing and maintaining internal 

control over financial reporting, including Other Data, and for complying with 

laws and regulations, including the requirements of TFM Chapter 4700. 

Our consideration of internal control over the financial reporting process for the 

special-purpose financial statements would not necessarily disclose all matters in 

the internal control over the financial reporting process that might be significant 

deficiencies. Under standards issued by the American Institute of Certified Public 

Accountants, significant deficiencies are deficiencies in internal control, or a 

combination of deficiencies, that adversely affects DOT’s ability to initiate, 

authorize, record, process, or report financial data reliably and in accordance with 

accounting principles generally accepted in the United States of America such that 

there is more than a remote likelihood that a misstatement of the special-purpose 

financial statements being audited that is more than inconsequential will not be 

prevented or detected. Material weaknesses are significant deficiencies or a 

combination of significant deficiencies, that result in a more than remote 

likelihood that material misstatements in relation to the special-purpose financial 

statements being audited will not be prevented or detected. 

We found no material weaknesses in internal control over the financial reporting 

process for the special-purpose financial statements, and our tests of compliance 

with TFM Chapter 4700 requirements disclosed no instances of noncompliance 

that are required to be reported under Generally Accepted Government Auditing 

Standards or OMB Bulletin No. 07-04. However, providing an opinion on 

(1) internal controls over the special-purpose financial statement reporting process 

and (2) compliance with TFM Chapter 4700 requirements were not objectives of 

our audit of the special-purpose financial statements, and, accordingly, we do not 

express any such opinion. 

 

2

 DOT Report on Consolidated Financial Statements for Fiscal Years 2007 and 2006, Report No. FI-2008-011 

November 13, 2007. 
Attachment 1 

Page 4 of 4

This report is intended solely for the information and use of DOT, the Department 

of the Treasury, the Office of Management and Budget, and the Government 

Accountability Office in connection with the preparation and audit of the 

Financial Report of the U.S. Government and is not intended to be and should not 

be used by anyone other than these specified parties. 

Rebecca C. Leng 

Assistant Inspector General for Financial 

 and Information Technology Audits