GAO 

United States Government Accountability Office

Report to the Secretary of the Treasury 

and the Director of the Office of 

Management and Budget 

FINANCIAL AUDIT

Material Weaknesses 

in Internal Control 

Continue to Impact 

Preparation of the 

Consolidated 

Financial Statements 

of the U.S. 

Government 

April 2009 

GAO-09-387 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2009

FINANCIAL AUDIT

Material Weaknesses in Internal Control Continue to 

Impact Preparation of the Consolidated Financial 

Highlights of GAO-09-387, a report to the Statements of the U.S. Government 

Secretary of the Treasury and the Director 

of the Office of Management and Budget 

Since GAO’s first audit of the fiscal 

year 1997 consolidated financial 

statements of the U.S. government 

(CFS), material weaknesses in 

internal control and other 

limitations on the scope of our 

work have prevented GAO from 

expressing an opinion on the 

accrual basis CFS. Certain of those 

material weaknesses relate to 

inadequate systems, controls, and 

procedures to properly prepare the 

CFS. The purpose of this report is 

to (1) provide details of the 

continuing material weaknesses 

related to the preparation of the 

CFS, (2) recommend 

improvements, and (3) provide the 

status of corrective actions taken 

to address GAO’s previous 

56 recommendations in this area. 

What GAO Recommends

GAO is making four new 

recommendations to address 

control deficiencies identified 

during the fiscal year 2008 CFS 

audit that relate to the federal 

government’s processes used to 

prepare the CFS. In commenting on 

our draft report, The Department of 

the Treasury and the Office of 

Management and Budget stated 

that they generally concurred with 

our recommendations. 

During its audit of the fiscal year 2008 CFS, GAO identified continuing and 

new control deficiencies in the federal government’s processes used to 

prepare the CFS. These control deficiencies contribute to material 

weaknesses in internal control over the federal government’s ability to 

(1) adequately account for and reconcile intragovernmental activity and 

balances between federal agencies; (2) ensure that the CFS was consistent 

with the underlying audited agency financial statements, properly balanced, 

and in conformity with U.S. generally accepted accounting principles; and 

(3) identify and either resolve or explain material differences between 

components of the budget deficit reported in the Department of the Treasury’s 

records, used to prepare the Reconciliation of Net Operating Cost and Unified 

Budget Deficit and Statement of Changes in Cash Balance from Unified 

Budget and Other Activities, and related amounts reported in federal agencies’ 

financial statements and underlying financial information and records. 

The control deficiencies GAO identified involved: 

• establishing and documenting policies and procedures for identifying and 

eliminating federal agencies’ intragovernmental payroll tax amounts when 

compiling the CFS, 

• establishing and documenting policies and procedures for preparing and 

reviewing information included in key sections of the Financial Report of 

the U.S. Government, 

• establishing criteria for identifying federal entities’ significance to the CFS 

and annually assessing which entities meet such criteria, 

• enhancing procedures for analyzing and reviewing data used when 

compiling the Statements of Net Cost, and 

• various other control deficiencies identified in previous years’ audits 

(see app. I). 

Of the 56 open recommendations GAO reported in June 2008, 16 were closed 

and 40 remained open as of December 9, 2008, the date of our report on our 

audit of the fiscal year 2008 CFS. GAO will continue to monitor the status of 

corrective actions taken to address the 4 new recommendations as well as the 

40 open recommendations from prior years. 

To view the full product, including the scope 

and methodology, click on GAO-09-387. 

For more information, contact Gary Engel, 

(202) 512-3406, engelg@gao.gov. 
Page i GAO-09-387 

Contents 

Letter 1

Scope and Methodology 2 

Treatment of Intragovernmental Payroll Tax Amounts in Compiling 

the CFS 3 

Consistency and Accuracy of Key Sections of the Financial Report 4 

Identifying Federal Entities Significant to the CFS 6 

Procedures for Reviewing the Statements of Net Cost 8 

Agency Comments and Our Evaluation 9 

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

GAO’s Prior Year Recommendations for Preparing the 

CFS 11 

Appendix II Comments from the Department of the Treasury 39 

Appendix III GAO Contact and Staff Acknowledgments 40 

Tables 

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

GAO’s Prior Year Recommendations for Preparing the CFS 

(as of December 9, 2008) 12 

 Material Weaknesses in Internal Control 
Abbreviations 

CFOC Chief Financial Officers’ Council 

CFS Consolidated financial statements of the U.S. government 

FASAB Federal Accounting Standards Advisory Board 

GAAP Generally Accepted Accounting Principles 

GFRS Governmentwide Financial Report System 

IDRC Intragovernmental Dispute Resolution Committee 

Justice Department of Justice 

MD&A Management’s Discussion and Analysis 

OMB Office of Management and Budget 

SFFAS Statement of Federal Financial Accounting Standard 

SNC Statement of Net Cost 

SOP Standard Operating Procedure 

STAR Treasury’s Central Accounting and Reporting System 

TFM Treasury Financial Manual 

Treasury Department of the Treasury 

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Page ii GAO-09-387 Material Weaknesses in Internal Control
Page 1 GAO-09-387 

nd 

 

United States Government Accountability Office

Washington, DC 20548 

 

April 21, 2009 

The Honorable Timothy F. Geithner 

The Secretary of the Treasury 

The Honorable Peter Orszag 

Director, Office of Management and Budget 

In our report dated December 9, 2008,1

 we disclaimed an opinion on the 

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

fiscal years ended September 30, 2008 and 2007,2

 except for the 2008 and 

2007 Statements of Social Insurance, which received unqualified opinions. 

Since GAO’s first audit of the fiscal year 1997 CFS, material weaknesses in 

financial reporting and other limitations on the scope of our work have 

prevented us from expressing an opinion on the federal government’s 

accrual basis consolidated financial statements.3

 We have reported that 

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

procedures for preparing the CFS to ensure that the consolidated financial 

statements are consistent with the underlying audited agency financial 

statements, properly balanced, and in conformity with U.S. generally 

accepted accounting principles (GAAP). 

On behalf of the federal government, the Department of the Treasury 

(Treasury), in coordination with the Office of Management and Budget 

(OMB),4

 prepares the CFS. Many of the material weaknesses5 in internal 

1

The fiscal year 2008 Financial Report of the United States Government includes our 

report and was issued by the Department of the Treasury (Treasury) on December 15, 2008, 

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. 

2

The consolidated financial statements for the fiscal years ended September 30, 2008 and 

2007, consist of the Statements of Net Cost, Statements of Operations and Changes in Net 

Position, Reconciliations of Net Operating Cost and Unified Budget Deficit, Statements of 

Changes in Cash Balance from Unified Budget and Other Activities, Balance Sheets, and 

the Statements of Social Insurance, including the related notes to these financial 

statements. 

3

As used in this report, accrual basis consolidated financial statements refer to all of the 

consolidated financial statements and notes, except those related to the Statement of 

Social Insurance. 

4

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

the executive branch of government, beginning with financial statements prepared for 

fiscal year 1997. 31 U.S.C. 331(e). 

 Material Weaknesses in Internal Control 
 

control that have contributed to our continuing disclaimers of opinion 

were identified by other auditors during their audits of individual federal 

agencies’ financial statements and were reported in detail with 

recommendations to the agencies in separate reports. This report presents 

the additional material weaknesses that we identified during our tests of 

the federal government’s processes used to prepare the CFS. 

The purpose of this report is to (1) provide more detailed information on 

the material weaknesses that we identified during our audit of the fiscal 

year 2008 CFS that relate to internal control over the processes used to 

prepare the CFS, (2) recommend improvements to address these 

weaknesses, and (3) provide the status of corrective actions by Treasury 

and OMB to address the 56 recommendations detailed in our previous 

reports that remained open at the end of the fiscal year 2007 audit (see 

app. I). We have discussed each of the new control deficiencies identified 

during our fiscal year 2008 audit with your staff and have incorporated 

their comments as appropriate. 

As part of our audit of the fiscal years 2008 and 2007 CFS, we evaluated 

the federal government’s financial reporting procedures and related 

internal control. Also, we determined the status of corrective actions by 

Treasury and OMB to address open recommendations relating to the 

processes used to prepare the CFS detailed in our previous reports. In our 

audit report on the fiscal year 2008 CFS, which is included in the fiscal 

year 2008 Financial Report of the United States Government (Financial 

Report), we discussed the material weaknesses related to the federal 

government’s processes used to prepare the CFS. These material 

weaknesses contributed to our disclaimer of opinion on the accrual basis 

consolidated financial statements and also contributed to our adverse 

opinion on internal control. We performed sufficient audit procedures to 

provide the disclaimer of opinion on the accrual basis consolidated 

financial statements in accordance with U.S. generally accepted 

Scope and 

Methodology 

 

5

A material weakness is a significant deficiency, or combination of significant deficiencies, 

that results in more than a remote likelihood that a material misstatement of the financial 

statements will not be prevented or detected. A significant deficiency is a control 

deficiency, or combination of control deficiencies, that adversely affects the entity’s ability 

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

generally accepted accounting principles such that there is more than a remote likelihood 

that a misstatement of the entity’s financial statements that is more than inconsequential 

will not be prevented or detected. A control deficiency exists when the design or operation 

of a control does not allow management or employees, in the normal course of performing 

their assigned functions, to prevent or detect misstatements on a timely basis. 

Page 2 GAO-09-387 Material Weaknesses in Internal Control
 

government auditing standards. This report provides the details of the 

material weaknesses identified during the fiscal year 2008 audit that relate 

to the processes used to prepare the CFS and our recommendations to 

correct these weaknesses, as well as the status of corrective actions by 

Treasury and OMB to address recommendations from previous 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 summarized in the Agency Comments and Our 

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

appendix II and are also summarized in the Agency Comments section. 

Treasury did not establish policies and procedures to provide assurance 

that federal agencies’ intragovernmental payroll tax amounts are identified 

and eliminated at the governmentwide level when compiling the CFS. 

Consolidated financial statements are intended to present the results of 

operations and financial position of all of the components that make up 

the reporting entity as if the entity were a single enterprise. Therefore, 

when preparing the CFS, Treasury should ensure that intragovernmental 

activity and balances between federal agencies are eliminated. Federal 

agencies, as well as other employers, are required to pay, among other 

taxes, a matching amount of Social Security and Medicare taxes for their 

employees (payroll taxes). Federal agencies’ payments of payroll taxes to 

the Internal Revenue Service represent intragovernmental transactions. If 

these amounts are not eliminated at the governmentwide level when 

compiling the CFS, revenues and expenses become overstated in the CFS. 

However, in disclosing the types of revenues included in the Statement of 

Operations and Changes in Net Position in the draft CFS, Treasury’s 

description stated that “individual income tax and tax withholdings 

include....payroll taxes collected from other agencies.” We inquired of 

Treasury as to why these amounts would be included in the CFS and not 

eliminated during the preparation process. Treasury subsequently deleted 

the language regarding the inclusion of federal agency payroll taxes from 

the CFS. However, Treasury was unable to provide any documentation 

demonstrating that these amounts were appropriately classified as 

intragovernmental transactions and eliminated from the CFS. Without 

adequate policies and procedures to accurately identify and eliminate 

intragovernmental payroll tax amounts in the process used to prepare the 

CFS, the federal government’s ability to determine the impact of these 

amounts on the CFS is impaired and, consequently, the CFS may be 

misstated. 

Treatment of 

Intragovernmental 

Payroll Tax Amounts 

in Compiling the CFS 

Page 3 GAO-09-387 Material Weaknesses in Internal Control
 

We recommend that the Secretary of the Treasury direct the Fiscal 

Assistant Secretary to design, document, and implement policies and 

procedures to identify and eliminate intragovernmental payroll tax 

amounts at the governmentwide level when compiling the CFS. 

Treasury, in coordination with OMB, did not take the steps necessary to 

help assure that certain key information related to significant financial 

events and conditions were consistent and accurately presented 

throughout the fiscal year 2008 Financial Report.6

 Specifically, Treasury, in 

coordination with OMB, has not fully established an effective process for 

preparing and reviewing information included in the Management’s 

Discussion and Analysis (MD&A), and “The Federal Government’s 

Financial Health: A Citizen’s Guide to the Financial Report of the United 

States Government” (Citizen’s Guide) sections of the Financial Report. 

According to Statement of Federal Financial Accounting Standards No. 15, 

Management’s Discussion and Analysis, the MD&A should highlight key 

information and increase the understanding and usefulness of the 

Financial Report. Similarly, the Citizen’s Guide is intended to provide 

readers with a brief, high-level summary of key financial information from 

the Financial Report on our nation’s current fiscal condition and the longterm sustainability. Further, data presented in both the MD&A and 

Citizen’s Guide must be consistent with related data in the CFS. 

Recommendation for 

Executive Action 

Consistency and 

Accuracy of Key 

Sections of the 

Financial Report 

Treasury, in coordination with OMB, performed certain procedures to 

prepare and review the MD&A and Citizen’s Guide. However, these 

procedures were not effective in helping assure that (1) information was 

consistently reported in the CFS and these related sections of the 

Financial Report and (2) information reported in the MD&A and Citizen’s 

Guide was consistent, complete, and accurate. During our comparison of 

information reported in draft versions of the MD&A and Citizen’s Guide 

with information reported in the fiscal year 2008 draft CFS, we identified 

(1) several inconsistencies and (2) numerous instances in which 

information was omitted from, or incorrectly reported in, these draft 

sections of the Financial Report that were not detected by Treasury’s 

review process. For example, information in the draft MD&A and Citizen’s 

Guide regarding certain federal actions for addressing the financial crisis 

was incomplete or incorrectly reported. In addition, the $339 billion 

 

6

The Financial Report is intended to provide an understanding of both the government’s 

current financial position and prospects for moving forward. 

Page 4 GAO-09-387 Material Weaknesses in Internal Control
 

change in veterans benefit liability in fiscal year 2008 reported in the draft 

CFS was incorrectly reported as $365 billion in the draft versions of the 

MD&A and Citizen’s Guide. We communicated our findings to Treasury 

officials who corrected the data presented in the MD&A and Citizen’s 

Guide sections of the final Financial Report. Without effective procedures 

for preparing and reviewing the MD&A and Citizen’s Guide to ensure that 

the information is complete, accurate, and consistent with the information 

reported in the CFS, Treasury is at risk that information provided in these 

key sections of the Financial Report will not be reliable. 

A contributing factor to the reporting errors and inconsistencies we 

detected is that Treasury does not have documented procedures for 

preparing and reviewing the MD&A and Citizen’s Guide sections of the 

Financial Report in comparison with data presented in the CFS. As 

preparer of the Financial Report, Treasury management, in coordination 

with OMB, is responsible for developing and documenting detailed 

policies, procedures, and practices and for ensuring that internal control is 

built into and is an integral part of operations to ensure that information is 

consistent and accurate throughout the Financial Report. GAO’s Standards 

for Internal Control in the Federal Government calls for clear 

documentation of policies and procedures.7

 Although, Treasury has 

documented policies and procedures used to compile the CFS in its 

Standard Operating Procedures (SOP) entitled “Preparing the Financial 

Report of the U.S. Government,” the SOP does not provide procedures for 

preparing and reviewing the MD&A and Citizen’s Guide—two key report 

sections providing information to the Congress and the public regarding 

the fiscal condition of the U.S. government—to help assure they are 

consistent and accurate in comparison with related information presented 

elsewhere in the Financial Report. 

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, document, and implement processes and procedures for 

preparing and reviewing the MD&A and Citizen’s Guide sections of the 

Financial Report to help assure that information reported in these sections 

is complete, accurate, and consistent with related information reported 

elsewhere in the Financial Report. 

 

7

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

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

Page 5 GAO-09-387 Material Weaknesses in Internal Control
 

Treasury, in coordination with OMB, has not established and documented 

criteria for identifying which federal entities are significant to the CFS for 

purposes of verifying and validating the information submitted by federal 

entities for inclusion in the CFS. Treasury, through the Treasury Financial 

Manual (TFM), identified 35 significant federal agencies and entities, 

referred to as “verifying agencies.”8

 Those agencies are required to 

perform a number of procedures to provide audit assurance over the 

information submitted to Treasury for the CFS. However, Treasury and 

OMB have not (1) established and documented criteria for designating 

federal entities as “verifying agencies” significant to the CFS, and (2) 

established policies and procedures for assessing and documenting, on

annual basis, which entities meet the 

Identifying Federal 

Entities Significant to 

the CFS 

 an 

criteria. 

 

Treasury, in coordination with OMB, is required to prepare the CFS. 

According to the Federal Accounting Standards Advisory Board’s 

Statement of Federal Financial Accounting Concepts No. 4, Intended 

Audience and Qualitative Characteristics for the Consolidated Financial 

Report of the United States Government, the consolidated financial report 

should be a general purpose report that is aggregated from federal 

agencies’ and other federal entities’ financial reports. The TFM provides 

policies and procedures on how federal agencies are to provide their 

financial data to Treasury for consolidation. 

In accordance with the TFM, verifying agencies are required to submit 

their financial data to Treasury using a Closing Package. The verifying 

agency’s Chief Financial Officer must certify the accuracy of the data in 

the Closing Package and have the Closing Package audited by the agency’s 

Inspector General. In addition, the Closing Package process requires 

verifying agencies to reclassify their audited financial statements to the 

Closing Package “special purpose financial statements.” Verifying agencies 

must also identify trading partners9

 and enter certain financial statement 

notes. The special purpose financial statements are audited to obtain 

8

Treasury refers to the significant agencies as “verifying agencies.” They are the 24 Chief 

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

Credit System Insurance Corporation, the Federal Communications Commission, the 

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

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

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

Tennessee Valley Authority. 

9

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

included in the CFS that do business with each other. 

Page 6 GAO-09-387 Material Weaknesses in Internal Control
 

reasonable assurance about whether the financial statements are (1) free 

of material misstatements, (2) in conformity with accounting principles 

generally accepted in the United States, and (3) presented pursuant to the 

requirements of the TFM. Because the Closing Package process requires 

verifying agencies to verify and validate the information in the special 

purpose financial statements with their audited information and receive an 

audit opinion, Treasury is provided a level of assurance that it is compiling 

the CFS with audited financial information. All other federal entities that 

contribute financial information to the CFS are classified by Treasury as 

“nonverifying agencies.” Over 100 nonverifying federal agencies and 

entities submitted data for fiscal year 2008. Currently these entities are 

only required to submit adjusted trial balance data to Treasury instead of 

an audited Closing Package. Because of a lack of criteria for determining 

an entity’s significance to the CFS, it is unclear whether any of these 

“nonverifying agencies” should be classified as “verifying agencies.” 

One of Treasury’s and OMB’s goals for preparing the CFS is to link the 

agencies’ audited financial statements to the CFS. To accomplish this goal, 

Treasury needs an appropriate level of assurance that it compiles the CFS 

using audited Closing Packages from the federal entities contributing the 

most significant amounts of financial information. However, without 

establishing the criteria for identifying federal entities as significant to the 

CFS and establishing related policies and procedures to assess, on an 

annual basis, which entities meet such criteria, Treasury and OMB cannot 

obtain this level of assurance. 

Recommendations for 

Executive Action 

We recommend that the Secretary of the Treasury direct the Fiscal 

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

(1) establish and document criteria to be used in identifying federal 

entities as significant to the CFS for purposes of obtaining assurance over 

the information being submitted by those entities for the CFS and 

(2) develop and implement policies and procedures for assessing and 

documenting, on an annual basis, which entities met such criteria. These 

actions will help provide Treasury and OMB with assurance that the 

information being used to prepare the CFS is consistent with the audited 

financial statements of the federal agencies, in all material respects. 

Page 7 GAO-09-387 Material Weaknesses in Internal Control
 

During fiscal year 2008, Treasury enhanced its SOP entitled “Preparing the 

Financial Report of the U.S. Government” to require an overall analysis of 

the consolidated numbers in the financial statements to include a review 

for reasonableness of changes from the prior year to the current year. 

However, because of a lack of details on the objectives of the analysis and 

the procedures to be performed, the overall analysis did not detect 

significant errors in amounts used to prepare the Statements of Net Cost 

(SNC). 

Procedures for 

Reviewing the 

Statements of Net 

Cost 

Internal control should provide, among other things, reasonable assurance 

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

the Federal Government10 defines the minimum level of quality acceptable 

for internal control in the federal government and provides the standards 

against which internal control is to be evaluated. These standards state 

that internal controls should include, among other items, reviews by 

management at the functional or activity level. 

Treasury categorizes and allocates costs in the SNC by agency. For 

example, most of the costs associated with pension and health benefits 

that are reported by the Office of Personnel Management (OPM) in its 

financial statements are allocated to the costs of OPM’s federal user 

agencies for governmentwide federal reporting purposes. Treasury uses 

head count figures reported by OPM in its Closing Package to perform the 

allocation of pension and health benefit costs across all user federal 

agencies. However, we found that Treasury did not detect a significant 

variance in head count between certain federal entities from 2007 to 2008, 

which resulted in significant errors in the draft SNC. Specifically, we found 

that, in fiscal year 2007, the head count used for the Department of 

Defense (DOD) was 497,724, and the head count used for “all other 

entities” was 92,566.11 In fiscal year 2008, we found that the head counts 

were erroneously reversed. The head count used for DOD was 95,157, 

while the head count used for “all other entities” was 495,673. Treasury’s 

review process and overall analysis did not detect this error. As a result, 

Treasury’s draft SNC understated DOD’s reported costs on the fiscal year 

2008 SNC by approximately $10 billion and costs for the “all other entities” 

line item was equally overstated. Without sufficiently detailed procedures 

 

10GAO/AIMD-00-21.3.1. 

11“All other entities,” a line item on the Statement of Net Cost (SNC), consists of entities not 

individually listed on the SNC. The entities in the “all other entities” line item are 

individually not deemed significant agencies by Treasury. 

Page 8 GAO-09-387 Material Weaknesses in Internal Control
 

including guidance for performing the analysis and review of data used in 

the allocation process for compiling the SNC, significant errors could 

occur in the SNC and not be detected. 

Recommendation for 

Executive Action 

We reaffirm our recommendation that the Secretary of the Treasury direct 

the Fiscal Assistant Secretary to further enhance the SOP entitled 

“Standard Operating Procedures for Preparing the Financial Report of the 

U.S. Government” to better ensure that CFS compilation practices are 

proper, complete, and can be consistently applied, including detailed 

procedures for conducting reviews and documenting reasonableness of 

data used in the process for compiling the CFS. 

Agency Comments 

and Our Evaluation 

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

concurred with the new findings and related recommendations in this 

report. In addition, OMB provided technical comments, which we have 

incorporated as appropriate. 

Treasury Comments In its April 15, 2009, written comments on a draft of this report, which are 

reprinted in appendix II, Treasury stated that it concurs with the new 

recommendations and expects to implement them by the end of fiscal year 

2009. We will evaluate the actions taken to address our recommendations 

as part of our fiscal year 2009 CFS audit. 

This report contains recommendations to the Secretary of the Treasury. 

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 Oversight and 

Government Reform within 60 days of the date of this report. A written 

statement must also be sent to the House and Senate Committees on 

Appropriations with the agency’s first request for appropriations made 

more than 60 days after the date of the report. 

Page 9 GAO-09-387 Material Weaknesses in Internal Control
 

We are sending copies of this report to the Chairman and Ranking Member 

of the Senate Committee on Homeland Security and Governmental Affairs 

and its Subcommittee on Federal Financial Management, Government 

Information, Federal Services, and International Security and the 

Chairman and Ranking Member of the House Committee on Oversight and 

Government Reform and its Subcommittee on Government Management, 

Organization, and Procurement. In addition, we are sending copies to the 

Fiscal Assistant Secretary of the Treasury, the Director of OMB, the 

Deputy Director for Management of OMB, and the Acting Controller of 

OMB’s Office of Federal Financial Management. 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 me 

(202) 512-3406 or engelg@gao.gov. Key contributors to this report are 

Gary T. Engel 

listed in appendix III. 

Director 

Financial Management and Assurance 

Page 10 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: Status of Treasury’s and OMB’s 

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

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS 

This appendix includes the status of recommendations from the following 

six reports that were open at the beginning of our fiscal year 2008 audit: 

Financial Audit: Process for Preparing the Consolidated Financial 

Statements of the U.S. Government Needs Improvement, GAO-04-45

(Washington, D.C.: Oct. 30, 2003); 

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); 

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); 

Financial Audit: Significant Internal Control Weaknesses Remain in 

Preparing the Consolidated Financial Statements of the U.S. 

Government, GAO-06-415 (Washington, D.C.: Apr. 21, 2006); 

Financial Audit: Significant Internal Control Weaknesses Remain in the 

Preparation of the Consolidated Financial Statements of the U.S. 

Government, GAO-07-805 (Washington, D.C.: July 23, 2007); and 

Financial Audit: Material Weaknesses in Internal Control over the 

Processes Used to Prepare the Consolidated Financial Statements of the 

U.S. Government, GAO-08-748 (Washington, D.C.: June 17, 2008). 

Recommendations from these reports that were closed in prior years are 

not included in this appendix. This appendix includes the status of the 

56 remaining open 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 or our assessment of the status of a recommendation. 

We will continue to monitor Treasury’s and OMB’s progress in addressing 

GAO’s recommendations. 

Of the 56 recommendations relating to the processes used to prepare the 

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

listed in this appendix, 16 were closed and 40 remained open as of 

December 9, 2008, the date of our report on the audit of the fiscal year 

2008 CFS. 

Page 11 GAO-09-387 Material Weaknesses in Internal Control 
Appendix I: Status of Treasury’s and OMB’s 

Progress in Addressing GAO’s Prior Year 

Recommendations for Preparing the CFS 

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

(as of December 9, 2008) 

Status of recommendation 

Count No. Recommendation Per Treasury and OMB Per GAO 

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

1 02-4 As the Department of the 

Treasury (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 the Office of 

Management and Budget 

(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 to net position, 

Treasury has continued to 

eliminate, at the consolidated 

level, intragovernmental activity 

and balances using formal 

balanced accounting entries (via 

Reciprocal Categories) and has 

continued its analysis of 

transactions that contribute to the 

unmatched transactions and 

balances adjustment. Major 

contributors to the plug are 

transactions with the General 

Fund (Reciprocal Category 29). 

In fiscal year 2008, a Treasury 

Task Force was formed to 

develop an accounting model for 

the General Fund. Treasury 

continues to separately identify 

General Fund transactions to 

facilitate their agency 

reconciliation. Also in fiscal year 

2008, Treasury focused its efforts 

on particular areas (fiduciary and 

employee benefits) and 

increased its analysis and 

monitoring efforts on agencies’ 

explanations of material 

differences with their trading 

partners. 

Open. Treasury has 

continued developing 

reconciliation procedures to 

aid in understanding the 

net position balance but 

remains unable to eliminate 

the plugs associated with 

compiling the CFS. In 

addition, there are 

hundreds of billions of 

dollars of unreconciled 

differences between the 

General Fund and federal 

agencies related to 

appropriation and other 

intragovernmental 

transactions. The ability to 

reconcile these 

transactions is hampered 

because not all General 

Fund transactions are 

reported in the Department 

of the Treasury’s financial 

statements. 

Page 12 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

2 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-07-03, 

Business Rules for 

Intragovernmental 

Transactions. 

The business rules were revised 

in fiscal year 2006 to expand and 

enhance the standard practices 

for how federal agencies do 

business with each other. The 

revised rules are published in 

Treasury Financial Manual (TFM) 

Bulletin 2007-03. 

OMB, Treasury, and the Chief 

Financial Officers’ Council 

(CFOC) are distributing quarterly, 

a “Watchlist” of the largest dollar 

imbalances between two federal 

agencies and/or federal agencies 

not reporting a trading partner. 

Federal agencies on the 

“Watchlist” meet with OMB and 

Treasury to discuss the root 

causes of the imbalances and 

come to resolution on how to 

mitigate the root causes. At the 

same time, OMB, Treasury, and 

the CFOC are continuing their 

efforts toward establishing the 

Intragovernmental Dispute 

Resolution Committee (IDRC), as 

referenced in the business rules. 

The IDRC will be a vehicle for 

resolving accounting disputes 

between federal agencies. The 

dispute resolution process is also 

predicated on the principle that 

federal agencies have 

implemented the business rules 

and will require the disputing 

federal agencies to provide 

evidence of compliance with the 

business rules during arbitration. 

Open. 

Page 13 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

3 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 federal agencies to 

resolve imbalances that are 

referred to OMB on a case-bycase basis. As part of OMB’s 

standard practice, resolutions 

reached will be communicated to 

all parties. As noted above, 

OMB, Treasury, and the CFOC 

are documenting the imbalances 

identified on the “Watchlist” and 

subsequent resolutions. OMB, 

Treasury, and the CFOC will 

continue to work toward 

establishing the IDRC, as 

referenced in the business rules, 

and it will be used as a vehicle 

for federal agencies to resolve 

their accounting disputes. The 

IDRC will incorporate a standard 

practice of documenting all 

resolutions and communicating 

the resolutions to all parties 

involved. 

Open. 

Page 14 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

4 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. 

Treasury has designed formal 

consolidating and eliminating 

procedures to account for these 

differences and has implemented 

them. See the status for 

recommendation No. 02-4. 

Open. Treasury’s formal 

consolidating and 

eliminating accounting 

entries could not fully 

account for the difference 

in intragovernmental assets 

and liabilities during the 

fiscal year 2008 

compilation process. For 

example, there are 

hundreds of billions of 

dollars of unreconciled 

differences between the 

General Fund and federal 

agencies related to 

appropriation and other 

intragovernmental 

transactions. These 

amounts are not eliminated 

by Treasury’s formal 

consolidating and 

elimination accounting 

entries due to the fact that 

Treasury’s ability to 

reconcile these 

transactions is hampered 

because not all General 

Fund transactions are 

reported in the Department 

of the Treasury’s financial 

statements. As indicated in 

Treasury’s response to 

recommendation No. 02-4, 

additional analysis of the 

General Fund is necessary 

to account for all 

differences in 

intragovernmental assets 

and liabilities. 

Page 15 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

5 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. 

Treasury continues to provide to 

federal agencies information from 

its Central Accounting and 

Reporting System (STAR) 

related to appropriations, 

transfers, and fund balance with 

Treasury for the agencies’ use in 

reconciling with this centrally 

reported data. The agencies will 

be required to reconcile with this 

information in fiscal year 2009. 

Open. Treasury and OMB 

did not provide federal 

agencies instructions on 

how to reconcile and report 

to Treasury any differences 

between their records and 

Treasury’s central 

accounting records. 

Further, although 

Treasury’s analysis of 

agencies’ transactions with 

the General Fund is 

ongoing, the ability to 

reconcile these 

transactions is hampered 

because not all General 

Fund transactions are 

reported in the Department 

of the Treasury’s financial 

statements. 

6 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. 

The current reconciliation of 

intragovernmental activity does 

account for differences caused 

by asset capitalization and 

agency advances or deferred 

revenue. Given current 

intragovernmental differences, 

further resolution of this activity is 

contingent on these differences 

being materially resolved. See 

status of recommendation 

No. 02-4. 

Open. 

Page 16 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

7 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. 

These unmatched transactions 

and balances will continue to be 

reflected in the Statements of 

Operations and Changes in Net 

Position until they are materially 

resolved. However, based on its 

analyses of these unmatched 

transactions and balances, 

Treasury believes that these 

unmatched transactions and 

balances are primarily caused by 

unreconciled transactions that 

affect only the amounts reported 

on an accrual basis of accounting 

(net operating cost) and, 

therefore, these unmatched 

transactions and balances should 

not be included as a separate 

reconciling item on this 

statement. Treasury will continue 

its analysis in fiscal year 2009. 

Open. Treasury has not 

implemented a process 

that demonstrates the 

amount, if any, of 

unmatched transactions 

and balances should be 

included as a separate 

reconciling item in the 

reconciliation statement. 

8 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. While Treasury has 

made progress in 

developing certain 

Standard Operating 

Procedures (SOP), it has 

not fully developed policies 

and procedures to ensure 

the completeness of 

reporting of information on 

the reconciliation statement 

and to document how all 

applicable components 

reported elsewhere in the 

CFS are properly reflected 

in the reconciliation 

statement. 

Page 17 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

9 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. 

During fiscal year 2009, Treasury 

will revise its reporting materiality 

policy to address any remaining 

concerns about the policy. 

Open. 

10 02-15 If Treasury chooses to 

continue using information 

from both federal agencies’ 

financial statements and 

STAR, Treasury should 

demonstrate how the 

amounts from STAR reconcile 

to federal agencies’ financial 

statements. 

Treasury has elected to continue 

the use of information from STAR 

and has identified the material 

areas where STAR data does not 

reconcile to federal agencies’ 

financial statements. Treasury 

intends to provide these specific 

items to agencies for their 

reconciliation in fiscal year 2009. 

Open. 

11 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. 

See status of recommendation 

No. 02-15. 

Open. 

Page 18 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

12 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 

federal agencies’ audited 

financial statements. 

Treasury has elected to continue 

to use information from STAR. 

Treasury will document the 

consistency of the significant line 

items on this statement to federal 

agencies’ audited financial 

statements as possible during 

fiscal year 2009. See status of 

recommendation No. 02-15. 

Open. 

13 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. 

Treasury will continue with its 

efforts to reconcile budgetary 

receipts to net operating 

revenue. During fiscal year 2008, 

Treasury made significant 

progress with identifying and 

documenting the larger 

differences between budgetary 

receipts and net operating 

revenue. Efforts will continue in 

fiscal year 2009, including 

looking into automating a portion 

of this reconciliation in the 

Governmentwide Financial 

Reporting System (GFRS). 

Open. 

Page 19 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

14 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 continues to define and 

document the reporting entity 

and made corresponding 

changes to the reporting entity 

disclosure in the fiscal year 2008 

CFS. 

Open. Key decisions by the 

Fiscal Assistant Secretary 

and the Controller of OMB 

have not been documented 

showing the basis for 

including and excluding 

certain federal entities. 

15 02-23 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary, in 

coordination with the 

Controller of OMB, to provide 

in the financial statements all 

the financial information 

relevant to the defined 

reporting entity, in all material 

respects. Such information 

would include, for example, 

the reporting entity’s assets, 

liabilities, and revenues. 

See status of recommendation 

No. 02-22. 

Open. See status of 

recommendation 

No. 02-22. 

Page 20 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

16 02-24 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary, in 

coordination with the 

Controller of OMB, to disclose 

in the financial statements all 

information that is necessary 

to inform users adequately 

about the reporting entity. 

Such disclosures should 

clearly describe the reporting 

entity and explain the reason 

for excluding any components 

that are not included in the 

defined reporting entity. 

See status of recommendation 

No. 02-22. 

Open. See status of 

recommendation 

No. 02-22. 

17 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 revised their 

policies and procedures in fiscal 

year 2008 to improve internal 

control over this process. 

Closed. 

Page 21 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

18 02-33 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary, in 

coordination with the 

Controller of OMB, to 

establish written policies and 

procedures for preparing the 

governmentwide 

management representation 

letter to help ensure that it is 

properly prepared and 

contains sufficient 

representations. Specifically, 

these policies and procedures 

should require an evaluation 

and assessment of the 

omission of representations 

ordinarily included in agency 

management representation 

letters. 

Treasury and OMB revised their 

policies and procedures in fiscal 

year 2008 to improve internal 

control over this process. 

Closed. 

19 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 federal 

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. 

Treasury updated the SOP for 

the aggregation and analysis of 

federal agencies’ summary of 

unadjusted misstatements. 

Treasury also tracked federal 

agencies’ submissions of this 

information and prepared a CFSlevel summary that showed that 

federal agencies’ unadjusted 

misstatements were immaterial in 

the aggregate to the CFS. 

Closed. 

Page 22 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

20 02-35 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary, in 

coordination with the 

Controller of OMB, to help 

ensure that federal agencies 

provide adequate information 

in their legal representation 

letters regarding the expected 

outcomes of the cases. 

During fiscal year 2008, Treasury 

and OMB continued to work with 

federal agencies to ensure that 

adequate information was 

provided in the legal 

representation letters regarding 

the expected outcomes of the 

cases. 

Open. Treasury and OMB 

did not ensure that all 

federal agencies reported 

adequate information 

relating to expected 

outcomes of legal cases. 

Page 23 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

21 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 federal 

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). 

Based on the work Treasury and 

OMB performed in fiscal year 

2008, OMB believes it is 

reasonable to continue disclosing 

treaties and other international 

agreements in the CFS notes 

with the acknowledgment that the 

U.S. government is a party to 

them and may have certain 

responsibilities under them; also, 

the Note should include a 

reference to where more detailed 

information is available (e.g., 

State Department’s Treaties In 

Force) similar to other notes. To 

that end, OMB proposed 

updating the requisite Note and 

believes that this proposed Note 

meets the intent and substance 

of Statement of Federal Financial 

Accounting Standard (SFFAS) 

No. 32, Consolidated Financial 

Report of the United States 

Government Requirements: 

Implementing Statement of 

Federal Financial Concepts 4 

“Intended Audience and 

Qualitative Characteristics for the 

Consolidated Financial Report of 

the United States Government” 

because the audience to whom 

the CFS is mainly directed is 

citizens and their intermediaries 

and, as such, this information 

should be timely and 

understandable to that audience. 

However, GAO has since 

provided some additional insight 

to OMB regarding the 

recommendation, and OMB 

established a working group of 

the OMB Circular No. A-136, 

Financial Reporting 

Requirements (A-136) 

Subcommittee of the CFOC to 

address the topic. Finally, OMB 

looks forward to meeting with 

GAO this year to discuss the 

recommendation further. 

Open. 

Page 24 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

22 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 federal 

agencies classify all such 

scheduled major treaties and 

other international 

agreements as commitments 

or contingencies. 

See status of recommendation 

No. 02-37. 

Open. 

23 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 federal 

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. 

Page 25 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

24 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 federal 

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. 

25 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 federal 

agencies take steps to 

prevent major treaties and 

other international 

agreements that are classified 

as remote from being 

recorded or disclosed as 

probable or reasonably 

possible in the CFS. 

OMB questions this 

recommendation, as it is not 

known whether any treaties or 

international agreements are 

different than any other 

commitments or contingencies. 

Additionally, if the difference 

were known, those that were 

classified as “remote” 

contingencies would not be 

recorded or disclosed as 

probable or reasonably possible 

in the CFS. Therefore, until these 

can be established as actually 

being different than any other 

commitments or contingencies, 

this recommendation should be 

removed. 

Open. Treasury, OMB, and 

the federal agencies have 

not yet performed the 

necessary work to 

determine whether 

commitments or 

contingencies exist under 

treaties and international 

agreements with foreign 

countries that would be 

required to be reported. In 

addition, Treasury and 

OMB have not established 

written policies and 

procedures to help ensure 

that major treaty and other 

international agreement 

information is properly 

identified and reported in 

the CFS. 

Page 26 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

26 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 Financial Accounting 

Standards Board 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. 

This required information was 

requested from federal agencies 

for disclosure in the required 

supplementary information (risk 

assumed) section of the fiscal 

year 2008 CFS. Further 

discussions with federal agencies 

will take place in fiscal year 2009 

to ensure proper and complete 

disclosure of this information. 

Open. 

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

27 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. 

In fiscal year 2008, Treasury 

disclosed the change in cash 

balances as reported on the 

Balance Sheet on the 

Statement of Changes in Cash 

Balance. 

Open. Although Treasury 

took steps to improve the 

readability of the Statement 

of Changes in Cash 

Balance, Treasury has not 

developed a process that 

will allow full reporting of 

the changes in cash 

balance. For example, 

Treasury was unable to 

identify and explain certain 

changes necessary to 

account for the changes in 

cash and other monetary 

assets reported on the 

Statement of Changes in 

Cash Balance. 

Page 27 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

28 03-8 The Director of OMB should 

direct the Controller of OMB, in 

coordination with Treasury’s 

Fiscal Assistant Secretary, to 

work with the Department of 

Justice (Justice) and certain 

other executive branch federal 

agencies to ensure that these 

federal agencies report or 

disclose relevant criminal debt 

information in conformity with 

generally accepted accounting 

principles (GAAP) in their 

financial statements and have 

such information subjected to 

audit. 

OMB will continue working with 

Justice to develop a reasonable 

approach for the reporting or 

disclosing of this information. 

Open. 

29 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 in the CFS as 

it becomes available. See 

status of recommendation No. 

03-8. 

Open. 

30 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. 

Treasury continues to use its 

CFS compilation process, 

GFRS, to provide direct linkage 

from the agency audited 

financial statements to most of 

the CFS principal statements. 

However, additional work is 

needed related to the two 

budgetary principal financial 

statements. See status of 

recommendation No. 02-17. 

With regard to note disclosures, 

GFRS note references 

(linkages), with additional 

Treasury analysis, ensure 

direct linking of the CFS and 

agency note disclosures. 

Open. Treasury has 

showed progress by 

demonstrating that 

amounts in the Statement 

of Social Insurance were 

consistent with the 

underlying federal 

agencies’ audited financial 

statements and that the 

Balance Sheet and the 

Statement of Net Cost 

were consistent with 

federal agencies’ financial 

statements prior to 

eliminating 

intragovernmental activity 

and balances. However, 

Treasury’s closing package 

process did not ensure that 

the information in the 

remaining three principal 

financial statements were 

fully consistent with the 

underlying information in 

federal agencies’ audited 

financial statements and 

other financial data. 

Page 28 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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-05-407 (results of the fiscal year 2004 audit) 

31 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 continue its efforts 

to better ensure that journal 

vouchers include appropriate 

supporting documentation. 

Open. Treasury did not 

have appropriate 

supporting documentation 

for all journal vouchers 

recorded in the CFS. 

32 04-3 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to require 

that Treasury employees 

contact and document 

communications with federal 

agencies before recording 

journal vouchers to change 

agency audited closing 

package data. 

Treasury will continue its efforts 

to better ensure that journal 

vouchers are communicated to 

the federal agencies before 

recording them in GFRS. 

However, because of year-end 

time constraints, Treasury will 

make changes without agency 

contact under the following 

circumstances: (1) adjustments 

to agree closing packages to 

financial statements, 

(2) adjustments to ensure 

consistency of GAAP between 

federal agencies, and 

(3) adjustments to conform an 

agency to GAAP. 

Open. We believe that 

Treasury should be 

required to contact federal 

agencies to resolve any 

discrepancies between 

federal agencies’ audited 

closing packages and 

audited financial 

statements and discuss 

any other situations that 

require adjustments to 

federal agencies’ audited 

closing package data 

because Treasury could 

incorrectly adjust federal 

agencies’ audited 

information. 

33 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 will continue its efforts 

to ensure that data changes have 

appropriate management review. 

Open. Not all of Treasury’s 

procedures were effective 

for fiscal year 2008. We 

identified certain 

adjustments and key 

spreadsheets that lacked 

documentation evidencing 

management review. 

Page 29 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

34 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 continued to make 

improvements to its internal 

control infrastructure during fiscal 

year 2008. Treasury has updated 

its documentation to help ensure 

control procedures are in place at 

all critical areas of the CFS 

preparation process and is 

working with a contractor to 

ensure that these controls are 

adequately monitored and 

assessed each year. 

Open. Treasury has not 

completed an assessment 

to ensure it has sufficient 

personnel with specialized 

financial reporting 

experience to achieve a 

sound internal control 

environment to carry out 

the compilation process 

and help ensure reliable 

financial reporting by the 

reporting date. For 

example, for fiscal year 

2008, Treasury did not 

provide the final accrual 

basis CFS and related 

supporting documentation 

in time for us to complete 

all of our planned audit 

procedures. 

35 04-19 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to ensure 

that federal 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.

 

This required information was 

disclosed in Note 2, Cash and 

Other Monetary Assets, in the 

fiscal year 2008 CFS. 

Closed. 

36 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 insurancerelated estimates and the 

sensitivity of the estimates to 

changes in major 

assumptions. 

The required information related 

to life insurance in the other 

liabilities note disclosure was not 

material to the fiscal year 2008 

CFS. 

Closed. 

Page 30 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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-06-415 (results of the fiscal year 2005 audit) 

37 05-2 The Director of OMB should 

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 federal 

agencies. 

OMB has developed an 

alternative solution and 

documented related procedures 

for obtaining audit assurance 

related to those verifying entities 

that have a calendar year-end 

and determined to be significant 

to the CFS. The solution entails 

the requirement that these 

entities have an examination 

attestation engagement 

performed. 

Closed. 

38 05-3 The Director of OMB should 

direct the Controller of the 

Office of Federal Financial 

Management to consider, in 

order to provide audit 

assurance over federal 

agencies’ closing packages, 

not waiving the closing 

package audit requirement for 

any verifying agency in future 

years, such as Tennessee 

Valley Authority. 

OMB generally agrees with the 

recommendation; however, it will 

continue to weigh the costs 

against the benefits of global 

requirements during extenuating 

circumstances. OMB and 

Treasury will continue to work 

with agencies that are also 

subject to Securities and 

Exchange Commission filing 

requirements. 

Open. For fiscal year 2008, 

OMB did not ensure that all 

verifying entities met the 

closing package audit 

requirements. 

Page 31 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

39 05-4 The Secretary of the Treasury 

should 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 long-range solutions; and 

(3) all actions that correct or 

otherwise resolve the audit 

findings are completed within 

established time frames. 

OMB concurs with the 

recommendation and is 

committed to improving the 

corrective action plans and 

monitoring progress against 

those plans. 

Open. 

40 05-6 The Secretary of the Treasury 

should 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 for restricted cash. 

Treasury revised its guidance 

related to restricted cash and 

ensured that sufficient 

information was requested to 

determine these amounts at the 

governmentwide level. 

Closed. 

41 05-8 The Secretary of the Treasury 

should 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 for summaries of 

unadjusted misstatements. 

Treasury updated the TFM in 

fiscal year 2008 related to the 

guidance to federal agencies 

concerning agency management 

representations and related 

summaries of unadjusted 

misstatements. 

Closed. 

Page 32 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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-07-805 (results of the fiscal year 2006 audit) 

42 06-1 The Director of OMB and 

Secretary of the Treasury 

should direct the Controller of 

the Office of Federal Financial 

Management and Fiscal 

Assistant Secretary, 

respectively, to develop 

formal processes and 

procedures for identifying and 

either resolving or explaining 

any material differences in 

undistributed offsetting receipt 

amounts between Treasury’s 

central accounting records 

and information reported in 

agency financial statements 

and underlying agency 

financial information and 

records. 

Treasury has policies and 

procedures for identifying and 

either resolving or explaining any 

material differences in 

undistributed offsetting receipt 

amounts between Treasury’s 

central accounting records and 

information reported in agency 

financial statements and 

underlying agency financial 

information and records, and 

demonstrated their effectiveness 

during fiscal year 2008. 

Closed. 

43 06-2 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

develop formal processes and 

procedures for ensuring that 

intragovernmental activity and 

balances related to 

undistributed offsetting 

receipts, including 

intragovernmental interest, 

are fully eliminated in the 

calculation of the budget 

deficit. 

Treasury has processes and 

procedures for ensuring that 

intragovernmental activity and 

balances, including 

intragovernmental interest, are 

fully eliminated in the calculation 

of the budget deficit, and 

demonstrated their effectiveness 

during fiscal year 2008. 

Closed. 

Page 33 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

44 06-6 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 establish 

effective processes and 

procedures to ensure that 

appropriate information 

regarding litigation and claims 

is included in the 

governmentwide legal 

representation letter. 

In fiscal year 2008, GAO drafted 

an approach for addressing the 

recommendation and OMB tried 

to implement it via its 

governmentwide legal request 

letter it sends to Justice annually. 

Due to unintended 

circumstances, all parties were 

not able to come together to 

discuss the approach’s additional 

requirements if it was to be 

implemented in fiscal year 2008. 

Thereafter, OMB held a meeting 

with GAO and Justice to discuss 

implementing the approach for 

fiscal year 2009. However, 

Justice concluded that the 

approach’s requirements were 

not “executable” because it did 

not believe the approach was 

cost effective, given its 

resources. OMB plans to meet 

with GAO this year to discuss a 

workable solution for addressing 

this recommendation. 

Open. Treasury, in 

coordination with OMB, has 

not established effective 

processes and procedures 

to ensure that appropriate 

information regarding 

litigation and claims is 

included in the 

governmentwide legal 

representation letter. 

Page 34 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

45 06-7 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 a 

process for obtaining 

sufficient information from 

federal agencies to enable 

Treasury and OMB to 

adequately monitor federal 

agencies’ efforts to reconcile 

intragovernmental activity and 

balances with their trading 

partners. This information 

should include (1) the nature 

and a detailed description of 

the significant differences that 

exist between trading 

partners’ records of 

intragovernmental activity and 

balances, (2) detailed 

reasons why such differences 

exist, (3) details of steps 

taken or being taken to work 

with federal agencies’ trading 

partners to resolve the 

differences, and (4) the 

potential outcome of such 

steps. 

During fiscal year 2008, Treasury 

continued a process for obtaining 

sufficient information from federal 

agencies to enable Treasury and 

OMB to adequately monitor 

federal agencies’ efforts to 

reconcile intragovernmental 

activity and balances with their 

trading partners. This information 

included (1) the nature and a 

detailed description of the 

significant differences that exist 

between trading partners’ 

records of intragovernmental 

activity and balances, (2) detailed 

reasons why such differences 

exist, (3) details of steps taken or 

being taken to work with federal 

agencies’ trading partners to 

resolve the differences, and (4) 

the potential outcome of such 

steps. In addition, in fiscal year 

2008, Treasury required the 

federal agencies to provide 

additional information related to 

their intragovernmental 

differences that would allow 

Treasury to correct these 

differences within GFRS. This 

effort will continue in fiscal year 

2009 including following-up with 

any federal agencies that either 

did not comply or provided 

incomplete information related to 

this new requirement. 

Open. 

46 06-11 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

disclose the balance of 

foreign currencies held at 

fiscal year end in the Cash 

and Other Monetary Assets 

footnote to the CFS. 

Treasury disclosed these 

balances in Note 2, Cash and 

Other Monetary Assets, in the 

fiscal year 2008 CFS. 

Closed. 

Page 35 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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-08-748 (results of the fiscal year 2007 audit) 

47 07-1 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

enhance and fully document 

all practices referred to in the 

SOP entitled “Standard 

Operating Procedures for 

Preparing the Financial 

Report of the U.S. 

Government” to better ensure 

that practices are proper, 

complete, and can be 

consistently applied by staff 

members. 

In fiscal year 2008, Treasury 

updated this SOP by significantly 

expanding the functions covered 

by this SOP and increasing the 

level of detail related to all the 

key procedures. Treasury will 

update this SOP during fiscal 

year 2009, as necessary. 

Open. Although Treasury 

made significant 

improvements to this SOP 

during fiscal year 2008, we 

found that additional 

enhancements are needed 

to help ensure that all 

procedures referred to in 

the SOP are correctly 

performed and consistently 

applied by all staff 

members. 

48 07-2 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

enhance its checklist or 

design an alternative and use 

it to adequately and timely 

document Treasury’s 

assessment of the relevance, 

usefulness, or materiality of 

information reported by the 

federal agencies for use at 

the governmentwide level. 

During fiscal year 2008, Treasury 

enhanced its analysis procedures 

to take into account agencyspecific disclosures and assess 

their impact at the 

governmentwide level. Treasury 

will update its checklist during 

fiscal year 2009, as necessary. 

Open. Although Treasury 

made significant 

improvements in 

documenting its 

assessment of agency 

information, we found that 

the assessment and 

documentation were not 

adequately or timely 

completed. 

49 07-3 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

enhance its checklist or 

design an alternative and use 

it to adequately and timely 

document Treasury’s 

consideration of relevant 

accounting standards other 

than those issued by FASAB. 

Treasury’s checklist was revised 

in fiscal year 2008 to address 

these concerns. 

Closed. 

50 07-4 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

enhance its checklist or 

design an alternative and use 

it to adequately and timely 

document Treasury’s final 

decisions regarding the 

inclusion or exclusion of 

federal agencies’ disclosure 

information in the existing 

notes to the CFS. 

Treasury’s checklist was revised 

in fiscal year 2008 to address 

these concerns. 

Closed. 

Page 36 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

51 07-5 The Director of OMB should 

direct the Controller of OMB’s 

Office of Federal Financial 

Management, in coordination 

with Treasury’s Fiscal 

Assistant Secretary, to 

develop formal processes and 

procedures for identifying and 

resolving any material 

differences in distributed 

offsetting receipt amounts 

included in the net outlay 

calculation of federal 

agencies’ Statement of 

Budgetary Resources and the 

amounts included in the 

computation of the budget 

deficit in the CFS. 

OMB is currently updating its 

policies and procedures for 

identifying and resolving material 

differences in distributed 

offsetting receipt amounts. In 

addition, OMB worked with 

agencies on this issue 

throughout fiscal year 2008 and 

made significant progress. 

Open. 

52 07-6 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

establish effective internal 

control to ensure the 

spreadsheets used to compile 

the CFS are protected from 

inadvertent change. 

Treasury revised its internal 

control policies and procedures 

to ensure that the spreadsheets 

were protected from inadvertent 

change. 

Closed. 

53 07-7 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to 

establish effective internal 

control to ensure the 

spreadsheets used to compile 

the CFS are documented to 

facilitate detection and 

tracking of changes to key 

formulas and data. 

Treasury revised its internal 

control policies and procedures 

to ensure that the spreadsheets 

were documented to address 

these concerns. 

Closed. 

54 07-8 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary to ensure 

that columns within key 

spreadsheets used to compile 

the CFS are labeled and 

properly aligned to reflect the 

data contained within. 

Treasury revised its internal 

control policies and procedures 

to ensure that the spreadsheets 

were labeled and aligned to 

address these concerns. 

Closed. 

Page 37 GAO-09-387 Material Weaknesses in Internal Control
Appendix I: 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 

55 07-9 The Secretary of the Treasury 

should direct the Fiscal 

Assistant Secretary, in 

coordination with the 

Controller of OMB’s Office of 

Federal Financial 

Management, to develop and 

implement effective 

processes for monitoring and 

assessing the effectiveness of 

internal control over the 

processes used to prepare 

the CFS. 

Treasury is currently reviewing its 

internal control procedures to 

develop a formal mechanism for 

monitoring and assessing the 

effectiveness of internal control 

over the preparation of the CFS. 

See status of recommendation 

No. 04-6. 

Open. 

56 07-10 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 and 

implement alternative 

solutions to performing almost 

all of the compilation effort at 

the end of the year, including 

obtaining and utilizing interim 

financial information from 

federal agencies. 

Treasury will continue to consider 

what information can be obtained 

during the interim period to 

facilitate the year-end CFS 

preparation process. 

Open. 

Source: GAO. 

Page 38 GAO-09-387 Material Weaknesses in Internal Control
Appendix II: Comments from the Department Appendix II: Comments from the Department of the Treasury 

of the Treasury 

Page 39 GAO-09-387 Material Weaknesses in Internal Control 
Appendix III: GAO Contact and Staff Appendix III: GAO Contact and Staff Acknowledgments 

Acknowledgments 

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

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

contributions to this report: Louise DiBenedetto, Assistant Director; Lynda 

Downing, Assistant Director; Cole Haase; Dragan Matic; Maria Morton; 

Thanomsri Piyapongroj; and Taya Tasse. 

Page 40 GAO-09-387 Material Weaknesses in Internal Control

GAO Contact 

Acknowledgments 

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