GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

United States General Accounting Office

Washington, DC 20548

December 14, 2001

The Honorable Patrick J. Toomey

House of Representatives

Subject: Survey Results of Selected Non-CFO Act Agencies’ Views on Having

Audited Financial Statements

Dear Mr. Toomey:

This letter summarizes the information we provided during a November 30, 2001,

briefing to your office. Based on your April 30, 2001, letter to the Comptroller General

and subsequent discussions with your office, we conducted a survey of 26 agencies

that are not subject to the Chief Financial Officers Act of 1990 (CFO Act). The CFO

Act, as expanded by the Government Management Reform Act of 1994, requires 24

major executive branch departments/agencies to prepare annual financial statements

and have them audited. Of the 26 non-CFO Act agencies that we surveyed, 12

agencies have prepared and had their financial statements audited within the past 5

years.

The objectives of the survey were to determine the

ß benefits achieved or anticipated by the surveyed agencies from preparing

financial statements and having them audited;

ß degree of effort or anticipated effort for the surveyed agencies to prepare

financial statements and have them audited;

ß factors, including budget authority, that should be considered in determining

whether agencies should prepare financial statements and have them audited; and

ß surveyed agencies’ views about whether, in general, agencies should have their

financial statements audited.

The enclosed briefing slides summarize the survey responses as provided to you in

the November 30, 2001, briefing. The attachment to the briefing slides lists, by

surveyed agency, the amounts of assets, liabilities, revenue, and expenses that the

agencies reported to the Department of the Treasury for fiscal year 2000, as well as

certain agency baseline information, such as budget authority, the number of offices,

and agency functions. Pages 13 and 14 of the enclosure discuss the scope and

methodology of our work. Where appropriate, we discussed certain responses to the

questionnaire with agency officials, but we did not independently verify the

information provided by the respondents. In addition, we sent agency-specific data

presented in the slides to the respective agencies for their review. We performed our
Page 2 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

work from June 2001 through November 2001 in accordance with U.S. generally

accepted government auditing standards.

Results in Brief

All 26 of the surveyed agencies responded to our survey. Overall, the surveyed

agencies reported that they either achieved significant benefits or would anticipate

achieving such benefits from having audited financial statements. The level of effort

to prepare financial statements and prepare for an audit of such statements varied

significantly with the size and other characteristics of the agencies. In determining

whether agencies should prepare financial statements and have them audited,

respondents identified a combination of factors that should be considered, including

budget authority, key financial statement amounts, and the type of agency operations.

For example, the surveyed agencies reported that an agency’s fiduciary

responsibilities and risks associated with the agency’s operations were the most

important factors to consider. Irrespective of the importance of such factors, 21 of

the 26 agencies reported that federal agencies, in general, should have their financial

statements audited.

Benefits Achieved or Anticipated by the Surveyed Agencies From Preparing

Financial Statements and Having Them Audited

The 12 surveyed agencies that have had their financial statements audited generally

reported significant benefits from those audits. The most significant benefits cited are

enhancing accountability and identifying inefficiencies and weaknesses. Other

significant benefits included improving internal control, enhancing the public’s

perception of the agency, meeting statutory requirements, and monitoring assets and

liabilities. The 14 surveyed agencies that have not had audited financial statements

reported that they would anticipate benefits from such audits, but to a much less

extent than the achieved benefits reported by the 12 surveyed agencies that have had

their financial statements audited.

We asked these 12 audited agencies whether the benefits of their first audit and

subsequent audits outweighed the costs and whether their audits were more or less

beneficial than expected. Half of the 12 agencies responded that the benefits achieved

outweighed the costs for the first audit, and about three-fourths of the agencies

responded that the benefits achieved outweighed the costs for subsequent audits. Ten

of the 12 agencies (83 percent) responded that their audits were more beneficial than

or about as beneficial as expected.

Degree of Effort or Anticipated Effort for the Surveyed Agencies to Prepare

Financial Statements and Have Them Audited

For the 12 surveyed agencies that have had their financial statements audited, the

reported level of effort to prepare financial statements and to prepare for an audit

varied significantly with the size and other characteristics of the agencies. For

example, the reported number of staff days to prepare for the first audit ranged from

50 to 750 days, and the estimated fiscal year 2000 audit costs ranged from $11,000 to

$350,000. Frequently reported steps that these agencies had taken to prepare for their
Page 3 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

first and subsequent audits are (1) improving or replacing financial management

systems, (2) hiring additional financial management personnel, (3) training financial

management personnel, and (4) performing significant manual procedures (for first

audits).

For the 14 surveyed agencies that have not had their financial statements audited, the

most frequently cited anticipated steps needed to prepare for a first audit are

(1) hiring consultants, (2) training financial management personnel, and

(3) requesting additional funding.

Factors That Should Be Considered in Determining Whether Agencies Should

Prepare Financial Statements and Have Them Audited

According to the 26 surveyed agencies, the most important factors that should be

considered in determining whether agencies should have audited financial statements

are (1) whether the agency has fiduciary responsibilities and (2) risks associated with

the agency’s operations. The surveyed agencies believe that of equal importance to

the amount of budget authority an agency receives are the amounts of an agency’s

assets and liabilities. Other important factors include whether the agency receives

nongovernmental funding and the amounts of an agency’s revenue and expenses.

Of the 14 surveyed agencies that have not had their financial statements audited, 13

reported that the absence of a statutory requirement to do so was a reason that they

have not had such audits. Other reasons cited by 6 of the 14 agencies include an

insufficient number of financial management personnel and insufficient funding.

General Views About Whether Agencies Should Have Their Financial

Statements Audited

Twenty-one of the 26 surveyed agencies, including all 12 agencies that have had their

financial statements audited, reported that, in general, agencies should have their

financial statements audited. The remaining 5 surveyed agencies, which had budget

authority ranging from about a quarter of a million dollars to a third of a billion

dollars, expressed the opposite point of view.

_ _ _ _ _

The factors that the surveyed agencies considered to be important in determining the

need for having audited financial statements, such as fiduciary responsibilities, risks

associated with the agency’s operations, and the magnitude of budget authority and

key financial statement amounts, are generally consistent with our views. Our longstanding position has been that the preparation and audit of financial statements

contribute to reliable, timely, and useful financial information. Such information is

important in helping management ensure accountability, measure and control costs,

and make timely and fully informed decisions. Preparing audited financial statements

also leads to improvements in internal control and financial management systems.

Hence, we view much of the effort to prepare financial statements and have them

audited as an integral part of effective financial management.
Page 4 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

We are sending copies of this letter to the surveyed agencies, the Chief Financial

Officer, Executive Office of the President, the Director of the Office of Management

and Budget, and interested congressional committees. Copies will also be made

available to others upon request. This letter will also be available on GAO’s home

page at http://www.gao.gov.

If you or your staff have any questions regarding this letter, please contact me at

(202) 512-3406 or Kent Bowden, Assistant Director, at (202) 512-5270. Other key

contributors to this assignment were Kimberly Graham, Casey Keplinger, Stanley

Kostyla, and LaShawnda Wilson.

Sincerely yours,

Gary T. Engel

Director

Financial Management and Assurance

Enclosure
Enclosure

Page 5 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

Briefing to the Honorable Patrick J. Toomey

Survey Results of Selected Non-CFO Act

Agencies’ Views on Having

Audited Financial Statements

Briefing to the Honorable Patrick J. Toomey

House of Representatives

November 30, 2001
Enclosure

Page 6 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

2

Contents

• Introduction

• Objectives

• Results in Brief

• Scope and Methodology

• Background

• Agency Responses to Our Survey

• Benefits of Financial Statements (FS) Audits

• Effort to Have FS Audits

• Factors to Consider in Determining Need for FS Audits

• General Views Regarding Whether Agencies Should Have FS

Audits
Enclosure

Page 7 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

3

Introduction

• The Chief Financial Officers Act of 1990 (CFO Act), as amended,

requires 24 major executive departments/agencies to prepare financial

statements annually and have them audited.

• We selected 26 agencies that are not subject to the CFO Act, as

amended. We obtained relevant data from these agencies and surveyed

them regarding their views on having audited financial statements. Of

the 26 agencies that we surveyed:

• 12 agencies have prepared and had their financial statements

audited within the past 5 years, and

• 14 agencies have not done so.
Enclosure

Page 8 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

4

Objectives

Based on your letter and subsequent discussions with your staff, we

surveyed selected non-CFO Act agencies to determine the

• benefits achieved or anticipated by the surveyed agencies from

preparing financial statements and having them audited;

• degree of effort or anticipated effort for the surveyed agencies to

prepare financial statements and have them audited;

• factors, including budget authority, that the surveyed agencies

believe should be considered in determining whether agencies

should prepare financial statements and have them audited; and

• surveyed agencies’ views about whether, in general, agencies

should have their financial statements audited.
Enclosure

Page 9 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

5

Results in Brief

Benefits of FS Audits

• The 12 surveyed agencies that have had their financial statements

audited generally reported significant benefits from those audits. The

most significant benefits are enhancing accountability and identifying

inefficiencies and weaknesses. Other significant benefits include

improving internal control; enhancing the public’s perception of the

agency; meeting statutory requirements; and monitoring assets,

liabilities, and net position.

• The 14 surveyed agencies that have not had audits of their financial

statements reported anticipated benefits for such audits, but to a much

less extent than the achieved benefits reported by the 12 agencies that

have had their financial statements audited.
Enclosure

Page 10 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

6

Results in Brief

Effort to Have FS Audits

• The level of effort required by the 12 surveyed agencies that have had

their financial statements audited to prepare financial statements and to

prepare for an audit varied significantly with the size and other

characteristics of the agencies.

• The number of staff days to prepare for the first audit ranged from

50 to 750 days, and the estimated FY 2000 audit costs ranged from

$11,000 to $350,000.

• Steps taken to prepare for the first and subsequent audits varied

significantly. Such steps included performing significant manual

procedures, improving or replacing financial management systems,

hiring additional financial management personnel, and training

financial management personnel.

• The most frequently anticipated steps to be taken to prepare for the first

audit, as reported by the 14 surveyed agencies that have not had their

financial statements audited, are hiring consultants, training financial

management personnel, and requesting additional funding. Other

anticipated steps reported include reorganizing business processes and

performing significant manual procedures.
Enclosure

Page 11 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

7

Results in Brief

Factors to Consider

in Determining Need for FS Audits

• According to the 26 surveyed agencies, the most important factors that

should be considered in determining whether agencies should have

audited financial statements are (1) whether the agency has fiduciary

responsibilities and (2) risks associated with the agency’s operations. Of

equal importance to the amount of budget authority an agency receives

are the amounts of agency assets and liabilities. Other important factors

include whether the agency receives nongovernmental funding and the

amounts of agency revenue and expenses.

• Of the 14 surveyed agencies that have not had their financial statements

audited, 13 reported that the absence of a statutory requirement to do so

was a reason that they have not had such audits. Other reasons cited by

6 of the 14 agencies for not having their financial statements audited

include an insufficient number of financial management personnel and

insufficient funding.
Enclosure

Page 12 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

8

Results in Brief

General Views of Surveyed Agencies

Regarding Whether Agencies Should Have FS Audits

• 21 of the 26 surveyed agencies, including the 12 agencies that have had

their financial statements audited, reported that, in general, agencies

should have their financial statements audited.
Enclosure

Page 13 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

9

Scope and Methodology

To accomplish our objectives, we:

• Identified 28 executive branch entities that, based on previous work (1)

were not subject to the CFO Act, as amended, (2) had budget authority of

at least $10 million,1 and, (3) with one exception,2 were not required by

statute to have their financial statements audited. As agreed with your

office, we did not include the Central Intelligence Agency Retirement Fund

or the Executive Office of the President (EOP)3 in the scope of our survey,

leaving 26 agencies for our survey.

1

In August 2000, we provided your staff a list of these 28 agencies as requested. Each of the agencies

had budget authority for fiscal year (FY) 1999 of at least $10 million.

2The legislation establishing one of the agencies, the U.S. Institute of Peace, requires that the

Institute’s financial statements be annually audited under private sector auditing standards.

3Public Law 106-58, Treasury and General Government Appropriations Act, 2000, established the

position of Chief Financial Officer (CFO) for EOP. The CFO, who was appointed in August 2001, and

his staff, have informed us that EOP plans to address financial systems needs, have its auditability

assessed, and then have financial statements audits.
Enclosure

Page 14 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

10

Scope and Methodology

• Obtained and reviewed certain documents that relate to the 26 selected

executive branch agencies, including audited financial statements, where

available.

• Developed, pretested, and used a questionnaire to survey the 26 agencies,

and summarized their responses. Because many of the survey questions

requested the agencies’ views, the agencies’ responses to those questions

represent their perspectives and judgments. We discussed certain

responses with agency officials, but did not independently verify the

reliability of the information provided.

• Sent agency-specific data presented in the slides to the respective

agencies for their review.

• Performed our work from June 2001 through November 2001 in

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

Page 15 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

11

Background

Key Legislation Requiring FS Audits

• Securities Exchange Act of 1934 - Requires publicly held private sector

companies to file annual audited financial statements with the Securities

and Exchange Commission.

• Chapter 91 of Title 31, United States Code, commonly called the

Government Corporation Control Act - Requires government corporations,

such as the Export-Import Bank of the United States, to have their annual

financial statements audited.

• Single Audit Act of 1984, as amended - Requires each nonfederal entity that

expends a total amount of federal awards equal to or in excess of $300,000

in any fiscal year to have either a single audit or a program-specific audit

made for such fiscal year.

• Chief Financial Officers Act of 1990, as expanded by the Government

Management Reform Act of 1994 - Requires 24 major executive branch

departments/agencies to prepare financial statements annually and have

them audited.

• Agency-specific legislation - Requires certain agencies, such as United

States Postal Service, to have their annual financial statements audited.
Enclosure

Page 16 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

12

Background

Types of FS Audits and Related Procedures

• Full-scope audits of financial statements, performed in accordance with

either of two relevant standards:

• Generally Accepted Government Auditing Standards (GAGAS) -

federal standards

• Generally Accepted Auditing Standards (GAAS) - nonfederal

standards (private sector)

• Audit scope that includes only selected financial statements (for

example, balance sheet audits)

• Targeted procedures:

• Audit of certain elements or accounts

• Agreed-upon procedures applied to certain elements or accounts

• Internal control testing

• Compliance testing

• Test of sensitive payments

• Review of financial statements (less than an audit)
Enclosure

Page 17 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

13

Background

Agency Information

• The 26 executive branch agencies we surveyed are generally

independent agencies that have commissions or boards appointed by

the President.

• 2 of the 26 surveyed agencies each received more budget authority

than the CFO Act agency with the least budget authority for FY 2000

(Nuclear Regulatory Commission - $465 million).

• 12 of the 26 agencies have had their financial statements audited within

the past 5 years (these agencies are subsequently referred to in this

briefing as agencies that have had their financial statements audited).

For FY 2000, 7 of these audits were conducted under GAGAS, 3 were

conducted in accordance with GAAS, and 2 agencies did not have such

audits for FY 2000.

• Only the 10 agencies that had their financial statements audited for FY

2000 prepared financial statements for that year. The remaining 16

agencies did not do so.
Enclosure

Page 18 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

14

Background

Surveyed Agencies

Have Had FS Audits

Defense Nuclear Facilities Safety Board1

Farm Credit System Insurance Corporation

Federal Communications Commission

Federal Housing Finance Board

Federal Mediation and Conciliation Service

Federal Trade Commission

International Trade Commission2

Office of Navajo and Hopi Indian Relocation

Railroad Retirement Board

U.S. Court of Appeals for Veterans Claims3

U.S. Holocaust Memorial Museum

U.S. Institute of Peace

Have Not Had FS Audits

Commodity Futures Trading Commission

Consumer Product Safety Commission

Equal Employment Opportunity Commission4

Federal Election Commission

Federal Labor Relations Authority

Institute of Museum and Library Services

Merit Systems Protection Board

National Archives and Records Administration5

National Endowment for the Arts

National Endowment for the Humanities

National Labor Relations Board

National Transportation Safety Board4

Securities and Exchange Commission

Selective Service System

1Defense Nuclear Facilities Safety Board has balance-sheet-only audits every 3 to 5 years, most recently for FY 1997. It did not

prepare FY 2000 FS.

2

International Trade Commission discontinued audits of its financial statements, effective for FY 1999. It did not prepare FY 2000 FS.

3U.S. Court of Appeals for Veterans Claims’ first audit was of its FY 2000 FS.

4Equal Employment Opportunity Commission and National Transportation Safety Board have indicated that they plan to have FS

audits within the next 5 years.

5National Archives and Records Administration has annual FS audits of three trust and revolving funds.
Enclosure

Page 19 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

15

Survey Responses - Benefits

Average Ranking by Surveyed Agencies of Extent

of Benefits Achieved or Anticipated from FS Audits

Little or no

extent

Moderate

extent

Very great

 extent

Increase grant funding

Facilitate external funding

Identify actual costs or savings

Identify costs of providing government services

Improve financial management systems

Monitor budget status

Improve reliability of financial management information

Monitor assets, liabilities, and net position

Meet statutory requirements

Enhance perception of the agency

Improve internal control

Identify inefficiencies and weaknesses

Enhance accountability

Agencies

that have

had FS

audits

Agencies

that have

not had FS

audits

Achieved or Anticipated Benefits

Average Ranking

Some

extent

Great

extent
Enclosure

Page 20 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

16

Survey Responses - Benefits

Number of Agencies That Reported Having Achieved

FS Audit Benefits to Very Great or Great Extent

0 1 2 3 4 5 6 7 8 9

Increase grant funding

Facilitate external funding

Identify actual costs or savings

Improve financial management systems

Improve reliability of financial management information

Identify costs of providing government services

Monitor budget status

Monitor assets, liabilities, and net position

Improve internal control

Meet statutory requirements

Identify inefficiencies and weaknesses

Enhance accountability

Enhance perception of the agency

Agencies that

have had FS

audits - very

great extent

Agencies that

have had FS

audits - great

extent

Achieved Benefits 

Number of Agencies
Enclosure

Page 21 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

17

Survey Responses - Benefits

Number of Agencies That Reported Anticipated

FS Audit Benefits to Very Great or Great Extent

0 1 2 3 4 5 6 7 8 9

Increase grant funding

Facilitate external funding

Identify actual costs or savings

Monitor budget status

Meet statutory requirements

Monitor assets, liabilities, and net position

Identify costs of providing government services

Enhance perception of the agency

Enhance accountability

Improve internal control

Identify inefficiencies and weaknesses

Improve reliability of financial management information

Improve financial management systems

Number of Agencies 

Agencies that

have not had

FS audits -

very great

extent

Agencies that

have not had

FS audits -

great extent

Anticipated Benefits
Enclosure

Page 22 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

18

Survey Responses - Benefits

Benefits Achieved Versus Expectations

for Surveyed Agencies That Have Had FS Audits

Audit substantially 

more beneficial

than expected

33%

Audit about as 

beneficial as 

expected

50%

Audit substantially 

less beneficial than 

expected

17%

Note: None of the surveyed agencies that have had FS audits responded that the audit was somewhat 

more beneficial than expected, that it was somewhat less beneficial than expected, or that they were not able to judge.
Enclosure

Page 23 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

19

Survey Responses - Benefits

Benefits Achieved Versus Costs for First Audit

for Surveyed Agencies That Have Had FS Audits

Benefits about equal to 

the costs

25%

Benefits somewhat 

outweigh the costs

8%

Benefits substantially 

outweigh the costs

42%

Not able to judge

8%

Costs substantially 

outweigh the benefits

17%

Note: None of the surveyed agencies that have had FS audits responded that the costs somewhat outweigh the benefits.
Enclosure

Page 24 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

20

Survey Responses - Benefits

Benefits Achieved Versus Costs for Subsequent Audits

for Surveyed Agencies That Have Had FS Audits

Benefits substantially 

outweigh the costs

55%

Benefits about equal 

to the costs

9%

Benefits somewhat 

outweigh the costs

18%

Costs substantially 

outweigh the benefits

18%

Note: None of the surveyed agencies that have had FS audits responded that the costs somewhat outweigh the benefits or

 that they were not able to judge. One of these 12 surveyed agencies is not included in this chart because FY 2000 was

 the agency’s first FS audit. 
Enclosure

Page 25 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

21

Survey Responses - Effort

Reported Level of Effort for Surveyed Agencies That

Had Their First FS Audit Within the Past 5 Years

1Budget authority data was obtained from the FY 2002 President’s Budget. None of the surveyed

agencies that have had FS audits had FY 2000 budget authority between $150 million and $6 billion.

Agencies that had their first FS audit within the past 5 years

Range of budget authority1 Number of

agencies

Calendar weeks to

prepare for first audit

Staff days to

 prepare for first

audit

Less than $25 million 1 4 50

$25 million to $150 million 2 (agency 1) 24 (agency 1) 120

(agency 2) 52 (agency 2) 180

Greater than $6 billion 1 26 750
Enclosure

Page 26 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

22

Survey Responses - Effort

Reported Level of Effort for Surveyed

Agencies That Have Had FS Audits

Agencies that have had FS

audits1

Typical number of calendar weeks to

prepare financial statements

Typical number of staff days to

prepare financial statements

Range of budget

authority2

Number

of

agencies

Low High Average Low High Average

Less than $25 million 3 1 4 2.7 5 80 33.3

$25 million to $150

million

4 3 6 4.1 17.5 40 29.4

Greater than $6 billion 2 8 10 9 50 120 85

13 of the agencies that have had FS audits did not provide a response. 

2Budget authority data was obtained from the FY 2002 President’s Budget. None of the surveyed agencies that have

 had FS audits had FY 2000 budget authority between $150 million and $6 billion. 
Enclosure

Page 27 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

23

Survey Responses - Effort

Reported Audit and Related Costs for

Surveyed Agencies That Had FY 2000 FS Audits

Estimated costs of FS audits

performed by contractor or Office of

Inspector General

Other estimated costs related to FS

audits

Range of budget

authority1

Number

of

agencies

that had

FY 2000

FS

audits2

Low High Average Low High Average

Less than $25 million 4 $11,000 $54,512 $29,525 $0 $9,300 $2,325

$25 million to $150

million

4 $26,000 $100,000 $54,000 $0 $15,000 $5,750

Greater than $6 billion 2 $220,000 $350,0003$285,000 $2,000 $1,218,0003$610,000

1Budget authority data was obtained from the FY 2002 President’s Budget. None of the surveyed agencies that

have had FS audits had FY 2000 budget authority between $150 million and $6 billion.

22 of the 12 surveyed agencies that have had FS audits, International Trade Commission and Defense Nuclear

Facilities Safety Board, did not have FS audits for FY 2000.

3The surveyed agency that reported FS audit costs of $350,000 also reported related costs of $1,218,000 for

consultants to assist the agency in preparing for the FS audit. This agency reported that it took each of the

steps described on the following slide during its first or subsequent year audits.
Enclosure

Page 28 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

24

Survey Responses - Effort

Steps Taken to Prepare for First and Subsequent Audits

by Surveyed Agencies That Have Had FS Audits

0 1 2 3 4 5 6

Replaced financial management systems

Obtained additional funding

Hired additional financial management personnel

Increased integration of financial management systems

Contracted for financial management personnel

Obtained additional information technology support

Hired more qualified financial management personnel

Used consultants to advise in preparing for audit

Reorganized business processes

Improved existing financial management systems

Trained financial management personnel

Performed significant manual procedures

Number of Agencies 

First FS audit

(if within past

5 years)

Subsequent

FS audits

Steps Taken
Enclosure

Page 29 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

25

Survey Responses - Effort

Anticipated Steps to Be Taken to Prepare for First Audit

by Surveyed Agencies That Have Not Had FS Audits

0 1 2 3 4 5 6 7 8 9 10

Improve existing financial management systems

Replace financial management systems

Increase integration of financial management systems

Hire additional financial management personnel

Contract for financial management personnel

Obtain additional information technology support

Hire more qualified financial management personnel

Perform significant manual procedures

Reorganize business processes

Request additional funding

Train financial management personnel

Use consultants to advise the agency in preparing for audit

Note: One surveyed agency that has not had an FS

audit reported a lack of property records as a 

challenge in obtaining an audit of its FS.

Anticipated Steps

Number of Agencies
Enclosure

Page 30 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

26

Note: None of the 14 surveyed agencies that have not had FS audits responded that their systems would require significant 

modifications. All of these agencies responded that they use the services of other agencies or contractors to perform

financial management functions. 

Survey Responses - Effort

Anticipated Systems Modifications to Prepare for First

Audit by Surveyed Agencies That Have Not Had FS Audits

Systems would have to 

be replaced

14%

No response

14%

Systems would require 

some modification

14%

Systems would require a 

moderate level of 

modification

22%

Systems would require 

no modification

36%
Enclosure

Page 31 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

27

Survey Responses - Factors

Ranking of Importance by Surveyed Agencies of Factors

to Consider in Determining Need for FS Audits

If an agency has an Office of Inspector General

If an agency has a CFO

Amount of expenses

Amount of revenue

Amount of budget authority

Amount of assets

Amount of liabilities

Receipt of nongovernmental funding

Fiduciary responsibilities

Risks associated with the agency's operations

Agencies that

have had FS

audits

Agencies that

have not had

FS audits

Little or no 

extent

Factors to Consider

Some

extent

Moderate

extent

Great

extent

Very great

extent

Average Ranking
Enclosure

Page 32 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

28

Survey Responses - Factors

Examples Provided by Surveyed Agencies of Other

Factors to Consider in Determining Need for FS Audits

• In addition to the factors listed on slide 27, agencies cited other factors,

including the following, that should be considered in determining

whether agencies, in general, should prepare and have audited financial

statements:

• Mission of the agency

• Value that customers would derive from audited financial statements

• Whether an agency’s funding consists primarily of salaries and

expense appropriations versus business-type appropriations
Enclosure

Page 33 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

29

Survey Responses - Factors

Reasons for Not Having FS Audits, As Reported by

Surveyed Agencies That Have Not Had FS Audits

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Other

Insufficient financial

management expertise

Insufficient funding

Insufficient number of

financial management

personnel

Not statutorily required

Reasons Provided

Number of Agencies
Enclosure

Page 34 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

30

Survey Responses - General Views

General Views of Surveyed Agencies

Regarding Whether Agencies Should Have FS Audits

• 21 of the 26 surveyed agencies responded that agencies, in general, should

have their financial statements audited. These agencies consisted of

• all 12 agencies that have had their financial statements audited and

• 9 of the 14 agencies that have not had their financial statements

audited.

• 5 surveyed agencies responded that agencies, in general, should not have

their financial statements audited.

• These agencies had budget authority ranging from about a quarter of a

million dollars to a third of a billion dollars.

• These agencies reported that the reasons that their particular agencies

have not had their financial statements audited were as follows:

• All 5 agencies reported that such audits were not statutorily required,

• 4 of the agencies reported that they had insufficient funding, and

• 3 of the agencies reported that they had an insufficient number of

financial management personnel.
Enclosure

Page 35 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

Attachment

FY 2000 Financial Data as Reported by Agencies to Treasury

Agencies That Have Had FS Audits

Agency

Budget 

authority1 Percent Total Assets Percent

Total 

Liabilities Percent

Total 

Revenue Percent

Total 

Expenses Percent

Railroad Retirement Board $9,183 56 $22,703.1 57 $3,977.6 29 $9,330.2 54 $8,678.5 47 

Federal Communications Commission 6,795 42 15,360.8 38 9,306.0 68 7,580.9 44 9,408.3 51 

Federal Trade Commission 126 1 227.3 1 218.4 2 126.8 1 143.7 1 

Farm Credit System Insurance Corporation 83 1 1,601.7 4 167.9 1 101.4 1 12.7 0 

International Trade Commission 44 0 6.7 0 5.4 0 46.0 0 46.3 0 

Federal Mediation and Conciliation Service 39 0 10.2 0 6.9 0 41.2 0 40.6 0 

U.S. Holocaust Memorial Museum 33 0 0.9 0 0.2 0 2.6 0 2.7 0 

Federal Housing Finance Board2

19 0 6.6 0 3.8 0 19.1 0 18.9 0 

Defense Nuclear Facilities Safety Board 17 0 10.2 0 2.8 0 0.0 0 17.4 0 

U.S. Institute of Peace 13 0 0.8 0 0.7 0 0.0 0 12.9 0 

U.S. Court of Appeals for Veterans Claims 11 0 10.4 0 2.5 0 11.5 0 11.4 0 

Office of Navajo and Hopi Indian Relocation 8 0 11.0 0 2.0 0 14.1 0 14.1 0 

Total $16,371 100 $39,949.7 100 $13,694.2 100 $17,273.8 100 $18,407.5 100

1

 FY 2000 budget authority data was obtained from the FY 2002 President’s Budget.

2 The amounts reported for Federal Housing Finance Board are from their audited financial statments and not from data reported to Treasury.

Note: All dollar amounts are in millions. The individual percentages do not total to 100 percent due to rounding. The percentages less than one are portrayed as zero 

in this chart.
Enclosure

Page 36 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

FY 2000 Financial Data as Reported by Agencies to Treasury

Agencies That Have Not Had FS Audits

Agency

Budget 

authority1Percent Total Assets Percent

Total 

Liabilities Percent

Total 

Revenue Percent

Total 

Expenses Percent

Securities and Exchange Commission $382 20 $2,790.0 71 $123.3 15 $3,638.7 74 $363.9 20 

National Archives and Records Administration 323 17 252.8 6 345.4 42 280.6 6 311.5 17 

Equal Employment Opportunity Commission 282 15 42.1 1 17.7 2 65.9 1 67.6 4 

National Labor Relations Board 205 11 47.7 1 49.8 6 8.8 0 213.4 11 

Institute of Museum and Library Services 190 10 225.5 6 0.3 0 187.0 4 187.2 10 

National Endowment for the Humanities 118 6 99.8 3 1.7 0 116.3 2 116.0 6 

National Endowment for the Arts 102 5 106.4 3 2.8 0 111.1 2 108.5 6 

National Transportation Safety Board 82 4 34.0 1 4.7 1 2 2 2 2

Commodity Futures Trading Commission 63 3 261.2 7 251.6 30 312.6 6 310.9 17 

Consumer Product Safety Commission 52 3 19.1 0 14.9 2 57.0 1 58.1 3 

Federal Election Commission 38 2 11.5 0 3.4 0 41.1 1 41.5 2 

Merit System Protection Board 29 2 7.3 0 4.2 1 31.1 1 31.1 2 

Federal Labor Relations Authority 24 1 4.0 0 4.2 1 23.9 0 24.2 1 

Selective Service System 24 1 15.5 0 3.8 0 21.2 0 22.5 1 

Total $1,914 100 $3,916.9 100 $827.8 100 $4,895.3 100 $1,856.4 100

1

 FY 2000 budget authority data was obtained from the FY 2002 President’s Budget. 

 2 National Transportation Safety Board did not report data for revenue and expenses to Treasury.

Note: All dollar amounts are in millions. The individual percentages do not total to 100 percent due to rounding. The percentages less than one are portrayed as zero in 

this chart.
Enclosure

Page 37 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

Agency Baseline Information as Reported

by Agencies That Have Had FS Audits

Agency FY 2000 budget authority (in millions)

FY 2000 total full time equivalentsNumber of officesCFO or equivalent?Statutory Office of Inspector General?Audit in accordance with GAGAS or 

GAAS?

Buy/lease real estateProvide insuranceMake loans or loan guaranteesMake grantsAssess fines and penaltiesProvide services for a feeMaintain retail operationsOther fiduciary/custodial functions

Railroad Retirement Board $9,183 1,154 60 Yes Yes GAGAS X X X X

Federal Communications Commission 6,795 1,950 4 Yes Yes GAGAS X X X X X

Federal Trade Commission 126 1,007 9 Yes Yes GAGAS X X X

Farm Credit System Insurance Corporation 83 10 1 Yes No GAGAS X X

International Trade Commission 44 354 1 Yes Yes GAGAS1

X X X

Federal Mediation and Conciliation Service 39 288 71 Yes No GAGAS X X

U.S. Holocaust Memorial Museum 33 458 5 Yes No GAAS X X

Federal Housing Finance Board 19 107 1 Yes Yes GAGAS X

Defense Nuclear Facilities Safety Board 17 96 7 Yes No GAAS2

U.S. Institute of Peace 13 65 1 No No GAAS X

U.S. Court of Appeals for Veterans Claims 11 88 1 Yes No GAGAS X X X

Office of Navajo and Hopi Indian Relocation 8 60 3 Yes No GAAS

Total $16,371 5,637 164

Average $1,364 470 14

1

International Trade Commission discontinued audits of its financial statements, effective for FY 1999. It did not prepare FY 2000 FS.

2Defense Nuclear Facilities Safety Board has balance sheet only audits every 3 to 5 years, most recently for FY 1997. It did not prepare FY 2000 FS.

Note: FY 2000 budget authority data was obtained from the FY 2002 President’s Budget.

Agency Functions
Enclosure

Page 38 GAO-02-281R Survey of Agencies’ Views on Audited Financial Statements

Agency Baseline Information as Reported

by Agencies That Have Not Had FS Audits

(191004)

Agency FY 2000 budget authority (in millions)

FY 2000 total full time equivalentsNumber of officesCFO or equivalent?Statutory Office of Inspector General?FY 2000 FS prepared?Buy/lease real estateProvide insuranceMake loans or loan guaranteesMake grantsAssess fines and penaltiesProvide services for a feeMaintain retail operationsOther fiduciary/custodial functions

Securities and Exchange Commission $382 3,037 14 No Yes No X X X

National Archives and Records Administration 323 2,362 28 Yes Yes No X X X X

Equal Employment Opportunity Commission 282 2,924 52 Yes Yes No X X

National Labor Relations Board 205 1,976 52 Yes Yes No X

Institute of Museum and Library Services 190 45 1 Yes No1 No X

National Endowment for the Humanities 118 170 1 Yes Yes No X X

National Endowment for the Arts 102 155 1 Yes Yes No X X

National Transportation Safety Board 82 425 11 Yes No1 No X

Commodity Futures Trading Commission 63 546 6 Yes Yes No X X X

Consumer Product Safety Commission 52 480 43 Yes Yes No X X

Federal Election Commission 38 357 2 Yes Yes No X

Merit Systems Protection Board 29 234 11 Yes No2 No

Federal Labor Relations Authority 24 198 8 Yes Yes No X

Selective Service System 24 165 5 Yes No1 No

Total $1,914 13,074 235

Average $137 934 17

1

 Institute of Museum and Library Services, National Transportation Safety Board, and Selective Service System use the services of another agency’s Office of 

Inspector General.

2

 Merit Systems Protection Board's General Counsel acts as its Inspector General for investigating fraud, waste, and abuse. The agency also uses the services of 

another agency's Office of Inspector General.

Note: FY 2000 budget authority data was obtained from the FY 2002 President’s Budget.

Agency Functions