Financial Audit: Process for Preparing the Consolidated Financial Statements of the U.S. Government Continues to Need Improvement
Published: 2005-05-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: For the past 8 years, since the first audit of the consolidated financial statements of the U.S. government (CFS), certain material weaknesses in internal control and in selected accounting and financial reporting practices have resulted in conditions that prevented GAO from expressing an opinion on the CFS. Specifically, GAO has reported that the U.S. government did not have adequate systems, controls, and procedures to properly prepare the CFS. In December 2004, GAO reported on weaknesses identified during its fiscal year 2004 audit of the CFS, including weaknesses relating to the Department of the Treasury's (Treasury) preparation of the CFS. The purpose of this report is to (1) discuss the details of the weaknesses relating to Treasury's preparation of the CFS, (2) recommend improvements to address those weaknesses, and (3) provide the status of corrective actions to address the 142 open recommendations GAO previously reported.
section_title: What GAO Found
paragraphs: GAO identified weaknesses during its tests of Treasury's process for preparing the fiscal year 2004 CFS. Such weaknesses in the CFS preparation process impair the U.S. government's ability to ensure that the CFS is consistent with the underlying audited agency financial statements, properly balanced, and in conformity with U.S. generally accepted accounting principles. The weaknesses GAO identified during the fiscal year 2004 CFS audit involved directly linking audited federal agency financial statements to the CFS, controls over the compilation process, consolidated reporting guidance to agencies, intragovernmental activity and balances--explanations for material unreconciled transactions, consistency of the Department of Justice's and agencies' opinions on legal cases, and conformity with U.S. generally accepted accounting principles. During fiscal year 2004, Treasury made progress in laying the foundation to address certain long-standing material deficiencies in preparing the CFS. Foremost is the ongoing development of a new system, which is intended to directly link information from federal agencies' audited financial statements to amounts reported in the CFS. Additional actions are under way and planned. Of the 142 open recommendations that GAO reported in September 2004 regarding the process for preparing the CFS, 135 remained open as of December 6, 2004, the end of GAO's fieldwork for the fiscal year 2004 CFS audit. However, 86 of these 135 recommendations relate to specific disclosures required under U.S. generally accepted accounting principles. Treasury has taken action to begin addressing the conformity with U.S. generally accepted accounting principles issue. GAO plans to determine the status of corrective actions to address its open recommendations during its fiscal year 2005 audit of the CFS.

section_title: Letter
paragraphs: In our report dated December 6, 2004, we disclaimed an opinion on the  consolidated financial statements of the U.S. government (CFS) for the  fiscal years ended September 30, 2004 and 2003. For the past 8 years,  certain material weaknesses in internal control and in selected accounting  and financial reporting practices resulted in conditions that prevented us  from expressing an opinion on the CFS. Specifically, we have reported that  the federal government did not have adequate systems, controls, and  procedures to properly prepare its consolidated financial statements. Many  of these weaknesses in internal control that contributed to our continuing  disclaimers of opinion were identified by agency financial statement  auditors during their audits of federal agencies’ financial statements and  were reported in detail with recommendations to the agencies in separate  reports. However, some of the internal control weaknesses were identified  during our tests of the Department of the Treasury’s (Treasury) process for  preparing the CFS.
Such weaknesses in the CFS preparation process impair the federal  government’s ability to ensure that the CFS is consistent with the  underlying audited agency financial statements, properly balanced, and in  conformity with U.S. generally accepted accounting principles (GAAP).  Consequently, these weaknesses also contributed to our inability to render  an opinion on the CFS.
The purpose of this report is to (1) discuss the details of the weaknesses  we identified during our fiscal year 2004 audit regarding financial reporting  procedures and internal control over the process for preparing the CFS,  (2) recommend improvements to address those weaknesses, and  (3) provide the status of corrective actions to address the  open recommendations detailed in our prior reports and listed in appendix  II. We have discussed each of the new weaknesses identified during our  fiscal year 2004 audit with your staff and have incorporated their comments  as appropriate.
subsections: section_title: Scope and Methodology
paragraphs: As part of our audit of the fiscal years 2004 and 2003 CFS, we evaluated  Treasury’s financial reporting procedures and related internal control and  we followed up on the status of Treasury and OMB corrective actions to  address open recommendations regarding the process for preparing the  CFS that were in our prior years’ reports. In our report, which is included in  the fiscal year 2004 Financial Report of the United States Government, we  reported material deficiencies relating to Treasury’s preparation of  the CFS. These material deficiencies contributed to our disclaimer of  opinion on the CFS and also constitute material weaknesses in internal  control, which contributed to our adverse opinion on internal control. We  performed sufficient audit procedures to provide the disclaimer of opinion  in accordance with U.S. generally accepted government auditing standards.  This report provides the details of the additional weaknesses we identified  in performing our fiscal year 2004 audit procedures and our  recommendations to correct those weaknesses, as well as the status of  corrective actions taken by Treasury and OMB to address  open recommendations contained in our prior years’ reports.
We requested comments on a draft of this report from the Director of OMB  and the Secretary of the Treasury or their designees. OMB provided oral  comments, which are discussed in the Agency Comments and Our  Evaluation section of this report. Treasury’s comments are reprinted in  appendix III and are also discussed in the Agency Comments and Our  Evaluation section.
section_title: Directly Linking Audited Federal Agency Financial Statements to the CFS
paragraphs: As we have reported in the past, Treasury’s process for compiling the CFS  does not yet ensure that financial information from federal agencies’  audited financial statements and other financial data directly link to  amounts reported in the CFS. Statement of Federal Financial Accounting  Concepts No. 4, Intended Audience and Qualitative Characteristics for  the Consolidated Financial Report of the United States Government,  states that the consolidated financial report should be a general purpose  report that is aggregated from agency reports and that it should tell users  where to find information in other formats, both aggregated and  disaggregated, such as in individual agency reports, on agency Web sites,  and in the President’s Budget. In our prior report, we recommended that as  Treasury continues to design and further implement its new process for  compiling the CFS, the Secretary of the Treasury direct the Fiscal Assistant  Secretary, in coordination with the Controller of the OMB, to modify  Treasury’s closing package to (1) require federal agencies to directly link  their audited financial statement notes to the CFS notes and (2) provide the  necessary information to demonstrate that all of the five principal  consolidated financial statements are consistent with the underlying  information in federal agencies’ audited financial statements and other  financial data.
As discussed in our fiscal year 2004 audit report, Treasury made progress in  laying the foundation to address certain long-standing material deficiencies  in preparing the CFS. Foremost is the ongoing development of a new  system, the Governmentwide Financial Reporting System (GFRS), to  collect agency financial statement information taken directly from federal  agencies’ audited financial statements rather than using federal agencies’  Standard General Ledger data, as Treasury had done in previous years to  compile the CFS. The goal of the new system is to be able to directly link  information from federal agencies’ audited financial statements to amounts  reported in the CFS, a concept that we strongly support. Once Treasury is  able to achieve this, a major impediment to our ability to audit the CFS  would be eliminated.
Based on our review of Treasury’s new process for compiling the CFS, we  found that Treasury was unable to demonstrate that the information in the  fiscal year 2004 CFS directly linked to agencies’ audited financial  statements. Even though Treasury required each significant agency to  submit its audited financial statement data in the GFRS closing package  and certify their accuracy, the closing package does not require federal  agencies to directly link their audited financial statement notes to the  closing package notes and does not require the necessary information to  compile all five of the required consolidated financial statements. In some  cases, we found that Treasury was unable to demonstrate that the financial  information in the CFS directly linked to federal agencies’ audited financial  statements because federal agencies provided Treasury with incomplete  and inaccurate financial information. Also, because of other internal  control weaknesses over the compilation process noted in this report,  Treasury could not fully ensure that the information in the CFS was  consistent with underlying information in agencies’ audited financial  statements and other financial data.
section_title: Controls over the Compilation Process
paragraphs: We continued to find that there are specific areas of internal control in  Treasury’s process for compiling the CFS that need to be strengthened.  Treasury had to resort to last-minute, alternative methods to gather the  needed fiscal year 2004 information. These problems were compounded by  Treasury’s reliance on internal controls that were dependent on procedures  that would attempt to identify any errors after they were made by an  agency (detective controls) rather than on internal controls that may have  prevented or minimized the errors from occurring (preventive controls).  Treasury had planned to perform certain tests of its new fiscal year 2004  process and design the necessary internal controls by collecting agencies’  fiscal year 2003 financial information during the summer of fiscal year  2004. Although Treasury did collect the fiscal year 2003 financial  information, it did not perform the necessary detailed tests to identify and  correct potential issues with its new reporting process and develop  adequate internal control for the fiscal year 2004 reporting process.
Internal control should provide, among other things, reasonable assurance  that financial reporting is reliable. GAO’s Standards for Internal Control  in the Federal Government defines the minimum level of quality  acceptable for internal control in the federal government and provides the  standards against which internal control is to be evaluated. These  standards state that internal controls should include (1) segregation of  duties, (2) appropriate documentation of transactions and internal control,  (3) reviews by management at the functional or activity level, and  (4) access controls over information systems. We found many internal  controls in place, but we also continued to identify areas that need to be  improved, as well as the need for a strong financial reporting  infrastructure. As Treasury continues to develop its new compilation  process, implementing adequate internal control remains important and  needs to be considered during the development process.
subsections: section_title: Segregation of Duties
paragraphs: Segregation of duties is the practice of dividing the steps in a critical  function among different individuals in order to reduce the risk of error,  thus preventing a single individual from having full control of a transaction  or event. Lack of proper segregation of duties for critical processes leaves  the CFS vulnerable to errors and could result in incomplete and inaccurate  summarization of data within these financial statements. During our fiscal  year 2004 audit, we identified a lack of segregation of duties over  (1) Treasury’s new process for preparing governmentwide adjustments to  the financial statements,(2) the process for making changes to Excel  spreadsheets that contain audited agency financial information, and  (3) access to federal agencies’ closing package data in Treasury’s new  system. The lack of segregation of duties over these areas allowed a single  Treasury employee to perform functions that should have been divided  among several employees. In each of the following examples, a single  Treasury employee was allowed to  determine and approve the amount of a journal voucher to adjust the   solely determine needed changes to the Excel spreadsheets and make  the changes without obtaining any approval, and  have access to agency closing package data entered in Treasury’s new  system by individual agencies and edit the same information without  obtaining approval from the agency.
section_title: Appropriate Documentation of Transactions and Internal Control
paragraphs: Agency management is responsible for developing appropriate detailed  policies, procedures, and practices to perform agency operations and  ensuring that internal control is an integral part of operations. Although  GAO’s Standards for Internal Control in the Federal Government calls for  clear documentation of policies and procedures and transactions, we  continued to find that many key policies and procedures were not  documented in Treasury’s standard operating procedures and that Treasury  did not have appropriate supporting documentation for all transactions  recorded in the CFS.
In our prior report, we recommended that the Secretary of the Treasury  direct the Fiscal Assistant Secretary to develop and fully document policies  and procedures for the consolidated financial statement preparation  process so that they are proper, complete, and consistently applied among  staff members. Without documented policies and procedures, staff could  apply practices inconsistently or not perform necessary practices at all.  However, during our fiscal year 2004 audit, we found that Treasury had not  fully documented its policies and procedures for preparing the CFS before  the fiscal year 2004 process began and continued to develop its policies and  procedures throughout our audit and up to the end-of-fieldwork date.  Treasury’s standard operating procedures did not include the following key  procedures:  procedures for correcting any errors identified in agencies’ closing   detailed and comprehensive procedures for the allocation of certain  costs on the statement of net cost; and  procedures for compiling information that was not collected in GFRS or  Excel spreadsheets, such as how to properly analyze and compile  contingency information.
Also, Treasury did not have appropriate supporting documentation for all  transactions recorded in the CFS. Recording transactions in the financial  statements without adequate underlying support increases the risk that  inappropriate adjustments to balances in the financial statements could be  made. Specifically, we found that 20 of the 51 journal vouchers recorded in  Treasury’s journal voucher log did not have adequate supporting  documentation. Eighteen of these journal vouchers were necessary  because agencies submitted data in their closing packages that did not  agree to their audited financial statements. Treasury did not document  communications with these agencies before recording such adjustments.  For example, we found that the supporting documentation for 13 fiscal  year 2004 journal vouchers to correct agency data was simply a printout  from GFRS or a copy of a page from an agency’s financial statements  without any agency confirmation of the correction. We also found that  some significant changes were made directly to the CFS and not through  the journal voucher process or any other formal documentation process.
section_title: Management Review
paragraphs: During our fiscal year 2004 audit, we found that Treasury management did  not review transactions within several key compilation processes.  Transactions and other significant events should be authorized and  executed only by persons acting within the scope of their authority.  Appropriate reviews by management of key decisions and data are vital  controls to ensure that only authorized actions occur. Inadequate  management reviews and lack of documentation of changes, reviews, and  approvals could allow the CFS to be manipulated or changed without any  supervisory control or review, resulting in the possibility that agency data  could be changed or incorrectly compiled in the CFS. For example, we  found that some changes to the Excel spreadsheets used to compile agency  financial information were not documented, and therefore, there was no  documentation of review and approval from management. We also found  that not all journal vouchers were approved by management before being  recorded in the CFS. In some cases, the lack of management review was  the result of improperly segregating duties as discussed above.
section_title: Access Controls over Information Systems
paragraphs: During our fiscal year 2004 audit, we found that information system control  weaknesses, including inadequate access controls, existed within the  segments of GFRS used during the fiscal year 2004 reporting process.  Access controls should provide reasonable assurance that computer  resources are protected against unauthorized modification, disclosure,  loss, or impairment. Limiting access ensures that access to very sensitive  resources is limited to very few individuals and that employees are  restricted from performing incompatible functions or functions beyond  their responsibility. Treasury’s lack of adequate controls to prevent  inappropriate access increases the risk of unauthorized information or  computer resource modification, disclosure, loss, or impairment.  Specifically, we found that inappropriate access to GFRS was granted to  certain Treasury personnel, and the GFRS database was not configured to  prevent the unauthorized alteration of data submitted by federal agencies.  We also found that the GFRS production database was also used for  testing, which could result in inadvertent alteration of the production data  used to compile the CFS.
section_title: Financial Reporting Infrastructure
paragraphs: During our fiscal year 2004 audit, Treasury did not have the infrastructure  to address the magnitude of the fiscal year 2004 financial reporting  challenges it faced, such as an incomplete financial reporting system,  compressed time frames for compiling the financial information, and  inaccurate and incomplete information provided by certain federal  agencies. As a result, we found that Treasury’s Financial Management  Service personnel had excessive workloads and that an extraordinary  amount of effort and dedication was required to compile the CFS. Also, too  few Financial Management Service personnel had the specialized financial  reporting experience necessary to ensure accurate and reliable financial  reporting by the accelerated reporting date. We found that there was a  heavy reliance on just a few personnel to perform key functions without  any trained backup employees. If these personnel were unavailable,  Treasury’s financial reporting process would be negatively affected.
section_title: Recommendations for Executive Action
paragraphs: In connection with Treasury’s development of its new compilation system  and process, we recommend that the Secretary of the Treasury direct the  Fiscal Assistant Secretary to  segregate the duties of individuals performing key functions in  Treasury’s processes for preparing governmentwide adjustments to the  financial statements, making changes to Excel spreadsheets that  contain audited agency financial information, and accessing federal  agencies’ closing package data in Treasury’s new system;  require and maintain appropriate supporting documentation for all  journal vouchers recorded in the CFS;  require that Treasury employees contact and document  communications with agencies before recording journal vouchers to  change agency audited closing package data;  require and document management reviews of all procedures that result  in data changes to the CFS;  configure the GFRS database to prevent Treasury personnel from  altering data submitted by federal agencies and to use separate GFRS  databases for testing and production; and  assess the infrastructure associated with the compilation process and  modify it as necessary to achieve a sound internal control environment.
section_title: Consolidated Reporting Guidance to Agencies
paragraphs: The Treasury Financial Manual (TFM) prescribes how federal agencies  are to submit financial information to Treasury to be compiled in the CFS.  While our planned audit procedures were not to review the entire TFM to  determine if its guidance to agencies was clear, we found several areas  where the TFM did not give clear guidance to federal agencies about the  information that they were required to provide in the notes to the financial  statements. Specifically, we found that the TFM did not give clear guidance  for reporting note disclosures for loans receivable and loan guarantees;  property, plant, and equipment; federal employee and veteran benefits  payable; and contingencies. Also, the TFM did not provide clear guidance  on how to consistently report debit and credit amounts throughout various  notes so that like amounts are appropriately added and subtracted. For  example, we noted that the TFM did not provide instructions about which  line in the property, plant, and equipment note should include land  improvements. As a result, agencies reported financial data inconsistently.  This increases the risk of incomplete and inaccurate summarization of data  in the CFS.
The TFM required federal agencies to also provide GAO, as the principal  auditor of the CFS, a complete closing package consisting of the special  purpose audit opinion, the management representation letter for the  closing package, audit trail report (reclassification journal voucher report),  closing package financial statement report, trading partner summary  report, notes reports, and other data reports. Certain federal agencies did  not provide us with complete closing packages. For example, many federal  agencies did not provide the audit trail report, which is a vital report  demonstrating the linkage between agencies’ audited financial statement  line items and the CFS line items. Treasury and OMB did not perform  follow-up procedures to obtain missing information from those agencies to  ensure that we had all the necessary audit documentation to perform our  audit procedures.
subsections: section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of the Treasury direct the Fiscal  Assistant Secretary to review the TFM and any other guidance to federal  agencies to ensure that they provide clear instructions for reporting  accurate data to Treasury in the following specific areas:  loans receivable and loan guarantees;  property, plant, and equipment;  federal employee and veteran benefits payable;  reporting debit and credit amounts.
We also recommend that the Director of OMB direct the Controller of the  Office of Federal Financial Management, in coordination with the Fiscal  Assistant Secretary, to ensure that federal agencies submit to GAO a  complete closing package, as required by the TFM as part of the  consolidation process, consisting of the  special purpose audit opinion,  management representation letter for the closing package,  audit trail report (reclassification journal voucher report),  closing package financial statement reports,  trading partner summary reports,  other data reports.
section_title: Intragovernmental Activity and Balances— Explanations for Material Unreconciled Differences
paragraphs: OMB and Treasury require federal agencies to reconcile selected  intragovernmental activity and balances with their “trading partners” and  report on the extent and results of the reconciliation efforts to Treasury. As  part of the reconciliation report, federal agencies were required to  categorize any material differences, as determined by Treasury, with their  trading partners at fiscal year-end within five categories: (1) confirmed  reporting (in which the agency is stating that it has confirmed its balance to  be correct); (2) accounting methodology differences; (3) accounting or  reporting errors; (4) timing difference—current year, timing difference— prior year; and (5) unknown/unreconciled. If a federal agency selects the  category “accounting methodology differences,” it is also required to  provide a detailed explanation. However, Treasury does not require federal  agencies to provide any detailed explanations for the material differences  reported in any other category selected. Lack of detailed explanations may  hinder efforts to identify and correct problems that federal agencies are  experiencing in reconciling with their trading partners.
subsections: section_title: Recommendation for Executive Action
paragraphs: As Treasury continues to make strides to address issues related to  intragovernmental transactions, we recommend that the Secretary of the  Treasury direct the Fiscal Assistant Secretary, working in coordination with  the Controller of OMB, to require that federal agencies provide detailed  explanations for all material differences identified in the intragovernmental  reconciliations.
section_title: Consistency of Justice’s and Agencies’ Opinions on Legal Cases
paragraphs: For each agency financial statement audit, generally accepted government  auditing standards require that the agency auditors obtain written legal  representations as part of the audit. Legal representation letters, along with  related management schedules, are essential to properly reporting the  possible effects of litigation on federal agency financial statements. Legal  counsel’s assessment of the likelihood of an unfavorable outcome and the  estimated potential losses on its agency’s cases are the basis for reporting  legal contingencies in the financial statements and making related  disclosures in the notes. Inconsistent assessments on the likelihood of an  unfavorable outcome or estimated potential losses for the same cases by  Justice and agency legal counsel limit both the ability of management to  determine the proper accounting treatment in the CFS in accordance with  GAAP and GAO’s ability to audit the CFS.
Generally, Justice is charged with the supervision of litigation to which the  U.S. government or its departments, agencies, officers, or employees are a  party and with providing advice and opinions to the President and the  heads of the executive departments of the U.S. government, when  requested. Accordingly, Justice has a special role in ensuring that we  receive legal representations to conduct our audit of the CFS in accordance  with generally accepted government auditing standards. During our audit,  we noted that the opinion of Justice’s legal counsel on certain agencies’  legal cases differed from the opinion of the respective individual federal  agencies’ legal counsel on such cases. For example, one agency estimated  its probable losses for certain cases, yet Justice’s legal counsel reported  that it was not able to estimate the potential losses for the same cases. In  another legal case involving multiple agencies, legal counsel from each of  the agencies had a differing assessment of the legal case’s outcome, while  Justice’s legal counsel was unable to provide an assessment. Treasury did  not have specific policies and procedures to address discrepancies of  opinion between Justice’s and applicable agencies’ legal counsel.
subsections: section_title: Recommendation for Executive Action
paragraphs: We recommend that the Secretary of the Treasury direct the Fiscal  Assistant Secretary, working in coordination with the Controller of OMB’s  Office of Federal Financial Management, to develop policies and  procedures to determine the proper resolution and the appropriate legal  representations to GAO at the governmentwide level when Justice’s legal  counsel and agencies’ legal counsel provide inconsistent opinions.
section_title: Conformity with U.S. Generally Accepted Accounting Principles
paragraphs: As we have reported in previous years, and noted again during our fiscal  year 2004 audit, Treasury lacks an adequate process to ensure that the  financial statements, related notes, stewardship information, and  supplemental information in the CFS are presented in conformity with  GAAP. Statement of Federal Financial Accounting Standards No. 24,  Selected Standards for the Consolidated Financial Report of the United  States Government, states that the Federal Accounting Standards Advisory  Board (FASAB) standards apply to all federal agencies, including the  U.S. government as a whole, unless provision is made for different  accounting treatment in a current or subsequent standard. In our prior  report, we recommended that the Secretary of the Treasury direct the  Fiscal Assistant Secretary to establish a formal process that will cause the  financial statements, related notes, stewardship information, and  supplemental information in the CFS to be presented in conformity with  GAAP in all material respects. The process should  timely identify GAAP requirements;  make timely modifications to Treasury’s closing package requirements  to obtain information needed;  assess, qualitatively and quantitatively, the impact of any omitted   document decisions reached and the rationale for such decisions.
However, during fiscal year 2004, Treasury did not implement our  recommendations. As a result of our prior audits, recommendations related  to 86 specific disclosures that may not have been in conformity with  applicable standards remain open. During our fiscal year 2004 audit, we  identified 6 additional specific disclosures required by applicable standards  that were not included in the CFS. These additional required disclosures  are described in appendix I. Treasury did not provide us with  documentation of its rationale for excluding this information. As a result of  this and certain of the material deficiencies identified during the fiscal year  2004 audit, we were unable to determine if the missing information was  material to the CFS. Treasury has not yet begun an annual process to  determine the proper GAAP disclosures. However, in an effort to begin  addressing this issue, Treasury collected certain additional note  information required by GAAP in its new process for fiscal year 2004.  However, due to the compressed time frames to compile the CFS and  because GFRS is still being developed, Treasury did not analyze such  information in preparing the fiscal year 2004 CFS. Treasury plans to analyze  this information in fiscal year 2005 and determine how or whether to  disclose this information in future years’ CFS.
subsections: section_title: Recommendations for Executive Action
paragraphs: With respect to the six specific disclosures related to three disclosure areas  identified in appendix I for which information was either not included in  the CFS or was presented in a way that did not meet GAAP standards, we  recommend that the Secretary of the Treasury direct the Fiscal Assistant  Secretary to include each of the six specific disclosures in the CFS or  document the specific rationale for excluding any of them.
section_title: Agency Comments and Our Evaluation
subsections: section_title: OMB Comments
paragraphs: In oral comments on a draft of this report, OMB stated that it generally  agreed with the new findings and related recommendations in this report.  In addition, OMB provided some technical comments, which we have  incorporated as appropriate.
section_title: Treasury Comments
paragraphs: In written comments on a draft of this report, which are reprinted in  appendix III, Treasury stated that it agrees that the reporting process still  needs improvement and that it is addressing many of the recommendations  in our previous reports. Treasury also stated that it generally concurs with  our new recommendations and that it will work with OMB and the federal  agencies to improve reporting practices. Also, Treasury asked that we  reconsider or modify our recommendations in three areas: (1) controls  over the compilation process, (2) consistency of Justice’s and agencies’  opinions on legal cases, and (3) directly linking audited federal agency  financial statements to the CFS. We modified recommendations in the first  two areas.
subsections: section_title: Controls over the Compilation Process
paragraphs: Treasury stated that it agrees that there are instances where it should  obtain agency approvals before changing federal agencies’ audited data  when compiling the CFS. However, Treasury also stated that it, as the  preparer of the CFS, needs the flexibility and authority to make appropriate  adjustments when needed regardless of whether federal agencies agree and  asked that we modify our recommendation accordingly. Treasury believes  that agency approval is not necessary when adjustments are required to  (1) make agency closing packages agree with their financial statements,  (2) apply a consistent application of an accounting principle between  agencies, and (3) make an agency conform to GAAP. In this regard, the  premise of the new compilation process is that the federal agencies’  audited closing package provides a direct link from agencies audited  financial statements to the CFS. Without that link, a timely and effective  audit is not possible. Federal agencies receive audit opinions on their  closing packages, and therefore, any adjustments that are necessary to  agencies’ audited closing package data should be discussed with the  agencies. Treasury is correct that certain circumstances may require  adjustments to agency closing package data. In such instances, Treasury  should contact agencies to resolve any discrepancies between agencies’  audited closing packages and audited financial statements and to discuss  any other situations that require adjustments to agencies’ audited closing  package data.
These communications should be documented and maintained as  supporting documentation for any resulting journal vouchers. This could  be done by e-mail. During our fiscal year 2004 audit of the CFS, we found  that Treasury did not have adequate supporting documentation for several  journal vouchers to adjust data submitted by agencies in their audited  closing packages. Treasury’s supporting documentation for some of these  journal vouchers was simply a printout from GFRS or a copy of a page from  an agency’s financial statements. The purpose of our recommendation is to  provide improved controls over adjustments made to federal agencies’  closing package data and was not intended to limit Treasury’s flexibility in  preparing the CFS. We have modified our recommendation to clarify our  intent that Treasury should contact and document communications with  agencies before recording journal vouchers to change agencies’ audited  closing package data.
section_title: Consistency of Justice’s and Agencies’ Opinions on Legal Cases
paragraphs: Treasury stated that with regard to the governmentwide legal letter,  Treasury and OMB have agreed that Justice is the final authority on legal  liabilities and disclosure amounts. Treasury also stated that it will work  with OMB to develop a policy to eliminate any inconsistencies between  Justice’s and the agencies’ opinions on legal cases. We have modified our  recommendation to reflect that Treasury and OMB will work jointly to  address the issue.
section_title: Directly Linking Audited Federal Agency Financial Statements to the CFS
paragraphs: Treasury stated that it recognizes the value and need for the CFS to be  consistent with the underlying agency financial statements, and it looks to  improve its process for compiling the CFS to allow for the expanded  traceability of the federal agencies’ audited financial statement note data to  the CFS notes. However, Treasury continues to disagree that additional  information should be collected through the closing package from federal  agencies’ audited financial statements to demonstrate consistency and  completeness of reporting for both the Reconciliation of Net Operating  Cost and Unified Budget Deficit and the Statement of Changes in Cash  Balance from Unified Budget and Other Activities—two of the five  principal financial statements.
Treasury acknowledged that problems with these two statements need to  be resolved, but does not believe that rolling up federal agencies’ reported  data will help to improve these statements. Treasury stated that the FASAB  standard related to the two statements makes clear that agency-reported  data are not relevant to these statements. We disagree with Treasury’s  underlying premise. While the FASAB standard does not require the CFS to  include the Statement of Budgetary Resources and Statement of Financing,  which are required financial statements at the agency level, the standard  should not be interpreted to mean that none of the information reported in  federal agency financial statements is relevant to the Reconciliation of Net  Operating Cost and Unified Budget Deficit and the Statement of Changes in  Cash Balance from Unified Budget and Other Activities. For example,  federal agencies report net outlays in their Statements of Budgetary  Resources, and net outlays for all federal agencies are reflected in the  budget deficit amount reported in the Reconciliation of Net Operating Cost  and Unified Budget Deficit and Statement of Changes in Cash Balance from  Unified Budget and Other Activities in the CFS. During our fiscal year 2004  audit, we identified material differences between net outlays reported by  the agencies and the records used by Treasury to report net outlays at the  consolidated level, totaling about $69 billion.
When differences arise between the amounts Treasury uses to compile the  CFS and related amounts federal agencies are reporting, it is important for  management of the federal government to understand and be able to  explain those differences and take corrective action where needed. For  fiscal year 2004, the Reconciliation of Net Operating Cost and Unified  Budget Deficit and Statement of Changes in Cash Balance from Unified  Budget and Other Activities included some amounts that Treasury could  not explain or fully support or for which Treasury could not demonstrate  the link to agencies’ audited financial statements. We continue to believe  that the process of directly linking relevant audited federal agencies’  financial statement information to these two financial statements would be  the most efficient and effective manner for Treasury, as the preparer of the  CFS, to obtain and demonstrate the necessary assurance on certain  information reported in such financial statements. As such, we have not  modified our recommendations in this area.
Treasury stated that it would welcome specific recommendations to  address problems with its Reconciliation of Net Operating Cost and Unified  Budget Deficit and Statement of Changes in Cash Balance from Unified  Budget and Other Activities. In this regard, we have previously provided  several specific recommendations to Treasury regarding the preparation  and reporting of these financial statements, and these recommendations  are included in appendix II of this report. Our recommendations are  intended to allow some flexibility in developing viable solutions to address  the issues. At the same time, we believe it is crucial that Treasury develop  corrective actions to address our recommendations now as it is still  designing and further implementing its new system and process for  compiling the CFS. Prolonging corrective actions could result in additional  costs to Treasury if it decides later to modify its new system to collect and  compile additional information.
This report contains recommendations to the Secretary of the Treasury  and the Director of OMB. The head of a federal agency is required by  31 U.S.C. 720 to submit a written statement on actions taken on these  recommendations. You should submit your statement to the Senate  Committee on Homeland Security and Governmental Affairs and the House  Committee on Government Reform within 60 days of the date of this  report. A written statement must also be sent to the House and Senate  Committees on Appropriations with the agency’s first request for  appropriations made more than 60 days after the date of the report.
We are sending copies of this report to the Chairmen and Ranking Minority  Members of the Senate Committee on Homeland Security and  Governmental Affairs; the Subcommittee on Federal Financial  Management, Government Information, and International Security, Senate  Committee on Homeland Security and Governmental Affairs; the House  Committee on Government Reform; and the Subcommittee on Government  Management, Finance, and Accountability, House Committee on  Government Reform. In addition, we are sending copies to the Fiscal  Assistant Secretary of the Treasury and the Deputy Director for  Management of OMB. Copies will be made available to others upon request.  This report is also available at no charge on GAO’s Web site at  http://www.gao.gov.
We acknowledge and appreciate the cooperation and assistance provided  by Treasury and OMB during our audit. If you or your staff have any  questions or wish to discuss this report, please contact Jeffrey C. Steinhoff,  Managing Director, Financial Management and Assurance, on  (202) 512-2600 or Gary T. Engel, Director, Financial Management and  Assurance, on (202) 512-3406.
section_title: Disclosure Issues
paragraphs: U.S. generally accepted accounting principles (GAAP) require the six  specific disclosures related to three disclosure areas described below to be  included in the consolidated financial statements (CFS), if material. If  management determines that the required disclosures need not be  included, the specific rationale for their exclusion should be sufficiently  documented. However, the Department of the Treasury (Treasury) neither  included the disclosures in the CFS nor provided documentation with the  rationale for exclusion of these required disclosures.
subsections: section_title: Federal Employee and Veteran Benefits Payable
paragraphs: Treasury did not disclose certain required information on the Department  of Veterans Affairs’ (VA) insurance benefit liabilities in the CFS. Such  information, as noted below, would include all components of the liability  for future policy benefits with a description of each amount and an  explanation of its projected use and any other potential uses for  noncancelable or renewable VA life insurance.
For noncancelable or renewable VA life insurance, Statement of Federal  Financial Accounting Standards (SFFAS) No. 5, Accounting for Liabilities  of the Federal Government, paragraph 110, table 9, states that all  components of the liability for future policy benefits should be separately  disclosed in a footnote with a description of each amount and an  explanation of its projected use and any other potential uses.
In accordance with SFFAS No. 5, paragraphs 117 and 118, all federal  reporting entities with whole life insurance programs should follow the  standards as prescribed in the private sector standards when reporting the  liability for future policy benefits, in addition to the following required  disclosures: liability for future policy benefits relating to participating life  insurance contracts should be equal to the sum of (1) the net level premium  reserve for death and endowment policy benefits, (2) the liability for  terminal dividends, and (3) any premium deficiency.
Additionally, SFFAS No. 5, paragraph 121, states that all components of the  liability for future policy benefits (i.e., the net-level premium reserve for  death and endowment policy and the liability for terminal dividends)  should be separately disclosed in a footnote with a description of each  amount and an explanation of its projected use and any other potential  uses (e.g., reducing premiums, determining and declaring dividends  available, or reducing federal support in the form of appropriations related  to administrative cost or subsidies).
section_title: Cash and Other Monetary Assets
paragraphs: The CFS note disclosure for cash and other monetary assets departed from  the disclosure requirements of SFFAS No. 1, Accounting for Selected  Assets and Liabilities, paragraph 30, which requires that financial reports  disclose the reasons for and nature of restricted cash. SFFAS No. 1 defines  restricted cash as restrictions usually imposed on cash deposits (in escrow  or other special accounts) by law, regulation, or agreement. Treasury did  not adequately ensure that the note disclosure relating to Cash and Other  Monetary Assets was presented in conformity with GAAP. Specifically,  while agencies are required by Treasury to describe in the closing package  the nature of the amount reported in the line item Other Cash, they are not  required to designate whether such cash is restricted.
In addition, cash held by certain agencies, although not restricted as it  relates to the operations of those agencies, could be legally or otherwise  restricted from a governmentwide perspective. For example, as disclosed  by the Pension Benefit Guaranty Corporation (PBGC), the Employee  Retirement Income Security Act of 1974 and the Pension Protection Act of  1987 established revolving funds in which premiums collected and held are  to be used for specific purposes related to the operations of PBGC. As  such, at the governmentwide level, the cash held by PBGC relating to these  revolving funds could be considered as restricted for governmentwide  reporting purposes. However, Treasury’s process did not require agencies  to designate any amounts reported for the “other cash” line items that are  restricted with respect to the federal government taken as a whole.
section_title: Other Liabilities
paragraphs: The CFS includes life insurance liabilities in the Other Liabilities line item.  However, the CFS did not report indicators of the range of uncertainty  around insurance-related estimates and the sensitivity of the estimates to  changes in major assumptions, in accordance with SFFAS No. 5,  paragraph 114.
section_title: Status of Treasury’s and OMB’s Progress in Addressing GAO’s Prior Year Recommendations for Preparing the CFS
paragraphs: This appendix includes open recommendations from two prior  GAO reports: Financial Audit: Process for Preparing the  Consolidated Financial Statements of the U.S. Government Needs  Improvement, GAO-04-45 (Oct. 30, 2003), and Financial Audit: Process  for Preparing the Consolidated Financial Statements of the  U.S. Government Needs Further Improvement, GAO-04-866 (Sept.  10, 2004). Recommendations that were closed in prior reports are not  included in this appendix. This appendix also includes the status of the  recommendations according to Treasury and the Office of Management and  Budget (OMB) and according to GAO. Explanations are included in the  GAO status of recommendations when Treasury and OMB disagreed with  our recommendation.
GAO-04-45 (results of the fiscal year 2002 audit)
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in connection with Treasury’s current  compilation process and the  development of Treasury’s new  compilation system and process, to  segregate the duties of individuals  who have the capability to enter,  change, and delete data within the  Federal Agencies’ Centralized Trial  Balance System (FACTS I) and the  Hyperion database and post  adjustments to the CFS.
Treasury established significant  policies and procedures to segregate  duties with the new fiscal year 2004  process. Treasury is currently  addressing the instances identified by  GAO and expects to address this  recommendation completely in fiscal  year 2005.
Closed during the fiscal year 2004  audit for FACTS I, but there are  segregation of duties issues with the  new process used during fiscal year  2004.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in connection with Treasury’s current  compilation process and the  development of Treasury’s new  compilation system and process, to  develop and fully document policies  and procedures for the CFS  preparation process so that they are  proper, complete, and consistently  applied by staff members.
Treasury developed substantial  documentation relative to our policies  and procedures for the new fiscal year  2004 process. Treasury is currently  addressing the instances identified by  GAO and expects to address this  recommendation completely in fiscal  year 2005.
Open.
As Treasury is designing its new  financial statement compilation  process to begin with the fiscal year  2004 CFS, the Secretary of the  Treasury should direct the Fiscal  Assistant Secretary, in coordination  with the Controller of OMB, to develop  reconciliation procedures that will aid  in understanding and controlling the  net position balance as well as  eliminate the plugs previously  associated with compiling the CFS.
This is a long-standing problem that  Treasury will continue analyzing.  However, Treasury designed a  process to eliminate  intragovernmental activity and  balances using formal balanced  accounting entries and developed a  model to provide an analysis of the  unreconciled transactions that affect  net position (plug) for fiscal year 2004.  Treasury will further analyze the  results of the 2004 process and  continue to work on this issue in 2005  by starting to establish the reciprocal  category for the General Fund and  analyzing the changes in net position  from the beginning of the year to the  end of the year to eliminate or explain  the adjustments to net position.
Open.
As Treasury is designing its new  financial statement compilation  process to begin with the fiscal year  2004 CFS, the Secretary of the  Treasury should direct the Fiscal  Assistant Secretary, in coordination  with the Controller of OMB, to use  balanced accounting entries to  account for the change in net position  rather than simple subtraction of  liabilities from assets.
See status of recommendation  No. 02-4.
Open.
As OMB continues to make strides to  address issues related to  intragovernmental transactions, the  Director of OMB should direct the  Controller of OMB to develop policies  and procedures that document how  OMB will enforce the business rules  provided in OMB Memorandum  M-03-01, Business Rules for  Intragovernmental Transactions.
OMB is reviewing the business rules  and also performing additional  analysis on several groupings of  intragovernmental transactions. Upon  the conclusion of the review and  analysis, OMB will determine how  best to proceed with the business  rules.
Open.
As OMB continues to make strides to  address issues related to  intragovernmental transactions, the  Director of OMB should direct the  Controller of OMB to require that  significant differences noted between  business partners be resolved and the  resolution be documented.
OMB and Treasury are performing  additional analysis on several  groupings of intragovernmental  transactions and will work with  individual agencies to resolve  imbalances. As part of OMB’s  standard practice, resolutions reached  will be communicated to all parties.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to implement the plan to require  federal agencies to report in  Treasury’s new closing package,  beginning with fiscal year 2004,  intragovernmental activity and  balances by trading partner and to  indicate amounts that have not been  reconciled with trading partners and  amounts, if any, that are in dispute.
Treasury is in the process of  identifying material differences so that  OMB and Treasury can work with  agencies to resolve differences. Also,  the Chief Financial Officers Council  Financial Reporting Acceleration  Committee has begun efforts to  identify issues and impediments to  intragovernmental reconciliations and  recommend solutions to mitigate  those issues.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to design procedures that will  account for the difference in  intragovernmental assets and  liabilities throughout the compilation  process by means of formal  consolidating and elimination  accounting entries.
See status of recommendation  No. 02-4.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to develop solutions for  intragovernmental activity and  balance issues relating to federal  agencies’ accounting, reconciling, and  reporting in areas other than those  OMB now requires be reconciled,  primarily areas relating to  appropriations.
See status of recommendation  No. 02-4.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to reconcile the change in  intragovernmental assets and  liabilities for the fiscal year, including  the amount and nature of all changes  in intragovernmental assets or  liabilities not attributable to cost and  revenue activity recognized during the  fiscal year. Examples of these  differences would include capitalized  purchases, such as inventory or  equipment, and deferred revenue.
See status of recommendation  No. 02-4.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to develop and implement a process  that adequately identifies and reports  items needed to reconcile net  operating cost and unified budget  surplus (or deficit). Treasury should  report “net unreconciled differences”  included in the net operating results  line item as a separate reconciling  activity in the reconciliation statement.
Treasury disagrees with GAO  on this item. No further action  is contemplated for this  recommendation.
Open. Treasury disagrees with all of  our recommendations regarding the  Statement of Changes in Cash  Balance from Unified Budget and  Other Activities and the  Reconciliations of Net Operating Cost  and Unified Budget Deficit even  though these statements include  some amounts that Treasury cannot  explain or fully support or for which  Treasury cannot demonstrate that the  amounts clearly link to agencies’  audited financial statements. Treasury  has not developed any alternative  solutions. We continue to believe that  implementation of our  recommendations would result in the  most efficient and effective manner for  Treasury, as the preparer of the CFS,  to obtain and demonstrate the  necessary assurance on the  significant amounts reported in the  Statement of Changes in Cash  Balance from Unified Budget and  Other Activities and the Reconciliation  of Net Operating Cost and Unified  Budget Deficit.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to develop and implement a process  that adequately identifies and reports  items needed to reconcile net  operating cost and unified budget  surplus (or deficit). Treasury should  develop policies and procedures to  ensure completeness of reporting and  document how all the applicable  components reported in the other  consolidated financial statements  (and related note disclosures included  in the CFS) were properly reflected in  the reconciliation statement.
Treasury disagrees with GAO  on this item. No further action  is contemplated for this  recommendation.
Open. In fiscal year 2004, Treasury  developed standard operating  procedures for preparing the  Reconciliations of the Net Operating  Cost and Budget Deficit and  Statement of Changes in Cash  Balance from Unified Budget and  Other Activities. However, the  procedures merely covered the  source of the information, with no  process for ensuring that  (1) information obtained was correct  and consistent with underlying agency  audited financial statements and  (2) reporting was complete.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to develop and implement a process  that adequately identifies and reports  items needed to reconcile net  operating cost and unified budget  surplus (or deficit). Treasury should  establish reporting materiality  thresholds for determining which  agency financial statement activities  to collect and report at the  governmentwide level to assist in  ensuring that the reconciliation  statement is useful and conveys  meaningful information.
Treasury disagrees with GAO  on this item. No further action  is contemplated for this  recommendation.
Open. The standard operating  procedures that Treasury developed  did not include considerations for  materiality thresholds in its financial  reporting or reconciling activities.
If Treasury chooses to continue using  information from both federal  agencies’ financial statements and the  Central Accounting and Reporting  System (STAR), Treasury should  demonstrate how the amounts from  STAR reconcile to federal agencies’  financial statements.
Treasury disagrees with GAO  on this item. No further action  is contemplated for this  recommendation.
Open. See status of recommendation  No. 02-12.
If Treasury chooses to continue using  information from both federal  agencies’ financial statements and  from STAR, Treasury should identify  and document the cause of any  significant differences, if any are  noted.
Treasury disagrees with GAO  on this item. No further action  is contemplated for this  recommendation.
Open. See status of recommendation  No. 02-12.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to develop and implement a  process to ensure that the Statement  of Changes in Cash Balance from  Unified Budget and Other Activities  properly reflects the activities reported  in federal agencies’ audited financial  statements. Treasury should  document the consistency of the  significant line items on this statement  to agencies’ audited financial  statements.
Treasury disagrees with GAO  on this item. This statement is not  prepared from the agency’s financial  statements. As cited in GAO-04-866,  p. 44, #3, para. 3: “It is important to  note that the “information” [referred to  in SFFAS 24, 9. SFFAS 7, paras. 77- 82] is not required therefore agency  budgetary data is not used nor was  ever contemplated to be used in our  reports. Treasury maintains the  source of original entry for budgetary  information in the STAR system and  consider the use of other data not only  less accurate but also a waste of  taxpayer resources to both obtain and  then correct the balances when  Treasury already has the information  at their finger tips. There are no  material differences between outlays  reported by us and those included in  the President’s Budget. The standard  does not require either receipts or  outlays.”
Open. See status of recommendation  No. 02-12.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to develop and implement a  process to ensure that the Statement  of Changes in Cash Balance from  Unified Budget and Other Activities  properly reflects the activities reported  in federal agencies’ audited financial  statements. Treasury should request,  through its closing package, that  federal agencies provide the net  outlays reported in their Combined  Statement of Budgetary Resources  and explanations for any significant  differences between net outlay  amounts reported in the Combined  Statement of Budgetary Resources  and the budget of the  U.S. government.
Treasury disagrees with GAO’s  recommendation to collect the agency  Statement of Budgetary Resources  outlay data through the Closing  Package process because Treasury  already collects agency outlay data for  budgetary reporting purposes.  Treasury and OMB are working  closely with the agencies to assure  that the outlays reported in their  Statement of Budgetary Resources  match the outlays reported to  Treasury for budgetary reporting  purposes.
Open. See status of recommendation  No. 02-12.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to develop and implement a  process to ensure that the Statement  of Changes in Cash Balance from  Unified Budget and Other Activities  properly reflects the activities reported  in federal agencies’ audited financial  statements. Treasury should  investigate the differences between  net outlays reported in federal  agencies’ Combined Statement of  Budgetary Resources and Treasury’s  records in STAR to ensure that the  proper amounts are reported in the  Statement of Changes in Cash  Balance from Unified Budget and  Other Activities.
See status of recommendation  No. 02-18.
Open. Material unexplained  differences between net outlays  reported by the agencies and the  central accounting records used to  report net outlays at the consolidated  level remained, totaling about  $69 billion in fiscal year 2004.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to develop and implement a  process to ensure that the Statement  of Changes in Cash Balance from  Unified Budget and Other Activities  properly reflects the activities reported  in federal agencies’ audited financial  statements. Treasury should explain  and document the differences  between the operating revenue  amount reported on the Statement of  Operations and Changes in Net  Position and unified budget receipts  reported on the Statement of  Changes in Cash Balance from  Unified Budget and Other Activities.
See status of recommendation  No. 02-17.
Open. In fiscal year 2004, there was a  $34.5 billion unexplained or  unreported difference between the  unified budget receipts as a  component of the deficit and the  modified cash operating revenue on  the Statement of Operations and  Changes in Net Position.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to develop and implement a  process to ensure that the Statement  of Changes in Cash Balance from  Unified Budget and Other Activities  properly reflects the activities reported  in federal agencies’ audited financial  statements. Treasury should provide  support for how the line items in the  “other activities” section of this  statement relate to either the  underlying Balance Sheet or related  notes accompanying the CFS.
Treasury disagrees with GAO  on this item. However, further  research and discussion will take  place in fiscal year 2005.
Open. See status of recommendation  No. 02-12.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to perform an assessment to  define the reporting entity, including its  specific components, in conformity  with the criteria issued by the Federal  Accounting Standards Advisory  Board. Key decisions made in this  assessment should be documented,  including the reason for including or  excluding components and the basis  for concluding on any issue. Particular  emphasis should be placed on  demonstrating that any financial  information that should be included  but is not included is immaterial.
Treasury’s Office of the Fiscal  Assistant Secretary (OFAS) has  developed an action plan for defining  the reporting entity. Treasury will  determine the relevant information not  currently received, and the Financial  Management Service will implement  changes OFAS identifies.
Open.
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.
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.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to establish a formal process that will  allow the financial statements, related  notes, and stewardship and  supplemental information in the CFS  to be presented in conformity with  GAAP. The process should timely  identify GAAP requirements.
Treasury developed and documented  a process to compare federal  accounting standards and the closing  package to ensure that all disclosures  are requested from federal agencies.  Treasury is currently analyzing the  reporting and modifying the CFS to  include GAAP requirements. Treasury  expects to address the majority of  these items in the 2005 CFS by  including the appropriate disclosures  in the CFS or documenting the  rationale for excluding inappropriate  disclosures.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to establish a formal process that will  allow the financial statements, related  notes, and stewardship and  supplemental information in the CFS  to be presented in conformity with  GAAP. The process should make  timely modifications to Treasury’s  closing package requirements to  obtain information needed.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to establish a formal process that will  allow the financial statements, related  notes, and stewardship and  supplemental information in the CFS  to be presented in conformity with  GAAP. The process should assess,  qualitatively and quantitatively, the  impact of the omitted disclosures.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to establish a formal process that will  allow the financial statements, related  notes, and stewardship and  supplemental information in the CFS  to be presented in conformity with  GAAP. The process should document  decisions reached and the rationale  for such decisions.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures for preparing the  governmentwide management  representation letter to help ensure  that it is properly prepared and  contains sufficient representations.  Specifically, these policies and  procedures should require an analysis  of the agency management  representations to determine if  discrepancies exist between what the  agency auditor reported and the  representations made by the agency,  including the resolution of such  discrepancies.
Discussions are ongoing with GAO as  to the use of the agencies’  management representation letters,  supplemented with other procedures.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures for preparing the  governmentwide management  representation letter to help ensure  that it is properly prepared and  contains sufficient representations.  Specifically, these policies and  procedures should require a  determination that the agency  management representation letters  have been signed by the highest-level  agency officials who are responsible  for and knowledgeable about the  matters included in the agency  management representation letters.
Treasury and OMB’s policy includes  the following sentence: “Items  included or not included in the  agencies’ rep letters will generally not  be challenged by Treasury and OMB  since they were obviously not a factor  in that agency’s audit and, therefore,  should not then rise to the  consolidated governmentwide audit  level.” Discussions are ongoing with  GAO as to the use of the agencies’  management representation letters,  supplemented with other procedures.
Open. The policies and procedures  discuss signatures on agency  management representation letters,  but do not include steps for Treasury’s  review of the signatures to determine  if the letters have been signed by the  highest-level agency officials who are  responsible for and knowledgeable  about the matters included in the  agency management representation  letters.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures for preparing the  governmentwide management  representation letter to help ensure  that it is properly prepared and  contains sufficient representations.  Specifically, these policies and  procedures should require an  assessment of the materiality  thresholds used by federal agencies in  their respective management  representation letters.
When preparing the governmentwide  management representation letter,  Treasury follows the guidance in  GAO’s Financial Audit Manual (FAM)  to calculate an amount for materiality.  The FAM is GAO’s guidance for those  entities that are performing audits of  federal entities. Treasury then  executes the following step, which is  written in Treasury and OMB’s policy:  “We check to ensure that the  materiality amounts cited by those  agencies who do quantitatively  discuss materiality are not larger than  the materiality cited in the FR  management representation letter.”
Open. In the fiscal years 2003 and  2004 audits, we reported a limitation  on the scope of our work due to  identified concerns with the adequacy  of certain federal agencies’  management representations, on  which Treasury and OMB depend to  provide their representations to us  regarding the CFS. These concerns  included the omission of materiality  thresholds. The policies and  procedures do not include steps to  obtain and assess materiality  thresholds from agencies that do not  quantitatively cite the amounts in their  management representation letters.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures for preparing the  governmentwide management  representation letter to help ensure  that it is properly prepared and  contains sufficient representations.  Specifically, these policies and  procedures should require an  assessment of the impact, if any, of  federal agencies’ materiality  thresholds on the management  representations made at the  governmentwide level.
When preparing the governmentwide  management representation letter,  Treasury follows the guidance in  GAO’s FAM to calculate an amount for  materiality. The FAM is GAO’s  guidance for those entities that are  performing audits of federal entities.  Treasury then executes the following  step, which is written in Treasury and  OMB’s policy: “We check to ensure  that the materiality amounts cited by  those agencies who do quantitatively  discuss materiality are not larger than  the materiality cited in the FR  management representation letter.”
Open. In the fiscal years 2003 and  2004 audits, we reported a limitation  on the scope of our work due to  identified concerns with the adequacy  of certain federal agencies’  management representations, on  which Treasury and OMB depend to  provide their representations to us  regarding the CFS. These concerns  included the omission of materiality  thresholds. The policies and  procedures do not include steps to  obtain and assess materiality  thresholds from agencies that do not  quantitatively cite the amounts in their  management representation letters. In  addition, the policies and procedures  are not sufficient to assess the impact  of agencies’ materiality thresholds on  the management representations  made at the governmentwide level.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures for preparing the  governmentwide management  representation letter to help ensure  that it is properly prepared and  contains sufficient representations.  Specifically, these policies and  procedures should require an  evaluation and assessment of the  omission of representations ordinarily  included in agency management  representation letters.
Treasury and OMB’s policy includes  the following sentence: “Items  included or not included in the  agencies’ rep letters will generally not  be challenged by Treasury and OMB  since they were obviously not a factor  in that agency’s audit and, therefore,  should not then rise to the  consolidated governmentwide audit  level.” Discussions are ongoing with  GAO as to the use of the agencies’  management representation letters,  supplemented with other procedures.
Open. In the fiscal years 2003 and  2004 audits, we reported a limitation  on the scope of our work due to  identified concerns with the adequacy  of certain federal agencies’  management representations, on  which Treasury and OMB depend to  provide their representations to us  regarding the CFS. These concerns  included the omission and  incompleteness of required  representations. The policies and  procedures do not include steps to  review the agencies’ management  representation letters for omitted or  incomplete representations. In  addition, the policies and procedures  do not include steps to assess the  impact of omitted or incomplete  representations on the  governmentwide management  representation letter.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures for preparing the  governmentwide management  representation letter to help ensure  that it is properly prepared and  contains sufficient representations.  Specifically, these policies and  procedures should require an analysis  and aggregation of the agencies’  summary of unadjusted  misstatements to determine the  completeness of the summaries and  to ascertain the materiality, both  individually and in the aggregate, of  such unadjusted misstatements to the  CFS taken as a whole.
Financial Management Service is  currently updating the standard  operating procedures for the  summaries of unadjusted  misstatements.
Open. In the fiscal years 2003 and  2004 audits, we reported a limitation  on the scope of our work due to  identified concerns with the adequacy  of certain federal agencies’  management representations, on  which Treasury and OMB depend to  provide their representations to us  regarding the CFS. These concerns  included the omission and  incompleteness of the summaries of  unadjusted misstatements, which are,  attached to the agencies  management representation letters.  The policies and procedures do not  include steps to ensure that all  summaries of unadjusted  misstatements have been received  from the agencies. In addition, the  policies and procedures do not  include steps to obtain information  missing from summaries submitted by  the agencies in order to adequately  prepare the governmentwide  summary of unadjusted  misstatements.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to help ensure that agencies  provide adequate information in their  legal representation letters regarding  the expected outcome of the cases.
OMB and Treasury will work to ensure  that adequate information is provided  in the legal representation letters  regarding the expected outcome of  cases.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to help ensure that agencies  provide related management  schedules.
OMB and Treasury will follow up with  agencies that have not provided their  management schedules to ensure  they do so.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures to help ensure that major  treaty and other international  agreement information is properly  identified and reported in the CFS.  Specifically, these policies and  procedures should require that  agencies develop a detailed schedule  of all major treaties and other  international agreements that obligate  the U.S. government to provide cash,  goods, or services, or that create  other financial arrangements that are  contingent on the occurrence or  nonoccurrence of future events (a  starting point for compiling these data  could be the State Department’s  Treaties in Force).
OMB will analyze the appropriateness  of reporting “treaties” before  developing specific corrective actions.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures to help ensure that major  treaty and other international  agreement information is properly  identified and reported in the CFS.  Specifically, these policies and  procedures should require that  agencies classify all such scheduled  major treaties and other international  agreements as commitments or  contingencies.
OMB will analyze the appropriateness  of reporting “treaties” before  developing specific corrective actions.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures to help ensure that major  treaty and other international  agreement information is properly  identified and reported in the CFS.  Specifically, these policies and  procedures should require that  agencies disclose in the notes to the  CFS amounts for major treaties and  other international agreements that  have a reasonably possible chance of  resulting in a loss or claim as a  contingency.
OMB will analyze the appropriateness  of reporting “treaties” before  developing specific corrective actions.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures to help ensure that major  treaty and other international  agreement information is properly  identified and reported in the CFS.  Specifically, these policies and  procedures should require that  agencies disclose in the notes to the  CFS amounts for major treaties and  other international agreements that  are classified as commitments and  that may require measurable future  financial obligations.
OMB will analyze the appropriateness  of reporting “treaties” before  developing specific corrective actions.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to establish written policies and  procedures to help ensure that major  treaty and other international  agreement information is properly  identified and reported in the CFS.  Specifically, these policies and  procedures should require that  agencies take steps to prevent major  treaties and other international  agreements that are classified as  remote from being recorded or  disclosed as probable or reasonably  possible in the CFS.
OMB will analyze the appropriateness  of reporting “treaties” before  developing specific corrective actions.
Open.
As Treasury is designing its new  compilation process, which it expects  to implement beginning with the fiscal  year 2004 CFS, the Secretary of the  Treasury should direct the Fiscal  Assistant Secretary, in coordination  with the Controller of OMB, to design  the new compilation process to  directly link information from federal  agencies’ audited financial statements  to amounts reported in all the  applicable CFS and related footnotes.
Treasury developed and implemented  the new compilation process, which  directly links agency audited financial  statements to the CFS except for  Reconciliation of Net Operating Cost  and Statements of Changes in Cash  Balance for fiscal year 2004. For fiscal  year 2005, for completeness, Treasury  will establish traceability from agency  audited financial statement footnotes  to the CFS footnotes.
Open. Treasury’s goal for the new  system is to directly link financial  information from federal agencies’  audited financial statements to  amounts reported in the CFS, a  concept that we strongly support.  However, based on our review of  Treasury’s new process, Treasury was  unable to demonstrate that the  information in the CFS directly linked  to agencies’ audited financial  statements.
As Treasury is designing its new  compilation process, which it expects  to implement beginning with the fiscal  year 2004 CFS, the Secretary of the  Treasury should direct the Fiscal  Assistant Secretary, in coordination  with the Controller of OMB, to  consider the other  applicable recommendations in this  report when designing and  implementing the new compilation  process.
Treasury will continue to consider  applicable recommendations as the  new compilation system is enhanced.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  Statement of Federal Financial  Accounting Standards (SFFAS) No. 3,  Accounting for Inventory and Related  Property, paragraph 91, which  requires the reporting entity to  disclose the valuation basis for  foreclosed property.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraph 91, which requires the  reporting entity to disclose the  changes from the prior year’s  accounting methods, if any.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraph 91, which requires the  reporting entity to disclose the  restrictions on the use/disposal of  property.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraph 91, which requires the  reporting entity to disclose the  balances by categories (i.e., pre-1992  and post-1991 foreclosed property).
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraph 91, which requires the  reporting entity to disclose the number  of properties held and average  holding period by type or category.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraph 91, which requires the  reporting entity to disclose the number  of properties for which foreclosure  proceedings are in process at the end  of the period for foreclosed assets  acquired in full or partial settlement of  a direct or guaranteed loan.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 9, which requires credit  programs to reestimate the subsidy  cost allowance for outstanding direct  loans and the liability for outstanding  loan guarantees. There are two kinds  of reestimates: (1) interest rate  reestimates and (2) technical/default  reestimates. Entities should measure  and disclose each program’s  reestimates in these two components  separately.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 10, which requires the  reporting entity to display in the notes  to the financial statements a  reconciliation between the beginning  and ending balances of the subsidy  cost allowance for outstanding direct  loans and the liability for outstanding  loan guarantees reported on the  entity’s balance sheet.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 11, which requires  disclosure of the total amount of direct  or guaranteed loans disbursed for the  current reporting year and the  preceding reporting year.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 11, which requires  disclosure of the subsidy expense by  components, recognized for the direct  or guaranteed loans disbursed in the  current reporting year and the  preceding reporting year.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 11, which requires  disclosure of the subsidy reestimates  by components for the current  reporting year and the preceding  reporting year.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 11, which requires  disclosure, at the program level, of the  subsidy rates for the total subsidy cost  and its components for the interest  subsidy costs, default costs (net of  recoveries), fees and other  collections, and other costs estimated  for direct loans and loan guarantees in  the current year’s budget for the  current year’s cohorts.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  loans receivable and loan guarantee  liabilities meets the requirements of  SFFAS No. 18, Amendments to  Accounting Standards for Direct  Loans and Loan Guarantees,  paragraph 11, which requires the  reporting entity to disclose, discuss,  and explain events and changes in  economic conditions, other risk  factors, legislation, credit policies, and  subsidy estimation methodologies and  assumptions that have had a  significant and measurable effect on  subsidy rates, subsidy expense, and  subsidy reestimates.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  inventories and operating materials  and supplies meets the requirements  of SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraph 30, which requires the  difference between the carrying  amount and the expected net  realizable value to be recognized as a  loss or gain and either separately  reported or disclosed when inventory  or operating materials and supplies  are declared excess, obsolete, or  unserviceable.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  inventories and operating materials  and supplies meets the requirements  of SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraphs 35 and 50, which require  disclosure of inventory and operating  materials and supplies general  composition.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  inventories and operating materials  and supplies meets the requirements  of SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraphs 35 and 50, that require  disclosure of any changes from the  prior year in accounting methods for  inventory and operating materials and  supplies.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  inventories and operating materials  and supplies meets the requirements  of SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraphs 35 and 50, which require  the disclosure of any restrictions on  the sale of inventory and the use of  operating materials and supplies.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  inventories and operating materials  and supplies meets the requirements  of SFFAS No. 3, Accounting for  Inventory and Related Property,  paragraphs 35 and 50, which requires  disclosure of any changes in the  criteria for categorizing inventory and  operating materials and supplies.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 56, which  requires disclosure of the basis for  valuing stockpile material, including  valuation method and any cost flow  assumptions.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 56, which  requires disclosure of any changes  from the prior year’s accounting  methods.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 56, which  requires disclosure of restrictions on  the use of stockpile material.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 56, which  requires disclosure of the balances in  each category of stockpile material  (i.e., stockpile material held and held  for sale).
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 56, which  requires disclosure of the criteria for  grouping stockpile material held  for sale.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 56, which  requires disclosure of changes in  criteria for categorizing stockpile  material held for sale.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stockpile material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 55, which  requires disclosure of any difference  between the carrying amount (i.e.,  purchase price or cost) of stockpile  material held for sale and the  estimated selling price of such assets.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  seized material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 66, which  requires disclosure of the valuation  method.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  seized material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 66, which  requires disclosure of any changes  from the prior year’s accounting  methods.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  seized material meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 66, which  requires disclosure of the analysis of  change in seized property (including  dollar value and number of seized  properties) that is on hand at the  beginning of the year, seized during  the year, disposed of during the year,  and on hand at the end of the year, as  well as known liens or other claims  against the property. This information  should be presented by type of  seizure and method of disposition,  when material.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  forfeited property meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 78, which  requires disclosure of the valuation  method.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  forfeited property meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 78, which  requires disclosure of the analysis of  the changes in forfeited property by  type and dollar amount that includes  (1) number of forfeitures on hand at  the beginning of the year,  (2) additions, (3) disposals and  method of disposition, and (4) end-of- year balances.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  forfeited property meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 78, which  requires disclosure of any restriction  on the use or disposition of the  property.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  forfeited property meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 78, which  requires disclosure, if available, of an  estimate of the value of property to be  distributed to other federal, state, and  local agencies in future reporting  periods.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  goods held under price support and  stabilization programs meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 98, which  requires that if a contingent loss is not  recognized because it is less than  probable or it is not reasonably  measurable, disclosure of the  contingency shall be made if it is at  least reasonably possible that a loss  may occur.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  goods held under price support and  stabilization programs meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 109, which  requires disclosure of the basis for  valuing commodities, including  valuation method and cost flow  assumptions.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  goods held under price support and  stabilization programs meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 109, which  requires disclosure of any changes  from the prior year’s accounting  methods.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  goods held under price support and  stabilization programs meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 109, which  requires disclosure of any restrictions  on the use, disposal, or sale of  commodities.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  goods held under price support and  stabilization programs meets the  requirements of SFFAS No. 3,  Accounting for Inventory and Related  Property, paragraph 109, which  requires disclosure of the analysis of  the change in dollar amount and  volume of commodities, including  those (1) on hand at the beginning of  the year, (2) acquired during the year,  (3) disposed of during the year listed  by method of disposition, (4) on hand  at the end of the year, (5) on hand at  year-end and estimated to be donated  or transferred during the coming  period, and (6) received as a result of  surrender of collateral related to  nonrecourse loans outstanding. The  analysis should also show the dollar  value and volume of purchase  agreement commitments.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  property, plant, and equipment  (PP&E) meets the disclosure  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraph 45, which  requires disclosure of the estimated  useful lives for each major class of  PP&E.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  PP&E meets the disclosure  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraph 45, which  requires disclosure of capitalization  thresholds, including any changes in  thresholds during the period.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  PP&E meets the disclosure  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraph 45, which  requires disclosure of restrictions on  the use or convertibility of general  PP&E.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  PP&E meets the disclosure  requirements of SFFAS No. 10,  Accounting for Internal Use Software,  paragraph 35, which requires  disclosure of the estimated useful life  for each major class of software for  internal use software.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  PP&E meets the disclosure  requirements of SFFAS No. 10,  Accounting for Internal Use Software,  paragraph 35, which requires  disclosure of the method of  amortization for internal use software.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  PP&E meets the disclosure  requirements of SFFAS No. 16,  Amendments to Accounting for  Property, Plant, and Equipment,  paragraph 9, which requires an  appropriate PP&E note disclosure to  explain that “physical quantity”  information for the multiuse heritage  assets is included in supplemental  stewardship reporting for heritage  assets.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  federal employee and veteran benefits  payable is completely and properly  reported, specifically, that (1) it  include a line for the valuation of plan  amendments that occurred during the  year and (2) the liability for military  pensions and note disclosure related  to the “change in actuarial accrued  pension liability and components of  related expenses” agree with the  information presented in the  Department of Defense’s financial  statements.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  environmental and disposal liabilities  meets the requirements of SFFAS  No. 6, Accounting for Property, Plant,  and Equipment, which requires  (1) estimation and recognition of  cleanup costs associated with general  PP&E at the time the PP&E is placed  in service and (2) recognition of a  liability for the portion of the estimated  total cleanup cost attributable to that  portion of the physical capacity used  or that portion of the estimated useful  life that has passed since the general  PP&E was placed in service.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  environmental and disposal liabilities  meets the requirements of SFFAS  No. 6, Accounting for Property, Plant,  and Equipment, which requires  inclusion of material changes in total  estimated cleanup costs due to  changes in laws, technology, or plans.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  capital leases meets the requirements  of Federal Accounting Standards  Board (FASB), Statement of Financial  Accounting Standards (SFAS) No. 13,  Accounting for Leases, paragraph 16,  which requires future minimum lease  payments as of the date of the latest  balance sheet presented, in the  aggregate and for each of the 5  succeeding fiscal years, with separate  deductions from the total for the  amount representing executory costs,  including any profit thereon, included  in the minimum lease payments, and  for the amount of the imputed interest  necessary to reduce the net minimum  lease payments to present value.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  capital leases meets the requirements  of FASB, SFAS No. 13, Accounting for  Leases, paragraph 16, which requires  a summary of assets under capital  lease by major asset category and the  related total accumulated  amortization.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  capital leases meets the requirements  of FASB, SFAS No. 13, Accounting for  Leases, paragraph 16, which requires  a general description of the lessee’s  leasing arrangements, including but  not limited to (1) the basis on which  contingent rental payments are  determined; (2) the existence and  terms of renewal or purchase options  and escalation clauses; and  (3) restrictions imposed by lease  agreements, such as those  concerning dividends, additional debt,  and further leasing.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  life insurance liabilities meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 117,  which requires all federal reporting  entities with whole life insurance  programs to follow applicable  standards as prescribed in the private  sector standards when reporting the  liability for future policy benefits: FASB  SFAS No. 60, Accounting and  Reporting by Insurance Enterprises;  SFAS No. 97, Accounting and  Reporting by Insurance Enterprises  for Certain Long-Duration Contracts  and for Realized Gains and Losses  from the Sale of Investments; SFAS  No. 120, Accounting and Reporting by  Mutual Life Insurance Enterprises and  by Insurance Enterprises for Certain  Long-Duration Participating  Contracts; and American Institute of  Certified Public Accountants  Statement of Position 95-1,  Accounting for Certain Insurance  Activities of Mutual Life Insurance  Enterprises.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  life insurance liabilities meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 5,  which requires all components of the  liability for future policy benefits (i.e.,  the net-level premium reserve for  death and endowment policies and  the liability for terminal dividends) to  be separately disclosed in a footnote  with a description of each amount and  an explanation of its projected use  and any other potential uses (e.g.,  reducing premiums, determining and  declaring dividends available, and  reducing federal support in the form of  appropriations related to  administrative cost or subsidies).
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure on  major commitments and  contingencies is consistent with  disclosed information in individual  agencies’ financial statements.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure on  major commitments and  contingencies discloses sufficient  information (detailed discussion)  regarding certain major commitments  and contingencies.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  collections and refunds of federal  revenue meets the requirements of  SFFAS No. 7, Concepts for  Reconciling Budgetary and Financial  Accounting, paragraph 69.2, which  requires collecting entities to provide  in the other accompanying information  any relevant estimates of the annual  tax gap that become available as a  result of federal government surveys  or studies.
See status of recommendation  No. 02-25.
Open.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  dedicated collections meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires inclusion of condensed  information about assets and liabilities  showing investments in Treasury  securities, other assets, liabilities due  and payable to beneficiaries, other  liabilities, and fund balance.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  dedicated collections meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires inclusion of condensed  information on net cost and changes  to fund balance, showing revenues by  type (exchange/nonexchange),  program expenses, other expenses,  other financing sources, and other  changes in fund balance.
See status of recommendation  No. 02-25.
02-102 The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  dedicated collections meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires inclusion of any  revenues, other financing sources, or  costs attributable to the fund under  accounting standards but not legally  allowable as credits or charges to  the fund.
See status of recommendation  No. 02-25.
Open.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  Indian trust funds meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires a description of each  fund’s purpose, how the administrative  entity accounts for and reports the  fund, and its authority to use those  collections.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  Indian trust funds meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires disclosure of the  sources of revenue or other financing  for the period and an explanation of  the extent to which they are inflows of  resources to the government or the  result of intragovernmental flows.
See status of recommendation  No. 02-25.
02-105 The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  Indian trust funds meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires condensed information  about assets and liabilities showing  investments in Treasury securities,  other assets, liabilities due and  payable to beneficiaries, and other  liabilities.
See status of recommendation  No. 02-25.
Open.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  Indian trust funds meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires condensed information  on net cost and changes to fund  balance, showing revenues by type  (exchange/nonexchange), program  expenses, other expenses, other  financing sources, and other changes  in fund balance.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  Indian trust funds meets the  requirements of SFFAS No. 7, Part I,  Accounting for Revenue and Other  Financing Sources, paragraph 85,  which requires disclosure of any  revenues, other financing sources, or  costs attributable to the fund under  accounting standards, but not legally  allowable as credits or charges to  the fund.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  social insurance meets the  requirements of SFFAS No. 17,  Accounting for Social Insurance,  paragraph 32(4), which requires  individual program sensitivity  analyses for projection period cash  flow in present value dollars and  annual cash flow in nominal dollars.  The CFS includes only present value  sensitivity analyses for Social Security  and Hospital Insurance. Paragraph  32(4) states that at a minimum the  summary should present Social  Security, Hospital Insurance, and  Supplementary Medical Insurance  separately.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  social insurance meets the  requirements of SFFAS No. 17,  Accounting for Social Insurance,  paragraph 27(4)(a), which requires  the individual program sensitivity  analyses for Social Security and  Hospital Insurance to include an  analysis of assumptions regarding net  immigration.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  nonfederal physical property included  in stewardship information meets the  requirements of SFFAS No. 8,  Supplementary Stewardship  Reporting, paragraph 87, which  requires disclosure of the annual  investment, including a description of  federally owned physical property  transferred to state and local  governments. This information should  be provided for the year ended on the  balance sheet date as well as for each  of the 4 preceding years. If data for  additional years would provide a  better indication of investment,  reporting of the additional years’ data  is encouraged. Reporting should be at  a meaningful category or level.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  nonfederal physical property included  in stewardship information meets the  requirements of SFFAS No. 8,  Supplementary Stewardship  Reporting, paragraph 87, which  requires a description of major  programs involving federal  investments in nonfederal physical  property, including a description of  programs or policies under which  noncash assets are transferred to  state and local governments.
See status of recommendation  No. 02-25.
02-120 The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  human capital included in stewardship  information meets the requirements of  SFFAS No. 8, Supplementary  Stewardship Reporting, paragraph 94,  which requires a narrative description  and the full cost of the investment in  human capital for the year being  reported on as well as the preceding  4 years (if full cost data are not  available, outlay data can be  reported).
See status of recommendation  No. 02-25.
Open.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  human capital included in stewardship  information meets the requirements of  SFFAS No. 8, Supplementary  Stewardship Reporting, paragraph 94,  which requires the full cost or outlay  data for investments in human capital  at a meaningful category or level (e.g.,  by major program, agency, or  department).
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  human capital included in stewardship  information meets the requirements of  SFFAS No. 8, Supplementary  Stewardship Reporting, paragraph 94,  which requires a narrative description  of major education and training  programs considered federal  investments in human capital.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  research and development included in  stewardship information meets the  requirements of SFFAS No. 8,  Supplementary Stewardship  Reporting, paragraph 94, which  requires reporting of the annual  investment made in the year ended on  the balance sheet date as well as in  each of the 4 years preceding that  year. (As defined in this standard,  “annual investment” includes more  than the annual expenditure reported  by character class for budget  execution. Full cost shall be measured  and accounted for in accordance with  SFFAS No. 4, Managerial Cost  Accounting Standards for the Federal  Government.) If data for  additional years would provide a  better indication of investment,  reporting of the additional years’ data  is encouraged. In those unusual  instances when entities have no  historical data, only current reporting  year data need be reported.  Reporting must be at a meaningful  category or level, for example, a major  program or department.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  research and development included in  stewardship information meets the  requirements of SFFAS No. 8,  Supplementary Stewardship  Reporting, paragraph 94, which  requires a narrative description of  major research and development  programs.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  deferred maintenance meets the  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraphs 83 and 84,  which requires inclusion of the method  of measuring deferred maintenance  for each major class of PP&E.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  deferred maintenance meets the  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraphs 83 and 84,  which requires that if the condition  assessment survey method of  measuring deferred maintenance is  used, the following should be  presented for each major class of  PP&E: (1) description of requirements  or standards for acceptable operating  condition, (2) any changes in the  condition requirements or standards,  and (3) asset condition and a range  estimate of the dollar amount of  maintenance needed to return the  asset to its acceptable operating  condition.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  deferred maintenance meets the  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraphs 83 and 84,  which requires that if the total life- cycle cost method is used, the  following should be presented for  each major class of PP&E: (1) the  original date of the maintenance  forecast and an explanation for any  changes to the forecast; (2) prior year  balance of the cumulative deferred  maintenance amount; (3) the dollar  amount of maintenance that was  defined by the professionals who  designed, built, or managed the PP&E  as required maintenance for the  reporting period; (4) the dollar amount  of maintenance actually performed  during the period; (5) the difference  between the forecast and actual  maintenance; (6) any adjustments to  the scheduled amounts deemed  necessary by the managers of the  PP&E; and (7) the ending cumulative  balance for the reporting period for  each major class of asset  experiencing deferred maintenance.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary,  to ensure that the note disclosure for  deferred maintenance meets the  requirements of SFFAS No. 6,  Accounting for Property, Plant, and  Equipment, paragraphs 83 and 84,  which requires that if management  elects to disclose critical and  noncritical amounts, the disclosure is  to include management’s definition of  these categories.
See status of recommendation  No. 02-25.
See status of recommendation  No. 02-25.
Open. direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  stewardship responsibilities related to  the risk assumed for federal insurance  and guarantee programs meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 106,  which requires that when financial  information pursuant to FASB  standards on federal insurance and  guarantee programs conducted by  government corporations is  incorporated in general purpose  financial reports of a larger federal  reporting entity, the entity should  report as required supplementary  information what amounts and  periodic change in those amounts  would be reported under the “risk  assumed” approach.
GAO-04-866 (results of the fiscal year 2003 audit)
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that if full-time equivalents  (FTE) are used as part of Treasury’s  methodology for allocating Office of  Personnel Management (OPM) costs,  the FTEs used for the agencies listed  on the Statement of Net Cost agree  with the FTEs listed in the Analytical  Perspectives, Budget of the United  States Government as currently  stated in Treasury’s methodology.
Closed.
Closed during the fiscal year 2004  audit. Treasury changed its  methodology and did not use the  FTEs listed in the Analytical  Perspectives, Budget of the United  States Government.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to document any changes to the  stated methodology for allocating  OPM costs and the rationale for these  changes.
Closed.
Closed during the fiscal year 2004  audit. Treasury changed its  methodology and did not use the  FTEs listed in the Analytical  Perspectives, Budget of the United  States Government.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to require reviews by Treasury  management of the accuracy of the  allocated OPM costs.
Closed.
Closed during the fiscal year 2004  audit. Treasury changed its  methodology and did not use the  FTEs listed in the Analytical  Perspectives, Budget of the United  States Government.
The Director of OMB should direct the  Controller of OMB, in coordination  with Treasury’s Fiscal Assistant  Secretary, to work with the federal  agencies so that the differences  between net outlays the agencies  report in their Statement of Budgetary  Resources and the net outlay records  Treasury uses to prepare the  Statement of Changes in Cash  Balance are reconciled.
See status of recommendation  No. 02-18.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to determine and address the effects  that any of the differences between  net outlays the agencies report in their  Statement of Budgetary Resources  and Treasury’s net outlay records may  have on the CFS.
Treasury will wait to see the results of  the work between Treasury, OMB, and  the agencies to address GAO’s  recommendation for No. 02-18.  Pending the results of that work and  analysis, this step may not be  necessary.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to develop a process that will allow full  reporting of the changes in cash  balance of the U.S. government.  Specifically, the process should  provide for reporting on the change in  cash reported on the consolidated  balance sheet, which should be linked  to cash balances reported in federal  agencies’ audited financial  statements.
Treasury disagrees with GAO. The  total operating cash reported in the  2004 CFS was linked to the amounts  reported in the agencies’ audited  financial statements. The Statement  of Changes in Cash Balance  reconciles to Operating Cash, which is  in accordance with SFFAS 24. SFFAS  24, paras. 12-13, requires  reconciliation to the Government  Cash balance. It also references an  illustration that is not prescriptive.
Open. The Statement of Changes in  Cash Balance reported only the  changes in the “operating” cash of the  U.S. government of $19.8 billion  rather than the change in all cash  reported on the U.S. government’s  Balance Sheet of $22.6 billion, as of  September 30, 2004.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to report gross amounts for receipts  and disbursements of cash related to  direct loans and loan guarantees.
Treasury disagrees with GAO  on this item. However, further  research and discussion will take  place in fiscal year 2005.
Open. See status of recommendation  No. 02-12.
The Director of OMB should direct the  Controller of OMB, in coordination  with Treasury’s Fiscal Assistant  Secretary, to work with Justice and  certain other executive branch  agencies to ensure that these  agencies report or disclose relevant  criminal debt information in conformity  with GAAP in their financial  statements and have such information  subjected to audit.
OMB is participating in a multi-agency  task force that will begin to address  the issues related to criminal debt.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to include relevant criminal debt  information in the CFS or document  the specific rationale for excluding  such information.
See status of recommendation  No. 03-8.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to include in the new system a request  for federal agencies to provide  contingency loss information to assist  Treasury in disclosing contingencies  in the CFS in accordance with GAAP.
Treasury plans to modify the new  system to request contingency loss  information for fiscal year 2005.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  in coordination with the Controller of  OMB, to modify Treasury’s plans for  the new closing package to (1) require  federal agencies to directly link their  audited financial statement notes to  the CFS notes and (2) provide the  necessary information to demonstrate  that all of the five principal  consolidated financial statements are  consistent with the underlying  information in federal agencies’  audited financial statements and other  financial data.
See status of recommendation  No. 02-42.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to report prior period adjustments in  accordance with SFFAS No. 21 by  (1) restating the prior year for  corrections of material errors and  adjusting the beginning balance of  cumulative results of operations and  disclosing the nature of the errors in  the notes to the CFS and (2) including  corrections of immaterial errors in the  current year and not citing them as  prior period adjustments on the  Statement of Changes in Net Position  and not disclosing them in the notes to  the CFS.
Closed.
Closed during the fiscal year 2004  audit.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to include in Treasury’s new closing  package a process that will allow  federal agencies to clearly distinguish  between prior period adjustments and  changes in accounting principles in  accordance with SFFAS No. 21.
Closed.
Closed during the fiscal year 2004  audit.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  to ensure that the note disclosure for  federal employees and veterans  benefits payable meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 65,  which requires that the actuarial  assumptions be the basis of the actual  experience of the covered group, to  the extent that credible experience  data are available, but should  emphasize expected long-term future  trends rather than give undue weight  to recent experience.
Closed.
Closed during the fiscal year 2004  audit.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary,  to ensure that the note disclosure for  federal employees and veterans  benefits payable meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 83,  which requires the reporting entity to  disclose the assumptions used for  veterans compensation and burial  benefits.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  federal employees and veterans  benefits payable meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 72,  which requires the reporting entity to  disclose prior service costs from plan  amendments as a separate  component.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  federal employees and veterans  benefits payable meets the  requirements of SFFAS No. 5,  Accounting for Liabilities of the  Federal Government, paragraph 88,  which requires the reporting entity to  disclose gains or losses due to a  change in the medical inflation rate  assumption for health benefits as a  separate component.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  environmental and disposal liabilities  meets the requirements of SFFAS  No. 6, Accounting for Property, Plant,  and Equipment, which requires the  reporting entity to disclose the method  for assigning estimated total cleanup  costs to current operating periods.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  environmental and disposal liabilities  meets the requirements of SFFAS  No. 6, Accounting for Property, Plant,  and Equipment, which requires the  reporting entity to disclose, for  cleanup costs associated with general  property, plant, and equipment, the  unrecognized portion of estimated  total cleanup costs be disclosed.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the note disclosure for  environmental and disposal liabilities  meets the requirements of SFFAS  No. 6, Accounting for Property, Plant,  and Equipment, which requires the  reporting entity to disclose the nature  of estimates and information  regarding possible changes to the  estimates resulting from inflation,  deflation, technology, or applicable  laws and regulations.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to consider whether the reader would  be interested in understanding why  the environmental and disposal  liabilities amount significantly changed  during the year and include the  explanation for the change in the note  disclosure.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the information in  stewardship information for research  and development meets the  requirements of SFFAS No. 8,  Supplementary Stewardship  Reporting, paragraph 99, which  requires the reporting entity to include  a narrative discussion of the major  results achieved by the program along  the lines of basic research, applied  research, and development.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the information in  stewardship information for research  and development meets the  requirements of SFFAS No. 8,  Supplementary Stewardship  Reporting, paragraph 99, which  requires the reporting entity to include  a narrative description of the major  results achieved through the  investments in basic research, applied  research, and development.
See status of recommendation  No. 02-25.
Open.
The Secretary of the Treasury should  direct the Fiscal Assistant Secretary  to ensure that the required  supplemental information for deferred  maintenance meets the requirements  of SFFAS No. 6, Accounting for  Property, Plant, and Equipment,  paragraph 83, which requires the  reporting entity to disclose the  identification of each major class of  asset (i.e., building and structures,  furniture and fixtures, equipment,  vehicles, and land) for which  maintenance has been deferred.
See status of recommendation  No. 02-25.
Open.
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