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entitled 'Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Continues to Need 
Improvement' which was released on May 5, 2005.

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Report to the Secretary of the Treasury and the Director of the Office 
of Management and Budget: 

May 2005: 

Financial Audit: 

Process for Preparing the Consolidated Financial Statements of the U.S. 
Government Continues to Need Improvement: 

GAO-05-407: 

GAO Highlights: 

Highlights of GAO-05-407, a report to the Secretary of the Treasury and 
the Director of the Office of Management and Budget: 

Why GAO Did This Study: 

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.

What GAO Found: 

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 the following six areas: 

* 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.

What GAO Recommends: 

GAO is making 20 new recommendations to address compilation and 
reporting weaknesses identified during the fiscal year 2004 CFS audit. 
Treasury and the Office of Management and Budget stated that they 
generally concur with the findings in the report. Treasury also stated 
that it is addressing many of the recommendations from GAO’s prior 
reports.

www.gao.gov/cgi-bin/getrpt?GAO-05-407.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Gary T. Engel at (202) 
512-3406 or engelg@gao.gov.

[End of section]

Contents: 

Letter: 

Results in Brief: 

Scope and Methodology: 

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 Differences: 

Consistency of Justice's and Agencies' Opinions on Legal Cases: 

Conformity with U.S. Generally Accepted Accounting Principles: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Disclosure Issues: 

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

Appendix III: Comments from the Department of the Treasury: 

Abbreviations: 

CFS: consolidated financial statements of the U.S. government: 

FASAB: Federal Accounting Standards Advisory Board: 

GAAP: generally accepted accounting principles: 

GFRS: Governmentwide Financial Reporting System: 

Justice: Department of Justice: 

OMB: Office of Management and Budget: 

PBGC: Pension Benefit Guaranty Corporation: 

SFFAS: Statement of Federal Financial Accounting Standards: 

TFM: Treasury Financial Manual: 

Treasury: Department of the Treasury: 

VA: Department of Veterans Affairs: 

Letter May 4, 2005: 

The Honorable John W. Snow: 
The Secretary of the Treasury: 

The Honorable Joshua B. Bolten: 
Director, Office of Management and Budget: 

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.[Footnote 1] 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.

Results in Brief: 

We identified weaknesses in the compilation and reporting processes 
during our fiscal year 2004 audit. Specifically, we found that: 

* 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;

* Treasury's process for compiling the CFS has weaknesses in internal 
control, including a lack of adequate segregation of duties and 
management reviews of certain key data;

* Treasury did not provide clear guidance to federal agencies about 
certain financial information that they were required to provide 
Treasury to be compiled in the CFS and Treasury and the Office of 
Management and Budget (OMB) did not perform follow-up procedures to 
ensure we had all the necessary audit documentation to perform certain 
of our audit procedures relating to the compilation of the CFS;

* Treasury does not require federal agencies to provide detailed 
explanations for all material differences identified in the 
intragovernmental reconciliations that Treasury and OMB require the 
agencies to perform;

* Treasury does not have specific policies and procedures to address 
discrepancies of opinion between the Department of Justice's (Justice) 
and applicable federal agencies' legal counsel for purposes of 
providing legal representations to us at the governmentwide level; and: 

* Treasury continues to lack an adequate process to ensure that the 
financial statements, related notes, stewardship information, and 
supplementary information in the CFS are presented in conformity with 
GAAP.

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.

This report includes 20 new recommendations to address the weaknesses 
we identified during our fiscal year 2004 CFS audit, including 6 
related to three required GAAP disclosure areas identified in appendix 
I. Consistent with our position on previously identified disclosure 
weaknesses, we are recommending that the required disclosures that are 
not included in the fiscal year 2004 CFS either be included in future 
years' CFS or that the specific basis for their exclusion be 
documented. Appendix II of this report reflects the status of actions 
taken as of December 6, 2004, the date of completion of our fieldwork 
on our fiscal year 2004 CFS audit, to address the open recommendations 
from our previous reports and shows that 135 recommendations contained 
in our prior reports remain open and 7 were closed during our fiscal 
year 2004 audit. However, 86 of these 135 recommendations relate to 
specific disclosures required under GAAP. Treasury has taken action to 
begin addressing the conformity with GAAP issue. We plan to determine 
the status of corrective actions to address our open recommendations 
during our fiscal year 2005 audit of the CFS.

OMB stated that it generally agreed with the new findings and related 
recommendations in this report. 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.

With regard to controls over the compilation process, 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 stated that it agrees that there are 
instances where it should obtain agency approvals before changing 
federal agencies' audited data when compiling the CFS, but it needs the 
flexibility and authority to make appropriate adjustments when needed 
regardless of whether agencies agree and asked that we modify our 
recommendation accordingly. Treasury believes that agency approval is 
not necessary when certain adjustments to agencies' closing package 
data are made. Treasury is correct that certain circumstances may 
require adjustments to agency closing package data. In such instances, 
we believe that Treasury should contact agencies to resolve any 
discrepancies between agencies' audited closing packages and audited 
financial statements and discuss any other situations that require 
adjustments to agencies' audited closing package data. The purpose of 
our recommendation was to provide improved controls over adjustments 
made to agencies' data and was not intended to limit Treasury's 
flexibility in preparing the CFS. We have modified our recommendation 
to clarify our intent.

With regard to consistency of Justice's and agencies' opinions on legal 
cases, Treasury stated that it and OMB have agreed that Justice is the 
final authority on legal liabilities and disclosure amounts at the 
governmentwide level. Treasury also stated that it will work with OMB 
to develop a policy to eliminate any inconsistencies between Justice's 
and federal agencies' opinions on legal cases. We have modified our 
recommendation to reflect that Treasury and OMB will work jointly to 
address the issue.

With regard to directly linking audited federal agency financial 
statements to the CFS, Treasury continues to disagree that additional 
information should be collected 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. For fiscal year 2004, these two 
financial statements 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.

Scope and Methodology: 

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.

Directly Linking Audited Federal Agency Financial Statements to the 
CFS: 

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,[Footnote 2] 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[Footnote 3] 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.

Controls over the Compilation Process: 

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[Footnote 4] 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.

Segregation of Duties: 

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 
financial statements,

* 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.

Appropriate Documentation of Transactions and Internal Control: 

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,[Footnote 5] 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 
packages;

* 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.

Management Review: 

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.

Access Controls over Information Systems: 

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.

Financial Reporting Infrastructure: 

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.

Recommendations for Executive Action: 

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.

Consolidated Reporting Guidance to Agencies: 

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.

Recommendations for Executive Action: 

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;

* contingencies; and: 

* 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,

* notes reports, and: 

* other data reports.

Intragovernmental Activity and Balances--Explanations for Material 
Unreconciled Differences: 

OMB and Treasury require federal agencies to reconcile selected 
intragovernmental activity and balances with their "trading 
partners"[Footnote 6] 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.

Recommendation for Executive Action: 

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.

Consistency of Justice's and Agencies' Opinions on Legal Cases: 

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,[Footnote 7] 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.

Recommendation for Executive Action: 

We recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB'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.

Conformity with U.S. Generally Accepted Accounting Principles: 

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,[Footnote 8] 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 
disclosures;[Footnote 9] and: 

* 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.

Recommendations for Executive Action: 

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.

Agency Comments and Our Evaluation: 

OMB Comments: 

In oral comments on a draft of this report, OMB stated that it 
generally agreed with the new findings and related recommendations in 
this report. In addition, OMB provided some technical comments, which 
we have incorporated as appropriate.

Treasury Comments: 

In written comments on a draft of this report, which are reprinted in 
appendix 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.

Controls over the Compilation Process: 

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.

Consistency of Justice's and Agencies' Opinions on Legal Cases: 

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.

Directly Linking Audited Federal Agency Financial Statements to the 
CFS: 

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.[Footnote 
10] 

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.[Footnote 
11] 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 [Hyperlink, 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.

Signed by: 

David M. Walker: 
Comptroller General of the United States: 

[End of section]

Appendixes: 

Appendix I: Disclosure Issues: 

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.

Federal Employee and Veteran Benefits Payable: 

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).

Cash and Other Monetary Assets: 

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.

Other Liabilities: 

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.

[End of section]

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

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, 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-45] (Oct. 30, 
2003), and Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Needs Further Improvement, 
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?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): 

Count: 1; 
No.: 02-1; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: 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.

Count: 2; 
No.: 02-2; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 3; 
No.: 02-4; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 4; 
No.: 02-5; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-4; 
Status of recommendations: Per GAO: Open.

Count: 5; 
No.: 02-6; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 6; 
No.: 02-7; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 7; 
No.: 02-8; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 8; 
No.: 02-9; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-4; 
Status of recommendations: Per GAO: Open.

Count: 9; 
No.: 02-10; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-4; 
Status of recommendations: Per GAO: Open.

Count: 10; 
No.: 02-11; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-4; 
Status of recommendations: Per GAO: Open.

Count: 11; 
No.: 02-12; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. No further action is contemplated for this 
recommendation; 
Status of recommendations: Per GAO: 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.

Count: 12; 
No.: 02-13; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. No further action is contemplated for this 
recommendation; 
Status of recommendations: Per GAO: 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.

Count: 13; 
No.: 02-14; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. No further action is contemplated for this 
recommendation; 
Status of recommendations: Per GAO: Open. The standard operating 
procedures that Treasury developed did not include considerations for 
materiality thresholds in its financial reporting or reconciling 
activities.

Count: 14; 
No.: 02-15; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. No further action is contemplated for this 
recommendation; 
Status of recommendations: Per GAO: Open. See status of recommendation 
No. 02-12.

Count: 15; 
No.: 02-16; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. No further action is contemplated for this 
recommendation; 
Status of recommendations: Per GAO: Open. See status of recommendation 
No. 02-12.

Count: 16; 
No.: 02-17; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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."; 
Status of recommendations: Per GAO: Open. See status of recommendation 
No. 02-12.

Count: 17; 
No.: 02-18; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open. See status of recommendation 
No. 02-12.

Count: 18; 
No.: 02-19; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-18; 
Status of recommendations: Per GAO: 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.

Count: 19; 
No.: 02-20; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-17; 
Status of recommendations: Per GAO: 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.

Count: 20; 
No.: 02-21; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. However, further research and discussion will 
take place in fiscal year 2005; 
Status of recommendations: Per GAO: Open. See status of recommendation 
No. 02-12.

Count: 21; 
No.: 02-22; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 22; 
No.: 02-23; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-22; 
Status of recommendations: Per GAO: Open.

Count: 23; 
No.: 02-24; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-22; 
Status of recommendations: Per GAO: Open.

Count: 24; 
No.: 02-25; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 25; 
No.: 02-26; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 26; 
No.: 02-27; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 27; 
No.: 02-28; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 28; 
No.: 02-29; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Discussions are 
ongoing with GAO as to the use of the agencies' management 
representation letters, supplemented with other procedures; 
Status of recommendations: Per GAO: Open.

Count: 29; 
No.: 02-30; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: 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.

Count: 30; 
No.: 02-31; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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."; 
Status of recommendations: Per GAO: 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.

Count: 31; 
No.: 02-32; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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."; 
Status of recommendations: Per GAO: 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.

Count: 32; 
No.: 02-33; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: 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.

Count: 33; 
No.: 02-34; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Financial Management 
Service is currently updating the standard operating procedures for the 
summaries of unadjusted misstatements; 
Status of recommendations: Per GAO: 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.

Count: 34; 
No.: 02-35; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB and Treasury will 
work to ensure that adequate information is provided in the legal 
representation letters regarding the expected outcome of cases; 
Status of recommendations: Per GAO: Open.

Count: 35; 
No.: 02-36; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB and Treasury will 
follow up with agencies that have not provided their management 
schedules to ensure they do so; 
Status of recommendations: Per GAO: Open.

Count: 36; 
No.: 02-37; 
Recommendations: 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); 
Status of recommendations: Per Treasury and OMB: OMB will analyze the 
appropriateness of reporting "treaties" before developing specific 
corrective actions; 
Status of recommendations: Per GAO: Open.

Count: 37; 
No.: 02-38; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB will analyze the 
appropriateness of reporting "treaties" before developing specific 
corrective actions; 
Status of recommendations: Per GAO: Open.

Count: 38; 
No.: 02-39; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB will analyze the 
appropriateness of reporting "treaties" before developing specific 
corrective actions; 
Status of recommendations: Per GAO: Open.

Count: 39; 
No.: 02-40; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB will analyze the 
appropriateness of reporting "treaties" before developing specific 
corrective actions; 
Status of recommendations: Per GAO: Open.

Count: 40; 
No.: 02-41; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB will analyze the 
appropriateness of reporting "treaties" before developing specific 
corrective actions; 
Status of recommendations: Per GAO: Open.

Count: 41; 
No.: 02-42; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: 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.

Count: 42; 
No.: 02-43; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury will continue 
to consider applicable recommendations as the new compilation system is 
enhanced; 
Status of recommendations: Per GAO: Open.

Count: 43; 
No.: 02-44; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 44; 
No.: 02-45; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 45; 
No.: 02-46; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 46; 
No.: 02-47; 
Recommendations: 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); 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 47; 
No.: 02-48; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 48; 
No.: 02-49; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 49; 
No.: 02-50; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 50; 
No.: 02-51; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 51; 
No.: 02-52; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 52; 
No.: 02-53; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 53; 
No.: 02-54; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 54; 
No.: 02-55; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 55; 
No.: 02-56; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 56; 
No.: 02-57; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 57; 
No.: 02-58; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 58; 
No.: 02-59; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 59; 
No.: 02-60; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 60; 
No.: 02-61; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 61; 
No.: 02-62; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 62; 
No.: 02-63; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 63; 
No.: 02-64; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 64; 
No.: 02-65; 
Recommendations: 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); 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 65; 
No.: 02-66; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 66; 
No.: 02-67; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 67; 
No.: 02-68; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 68; 
No.: 02-69; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 69; 
No.: 02-70; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 70; 
No.: 02-71; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 71; 
No.: 02-72; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 72; 
No.: 02-73; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 73; 
No.: 02-74; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 74; 
No.: 02-75; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 75; 
No.: 02-76; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 76; 
No.: 02-77; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 77; 
No.: 02-78; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 78; 
No.: 02-79; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 79; 
No.: 02-80; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 80; 
No.: 02-81; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 81; 
No.: 02-82; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 82; 
No.: 02-83; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 83; 
No.: 02-85; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 84; 
No.: 02-86; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 85; 
No.: 02-87; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 86; 
No.: 02-88; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 87; 
No.: 02-89; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 88; 
No.: 02-90; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 89; 
No.: 02-91; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 90; 
No.: 02-92; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 91; 
No.: 02-93; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 92; 
No.: 02-94; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 93; 
No.: 02-95; 
Recommendations: 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); 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 94; 
No.: 02-96; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 95; 
No.: 02-97; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 96; 
No.: 02-99; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 97; 
No.: 02-100; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for dedicated 
collections meets the requirements of SFFAS No. 7, Part I, Accounting 
for Revenue and Other Financing Sources, paragraph 85, which requires 
inclusion of condensed information about assets and liabilities showing 
investments in Treasury securities, other assets, liabilities due and 
payable to beneficiaries, other liabilities, and fund balance; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 98; 
No.: 02-101; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for dedicated 
collections meets the requirements of SFFAS No. 7, Part I, Accounting 
for Revenue and Other Financing Sources, paragraph 85, which requires 
inclusion of condensed information on net cost and changes to fund 
balance, showing revenues by type (exchange/nonexchange), program 
expenses, other expenses, other financing sources, and other changes in 
fund balance; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 99; 
No.: 02-102; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 100; 
No.: 02-103; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires a 
description of each fund's purpose, how the administrative entity 
accounts for and reports the fund, and its authority to use those 
collections; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 101; 
No.: 02-104; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires 
disclosure of the sources of revenue or other financing for the period 
and an explanation of the extent to which they are inflows of resources 
to the government or the result of intragovernmental flows; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 102; 
No.: 02-105; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 103; 
No.: 02-106; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires 
condensed information on net cost and changes to fund balance, showing 
revenues by type (exchange/nonexchange), program expenses, other 
expenses, other financing sources, and other changes in fund balance; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 104; 
No.: 02-107; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires 
disclosure of any revenues, other financing sources, or costs 
attributable to the fund under accounting standards, but not legally 
allowable as credits or charges to the fund; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 105; 
No.: 02-114; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for social 
insurance meets the requirements of SFFAS No. 17, Accounting for Social 
Insurance, paragraph 32(4), which requires individual program 
sensitivity analyses for projection period cash flow in present value 
dollars and annual cash flow in nominal dollars. The CFS includes only 
present value sensitivity analyses for Social Security and Hospital 
Insurance. Paragraph 32(4) states that at a minimum the summary should 
present Social Security, Hospital Insurance, and Supplementary Medical 
Insurance separately; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 106; 
No.: 02-115; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for social 
insurance meets the requirements of SFFAS No. 17, Accounting for Social 
Insurance, paragraph 27(4)(a), which requires the individual program 
sensitivity analyses for Social Security and Hospital Insurance to 
include an analysis of assumptions regarding net immigration; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 107; 
No.: 02-118; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for nonfederal 
physical property included in stewardship information meets the 
requirements of SFFAS No. 8, Supplementary Stewardship Reporting, 
paragraph 87, which requires disclosure of the annual investment, 
including a description of federally owned physical property 
transferred to state and local governments. This information should be 
provided for the year ended on the balance sheet date as well as for 
each of the 4 preceding years. If data for additional years would 
provide a better indication of investment, reporting of the additional 
years' data is encouraged. Reporting should be at a meaningful category 
or level; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 108; 
No.: 02-119; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for nonfederal 
physical property included in stewardship information meets the 
requirements of SFFAS No. 8, Supplementary Stewardship Reporting, 
paragraph 87, which requires a description of major programs involving 
federal investments in nonfederal physical property, including a 
description of programs or policies under which noncash assets are 
transferred to state and local governments; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 109; 
No.: 02-120; 
Recommendations: 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); 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 110; 
No.: 02-121; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for human 
capital included in stewardship information meets the requirements of 
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 94, which 
requires the full cost or outlay data for investments in human capital 
at a meaningful category or level (e.g., by major program, agency, or 
department); 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 111; 
No.: 02-122; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for human 
capital included in stewardship information meets the requirements of 
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 94, which 
requires a narrative description of major education and training 
programs considered federal investments in human capital; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 112; 
No.: 02-123; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for research and 
development included in stewardship information meets the requirements 
of SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 113; 
No.: 02-124; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for research and 
development included in stewardship information meets the requirements 
of SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 94, 
which requires a narrative description of major research and 
development programs; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 114; 
No.: 02-125; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which requires 
inclusion of the method of measuring deferred maintenance for each 
major class of PP&E; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 115; 
No.: 02-126; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which requires 
that if the condition assessment survey method of measuring deferred 
maintenance is used, the following should be presented for each major 
class of PP&E: (1) description of requirements or standards for 
acceptable operating condition, (2) any changes in the condition 
requirements or standards, and (3) asset condition and a range estimate 
of the dollar amount of maintenance needed to return the asset to its 
acceptable operating condition; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 116; 
No.: 02-127; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which requires 
that if the total life-cycle cost method is used, the following should 
be presented for each major class of PP&E: (1) the original date of the 
maintenance forecast and an explanation for any changes to the 
forecast; (2) prior year balance of the cumulative deferred maintenance 
amount; (3) the dollar amount of maintenance that was defined by the 
professionals who designed, built, or managed the PP&E as required 
maintenance for the reporting period; (4) the dollar amount of 
maintenance actually performed during the period; (5) the difference 
between the forecast and actual maintenance; (6) any adjustments to the 
scheduled amounts deemed necessary by the managers of the PP&E; and (7) 
the ending cumulative balance for the reporting period for each major 
class of asset experiencing deferred maintenance; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 117; 
No.: 02-128; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which requires 
that if management elects to disclose critical and noncritical amounts, 
the disclosure is to include management's definition of these 
categories; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 118; 
No.: 02-129; 
Recommendations: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stewardship 
responsibilities related to the risk assumed for federal insurance and 
guarantee programs meets the requirements of SFFAS No. 5, Accounting 
for Liabilities of the Federal Government, paragraph 106, which 
requires that when financial information pursuant to FASB standards on 
federal insurance and guarantee programs conducted by government 
corporations is incorporated in general purpose financial reports of a 
larger federal reporting entity, the entity should report as required 
supplementary information what amounts and periodic change in those 
amounts would be reported under the "risk assumed" approach; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

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

Count: 119; 
No.: 03-1; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Closed; 
Status of recommendations: Per GAO: 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.

Count: 120; 
No.: 03-2; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Closed; 
Status of recommendations: Per GAO: 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.

Count: 121; 
No.: 03-3; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Closed; 
Status of recommendations: Per GAO: 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.

Count: 122; 
No.: 03-4; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-18; 
Status of recommendations: Per GAO: Open.

Count: 123; 
No.: 03-5; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: Open.

Count: 124; 
No.: 03-6; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: 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; 
Status of recommendations: Per GAO: 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.

Count: 125; 
No.: 03-7; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury disagrees 
with GAO on this item. However, further research and discussion will 
take place in fiscal year 2005; 
Status of recommendations: Per GAO: Open. See status of recommendation 
No. 02-12.

Count: 126; 
No.: 03-8; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: OMB is participating 
in a multi-agency task force that will begin to address the issues 
related to criminal debt; 
Status of recommendations: Per GAO: Open.

Count: 127; 
No.: 03-9; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 03-8; 
Status of recommendations: Per GAO: Open.

Count: 128; 
No.: 03-10; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Treasury plans to 
modify the new system to request contingency loss information for 
fiscal year 2005; 
Status of recommendations: Per GAO: Open.

Count: 129; 
No.: 03-11; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-42; 
Status of recommendations: Per GAO: Open.

Count: 130; 
No.: 03-12; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Closed; 
Status of recommendations: Per GAO: Closed during the fiscal year 2004 
audit.

Count: 131; 
No.: 03-13; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Closed; 
Status of recommendations: Per GAO: Closed during the fiscal year 2004 
audit.

Count: 132; 
No.: 03-14; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: Closed; 
Status of recommendations: Per GAO: Closed during the fiscal year 2004 
audit.

Count: 133; 
No.: 03-15; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 134; 
No.: 03-16; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 135; 
No.: 03-17; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 136; 
No.: 03-18; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 137; 
No.: 03-19; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 138; 
No.: 03-20; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 139; 
No.: 03-21; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 140; 
No.: 03-22; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 141; 
No.: 03-23; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Count: 142; 
No.: 03-24; 
Recommendations: 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; 
Status of recommendations: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendations: Per GAO: Open.

Source: GAO.

[End of table]

[End of section]

Appendix III: Comments from the Department of the Treasury: 

DEPARTMENT OF THE TREASURY: 
ASSISTANT SECRETARY: 

WASHINGTON:

April 18, 2005:

Mr. Jeffrey C. Steinhoff:
Managing Director, Financial Management Assurance: 
Government Accountability Office:
Washington, DC 20548:

Dear Mr. Steinhoff:

Thank you for the opportunity to comment on GAO's draft management 
letter on the Fiscal Year 2004 financial audit, GAO-05-407, Process for 
Preparing the Consolidated Financial Statements of the U.S. Government 
Continues to Need Improvement.

Your report recognized the progress Treasury has made in preparing the 
Consolidated Financial Report. Of special note was the development of 
the first phase of the new Governmentwide Financial Report System 
(GFRS), a closing package system which was implemented concurrently 
with the accelerated reporting dates for the agency statements and the 
government-wide statements. The audit report also noted that GFRS was 
an on-going work in progress and we believe that this new system has 
put us on the right track for improved report preparation. Treasury 
will make further improvements to GFRS for this year's reporting cycle.

GAO's audit report clearly pointed out the issues we need to address in 
continuing to develop and deploy our new closing package system to 
collect and consolidate the data for preparing the consolidated 
statements. We agree that the reporting process still needs 
improvement, and, to that end, we have been addressing many of the 
recommendations in previous reports through the continued development 
of the new system and procedural changes to address items such as 
segregation of duties, documentation, and management review.

The FY 2004 audit report offers 20 new recommendations for improving 
report compilation and preparation and discusses six principal areas of 
concern mentioned in previous audit reports. We generally concur with 
these new recommendations and will work with OMB and the agencies to 
adopt them and improve reporting practices. There are two areas; 
however, where we would like you to reconsider your recommendations.

1. Directly linking audited federal agency financial statements to the 
CFS. We recognize the value and need for the government-wide financial 
statements to be consistent with the underlying agency financial 
statements. During the year, we look to improve our process for 
compiling the CFS to allow for the expanded traceability of the federal 
agencies' audited financial statement note data to the CFS notes.

While three of the principal consolidated statements are now linked 
directly to the agency statements, your report recommends that Treasury 
require the necessary information from the agencies to compile all five 
consolidated financial statements. We continue to disagree with the 
assertion that the Closing Package should require this additional 
information for two reasons. First, the FASAB standard relating to the 
Statement of Changes in Cash Balance from Unified Budget and Other 
Activities and the Reconciliation of Net Operating Cost and Unified 
Budget Deficit makes it clear that the agency reported data is not 
relevant to these consolidated reports and second, rolling up such data 
will not help us improve the statements. We agree that the agency 
Statements of Financing and Budgetary Resources should be improved and 
we also agree that other problems with our reconciliation statements 
need to be resolved. We would welcome specific recommendations as to 
how to accomplish both objectives; however, we believe rolling up the 
agency amounts will not be effective at achieving either one.

2. Controls over the compilation process. Your report recommends that 
Treasury employees obtain and document approval from agencies before 
changing agency data. We agree that there are instances where we should 
obtain agency approvals prior to posting adjustments. We also agree 
that all adjustments must be properly documented and approved by us; 
however, we believe that the following are examples of situations that 
do not require agency approval:

* Adjustments required to make agency closing packages agree with their 
financial statements:

* Adjustments required to apply a consistent application of an 
accounting principle between agencies:

* Adjustments required to make an agency conform to GAAP.

As the preparers of the statement, we must have the flexibility and 
authority to make appropriate adjustments when needed regardless of 
whether or not agencies agree. We would hope you would modify your 
recommendation accordingly.

With regard to the government-wide legal letter, Treasury and OMB agree 
that the Justice Department is the final authority on legal liability/
disclosure amounts. Treasury will assist OMB in developing a policy to 
eliminate any inconsistencies between Justice and the agencies. Please 
reflect this position in your recommendation.

In conclusion, we will continue to work with you on those many items on 
which we agree improvements need to be made, and we will continue the 
dialogue to try to resolve those areas in which we disagree with your 
recommended approach. If you have any questions, please contact Robert 
Reid at 622-0550.

Sincerely,

Signed by: 

Donald V. Hammond: 
Fiscal Assistant Secretary:

cc: Linda Combs: 
David Zavada: 

[End of section]

(198358): 

FOOTNOTES

[1] The fiscal year 2004 Financial Report of the United States 
Government includes our report and was completed by the Department of 
the Treasury (Treasury) on December 15, 2004, and is available through 
GAO's Web site at www.gao.gov/financial.html and Treasury's Web site at 
www.fms.treas.gov/fr/index.html.

[2] GAO, Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Needs Further Improvement, 
GAO-04-866 (Washington, D.C.: Sept. 10, 2004).

[3] Treasury refers to the significant agencies as "verifying 
agencies." They are the Chief Financial Officers Act agencies, the 
Export-Import Bank of the United States, the Farm Credit System 
Insurance Corporation, the Federal Communications Commission, the 
Federal Deposit Insurance Corporation, the National Credit Union 
Administration, the U.S. Postal Service, the Pension Benefit Guaranty 
Corporation, the Railroad Retirement Board, the Securities and Exchange 
Commission, the Smithsonian Institution, and the Tennessee Valley 
Authority.

[4] GAO, Internal Control: Standards for Internal Control in the 
Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 
1999).

[5] GAO, Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Needs Improvement, GAO-04-
45 (Washington, D.C.: Oct. 30, 2003).

[6] Trading partners are U.S. government agencies, departments, or 
other components included in the CFS that do business with each other.

[7] Office of Management and Budget, Audit Requirements for Federal 
Financial Statements, OMB-01-02 (Washington, D.C.: Oct. 16, 2000), 
requires each agency chief financial officer to prepare a management 
schedule that documents how the information obtained in the legal 
counsel's response was considered in preparing the financial 
statements. 

[8] GAO-04-45.

[9] An item's omission or error is considered material if the 
surrounding circumstances make it probable that the judgment of a 
reasonable person relying on the information would have been changed or 
influenced by the inclusion or correction of the item.

[10] The CFS has five principal financial statements--the Balance 
Sheet, Statement of Net Cost, Statement of Operations and Changes in 
Net Position, Reconciliation of Net Operating Cost and Unified Budget 
Deficit, and Statement of Changes in Cash Balance from Unified Budget 
and Other Activities.

[11] See recommendations 02-12 through 02-21 and 03-4 through 03-7 in 
appendix II of this report.

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