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entitled 'Management Report: Improvements Needed in Controls over the 
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United States Government Accountability Office: 
GAO: 

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

May 2011: 

Management Report: 

Improvements Needed in Controls over the Preparation of the U.S. 
Consolidated Financial Statements: 

GAO-11-525: 

GAO Highlights: 

Highlights of GAO-11-525, a report to the Secretary of the Treasury 
and the Director of the Office of Management and Budget. 

Why GAO Did This Study: 

The Department of the Treasury (Treasury), in coordination with the 
Office of Management and Budget (OMB), is primarily responsible for 
preparing the financial report of the U.S. government, which contains 
the consolidated financial statements of the U.S. government (CFS). 
Since GAO’s first audit of the fiscal year 1997 CFS, certain material 
weaknesses in internal control and other limitations on the scope of 
GAO’s work have prevented GAO from expressing an opinion on the CFS, 
exclusive of the Statement of Social Insurance (SOSI). Also, GAO was 
unable to express an opinion on the 2010 SOSI because of significant 
uncertainties primarily related to the achievement of projected 
reductions in Medicare cost growth reflected in the 2010 SOSI. As part 
of the fiscal year 2010 CFS audit, GAO identified material weaknesses 
and other control deficiencies in the processes used to prepare the 
CFS. The purpose of this report is to (1) provide details on new 
financial statement preparation control deficiencies GAO identified 
during its audit of the fiscal year 2010 CFS, (2) recommend 
improvements, and (3) provide the status of corrective actions taken 
to address GAO’s recommendations in this area that remained open at 
the end of the fiscal year 2009 audit. 

What GAO Found: 

During its audit of the fiscal year 2010 CFS, GAO identified new and 
continuing control deficiencies in the federal government’s processes 
used to prepare the CFS. 

New control deficiencies GAO identified involved: 

* the need to enhance policies and procedures for carrying out and 
documenting that certain amounts and disclosures were reported 
consistently and in conformity with Statement of Federal Financial 
Accounting Standards No. 33, Pensions, Other Retirement Benefits, and 
Other Postemployment Benefits: Reporting the Gains and Losses from 
Changes in Assumptions and Selecting Discount Rates and Valuation 
Dates, which became effective in fiscal year 2010; and; 

* the need to fully develop procedures for carrying out and 
documenting certain other information related to the federal 
government’s financial management reported in appendixes to the 2010 
Financial Report of the United States Government. 

In addition, GAO found that various other control deficiencies 
identified in previous years’ audits with respect to the CFS 
preparation continued to exist, and the related recommendations are 
included in appendix I. 

These control deficiencies contributed to material weaknesses in 
internal control over the federal government’s ability to (1) 
adequately account for and reconcile intragovernmental activity and 
balances between federal entities; (2) ensure that the federal 
government’s accrual-based consolidated financial statements were 
consistent with the underlying audited entities’ financial statements, 
properly balanced, and in conformity with U.S. generally accepted 
accounting principles; and (3) identify and either resolve or explain 
material differences between certain components of the budget deficit 
reported in Treasury’s central accounting records and related amounts 
reported in federal entities’ financial statements and underlying 
financial information and records. The budget deficit reported in 
Treasury’s central accounting records is used to prepare the 
Reconciliation of Net Operating Cost and Unified Budget Deficit, the 
Statement of Changes in Cash Balance from Unified Budget and Other 
Activities, and the Fiscal Projections for the U.S. Government 
(included in Supplemental Information). As a result of these and other 
material weaknesses, the federal government did not have effective 
internal control over financial reporting. 

As summarized in appendix I, of the 52 open recommendations GAO 
reported in July 2010, 6 were closed and 46 remained open as of 
December 13, 2010, the date of GAO’s report on its audit of the fiscal 
year 2010 CFS. GAO will continue to monitor the status of corrective 
actions taken to address the 4 new recommendations as well as the 46 
open recommendations from prior years as part of our fiscal year 2011 
CFS audit. 

What GAO Recommends: 

GAO is making four recommendations-—two each to Treasury and OMB-—to 
address new control deficiencies. In commenting on GAO’s draft report, 
Treasury and OMB generally concurred with GAO’s findings. 

View [hyperlink, http://www.gao.gov/products/GAO-11-525] or key 
components. For more information, contact Gary Engel at (202) 512-3406 
or engelg@gao.gov. 

[End of section] 

Contents: 

Letter: 

Scope and Methodology: 

New Internal Control Deficiencies: 

Status of Recommendations from Prior Reports: 

Agency Comments: 

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

Appendix II: Comments from the Department of the Treasury: 

Abbreviations: 

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

FASAB: Federal Accounting Standards Advisory Board: 

FEVBP: Federal Employee and Veteran Benefits Payable: 

Financial Report: Financial Report of the United States Government: 

FMFIA: Federal Managers' Financial Integrity Act: 

GAAP: generally accepted accounting principles: 

Justice: Department of Justice: 

MD&A: Management's Discussion and Analysis: 

OFAS: Office of the Fiscal Assistant Secretary: 

OMB: Office of Management and Budget: 

SFFAS: Statement of Federal Financial Accounting Standards: 

SOP: standard operating procedure: 

SOSI: Statement of Social Insurance: 

STAR: Treasury's central accounting and reporting system: 

Treasury: Department of the Treasury: 

TVA: Tennessee Valley Authority: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

May 26, 2011: 

The Honorable Timothy F. Geithner: 
Secretary of the Treasury: 

The Honorable Jacob J. Lew: 
Director: 
Office of Management and Budget: 

In our report dated December 13, 2010,[Footnote 1] we disclaimed an 
opinion on the consolidated financial statements of the U.S. 
government (CFS) for the fiscal years ended September 30, 2010 and 
2009, except for the 2009, 2008, and 2007 Statements of Social 
Insurance (SOSI), which received unqualified opinions. Since GAO's 
first audit of the fiscal year 1997 CFS, certain material weaknesses 
in internal control over financial reporting and other limitations on 
the scope of our work have resulted in conditions that prevented us 
from expressing an opinion on the federal government's accrual-based 
consolidated financial statements. These include material weaknesses 
that relate to the federal government's processes used to prepare the 
CFS. Such material weaknesses involve the federal government's 
inability to: 

* adequately account for and reconcile intragovernmental activity and 
balances between federal entities; 

* ensure that the federal government's accrual-based consolidated 
financial statements were consistent with the underlying audited 
entities' financial statements, properly balanced, and in conformity 
with U.S. generally accepted accounting principles; and: 

* identify and either resolve or explain material differences between 
(1) certain components of the budget deficit reported in the 
Department of the Treasury's (Treasury) central accounting records 
that are used to prepare the Reconciliation of Net Operating Cost and 
Unified Budget Deficit, the Statement of Changes in Cash Balance from 
Unified Budget and Other Activities, and the Fiscal Projections for 
the U.S. Government (included in Supplemental Information) and (2) 
related amounts reported in federal entities' financial statements and 
underlying financial information and records. 

Treasury, in coordination with the Office of Management and Budget 
(OMB), prepares the CFS on behalf of the federal government. Many of 
the material weaknesses in internal control that have contributed to 
our continuing disclaimers of opinion were identified by other 
auditors during their audits of individual federal entities' financial 
statements and were reported in detail with recommendations to the 
entities in separate reports. 

The purpose of this report is to provide (1) more detailed information 
on new control deficiencies that we identified during our audit of the 
fiscal year 2010 CFS that relate to the processes used to prepare the 
CFS, (2) four recommendations to address these control deficiencies, 
and (3) the status of corrective actions by Treasury and OMB to 
address the 52 recommendations relating to the processes used to 
prepare the CFS detailed in our previous reports that remained open at 
the end of the fiscal year 2009 audit. Appendix I provides a summary 
of the status of actions taken to address the open recommendations 
from our previous reporting. During our fiscal year 2010 audit, we 
communicated each of the new control deficiencies to your staff. 

Scope and Methodology: 

As part of our audit of the fiscal years 2010 and 2009 CFS, we 
considered the federal government's financial reporting procedures and 
related internal control. Also, we determined the status of corrective 
actions by Treasury and OMB to address open recommendations relating 
to the processes used to prepare the CFS detailed in our previous 
reports. In our audit report on the fiscal year 2010 CFS, which is 
included in the 2010 Financial Report of the United States Government 
(Financial Report), we discussed the material weaknesses related to 
the federal government's processes used to prepare the CFS. These 
material weaknesses contributed to our disclaimer of opinion on the 
federal government's accrual-based consolidated financial statements 
and our conclusion that the federal government did not have effective 
internal control over financial reporting. Based on the scope of our 
work and the effects of the other limitations on the scope of our 
audit noted throughout our audit report on the fiscal year 2010 CFS, 
our internal control work would not necessarily identify all 
deficiencies in internal control, including those that might be 
material weaknesses or significant deficiencies. We performed our 
audit of the fiscal year 2010 and 2009 CFS in accordance with U.S. 
generally accepted government auditing standards. We believe that our 
audit provided a reasonable basis for our conclusions in this report. 

We requested comments on a draft of this report from the Director of 
OMB and the Secretary of the Treasury or their designees. OMB provided 
oral comments, which are summarized in the Agency Comments section of 
this report. Treasury's Fiscal Assistant Secretary provided written 
comments on May 11, 2011, which are reprinted in their entirety in 
appendix II and are also summarized in the Agency Comments section. 

New Internal Control Deficiencies: 

Standard Operating Procedures for Preparing the CFS: 

Over the past several years, Treasury has made progress in developing, 
documenting, and implementing internal control over financial 
reporting related to the process for preparing the CFS through 
numerous improvements to its standard operating procedures (SOP). 
However, in fiscal year 2010, we identified a control deficiency 
involving enhancing and documenting two SOPs. In connection with its 
role as preparer of the CFS, Treasury management is responsible for 
developing and documenting detailed policies, procedures, and 
practices for preparing the CFS and ensuring that appropriate internal 
control is built into and is an integral part of the CFS compilation 
process. Standards for Internal Control in the Federal Government 
calls for clear documentation of policies and procedures. Deficient 
policies and procedures increase the risk that errors in the 
compilation process could go undetected and result in misstatements in 
the financial statements or incomplete and inaccurate disclosure of 
information within the Financial Report. 

Treasury's SOPs entitled "Preparing the Financial Report of the U.S. 
Government" and "Data Analysis" include procedures for Treasury staff 
to review the CFS Statement of Net Cost and the Federal Employee and 
Veteran Benefits Payable (FEVBP) note disclosure. However, the SOPs 
did not include steps for assuring that amounts and disclosures were 
in conformity with Statement of Federal Financial Accounting Standards 
(SFFAS) No. 33, Pensions, Other Retirement Benefits, and Other 
Postemployment Benefits: Reporting the Gains and Losses from Changes 
in Assumptions and Selecting Discount Rates and Valuation Dates, which 
became effective in fiscal year 2010. SFFAS No. 33 requires that the 
governmentwide entity (1) display gains and losses related to changes 
in assumptions as a separate line item or line items on the statement 
of net cost and (2) disclose in the notes to the financial statements 
a reconciliation of the beginning and ending liability balances that 
provides the material components of the changes for pensions, other 
retirement benefits, and other postemployment benefits. We identified 
that the gains and losses reported on the draft statement of net cost 
were not consistent with the amounts disclosed in the draft FEVBP note 
for changes in assumptions. Specifically, the gains and losses 
reported on the draft statement of net cost, primarily for the 
Department of Veterans Affairs and Department of Defense, included 
amounts from other changes in the liability balance beyond those 
related to changes in assumptions. Treasury's SOPs did not include 
steps for reviewing and documenting amounts and disclosures for 
conformity with SFFAS No. 33. As a result, Treasury's compilation 
process did not identify inconsistencies in amounts reported by these 
agencies to Treasury for the draft statement of net cost and FEVBP 
note disclosure. In addition, the draft FEVBP note did not include the 
required disclosure of material components of the change in the 
veterans compensation and burial benefits liability. Treasury adjusted 
(1) the final statement of net cost to include only gains and losses 
related to changes in assumptions and to ensure consistency with 
amounts reported in the note disclosure, and (2) the final FEVBP note 
disclosure to include the material components of veterans compensation 
and burial benefits. 

Recommendations for Executive Action: 

To help assure that FEVBP amounts are properly reported in the CFS, we 
recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary to (1) enhance the applicable SOPs to include 
required steps for assuring conformity with SFFAS No. 33 and the 
consistency of amounts between the statement of net cost and the FEVBP 
note disclosure, and (2) implement and document such steps. 

Process for Preparing Certain Other Accompanying Information: 

Beginning in the 2009 Financial Report, OMB has included several 
appendixes to the Financial Report related to the federal government's 
financial management, including information on (1) auditor-identified 
material weaknesses, (2) agency reporting under 31 U.S.C. 3512 (c), 
(d) (commonly known as the Federal Managers' Financial Integrity Act 
or FMFIA), (3) government corporations required to submit audited 
financial statements to OMB, (4) audit results of the Accountability 
of Tax Dollars Act agencies and selected components of the Chief 
Financial Officers Act agencies, and (5) agencies' compliance with the 
Federal Financial Management Improvement Act. However, we identified 
that OMB did not have an adequate process to assure the accuracy of 
the information provided in these appendixes. 

As part of our audit of the fiscal year 2010 CFS, we reviewed the 
draft Financial Report appendixes to ensure that they were consistent 
with agency auditors' reporting and other information presented in the 
agencies' annual reports and the Financial Report. However, because 
OMB has not fully developed procedures for preparing this information, 
we identified errors in the draft appendixes that were not identified 
through OMB's process for preparing these appendixes. For example, we 
found several errors in the draft appendix related to FMFIA reporting. 
Specifically, we found instances where the FMFIA assurance results 
summarized in the draft appendixes were not consistent with those 
reported in the agencies' annual reports. We also found errors in the 
number and status of internal control material weaknesses reported by 
OMB regarding four agencies in comparison with the related auditors' 
reporting. For another agency, the FMFIA assurance statement on the 
effectiveness of the agency's internal control over operations 
reported in the draft appendix did not agree with the assurance 
statement reported in the agency's annual report. Additionally, we 
found errors in the calculation of FMFIA consolidated totals of 
agencies' material weaknesses related to management and system 
controls. Further, OMB procedures did not provide for maintaining 
documentation supporting the information presented in these 
appendixes. We communicated these matters to OMB, which corrected the 
information for the final 2010 Financial Report. 

Recommendations for Executive Action: 

To help assure the accuracy of the appendixes to the Financial Report 
prepared by OMB, we recommend that the Director of OMB direct the 
Controller of OMB to enhance its procedures for preparing the 
appendixes to include required steps to (1) assure the accuracy and 
consistency of the accompanying information presented in the 
appendixes to the Financial Report related to the federal government's 
financial management, and (2) maintain documentation supporting such 
information. 

Status of Recommendations from Prior Reports: 

Of our 52 recommendations open at the end of the fiscal year 2009 
audit, 6 were closed and 46 remained open as of December 13, 2010, the 
date of our report on the audit of the fiscal year 2010 CFS. 

Appendix I summarizes the status as of December 13, 2010, for the 52 
open recommendations regarding control deficiencies in the CFS 
preparation process from prior years' reports. Specifically, appendix 
I includes the status according to Treasury and OMB, as well as our 
own assessments. Explanations are included in the status of 
recommendations per GAO when Treasury's or OMB's status of 
recommendation needed further clarification. We will continue to 
monitor Treasury's and OMB's progress in addressing GAO's 
recommendations as part of our fiscal year 2011 CFS audit work. 

Agency Comments: 

OMB Comments: 

In oral comments on a draft of this report, OMB generally concurred 
with the findings in this report. With respect to GAO's finding 
relating to certain financial management information included in 
appendixes to the Financial Report, OMB stated that it does not plan 
to include such appendixes in future Financial Reports. : 

Treasury Comments: 

In written comments on a draft of this report, Treasury concurred with 
our findings and noted that the agency has made significant progress 
in improving its policies and procedures for the CFS preparation since 
the issuance of the report. Further, Treasury stated that it expects 
to implement additional recommendations by the end of fiscal year 
2011, and that it will use GAO's findings to focus its efforts on 
improving the central accounting and compilation activities associated 
with the CFS. Also, Treasury stated that it has increased its 
commitment to resolving material intragovernmental differences, and 
plans to utilize multiple focus groups to identify and implement short-
and long-term solutions to this issue. 

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 our 
recommendations to the Senate Committee on Homeland Security and 
Governmental Affairs and to the House Committee on Oversight and 
Government Reform not later than 60 days after the date of this 
report. A written statement must also be sent to the Senate and House 
Committees on Appropriations with the agency's first request for 
appropriations made more than 60 days after the date of this report. 

We are sending copies of this report to interested congressional 
committees, the Fiscal Assistant Secretary of the Treasury, the Deputy 
Director for Management of OMB and Federal Chief Performance Officer, 
and the Controller of OMB's Office of Federal Financial Management. 
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 me at (202) 
512-3406 or engelg@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. 

Signed by: 

Gary T. Engel: 
Director: 
Financial Management and Assurance: 

[End of section] 

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

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

Count: 1; 
Number: 02-4; 
Recommendation: As the Department of the Treasury (Treasury) is 
designing its new financial statement compilation process to begin 
with the fiscal year 2004 consolidated financial statements of the 
U.S. government (CFS), the Secretary of the Treasury should direct the 
Fiscal Assistant Secretary, in coordination with the Controller of the 
Office of Management and Budget (OMB), to develop reconciliation 
procedures that will aid in understanding and controlling the net 
position balance as well as eliminate the plugs previously associated 
with compiling the CFS; 
Status of recommendation[A]: Per Treasury and OMB: To eliminate or 
explain adjustments to net position, Treasury has continued to 
eliminate, at the consolidated level, intragovernmental activity and 
balances using formal balanced accounting entries (via Reciprocal 
Categories) and has continued its analysis of transactions that 
contribute to the unmatched transactions and balances adjustment. 
Major contributors to the plug are transactions with the General Fund 
(Reciprocal Category 29). A Treasury Task Group is currently 
developing the financial statements for the General Fund, with the 
goal to prepare them for financial audit in fiscal year 2012. In the 
interim, Treasury continues to separately identify certain General 
Fund transactions by providing agencies with monthly Centrally 
Reporting System data to facilitate reconciliation on a quarterly 
basis. Also, throughout fiscal year 2011, Treasury will continue to 
identify and resolve material differences related to fiduciary, 
employee benefits, buy/sell and transfer activity through the 
continued efforts of Focus Groups for each of these transaction 
categories; 
Status of recommendation[A]: Per GAO: Open. 

Count: 2; 
Number: 02-6; 
Recommendation: As OMB continues to make strides to address issues 
related to intragovernmental transactions, the Director of OMB should 
direct the Controller of OMB to develop policies and procedures that 
document how OMB will enforce the business rules provided in OMB 
Memorandum M-07-03, Business Rules for Intragovernmental Transactions; 
Status of recommendation[A]: Per Treasury and OMB: Treasury has 
published the updated Intragovernmental Business Rules which include 
dispute resolution procedures for trading partner agencies to follow. 
Treasury will continue to monitor the effectiveness of the revised 
rules and the dispute resolution process during fiscal year 2011. OMB, 
working with Treasury, will continue its efforts to implement this 
recommendation; 
Status of recommendation[A]: Per GAO: Open. 

Count: 3; 
Number: 02-7; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: See the status of 
recommendation no. 02-6; 
Status of recommendation[A]: Per GAO: Open. 

Count: 4; 
Number: 02-9; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: Treasury has 
designed and implemented formal consolidating and eliminating 
procedures with regard to intragovernmental assets and liabilities. 
Final resolution is contingent on resolving material intragovernmental 
differences; See status of recommendation no. 02-4; 
Status of recommendation[A]: Per GAO: Open. 

Count: 5; 
Number: 02-10; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: See the status of 
recommendation no. 02-4; 
Status of recommendation[A]: Per GAO: Open. 

Count: 6; 
Number: 02-11; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: Treasury's 
consolidating procedures request information related to asset 
capitalization and agency advances or deferred revenue. However, final 
resolution is contingent on resolving material intragovernmental 
differences affecting revenues and receivables related to buy/sell 
transactions. During fiscal year 2011, a Focus Group will work on 
reconciling buy/sell differences. See status of recommendation no. 02-
4; 
Status of recommendation[A]: Per GAO: Open. 

Count: 7; 
Number: 02-12; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: These unmatched 
transactions and balances will continue to be reflected only in the 
Statements of Operations and Changes in Net Position until 
intragovernmental differences are materially resolved. At that point, 
unresolved reconciling items, if any, needed to reconcile net 
operating cost to the unified budget deficit can be separately 
identified in the reconciliation statements. See status of 
recommendation no. 02-13; 
Status of recommendation[A]: Per GAO: Open. 

Count: 8; 
Number: 02-13; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: Treasury will 
continue to improve the completeness and consistency of the 
information in the reconciliation statements and will continue to 
resolve significant inconsistencies, if any, to the applicable and 
related components reported in the other basic financial statements, 
and in the related note disclosures, included in the CFS. Treasury 
will analyze certain budgetary amounts, like loan repayments and 
deposit fund transactions, and work on resolving the differences 
between how they contribute to the unified budget deficit and compare 
to the related amounts as reported in the agencies' financial 
statements. We will also work with GAO as Treasury finalizes the 
compilation approach for the CFS and the resolution of these 
differences; 
Status of recommendation[A]: Per GAO: Open. 

Count: 9; 
Number: 02-14; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: During fiscal year 
2011, Treasury will continue to refine its reporting materiality 
policy and work with GAO to gain consensus on an approach to determine 
material vs. non-material items. See also status of recommendation no. 
02-13; 
Status of recommendation[A]: Per GAO: Open. 

Count: 10; 
Number: 02-15; 
Recommendation: If Treasury chooses to continue using information from 
both federal agencies' financial statements and Treasury's central 
accounting and reporting system (STAR), Treasury should demonstrate 
how the amounts from STAR reconcile to federal agencies' financial 
statements; 
Status of recommendation[A]: Per Treasury and OMB: Treasury has 
elected to continue the use of information from STAR and has 
identified material areas where STAR data does not reconcile to 
federal agencies' financial statements. Treasury will work with GAO as 
Treasury develops an approach during fiscal year 2011 to resolve these 
reconciliation issues. See also status of recommendation no. 02-13; 
Status of recommendation[A]: Per GAO: Open. 

Count: 11; 
Number: 02-16; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-13; 
Status of recommendation[A]: Per GAO: Open. 

Count: 12; 
Number: 02-17; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement a process to ensure that the Statement of 
Changes in Cash Balance from Unified Budget and Other Activities 
properly reflects the activities reported in federal agencies' audited 
financial statements. Treasury should document the consistency of the 
significant line items on this statement to federal agencies' audited 
financial statements; 
Status of recommendation[A]: Per Treasury and OMB: Treasury has 
elected to continue to use information from STAR. Treasury will 
continue to document the consistency of the significant line items on 
this statement to federal agencies' audited financial statements as 
much as possible during fiscal year 2011. See status of 
recommendations no. 02-13 and no. 02-15; 
Status of recommendation[A]: Per GAO: Open. 

Count: 13; 
Number: 02-20; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: Treasury will 
continue with its efforts to reconcile budgetary receipts to net 
operating revenue in fiscal year 2011. Treasury will again work with 
the agencies that contribute to the largest unreconciled differences 
to identify the causes of the differences and work with the agencies 
and with GAO as Treasury develops an approach for resolving these 
differences; 
Status of recommendation[A]: Per GAO: Open. 

Count: 14; 
Number: 02-22; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
perform an assessment to define the reporting entity, including its 
specific components, in conformity with the criteria issued by the 
Federal Accounting Standards Advisory Board (FASAB). Key decisions 
made in this assessment should be documented, including the reason for 
including or excluding components and the basis for concluding on any 
issue. Particular emphasis should be placed on demonstrating that any 
financial information that should be included but is not included is 
immaterial; 
Status of recommendation[A]: Per Treasury and OMB: Treasury will 
continue working in fiscal year 2011 to address GAO concerns about the 
reporting entity policy. Specifically, Treasury will address some of 
the specific points raised by GAO related to its Reporting Entity 
White Paper presented in 2009. Furthermore, Treasury acknowledges the 
work of FASAB in this area and is supporting and participating in 
those efforts to help gain clarity to this issue; 
Status of recommendation[A]: Per GAO: Open. 

Count: 15; 
Number: 02-23; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-22; 
Status of recommendation[A]: Per GAO: Open. 

Count: 16; 
Number: 02-24; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-22; 
Status of recommendation[A]: Per GAO: Open. 

Count: 17; 
Number: 02-35; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
help ensure that federal agencies provide adequate information in 
their legal representation letters regarding the expected outcomes of 
the cases; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury and OMB continued to work with federal agencies to 
ensure that adequate information was provided in the legal 
representation letters regarding the expected outcomes of the cases. 
This effort will continue in fiscal year 2011. During fiscal year 
2011, Treasury will pursue talks with Department of Justice to 
determine if a global approach and solution is available; 
Status of recommendation[A]: Per GAO: Open. 

Count: 18; 
Number: 02-37; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that federal agencies develop a detailed 
schedule of all major treaties and other international agreements that 
obligate the U.S. government to provide cash, goods, or services, or 
that create other financial arrangements that are contingent on the 
occurrence or nonoccurrence of future events (a starting point for 
compiling these data could be the State Department's Treaties in 
Force); 
Status of recommendation[A]: Per Treasury and OMB: Treasury will 
consider performing further analysis on these contingencies building 
on the work undertaken jointly with OMB in 2009 depending on time and 
resources constraints. As part of this effort, Treasury will also 
discuss with OMB and the relevant agencies with material international 
agreements as to what steps they could do to enforce the existing 
requirements to register international agreements with the Department 
of State. Treasury will also discuss with OMB to consider the 
expansion and/or revision of agency audit requirements to test for 
registration of treaties and international agreements; 
Status of recommendation[A]: Per GAO: Open. As noted in Note 22, 
Contingencies, a comprehensive analysis to determine any financial 
obligation or possible exposure to loss and its related effect on the 
CFS has not yet been performed. 

Count: 19; 
Number: 02-38; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that federal agencies classify all such 
scheduled major treaties and other international agreements as 
commitments or contingencies; 
Status of recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-37; 
Status of recommendation[A]: Per GAO: Open. See status of 
recommendation no. 02-37. 

Count: 20; 
Number: 02-39; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that federal agencies disclose in the notes 
to the CFS amounts for major treaties and other international 
agreements that have a reasonably possible chance of resulting in a 
loss or claim as a contingency; 
Status of recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-37; 
Status of recommendation[A]: Per GAO: Open. See status of 
recommendation no. 02-37. 

Count: 21; 
Number: 02-40; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that federal agencies disclose in the notes 
to the CFS amounts for major treaties and other international 
agreements that are classified as commitments and that may require 
measurable future financial obligations; 
Status of recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-37; 
Status of recommendation[A]: Per GAO: Open. See status of 
recommendation no. 02-37. 

Count: 22; 
Number: 02-41; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that federal agencies take steps to prevent 
major treaties and other international agreements that are classified 
as remote from being recorded or disclosed as probable or reasonably 
possible in the CFS; 
Status of recommendation[A]: Per Treasury and OMB: See status of 
recommendation no. 02-37; 
Status of recommendation[A]: Per GAO: Open. See status of 
recommendation no. 02-37. 

Count: 23; 
Number: 02-129; 
Recommendation: 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 Statement of Federal 
Financial Accounting Standards (SFFAS) No. 5, Accounting for 
Liabilities of the Federal Government, paragraph 106, which requires 
that when financial information pursuant to Financial Accounting 
Standards Board standards on federal insurance and guarantee programs 
conducted by government corporations is incorporated in general 
purpose financial reports of a larger federal reporting entity, the 
entity should report as required supplementary information what 
amounts and periodic change in those amounts would be reported under 
the "risk assumed" approach; 
Status of recommendation[A]: Per Treasury and OMB: This information 
was requested from federal agencies for disclosure in the fiscal year 
2010 CFS. Treasury will continue to work with agencies to improve the 
consistency of this disclosure in the fiscal year 2011 CFS; 
Status of recommendation[A]: Per GAO: Open. Treasury's reporting in 
this area is not complete. The CFS should include all major federal 
insurance programs in the risk assumed reporting and analysis. Also, 
since future events are uncertain, risk assumed information should 
include indicators of the range of uncertainty around expected 
estimates, including indicators of the sensitivity of the estimate to 
changes in major assumptions. 

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

Count: 24; 
Number: 03-6; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: In fiscal year 
2010, Treasury disclosed the change in cash balances as reported on 
the Balance Sheet on the Statement of Changes in Cash Balance. 
Treasury will continue to analyze cash transactions, and work with its 
Cash Policy area to ensure consistent reporting of cash transactions, 
to ensure full reporting of the changes in the cash balance of the 
U.S. government; 
Status of recommendation[A]: Per GAO: Open. Treasury has not 
established and implemented effective processes and procedures for 
identifying and reporting all items needed to prepare the Statement of 
Changes in Cash Balance from Unified Budget and Other Activities. 

Count: 25; 
Number: 03-8; 
Recommendation: The Director of OMB should direct the Controller of 
OMB, in coordination with Treasury's Fiscal Assistant Secretary, to 
work with the Department of Justice (Justice) and certain other 
executive branch federal agencies to ensure that these federal 
agencies report or disclose relevant criminal debt information in 
conformity with generally accepted accounting principles (GAAP) in 
their financial statements and have such information subjected to 
audit; 
Status of recommendation[A]: Per Treasury and OMB: OMB, working with 
Treasury, Justice, and certain other agencies, will continue working 
to address this recommendation; 
Status of recommendation[A]: Per GAO: Open. 

Count: 26; 
Number: 03-9; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: Treasury will 
include criminal debt information in the CFS, when it becomes 
available in the agencies' financial statements. See status of 
recommendation no. 03-8; 
Status of recommendation[A]: Per GAO: Open. 

Count: 27; 
Number: 03-11; 
Recommendation: 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 recommendation[A]: Per Treasury and OMB: Treasury's current 
CFS compilation process provides for direct linkage from the 35 
significant federal agencies audited financial statements to most of 
the CFS principal statements and to the related note disclosures. 
However, additional work is needed related to the two budgetary 
principal financial statements. Treasury will work with GAO as 
Treasury develops an approach during fiscal year 2011 to resolve long 
standing issues regarding these statements. See status of 
recommendation no. 02-15; 
Status of recommendation[A]: Per GAO: Open. Treasury's process for 
compiling the CFS generally demonstrated that amounts in the Statement 
of Social Insurance were consistent with the underlying federal 
entities' financial statements and that the Balance Sheet and the 
Statement of Net Cost were also consistent with the 35 significant 
federal entities' financial statements prior to eliminating 
intragovernmental activity and balances. However, Treasury's process 
did not ensure that the information in the remaining three principal 
financial statements was fully consistent with the underlying 
information in the 35 significant federal entities' audited financial 
statements and other financial data. 

GAO-05-407 (results of the fiscal year 2004 audit): 

Count: 28; 
Number: 04-3; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to require that Treasury employees contact and 
document communications with federal agencies before recording journal 
vouchers to change agency audited closing package data; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2011, Treasury will revise its journal voucher procedures to ensure 
that the communications to the agencies be included in the supporting 
documentation; 
Status of recommendation[A]: Per GAO: Open. 

Count: 29; 
Number: 04-6; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to assess the infrastructure associated with the 
compilation process and modify it as necessary to achieve a sound 
internal control environment; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury hired a contractor to assist in areas requiring 
specialized expertise related to internal controls and certain 
financial reporting matters. With the assistance of this contractor, 
Treasury made improvements to its internal control infrastructure 
during fiscal year 2010. Treasury has updated, and will continue to 
revise and improve its documentation to help ensure control procedures 
are in place at all critical areas of the CFS preparation process and 
is working to ensure that these controls are adequately monitored and 
assessed each year; 
In addition, Treasury is in the process of restructuring the 
management of the organization responsible for the CFS compilation 
process to provide additional oversight and accountability over the 
year-end CFS process; 
Further, to assist Treasury during the year-end compilation and 
preparation of the fiscal year 2011 CFS, Treasury is considering 
obtaining personnel from other agencies, with additional financial 
reporting expertise, to assist with the year-end process; 
Status of recommendation[A]: Per GAO: Open. 

GAO-06-415 (results of the fiscal year 2005 audit): 

Count: 30; 
Number: 05-3; 
Recommendation: The Director of OMB should direct the Controller of 
the Office of Federal Financial Management to consider, in order to 
provide audit assurance over federal agencies' closing packages, not 
waiving the closing package audit requirements for any verifying 
agency in future years, such as Tennessee Valley Authority (TVA); 
Status of recommendation[A]: Per Treasury and OMB: OMB will continue 
working with TVA so that it submits its audited closing package by the 
required financial reporting deadline. Over the last two fiscal years 
TVA has progressively moved closer to submitting its closing package 
by the required financial reporting deadline. According to OMB, for 
fiscal year 2010, it did not waive the closing package audit 
requirements for any verifying agencies; 
Status of recommendation[A]: Per GAO: Open. TVA continued to be unable 
to provide its audited closing package within the required financial 
reporting deadline. Until all verifying agencies are able to submit 
their audited closing package by the required financial reporting 
deadline, this recommendation will remain open. 

Count: 31; 
Number: 05-4; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop policies and procedures for monitoring internal control to 
help ensure that (1) audit findings are promptly evaluated; 
(2) proper actions are determined in response to audit findings and 
recommendations, such as a documented plan of action with milestones 
for short-term and long-range solutions; 
and (3) all actions that correct or otherwise resolve the audit 
findings are completed within established time frames; 
Status of recommendation[A]: Per Treasury and OMB: Treasury has 
designed policies and procedures to identify and execute Treasury's 
and OMB's actions to address findings related to GAO's audit (or 
review performed by another entity reviewing the compilation and 
preparation of the CFS). In addition, Treasury will continue to track 
and resolve audit and/or other CFS review findings; 
Status of recommendation[A]: Per GAO: Closed. 

GAO-07-805 (results of the fiscal year 2006 audit): 

Count: 32; 
Number: 06-6; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB's Office of Federal Financial Management, to establish effective 
processes and procedures to ensure that appropriate information 
regarding litigation and claims is included in the governmentwide 
legal representation letter; 
Status of recommendation[A]: Per Treasury and OMB: Treasury, in 
coordination with OMB, will continue working to establish effective 
processes and procedures to ensure that appropriate information 
regarding litigation and claims is included in the governmentwide 
legal representation letter; 
Status of recommendation[A]: Per GAO: Open. 

Count: 33; 
Number: 06-7; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB's Office of Federal Financial Management, to develop a process for 
obtaining sufficient information from federal agencies to enable 
Treasury and OMB to adequately monitor federal agencies' efforts to 
reconcile intragovernmental activity and balances with their trading 
partners. This information should include (1) the nature and a 
detailed description of the significant differences that exist between 
trading partners' records of intragovernmental activity and balances, 
(2) detailed reasons why such differences exist, (3) details of steps 
taken or being taken to work with federal agencies' trading partners 
to resolve the differences, and (4) the potential outcome of such 
steps; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury continued a process for obtaining sufficient 
information from federal agencies to enable Treasury and OMB to 
adequately monitor federal agencies' efforts to reconcile 
intragovernmental activity and balances with their trading partners. 
The information obtained included (1) the nature and a detailed 
description of the significant differences that exist between trading 
partners' records of intragovernmental activity and balances, (2) 
detailed reasons why such differences exist, (3) details of steps 
taken or being taken to work with federal agencies' trading partners 
to resolve the differences, (4) the potential outcome of such steps, 
and (5) additional information related to their intragovernmental 
differences that would allow Treasury to correct these differences 
within Governmentwide Financial Report System. This effort will 
continue in fiscal year 2011; 
Status of recommendation[A]: Per GAO: Open. Treasury continues to take 
steps to help resolve material differences in intragovernmental 
activity and balances. However, Treasury's and OMB's process did not 
provide them with sufficient information to adequately monitor federal 
agencies' efforts to reconcile intragovernmental activity and balances 
with trading partners. We noted that a significant number of Chief 
Financial Officers' were unable to adequately explain the reasons for 
the differences with their trading partners or did not provide 
adequate documentation to support responses related to year-end 
reconciliations. 

GAO-08-748 (results of the fiscal year 2007 audit): 

Count: 34; 
Number: 07-1; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance and fully document all practices 
referred to in the standard operating procedure (SOP) entitled 
"Preparing the Financial Report of the U.S. Government" to better 
ensure that practices are proper, complete, and can be consistently 
applied by staff members; 
Status of recommendation[A]: Per Treasury and OMB: Treasury will meet 
with GAO to discuss in further detail their remaining concerns related 
to this SOP during fiscal year 2011, and will revise the SOP, as 
necessary, to address the outstanding issues; 
Status of recommendation[A]: Per GAO: Open. 

Count: 35; 
Number: 07-2; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance Treasury's checklist or design an 
alternative and use it to adequately and timely document Treasury's 
assessment of the relevance, usefulness, or materiality of information 
reported by the federal agencies for use at the governmentwide level; 
Status of recommendation[A]: Per Treasury and OMB: Treasury will 
address remaining GAO concerns related to the checklist during fiscal 
year 2011, specifically the inclusion of disclosure items related to 
the principal financial statements and management's discussion and 
analysis; 
Status of recommendation[A]: Per GAO: Open. 

Count: 36; 
Number: 07-5; 
Recommendation: The Director of OMB should direct the Controller of 
OMB's Office of Federal Financial Management, in coordination with 
Treasury's Fiscal Assistant Secretary, to develop formal processes and 
procedures for identifying and resolving any material differences in 
distributed offsetting receipt amounts included in the net outlay 
calculation of federal agencies' Statement of Budgetary Resources and 
the amounts included in the computation of the budget deficit in the 
CFS; 
Status of recommendation[A]: Per Treasury and OMB: Treasury will work 
with OMB to perform this analysis and to develop policies and 
procedures to resolve these differences. OMB, working jointly with 
Treasury, will continue its efforts to implement this recommendation; 
Status of recommendation[A]: Per GAO: Open. 

Count: 37; 
Number: 07-9; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB's 
Office of Federal Financial Management, to develop and implement 
effective processes for monitoring and assessing the effectiveness of 
internal control over the processes used to prepare the CFS; 
Status of recommendation[A]: Per Treasury and OMB: Treasury is in the 
process of reviewing and revising its internal control procedures to 
formalize monitoring and assessment of the effectiveness of internal 
control over the preparation of the CFS. See status of recommendation 
no. 04-6; 
Status of recommendation[A]: Per GAO: Open. 

Count: 38; 
Number: 07-10; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB's Office of Federal Financial Management, to develop and implement 
alternative solutions to performing almost all of the compilation 
effort at the end of the year, including obtaining and utilizing 
interim financial information from federal agencies; 
Status of recommendation[A]: Per Treasury and OMB: Treasury will 
continue to consider what information can be obtained during the 
interim period to facilitate the year-end CFS preparation process; 
Status of recommendation[A]: Per GAO: Open. 

GAO-09-387 (results of the fiscal year 2008 audit): 

Count: 39; 
Number: 08-01; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to design, document, and implement policies and 
procedures to identify and eliminate intragovernmental payroll tax 
amounts at the governmentwide level when compiling the CFS; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2011, Treasury will continue to analyze and compare the amount of 
payroll taxes recorded centrally compared to the corresponding amounts 
reported by the agencies in their financial statements. Policies and 
procedures will be modified to reflect the results of the analysis; 
Status of recommendation[A]: Per GAO: Open. 

Count: 40; 
Number: 08-02; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop, document, and implement processes and procedures for 
preparing and reviewing the Management's Discussion and Analysis 
(MD&A) and "The Federal Government's Financial Health: A Citizen's 
Guide to the Financial Report of the United States Government" 
sections of the Financial Report of the U.S. Government (Financial 
Report) to help assure that information reported in these sections is 
complete, accurate, and consistent with related information reported 
elsewhere in the Financial Report; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2009, the Office of the Fiscal Assistant Secretary (OFAS) drafted and 
in fiscal year 2010 enhanced standard operating procedures (SOP) 
concerning the preparation of the Management's Discussion & Analysis 
(MD&A) and Citizen's Guide. As a result of implementing the enhanced 
SOP in fiscal year 2010, instances of inaccuracies and inconsistency 
were lower during the fiscal year 2010 reporting process than it had 
been during prior years. During fiscal year 2011, OFAS will further 
enhance its SOP and focus on its implementation to assure that 
information reported in the MD&A and Citizen's Guide is complete, 
accurate and consistent with related information reported elsewhere in 
the Financial Report; 
Status of recommendation[A]: Per GAO: Open. 

Count: 41; 
Number: 08-03; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish and document criteria to be used in identifying federal 
entities as significant to the CFS for purposes of obtaining assurance 
over the information being submitted by those entities for the CFS; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury and OMB used its documented criteria to identify all 
federal entities that are significant to the CFS. Treasury and OMB are 
working with the significant agencies that have not submitted Closing 
Packages prior to fiscal year 2011 on the reporting and audit 
requirements related to their submission to Treasury. During fiscal 
year 2011, Treasury will address GAO's remaining concerns as to the 
impact on the CFS of the remaining agencies that would not be required 
to submit audited Closing Package data; 
Status of recommendation[A]: Per GAO: Open. 

Count: 42; 
Number: 08-04; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement policies and procedures for assessing and 
documenting, on an annual basis, which entities meet the criteria 
established for identifying federal entities as significant to the CFS; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2011, Treasury will revise its policies and procedures for identifying 
entities that are significant to the CFS to require them to be 
performed on an annual basis; 
Status of recommendation[A]: Per GAO: Open. 

GAO-10-757 (results of the fiscal year 2009 audit): 

Count: 43; 
Number: 09-01; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Analyzing Agency 
Restatements" to fully document all procedures related to identifying, 
analyzing, and reporting restated closing package data as well as 
changes in accounting principles; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury fully documented its procedures related to identifying, 
analyzing and reporting restated closing package data as well as prior 
period adjustments due to changes in accounting principles; 
Status of recommendation[A]: Per GAO: Closed. 

Count: 44; 
Number: 09-02; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Analyzing Agency 
Restatements" to clarify who is responsible for performing the 
procedures contained in the SOP; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury ensured that its procedures related to identifying, 
analyzing and reporting restated closing package data as well as prior 
period adjustments due to changes in accounting principles, clarified 
the roles and responsibilities for the assigned Treasury staff; 
Status of recommendation[A]: Per GAO: Closed. 

Count: 45; 
Number: 09-03; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Analyzing Agency 
Restatements" to include procedures for analyzing the overall impact 
of entities' restatements on the CFS and documenting the analysis and 
related conclusion; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury fully enhanced its procedures for analyzing the impact 
of entities' restatements on the CFS and documenting its analysis and 
related conclusions. During fiscal year 2011, Treasury will ensure 
that the procedures are followed and the impact of the entities' 
restatements is correctly incorporated into the CFS; 
Status of recommendation[A]: Per GAO: Open. 

Count: 46; 
Number: 09-04; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to develop, implement, and document procedures for 
identifying, analyzing, compiling, and reporting all significant 
accounting policies and related party transactions at the 
governmentwide level; 
Status of recommendation[A]: Per Treasury and OMB: Treasury will 
revise its procedures for identifying, analyzing, compiling, and 
reporting all significant accounting policies and related party 
transactions at the governmentwide level in fiscal year 2011 to 
address remaining GAO concerns concerning the completeness of these 
disclosures; 
Status of recommendation[A]: Per GAO: Open. 

Count: 47; 
Number: 09-05; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Statement of Social 
Insurance, Social Insurance Note, and Required Supplementary 
Information" to include procedures for assuring the accuracy of 
staff's work related to preparing the social insurance information for 
the CFS; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury fully documented its procedures for assuring the 
accuracy of staff's work related to preparing the social insurance 
information for the CFS; 
Status of recommendation[A]: Per GAO: Closed. 

Count: 48; 
Number: 09-06; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Statement of Social 
Insurance, Social Insurance Note, and Required Supplementary 
Information" to implement and document procedures for assuring the 
accuracy of staff's work related to preparing the social insurance 
information for the CFS; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury revised its procedures for assuring the accuracy of 
staff's work related to preparing the social insurance information for 
the CFS and clarified the roles and responsibilities for the assigned 
Treasury staff. However, there were inconsistencies between the draft 
of the fiscal year 2010 CFS and the Statement of Social Insurance-
related information included in the social insurance reporting 
agencies' fiscal year 2010 Closing Packages. In fiscal year 2011, 
Treasury will ensure that the procedures in the enhanced Statement of 
Social Insurance SOP are effectively implemented and documented to 
ensure that all the social insurance information in the CFS is 
consistent with the agencies' social insurance information; 
Status of recommendation[A]: Per GAO: Open. 

Count: 49; 
Number: 09-07; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Federal Agency Legal 
Letter Analysis" to include procedures for assuring the accuracy of 
staff's work related to preparing the Schedule of Differences; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury included procedures for assuring the accuracy of 
staff's work related to preparing the Schedule of Differences; 
Status of recommendation[A]: Per GAO: Closed. 

Count: 50; 
Number: 09-08; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to implement and document procedures for assuring 
the accuracy of staff's work related to preparing the Schedule of 
Differences; 
Status of recommendation[A]: Per Treasury and OMB: In fiscal year 
2011, Treasury will improve the implementation and documentation of 
its procedures to help assure completeness and accuracy of documenting 
the inconsistencies between the amounts provided by the agencies; 
Status of recommendation[A]: Per GAO: Open. 

Count: 51; 
Number: 09-09; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to enhance the SOP entitled "Preparing the 
Financial Report of the U.S. Government" to include procedures for 
assuring the accuracy of staff's work related to performing analytical 
procedures; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2010, Treasury included procedures for assuring the accuracy of 
staff's work related to performing analytical procedures; 
Status of recommendation[A]: Per GAO: Closed. 

Count: 52; 
Number: 09-10; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to implement and document procedures for assuring 
the accuracy of staff's work related to performing analytical 
procedures; 
Status of recommendation[A]: Per Treasury and OMB: During fiscal year 
2011 Treasury will improve the implementation and documentation of its 
procedures to address remaining GAO issues related to assuring the 
accuracy of staff's work related to performing analytical procedures, 
specifically strengthening the explanations for all significant 
variances found during the year-end analyses; 
Status of recommendation[A]: Per GAO: Open. 

Source: GAO, Treasury, and OMB. 

[A] The status of the recommendations listed in app. I is as of 
December 13, 2010, the date of our report on the audit of the fiscal 
year 2010 CFS. 

[End of table] 

[End of section] 

Appendix II: Comments from the Department of the Treasury: 

Department Of The Treasury: 
Assistant Secretary: 
Washington: 

May 11, 2011: 

Mr. Gary T. Engel: 
Director, Financial Management and Assurance: 
Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Engel: 

Thank you for the opportunity to comment on the Government 
Accountability Office's (GAO) draft report on the Fiscal Year (FY) 
2010 audit, GAO-11-525, Management Report: Improvements Needed in 
Controls Over the Preparation of the U.S. Consolidated Financial 
Statements. 

The draft Management Report for the FY 2010 audit identifies four new 
recommendations for improving the Consolidated Financial Statements 
(CFS) preparation process through changes to documented policies and 
enhancement to standard operating procedures. We have made significant 
progress in improving our policies and procedures since the issuance 
of the report, and we expect to implement additional recommendations 
by the end of FY 2011. We concur with GAO's findings and will use them 
to focus our efforts on improving the central accounting and 
compilation activities associated with the CFS. 

During FY 2010 and FY 2011, we continued to make progress in improving 
the preparation of the CFS, leading to the closing of 6 of 52 
recommendations outstanding from the previous CFS audit reports. We 
are making steady improvements in our data analysis capabilities and 
in the procedural and automated changes to our reporting processes. We 
also strengthened the internal controls related to the preparation of 
the CFS. Our efforts included improved CFS disclosures, enhanced 
internal control processes and procedures, and development of more 
detailed corrective actions to address the recommendations. This year, 
we have increased our commitment to resolving material 
intragovernmental differences. Our strategy entails utilizing multiple 
focus groups to identify and implement short- and long-term solutions 
to ensure that this material weakness can be closed as soon as 
possible. We expect that, within the next three years, we will remove 
this issue as a disclaimer. 

In addition, we appreciate both OMB's and GAO's support during the 
past year in helping Treasury launch an enhanced, interactive, and 
more usable Financial Report website that facilitates navigation 
throughout the Report and Citizen's Guide, and enables users to easily 
access more detailed and additional information. 

Thank you, again, for the opportunity to review and comment on the 
final draft. We look forward to working with you and your staff in 
making the CFS more meaningful and usable to its readers.		 

Sincerely, 

Signed by: 

Richard L. Gregg: 
Fiscal Assistant Secretary: 

cc:	Daniel Werfel, Comptroller, OMB:	 

[End of section] 

Footnotes: 

[1] The 2010 Financial Report of the United States Government 
(Financial Report) includes our report and was issued by the 
Department of the Treasury (Treasury) on December 21, 2010, and is 
available through GAO's Web site at [hyperlink, 
http://www.gao.gov/financial.html] and Treasury's Web site at 
[hyperlink, http://www.fms.treas.gov/fr/index.html]. 

[End of section] 

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