Financial Audit: Bureau of the Fiscal Service's Fiscal Year 2018 Schedules of the General Fund
Fast Facts
The Treasury Department manages the General Fund, which finances the daily and long-term operations of the U.S. government.
The Schedules of the General Fund reported the government's cash activity ($14 trillion), debt activity (borrowings of $10 trillion and repayments of $9 trillion), and budget deficit ($779 billion) in FY 2018.
In the first audit of these schedules, data limitations left us unable to issue an opinion on their reliability. For example, we didn't get all the audit evidence we requested on time because some of it wasn't readily available from Treasury's systems.
We made 12 recommendations to address weaknesses we found.
Various denominations of U.S. currency.
Highlights
What GAO Found
Certain significant deficiencies in internal control over financial reporting and other limitations on the scope of GAO's work resulted in conditions that prevented GAO from expressing an opinion on the Schedules of the General Fund as of and for the fiscal year ended September 30, 2018. Such scope limitations also prevented GAO from obtaining sufficient appropriate audit evidence to provide a basis for an opinion on the effectiveness of the Bureau of the Fiscal Service's (Fiscal Service) internal control over financial reporting relevant to the Schedules of the General Fund as of September 30, 2018. In addition, such scope limitations limited tests of compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 2018.
Fiscal Service was unable to timely provide sufficient appropriate evidence to support certain information reported in the accompanying Schedules of the General Fund. The underlying scope limitations are the basis for GAO's disclaimer of opinion on the Schedules of the General Fund. These limitations primarily related to (1) the inability to readily identify and trace General Fund transactions to determine whether they were complete and properly recorded in the correct general ledger accounts and line items within the Schedules of the General Fund, (2) inadequate Fiscal Service procedures to determine the effect of differences between General Fund's records and the amounts reported by certain federal agencies on the Schedules of the General Fund, and (3) Fiscal Service's inability to timely provide sufficient appropriate audit evidence to support the beginning balance of the Liability for Fund Balance with Treasury. GAO also identified two significant deficiencies contributing to the first two scope limitations discussed above. As a result of these limitations, readers are cautioned that amounts reported in the Schedules of the General Fund and related notes may not be reliable.
Further, GAO identified two additional significant deficiencies in Fiscal Service's internal control over financial reporting relevant to the Schedules of the General Fund related to deficiencies in (1) information systems controls and (2) Fiscal Service's risk assessment and monitoring controls. In addition, GAO identified three other control deficiencies, which it does not consider to be material weaknesses or significant deficiencies.
GAO recognizes that the fiscal year 2018 Schedules of the General Fund reflect the significant efforts of Fiscal Service over the past several years to develop the infrastructure to support the Schedules of the General Fund. Fiscal Service's actions have substantially improved its ability to report on the General Fund, including the government-wide cash inflows and outflows.
Why GAO Did This Study
GAO audits the consolidated financial statements of the U.S. government. Because of the significance of the General Fund of the United States (General Fund) to the government-wide financial statements, GAO audited the fiscal year 2018 Schedules of the General Fund, which are managed by Fiscal Service, to determine whether, in all material respects, (1) the schedules are fairly presented and (2) Fiscal Service management maintained effective internal control over financial reporting relevant to the Schedules of the General Fund. Further, GAO tested compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements related to the Schedules of the General Fund.
The General Fund is the reporting entity responsible for accounting for the cash activity of the U.S. government. In fiscal year 2018, the General Fund reported $14.2 trillion of cash inflows, including debt issuances and taxes collected, and $14.0 trillion of cash outflows, including debt repayments and Social Security and health care benefit payments. It also reported $21.6 trillion of federal debt securities held and managed by the Department of the Treasury as of September 30, 2018.
Recommendations
GAO is making 12 recommendations to improve Fiscal Service's internal control over financial reporting relevant to the Schedules of the General Fund.
In commenting on a draft of this report, Fiscal Service concurred with the results of GAO's audit.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Bureau of the Fiscal Service |
Priority Rec.
The Commissioner of Fiscal Service should develop and implement a mechanism to reasonably assure that all the journal entries recorded in the Schedules of the General Fund general ledgers can be readily identified and traced, such as through a unique identifier, to determine the effect of a transaction on all applicable general ledger accounts and line items of the Schedules of the General Fund, including the budget deficit. (Recommendation 1) |
Fiscal Service has developed a long-term strategy to address this recommendation that primarily includes developing new reporting mechanisms for federal entities to report transactions and reclassifications at the appropriate level of detail for traceability. As part of this strategy, in January 2023, Fiscal Service completed a system upgrade to enable federal entities to report transfers and non-cash (TANC) transactions at the appropriate level of detail. As of February 2024, only one entity has been approved to use and is using this new reporting mechanism (known as the TANC module) to report TANC transactions. Furthermore, Fiscal Service's ability to address this finding is contingent on (1) converting any remaining entities to full CARS reporters, which is dependent on entity cooperation, or (2) working with those entities to report the necessary detail rather than converting to full CARS reporters. Fiscal Service anticipates resolution of this recommendation in fiscal year 2027.
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| Bureau of the Fiscal Service | The Commissioner of Fiscal Service should develop and implement a mechanism to reasonably assure that payment transactions recorded in the Schedules of the General Fund general ledgers capture all of the key information needed, including payment schedules if applicable, to readily trace transactions to the information certified by the federal agency. (Recommendation 2) |
In November 2021, Fiscal Service developed and implemented a monthly process to readily identify and trace the electronic payment vouchers and check issuances that are recorded in the general ledgers to the payment schedules that the federal agencies certified.
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| Bureau of the Fiscal Service |
Priority Rec.
The Commissioner of Fiscal Service should develop and implement additional reporting requirements with related guidance for federal agencies that better align with the General Fund financial reporting objectives and enable Fiscal Service to capture the effect of a transaction on all applicable general ledger accounts and line items of the Schedules of the General Fund, including the budget deficit. (Recommendation 3) |
As of February 2024, Fiscal Service continued to educate and encourage federal entities to fully implement the new Business Event Type Codes (BETC) for reporting direct and guaranteed loan financing activity. Additionally, Fiscal Service is still in the process of reviewing line items related to federal debt securities and other General Fund activity to determine the reporting requirements needed to capture the effect of this activity on the Schedules of the General Fund. Further, Fiscal Service continues to encourage federal entities to fully implement the new BETCs designed to distinguish between disbursements of appropriated and non-appropriated funds. Fiscal Service anticipates resolution of this recommendation in fiscal year 2025.
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| Bureau of the Fiscal Service |
Priority Rec.
We recommend that the Commissioner of Fiscal Service develop and implement a process that would enable Fiscal Service to obtain the information necessary to effectively assess the effect of the Statement of Difference on the Schedules of the General Fund for those federal agencies that have not implemented the Central Accounting and Reporting System. (Recommendation 4) |
In January 2021, Fiscal Service completed its methodology to effectively assess the effect of the Statement of Difference on the Schedules of the General Fund which first included conducting outreach to federal agencies to identify and resolve the root cause of the statements of difference. For those differences that could not be resolved, Fiscal Service obtained additional information from federal agencies and other data sources to estimate the impact of these differences on the line items of the Schedules of the General Fund.
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| Bureau of the Fiscal Service |
Priority Rec.
We recommend that the Commissioner of Fiscal Service design and implement procedures to evaluate risks and monitor internal controls over financial reporting relevant to the Schedules of the General Fund. (Recommendation 5) |
As of February 2024, Fiscal Service has taken corrective actions regarding its procedures to evaluate risks and monitor the effectiveness of its internal controls over financial reporting relevant to the Schedules of the General Fund. For example, Fiscal Service implemented an MFC, Deficiency, and Identified Risk Tracker that it updates quarterly to monitor internal control gaps. However, we continue to find deficiencies in this area, such as identifying relevant controls that were omitted from or not sufficiently tested as part of Fiscal Service's monitoring process. Fiscal Service has stated its commitment to continue addressing the remaining control deficiencies in this area.
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| Bureau of the Fiscal Service | The Commissioner of Fiscal Service should enhance guidance available to federal agencies to comprehensively define and describe the proper use and related accounting implications of each Business Event Type Codes (BETC). (Recommendation 6) |
In December 2019, Fiscal Service enhanced BETC guidance that defined, indicated proper usage, and identified the accounting implication of each BETC and published the guidance for use by federal agencies.
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| Bureau of the Fiscal Service | The Commissioner of Fiscal Service should develop and implement a mechanism for evaluating agencies' use of BETCs based on the enhanced guidance. (Recommendation 7) |
In May 2021, Fiscal Service mapped the United States Standard General Ledger (USSGL) accounts to the related BETCs. This allowed Fiscal Service to develop automated edit checks within the government-wide Treasury Account Symbol Adjusted Trial Balance System to help ensure federal agencies are implementing BETCs as designed.
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| Bureau of the Fiscal Service | The Commissioner of Fiscal Service should design and implement procedures to (1) obtain and review supporting documentation for reported activity included on Agency Submission Forms and (2) assess the overall completeness of federal agency activity reported on Agency Submission Forms. (Recommendation 8) |
As of March 2023, Fiscal Service established procedures to obtain and review supporting documentation for reported activity included on entity submission forms. In addition, Fiscal Service implemented procedures to review federal entity audited financial statements and conduct a data call for unrecorded activity to ensure overall completeness of federal entity activity included in the General Fund's general ledger at year-end.
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| Bureau of the Fiscal Service | The Commissioner of Fiscal Service should enhance journal voucher review procedures to include a review of relevant accounting criteria before recording transactions based on Agency Submission Forms. (Recommendation 9) |
In September 2019, Fiscal Service enhanced its standard operating procedure by adding steps that require the reviewer to review all relevant accounting criteria and related guidance for each journal entry prior to approval and recording to ensure that the impact on the financial statements is accurate.
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| Bureau of the Fiscal Service |
Priority Rec.
The Commissioner of Fiscal Service should design and implement procedures to periodically review all active Treasury accounts to determine whether they are valid and the related General Fund account balances are consistent with federal agency records. (Recommendation 10) |
During fiscal year 2019, Fiscal Service developed and implemented review procedures to identify Treasury accounts that are no longer valid and then to work with the federal agencies to determine if actions need to be taken on the accounts. In addition, Fiscal Service established procedures to reconcile General Fund account balances with reported federal agency account balances.
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| Bureau of the Fiscal Service |
Priority Rec.
The Commissioner of Fiscal Service should enhance current procedures for reviewing negative balances to include Treasury accounts with indefinite periods of availability. (Recommendation 11) |
During fiscal year 2020, Fiscal Service established procedures to include a review of negative balances for all Treasury accounts, including those with indefinite periods of availability.
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| Bureau of the Fiscal Service | We recommend that the Commissioner of Fiscal Service enhance the standard operating procedures for prior period transactions to include a requirement for Fiscal Service to assess the materiality of transactions to determine the appropriateness of recording them as a current year adjustment or restating the prior period. (Recommendation 12) |
In November 2019, Fiscal Service enhanced its standard operating procedures by incorporating a requirement to assess materiality for backdated transactions to determine the appropriateness of recording them as current year adjustments or to restate the prior period and adjust beginning balances.
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