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Government Management Reform Act - Audited Financial Statements
The Government Management Reform Act (GMRA) of 1994 amended the requirements of the CFO Act of 1990 by requiring the annual preparation and audit of agency-wide financial statements from the 24 major executive departments and agencies, including USAID. The statements are audited by the USAID IG. An audit report on the principal financial statements, internal controls, and compliance with laws and regulations is prepared after the audit is completed.
USAID's FY 2005 financial statements received an unqualified opinion – the best possible result of the audit process. This year marks the third consecutive year that USAID's financial statements have achieved such an opinion. USAID also, for the third year in a row, significantly accelerated the preparation and audit of the FY 2005 financial statements and associated reports. This indicates important progress toward the Agency's goal of providing timely, accurate, and useful financial information.
In relation to internal control, the Independent Auditor's Report cites one material weakness related to USAID's Accruals Reporting System. A material weakness is defined as a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing assigned functions. USAID has continuously improved its status in this area, from seven material weaknesses in FY 2002, three in FY 2003, and one in FY 2004.
The audit report also names three reportable conditions, which are detailed in the table below. Reportable conditions are significant deficiencies, though not material, in the design or operation of internal control that could adversely affect the Agency's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. USAID will continue working on these issues and is pleased that the auditors have consistently acknowledged the Agency's efforts to eliminate and reduce weaknesses. The auditors are also required to report on non-compliance with laws and regulations. The current auditor's report states that USAID's financial systems continue to be non-compliant with FFMIA, as discussed earlier in this section.
The following table summarizes the weaknesses cited in the FY 2005 Independent Auditor's Report, as well as planned actions to resolve the problems.
SUMMARY OF INDEPENDENT AUDITOR'S REPORT FINDINGS FY 2005
(Refer to Independent Auditor's Report Section)
| Material Weakness |
Planned Corrective Actions |
Target
Correction Date |
| Accruals Reporting System Needs Improvement |
Appropriate actions have already been taken to correct the interface that created the problem. As part of our first quarter FY 2006 accruals cycle and financial statement preparation process, the Bureau for Management, Office of the Chief Financial Officer (M/CFO) will evaluate accurate production performance of the interface to deliver accurate information to the Phoenix general ledgers. |
February 15, 2006 |
| Reportable Condition |
Planned Corrective Actions |
Target
Correction Date |
| Process for Reconciling Fund Balance with U.S. Treasury Needs Improvement (Repeat Finding) |
M/CFO has issued guidance on reconciliation processing and will work to enhance guidance on Phoenix reconciliations. However, improved Phoenix reconciliations will require enhancements to the Phoenix software as related to reconciliations. The Phoenix team is aware of needed improvements on reconciliation processes and will be working the issues in FY 2006. |
September 30, 2006 |
| Intragovernmental Transactions Remain Unreconciled (Repeat Finding) |
Past practice has been focused on conducting transaction reviews at year-end. We will accelerate our processes to conduct quarterly evaluations of Trading Partner 99 transactions. |
February 15, 2006 |
| Process for Recognizing and Reporting Overseas Accounts Receivable (Repeat Finding) |
Actions to improve will continue. |
September 30, 2006 |
| Noncompliance with Laws and Regulations |
Planned Corrective Actions |
Target
Correction Date |
| Federal Financial Management Improvement Act of 1996 (FFMIA) (Repeat Finding) |
Detailed in FFMIA Remediation Plan table in previous section. |
June 30, 2006 |
Progress Made on Issues From FY 2004 GMRA Audit:
USAID has taken extensive and aggressive actions during FY 2005 to address the weaknesses from the FY 2004 audit, as indicated in the table below.
SUMMARY OF INDEPENDENT AUDITOR'S REPORT FINDINGS FY 2004
| Material Weakness |
Corrective Actions |
Correction Date |
| Process for Reviewing and Reporting Quarterly Accrued Expenditures and Accounts Payable |
Accruals training has been updated in both classroom and computer-based venues. In addition, an accruals calculator tool has been developed to assist CTOs in calculating accruals. Actions to improve training continue. |
December 31, 2005 |
| Reportable Condition |
Corrective Actions |
Correction Date |
| Certification Process for Mapping Strategic Objectives to Performance Goals |
The Agency instituted a new process for certifying strategic objective linkages to the performance goals of the Joint State-USAID Strategic Plan. |
October 31, 2005 |
| Process for Reconciling Fund Balance with U.S. Treasury (Repeat Finding) |
The CFO continues to improve the process to properly document the rationale for adjusting entries between the Fund Balance with Treasury and the Standard General Ledger. A CFO Policy bulletin was issued to all Accounting Stations reinforcing the requirement to perform full monthly reconciliations of Agency balances, by appropriation, with Treasury. |
December 31, 2005 |
| Process for Recognizing and Reporting Accounts Receivable (Repeat Finding) |
The CFO continues to implement the policies and procedures, established in FY 2004, for overseas missions and the Office of Acquisition and Assistance to immediately recognize accounts receivable. The CFO has revised and implemented new collection letters and prepared and implemented new desk procedures regarding the transfer, cross-servicing, and tracking of delinquent debt. |
September 30, 2005 |
| Intragovernmental Reconciliation Process |
The CFO has implemented the process of conducting quarterly reconciliation efforts with federal trading partners with whom USAID has differences greater than $100 million. This is an ongoing work process/procedure and resolution of these differences depends on the timeliness of trading partners in providing their data, data quality, and data compatibility with USAID's data. USAID also participates in an intragovernmental subcommittee. Since intragovernmental reconciliations are a government-wide issue, a working group has been established to identify underlying issues and ways to improve this process. |
September 30, 2005 |
| Process for Analyzing and De-obligating Unliquidated Obligations |
Improved policies and procedures have been implemented, including clarification of responsibilities for analyzing and de-obligating funds. |
September 30, 2005 |
| System for Preparing Management's Discussion and Analysis (MD&A) |
USAID continues to refine its process for collecting timely and accurate performance information for the PAR MD&A. The most significant improvement is in the area of the performance information collected at the Mission level through the Annual Report (AR) application, which will be collected on a semi-annual (as opposed to annual) basis. Twice-yearly reporting will permit operating units to project data for the full year based on actual data halfway through the year. These projections, based on first half actual data, will be included in the draft PAR MD&A, which is submitted to OIG in October. This data, along with the inclusion of the congressionally-mandated OPIN data, provides real-time performance information for the PAR. Performance information will then be updated when final AR data is available, and will be included in the PAR Addendum published each Spring. |
September 30, 2005 |
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