Reportable Condition: Independent Auditor's Report – USAID's Intragovernmental Transactions Remain Unreconciled (Repeat Finding)
Summary: USAID did not resolve all significant differences in intragovernmental transactions between USAID and its trading partners
throughout fiscal year 2005. FMS reported a $5.9 billion net difference in intragovernmental transactions for the 4th quarter in the Intragovernmental Summary
Activity Report, with an absolute value of $6.9 billion. Section 11.3 of OMB Bulletin 01-09 requires Federal agencies to perform quarterly reconciliations of
intragovernmental transactions and these reconciliations are to be conducted in accordance with the FMS Federal Intragovernmental Transactions Accounting
Policies Guide. Although USAID reconciled material differences identified by FMS in its quarterly Material Differences/Status
of Disposition Certification (MD/SD) Report and other differences equal to or greater than $100 million, it did not consistently reconcile other significant differences
by reciprocal category with its Federal trading partners throughout FY 2005. Until intragovernmental transactions are reconciled, USAID's financial statements
are subject to error.
Beginning in the quarter ending March 31, 2004, FMS implemented its
Intragovernmental Management Control Plan to address a material weakness cited by
the Government Accountability Office in the Financial Report of the United States
Government. FMS monitors the intragovernmental payment and collection (IPAC)
process for the entire Federal government and accumulates daily IPAC transactions
among all Federal agencies. To facilitate quarterly reporting, FMS developed a
reconciliation process based on a reciprocal category concept. As of September 30,
2005, FMS identified $6.9 billion of unreconciled differences between USAID and 36
separate Federal government agencies.
In its response to a finding reported by the OIG in FY 2004, USAID agreed to reconcile
all differences equal to or greater than $100 million. USAID also reconciled all
differences that FMS reported on the MD/SD Report. For the 4th quarter of FY 2005
these differences amounted to $742 million out of $6.9 billion the total differences
reported.
We noted that $5.2 billion of unreconciled transactions under Trading Partner 99 are not
required to be reconciled by USAID because these transactions indicate general fund
activities between USAID and the U.S. Treasury. FMS does suggest that Federal
agencies confirm that these differences represent general fund activities, however, and
this was not always documented.
For other trading partners, USAID investigated the differences, identified reasons for the
differences, reported the reasons to FMS, contacted the responsible personnel at the
trading partners, and took appropriate action to resolve them. Nevertheless, USAID's
reconciliations are not always documented, and differences persist because Federal
trading partners did not always perform the same investigations. While some timing
differences may ultimately be resolving differences due to accounting errors or
different accounting methodologies require a special effort by USAID and its trading
partners for timely resolution. The Federal Intragovernmental Transactions Accounting
Policy Guide suggests that agencies should work together to estimate accruals and to
record corresponding entries in each set of records so that they are in agreement or
that long term accounting policy differences can be easily identified. As a result of
the reportable condition, until these reconciliations are complete, USAID's year-end
balances related to intragovernmental line items reported on the financial statements
are subject to misstatement.
Through its participation in the Chief Financial Officers' Council, USAID expects to
continue to work with other federal agency financial management leaders to
support intragovernmental reconciliation activities, including but not limited to; the
facilitation of requests for data; agreement on accounting presentation and; investigation
and resolution of differences.
Because significant differences in intragovernmental transactions remain between
USAID and its trading partners in fiscal year 2005, we are making the following
recommendation:
Recommendation No 3: We recommend that USAID's Office of the Chief Financial
Officer develop a system for reviewing transactions reported under Trading Partner
99 to ensure that they are properly classified and appropriately reported, as
recommended by section 4706.30 of TFM 2-4700, "Agency Reporting Requirements
for the Financial Report of the United States Government."
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