Independent Auditor's Report – Appendix II: Management Comments
| November 9, 2005 |
| MEMORANDUM |
TO: |
Acting AIG/A, Joseph Farinella
|
FROM: |
CFO, Lisa D. Fiely /s/  |
SUBJECT: |
Management Response to Draft Independent Auditor's Report on
USAID's Financial Statements for Fiscal Years 2005 and 2004 (Report
No. 0-000-06-001-C) |
Thank you for your partnership in this Fiscal Year (FY) 2005 presentation of
USAID's Performance and Accountability Report (PAR), and particularly with respect to
the audit of the financial statements, against which the Agency has earned its third
consecutive unqualified opinion. The professionalism of your staff has been outstanding
and I would like to note that the recently retired Acting Inspector General, Bruce
Crandlemire, has left a legacy of collaboration between our organizations.
FY 2005 has been marked with significant improvements in our financial
operating environment. With the Office of the Inspector General's (OIG) support, we
have implemented Phoenix in a total of 22 overseas missions and have only two
bureaus remaining to complete worldwide implementation. As we continue to identify
areas for improvement in our systems, we also continue to improve the quality of
information and the availability of information for our clients. In the upcoming years we
will also work to strengthen our financial systems by integrating procurement and
assistance systems that will improve our operations and information gathering processes
and improve our overall reporting capabilities.
Following are our comments and management decisions regarding the findings
and proposed audit recommendations:
Material Weakness: USAID's Accruals Reporting System Needs Improvement
Recommendation 1: We recommend that USAID's Office of the Chief Financial Officer
modify USAID's interface between the Accruals Reporting System (ARS) and the USAID
accounting system general ledger so that it correctly calculates and posts accrual
information and that it establishes a review mechanism in ARS to review accrual
information for propriety before it is posted to the general ledger.
Management Decision: We have already taken the appropriate actions to correct the
interface that created the problem. As part of our 1st 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. Target completion date
is February 15, 2006.
Reportable Condition: USAID's Process for Reconciling its Fund Balance with
the U.S. Treasury Needs Improvement (Repeat Finding)
Recommendation No. 2: We recommend that the Office of the Chief Financial Officer
ensure that USAID financial managers and mission controllers implement the
reconciliation guidelines specified by CFO Bulletin No. 06-1001, Reconciliation with the
U. S. Treasury, dated October 2005, to ensure that Fund Balance with
Treasury accounts are reconciled in a timely manner, reconciling items are investigated
and resolved, and that adequate documentation is retained to support the reconciliation
procedures performed.
Management Decision: We agree to implement Recommendation No. 2. Target
completion date is September 30, 2006. As noted in the recommendation, 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.
Reportable Condition: USAID's Intragovernmental Transactions Remain
Unreconciled (Repeat Finding)
Recommendation 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.
Management Decision: While past practice has been focused on conducting transaction
reviews at year-end, we agree with the recommendation and will accelerate our
processes to conduct quarterly evaluations of Trading Partner 99 transactions. Target
completion date is February 15, 2006.
Reportable Condition: USAID's Process for Recognizing and Reporting its
Overseas Accounts Receivable Needs Improvement (Repeat Finding)
No Recommendation.
Reportable FFMIA Noncompliance (Repeat Finding)
Management Response: As noted earlier, the Agency is making tremendous progress
in our goal of replacing our legacy accounting system with Phoenix. It is my expectation
that by June 2006 USAID will report that Phoenix has been fully implemented for the
accounting of USAID's worldwide resources. This accomplishment is intended to fully
address all of your concerns related to FFMIA compliance.
In closing, I would like to confirm USAID's commitment to continual improvement
in financial management and financial reporting. Thank you.
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