Independent Auditor's Report – Report on Internal
Control
We have audited the consolidated balance sheets of USAID
as of September 30, 2006 and 2005. We have also audited the
consolidated statements of changes in net position, consolidated
statements of net cost, combined statements of budgetary resources,
and consolidated statements of financing for the fiscal years
ended September 30, 2006 and 2005, and have issued our report
thereon dated November 15, 2006. We conducted the audits in
accordance with generally accepted auditing standards; Government
Auditing Standards issued by the Comptroller General
of the United States; and Office of Management and Budget
(OMB) Bulletin No. 06-03, Audit Requirements for Federal
Financial Statements.
In planning and performing our audits of USAID’s financial
statements for the fiscal years ended September 30, 2006 and
2005, we considered its internal control over financial reporting
by obtaining an understanding of the agency’s internal
control, determined whether internal controls had been placed
in operation, assessed control risk, and performed tests of
controls in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements.
We limited our system of internal control testing to those
controls necessary to achieve the objectives described in
OMB Bulletin 06-03. We did not test all internal controls
relevant to operating objectives as broadly defined by the
Federal Managers’ Financial Integrity Act of 1982 (FMFIA),
such as those controls relevant to ensuring efficient operations.
The objective of our audit was not to provide assurance on
internal control. Consequently, we do not provide an opinion
on internal control.
Our consideration of internal control over financial reporting
would not necessarily disclose all matters in internal control
over financial reporting that might be reportable conditions.
Under standards established by the American Institute of Certified
Public Accountants, reportable conditions are matters coming
to our attention relating to significant deficiencies in the
design or operation of internal control that, in our judgment,
could adversely affect the Agency’s ability to record,
process, summarize, and report financial data consistent with
the assertions by management in the financial statements.
Material weaknesses are reportable conditions 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 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 their assigned functions.
Because of inherent limitations in internal control, misstatements,
losses, or noncompliance may occur and not be detected. Our
consideration of internal control over financial reporting
would not necessarily disclose all reportable conditions that
are also considered to be material weaknesses as defined above.
We identified one matter involving internal control and its
operation that we consider to be a material weakness, and
five matters that we consider to be reportable conditions.
The material internal control weakness relates to USAID’s
accounting and reporting of accruals. This issue was also
identified by USAID during its OMB Circular A-123 assessment.
The reportable conditions relate to USAID’s:
- Reconciliations of its fund balance with the U.S. Treasury
- Intragovernmental reconciliations
- Controls over Treasury symbol information
- Accounting for foreign currency transactions
- Management’s Discussion and Analysis data
With respect to internal control related to performance measures
included in the Management’s Discussion and Analysis
(MD&A) Section of USAID’s Performance and Accountability
Report, we obtained an understanding of the design of significant
internal controls relating to the existence and completeness
assertions, as required by OMB Bulletin 06-03, and determined
whether they have been placed in operation. Our procedures
were not designed to provide assurance on internal control
over reported performance measures and, accordingly, we do
not provide an opinion on such controls.
We also noted other matters involving the internal control
over financial and performance reporting which we reported
to USAID management in a separate letter dated November 15,
2006.
Material Weakness
Reportable Conditions
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