Independent Auditor's Report – Report on Compliance
with Laws and Regulations
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. We conducted the audit 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.
The management of USAID is responsible for complying with
laws and regulations applicable to USAID. As part of obtaining
reasonable assurance about whether USAID’s financial
statements are free of material misstatement, we performed
tests of its compliance with certain provisions of laws and
regulations–noncompliance with which could have a direct
and material effect on the determination of financial statement
amounts and with certain other laws and regulations specified
in OMB Bulletin 06-03, including the requirements referred
to in the Federal Financial Management Improvement Act (FFMIA)
of 1996. We limited our tests of compliance to these provisions
and did not test compliance with all laws and regulations
applicable to USAID.
Under FFMIA, we are required to report whether USAID’s
financial management systems substantially comply with Federal
financial management systems requirements, applicable Federal
accounting standards, and the United States Government Standard
General Ledger at the transaction level. To meet this requirement,
we performed tests of compliance with FFMIA section 803(a)
requirements. The results of our tests showed that USAID is
in substantial compliance with FFMIA Section 803(a).
Our tests disclosed instances of noncompliance considered
to be reportable under Government Auditing Standards,
including Antideficiency Act violations. However, our objective
was not to provide an opinion on overall compliance with laws
and regulations. Accordingly, we do not express such an opinion.
OMB Circular A-123, Management’s Responsibility
for Internal Control, implements the requirements of
the Federal Managers’ Financial Integrity Act (FMFIA).
Appendix A of OMB Circular A-123 contains an assessment process
that management should implement in order to properly assess
and improve internal controls over financial reporting. The
assessment process should provide management with the information
needed to properly support a separate assertion on the effectiveness
of the internal controls over financial reporting, as a subset
of the overall FMFIA report.
USAID elected to complete its assessment in accordance with
OMB Circular A-123, Appendix A over three years. This plan
provides for identifying, testing, and assessing a significant
percentage of USAID’s key business processes and controls
in each year and demonstrates how USAID will meet the A-123,
Appendix A requirements by September 2008.
USAID’s A-123 assessment process was implemented in
substantial accordance with the OMB-approved plan. USAID’s
Statement of Assurance accurately reflects the amount of work
completed and the results of the assessment, and includes
an appropriate scope limitation.
Federal Financial Management Improvement Act of 1996
The results of our tests disclosed that USAID’s core
financial system substantially complied with the Office of
Management and Budget’s (OMB) November 2001 Federal
financial management systems requirements. OMB issued new
requirements in January 2006 and the results of our work related
to these new requirements are documented in a separate letter
dated November 14, 2006. We also identified areas for improvement
over several financial system processes not affecting substantial
compliance with FFMIA.
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