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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 Agency 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 2006 financial statements received an unqualified opinion—the best possible result of the audit process. This year marks the fourth consecutive year that USAID’s financial statements have achieved such an opinion. USAID also, for the fourth year in a row, significantly accelerated the preparation and audit of the FY 2006 financial statements and associated reports. Of significant note is the fact that for the first time this year the Agency closed its financial books and records and produced the financial statements using a single integrated worldwide financial system. This indicates important progress toward the Agency’s goal of providing timely, accurate, and useful financial information.
The Senegalese town of Koungheul had long been troubled by unsanitary conditions. Thanks to the USAID-sponsored “Clean Town” initiative, there is less litter, households bag their garbage, and puddles are filled with sand.
Photo: Democratié et la Gouvernance Locale |
In relation to internal control, the Independent Auditor’s Report cites one material weakness related to USAID’s accounting and reporting of accruals. 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.
The audit report also names five reportable conditions, which are detailed in the table below. Reportable conditions, though not material, are vulnerabilities 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 noncompliance with laws and regulations.
The following table summarizes the weaknesses cited in the FY 2006 Independent Auditor’s Report, as well as planned actions to resolve the problems.
SUMMARY OF INDEPENDENT AUDITOR'S REPORT FINDINGS FY 2006
(Refer to Independent Auditor's Report Section)
| Material Weakness |
Planned Corrective Actions |
Target
Correction Date |
| Accounting and Reporting of Accruals |
We have commenced a reconciliation effort which will be demonstrated during January 2007 and will be accomplished in each subsequent accruals cycle. In addition, we will review and enhance training and identify other means to improve recognition of the need for effective accrual practices. |
September 30, 2007 |
| Reportable Condition |
Planned Corrective Actions |
Target
Correction Date |
| Reconciliations of Fund Balance with Treasury |
We will review current procedures for consistency with the Treasury guidance and modify the procedures as appropriate. We will also consider alternatives to ensure mission reconciliation compliance. |
September 30, 2007 |
| Intragovernmental Reconciliations |
Actions continue to improve reconciliations of financial data with our trading partners at other federal agencies. |
September 30, 2007 |
| Controls Over Treasury Symbol Information |
In addition to reviewing procedures related to payment transactions, it is our intent to identify processes that will ensure that all types of transactions are properly identified and posted. Where corrective actions are necessary, we will resolve discrepancies as quickly as possible. Efforts to improve interfacing of transactions from the Department of Health and Human Services related to grant processing are currently underway and these actions are expected to correct this finding. |
September 30, 2007 |
| Accounting for Foreign Currency Transactions |
The CFO’s Phoenix team has been charged with responsibility for reviewing foreign currency accounting in Phoenix and ensuring that foreign currency accounting is improved in the upcoming year. In the meantime, we will coordinate validation of accounting information between Missions and our central accounting ledgers. |
September 30, 2007 |
| Management’s Discussion and Analysis Data |
Recognizing that accurate and verifiable performance information is critical to management of the Agency, USAID will re-establish policies and procedures to ensure that accurate performance information is documented and that required data quality assessments are performed. |
September 30, 2007 |
| Noncompliance with Laws and Regulations |
Planned Corrective Actions |
Target
Correction Date |
| Federal Financial Management Improvement Act |
Efforts to improve the overall management of Section 511 funding authority in the Phoenix accounting system operations are underway. |
March 31, 2007 |
| The Antideficiency Act |
The CFO will issue an immediate notice reminding all Agency personnel of the necessity to ensure that all legal, regulatory, and internal USAID policies are followed for compliance with funds control practices. |
December 15, 2006 |
USAID programs support primary through university education in Iraq.
Photo: Thomas Hartwell |
Progress Made on Issues From FY 2005 GMRA Audit
USAID has taken extensive and aggressive actions during FY 2006 to address the weaknesses from the FY 2005 audit, as indicated in the table below.
SUMMARY OF INDEPENDENT AUDITOR'S REPORT FINDINGS FY 2005
| Material Weakness |
Corrective Actions |
Correction Date |
| The Accruals Reporting System (ARS) |
USAID no longer uses the ARS to record quarterly accruals information. Beginning in September 2006, users enter their accrual data directly into the primary accounting system via the Accrual Query. A reconciliation report has been developed to track accruals in the system. |
October 31,
2006 |
| Reportable Condition |
Corrective Actions |
Correction Date |
| Process for Reconciling Fund Balance with U.S. Treasury |
Due to Operating Expense (OE) budget cuts and a tight Phoenix budget, a cash reconciliation tool was being considered, but was not developed and implemented before the end of this fiscal year. Reports, however, were developed that assist in tracking cash disbursement differences. Based on these reports, management can identify large discrepancies and address them. The cash reconciliation tool will be completed next fiscal year. |
September 30, 2007 |
| Process for Recognizing and Reporting Accounts Receivable |
System users have received training on how to enter Accounts Receivable transactions into the accounting system and the CFO has reinforced the requirement. |
April 25,
2006 |
| Intragovernmental Reconciliation Process |
Desk procedures have been established for USAID’s reporting and reconciliation of Intragovernmental transactions. The Intragovernmental procedures are used in conjunction with Treasury’s Federal Intragovernmental Transactions Accounting Policies Guide. The Intragovernmental procedures established a system to review transactions reported under Trading Partner 99 on a quarterly basis to ensure that they are properly classified and appropriately reported. |
March 15,
2006 |
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