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entitled 'Financial Audit: Significant Internal Control Weaknesses 
Remain in the Preparation of the Consolidated Financial Statements of 
the U.S. Government' which was released on July 23, 2007. 

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Report to the Secretary of the Treasury and the Director of the Office 
of Management and Budget: 

United States Government Accountability Office: 

GAO: 

July 2007: 

Financial Audit: 

Significant Internal Control Weaknesses Remain in the Preparation of 
the Consolidated Financial Statements of the U.S. Government: 

GAO-07-805: 

Contents: 

Letter: 

Results in Brief: 

Scope and Methodology: 

Reconciling and Reporting Undistributed Offsetting Receipts (Component 
of the Budget Deficit): 

Directly Linking Audited Federal Agencies' Financial Statements to the 
CFS: 

Reporting Unexpended Budget Balances: 

Reporting Operating Cash: 

Reporting and Disclosing Legal Contingencies: 

Reconciling Intragovernmental Activity and Balances: 

Preparing and Auditing Certain Information in Federal Agencies' Closing 
Packages: 

Conformity with GAAP: 

Agency Comments and Our Evaluation: 

Appendix I: Status of Treasury's and OMB's Progress in Addressing GAO's 
Prior Year Recommendations for Preparing the CFS: 

Appendix II: Comments from the Department of the Treasury: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Status of Treasury's and OMB's Progress in Addressing GAO's 
Prior Year Recommendations for Preparing the CFS: 

United States Government Accountability Office: 
Washington, DC 20548: 

July 23, 2007: 

The Honorable Henry M. Paulson, Jr. 
The Secretary of the Treasury: 

The Honorable Robert J. Portman: 
Director, Office of Management and Budget: 

In our report dated December 1, 2006,[Footnote 1] we disclaimed an 
opinion on the consolidated financial statements of the U.S. government 
(CFS) for the fiscal years ended September 30, 2006 and 2005.[Footnote 
2] For the past 10 years, certain material weaknesses in internal 
control and in selected accounting and financial reporting practices 
have resulted in conditions that prevented us from expressing an 
opinion on the CFS. We have reported that the federal government did 
not have adequate systems, controls, and procedures for preparing the 
CFS. On behalf of the federal government, the Department of the 
Treasury (Treasury), in coordination with the Office of Management and 
Budget (OMB), prepares the CFS. Many of the weaknesses in internal 
control that have contributed to our continuing disclaimers of opinion 
were identified by auditors during their audits of federal agencies' 
financial statements and were reported in detail with recommendations 
to the agencies in separate reports. Other internal control weaknesses 
were identified during our tests of the federal government's process 
for preparing the CFS. 

The purpose of this report is to (1) discuss the details of the 
weaknesses we identified during our audit of the fiscal year 2006 CFS 
regarding financial reporting procedures and internal control over the 
process for preparing the CFS, (2) recommend improvements to address 
those weaknesses, and (3) provide the status of corrective actions on 
the recommendations detailed in our prior reports and listed in 
appendix I. We have discussed each of the new weaknesses identified 
during our fiscal year 2006 audit with your staff and have incorporated 
their comments as appropriate. 

Results in Brief: 

We identified weaknesses in the processes used to compile and report 
the fiscal year 2006 CFS. These weaknesses impair the federal 
government's ability to ensure that the CFS are consistent with the 
underlying audited agency financial statements, properly balanced, and 
in conformity with U.S. generally accepted accounting principles 
(GAAP). Consequently, these weaknesses contributed to our inability to 
render an opinion on the CFS. Specifically, we found that: 

* Treasury lacked effective processes and procedures for (1) 
reconciling undistributed offsetting receipts[Footnote 3] to related 
information in federal agencies' financial statements and underlying 
agency information and records with Treasury's central accounting 
records and (2) demonstrating that undistributed offsetting receipts 
from intragovernmental interest were fully eliminated in the unified 
budget deficit reported in the CFS; 

* Treasury's process for compiling the CFS does not yet fully ensure 
that financial information from federal agencies' audited financial 
statements and other financial data directly link to amounts reported 
in the CFS and required supplemental information; 

* Treasury lacked effective processes and procedures for ensuring that 
unexpended balances of budget authority (unexpended budget 
balances[Footnote 4]) are properly reported in the supplemental 
information section of the CFS; 

* Treasury lacked effective processes and procedures for ensuring that 
the operating cash balance reported in the CFS and the related footnote 
to the financial statements was appropriate; 

* the federal government lacked effective processes and procedures to 
ensure that appropriate information regarding litigation and claims is 
included in the governmentwide legal representation letter; 

* Treasury and OMB did not have effective processes and procedures in 
place for obtaining sufficient information from federal agencies to 
enable them to adequately monitor agencies' efforts to reconcile 
intragovernmental activity and balances with their trading partners; 

* auditors of several of the agencies identified by Treasury and OMB as 
significant[Footnote 5] to the CFS did not perform the required audit 
procedures on certain information in the footnotes to the respective 
agencies' closing packages.[Footnote 6] In addition, one of the 
significant agencies did not provide in its closing package the 
required cost allocation information used by Treasury in preparing the 
consolidated Statement of Net Cost; 

* Treasury continues to lack an adequate process to ensure that the 
financial statements, related notes, stewardship information, and 
supplemental information in the CFS are presented in conformity with 
GAAP; and: 

* various other internal control weaknesses identified in previous 
years' audits still existed during fiscal year 2006 (see app. I). 

This report includes 11 new recommendations to address weaknesses we 
identified during our audit of the fiscal year 2006 CFS. Appendix I of 
this report reflects the status of actions taken (as of December 1, 
2006, the date of completion of our fieldwork on our audit of the 
fiscal year 2006 CFS) to address 143 open recommendations from our 
previous reports.[Footnote 7] Our work showed that 70 recommendations 
contained in our prior reports remained open and 73 were closed. Of the 
recommendations that were closed, 53 were closed based on the Federal 
Accounting Standards Advisory Board's (FASAB) issuance in fiscal year 
2006 of Statement of Federal Financial Accounting Standard (SFFAS) No. 
32, Consolidated Financial Report of the United States Government 
Requirements: Implementing Statement of Federal Financial Accounting 
Concepts 4 "Intended Audience and Qualitative Characteristics for the 
Consolidated Financial Report of the United States Government." 
Specifically, this standard eliminated or lessened the disclosure 
requirements for the CFS related to certain information that Treasury 
had not been reporting. Overall, a total of 81 recommendations remained 
open as of the end of our fiscal year 2006 CFS audit. We will continue 
to monitor the status of corrective actions on our open recommendations 
during our fiscal year 2007 audit of the CFS. 

In commenting on a draft of this report, OMB stated that it generally 
agreed with the new findings and related recommendations in this 
report. Treasury stated that it concurs with the new findings and 
related recommendations in this report with the exception of the 
nonconformity with GAAP finding and recommendation related to reporting 
a consolidated total in the consolidated Statement of Social Insurance 
(SOSI). Treasury stated that it does not believe that GAAP requires the 
reporting of a consolidated total in the consolidated SOSI or believe 
that doing so is especially meaningful. We do not agree with Treasury. 
In our view, GAAP requires the consolidated SOSI to include a 
consolidated total for all the social insurance programs. In addition, 
we believe that including a total is necessary to provide increased 
transparency and is meaningful to the users of the CFS. 

Scope and Methodology: 

As part of our audit of the fiscal years 2006 and 2005 CFS, we 
evaluated the federal government's financial reporting procedures and 
related internal control, and we followed up on the status of Treasury 
and OMB corrective actions to address open recommendations regarding 
the process for preparing the CFS that were in our prior years' 
reports. In our disclaimer of opinion on the fiscal year 2006 CFS, 
which is included in the fiscal year 2006 Financial Report of the 
United States Government, we discussed material deficiencies related to 
the federal government's process for preparing the CFS. These material 
deficiencies contributed to our disclaimer of opinion on the CFS and 
also constitute material weaknesses in internal control, which 
contributed to our adverse opinion on internal control. We performed 
sufficient audit procedures to provide the disclaimer of opinion in 
accordance with U.S. generally accepted government auditing standards. 
This report provides the details of the weaknesses we identified in 
performing our fiscal year 2006 audit procedures related to the process 
for preparing the CFS and our recommendations to correct those 
weaknesses, as well as the status of corrective actions taken by 
Treasury and OMB to address recommendations in our prior reports. 

We requested comments on a draft of this report from the Director of 
OMB and the Secretary of the Treasury or their designees. OMB provided 
oral comments, which are discussed in the Agency Comments and Our 
Evaluation section of this report. Treasury's comments are reprinted in 
appendix II and are also discussed in the Agency Comments and Our 
Evaluation section. 

Reconciling and Reporting Undistributed Offsetting Receipts (Component 
of the Budget Deficit): 

The federal government reports a unified budget deficit[Footnote 8] 
(budget deficit) in the Reconciliation of Net Operating Cost and the 
Unified Budget Deficit and in the Statement of Changes in Cash Balance 
from Unified Budget and Other Activities. The budget deficit is 
calculated by subtracting actual budget outlays from actual budget 
receipts. Budget outlays consist of federal agencies' outlay 
amounts[Footnote 9] and undistributed offsetting receipts.[Footnote 10] 

For several years, we have been reporting material unreconciled 
differences between the total net outlays reported in selected federal 
agencies' Statements of Budgetary Resources (SBR) and Treasury's 
central accounting records used to compute the budget deficit[Footnote 
11] reported in the CFS. OMB and Treasury have been working with 
federal agencies to reduce these material unreconciled differences. 
Such efforts have resulted in significantly reducing the net outlay 
differences in fiscal year 2006. However, billions of dollars of 
differences still exist in this and other components of the budget 
deficit because the federal government does not have effective 
processes and procedures for identifying and either resolving or 
explaining material differences in the components of the budget deficit 
between Treasury's central accounting records and information reported 
in agency financial statements and underlying agency financial 
information and records. For example, during our audit of the 2006 CFS, 
we found that undistributed offsetting receipts related to two 
intragovernmental activities[Footnote 12]: both (1) federal employers' 
contributions to their employees' retirement and (2) interest received 
by federal trust funds did not always link to related amounts reported 
in federal agencies' financial statements. For fiscal year 2006, 
Treasury's central accounting records used to compute the budget 
deficit reported in the CFS showed (1) undistributed offsetting 
receipts for federal employers' contributions to their employees' 
retirement of $60.9 billion and (2) $169.3 billion of interest received 
by certain federal agencies' trust funds[Footnote 13] on Treasury's 
borrowings from the trust funds. These activities, which totaled $230.2 
billion, were material components of the budget deficit. 

We compared components of undistributed offsetting receipts reflected 
in Treasury's central accounting records of about $54.7 billion, or 
about 24 percent of the $230.2 billion balance, to amounts reported in 
certain federal agency financial statement information and found 
differences. However, neither Treasury nor the respective federal 
agencies had identified that differences existed. In addition, we were 
not able to link the remainder of these undistributed offsetting 
receipts, $175.5 billion, to related information in other federal 
agencies' financial statements because the information was not 
separately disclosed in such statements. Neither OMB nor Treasury was 
able to explain how undistributed offsetting receipts reflected in 
Treasury's central accounting records linked to related amounts 
reported in federal agency financial statements. 

Consolidated financial statements are intended to present the results 
of operations and financial position of the components that make up a 
reporting entity as if the entity were a single enterprise. When 
preparing consolidated financial statements, the preparer must 
eliminate intragovernmental activity and balances between federal 
agencies. For fiscal year 2006, we found that Treasury was unable to 
demonstrate that it fully eliminated amounts related to 
intragovernmental interest from the reported budget deficit. As noted 
above, for fiscal year 2006, Treasury's central accounting records 
reflected $169.3 billion of intragovernmental interest received by 
certain federal agencies' trust funds. Treasury's central accounting 
records also reflected outlays by Treasury to such trust funds for 
intragovernmental interest of $187.4 billion. Treasury was unable to 
provide support to demonstrate where and how the $18.1 billion 
difference between these two intragovernmental amounts was eliminated 
in the calculation of the budget deficit. Until these types of 
differences are timely reconciled by the federal government, their 
effect on the CFS will be unknown. 

Recommendations for Executive Action: 

We recommend that the Director of OMB and Secretary of the Treasury 
direct the Controller of the Office of Federal Financial Management and 
Fiscal Assistant Secretary, respectively, to develop formal processes 
and procedures for identifying and either resolving or explaining any 
material differences in undistributed offsetting receipt amounts 
between Treasury's central accounting records and information reported 
in agency financial statements and underlying agency financial 
information and records. 

We also recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary to develop formal processes and procedures for 
ensuring that intragovernmental activity and balances, including 
intragovernmental interest, are fully eliminated in the calculation of 
the budget deficit. 

Directly Linking Audited Federal Agencies' Financial Statements to the 
CFS: 

As discussed in our report on our audit of the fiscal year 2006 CFS, 
fiscal year 2006 was the third year that Treasury used the 
Governmentwide Financial Report System (GFRS) to collect agency 
financial statement information taken directly from federal agencies' 
audited financial statements. The goal of GFRS, which we strongly 
support, is to be able to directly link information from federal 
agencies' audited financial statements to amounts reported in the CFS 
and resolve many of the weaknesses we previously identified in the 
process for preparing the CFS. However, GFRS was still undergoing 
development and was not yet fully operational. 

As we have reported in the past, Treasury's process for compiling the 
CFS does not yet fully ensure that financial information from federal 
agencies' audited financial statements and other financial data 
directly link to amounts reported in the CFS. In our report on our 
audit of the fiscal year 2006 CFS, we noted that Treasury showed 
progress by demonstrating that amounts in the SOSI were consistent with 
the underlying federal agencies' audited financial statements and that 
the Balance Sheet and the Statement of Net Cost were consistent with 
federal agencies' audited financial statements prior to eliminating 
intragovernmental activity and balances. However, Treasury's process 
for compiling the CFS did not ensure that the information in the 
remaining three principal financial statements and notes was consistent 
with the underlying information in federal agencies' audited financial 
statements and other financial data. 

We reaffirm the recommendation in our prior report[Footnote 14] that as 
Treasury continues to design and further implement its process for 
compiling the CFS, the Secretary of the Treasury should direct the 
Fiscal Assistant Secretary, in coordination with the Controller of OMB, 
to modify Treasury's closing package to (1) require federal agencies to 
directly link their audited financial statement notes to the CFS notes 
and (2) provide the necessary information to demonstrate that all of 
the six[Footnote 15] principal consolidated financial statements are 
consistent with the underlying information in federal agencies' audited 
financial statements and other financial data. 

Reporting Unexpended Budget Balances: 

Treasury lacked effective processes and procedures for ensuring that 
unexpended balances of budget authority (unexpended budget 
balances[Footnote 16]) are properly reported in the supplemental 
information section of the CFS. 

Instead of obtaining federal agencies' unobligated and obligated 
amounts through the closing packages, Treasury reported estimated 
amounts for unobligated and obligated balances (which comprise the 
unexpended budget balances). Specifically, in the supplemental 
information section of the fiscal year 2006 CFS, Treasury noted that 
because the President's Budget with fiscal year 2006 actual amounts 
would not be published until February 2007, it used the estimated 
fiscal year 2006 amounts from the previous fiscal year's President's 
Budget, which was issued in February 2006, to report unobligated and 
obligated budget balances for fiscal year 2006. Subsequent to our 
fiscal year 2006 CFS audit, we compared the fiscal year 2006 
unobligated and obligated budget balances reported in the fiscal year 
2006 CFS to the fiscal year 2006 actual amounts reported in the 
President's Budget, issued in February 2007, and noted a material 
difference. Specifically, for fiscal year 2006, we identified an 
absolute difference of $118.4 billion--an $82.2 billion understatement 
in unobligated balances and a $36.2 billion overstatement in obligated 
balances--between the estimated amounts reported by Treasury and the 
actual amounts reported in the President's Budget. Actual amounts 
reported in the President's Budget are compiled from amounts reported 
in agencies' SF-133s.[Footnote 17] The SBR is an agencywide report, 
which aggregates account-level information reported in the SF-133. 
Agency auditors have also reported internal control issues regarding 
differences and the lack of effective reconciliation between the 
unexpended budget balances reported in agencies' financial statements 
and amounts reported in agencies' SF-133s. To address these reporting 
issues, OMB recently issued requirements for agencies to reconcile 
these amounts quarterly. Until agencies fully implement corrective 
actions to resolve internal control issues regarding the reliability of 
recorded and reported budgetary information, and Treasury develops 
effective processes and procedures for obtaining federal agencies' 
obligated and unobligated amounts to assist Treasury in reporting 
unexpended budget balances in the supplemental information section of 
the CFS, the effect on the CFS will be unknown. 

Recommendations for Executive Action: 

We recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB's 
Office of Federal Financial Management, to develop processes and 
procedures for collecting all the necessary information that would 
enable the proper reporting of unexpended budget balances in the CFS. 

We also recommend that the Director of OMB direct the Controller of 
OMB's Office of Federal Financial Management to continue to work with 
federal agencies to resolve internal control issues regarding 
differences and the lack of effective reconciliation between the 
unexpended budget balances reported in agencies' financial statements 
and amounts reported in agencies' SF-133s. 

Reporting Operating Cash: 

In the U.S. government's Statement of Changes in Cash Balance from 
Unified Budget and Other Activities for the Years Ended September 30, 
2006 and 2005, the amounts reported as "Operating Cash" agreed to the 
amounts reported in the notes to Treasury's consolidated agency 
financial statements as "Operating Cash of the Federal Government." 
However, other federal agencies reported additional unrestricted cash 
balances totaling $13.2 billion and $10.5 billion for fiscal years 2006 
and 2005, respectively. Treasury could not provide us with an adequate 
explanation of the rationale for excluding these amounts from the CFS 
"Operating Cash" balance. 

For example, in fiscal year 2006, the Pension Benefit Guaranty 
Corporation (PBGC) reported $8.5 billion in cash on hand, demand 
deposits, and cash equivalents with 1-day maturities in its Balance 
Sheet and as "Cash and cash equivalents" in its Statement of Cash 
Flows. PBGC prepares its financial statements in accordance with 
accounting principles promulgated by the Financial Accounting Standards 
Board (FASB).[Footnote 18] Accordingly, "Cash and cash equivalents" 
could be considered and would conform to the definition of "Operating 
Cash" for purposes of preparing the CFS. 

Recommendation for Executive Action: 

We recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary to develop and implement processes and procedures 
for identifying and either resolving or explaining the differences that 
exist between operating cash reported in certain federal agencies' 
financial statements and the operating cash balance reported in the 
CFS. 

Reporting and Disclosing Legal Contingencies: 

The Department of Justice (Justice) is charged with, among other 
things, the supervision of litigation to which the U.S. government is a 
party and providing advice and opinions to the President and heads of 
executive departments when requested. The Accounting and Auditing 
Policy Committee (AAPC)[Footnote 19] guidance (Technical Release No. 1, 
Audit Legal Letter Guidance) clarifies FASAB Interpretation No. 2, 
Accounting for Treasury Judgment Fund Transactions, with respect to 
Justice's role related to legal letters in cases in which Justice's 
attorneys are handling legal matters on behalf of other federal 
reporting entities. This guidance states that a federal entity's 
management, its legal counsel, or the auditor may consult with Justice 
as well as other outside legal counsel to ensure completeness and 
accuracy of the entity's financial statements' presentation of matters 
related to litigation, claims, and assessments. Such consultation may 
include requesting a list of pending litigation, claims, and 
assessments from Justice or other outside legal counsel or discussion 
of specific cases. 

In the governmentwide legal representation letter, Justice represented 
to us that it provided us with an assessment for individual cases in 
which the potential for loss exceeded $500 million individually and $1 
billion in the aggregate. The legal representation letter was limited 
to matters with which Justice had been engaged and to which Justice had 
devoted substantial attention on behalf of the U.S. government. In 
addition, we were provided legal representation letters for the 35 
federal agencies that Treasury and OMB deemed significant to the CFS. 
However, the federal government was unable to provide us with 
sufficient evidence to determine that cases below the $500 million 
individual case threshold were (1) considered by the agencies' legal 
counsels and, where appropriate, included in their legal representation 
letters and (2) in the aggregate, not material to the CFS. Until the 
federal government implements effective processes and procedures to 
ensure that all appropriate litigation and claims are included in the 
governmentwide legal representation letter and are appropriately 
considered for potential financial reporting, the adequacy of reporting 
and disclosing legal contingencies in the CFS will be unknown and the 
potential effect of these litigation claims on the financial condition 
of the federal government will likewise be unclear. 

Recommendation for Executive Action: 

We recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB's Office of Federal Financial Management, to establish effective 
processes and procedures to ensure that appropriate information 
regarding litigation and claims is included in the governmentwide legal 
representation letter. 

Reconciling Intragovernmental Activity and Balances: 

The federal government's inability to adequately account for and 
reconcile intragovernmental activity and balances between federal 
agencies has been a long-standing problem and major impediment to us 
being able to render an opinion on the CFS. Resolving this difficult 
challenge will require, among other things, strong leadership and 
oversight by Treasury and OMB. 

Treasury and OMB require federal agencies to reconcile selected 
intragovernmental activity and balances with their "trading 
partners"[Footnote 20] and report the extent and results of the 
reconciliation efforts to Treasury. However, in our view, federal 
agencies have not provided Treasury and OMB with sufficient information 
to enable them to adequately oversee and monitor agencies' efforts to 
reconcile intragovernmental activity and balances with their trading 
partners. Specifically, for fiscal year 2006, we found that federal 
agencies did not provide Treasury and OMB with (1) detailed information 
regarding the nature and description of the differences that exist 
between trading partners' records of intragovernmental activity and 
balances, (2) detailed reasons why such differences exist, (3) steps 
being taken to work with the agencies' trading partners to resolve the 
differences, and (4) the potential outcome of such steps. 

Recommendation for Executive Action: 

We recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB's Office of Federal Financial Management, to develop a process for 
obtaining sufficient information from federal agencies to enable 
Treasury and OMB to adequately monitor agencies' efforts to reconcile 
intragovernmental activity and balances with their trading partners. 
This information should include (1) the nature and a detailed 
description of the significant differences that exist between trading 
partners' records of intragovernmental activity and balances, (2) 
detailed reasons why such differences exist, (3) details of steps taken 
or being taken to work with the agencies' trading partners to resolve 
the differences, and (4) the potential outcome of such steps. 

Preparing and Auditing Certain Information in Federal Agencies' Closing 
Packages: 

OMB Bulletin No. 06-03, Audit Requirements for Federal Financial 
Statements, and the Treasury Financial Manual provide guidance to 
agencies for preparing and auditing their closing packages. As part of 
the closing package process, agencies are required to reclassify 
certain of their audited financial statement line items to the 
appropriate CFS line items and enter certain of their financial 
statement notes and other requested data into GFRS. The 35 federal 
agencies that Treasury and OMB determined to be significant to the CFS 
are required to have their closing packages audited and audit reports 
issued on such packages. However, auditors for several of these 
agencies did not perform the required audit procedures on certain 
information in the footnotes to the respective agencies' closing 
packages, including intragovernmental trading partner data, stewardship 
land information, and heritage assets information. In addition, one of 
the significant agencies did not provide in its closing package the 
required cost allocation information used by Treasury in preparing the 
consolidated Statement of Net Cost. As a result, Treasury's ability to 
prepare and our ability to audit the CFS were impaired. 

Recommendations for Executive Action: 

We recommend that the Director of OMB direct the Controller of the 
Office of Federal Financial Management, in coordination with the 
Treasury Fiscal Assistant Secretary, to establish additional procedures 
to ensure that agencies prepare their closing packages and have them 
audited in accordance with the requirements specified in the closing 
package instructions. 

We also recommend that the Director of OMB direct the Controller of the 
Office of Federal Financial Management to work with the significant 
agency that did not provide in its closing package the required 
information that Treasury uses to allocate costs in the consolidated 
Statement of Net Cost to ensure that such information is reported by 
the agency in future years. 

Conformity with GAAP: 

As we have reported in previous years, and noted during our fiscal year 
2006 audit, Treasury lacks an adequate process to ensure that the 
financial statements, related notes, stewardship information, and 
supplemental information in the CFS are presented in conformity with 
GAAP. In our prior report,[Footnote 21] we recommended that the 
Secretary of the Treasury direct the Fiscal Assistant Secretary to 
establish a formal process that will cause the financial statements, 
related notes, stewardship information, and supplemental information in 
the CFS to be presented in conformity with GAAP in all material 
respects. The process should: 

* timely identify GAAP requirements; 

* make timely modifications to Treasury's closing package requirements 
to obtain information needed; 

* assess, qualitatively and quantitatively, the impact of any omitted 
disclosures;[Footnote 22] and: 

* document decisions reached and the rationale for such decisions. 

FASAB issued SFFAS No. 32 on September 28, 2006, which was effective 
for periods after September 30, 2005. This standard eliminated or 
lessened the disclosure requirements for the CFS related to certain 
information that Treasury had not been reporting. As a direct result of 
the requirements in SFFAS No. 32, 53 of the 76 disclosure-related 
recommendations from our previous reports were closed during fiscal 
year 2006. 

However, there continued to be other disclosures required by GAAP that 
are not disclosed in the CFS. Specifically, 13 of our disclosure- 
related recommendations from previous years' audits have not yet been 
implemented by Treasury. In addition, during our fiscal year 2006 audit 
of the CFS, we identified an additional disclosure required by 
applicable standards related to including consolidated totals in the 
consolidated SOSI. Further, while there is no specific GAAP requirement 
to disclose foreign currencies in the CFS, we believe Treasury should 
separately disclose the balance of foreign currencies held at fiscal 
year end in the cash footnote to the CFS. 

Consolidated Statement of Social Insurance: 

Beginning in fiscal year 2006, the SOSI became a principal financial 
statement. However, in our view, the fiscal year 2006 consolidated SOSI 
was not fully presented in conformity with GAAP. Specifically, for each 
social insurance program included in the consolidated SOSI, Treasury 
presented the "excess of the present value of future expenditures less 
future revenues." However, the fiscal year 2006 consolidated SOSI did 
not include a consolidated total for all of such programs. 

Paragraph 32 (3) of SFFAS No. 17, Accounting for Social Insurance, as 
amended by SFFAS No. 25, Reclassification of Stewardship 
Responsibilities and Eliminating the Current Services Assessment, 
requires a statement combining the entity statements for all programs, 
except Unemployment Insurance, including data for the current year and 
separate estimates for each of the 4 preceding years. In addition, the 
pro forma illustrations of the SOSI shown in Appendix B of SFFAS No. 
17[Footnote 23] and in OMB Circular No. A-136, Financial Reporting 
Requirements, include a total of the "excess of actuarial present 
values of future benefit payments over future contributions and tax 
income" summarized and consolidated in accordance with paragraph 32. 
Further, each of the applicable component entities' respective SOSI 
included a total of the excess of actuarial present values of future 
benefit payments over future contributions and tax income. Finally, 
Treasury reported the consolidated total of the excess of the present 
value of future expenditures less future revenues for the social 
insurance programs in the Management's Discussion and Analysis section 
of the CFS. 

According to Treasury, a consolidated total was not presented on the 
consolidated SOSI because the Social Security, Medicare, Railroad 
Retirement, and Black Lung social insurance programs have different 
valuation dates, projection periods, and discount rates. However, our 
audit work found that (1) the most significant social insurance 
programs (Social Security and Medicare) have the same valuation dates 
and projection periods and (2) the key elements used in the projections 
for the social insurance programs were either displayed in the 
footnotes of the consolidated SOSI or disclosed in the notes to the 
CFS. The existence of differences among certain social insurance 
programs in the elements used in the projections is not, in our view, a 
relevant factor in deciding whether to present a consolidated total, 
especially since the elements are disclosed. In addition, we believe 
that including a consolidated total in the statement provides increased 
transparency. 

Cash and Other Monetary Assets: 

While there is no specific GAAP requirement to disclose foreign 
currencies in the CFS, we believe that the balance of foreign 
currencies held at fiscal year end should be separately disclosed in 
the cash footnote to the CFS. In this regard, OMB Circular No. A-136 
requires the disclosure of foreign currencies,[Footnote 24] including 
the balance of foreign currencies held at fiscal year end, in the notes 
to federal agencies' financial statements. For fiscal year 2006, we 
found that the Cash and Other Monetary Assets note included a 
disclosure that international monetary assets included official 
reserves of foreign currency. However, the balance of such foreign 
currency was not disclosed. OMB Circular No. A-136 requirements do not 
specifically apply to the CFS. However, we believe that the balance of 
foreign currency holdings as of the fiscal year end should be disclosed 
in the CFS since (1) OMB has deemed this a necessary disclosure at the 
agency level; (2) foreign currencies constituted about $11.7 billion, 
or 12 percent, of the reported fiscal year 2006 Cash and Other Monetary 
Assets in the CFS; (3) foreign currency information was readily 
available as certain federal agencies, including Treasury, disclosed 
foreign currencies in the notes to their respective financial 
statements; and (4) disclosing the dollar amount of the foreign 
currencies provides increased transparency. 

Recommendations for Executive Action: 

We reaffirm our prior recommendation regarding the establishment of a 
formal process that will cause the financial statements, related notes, 
stewardship information, and supplemental information in the CFS to be 
presented in conformity with GAAP in all material respects. In 
addition, we recommend that the Secretary of the Treasury direct the 
Fiscal Assistant Secretary to establish procedures to ensure that the 
CFS include required consolidated totals in the SOSI or document the 
specific rationale for excluding such disclosure. 

We also recommend that the Secretary of the Treasury direct the Fiscal 
Assistant Secretary to disclose the balance of foreign currencies held 
at fiscal year end in the Cash and Other Monetary Assets footnote to 
the CFS. 

Agency Comments and Our Evaluation: 

OMB Comments: 

In oral comments on a draft of this report, OMB stated that it 
generally agreed with the new findings and related recommendations in 
this report. In addition, OMB provided some technical comments, which 
we have incorporated as appropriate. 

Treasury Comments: 

In written comments on a draft of this report, which are reprinted in 
appendix II, Treasury stated that it concurs with the new findings and 
related recommendations with the exception of the nonconformity with 
GAAP finding and recommendation related to reporting a consolidated 
total in the consolidated SOSI. Treasury also stated that it concurs 
with GAO that the preparation process should continually be improved, 
and will continue to work with GAO on CFS matters where improvements 
need to be made. 

With respect to the SOSI GAAP finding, Treasury stated that it does not 
believe that GAAP requires the reporting of a consolidated total in the 
consolidated SOSI. In addition, Treasury noted that because of 
differences in key assumptions and other criteria used in preparing the 
different sections of the SOSI, it does not believe that a consolidated 
total is especially meaningful. 

We do not agree with Treasury on these matters. As stated earlier in 
the report, in our view, the consolidated SOSI was not fully presented 
in conformity with GAAP because it did not include a consolidated total 
for all the social insurance programs. In the body of the report, we 
noted that (1) the most significant social insurance programs (Social 
Security and Medicare) have the same valuation dates and projection 
periods, and (2) the key elements used in the projections for the 
social insurance programs were either displayed in the footnotes of the 
consolidated SOSI or disclosed in the notes to the CFS. We also noted 
that the existence of differences among certain social insurance 
programs in the elements used in the projections is not, in our view, a 
relevant factor in deciding whether to present a consolidated total, 
especially since the elements are disclosed. The consolidated SOSI is 
one of the principal financial statements included in the CFS and 
represents an important source for the consolidated information on 
federal social insurance programs. As such, we believe that including a 
total on the consolidated SOSI, as was included in the Management's 
Discussion and Analysis section of the CFS, is both necessary to 
provide increased transparency and is meaningful to the users of the 
CFS. Treasury also provided technical comments, which we have 
incorporated as appropriate. 

This report contains recommendations to the Secretary of the Treasury 
and the Director of OMB. The head of a federal agency is required by 31 
U.S.C.  720 to submit a written statement on actions taken on these 
recommendations. You should submit your statement to the Senate 
Committee on Homeland Security and Governmental Affairs and the House 
Committee on Oversight and Government Reform within 60 days of the date 
of this report. A written statement must also be sent to the House and 
Senate Committees on Appropriations with the agency's first request for 
appropriations made more than 60 days after the date of the report. 

We are sending copies of this report to the Chairmen and Ranking 
Members of the Senate Committee on Homeland Security and Governmental 
Affairs; the Subcommittee on Federal Financial Management, Government 
Information, Federal Services, and International Security, Senate 
Committee on Homeland Security and Governmental Affairs; the House 
Committee on Oversight and Government Reform; and the Subcommittee on 
Government Management, Organization, and Procurement, House Committee 
on Oversight and Government Reform. In addition, we are sending copies 
to the Fiscal Assistant Secretary of the Treasury, the Deputy Director 
for Management of OMB, and the Controller of OMB's Office of Federal 
Financial Management. Copies will be made available to others upon 
request. This report is also available at no charge on GAO's Web site 
at http://www.gao.gov. 

We acknowledge and appreciate the cooperation and assistance provided 
by Treasury and OMB during our audit. If you or your staff have any 
questions or wish to discuss this report, please contact Jeffrey C. 
Steinhoff, Managing Director, Financial Management and Assurance, on 
(202) 512-2600, or Gary T. Engel, Director, Financial Management and 
Assurance, on (202) 512-3406. Key contributors to this report are 
listed in appendix III. 

Signed by: 

David M. Walker: 
Comptroller General of the United States: 

[End of section] 

Appendix I: Status of Treasury's and OMB's Progress in Addressing GAO's 
Prior Year Recommendations for Preparing the CFS: 

This appendix includes open recommendations from four of our prior 
reports: Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Needs Improvement, GAO-04- 
45 (Washington, D.C.: Oct. 30, 2003); Financial Audit: Process for 
Preparing the Consolidated Financial Statements of the U.S. Government 
Needs Further Improvement, GAO-04-866 (Washington, D.C.: Sept. 10, 
2004); Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Continues to Need 
Improvement, GAO-05-407 (Washington, D.C.: May 4, 2005); and Financial 
Audit: Significant Internal Control Weaknesses Remain in Preparing the 
Consolidated Financial Statements of the U.S. Government, GAO-06-415 
(Washington, D.C.: Apr. 21, 2006). Recommendations that were closed in 
prior reports are not included in this appendix. This appendix includes 
the status of the recommendations according to the Department of the 
Treasury (Treasury) and the Office of Management and Budget (OMB) as 
well as our own assessments. Explanations are included in the status of 
recommendations per GAO when Treasury and OMB disagreed with our 
recommendation. 

Of the 143 recommendations regarding the process for preparing the 
consolidated financial statements of the U.S. government (CFS) that are 
listed in this appendix, 70 remained open as of December 1, 2006, the 
end of GAO's fieldwork for the audit of the fiscal year 2006 CFS. Of 
the 73 recommendations that were closed, 53 were closed with the 
issuance of Statement of Federal Financial Accounting Standards No. 32, 
Consolidated Financial Report of the United States Government 
Requirements: Implementing Statement of Federal Financial Accounting 
Concepts 4 "Intended Audience and Qualitative Characteristics for the 
Consolidated Financial Report of the United States Government." In 
fiscal year 2006, the Federal Accounting Standards Advisory Board 
issued this new standard, which eliminated or lessened the disclosure 
requirements for the CFS related to certain information that Treasury 
had not been reporting. 

Table 1: Status of Treasury's and OMB's Progress in Addressing GAO's 
Prior Year Recommendations for Preparing the CFS: 

GAO-04-45 (results of the fiscal year 2002 audit). 

Count: 1;
 No.: 02-2; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in connection with Treasury's current compilation 
process and the development of Treasury's new compilation system and 
process, to develop and fully document policies and procedures for the 
CFS preparation process so that they are proper, complete, and 
consistently applied by staff members; 
Status of recommendation: Per Treasury and OMB: Treasury further 
revised and documented all of its major policies and procedures for the 
fiscal year 2006 compilation process to ensure the propriety, accuracy, 
and consistency of application; 
Status of recommendation: Per GAO: Open. Treasury needs to further 
document its policies and procedures. 

Count: 2; 
No.: 02-4; 
Recommendation: As Treasury is designing its new financial statement 
compilation process to begin with the fiscal year 2004 CFS, the 
Secretary of the Treasury should direct the Fiscal Assistant Secretary, 
in coordination with the Controller of OMB, to develop reconciliation 
procedures that will aid in understanding and controlling the net 
position balance as well as eliminate the plugs previously associated 
with compiling the CFS; 
Status of recommendation: Per Treasury and OMB: To eliminate or explain 
adjustments (plugs) to net position, Treasury designed a process in 
fiscal year 2004 to eliminate, at the consolidated level, 
intragovernmental activity and balances using formal balanced 
accounting entries (via Reciprocal Categories) and developed a model to 
analyze unreconciled transactions that contributed to the plug. In 
fiscal year 2005, Treasury started an analysis to establish the 
reciprocal category for the General Fund (RC29) and that process is 
still continuing. Lastly, in fiscal year 2006, Treasury included the 
components contributing to the plug in the supplementary information 
section of the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Open. 

Count: 3; 
No.: 02-5; 
Recommendation: As Treasury is designing its new financial statement 
compilation process to begin with the fiscal year 2004 CFS, the 
Secretary of the Treasury should direct the Fiscal Assistant Secretary, 
in coordination with the Controller of OMB, to use balanced accounting 
entries to account for the change in net position rather than simple 
subtraction of liabilities from assets; 
Status of recommendation: Per Treasury and OMB: The process mentioned 
in No. 02-4 no longer involves the simple subtraction of liabilities 
from assets, but instead takes into account the intragovernmental 
balances and activities to compute the change in net position. Because 
of continuing intragovernmental differences, intragovernmental balances 
and activity cannot be completely eliminated, leading to unbalanced 
entries that constitute the plug; 
Status of recommendation: Per GAO: Open. 

Count: 4; 
No.: GAO-04-45 (results of the fiscal year 2002 audit): 02-6; 
Recommendation: As OMB continues to make strides to address issues 
related to intragovernmental transactions, the Director of OMB should 
direct the Controller of OMB to develop policies and procedures that 
document how OMB will enforce the business rules provided in OMB 
Memorandum M-03-01, Business Rules for Intragovernmental Transactions; 
Status of recommendation: Per Treasury and OMB: The business rules were 
revised in fiscal year 2006 to expand and enhance the standard 
practices for how federal agencies do business with each other. The 
revised rules are published in Treasury Financial Manual (TFM) Bulletin 
2007-03; OMB, Treasury, and the Chief Financial Officers' Council 
continue working to establish a performance metric(s) to track 
agencies' progress toward effectively reconciling intragovernmental 
balances, which is predicated on agencies implementing the business 
rules. In addition, OMB, Treasury, and the Chief Financial Officers' 
Council are continuing their efforts toward establishing the Dispute 
Resolution Committee (DRC), as referenced in the business rules. The 
DRC will be a vehicle for resolving accounting disputes between federal 
agencies. The dispute resolution process is also predicated on the 
principle that agencies have implemented the business rules and will 
require the disputing agencies to provide evidence of compliance with 
the business rules during arbitration; 
Status of recommendation: Per GAO: Open. The revised business rules are 
effective beginning in fiscal year 2007. We plan to review the policies 
and procedures for enforcing these revised business rules as part of 
the fiscal year 2007 CFS audit. 

Count: 5; 
No.: 02-7; 
Recommendation: As OMB continues to make strides to address issues 
related to intragovernmental transactions, the Director of OMB should 
direct the Controller of OMB to require that significant differences 
noted between business partners be resolved and the resolution be 
documented; 
Status of recommendation: Per Treasury and OMB: OMB will continue to 
work with individual agencies to resolve imbalances that are referred 
to OMB on a case-by- case basis. As part of OMB's standard practice, 
resolutions reached will be communicated to all parties; As noted 
above, OMB, Treasury, and the Chief Financial Officers' Council are 
continuing to work toward establishing the DRC, as referenced in the 
business rules, and it will be used as a vehicle for agencies to 
resolve their accounting disputes. The DRC will incorporate a standard 
practice of documenting all resolutions and communicating the 
resolutions to all parties involved; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-6. 

Count: 6; 
No.: 02-9; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
design procedures that will account for the difference in 
intragovernmental assets and liabilities throughout the compilation 
process by means of formal consolidating and elimination accounting 
entries; 
Status of recommendation: Per Treasury and OMB: Treasury designed 
formal consolidating and eliminating procedures to account for these 
differences and has implemented these procedures since fiscal year 
2004. See also the status for recommendations No. 02-4 and No. 02-5; 
Status of recommendation: Per GAO: Open. 

Count: 7; 
No.: 02- 10; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop solutions for intragovernmental activity and balance issues 
relating to federal agencies' accounting, reconciling, and reporting in 
areas other than those OMB now requires be reconciled, primarily areas 
relating to appropriations; 
Status of recommendation: Per Treasury and OMB: GAO- 04-45 (results of 
the fiscal year 2002 audit): During fiscal year 2006, Treasury 
forwarded information from its central accounting system (STAR) related 
to appropriations and fund balance with Treasury to the agencies for 
their use in reconciling these data. In fiscal year 2007 Treasury will 
start providing transfer information from STAR to the agencies to begin 
reconciling and reporting in the areas other than those OMB now 
requires be reconciled; 
Status of recommendation: Per GAO: Open. Treasury will need to 
establish a mechanism for follow-up with the federal agencies to see if 
they are using the information Treasury will be providing to them. In 
addition, Treasury and OMB will need to provide federal agencies 
instructions on how to reconcile and report differences between their 
records and Treasury's central accounting records. 

Count: 8; 
No.: 02- 11; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
reconcile the change in intragovernmental assets and liabilities for 
the fiscal year, including the amount and nature of all changes in 
intragovernmental assets or liabilities not attributable to cost and 
revenue activity recognized during the fiscal year. Examples of these 
differences would include capitalized purchases, such as inventory or 
equipment, and deferred revenue; 
Status of recommendation: Per Treasury and OMB: GAO- 04-45 (results of 
the fiscal year 2002 audit): The current reconciliation of 
intragovernmental activity accounts for differences caused by asset 
capitalization and agency advanced or deferred revenue. Given current 
intragovernmental differences, asset capitalization and recognition of 
advanced and deferred revenue may be incorrect. However, the current 
reconciliation analysis is expected to correctly report this activity 
once intragovernmental differences are materially resolved. See also 
the status of recommendation No. 02-4; 
Status of recommendation: Per GAO: Open. 

Count: 9; 
No.: 02- 12; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to develop and implement a process that adequately 
identifies and reports items needed to reconcile net operating cost and 
unified budget surplus (or deficit). Treasury should report "net 
unreconciled differences" included in the net operating results line 
item as a separate reconciling activity in the reconciliation 
statement; 
Status of recommendation: Per Treasury and OMB: In fiscal year 2006, 
Treasury revised how this reconciliation is performed so that all 
differences between the change in the proprietary basis balance sheet 
net position (i.e., the net operating revenue/cost) is reconciled to 
the change in the budgetary basis balance sheet net position (i.e., the 
unified budget deficit/ surplus). Treasury's position is that the plug 
cannot be placed with certainty either as a component of the Statement 
of Net Cost or as a component of the Statement of Operations and 
Changes in Net Position (SOCNP) and has chosen to reflect the plug in 
the SOCNP until these differences are resolved. However, based on its 
analysis of the plug, as disclosed in the supplementary information 
section of the fiscal year 2006 CFS, Treasury believes that the plug is 
primarily caused by unreconciled transactions that affect the amounts 
reported on an accrual basis of accounting (net operating cost) and, 
therefore, the "net unreconciled differences" plug should not be 
included as a separate reconciling item on this statement, which is the 
reconciliation of the federal government's activity between two 
different bases of accounting; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Open. Although Treasury was unsure if the plug 
(reported in fiscal year 2006 as "unmatched transactions and balances") 
was a component of the Statement of Net Cost or a component of the 
SOCNP, Treasury chose to reflect the plug in the SOCNP as a component 
of net operating cost. The Reconciliation of Net Operating Cost and 
Unified Budget Deficit reconciles the net operating cost, which 
includes the "unmatched transactions and balances" plug, to the unified 
budget deficit. As such, unless the plug is also part of the unified 
budget deficit, then the plug amount should be included as a 
reconciling item on the reconciliation statement. 

Count: 10; 
No.: 02- 13; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to develop and implement a process that adequately 
identifies and reports items needed to reconcile net operating cost and 
unified budget surplus (or deficit). Treasury should develop policies 
and procedures to ensure completeness of reporting and document how all 
the applicable components reported in the other consolidated financial 
statements (and related note disclosures included in the CFS) were 
properly reflected in the reconciliation statement; 
Status of recommendation: Per Treasury and OMB: Treasury will continue 
to improve the completeness and consistency of the information in this 
reconciliation statement and will continue to resolve significant 
inconsistencies, if any, to the applicable and related components 
reported in the other basic financial statements, and in the related 
note disclosures, included in the CFS; 
Status of recommendation: Per GAO: Open. 

Count: 11; 
No.: 02- 14; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to develop and implement a process that adequately 
identifies and reports items needed to reconcile net operating cost and 
unified budget surplus (or deficit). Treasury should establish 
reporting materiality thresholds for determining which agency financial 
statement activities to collect and report at the governmentwide level 
to assist in ensuring that the reconciliation statement is useful and 
conveys meaningful information; 
Status of recommendation: Per Treasury and OMB: As mentioned in the 
status of recommendation No. 02-12, Treasury revised the manner for 
producing this reconciliation and will continue to improve the 
completeness and accuracy of the various reconciliation items. Treasury 
will consider the need for establishing a reporting materiality 
threshold related to this statement, as necessary, as part of the 
overall process to improve the reliability of the information included 
in this statement; 
Status of recommendation: Per GAO: Open. 

Count: 12; 
No.: 02- 15; 
Recommendation: If Treasury chooses to continue using information from 
both federal agencies' financial statements and the Central Accounting 
and Reporting System (STAR), Treasury should demonstrate how the 
amounts from STAR reconcile to federal agencies' financial statements; 
Status of recommendation: Per Treasury and OMB: As stated in status of 
recommendation No. 02-12, Treasury has revised the method for producing 
this reconciliation statement. In so doing, Treasury has elected to 
continue the use of information from STAR. Treasury will focus on the 
reliability of the information from STAR to address GAO's concerns 
related to its accuracy, completeness and consistency to the underlying 
agency financial records; 
Status of recommendation: Per GAO: Open. Treasury needs to further 
develop its process for ensuring reliability of the information in STAR 
and the consistency of information in STAR with underlying agency 
financial statements, financial information, and records. 

Count: 13; 
No.: 02- 16; 
Recommendation: If Treasury chooses to continue using information from 
both federal agencies' financial statements and from STAR, Treasury 
should identify and document the cause of any significant differences, 
if any are noted; 
Status of recommendation: Per Treasury and OMB: For now, Treasury will 
concentrate on the reliability of the information within STAR. Treasury 
believes that with the agencies reconciling their records against the 
related information provided from the central accounting system (STAR), 
this will improve the reliability and accuracy of the information 
within STAR, as well as demonstrate the consistency to the underlying 
agency data. As this process matures, Treasury will determine what 
further steps are necessary to fully address GAO's consistency and 
accuracy concerns; 
Status of recommendation: Per GAO: Open. OMB has been working with 
federal agencies to reduce previously reported unreconciled differences 
between the total net outlays reported in selected federal agencies' 
Statements of Budgetary Resources and Treasury's central accounting 
records in STAR used to compute the budget deficit reported in the CFS. 
Such efforts have resulted in significantly reducing the differences in 
net outlays in fiscal year 2006. However, billions of dollars of 
differences still exist between this and other components of the budget 
deficit. 

Count: 14; 
No.: 02- 17; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement a process to ensure that the Statement of Changes 
in Cash Balance from Unified Budget and Other Activities properly 
reflects the activities reported in federal agencies' audited financial 
statements. Treasury should document the consistency of the significant 
line items on this statement to agencies' audited financial statements; 
Status of recommendation: Per Treasury and OMB: See planned direction 
of corrective steps in status of recommendation No. 02-16; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Open. See status of recommendation No. 02-16. 

Count: 15; 
No.: 02- 18; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement a process to ensure that the Statement of Changes 
in Cash Balance from Unified Budget and Other Activities properly 
reflects the activities reported in federal agencies' audited financial 
statements. Treasury should request, through its closing package, that 
federal agencies provide the net outlays reported in their Combined 
Statement of Budgetary Resources and explanations for any significant 
differences between net outlay amounts reported in the Combined 
Statement of Budgetary Resources and the budget of the U.S. government; 
Status of recommendation: Per Treasury and OMB: In accordance with the 
net outlays corrective action plan, OMB requires agencies to provide 
explanations for significant differences between the unaudited 
quarterly Statement of Budgetary Resources and the quarterly SF-133 
(budget execution document). This requirement is intended to assist 
agencies in identifying and mitigating discrepancies between the two 
reports throughout the fiscal year rather than only at year-end. The 
number of federal agencies with significant discrepancies has decreased 
in the last couple of years, and OMB is working with the federal 
agencies toward further reductions this year; 
Status of recommendation: Per GAO: Open. This requirement became 
effective in the first quarter of fiscal year 2007. We plan to review 
the implementation of the requirement as part of the fiscal year 2007 
CFS audit. 

Count: 16; 
No.: 02- 19; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement a process to ensure that the Statement of Changes 
in Cash Balance from Unified Budget and Other Activities properly 
reflects the activities reported in federal agencies' audited financial 
statements. Treasury should investigate the differences between net 
outlays reported in federal agencies' Combined Statement of Budgetary 
Resources and Treasury's records in STAR to ensure that the proper 
amounts are reported in the Statement of Changes in Cash Balance from 
Unified Budget and Other Activities; 
Status of recommendation: Per Treasury and OMB: Treasury and OMB will 
consider this recommendation to determine further actions needed; 
Status of recommendation: Per GAO: Open. 

Count: 17; 
No.: 02- 20; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement a process to ensure that the Statement of Changes 
in Cash Balance from Unified Budget and Other Activities properly 
reflects the activities reported in federal agencies' audited financial 
statements. Treasury should explain and document the differences 
between the operating revenue amount reported on the Statement of 
Operations and Changes in Net Position and unified budget receipts 
reported on the Statement of Changes in Cash Balance from Unified 
Budget and Other Activities; 
Status of recommendation: Per Treasury and OMB: Treasury and OMB will 
consider this recommendation to determine further actions needed for 
the reconciliation of budgetary receipts and net operating revenue; 
Status of recommendation: Per GAO: Open. 

Count: 18; 
No.: 02- 21; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop and implement a process to ensure that the Statement of Changes 
in Cash Balance from Unified Budget and Other Activities properly 
reflects the activities reported in federal agencies' audited financial 
statements. Treasury should provide support for how the line items in 
the "other activities" section of this statement relate to either the 
underlying Balance Sheet or related notes accompanying the CFS; 
Status of recommendation: Per Treasury and OMB: As referred to in 
status of recommendation No. 02-12, Treasury has revised the method for 
producing this statement. In so doing, Treasury has elected to continue 
the use of information from STAR. Treasury will focus on the 
reliability of the information from STAR to address GAO's concerns 
related to its accuracy, completeness, and consistency to the 
underlying agency financial records; 
Status of recommendation: Per GAO: Open. See status of recommendation 
Nos. 02-15 and 02-16. 

Count: 19; 
No.: 02- 22; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
perform an assessment to define the reporting entity, including its 
specific components, in conformity with the criteria issued by the 
Federal Accounting Standards Advisory Board (FASAB). Key decisions made 
in this assessment should be documented, including the reason for 
including or excluding components and the basis for concluding on any 
issue. Particular emphasis should be placed on demonstrating that any 
financial information that should be included but is not included is 
immaterial; 
Status of recommendation: Per Treasury and OMB: In fiscal year 2006, 
Treasury drafted policies and procedures to define and document the 
reporting entity. These draft policies and procedures are still under 
Treasury review and any final changes are expected to be implemented in 
fiscal year 2007; 
Status of recommendation: Per GAO: Open. 

Count: 20; 
No.: 02- 23; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
provide in the financial statements all the financial information 
relevant to the defined reporting entity, in all material respects. 
Such information would include, for example, the reporting entity's 
assets, liabilities, and revenues; 
Status of recommendation: Per Treasury and OMB: GAO-04- 45 (results of 
the fiscal year 2002 audit): Treasury will implement changes to the 
reporting entity once its related policies and procedures are 
finalized. See status of recommendation No. 02-22; 
Status of recommendation: Per GAO: Open. 

Count: 21; 
No.: 02- 24; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
disclose in the financial statements all information that is necessary 
to inform users adequately about the reporting entity. Such disclosures 
should clearly describe the reporting entity and explain the reason for 
excluding any components that are not included in the defined reporting 
entity; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-23; 
Status of recommendation: Per GAO: Open. 

Count: 22; 
No.: 02- 25; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to establish a formal process that will allow the 
financial statements, related notes, and stewardship and supplemental 
information in the CFS to be presented in conformity with GAAP. The 
process should timely identify GAAP requirements; 
Status of recommendation: Per Treasury and OMB: Treasury performed an 
analysis of fiscal year 2006 required agency financial statement and 
note disclosures and included the appropriate disclosures in the fiscal 
year 2006 CFS. For items not disclosed, Treasury will continue to 
analyze what additional data, if necessary, are needed to finalize 
these required disclosures; 
In addition, in September 2006, FASAB issued Statement of Federal 
Financial Accounting Standards (SFFAS) No. 32, Consolidated Financial 
Report of the United States Government Requirements: Implementing 
Statement of Federal Financial Accounting Concepts No. 4 "Intended 
Audience and Qualitative Characteristics for the Consolidated Financial 
Report of the United States Government," that resulted in the 
elimination of or reduction for certain disclosures required by SFFAS 
issued prior to SFFAS No. 24, Selected Standards for the Consolidated 
Financial Report of the United States Government, and Statement of 
Federal Financial Accounting Concepts No. 4; 
Treasury reviewed the requirements of SFFAS No. 32 and ensured that the 
fiscal year 2006 CFS is in compliance with this new standard; 
Status of recommendation: Per GAO: Open. Treasury's fiscal year 2006 
process did not completely analyze the fiscal year 2006 disclosures. 

Count: 23; 
No.: 02- 26; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to establish a formal process that will allow the 
financial statements, related notes, and stewardship and supplemental 
information in the CFS to be presented in conformity with GAAP. The 
process should make timely modifications to Treasury's closing package 
requirements to obtain information needed; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 24; 
No.: 02- 27; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to establish a formal process that will allow the 
financial statements, related notes, and stewardship and supplemental 
information in the CFS to be presented in conformity with GAAP. The 
process should assess, qualitatively and quantitatively, the impact of 
the omitted disclosures; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02- 25. 

Count: 25; 
No.: 02- 28; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to establish a formal process that will allow the 
financial statements, related notes, and stewardship and supplemental 
information in the CFS to be presented in conformity with GAAP. The 
process should document decisions reached and the rationale for such 
decisions; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 26; 
No.: 02- 29; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures for preparing the 
governmentwide management representation letter to help ensure that it 
is properly prepared and contains sufficient representations. 
Specifically, these policies and procedures should require an analysis 
of the agency management representations to determine if discrepancies 
exist between what the agency auditor reported and the representations 
made by the agency, including the resolution of such discrepancies; 
Status of recommendation: Per Treasury and OMB: Treasury and OMB are 
currently revising the policies and procedures related to 
governmentwide and agency management representation letters and, when 
finalized, will discuss with GAO these revisions which address its 
concerns; 
Status of recommendation: Per GAO: Open. 

Count: 27; 
No.: 02- 30; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures for preparing the 
governmentwide management representation letter to help ensure that it 
is properly prepared and contains sufficient representations. 
Specifically, these policies and procedures should require a 
determination that the agency management representation letters have 
been signed by the highest-level agency officials who are responsible 
for and knowledgeable about the matters included in the agency 
management representation letters; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-29; 
Status of recommendation: Per GAO: Open. 

Count: 28; 
No.: 02- 31; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures for preparing the 
governmentwide management representation letter to help ensure that it 
is properly prepared and contains sufficient representations. 
Specifically, these policies and procedures should require an 
assessment of the materiality thresholds used by federal agencies in 
their respective management representation letters; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-29; 
Status of recommendation: Per GAO: Open. 

Count: 29; 
No.: 02- 32; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures for preparing the 
governmentwide management representation letter to help ensure that it 
is properly prepared and contains sufficient representations. 
Specifically, these policies and procedures should require an 
assessment of the impact, if any, of federal agencies' materiality 
thresholds on the management representations made at the governmentwide 
level; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-29; 
Status of recommendation: Per GAO: Open. 

Count: 30; 
No.: 02- 33; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures for preparing the 
governmentwide management representation letter to help ensure that it 
is properly prepared and contains sufficient representations. 
Specifically, these policies and procedures should require an 
evaluation and assessment of the omission of representations ordinarily 
included in agency management representation letters; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-29; 
Status of recommendation: Per GAO: Open. 

Count: 31; 
No.: 02- 34; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures for preparing the 
governmentwide management representation letter to help ensure that it 
is properly prepared and contains sufficient representations. 
Specifically, these policies and procedures should require an analysis 
and aggregation of the agencies' summary of unadjusted misstatements to 
determine the completeness of the summaries and to ascertain the 
materiality, both individually and in the aggregate, of such unadjusted 
misstatements to the CFS taken as a whole; 
Status of recommendation: Per Treasury and OMB: In fiscal year 2006, 
Treasury updated the standard operating procedure (SOP) for the 
agencies' summary of unadjusted misstatements; 
Status of recommendation: Per GAO: Open. Certain federal agencies 
either did not provide a summary of unadjusted misstatements or did not 
provide a complete summary of unadjusted misstatements. The SOP should 
be further revised to address these issues. 

Count: 32; 
No.: 02- 35; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
help ensure that agencies provide adequate information in their legal 
representation letters regarding the expected outcomes of the cases; 
Status of recommendation: Per Treasury and OMB: During fiscal year 
2006, OMB and Treasury continued to work with the agencies to ensure 
that adequate information was provided in the legal representation 
letters regarding the expected outcomes of the cases; 
Status of recommendation: Per GAO: Open. Certain federal agencies did 
not report adequate information in their legal representation letters 
regarding the expected outcomes of certain pending cases. 

Count: 33; 
No.: 02- 36; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
help ensure that agencies provide related management schedules; 
Status of recommendation: Per Treasury and OMB: OMB and Treasury 
followed up with agencies that had not provided their management 
schedules to ensure that they did so. Agreements are in place to 
receive all schedules in the future; 
Status of recommendation: Per GAO: Closed. 

Count: 34; 
No.: 02- 37; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that agencies develop a detailed schedule of 
all major treaties and other international agreements that obligate the 
U.S. government to provide cash, goods, or services, or that create 
other financial arrangements that are contingent on the occurrence or 
nonoccurrence of future events (a starting point for compiling these 
data could be the State Department's Treaties in Force); 
Status of recommendation: Per Treasury and OMB: To ensure a reasonable 
approach, OMB will analyze the appropriateness of reporting "treaties" 
before developing specific corrective actions. OMB has, however, 
analyzed the State Department's Treaties in Force and concluded that 
while it provides a comprehensive listing of treaties and international 
agreements, it is not the appropriate document from which to derive 
potential commitments or contingencies of the U.S. government. OMB 
continues to analyze the issue; 
Status of recommendation: Per GAO: Open. 

Count: 35; 
No.: 02- 38; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that agencies classify all such scheduled 
major treaties and other international agreements as commitments or 
contingencies; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-37; 
Status of recommendation: Per GAO: Open. 

Count: 36; 
No.: 02- 39; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that agencies disclose in the notes to the 
CFS amounts for major treaties and other international agreements that 
have a reasonably possible chance of resulting in a loss or claim as a 
contingency; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-37; 
Status of recommendation: Per GAO: Open. 

Count: 37; 
No.: 02- 40; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that agencies disclose in the notes to the 
CFS amounts for major treaties and other international agreements that 
are classified as commitments and that may require measurable future 
financial obligations; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-37; 
Status of recommendation: Per GAO: Open. 

Count: 38; 
No.: 02- 41; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
establish written policies and procedures to help ensure that major 
treaty and other international agreement information is properly 
identified and reported in the CFS. Specifically, these policies and 
procedures should require that agencies take steps to prevent major 
treaties and other international agreements that are classified as 
remote from being recorded or disclosed as probable or reasonably 
possible in the CFS; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-37; 
Status of recommendation: Per GAO: Open. 

Count: 39; 
No.: 02- 42; 
Recommendation: As Treasury is designing its new compilation process, 
which it expects to implement beginning with the fiscal year 2004 CFS, 
the Secretary of the Treasury should direct the Fiscal Assistant 
Secretary, in coordination with the Controller of OMB, to design the 
new compilation process to directly link information from federal 
agencies' audited financial statements to amounts reported in all the 
applicable consolidated financial statements and related footnotes; 
Status of recommendation: Per Treasury and OMB: Treasury used its 
revised CFS compilation process, the Governmentwide Financial Reporting 
System (GFRS), first implemented in fiscal year 2004, to directly link 
agency audited financial statements to three of the five CFS principal 
statements. The exceptions are the Reconciliation of Net Operating Cost 
and Unified Budget Deficit (or Surplus) and the Statement of Changes in 
Cash Balance. Treasury does not currently plan to link these statements 
to agency financial statements (see also status of recommendation No. 
02- 15). With regard to note disclosures, GFRS included a direct link 
between the CFS note disclosures and the related agencies' audited note 
disclosures, for which the links were supplemented by additional 
documentation describing in more detail the links between the CFS and 
agency note disclosures; 
Status of recommendation: Per GAO: Open. Treasury showed progress by 
demonstrating that amounts in the Statement of Social Insurance were 
consistent with the underlying federal agencies' audited financial 
statements and that the Balance Sheet and the Statement of Net Cost 
were consistent with federal agencies' financial statements prior to 
eliminating intragovernmental activity and balances. However, 
Treasury's process for compiling the CFS did not ensure that the 
information in the remaining three principal financial statements and 
notes were fully consistent with the underlying information in federal 
agencies' audited financial statements and other financial data. Also, 
see status of recommendation Nos. 02-15 and 02-16. 

Count: 40; 
No.: 02- 43; 
Recommendation: As Treasury is designing its new compilation process, 
which it expects to implement beginning with the fiscal year 2004 CFS, 
the Secretary of the Treasury should direct the Fiscal Assistant 
Secretary, in coordination with the Controller of OMB, to consider the 
other applicable recommendations in this report when designing and 
implementing the new compilation process; 
Status of recommendation: Per Treasury and OMB: Treasury will continue 
to consider applicable recommendations as the current CFS compilation 
system is revised and enhanced; 
Status of recommendation: Per GAO: Open. 

Count: 41; 
No.: 02- 44; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 3, Accounting for Inventory and Related Property, paragraph 
91, which requires the reporting entity to disclose the valuation basis 
for foreclosed property; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 42; 
No.: 02- 45; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 3, Accounting for Inventory and Related Property, paragraph 
91, which requires the reporting entity to disclose the changes from 
the prior year's accounting methods, if any; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 43; 
No.: 02- 46; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 3, Accounting for Inventory and Related Property, paragraph 
91, which requires the reporting entity to disclose the restrictions on 
the use/ disposal of property; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 44; 
No.: 02- 47; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 3, Accounting for Inventory and Related Property, paragraph 
91, which requires the reporting entity to disclose the balances by 
categories (i.e., pre-1992 and post-1991 foreclosed property); 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 45; 
No.: 02- 48; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 3, Accounting for Inventory and Related Property, paragraph 
91, which requires the reporting entity to disclose the number of 
properties held and average holding period by type or category; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 46; 
No.: 02- 49; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 3, Accounting for Inventory and Related Property, paragraph 
91, which requires the reporting entity to disclose the number of 
properties for which foreclosure proceedings are in process at the end 
of the period for foreclosed assets acquired in full or partial 
settlement of a direct or guaranteed loan; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 47; 
No.: 02- 50; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 9, which requires credit programs to 
reestimate the subsidy cost allowance for outstanding direct loans and 
the liability for outstanding loan guarantees. There are two kinds of 
reestimates: (1) interest rate reestimates and (2) technical/default 
reestimates. Entities should measure and disclose each program's 
reestimates in these two components separately; 
Status of recommendation: Per Treasury and OMB: The disclosures related 
to direct loans and loan guarantees with regard to subsidy expense is 
now governed by SFFAS No. 32 paragraph 27.f. As such, disclosure of the 
two kinds of subsidy reestimates is no longer required for the CFS; 
only the total subsidy expense is required to be disclosed, and it was 
disclosed in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 48; 
No.: 02- 51; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 10, which requires the reporting entity to 
display in the notes to the financial statements a reconciliation 
between the beginning and ending balances of the subsidy cost allowance 
for outstanding direct loans and the liability for outstanding loan 
guarantees reported on the entity's balance sheet; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 15.a; 
Status of recommendation: Per GAO: Closed. 

Count: 49; 
No.: 02- 52; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 11, which requires disclosure of the total 
amount of direct or guaranteed loans disbursed for the current 
reporting year and the preceding reporting year; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 15.b; 
Status of recommendation: Per GAO: Closed. 

Count: 50; 
No.: 02- 53; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 11, which requires disclosure of the subsidy 
expense by components, recognized for the direct or guaranteed loans 
disbursed in the current reporting year and the preceding reporting 
year; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 15.b; 
Status of recommendation: Per GAO: Closed. 

Count: 51; 
No.: 02- 54; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 11, which requires disclosure of the subsidy 
reestimates by components for the current reporting year and the 
preceding reporting year; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 15.b; 
Status of recommendation: Per GAO: Closed. 

Count: 52; 
No.: 02- 55; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 11, which requires disclosure, at the 
program level, of the subsidy rates for the total subsidy cost and its 
components for the interest subsidy costs, default costs (net of 
recoveries), fees and other collections, and other costs estimated for 
direct loans and loan guarantees in the current year's budget for the 
current year's cohorts; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 15.b; 
Status of recommendation: Per GAO: Closed. 

Count: 53; 
No.: 02- 56; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for loans 
receivable and loan guarantee liabilities meets the requirements of 
SFFAS No. 18, Amendments to Accounting Standards for Direct Loans and 
Loan Guarantees, paragraph 11, which requires the reporting entity to 
disclose, discuss, and explain events and changes in economic 
conditions, other risk factors, legislation, credit policies, and 
subsidy estimation methodologies and assumptions that have had a 
significant and measurable effect on subsidy rates, subsidy expense, 
and subsidy reestimates; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 15.b; 
Status of recommendation: Per GAO: Closed. 

Count: 54; 
No.: 02- 57; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for inventories 
and operating materials and supplies meets the requirements of SFFAS 
No. 3, Accounting for Inventory and Related Property, paragraph 30, 
which requires the difference between the carrying amount and the 
expected net realizable value to be recognized as a loss or gain and 
either separately reported or disclosed when inventory or operating 
materials and supplies are declared excess, obsolete, or unserviceable; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosure of the differences between the carrying 
amounts of inventories and operating materials and their expected net 
realizable values is no longer applicable to the CFS per SFFAS No. 32, 
paragraph 10.b; 
Status of recommendation: Per GAO: Closed. 

Count: 55; 
No.: 02- 58; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for inventories 
and operating materials and supplies meets the requirements of SFFAS 
No. 3, Accounting for Inventory and Related Property, paragraphs 35 and 
50, which require disclosure of inventory and operating materials and 
supplies general composition; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 56; 
No.: 02- 59; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for inventories 
and operating materials and supplies meets the requirements of SFFAS 
No. 3, Accounting for Inventory and Related Property, paragraphs 35 and 
50, which require disclosure of any changes from the prior year in 
accounting methods for inventory and operating materials and supplies; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 57; 
No.: 02- 60; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for inventories 
and operating materials and supplies meets the requirements of SFFAS 
No. 3, Accounting for Inventory and Related Property, paragraphs 35 and 
50, which require the disclosure of any restrictions on the sale of 
inventory and the use of operating materials and supplies; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 58; 
No.: 02- 61; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for inventories 
and operating materials and supplies meets the requirements of SFFAS 
No. 3, Accounting for Inventory and Related Property, paragraphs 35 and 
50, which require disclosure of any changes in the criteria for 
categorizing inventory and operating materials and supplies; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 59; 
No.: 02- 62; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stockpile 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 56, which requires disclosure 
of the basis for valuing stockpile material, including valuation method 
and any cost flow assumptions; 
Status of recommendation: Per Treasury and OMB: GAO- 04-45 (results of 
the fiscal year 2002 audit): Beginning in fiscal year 2006, this 
disclosure is no longer applicable to the CFS per SFFAS No. 32, 
paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 60; 
No.: 02- 63; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stockpile 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 56, which requires disclosure 
of any changes from the prior year's accounting methods; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 61; 
No.: 02- 64; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stockpile 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 56, which requires disclosure 
of restrictions on the use of stockpile material; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 62; 
No.: 02- 66; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stockpile 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 56, which requires disclosure 
of the criteria for grouping stockpile material held for sale; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 63; 
No.: 02- 67; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stockpile 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 56, which requires disclosure 
of changes in criteria for categorizing stockpile material held for 
sale; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 64; 
No.: 02- 68; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stockpile 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 55, which requires disclosure 
of any difference between the carrying amount (i.e., purchase price or 
cost) of stockpile material held for sale and the estimated selling 
price of such assets; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosure of the differences between the carrying 
amounts of stockpile materials held for sale and their estimated 
selling price is no longer required for the CFS per SFFAS No. 32, 
paragraph 10.c; 
Status of recommendation: Per GAO: Closed. 

Count: 65; 
No.: 02- 69; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for seized 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 66, which requires disclosure 
of the valuation method; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 66; 
No.: 02- 70; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for seized 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 66, which requires disclosure 
of any changes from the prior year's accounting methods; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 67; 
No.: 02- 71; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for seized 
material meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 66, which requires disclosure 
of the analysis of change in seized property (including dollar value 
and number of seized properties) that is on hand at the beginning of 
the year, seized during the year, disposed of during the year, and on 
hand at the end of the year, as well as known liens or other claims 
against the property. This information should be presented by type of 
seizure and method of disposition, when material; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 68; 
No.: 02- 72; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for forfeited 
property meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 78, which requires disclosure 
of the valuation method; 
Status of recommendation: Per Treasury and OMB: GAO- 04-45 (results of 
the fiscal year 2002 audit): Beginning in fiscal year 2006, this 
disclosure is no longer applicable to the CFS per SFFAS No. 32, 
paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 69; 
No.: 02- 73; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for forfeited 
property meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 78, which requires disclosure 
of the analysis of the changes in forfeited property by type and dollar 
amount that includes (1) number of forfeitures on hand at the beginning 
of the year, (2) additions, (3) disposals and method of disposition, 
and (4) end-of-year balances; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 70; 
No.: 02- 74; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for forfeited 
property meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 78, which requires disclosure 
of any restriction on the use or disposition of the property; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 71; 
No.: 02- 75; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for forfeited 
property meets the requirements of SFFAS No. 3, Accounting for 
Inventory and Related Property, paragraph 78, which requires 
disclosure, if available, of an estimate of the value of property to be 
distributed to other federal, state, and local agencies in future 
reporting periods; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 72; 
No.: 02- 76; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for goods held 
under price support and stabilization programs meets the requirements 
of SFFAS No. 3, Accounting for Inventory and Related Property, 
paragraph 98, which requires that if a contingent loss is not 
recognized because it is less than probable or it is not reasonably 
measurable, disclosure of the contingency shall be made if it is at 
least reasonably possible that a loss may occur; 
Status of recommendation: Per Treasury and OMB: GAO- 04-45 (results of 
the fiscal year 2002 audit): This required information was requested 
from the agencies for inclusion in Note 18, Contingencies, in the 
fiscal year 2006 CFS. However, no related GFRS data were received in 
fiscal year 2006 or fiscal year 2005 from the Department of Agriculture 
(USDA), the only agency that has reported this type of inventory in 
both years. In addition, USDA also did not disclose such a contingency 
in its fiscal year 2006 or fiscal year 2005 audited financial 
statements. Therefore, no disclosure related to this requirement was 
necessary at the governmentwide level; 
Status of recommendation: Per GAO: Closed. Beginning in fiscal year 
2006, the disclosure requirement of SFFAS No. 3, relating to goods held 
under price support and stabilization programs, is no longer applicable 
to the CFS per SFFAS No. 32, paragraph 10. However, disclosure 
requirements related to major commitments and contingencies contained 
in SFFAS No. 5 were not affected by SFFAS No. 32. We continue to 
monitor the sufficiency and accuracy of disclosures in the CFS relating 
to major commitments and contingencies. 

Count: 73; 
No.: 02- 77; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for goods held 
under price support and stabilization programs meets the requirements 
of SFFAS No. 3, Accounting for Inventory and Related Property, 
paragraph 109, which requires disclosure of the basis for valuing 
commodities, including valuation method and cost flow assumptions; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 74; 
No.: 02- 78; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for goods held 
under price support and stabilization programs meets the requirements 
of SFFAS No. 3, Accounting for Inventory and Related Property, 
paragraph 109, which requires disclosure of any changes from the prior 
year's accounting methods; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 75; 
No.: 02- 79; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for goods held 
under price support and stabilization programs meets the requirements 
of SFFAS No. 3, Accounting for Inventory and Related Property, 
paragraph 109, which requires disclosure of any restrictions on the 
use, disposal, or sale of commodities; 
Status of recommendation: Per Treasury and OMB: GAO- 04-45 (results of 
the fiscal year 2002 audit): Beginning in fiscal year 2006, this 
disclosure is no longer applicable to the CFS per SFFAS No. 32, 
paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 76; 
No.: 02- 80; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for goods held 
under price support and stabilization programs meets the requirements 
of SFFAS No. 3, Accounting for Inventory and Related Property, 
paragraph 109, which requires disclosure of the analysis of the change 
in dollar amount and volume of commodities, including those (1) on hand 
at the beginning of the year, (2) acquired during the year, (3) 
disposed of during the year listed by method of disposition, (4) on 
hand at the end of the year, (5) on hand at year-end and estimated to 
be donated or transferred during the coming period, and (6) received as 
a result of surrender of collateral related to nonrecourse loans 
outstanding. The analysis should also show the dollar value and volume 
of purchase agreement commitments; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 10.a; 
Status of recommendation: Per GAO: Closed. 

Count: 77; 
No.: 02- 81; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for property, 
plant, and equipment (PP&E) meets the disclosure requirements of SFFAS 
No. 6, Accounting for Property, Plant, and Equipment, paragraph 45, 
which requires disclosure of the estimated useful lives for each major 
class of PP&E; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 12.a; 
Status of recommendation: Per GAO: Closed. 

Count: 78; 
No.: 02- 82; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for PP&E meets 
the disclosure requirements of SFFAS No. 6, Accounting for Property, 
Plant, and Equipment, paragraph 45, which requires disclosure of 
capitalization thresholds, including any changes in thresholds during 
the period; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 12.a; 
Status of recommendation: Per GAO: Closed. 

Count: 79; 
No.: 02- 83; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for PP&E meets 
the disclosure requirements of SFFAS No. 6, Accounting for Property, 
Plant, and Equipment, paragraph 45, which requires disclosure of 
restrictions on the use or convertibility of general PP&E; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 12.a; 
Status of recommendation: Per GAO: Closed. 

Count: 80; 
No.: 02- 85; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for PP&E meets 
the disclosure requirements of SFFAS No. 10, Accounting for Internal 
Use Software, paragraph 35, which requires disclosure of the estimated 
useful life for each major class of software for internal use software; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 14; 
Status of recommendation: Per GAO: Closed. 

Count: 81; 
No.: 02- 89; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for 
environmental and disposal liabilities meets the requirements of SFFAS 
No. 6, Accounting for Property, Plant, and Equipment, which requires 
(1) estimation and recognition of cleanup costs associated with general 
PP&E at the time the PP&E is placed in service and (2) recognition of a 
liability for the portion of the estimated total cleanup cost 
attributable to that portion of the physical capacity used or that 
portion of the estimated useful life that has passed since the general 
PP&E was placed in service; 
Status of recommendation: Per Treasury and OMB: This required 
information was disclosed in Note 12, Environmental and Disposal 
Liabilities, in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. The requirements of SFFAS 
No. 6, as they apply to the note disclosure for environmental and 
disposal liabilities, were superseded by modified disclosure 
requirements contained in SFFAS No. 32. The disclosures provided in 
Note 12, Environmental and Disposal Liabilities, of the fiscal year 
2006 CFS were in conformity with SFFAS No. 32 as they relate to cleanup 
costs associated with general PP&E. 

Count: 82; 
No.: 02- 90; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for 
environmental and disposal liabilities meets the requirements of SFFAS 
No. 6, Accounting for Property, Plant, and Equipment, which requires 
inclusion of material changes in total estimated cleanup costs due to 
changes in laws, technology, or plans; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 12.g; 
Status of recommendation: Per GAO: Closed. 

Count: 83; 
No.: 02- 91; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for capital 
leases meets the requirements of Federal Accounting Standards Board 
(FASB), Statement of Financial Accounting Standards (SFAS) No. 13, 
Accounting for Leases, paragraph 16, which requires future minimum 
lease payments as of the date of the latest balance sheet presented, in 
the aggregate and for each of the 5 succeeding fiscal years, with 
separate deductions from the total for the amount representing 
executory costs, including any profit thereon, included in the minimum 
lease payments, and for the amount of the imputed interest necessary to 
reduce the net minimum lease payments to present value; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 84; 
No.: 02- 92; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for capital 
leases meets the requirements of FASB, SFAS No. 13, Accounting for 
Leases, paragraph 16, which requires a summary of assets under capital 
lease by major asset category and the related total accumulated 
amortization; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 85; 
No.: 02- 93; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for capital 
leases meets the requirements of FASB, SFAS No. 13, Accounting for 
Leases, paragraph 16, which requires a general description of the 
lessee's leasing arrangements, including but not limited to (1) the 
basis on which contingent rental payments are determined; 
(2) the existence and terms of renewal or purchase options and 
escalation clauses; 
and (3) restrictions imposed by lease agreements, such as those 
concerning dividends, additional debt, and further leasing; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 86; 
No.: 02- 94; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for life 
insurance liabilities meets the requirements of SFFAS No. 5, Accounting 
for Liabilities of the Federal Government, paragraph 117, which 
requires all federal reporting entities with whole life insurance 
programs to follow applicable standards as prescribed in the private 
sector standards when reporting the liability for future policy 
benefits: FASB SFAS No. 60, Accounting and Reporting by Insurance 
Enterprises; 
SFAS No. 97, Accounting and Reporting by Insurance Enterprises for 
Certain Long-Duration Contracts and for Realized Gains and Losses from 
the Sale of Investments; 
SFAS No. 120, Accounting and Reporting by Mutual Life Insurance 
Enterprises and by Insurance Enterprises for Certain Long- Duration 
Participating Contracts; 
and American Institute of Certified Public Accountants Statement of 
Position 95-1, Accounting for Certain Insurance Activities of Mutual 
Life Insurance Enterprises; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosures required by SFFAS No. 5, paragraph 117, are 
no longer applicable to the CFS per SFFAS No. 32, paragraph 11.a; 
Status of recommendation: Per GAO: Closed. 

Count: 87; 
No.: 02- 95; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for life 
insurance liabilities meets the requirements of SFFAS No. 5, Accounting 
for Liabilities of the Federal Government, paragraph 121, which 
requires all components of the liability for future policy benefits 
(i.e., the net-level premium reserve for death and endowment policies 
and the liability for terminal dividends) to be separately disclosed in 
a footnote with a description of each amount and an explanation of its 
projected use and any other potential uses (e.g., reducing premiums, 
determining and declaring dividends available, and reducing federal 
support in the form of appropriations related to administrative cost or 
subsidies); 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosures required by SFFAS No. 5, paragraph 121, are 
no longer applicable to the CFS per SFFAS No. 32, paragraph 11.b; 
Status of recommendation: Per GAO: Closed. 

Count: 88; 
No.: 02- 96; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure on major 
commitments and contingencies is consistent with disclosed information 
in individual agencies' financial statements; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation Nos. 02-25 and 02-42 as to the need for further analysis 
of certain disclosures. In addition, these items were disclosed in Note 
18, Contingencies, and Note 19, Commitments, in the fiscal year 2006 
CFS; 
Status of recommendation: Per GAO: Open. See status of recommendation 
Nos. 02-25 and 02-42. 

Count: 89; 
No.: 02- 102; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for dedicated 
collections meets the requirements of SFFAS No. 7, Part I, Accounting 
for Revenue and Other Financing Sources, paragraph 85, which requires 
inclusion of any revenues, other financing sources, or costs 
attributable to the fund under accounting standards but not legally 
allowable as credits or charges to the fund; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures. In addition, this required information was requested from 
the agencies for inclusion in Note 21, Dedicated Collections, in the 
fiscal year 2006 CFS. However, no data were received in fiscal years 
2006 or 2005, and therefore, no disclosure was needed related to this 
requirement. In addition, fiscal year 2006 dedicated collections 
related to non-earmarked funds were immaterial and, therefore, were not 
disclosed in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Open. Treasury expected the required 
information from applicable agencies as requested in the TFM. However, 
when the information was not provided, Treasury did not have any 
policies and procedures for following up with agencies to determine why 
the information was not provided. 

Count: 90; 
No.: 02- 103; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires a 
description of each fund's purpose, how the administrative entity 
accounts for and reports the fund, and its authority to use those 
collections; 
Status of recommendation: Per Treasury and OMB: This required 
information was disclosed in Note 22, Indian Trust Funds, in the fiscal 
year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 91; 
No.: 02- 104; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires 
disclosure of the sources of revenue or other financing for the period 
and an explanation of the extent to which they are inflows of resources 
to the government or the result of intragovernmental flows; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 92; 
No.: 02- 106; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires 
condensed information on net cost and changes to fund balance, showing 
revenues by type (exchange/nonexchange), program expenses, other 
expenses, other financing sources, and other changes in fund balance; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-25. 

Count: 93; 
No.: 02- 107; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for Indian trust 
funds meets the requirements of SFFAS No. 7, Part I, Accounting for 
Revenue and Other Financing Sources, paragraph 85, which requires 
disclosure of any revenues, other financing sources, or costs 
attributable to the fund under accounting standards, but not legally 
allowable as credits or charges to the fund; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02- 25. 

Count: 94; 
No.: 02- 114; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for social 
insurance meets the requirements of SFFAS No. 17, Accounting for Social 
Insurance, paragraph 32(4), which requires individual program 
sensitivity analyses for projection period cash flow in present value 
dollars and annual cash flow in nominal dollars. The CFS includes only 
present value sensitivity analyses for Social Security and Hospital 
Insurance. Paragraph 32(4) states that at a minimum the summary should 
present Social Security, Hospital Insurance, and Supplementary Medical 
Insurance separately; 
Status of recommendation: Per Treasury and OMB: With the exception of 
the Black Lung program, sensitivity analyses for the significant social 
insurance programs-Social Security, Medicare Hospital Insurance (Part 
A), the Supplementary Medical Insurance Programs (Parts B and D), and 
the Railroad Retirement Program-were disclosed in the required 
supplementary information-social insurance section of the fiscal year 
2006 CFS. Since the Black Lung program is immaterial in relation to the 
above social insurance programs, its related sensitivity analysis is 
not required to be disclosed; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Closed. 

Count: 95; 
No.: 02- 118; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for nonfederal 
physical property included in stewardship information meets the 
requirements of SFFAS No. 8, Supplementary Stewardship Reporting, 
paragraph 87, which requires disclosure of the annual investment, 
including a description of federally owned physical property 
transferred to state and local governments. This information should be 
provided for the year ended on the balance sheet date as well as for 
each of the 4 preceding years. If data for additional years would 
provide a better indication of investment, reporting of the additional 
years' data is encouraged. Reporting should be at a meaningful category 
or level; 
Status of recommendation: Per Treasury and OMB: Treasury has revised 
its policies and procedures to analyze component entity stewardship 
investment data and determine the manner for reporting this information 
in the CFS in accordance with SFFAS No. 8, paragraph 39, which is the 
only reporting requirement that relates to the CFS; 
SFFAS 8, paragraph 39, states that component entity required reporting 
for stewardship investments is not applicable to the CFS, but does 
require disclosure in the CFS of such "summary (stewardship) 
information or selected information as is feasible."; 
The revised policies and procedures require the following to be 
documented: (1) the determination of what is considered feasible for 
CFS reporting of stewardship investments and (2) what related entity 
and/or program information is to be disclosed in the CFS and revised 
each year as appropriate; 
With regard to investments in nonfederal physical property, the revised 
policies and procedures only require narrative description(s) of the 
program(s) that was (were) selected for disclosure in the CFS. This 
required information is shown as required supplementary stewardship 
information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 96; 
No.: 02- 119; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for nonfederal 
physical property included in stewardship information meets the 
requirements of SFFAS No. 8, Supplementary Stewardship Reporting, 
paragraph 87, which requires a description of major programs involving 
federal investments in nonfederal physical property, including a 
description of programs or policies under which noncash assets are 
transferred to state and local governments; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
nonfederal physical property only require the narrative description of 
noncash items transferred to state and local governments related to the 
specific program(s) that was (were) selected for disclosure in the CFS. 
This required information is shown as required supplementary 
stewardship information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 97; 
No.: 02- 120; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for human 
capital included in stewardship information meets the requirements of 
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 94, which 
requires a narrative description and the full cost of the investment in 
human capital for the year being reported on as well as the preceding 4 
years (if full cost data are not available, outlay data can be 
reported); 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
human capital investments only require cost disclosure for the 
program(s) that was (were) selected for disclosure in the CFS. This 
required information is shown as required supplementary stewardship 
information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 98; 
No.: 02- 121; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for human 
capital included in stewardship information meets the requirements of 
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 94, which 
requires the full cost or outlay data for investments in human capital 
at a meaningful category or level (e.g., by major program, agency, or 
department); 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
human capital investments only require cost disclosure for the 
program(s) that was (were) selected for disclosure in the CFS. This 
required information is shown as required supplementary stewardship 
information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 99; 
No.: 02- 122; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for human 
capital included in stewardship information meets the requirements of 
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 94, which 
requires a narrative description of major education and training 
programs considered federal investments in human capital; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
human capital investments only require narrative description(s) of the 
program(s) that was (were) selected for disclosure in the CFS. This 
required information is shown as required supplementary stewardship 
information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Closed. 

Count: 100; 
No.: 02- 123; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for research and 
development included in stewardship information meets the requirements 
of SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 100, 
which requires reporting of the annual investment made in the year 
ended on the balance sheet date as well as in each of the 4 years 
preceding that year. (As defined in this standard, "annual investment" 
includes more than the annual expenditure reported by character class 
for budget execution. Full cost shall be measured and accounted for in 
accordance with SFFAS No. 4, Managerial Cost Accounting Standards for 
the Federal Government.) If data for additional years would provide a 
better indication of investment, reporting of the additional years' 
data is encouraged. In those unusual instances when entities have no 
historical data, only current reporting year data need be reported. 
Reporting must be at a meaningful category or level, for example, a 
major program or department; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
research and development investments only require narrative 
description(s) of the program(s) that was (were) selected for 
disclosure in the CFS. This required information is shown as required 
supplementary stewardship information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 101; 
No.: 02- 124; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for research and 
development included in stewardship information meets the requirements 
of SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 100, 
which requires a narrative description of major research and 
development programs; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
research and development investments only require narrative 
description(s) of the program(s) that was (were) selected for 
disclosure in the CFS. This required information is shown as required 
supplementary stewardship information in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 102; 
No.: 02- 125; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which require 
inclusion of the method of measuring deferred maintenance for each 
major class of PP&E; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosures required by SFFAS No. 6, paragraphs 83 and 
84, are no longer applicable to the CFS per SFFAS No. 32, paragraphs 
12.b and 12.c, respectively; 
Status of recommendation: Per GAO: Closed. 

Count: 103; 
No.: 02- 126; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which require 
that if the condition assessment survey method of measuring deferred 
maintenance is used, the following should be presented for each major 
class of PP&E: (1) description of requirements or standards for 
acceptable operating condition, (2) any changes in the condition 
requirements or standards, and (3) asset condition and a range estimate 
of the dollar amount of maintenance needed to return the asset to its 
acceptable operating condition; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosures required by SFFAS No. 6, paragraphs 83 and 
84, are no longer applicable to the CFS per SFFAS No. 32, paragraphs 
12.b and 12.c, respectively; 
Status of recommendation: Per GAO: Closed. 

Count: 104; 
No.: 02- 127; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which require 
that if the total life-cycle cost method is used, the following should 
be presented for each major class of PP&E: (1) the original date of the 
maintenance forecast and an explanation for any changes to the 
forecast; 
(2) prior year balance of the cumulative deferred maintenance amount; 
(3) the dollar amount of maintenance that was defined by the 
professionals who designed, built, or managed the PP&E as required 
maintenance for the reporting period; 
(4) the dollar amount of maintenance actually performed during the 
period; 
(5) the difference between the forecast and actual maintenance; 
(6) any adjustments to the scheduled amounts deemed necessary by the 
managers of the PP&E; 
and (7) the ending cumulative balance for the reporting period for each 
major class of asset experiencing deferred maintenance; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosures required by SFFAS No. 6, paragraphs 83 and 
84, are no longer applicable to the CFS per SFFAS No. 32, paragraphs 
12.b and 12.c, respectively; 
Status of recommendation: Per GAO: Closed. 

Count: 105; 
No.: 02- 128; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, to ensure that the note disclosure for deferred 
maintenance meets the requirements of SFFAS No. 6, Accounting for 
Property, Plant, and Equipment, paragraphs 83 and 84, which require 
that if management elects to disclose critical and noncritical amounts, 
the disclosure is to include management's definition of these 
categories; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, the disclosures required by SFFAS No. 6, paragraphs 83 and 
84, are no longer applicable to the CFS per SFFAS No. 32, paragraphs 
12.b and 12.c, respectively; 
Status of recommendation: Per GAO: Closed. 

Count: 106; 
No.: 02- 129; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for stewardship 
responsibilities related to the risk assumed for federal insurance and 
guarantee programs meets the requirements of SFFAS No. 5, Accounting 
for Liabilities of the Federal Government, paragraph 106, which 
requires that when financial information pursuant to FASB standards on 
federal insurance and guarantee programs conducted by government 
corporations is incorporated in general purpose financial reports of a 
larger federal reporting entity, the entity should report as required 
supplementary information what amounts and periodic change in those 
amounts would be reported under the "risk assumed" approach; 
Status of recommendation: Per Treasury and OMB: This required 
information was requested from the agencies for disclosure in the 
required supplementary information (risk assumed) section of the fiscal 
year 2006 CFS. However, no data were received from some agencies; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Open. Treasury expected the required information from 
applicable agencies as requested in the TFM. However, when the 
information was not provided, Treasury did not have any policies and 
procedures for following up with agencies to determine why the 
information was not provided. 

GAO-04-866 (results of the fiscal year 2003 audit). 

Count: 107; 
No.: 03- 4; Recommendation: The Director of OMB should direct the 
Controller of OMB, in coordination with Treasury's Fiscal Assistant 
Secretary, to work with the federal agencies so that the differences 
between net outlays the agencies report in their Statement of Budgetary 
Resources and the net outlay records Treasury uses to prepare the 
Statement of Changes in Cash Balance are reconciled; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-18; Status of recommendation: Per GAO: GAO- 04-45 
(results of the fiscal year 2002 audit): Open. 
See status of recommendation No. 02-18. 

Count: 108; 
No.: 03- 5; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to determine and address the effects that any of 
the differences between net outlays the agencies report in their 
Statement of Budgetary Resources and Treasury's net outlay records may 
have on the CFS; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-16; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02- 16. 

Count: 109; 
No.: 03- 6; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to develop a process that will allow full reporting 
of the changes in cash balance of the U.S. government. Specifically, 
the process should provide for reporting on the change in cash reported 
on the consolidated balance sheet, which should be linked to cash 
balances reported in federal agencies' audited financial statements; 
Status of recommendation: Per Treasury and OMB: The Statement of 
Changes in Cash Balance reconciles to operating cash as opposed to the 
total cash balance shown in the Balance Sheet. SFFAS No. 24, paragraph 
12, requires a reconciliation to the government's cash balance, but 
does not prescribe how this reconciliation should be presented. 
Treasury believes it complies with paragraph 12 by linking operating 
cash to Note 2, Cash and Other Monetary Assets, which then links 
operating cash to the total cash balance amount on the Balance Sheet; 
Status of recommendation: Per GAO: Open. We agree that SFFAS No. 24 
requires the reconciliation of the federal government's cash balance. 
However, the Statement of Changes in Cash Balance reconciles to 
operating cash of $43.6 billion rather than the cash balance reported 
on the Balance Sheet of $97.9 billion, as of September 30, 2006. 

Count: 110; 
No.: 03- 7; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to report gross amounts for receipts and 
disbursements of cash related to direct loans and loan guarantees; 
Status of recommendation: Per Treasury and OMB: While SFFAS No. 24 
shows gross receipt and disbursement amounts for direct loans and loan 
guarantees as an illustration only, it does not require such 
disaggregated disclosure in the CFS; 
Status of recommendation: Per GAO: Closed. Beginning in fiscal year 
2006, this disclosure is no longer applicable to the CFS per SFFAS No. 
32, paragraph 15.b. 

Count: 111; 
No.: 03- 8; 
Recommendation: The Director of OMB should direct the Controller of 
OMB, in coordination with Treasury's Fiscal Assistant Secretary, to 
work with Justice and certain other executive branch agencies to ensure 
that these agencies report or disclose relevant criminal debt 
information in conformity with GAAP in their financial statements and 
have such information subjected to audit; 
Status of recommendation: Per Treasury and OMB: An interagency task 
force has been established under the direction of the Attorney General 
and has developed a strategic plan for improving criminal debt 
collection and has provided the plan to Congress. The task force 
includes representatives from the Department of Justice (Justice), 
Treasury, OMB, and the Administrative Office of the U.S. Courts. The 
task force continues to make progress in implementing new policies and 
procedures; 
Status of recommendation: Per GAO: Open. 

Count: 112; 
No.: 03- 9; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to include relevant criminal debt information in 
the CFS or document the specific rationale for excluding such 
information; 
Status of recommendation: Per Treasury and OMB: Treasury will include 
criminal debt information as it becomes available. See status of 
recommendation No. 03-08; 
Status of recommendation: Per GAO: Open. 

Count: 113; 
No.: 03- 11; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
modify Treasury's plans for the new closing package to (1) require 
federal agencies to directly link their audited financial statement 
notes to the CFS notes and (2) provide the necessary information to 
demonstrate that all of the five principal consolidated financial 
statements are consistent with the underlying information in federal 
agencies' audited financial statements and other financial data; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-42; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 02-42. 

Count: 114; 
No.: 03- 18; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for 
environmental and disposal liabilities meets the requirements of SFFAS 
No. 6, Accounting for Property, Plant, and Equipment, which requires 
the reporting entity to disclose the method for assigning estimated 
total cleanup costs to current operating periods; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 12.e; 
Status of recommendation: Per GAO: Closed. 

Count: 115; 
No.: 03- 19; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for 
environmental and disposal liabilities meets the requirements of SFFAS 
No. 6, Accounting for Property, Plant, and Equipment, which requires 
the reporting entity to disclose, for cleanup costs associated with 
general property, plant, and equipment, the unrecognized portion of 
estimated total cleanup costs be disclosed; 
Status of recommendation: Per Treasury and OMB: The disclosure of the 
unrecognized portion of estimated total cleanup costs is now governed 
by SFFAS No. 32, paragraph 25.b. The required disclosure is included in 
Note 12, Environmental and Disposal Liabilities, in the fiscal year 
2006 CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 116; 
No.: 03- 20; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for 
environmental and disposal liabilities meets the requirements of SFFAS 
No. 6, Accounting for Property, Plant, and Equipment, which requires 
the reporting entity to disclose the nature of estimates and 
information regarding possible changes to the estimates resulting from 
inflation, deflation, technology, or applicable laws and regulations; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 12.h; 
Status of recommendation: Per GAO: Closed. 

Count: 117; 
No.: 03- 21; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to consider whether the reader would be interested 
in understanding why the environmental and disposal liabilities amount 
significantly changed during the year and include the explanation for 
the change in the note disclosure; 
Status of recommendation: Per Treasury and OMB: The disclosure of the 
unrecognized portion of estimated total cleanup costs is now governed 
by SFFAS No. 32, paragraph 25, which does not mandate such an 
explanation, although such explanation would be added as circumstances 
merit; 
Status of recommendation: Per GAO: Closed. Although there is no 
authoritative requirement to disclose significant or unusual changes in 
balances in the notes to the financial statements, the Management's 
Discussion and Analysis section of the 2006 CFS included a discussion 
of the reasons for and the amount of certain significant changes 
relating to environmental and disposal liabilities. 

Count: 118; 
No.: 03- 22; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the information in stewardship 
information for research and development meets the requirements of 
SFFAS No. 8, Supplementary Stewardship Reporting, paragraph 99, which 
requires the reporting entity to include a narrative discussion of the 
major results achieved by the program along the lines of basic 
research, applied research, and development; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-118; 
Treasury's revised policies and procedures related to reporting on 
stewardship investments only require reporting on major results that 
were achieved by the basic or applied research programs, and by the 
development program(s), that were selected for disclosure in the CFS; 
Status of recommendation: Per GAO: Open. Paragraph 39 of SFFAS No. 8, 
Supplementary Stewardship Reporting, established that summary or 
selected stewardship investments information, as is feasible, should be 
reported in the CFS. Treasury agreed that it was feasible to include in 
the CFS a narrative discussion of the results achieved by the major 
research and development programs. As such, in the fiscal year 2006 
TFM, Treasury requested applicable federal agencies to provide 
information regarding results achieved for their research and 
development programs. However, the requested disclosure information was 
not provided in the closing packages by the federal agencies that had 
major research and development programs. Regardless, two federal 
agencies that had major research and development programs did report 
this type of information in their respective fiscal year 2006 
performance and accountability reports. 

Count: [Empty]. 

Count: GAO-05-407 (results of the fiscal year 2004 audit). 

Count: 119; 
No.: 04- 1; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to segregate the duties of individuals performing 
key functions in Treasury's processes for preparing governmentwide 
adjustments to the financial statements, making changes to Excel 
spreadsheets that contain audited agency financial information, and 
accessing federal agencies' closing package data in Treasury's new 
system; 
Status of recommendation: Per Treasury and OMB: Treasury further 
revised and documented its major procedures in fiscal year 2006 related 
to the CFS compilation process, including those related to the duties 
of the individuals with the capability to enter, change, and delete 
data within the GFRS database, and the posting of adjustments to the 
CFS to address segregation of duties; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Closed. 

Count: 120; 
No.: 04- 2; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to require and maintain appropriate supporting 
documentation for all journal vouchers recorded in the CFS; 
Status of recommendation: Per Treasury and OMB: Treasury will follow 
its standard operating procedure that includes maintaining 
documentation for all recorded journal vouchers, including notification 
and approval of changes from affected agencies; 
Except in certain circumstances described below, Treasury will seek 
approval from agencies before making data changes. However, because of 
year-end time constraints, Treasury will make changes without agency 
contact or approval under the following circumstances: (1) adjustments 
to agree closing packages to financial statements, (2) adjustments to 
ensure consistency of GAAP between agencies, and (3) adjustments to 
conform an agency to GAAP; 
Status of recommendation: Per GAO: Open. Treasury did not have 
appropriate supporting documentation for all transactions recorded in 
the CFS. Recording transactions in the financial statements without 
adequate underlying support increases the risk that inappropriate 
adjustments to balances in the financial statements could be made; 
We believe that Treasury should contact agencies to resolve any 
discrepancies between agencies' audited closing packages and audited 
financial statements and discuss any other situations that require 
adjustments to agencies' audited closing package data because Treasury 
could incorrectly adjust agencies' audited information. 

Count: 121; 
No.: 04- 3; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to require that Treasury employees contact and 
document communications with agencies before recording journal vouchers 
to change agency audited closing package data; 
Status of recommendation: Per Treasury and OMB: Treasury policy related 
to the notification of agencies before making needed data changes is 
described in status of recommendation No. 04-2; 
Treasury agrees that changes to closing package information should be 
accurate and fully supported. Nevertheless, errors in closing packages 
do occur, and Treasury and OMB have notified the agencies and their 
auditors of these errors in an effort to reduce such errors; 
With regard to adjustments to agree closing packages to financial 
statements, which constitute a significant portion of all adjustments 
made, the rebuttable presumption is that since closing packages must be 
consistent with the underlying agencies' financial statements, any 
inconsistencies found require adjustment to agree to the agency 
records; 
Treasury maintains that agency financial statements also serve as 
communications to Treasury; 
thus adjustments agreeing closing packages to financial statements are, 
by definition, fully supported. Where agency clarification is needed 
related to complex disclosures, Treasury will continue to document 
these discussions to ensure that the CFS is consistent with agency 
financial statements and note disclosures; 
Treasury understands the risk for material error in making changes 
without adequate support. However, Treasury believes that this risk is 
sufficiently minimized by following its current policies and 
procedures; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 04-2. 

Count: 122; 
No.: 04- 4; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to require and document management reviews of all 
procedures that result in data changes to the CFS; 
Status of recommendation: Per Treasury and OMB: Treasury further 
revised its procedures to ensure management reviews of data changes to 
the CFS; 
Status of recommendation: Per GAO: Open. Certain of Treasury's 
procedures were not effective for fiscal year 2006. 

Count: 123; 
No.: 04- 5; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to configure the GFRS database to prevent Treasury 
personnel from altering data submitted by federal agencies and to use 
separate GFRS databases for testing and production; 
Status of recommendation: Per Treasury and OMB: Treasury further 
revised its automated processes in fiscal year 2006 to prevent 
unauthorized changes to agency-submitted data. Also, see status of 
recommendation No. 04-1; 
Status of recommendation: Per GAO: Closed. 

Count: 124; 
No.: 04- 6; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to assess the infrastructure associated with the 
compilation process and modify it as necessary to achieve a sound 
internal control environment; 
Status of recommendation: Per Treasury and OMB: Treasury made various 
improvements to its infrastructure during fiscal year 2006, including 
streamlining the compilation process to automate the production of 
certain items, continuing its recruitment of qualified personnel and 
providing them with appropriate training related to the CFS compilation 
process and associated internal controls, revising its policies and 
procedures to improve documentation of management reviews and 
approvals, and continuing cross-training on significant key compilation 
processes; 
Status of recommendation: Per GAO: Open. For fiscal year 2006, as had 
been the case for fiscal year 2005, Treasury was unable to provide the 
final CFS and supporting documentation in time for us to complete all 
of our planned auditing procedures related to the compilation of these 
financial statements. In our view, a major contributing factor is that 
Treasury did not have enough personnel with specialized financial 
reporting experience to help ensure reliable financial reporting by the 
reporting date. 

Count: 125; 
No.: 04- 9; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to review the TFM and any other guidance to federal 
agencies to ensure that they provide clear instructions for reporting 
accurate data to Treasury in the area of federal employee and veteran 
benefits payable; 
Status of recommendation: Per Treasury and OMB: Treasury updated the 
TFM in fiscal year 2006 related to the required GAAP disclosures to 
ensure accurate financial data reporting by federal agencies; 
Status of recommendation: Per GAO: Closed. 

Count: 126; 
No.: 04- 14; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB's Office of Federal Financial Management, to develop policies and 
procedures to determine the proper resolution and the appropriate legal 
representations to GAO at the governmentwide level when Justice's legal 
counsel and agencies' legal counsel provide inconsistent opinions; 
Status of recommendation: Per Treasury and OMB: OMB and Treasury 
followed their policies and procedures related to legal letter 
representations and legal contingency disclosures to address 
inconsistencies between Justice and agency assessments and determined 
the proper disclosure for the CFS; 
Status of recommendation: Per GAO: Closed. 

Count: 127; 
No.: 04- 15; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for federal 
employee and veteran benefits payable meets the requirements of SFFAS 
No. 5, Accounting for Liabilities of the Federal Government, paragraph 
110, table 9, which states that all components of the liability for 
future policy benefits should be separately disclosed in a footnote 
with a description of each amount and an explanation of its projected 
use and any other potential uses; 
Status of recommendation: Per Treasury and OMB: This required 
information was requested from the agencies for disclosure in Note 11, 
Federal Employees and Veteran Benefits Payable, in the fiscal year 2006 
CFS. However, no data were received; 
Status of recommendation: Per GAO: Open. Although no data were 
received, the agency for which this required disclosure is applicable 
included the disclosure in its fiscal year 2006 performance and 
accountability report. 

Count: 128; 
No.: 04- 16; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for federal 
employee and veteran benefits payable meets the requirements of SFFAS 
No. 5, Accounting for Liabilities of the Federal Government, paragraphs 
117 and 118, which state that all federal reporting entities with whole 
life insurance programs should follow the standards as prescribed in 
the private sector standards when reporting the liability for future 
policy benefits, in addition to the following required disclosures: 
liability for future policy benefits relating to participating life 
insurance contracts should be equal to the sum of (1) the net level 
premium reserve for death and endowment policy benefits, (2) the 
liability for terminal dividends, and (3) any premium deficiency; 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 11.a; 
Status of recommendation: Per GAO: Closed. 

Count: 129; 
No.: 04- 17; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for federal 
employee and veteran benefits payable meets the requirements of SFFAS 
No. 5, Accounting for Liabilities of the Federal Government, paragraph 
121, which states that all components of the liability for future 
policy benefits (i.e., the net-level premium reserve for death and 
endowment policy and the liability for terminal dividends) should be 
separately disclosed in a footnote with a description of each amount 
and an explanation of its projected use and any other potential uses 
(e.g., reducing premiums, determining and declaring dividends 
available, or reducing federal support in the form of appropriations 
related to administrative cost or subsidies); 
Status of recommendation: Per Treasury and OMB: Beginning in fiscal 
year 2006, this disclosure is no longer applicable to the CFS per SFFAS 
No. 32, paragraph 11.b; 
Status of recommendation: Per GAO: Closed. 

Count: 130; 
No.: 04- 19; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that agencies designate in the note 
disclosure for cash and other monetary assets any amounts reported for 
the "other cash" line items that are restricted with respect to the 
federal government taken as a whole; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 02-25 as to the need for further analysis of certain 
disclosures. In addition, this required information was requested from 
the agencies for inclusion in Note 2, Cash and Other Monetary Assets, 
in the fiscal year 2006 CFS; 
Status of recommendation: Per GAO: Open. Further clarification is 
needed in the TFM instructions regarding the disclosure of cash that is 
restricted with respect to the federal government taken as a whole. 
Also, see status of recommendation No. 02-25. 

Count: 131; 
No.: 04- 20; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the note disclosure for other 
liabilities meets the requirements of SFFAS No. 5, paragraph 114, which 
requires the reporting of indicators of the range of uncertainty around 
insurance-related estimates and the sensitivity of the estimates to 
changes in major assumptions; 
Status of recommendation: Per Treasury and OMB: The required 
information was requested from the agencies for disclosure in the 
required supplementary information, risk assumed section of the fiscal 
year 2006 CFS. However, no data were received from some agencies; 
Status of recommendation: Per GAO: Open. Treasury expected the required 
information from applicable agencies as requested in the TFM. However, 
when the information was not provided, Treasury did not have any 
policies and procedures for following up with agencies to determine why 
the information was not provided. 

GAO-06-415 (results of the fiscal year 2005 audit). 

Count: 132; 
No.: 05- 1; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to develop a process to help ensure that for each 
reporting year, the 2 years of consolidated financial statements and 
note information presented are consistently and comparably reported, in 
all material respects; 
Status of recommendation: Per Treasury and OMB: Treasury revised and 
documented its policies and procedures in fiscal year 2006 related to 
the CFS compilation process, including those related to the consistent 
and comparable presentation of prior and current year information, in 
all material respects; 
Status of recommendation: Per GAO: Closed. 

Count: 133; 
No.: 05- 2; 
Recommendation: The Director of OMB should direct the Controller of the 
Office of Federal Financial Management, in coordination with the 
Treasury Fiscal Assistant Secretary, to develop an alternative solution 
for obtaining audit assurance related to the Federal Deposit Insurance 
Corporation's funds, National Credit Union Administration, and Farm 
Credit System Insurance Corporation, which includes the requirement for 
adequate audit procedures to be performed over significant information 
included in the CFS for these agencies; 
Status of recommendation: Per Treasury and OMB: OMB agrees with the 
recommendation and is committed to working with Treasury, GAO, and the 
pertinent federal agencies to develop an alternative solution for 
obtaining audit assurance over the significant information included in 
the CFS for these agencies; 
Status of recommendation: Per GAO: GAO- 04-45 (results of the fiscal 
year 2002 audit): Open. 

Count: 134; 
No.: 05- 3; 
Recommendation: The Director of OMB should direct the Controller of the 
Office of Federal Financial Management to consider not waiving the 
closing package audit requirement for any verifying agency in future 
years, such as Tennessee Valley Authority; 
Status of recommendation: Per Treasury and OMB: OMB generally agrees 
with the recommendation; 
however, it will continue to weigh the costs against benefits of global 
requirements during extenuating circumstances; 
Status of recommendation: Per GAO: GAO-04- 45 (results of the fiscal 
year 2002 audit): Open. 

Count: 135; 
No.: 05- 4; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop policies and procedures for monitoring internal control to help 
ensure that (1) audit findings are promptly evaluated; 
(2) proper actions are determined in response to audit findings and 
recommendations, such as a documented plan of action with milestones 
for short-term and long-range solutions; 
and (3) all actions that correct or otherwise resolve the audit 
findings are completed within established time frames; 
Status of recommendation: Per Treasury and OMB: OMB concurs with the 
recommendations and is committed to improving the corrective action 
plans and monitoring progress against those plans; 
Status of recommendation: Per GAO: Open. 

Count: 136; 
No.: 05- 5; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop an executable plan of action and milestones for short-term and 
long-range solutions for certain internal control weaknesses we have 
previously reported regarding the process for preparing the CFS; 
Status of recommendation: Per Treasury and OMB: OMB concurs with the 
recommendations and is committed to improving the corrective action 
plans and monitoring progress against those plans; 
Status of recommendation: Per GAO: Open. 

Count: 137; 
No.: 05- 6; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the TFM and any other guidance to 
federal agencies provide clear instructions for providing reliable data 
to Treasury for restricted cash; 
Status of recommendation: Per Treasury and OMB: Treasury updated the 
TFM in fiscal year 2006 related to the required GAAP disclosures to 
ensure accurate financial data reporting by federal agencies. With 
regard to restricted cash, during fiscal year 2006, Treasury reviewed 
agency cash amounts designated as restricted to determine what, if any, 
restrictions applied at the governmentwide level. Treasury will 
implement changes based on this review to the restricted cash 
disclosures during fiscal year 2007; 
Status of recommendation: Per GAO: Open. 

Count: 138; 
No.: 05- 7; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the TFM and any other guidance to 
federal agencies provide clear instructions for providing reliable data 
to Treasury for accounts payable; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 04-9; 
Status of recommendation: Per GAO: GAO-04- 45 (results of the fiscal 
year 2002 audit): Closed. 

Count: 139; 
No.: 05- 8; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the TFM and any other guidance to 
federal agencies provide clear instructions for providing reliable data 
to Treasury for summaries of unadjusted misstatements; 
Status of recommendation: Per Treasury and OMB: Treasury updated the 
TFM in fiscal year 2006 related to the guidance to agencies concerning 
agency management representations and related summaries of unadjusted 
misstatements and will continue to revise them as necessary during 
fiscal year 2007; 
Status of recommendation: Per GAO: Open. 

Count: 140; 
No.: 05- 9; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary to ensure that the TFM and any other guidance to 
federal agencies provide clear instructions for providing reliable data 
to Treasury for certain information reported by the Office of Personnel 
Management that is used to allocate costs on the Statement of Net Cost; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 04-9; 
Status of recommendation: Per GAO: Closed. 

Count: 141; 
No.: 05- 10; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
provide clear guidance to federal agencies as to when the "confirmed 
reporting" category in the intragovernmental reconciliation report 
should be selected; 
Status of recommendation: Per Treasury and OMB: Treasury revised its 
quarterly intragovernmental reporting process to provide clearer 
guidance to agencies related to their intragovernmental confirmations 
as well as to require that agencies prepare corrective action plans for 
continuing "confirmed" differences; 
Status of recommendation: Per GAO: Open. A significant number of 
agencies reported material differences on their certification documents 
as being confirmed, and upon detailed review of supporting 
explanations, the agencies provided little or no supporting 
documentation for the material differences. Therefore, we determined 
that federal agencies are still not being provided clear guidance as to 
when the "confirmed reporting" category in the intragovernmental 
reconciliation report should be selected. 

Count: 142; 
No.: 05- 11; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, in coordination with the Controller of OMB, to 
develop an effective process for obtaining clarification from federal 
agencies for inconsistent or incomplete explanations provided in all 
material difference categories; 
Status of recommendation: Per Treasury and OMB: See status of 
recommendation No. 05-10; 
Status of recommendation: Per GAO: Open. See status of recommendation 
No. 05-10. 

Count: 143; 
No.: 05- 12; 
Recommendation: The Secretary of the Treasury should direct the Fiscal 
Assistant Secretary, working in coordination with the Controller of 
OMB, to accelerate the due date for inspectors general to complete and 
report on the results of agreed-upon procedures (AUP) on the 
intragovernmental activity and balances or develop an alternative 
solution that would allow Treasury sufficient time to review the 
results and make any necessary adjustments to the CFS; 
Status of recommendation: Per Treasury and OMB: Treasury revised the 
focus of the intragovernmental AUP reports to allow for additional work 
on intragovernmental differences after the annual audit timelines. 
Therefore, the intragovernmental AUP reports were not accelerated as 
they were no longer meant to be used during the current years' audits 
but were now meant for prospective use only; As an "alternative 
solution," Treasury required that the current year intragovernmental 
trading partner balances and activities be included in the scope of the 
annual closing package audit. This alternative solution allowed for the 
agency audit results on intragovernmental activity and balances to be 
used during the year-end audit of the CFS; 
Status of recommendation: Per GAO: Closed. GAO agrees with the 
alternative solution. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix II: Comments from the Department of the Treasury: 

Assistant Secretary: 
Department Of The Treasury: 
Washington, D.C. 

June 27, 2007: 

Mr. Gary T. Engel: 
Director, Financial Management and Assurance:
Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Engel: 

Thank you for the opportunity to comment on the Government 
Accountability Office's (GAO's) draft report on the Fiscal Year (FY) 
2006 audit, GAO-07-805, Significant Internal Control Weaknesses Remain 
in the Preparation of the Consolidated Financial Statements of the U.S. 
Government. 

We are continuing to make significant progress in improving the 
preparation of the Consolidated Financial Statements (CFS) of the U.S. 
Government. Once again, we have issued the CFS by December 15; just one 
month after agencies' final data was made available and as new 
reporting requirements were implemented. During FY 2006, we were able 
to remove 73 recommendations identified in previous GAO audit reports. 
Many of the previous GAO recommendations were addressed through. our 
work with the Federal Accounting Standards Advisory Board to eliminate 
disclosure requirements that were too detailed and considered 
inappropriate for a government-wide report. Additionally, we made 
several procedural and automated changes to our reporting processes, 
which addressed other GAO recommendations. All these efforts were 
undertaken in an attempt to streamline the CFS and make it more 
meaningful and usable to its readers. 

GAO's draft report identifies areas needing further research, analysis 
and resolution to strengthen and improve our preparation of the CFS. 
While significant advancements have been made in the preparation 
process and in the usefulness and accuracy of the CFS, we concur with 
GAO that the preparation process should continually be improved, and we 
look forward to working with your office in identifying such process 
improvements. 

The FY 2006 draft report identifies 11 new findings and their related 
recommendations for improving the CFS preparation process. We concur 
with GAO on these new findings and recommendations with the exception 
of one finding related to non-conformity with generally accepted 
accounting principles (GAAP). 

With respect to GAO's GAAP conformity finding related to the 
consolidated Statement of Social Insurance, we do not believe that GAAP 
criteria require the reporting of a consolidated total in that 
Statement. In addition, because of the differences in key assumptions 
and other criteria used in preparing the different sections of the 
Statement of Social Insurance, we do not believe that a consolidated 
total is especially meaningful. Furthermore, the criteria referenced by 
GAO in its GAAP conformity finding are not GAAP requirements with 
respect to the CFS, but are instead meant to be used as guidance. 

Treasury concurs with GAO that there is no specific GAAP requirement to 
disclose foreign currency in the CFS. However, Treasury agrees that the 
recommended additional disclosure on foreign currency would increase 
the usefulness of the CFS to the reader. Therefore, we have taken steps 
to modify the Closing Package to collect foreign currency information 
in FY 2007 and thus fully implement GAO's recommendation. 

We also agree with GAO that a significant material weakness in the 
preparation of the CFS is the intragovernmental out-of-balance 
condition. We have taken steps to work with the CFO Council to address 
this issue through the issuance of Treasury Financial Manual Bulletin 
No. 2007-03, "Intragovernmental Business Rules," and working with OMB 
to establish the Intragovernmental Dispute Resolution Committee. 

While we continue to disagree with some of GAO's previous 
recommendations relating to the Statement of Changes in Cash Balance 
from Unified Budget Deficit and Other Activities, the Reconciliation of 
Net Operating Cost and Unified Budget Deficit, and the adjustment 
process, we have continued to work with your staff on alternative ways 
to satisfactorily address these recommendations and your concerns. To 
that end, we have revised the manner for producing these Statements and 
will continue to improve the completeness and accuracy of the various 
reconciliation items. 

In conclusion, we will continue to work with GAO on CFS matters where 
improvements need to be made, and we will continue our dialogue with 
you to resolve the areas in which we differ with GAO's recommended 
approach. 

Sincerely, 

Signed by: 

Kenneth E. Carfine: 
Fiscal Assistant Treasury: 

cc: Linda Combs, OMB: 
Daniel Werfel, OMB: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Gary T. Engel, (202) 512-3406 or engelg@gao.gov: 

Acknowledgments: 

In addition to the above contact, the following individuals made key 
contributions to this report: Lynda Downing, Assistant Director; Bill 
Boutboul; Darryl Chang; Mina Gusukuma; Nina Marrero; Maria Morton; 
Paula Rascona; Katherine Schirano; and Taya Tasse. 

FOOTNOTES 

[1] The fiscal year 2006 Financial Report of the United States 
Government includes our report and was completed by the Department of 
the Treasury (Treasury) on December 15, 2006, and is available through 
GAO's Web site at hyperlink, http://www.gao.gov/financial.html and 
Treasury's Web site at hyperlink, 
http://www.fms.treas.gov/fr/index.html. 

[2] The consolidated financial statements for the fiscal years ended 
September 30, 2006 and 2005, consist of the Statements of Net Cost: 
Statements of Operations and Changes in Net Position: Reconciliations 
of Net Operating Cost and Unified Budget Deficit: Statements of Changes 
in Cash Balance from Unified Budget and Other Activities: Balance 
Sheets: and as of January 1, 2006, the Statement of Social Insurance, 
including the related notes to these financial statements. 

[3] Undistributed offsetting receipts are deducted from total outlays 
for the government as a whole rather than from a single agency or 
subfunction in order to avoid distortion of agency or subfunction 
totals. Certain offsetting receipts that are undistributed in both 
agency and functional tables include collections of employer share of 
employee retirement payments. Interests received by federal trust funds 
are undistributed in the agency tables but distributed in the 
functional tables. 

[4] Unexpended budget balances represent budget authority that is the 
sum of unobligated and obligated, but not yet liquidated balances. 

[5] Treasury refers to these agencies as verifying agencies and defines 
these agencies as the 24 Chief Financial Officer Act agencies, Export- 
Import Bank of the United States, Farm Credit System Insurance 
Corporation, Federal Communications Commission, Federal Deposit 
Insurance Corporation, National Credit Union Administration, U.S. 
Postal Service, Pension Benefit Guaranty Corporation, Railroad 
Retirement Board, Securities and Exchange Commission, Smithsonian 
Institution, and Tennessee Valley Authority. In the CFS, Treasury also 
refers to the verifying agencies as significant agencies. 

[6] The Governmentwide Financial Reporting System uses a closing 
package methodology that has been developed to capture each federal 
agency's information and link the agencies' audited financial 
statements to the CFS. 

[7] GAO, Financial Audit: Significant Internal Control Weaknesses 
Remain in Preparing the Consolidated Financial Statements of the U.S. 
Government, GAO-06-415 (Washington, D.C.: Apr. 21, 2006). 

[8] Unified budget deficit is the amount by which the government's on- 
budget and off-budget outlays (budget outlays) exceed the sum of its on-
budget and off-budget receipts (budget receipts) for a given period, 
usually a fiscal year. Off-budget refers to those budgetary accounts 
(either federal or trust funds) designated by law as excluded from 
budget totals. Conversely, on-budget refers to all budgetary accounts 
other than those designated by law as off-budget. 

[9] Federal agencies also report this information in their Statements 
of Budgetary Resources (SBR) as net outlays. The SBR provides 
information about how budgetary resources were made available (i.e., 
appropriations, contract authority, spending authority from offsetting 
collections, etc.) as well as the status of such resources (obligated 
or unobligated). It also provides information regarding obligated 
balances at the end of and outlays for the fiscal year. 

[10] See footnote 3. 

[11] See GAO's audit report on its audit of the federal government's 
fiscal year 2005 financial statements that was incorporated in the 2005 
Financial Report of the U.S. Government published by Treasury. Also, 
see GAO, Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Needs Improvement, GAO-04-
45 (Washington, D.C.: Oct. 30, 2003). 

[12] Both of these activities represent outlays and receipts of the 
federal government. Specifically, employers' share of employee 
retirement payments are reported as outlays of federal agencies and 
receipts of certain federal agencies that manage federal retirement 
trust funds. In addition, intragovernmental interest payments are 
reported as outlays of the Department of the Treasury and receipts of 
certain federal agencies' trust funds that hold the related Treasury 
securities. 

[13] The federal government borrows money from agencies' trust funds 
and pays interest on these borrowings-receipts to the trust funds. 

[14] GAO, Financial Audit: Process for Preparing the Consolidated 
Financial Statements of the U.S. Government Needs Further Improvement, 
GAO-04-866 (Washington, D.C.: Sept. 10, 2004). 

[15] Beginning in fiscal year 2006 with the addition of the Statement 
of Social Insurance, there are six principal consolidated financial 
statements. 

[16] Unexpended budget balances consist of unobligated and obligated, 
but unliquidated, budget balances. Unexpended budget balances generally 
result in the outlays of resources and are reported in (1) the CFS, as 
unaudited supplemental information; (2) the Budget of the U.S. 
Government (also referred to as the President's Budget); and (3) 
federal agencies' financial statements. Federal agencies report 
unobligated and obligated, but unliquidated, budget balances in the 
SBR, which is a basic financial statement that is required to be 
audited. 

[17] The SF-133 is the report on budget execution and budgetary 
resources. The report provides detailed information for each 
appropriation account on how budgetary resources were made available to 
a reporting entity, the status of such resources--obligated or 
unobligated balances, and change in obligated balances, including gross 
disbursements and offsetting collections for the period. 

[18] FASB establishes standards of financial accounting and reporting 
for the private sector. 

[19] The AAPC is a permanent committee established by FASAB. The 
mission of the AAPC is to assist the federal government in improving 
financial reporting through the timely identification, discussion, and 
recommendation of solutions to accounting and auditing issues within 
the framework of existing authoritative literature. 

[20] Trading partners are U.S. government agencies, departments, or 
other components included in the CFS that do business with each other. 

[21] GAO-04-45. 

[22] FASB defined materiality in its Statement of Financial Accounting 
Concepts No. 2, Qualitative Characteristics of Accounting Information, 
as "the magnitude of an omission or misstatement of accounting 
information that, in the light of surrounding circumstances, makes it 
probable that the judgment of a reasonable person relying on the 
information would have been changed or influenced by the omission or 
misstatement." 

[23] The Consolidated Governmentwide Entity Accounting and Reporting 
Standard section of SFFAS No. 17 states that the standard applicable to 
the component entities is also applicable to the consolidated 
governmentwide entity. 

[24] Foreign currencies refer to the total U.S. dollar equivalent of 
nonpurchased foreign currencies held in foreign fund accounts. 

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