Financial Audit:

Issues Regarding Reconciliations of Fund Balances with Treasury Accounts

AIMD-99-271: Published: Sep 17, 1999. Publicly Released: Sep 17, 1999.

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Pursuant to a legislative requirement, GAO reviewed the: (1) overall effectiveness of federal agencies' reconciliation processes for Fund Balances with Treasury accounts; and (2) Department of the Treasury's actions to improve its assistance to agencies in their reconciliaiton efforts.

GAO noted that: (1) auditors continued to find significant problems with federal agencies' reconciliations of Fund Balances with Treasury accounts in fiscal year (FY) 1998; (2) auditors reported reconciliation problems at 11 federal agencies covered by the Chief Financial Officers Act of 1990; (3) these agencies disbursed about 48 percent of the total federal dollars disbursed in FY 1998 and had billions of dollars in unreconciled differences outstanding at year-end; (4) these agencies were either not timely in reconciling their Fund Balances with Treasury accounts or were adjusting their accounts to match the amounts reported by Treasury; (5) these adjustments were made without adequately researching the causes of the differences and thus without knowing which number, if any, was correct; (6) auditors reported that the lack of effective internal control procedures was, in general, the underlying cause of agency reconciliation problems; (7) auditors also reported that improper reconciliations contributed to management not detecting certain instances of fraud and mismanagement of funds at two agencies; (8) GAO reported that ineffective cash disbursement reconciliations affect the reliability of the U.S. government's FY 1998 financial statements and the underlying financial information; (9) GAO also reported that the failure of certain agencies to properly reconcile their disbursements increases the risks of inaccuracies in the President's budget and contributes to the overall inability of the federal government to accurately measure the full cost of its programs; (10) agencies depend on Treasury for support in fulfilling their reconciliation responsibilities; (11) Treasury has taken steps to improve its assistance to agencies in performing their reconciliation processes, such as providing more detailed reports to agencies and developing supplemental written guidance and training courses for agencies; and (12) however, because of the timing and nature of these actions, at the end of GAO's field work for the audit of the U.S. government's FY 1998 financial statements, it was too early to assess the impact such actions had on improving the overall effectiveness of agencies' reconciliations of Fund Balances with Treasury accounts.

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