Financial Audit:

Issues Regarding Reconciliations of Fund Balances With Treasury Accounts

AIMD-99-3: Published: Oct 14, 1998. Publicly Released: Oct 14, 1998.

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Pursuant to a legislative requirement, GAO reviewed federal agencies' efforts to reconcile their fund balances with Treasury accounts in the U.S. government's fiscal year (FY) 1997 consolidated financial statements, focusing on the: (1) overall effectiveness of agencies' reconciliation processes; and (2) agencies' satisfaction with the Department of the Treasury's role in providing assistance and systems support in their reconciliation efforts.

GAO noted that: (1) auditors found reconciliation problems at 10 of 22 agencies covered by the Chief Financial Officers Act of 1990; (2) the agencies with reconciliation problems disbursed about 47 percent of the total federal dollars disbursed in FY 1997, and had billions of dollars in unreconciled differences outstanding at year-end; (3) these agencies were either not timely in reconciling their fund balances with Treasury accounts, or they were merely adjusting their accounts to match the amounts reported by Treasury; (4) these adjustments were made without adequately researching the causes of the differences and thus without knowing which number, if any, was correct; (5) auditors reported that, in general, the underlying causes of agency reconciliation problems were lack of effective internal control procedures, insufficiently trained staff to perform reconciliations, or a lack of management emphasis on performing reconciliations; (6) these reconciliation problems could affect the government's ability to effectively monitor the execution of the budget; (7) also, the lack of effective reconciliation of disbursements contributes to the overall inability of the federal government to accurately measure the full cost of its programs and increases the risk of fraud, waste, and mismanagement; (8) agencies depend on Treasury for support in fulfilling their reconciliation responsibilities; (9) several agencies reported problems with Treasury's reconciliation processes and the assistance it provides agencies in carrying out these processes; (10) specifically, these agencies cited problems with: (a) Treasury not providing them with adequate levels of detail on transactions processed; (b) the Treasury automated system they use extensively for reconciliations; and (c) Treasury's assistance in areas such as written guidance and training related to the reconciliation process; and (11) GAO found that Treasury has taken some steps that attempt to improve the reconciliation process and is considering other actions to improve its assistance to agencies.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FMS developed a curriculum that provides agencies with a wide range of resources to develop in-house training programs. These resources include: (1) materials that agencies can use for in-house training courses; (2) written guidance for reconciling FBWT accounts; (3) Treasury personnel who are available to make on-site visits to agencies to train agency personnel; and (4) Treasury- hosted regional conferences on FBWT reconciliations for agency personnel. As a result of FMS' new curriculum, agencies now have better resources available to train their personnel in performing effective FBWT reconciliations.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of FMS to work with agencies and provide sufficient resources to develop training courses for agencies' use in training personnel who are involved in reconciling fund balances with Treasury accounts.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: FMS has taken several actions to better assist agencies with Fund Balance with Treasury accounts reconciliation problems and ensure that agencies receive assistance from knowledgeable staff. FMS has: (1) established a Fund Balance Team that is making on-site visits to agencies experiencing reconciliation problems; (2) created a Fund Balance web site that details the resources available to agencies; and (3) held conferences on the Fund Balance with Treasury (FBWT) reconciliation process for agencies at Treasury Regional Finance Centers. FMS also provided training to its staff on FBWT reconciliation. All of FMS' Financial Analysis Branch staff attended the "Reconciling Fund Balance with Treasury" training course.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of FMS to work with agencies and provide sufficient resources to ensure that agencies experiencing reconciliation problems receive assistance from knowledgeable Treasury staff and any necessary training required.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Implemented

    Comments: FMS' Fund Balance Team developed a comprehensive set of standard operating procedures (SOPs) for use by the federal agencies in reconciling Fund Balance with Treasury accounts. The procedures include steps for reconciling monthly Statement of Differences and Fund Balance with Treasury accounts. Overall, the SOPs cover the routine transactions an agency has to record and ultimately reconcile, that affect its Fund Balance accounts. The SOPs were made available to the agencies on the Treasury Fund Balance with Treasury website and are an attachment to the Treasury Financial Manual.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of FMS to work with agencies and provide sufficient resources to develop supplemental written guidance, including step-by-step procedures for reconciliations, targeted to agencies with reconciliation problems to assist them in clearly understanding their responsibilities.

    Agency Affected: Department of the Treasury

  4. Status: Closed - Implemented

    Comments: FMS started sending agencies that make their own disbursements a report that provides details on the types of differences between the agencies' and Treasury's records of receipts and disbursements. Based on GAO's work, FMS also changed procedures to provide Statement of Differences reports, which include transaction detail, for all unresolved differences instead of transferring differences over 6 months old to Budget Clearing Accounts (BCAs). After differences were transferred to the BCAs, FMS reported net BCA balances to agencies, but no longer reported individual differences outstanding or the transaction detail for the differences. As a result of these improvements in FMS' reports, agencies will have more detail on the differences to assist them in reconciling their Fund Balances with Treasury accounts.

    Recommendation: The Secretary of the Treasury should direct the Commissioner of the Financial Management Service (FMS) to work with agencies and provide sufficient resources to develop reports that provide agencies with the detailed data they need to perform effective and efficient reconciliations.

    Agency Affected: Department of the Treasury

  5. Status: Closed - Implemented

    Comments: Treasury has recognized that the current Government On-line Accounting Link System (GOALS) technology is outdated and is developing an new enhanced GOALS II system. FMS began implementation of GOALS II applications in August 2000 with the rollout of the SF224/1219 (Statement of Transactions) applications. Several other applications used by the agencies in reconciling their FBWT accounts, such as warrant and statement of differences, were implemented during fiscal year 2001.

    Recommendation: Treasury should make enhancements to the Government On-line Accounting Link System as soon as it is practical in order to provide agencies with the technology needed to promote efficient and effective reconciliations.

    Agency Affected: Department of the Treasury

 

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