Financial Audit: The Department of Transportation's Fiscal Year 2004 Management Representation Letter on Its Financial Statements
Highlights
The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget (OMB), is required to annually prepare and submit audited financial statements of the U.S. government to the President and the Congress. We are required to audit these consolidated financial statements (CFS) and report on the results of our work. In connection with fulfilling our requirement to audit the fiscal year 2004 CFS, we evaluated the Department of the Treasury's (Treasury) financial reporting procedures and related internal control over the process for compiling the CFS, including the management representation letter provided us by Treasury and OMB. Written representation letters from management, required by U.S. generally accepted government auditing standards, ordinarily confirm oral representations given to the auditor, indicate and document the continuing appropriateness of those representations, and reduce the possibility of a misunderstanding between management and the auditor. The purpose of this report is to communicate our observations on the Department of Transportation's (DOT) fiscal year 2004 management representation letter. Our objective is to help ensure that future management representation letters submitted by DOT are sufficient to help support Treasury and OMB's preparation of the CFS management representation letter and our ability to rely on the representations in that letter in combination with individual federal agency representation letters. We reviewed five key areas in each management representation letter: (1) signatures, (2) materiality thresholds, (3) representations, (4) summary of unadjusted misstatements, and (5) reliability of representations. In reviewing the management representation letters, we applied the American Institute of Certified Public Accountants' (AICPA) Codification of Auditing Standards, AU Section 333, Management Representations; OMB Bulletin 01-02, Audit Requirements for Federal Financial Statements; and the GAO/President's Council on Integrity and Efficiency (PCIE) Financial Audit Manual (FAM) section 1001, entitled "Management Representations."
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Transportation | DOT's Chief Financial Officer should ensure that in the future the management representation letter includes materiality thresholds or such thresholds be provided separately to Treasury and OMB. |
Closed – Implemented
As part of our FY 2005 audit of the consolidated financial statements (CFS) of the U.S government, we evaluated the agencies' management representation letters for a materiality threshold used for certain representations in the letter. DOT's FY 2005 management representation letter included the materiality threshold used.
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| Department of Transportation | DOT's Chief Financial Officer should ensure that in the future the management representation letter fully includes all representations from the FAM that are applicable to DOT. |
Closed – Implemented
As part of our FY 2006 audit of the consolidated financial statements (CFS) of the U.S government, we evaluated the agencies' management representation letters to determine whether all applicable representations from the FAM were fully provided. DOT's FY 2006 management representation letter provided all applicable representations from the FAM.
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| Department of Transportation | DOT's Chief Financial Officer should ensure that in the future the management representation letter includes a complete summary of unadjusted misstatements, if there are any uncorrected misstatements. |
Closed – Implemented
As part of our annual audit of the CFS, we reviewed the Department of Transportation's (DOT) Summary of Unadjusted Misstatements (SUM). We determined that DOT's FY's 2005, 2006, 2007, and 2008 SUMs did not provide the necessary information for us to prepare the governmentwide SUMs. As part of our FY 2009 audit, we found that DOT's independent public accountant (IPA) provided a template to help ensure the FY 2009 SUM is complete. The template is also designed to record all necessary information needed for GAO to prepare the governmentwide SUM. As a result, DOT has taken action to ensure that future management representation letters include a complete SUM.
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| Department of Transportation | DOT's Chief Financial Officer should ensure that in the future the management representation letter includes representations that are reliable. |
Closed – Implemented
As part of our FY 2005 audit of the consolidated financial statements (CFS) of the U.S government, we evaluated the agencies' management representation letters to determine whether the representations were reliable and do not contradict other audit evidence. DOT's FY 2005 management representation letter appeared to provide reliable representations.
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| Department of Transportation | The DOT Inspector General should work with the department to help ensure that future management representation letters meet the key conditions noted as needing improvements in this report. |
Closed – Implemented
As part of our audits of the CFS, we evaluated significant federal agencies' management representation letters to determine whether they were sufficient to help support Treasury and OMB's preparation of the CFS management representation letter. DOT's Office of Inspector General has worked with the agency to help ensure that DOT's management representation letter, including the summary of unadjusted misstatements, was sufficient.
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