Financial Audit:

Bureau of the Fiscal Service's Fiscal Year 2018 Schedules of the General Fund

GAO-19-185: Published: May 15, 2019. Publicly Released: May 15, 2019.

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Contact:

J. Lawrence Malenich
(202) 512-3406
malenichj@gao.gov

 

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The Treasury Department manages the General Fund, which finances the daily and long-term operations of the U.S. government.

The Schedules of the General Fund reported the government's cash activity ($14 trillion), debt activity (borrowings of $10 trillion and repayments of $9 trillion), and budget deficit ($779 billion) in FY 2018.

In the first audit of these schedules, data limitations left us unable to issue an opinion on their reliability. For example, we didn't get all the audit evidence we requested on time because some of it wasn't readily available from Treasury's systems.

We made 12 recommendations to address weaknesses we found.

 

Various denominations of U.S. currency.

Various denominations of U.S. currency.

Additional Materials:

Contact:

J. Lawrence Malenich
(202) 512-3406
malenichj@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Certain significant deficiencies in internal control over financial reporting and other limitations on the scope of GAO's work resulted in conditions that prevented GAO from expressing an opinion on the Schedules of the General Fund as of and for the fiscal year ended September 30, 2018. Such scope limitations also prevented GAO from obtaining sufficient appropriate audit evidence to provide a basis for an opinion on the effectiveness of the Bureau of the Fiscal Service's (Fiscal Service) internal control over financial reporting relevant to the Schedules of the General Fund as of September 30, 2018. In addition, such scope limitations limited tests of compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 2018.

Fiscal Service was unable to timely provide sufficient appropriate evidence to support certain information reported in the accompanying Schedules of the General Fund. The underlying scope limitations are the basis for GAO's disclaimer of opinion on the Schedules of the General Fund. These limitations primarily related to (1) the inability to readily identify and trace General Fund transactions to determine whether they were complete and properly recorded in the correct general ledger accounts and line items within the Schedules of the General Fund, (2) inadequate Fiscal Service procedures to determine the effect of differences between General Fund's records and the amounts reported by certain federal agencies on the Schedules of the General Fund, and (3) Fiscal Service's inability to timely provide sufficient appropriate audit evidence to support the beginning balance of the Liability for Fund Balance with Treasury. GAO also identified two significant deficiencies contributing to the first two scope limitations discussed above. As a result of these limitations, readers are cautioned that amounts reported in the Schedules of the General Fund and related notes may not be reliable.

Further, GAO identified two additional significant deficiencies in Fiscal Service's internal control over financial reporting relevant to the Schedules of the General Fund related to deficiencies in (1) information systems controls and (2) Fiscal Service's risk assessment and monitoring controls. In addition, GAO identified three other control deficiencies, which it does not consider to be material weaknesses or significant deficiencies.

GAO recognizes that the fiscal year 2018 Schedules of the General Fund reflect the significant efforts of Fiscal Service over the past several years to develop the infrastructure to support the Schedules of the General Fund. Fiscal Service's actions have substantially improved its ability to report on the General Fund, including the government-wide cash inflows and outflows.

Why GAO Did This Study

GAO audits the consolidated financial statements of the U.S. government. Because of the significance of the General Fund of the United States (General Fund) to the government-wide financial statements, GAO audited the fiscal year 2018 Schedules of the General Fund, which are managed by Fiscal Service, to determine whether, in all material respects, (1) the schedules are fairly presented and (2) Fiscal Service management maintained effective internal control over financial reporting relevant to the Schedules of the General Fund. Further, GAO tested compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements related to the Schedules of the General Fund.

The General Fund is the reporting entity responsible for accounting for the cash activity of the U.S. government. In fiscal year 2018, the General Fund reported $14.2 trillion of cash inflows, including debt issuances and taxes collected, and $14.0 trillion of cash outflows, including debt repayments and Social Security and health care benefit payments. It also reported $21.6 trillion of federal debt securities held and managed by the Department of the Treasury as of September 30, 2018.

What GAO Recommends

GAO is making 12 recommendations to improve Fiscal Service's internal control over financial reporting relevant to the Schedules of the General Fund.

In commenting on a draft of this report, Fiscal Service concurred with the results of GAO's audit.

For more information, contact J. Lawrence Malenich at (202) 512-3406 or malenichj@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should develop and implement a mechanism to reasonably assure that all the journal entries recorded in the Schedules of the General Fund general ledgers can be readily identified and traced, such as through a unique identifier, to determine the effect of a transaction on all applicable general ledger accounts and line items of the Schedules of the General Fund, including the budget deficit. (Recommendation 1)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  2. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should develop and implement a mechanism to reasonably assure that payment transactions recorded in the Schedules of the General Fund general ledgers capture all of the key information needed, including payment schedules if applicable, to readily trace transactions to the information certified by the federal agency. (Recommendation 2)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  3. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should develop and implement additional reporting requirements with related guidance for federal agencies that better align with the General Fund financial reporting objectives and enable Fiscal Service to capture the effect of a transaction on all applicable general ledger accounts and line items of the Schedules of the General Fund, including the budget deficit. (Recommendation 3)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  4. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: We recommend that the Commissioner of Fiscal Service develop and implement a process that would enable Fiscal Service to obtain the information necessary to effectively assess the effect of the Statement of Difference on the Schedules of the General Fund for those federal agencies that have not implemented the Central Accounting and Reporting System. (Recommendation 4)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  5. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: We recommend that the Commissioner of Fiscal Service design and implement procedures to evaluate risks and monitor internal controls over financial reporting relevant to the Schedules of the General Fund. (Recommendation 5)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  6. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should enhance guidance available to federal agencies to comprehensively define and describe the proper use and related accounting implications of each Business Event Type Codes (BETC). (Recommendation 6)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  7. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should develop and implement a mechanism for evaluating agencies' use of BETCs based on the enhanced guidance. (Recommendation 7)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  8. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should design and implement procedures to (1) obtain and review supporting documentation for reported activity included on Agency Submission Forms and (2) assess the overall completeness of federal agency activity reported on Agency Submission Forms. (Recommendation 8)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  9. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should enhance journal voucher review procedures to include a review of relevant accounting criteria before recording transactions based on Agency Submission Forms. (Recommendation 9)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  10. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should design and implement procedures to periodically review all active Treasury accounts to determine whether they are valid and the related General Fund account balances are consistent with federal agency records. (Recommendation 10)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  11. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: The Commissioner of Fiscal Service should enhance current procedures for reviewing negative balances to include Treasury accounts with indefinite periods of availability. (Recommendation 11)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

  12. Status: Open

    Comments: Fiscal Service concurred with the results of our audit.

    Recommendation: We recommend that the Commissioner of Fiscal Service enhance the standard operating procedures for prior period transactions to include a requirement for Fiscal Service to assess the materiality of transactions to determine the appropriateness of recording them as a current year adjustment or restating the prior period. (Recommendation 12)

    Agency Affected: Department of the Treasury: Bureau of the Fiscal Service

 

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