Recommendation: ODCFO should update the CAP template provided in its guidance to assist components in developing CAPs to include the year deficiencies are first identified data element defined in the Implementation Guide for OMB Circular A-123. (Recommendation 1)

Agency: Department of Defense
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: ODCFO should update the NFR Database with a field to record the year deficiencies are first identified. (Recommendation 2)

Agency: Department of Defense
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: ODCFO should incorporate appropriate steps to improve its CAP review process, including ensuring that (1) data elements not included in CAPs are appropriately identified and communicated to components and resolved, (2) NFRs are appropriately linked to the correct CAPs to address them, and (3) components document their rationale for accepting the risk associated with certain deficiencies and appropriately identify such instances in the NFR Database. (Recommendation 3)

Agency: Department of Defense
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: ODCFO should update DOD guidance to instruct DOD and components to document root-cause analysis when needed to address deficiencies auditors identified. (Recommendation 4)

Agency: Department of Defense
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: ODCFO should include appropriate steps in its monthly NFR Database review process to evaluate and follow-up on previously identified exceptions to ensure that they are resolved timely. (Recommendation 5)

Agency: Department of Defense
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should document lessons learned from stakeholder input and past performance.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: As of February 2020, IRS officials said LB&I has developed and deployed the Campaign Development Form and the LB&I Taxpayer Registry to capture stakeholder input and feedback. The form documents all actions and a decision made on a particular campaign and is used to monitor real-time performance. While this will help IRS document lessons learned moving forward, IRS officials have not said how they would document lessons learned in the past.

Recommendation: The Secretary of Agriculture should direct the Under Secretary for Food, Nutrition, and Consumer Services to design policies and procedures to reasonably assure that all award recipients required to submit single audit reports do so in accordance with OMB guidance.

Agency: Department of Agriculture
Status: Open
Priority recommendation

Comments: U.S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS) neither agreed nor disagreed with our recommendation. As of February 3, 2020, FNS stated that it has made revisions to the agency audit manual to meet the intent of the recommendation. In a section of the manual devoted to Cognizant and Awarding Agency Responsibilities (2 CFR 200.513), FNS is adding a bullet that states that the Federal awarding agency must "ensure that audits are completed and reports are received in a timely manner and in accordance with the requirements of 2 CFR 200.512(a)." FNS plans on releasing the full agency audit manual to FNS users in final by the end of Fiscal Year 2020. We believe that FNS's corrective actions will help FNS to meet the intent of our recommendation with regards to designing policies. However, to fully meet the intent of the recommendation, in addition to revising policies, FNS also needs to implement procedures to ensure staff are following the revised policies. We will assess these efforts once completed.

Recommendation: The Secretary of Agriculture should direct the Under Secretary for Food, Nutrition, and Consumer Services to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

Agency: Department of Agriculture
Status: Open
Priority recommendation

Comments: U.S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS) neither agreed nor disagreed with our recommendation. As of February 3, 2020, FNS stated that it has made revisions to the agency audit manual to meet the intent of the recommendation. In a section of the manual devoted to Cognizant and Awarding Agency Responsibilities (2 CFR 200.513), FNS stated that it is expanding upon an existing bullet that states that the Federal awarding agency must "issue a management decision on audit findings within six months after receipt of the audit report....". FNS indicated this section of the manual will be expanded to include the four elements that a management decision must clearly state in writing as prescribed in 2 CFR 200.521(a). FNS plans on releasing the full agency audit manual to FNS users in final by the end of Fiscal Year 2020. We believe that FNS's corrective actions will help FNS to meet the intent of our recommendation with regards to designing policies. However, to fully meet the intent of the recommendation, in addition to revising policies, FNS also needs to implement procedures to ensure staff are following the revised policies. We will assess these efforts once completed.

Recommendation: The Secretary of Agriculture should direct the Under Secretary for Food, Nutrition, and Consumer Services to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

Agency: Department of Agriculture
Status: Open

Comments: U.S. Department of Agriculture's (USDA) Food and Nutrition Service (FNS) neither agreed nor disagreed with our recommendation. As of February 3, 2020, FNS stated that it has made revisions to the agency audit manual to meet the intent of the recommendation. In a section of the manual devoted to Cognizant and Awarding Agency Responsibilities (2 CFR 200.513), FNS is adding a bullet stating that the cognizant agency is responsible for "developing a risk-based approach to manage high-risk and recurring single audit findings to identify problems so that adequate resources can be dedicated to address the problem." FNS plans on releasing the full agency audit manual to FNS users in final by the end of Fiscal Year 2020. We believe that FNS's corrective actions will partially help FNS to meet the intent of our recommendation with regards to designing policies. When designing policies, we believe FNS also needs to clearly provide guidance on the risk management strategy over high-risk and recurring single audit findings, including the steps to follow for identifying problem areas and setting priorities for addressing them. To fully meet the intent of the recommendation, in addition to revising policies, FNS also needs to implement procedures to ensure staff are following the revised policies. We will assess these efforts once completed.

Recommendation: The Secretary of Agriculture should direct the Under Secretary for Rural Development to design policies and procedures to reasonably assure that all award recipients required to submit single audit reports do so in accordance with OMB guidance.

Agency: Department of Agriculture
Status: Open
Priority recommendation

Comments: U.S. Department of Agriculture's (USDA) Rural Development (RD) concurred with our recommendation. To address the GAO recommendation, in February 2020, RD stated that it has developed a disbursement report that will capture disbursements equal to or greater than $750,000 and is currently documenting that process and creating instructions for the program areas. RD indicated that it plans to complete these actions by June 30, 2020. We will assess these efforts once completed.

Recommendation: The Secretary of Agriculture should direct the Under Secretary for Rural Development to revise policies and procedures to reasonably assure that management decisions contain the required elements and are issued timely in accordance with OMB guidance.

Agency: Department of Agriculture
Status: Open
Priority recommendation

Comments: U.S. Department of Agriculture's (USDA) Rural Development (RD) concurred with our recommendation. To address the GAO recommendation, in February 2020, RD stated it has developed a Management Decision Manual template that the program areas will use and is currently creating instructions for the program areas. RD indicated that it plans to complete these actions by June 30, 2020. We will assess these efforts once completed.

Recommendation: The Secretary of Agriculture should direct the Under Secretary for Rural Development to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

Agency: Department of Agriculture
Status: Open

Comments: U.S. Department of Agriculture's (USDA) Rural Development (RD) concurred with our recommendation. To address the GAO recommendation, in February 2020, RD stated that it has developed a process to rate each single audit finding. According to RD, the ratings will be tracked in an Access Database, where it will generate reports indicating reoccurring and high-risk findings by borrower and by program. RD indicated that it plans to complete these actions by June 30, 2020. We will assess these efforts once completed.

Recommendation: The Secretary of Housing and Urban Development should direct the Principal Deputy Assistant Secretary for the Office of Community Planning and Development to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

Agency: Department of Housing and Urban Development
Status: Open

Comments: The Department of Housing and Urban Development's (HUD) Office of Community Planning and Development (CPD) stated that it did not agree with GAO's emphasis on high risk/recurring single audit findings. Nevertheless, in March 2019, HUD's CPD stated that it is working towards a redesigned model for analyzing risk as a basis for monitoring. In August 2020, HUD informed us that CPD is finalizing the beta test for the risk model. Although the risk model will be further defined and enhanced in fiscal year 2021 for fiscal year 2022, CPD plans to roll out the beta test of the risk model to develop the fiscal year 2021 risk rankings. Single audit will be one factor that is included in calculating the risk scores. CPD will validate and assess the results of the beta test and make adjustments as needed. We will continue to monitor agency's actions to address this recommendation.

Recommendation: The Secretary of Housing and Urban Development should direct the Principal Deputy Assistant Secretary for the Office of Public and Indian Housing to design and implement policies and procedures for identifying and managing high-risk and recurring single audit findings using a risk-based approach.

Agency: Department of Housing and Urban Development
Status: Open

Comments: The Department of Housing and Urban Development's (HUD) Office of Public and Indian Housing (PIH) agreed with this recommendation. On May 7, 2018, PIH stated that it had implemented a Risk Based Approach Tool designed to identify and manage high-risk and recurring single audit findings. The Risk Based Approach tool was intended to track and focus on audit findings reported as material weaknesses or significant deficiencies and was designed to determine the resources needed and available to assist in mitigating the audit findings. However, in March 2019, PIH informed us that in late 2018, PIH began to work toward repositioning goals, priorities and identification of key risk indicators. PIH stated that it is now focused on aligning risk indicators to the HUD and PIH priorities. PIH priorities for fiscal year 2019 include addressing Public Housing Authorities insolvency which may be identified through an Independent Public Accountant audit or through other means. PIH stated that it no longer uses the assessment tool that included over 100 risk indicators. PIH indicated that it has a revised risk mitigation framework proposal that will be presented to the Enterprise Risk Counsel in the near future. In fiscal year 2020, we have sent additional follow-up questions to the agency and are currently waiting for a response. We will continue to monitor agency's actions to address this recommendation.

Recommendation: To improve the Navy's implementation of the FIAR Guidance for its General Fund FBWT FIP and facilitate efforts to achieve SBR auditability, the Secretary of the Navy should direct the Assistant Secretary of the Navy, Financial Management and Comptroller, to prepare a level I quantitative drilldown in accordance with the FIAR Guidance.

Agency: Department of Defense: Department of the Navy
Status: Open

Comments: The Navy concurred with this recommendation and stated that it has actions planned, taken, or under way to prepare a quantitative drilldown. In September 2017, Navy provided a listing of certain systems (DCAS, GLs, DDRS-B, and DDRS-AFS) it considered as Level 1 assessable units. However, the listing did not include a drilldown from the financial statement amounts through DDRS-AFS, DDRS-B, and DCAS to the receipt and disbursement source systems. In July 2020, Navy officials stated that Navy is implementing a new system that will enable them to complete a quantitative drill down for its Fund Balance with Treasury (FBWT). The new system is not expected to be fully implemented until March 2021. In the interim, certain FBWT reconciliations are performed at DFAS, that may provide a drilldown capability of FBWT as reported in financial statements to the applicable general ledger amounts.

Recommendation: To improve the Navy's implementation of the FIAR Guidance for its General Fund FBWT FIP and facilitate efforts to achieve SBR auditability, the Secretary of the Navy should direct the Assistant Secretary of the Navy, Financial Management and Comptroller, to prioritize audit readiness efforts for the key FBWT systems, prepare an audit strategy that identifies for each system (1) the Navy's plan for assessing the system to gain assurance that the system can be relied on; (2) the assessment types, including prioritizing the assessments based on qualitative and quantitative factors for each system; and (3) planned start and completion dates of these assessments for each system.

Agency: Department of Defense: Department of the Navy
Status: Open

Comments: The Navy concurred with this recommendation and stated that it has actions planned, taken, or under way to prioritize audit readiness efforts for key Fund Balance with Treasury (FBWT) systems. In September 2017, Navy provided documentation for three systems, but this documentation did not address corrective actions for ineffective controls and the expected completion dates. Further, during our audit, Navy provided a list of 22 relevant systems. In July 2020, Navy officials stated that they are preparing an audit strategy for each system, and documenting control activities and computer controls for significant systems. We will continue to follow-up on the status of this recommendation.

Recommendation: To improve the Navy's implementation of the FIAR Guidance for its General Fund FBWT FIP and facilitate efforts to achieve SBR auditability, the Secretary of the Navy should direct the Assistant Secretary of the Navy, Financial Management and Comptroller, to prepare, in accordance with FIAR Guidance, the documentation of control activities and information technology general computer controls for significant systems; system certifications or accreditations; system, end user, and systems documentation locations; and hardware, software, and interfaces.

Agency: Department of Defense: Department of the Navy
Status: Open

Comments: The Navy concurred with this recommendation and stated that it had actions planned, taken, or under way to document control activities, information technology general computer controls for significant systems, systems documentation locations, and hardware, software, and interfaces. In September 2017, Navy provided documentation for 3 systems, but the documentation did not include system certifications or accreditations; system, end user, and systems documentation locations; and hardware, software, and interfaces. Further, during our audit, Navy provided a list of 22 relevant systems. In July 2020, a Navy official told us that they are preparing an audit strategy for each system, and documenting control activities and computer controls for significant systems. We will continue to monitor Navy's progress addressing this recommendation.

Recommendation: To improve the Navy's implementation of the FIAR Guidance for its General Fund FBWT FIP and facilitate efforts to achieve SBR auditability, the Secretary of the Navy should direct the Assistant Secretary of the Navy, Financial Management and Comptroller, to prepare an internal control assessment document for each assessable unit, summarizing control activities that are appropriately designed and in place.

Agency: Department of Defense: Department of the Navy
Status: Open

Comments: The Navy concurred with this recommendation and stated that it had actions planned, taken, or under way to prepare an internal control assessment document. In September 2017, Navy provided support for actions taken to address this recommendation. However, the documentation provided did not summarize controls by assessable unit (DCAS, DDRS-B, or systems). Instead controls were listed by function (Treasury Reporting, Audit Readiness, and Departmental Reporting). In July 2020, a Navy official stated that documentation of overall Fund Balance with Treasury (FBWT) controls is in process and they are finalizing the Risk Control Matrix for FBWT to include controls at DFAS and at Treasury. The Rick Control Matrix is estimated to be completed by the end of August 2020. We will continue to monitor the progress in addressing this recommendation.

Recommendation: The Commissioner of Internal Revenue should track the results of large partnerships audits: (a) define a large partnership based on asset size and number of partners; (b) revise the activity codes to align with the large partnership definition; and (c) separately account for field audits and campus audits.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS has taken actions to implement GAO's September 2014 recommendation, but the definition IRS provided is not likely to help it analyze results from audits of the very large partnerships that GAO's report covered. In September 2017, IRS defined large partnerships as those with assets of $10 million or more, without regard to the number of partners. With changes to the Tax Equity and Fiscal Responsibility Act of 1982 partnership audit procedures and enactment of the Bipartisan Budget Act of 2015 (BBA) (sections 1101 and 1102 of Public Law 114-74), IRS officials said that the number of partners is no longer a critical factor when defining a large partnership. IRS is correct that the number of partners is no longer relevant to this statutory definition of large partnership. The recently eliminated Electing Large Partnerships audit procedures had defined large partnerships as those with 100 or more direct partners in a taxable year. Even so, IRS's new definition of large partnerships is limited compared to large corporations. IRS has defined eight asset categories for tracking large corporation audit results while it has one for large partnerships, which vary widely based on asset amounts and complex structures. As GAO reported, during tax years 2002 through 2011, the number of large partnerships with 100 or more direct and indirect partners as well as $100 million or more in assets more than tripled to 10,099, some of which had assets exceeding $5 billion. In tax year 2011, more than two-thirds of these large partnerships had at least 100 or more pass-through entities as direct and indirect partners. Until IRS develops a more expansive definition of large partnerships, IRS may have challenges analyzing the results from its audits of large partnerships. As of January 2020, IRS had revised its activity codes to create a category for its large partnership definition as well as created a reporting and monitoring structure for its new definition to track the results from auditing large partnerships. IRS also created reports to regularly track audit results (e.g., dollar amounts, hours, number of returns, campus versus field locations) for this one category. IRS officials said they plan to use the reports to analyze audit results to identify opportunities to better plan and use resources in auditing large partnerships but this outcome may not be possible with the statutory changes governing partnerships. Given the challenges involving such audits, IRS officials said they have started efforts to better select partnership returns for audits based on compliance risk. They said these efforts will extend at least through fiscal year 2021. Thus, IRS does not yet know whether the audit results will be sufficient to analyze ways to better plan and use IRS audit resources as well as to analyze noncompliance risk for its new definition. IRS's analysis may not be able to achieve these ends with only one asset category to cover the wide range of asset amounts above $10 million.

Recommendation: The Commissioner of Internal Revenue should analyze the audit results by these activity codes and types of audits to identify opportunities to better plan and use IRS resources in auditing large partnerships.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: As of January 2020, IRS created a reporting and monitoring structure for its new large partnership definition to track the results from auditing large partnerships. IRS also created reports to regularly track audit results (e.g., dollar amounts, hours, number of returns, campus versus field locations) for this one category. IRS officials said they plan to use the reports to analyze audit results to identify opportunities to better plan and use resources in auditing large partnerships but this outcome may not be possible with the statutory changes governing partnerships. Thus, IRS does not yet know whether the audit results will be sufficient to analyze ways to better plan and use IRS audit resources as well as to analyze noncompliance risk for its new definition. IRS's analysis may not be able to achieve these ends with only one asset category to cover the wide range of asset amounts above $10 million. Given these and other challenges involving such audits, IRS officials said they have started efforts to better select partnership returns for audits based on compliance risk. They said these efforts will extend at least through fiscal year 2021.

Recommendation: To improve the reliability of the information presented in the CFS budget statements, 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 establish and implement effective procedures for reporting amounts in the CFS budget statements that are fully consistent with the underlying information in significant federal entities' audited financial statements and other financial data.

Agency: Department of the Treasury
Status: Open
Priority recommendation

Comments: As of the completion of our fiscal year 2019 audit of the consolidated financial statements of the U.S. government (CFS), this recommendation remained open. Treasury continued to develop its budget deficit/surplus and cash reconciliation procedures. Specifically, Treasury performed a preliminary analysis on several federal entities' implementation of the new Statement of Federal Financial Accounting Standards No. 53, Budget and Accrual Reconciliation (BAR), and noted inconsistencies in the way each entity populated line items in the BAR. Treasury and OMB provided additional guidance for the BAR in OMB Circular No. A-136 and on the Treasury U.S. Standard General Ledger website, including a BAR crosswalk template. However, additional work is needed to reconcile line items to audited federal entity financial statements. We will follow-up on progress made by Treasury and OMB as part of our fiscal year 2020 CFS audit.

Recommendation: To improve the reliability of the information presented in the CFS budget statements, 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 establish and implement effective procedures for identifying and reporting all items needed to prepare the CFS budget statements.

Agency: Department of the Treasury
Status: Open
Priority recommendation

Comments: As of the completion of our fiscal year 2019 audit of the consolidated financial statements of the U.S. government (CFS), this recommendation remained open. Treasury continued to make improvements in fiscal year 2019 by implementing procedures, publishing guidance, and developing new transaction codes to improve the accounting for and reporting of General Fund transactions and balances that Treasury uses to compute the budget deficit reported in the consolidated financial statements. However, additional work is needed in determining the appropriate presentation for the reconciling items, which could affect the line items included. We will follow-up on progress made by Treasury and OMB as part of our fiscal year 2020 CFS audit.