REPORT OF AUDIT - THE AGENCY'S FUND BALANCE WITH TREASURY

• Document Type: SPECIALCOLLECTION
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06408118
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 32
• Document Creation Date: March 16, 2022
• Document Release Date: February 25, 2016
• Case Number: F-2014-02704

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REPORT OF AUDIT
(U) The Agency's Fund Balance With Treasury
Central Intelligence Agency
Office of Inspector General
Audit Staff
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Report of Audit
(U) The Agency's Fund Balance With Treasury
EXECUTIVE SUMMARY
(U) Objectives (U) The objectives of this audit were to
determine whether:
� The fiscal year 2000 financial statements of
the Agency fairly present the Fund Balance
with Treasury (FBWT) in accordance with
generally accepted accounting principles.
� The internal controls related to the FBWT are
adequate to detect or prevent errors or
misstatements that have a material effect on
the financial statements.
� The Agency complied with laws and
regulations that have an effect on the financial
statement presentation of the FBWT.
(U) Background
(U) With the enactment of the Chief Financial
Officers' Act in 1990, Congress called for the
production of financial statements that fully
disclose a Federal entity's financial position and
results of operations. One of the requirements of
the Act is that designated Federal organizations
annually submit audited financial statements to the
Director of the Office of Management and Budget.
As an executive agency, the CIA must follow
Federal financial accounting standards. The
Agency is not currently required to adhere to the
requirements of the Act; therefore, it is not
required to annually submit audited financial
statements. The Agency's Chief Financial
Officer (CFO) has indicated her intention to move
towards full compliance with Federal financial
accounting standards and the preparation of
auditable financial statements.
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(U) The FBWT is an asset on the balance sheet
that represents funds on deposit with the
Department of Treasury. Federal agencies are
required to reconcile their FBWT accounts on a
regular basis to ensure the integrity and accuracy
of their internal financial data. Specifically,
agencies are required to submit to Treasury, on a
monthly basis, a Statement of Transactions that
details their disbursement and collection activity
with Treasury. Treasury identifies differences by
comparing the disbursement and collection
activity reported on the Statement of Transactions
to data in its records and reports differences to
each agency on a Statement of Differences.
(U) Agencies are responsible for performing
detailed reconciliations of any differences in a
timely manner; the Treasury Financial Manual
(TFM) requires differences to be reconciled
monthly. Treasury notifies the responsible
CFO and Inspector General when differences are
not resolved.
(U) Results in Brief
(C) The presented on the
30 September 2000 financial statements as the
total FBWT cannot be relied upon as a fair
presentation of the Agency's cash on deposit with
Treasury. As of the end of the fiscal year, the
balance recorded in Agency general ledger
accounts and Treasury records differed by
However, this net difference
does not accurately reflect the total amount of
unresolved transactions outstanding at year-end.
In fact, transactions totaling
(absolute value) were recorded in Agency ledger
accounts that could not be identified in or
matched to Treasury records, and conversely,
transactions totaling (absolute
value) were recorded in Treasury records that
could not be identified in Agency general
ledger accounts.
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If we were asked to provide an opinion on the
financial statements, the existence of such material
unresolved differences at year-end would preclude
the issuance of an unqualified audit opinion.
(UHAIU0) Unresolved differences between
Agency and Treasury records have resulted from
ineffective internal controls related to FBWT.
Agency officials are not properly preparing the
Statement of Transactions sent to Treasury, which is
used to identify differences between the records of
the Agency and Treasury. The Agency has been
preparing its Statement of Transactions using the
collection and disbursement activity reported by
Treasury Regional Finance Centers (RFC) and the
Online Payment and Collection (OPAC) system
instead of reporting the activity actually recorded
in its general ledger accounts; therefore,
differences between Agency and Treasury records
are not acknowledged in the Statement of
Differences prepared by Treasury. Although the
Agency has been separately tracking these
differences using its own internal process, the
differences have not been resolved in a timely
manner, which has resulted in long-standing
discrepancies between the Agency
and Treasury records.
(UHAIU0) In addition, the FBWT and related
footnote disclosures were not properly presented
on the financial statements and contained
numerous inaccuracies.
(U) Summary of
Recommendations
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(U) Management
Comments and Our
Evaluation
(U) All of the recommendations in this report are
considered significant and will be included in the
Inspector General's next semiannual report to the
Director of Central Intelligence.
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(U) We acknowledge that the TFM could provide
more details in describing the FBWT reconciliation
process. However, the TFM states in specific
terms that each reporting office will prepare the
Statement of Transactions from its accounts
promptly at the close of each accounting month.
Our most recent discussions with knowledgeable
Treasury officials confirm that agencies should use
their general ledger account activity to prepare the
Statement of Transactions. Also, GAO guidance
for auditing FBWT accounts recommends that
auditors should determine whether agencies
adequately prepare the Statement of Transactions by
using the same records that are used to prepare the
agencies' financial statements. In this regard, we
continue to believe that Accounting Operations
needs to change its reconciliation procedures to
conform with guidance set forth in the TFM.
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(U) Table of Contents
(U) EXECUTIVE SUMMARY
(U) OBJECTIVES, SCOPE, AND METHODOLOGY 1
(U) BACKGROUND 2
(U) Financial Statement Reporting and Accounting
Standards 2
(U) Fund Balance With Treasury and Department of
Treasury Requirements 3
(U) DETAILED COMMENTS 4
(U) The Amount Reported as the Fund Balance With
Treasury Is Not Reliable 5
(U) Disbursement and Collection Data Submitted to
Treasury Was Not From Agency General Ledger
Accounts 8
(U) Differences Between Agency General Ledger
Accounts and Treasury Records Have Been Identified
but Not Resolved 9
(U) Fund Balance With Treasury and Related Footnote
Disclosures Were Not Properly Presented on Agency
Financial Statements 12
(U) Fund Balance With Treasury Was Inaccurately
Classified on the Balance Sheet 13
(U) Footnote Disclosures Were Not Properly
Presented and Contained Inaccuracies 14
(U) Fiscal Year 2000 Balance Sheet and Note 2
to the Financial Statements Exhibit A
(S) Agency's Fund Balance With Treasury General
Ledger (GL) Accounts Exhibit B
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(S) Unresolved Differences Between Agency
General Ledger Accounts and Treasury Records
as of 31 March 2001 Exhibit C
(U) Analysis of the Agency's Fund Balance With
Treasury Footnote Disclosures Exhibit D
(U) List of Recommendations Exhibit E
(U) Audit Team Members Exhibit F
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(U) OBJECTIVES, SCOPE, AND METHODOLOGY
(U) The objectives of this audit were to determine whether:
� The fiscal year 2000 financial statements of the Agency fairly
present the Fund Balance with Treasury (FBWT) in accordance
with generally accepted accounting principles.
� The internal controls related to FBWT are adequate to detect or
prevent errors or misstatements that have a material effect on the
financial statements.
� The Agency complied with laws and regulations that have an
effect on the financial statement presentation of FBWT.
(U) We reviewed the presentation of the FBWT line item on the fiscal
year 2000 balance sheet and related footnote disclosures (Exhibit A). We
also reviewed the supplemental information accompanying the financial
statements, including Management Discussion and Analysis. We examined
documentation prepared by Finance to support the amounts presented in the
balance sheet and footnote disclosures.
(UHAIU0) We reviewed the Agency's process for reconciling FBWT
to Department of Treasury records. We analyzed the September 2000
Statement of Transactions prepared by Finance officials for agency
location codes' and related supporting documentation including deposit
tickets and debit vouchers. We analyzed the October 2000 Statement of
Transactions for two agency location codes to determine whether errors on
the September statements were corrected in October. We examined records
generated by the Online Payment and Collection (OPAC) system, which is an
application used by agencies to make interagency billings and payments for
supplies and services, and from Regional Finance Centers (RFCs), which are
financial centers that issue payments and process cancellations on behalf of
Federal agencies that do not have their own disbursing authority. We also
reviewed reports generated by Treasury that are used in the reconciliation of
Agency FBWT, such as the Statement of Differences.
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(U) To identify the Federal requirements for financial statement
presentation and internal controls related to FBWT, we reviewed the Chief
Financial Officers' Act (CFO Act); Office of Management and Budget (OMB)
Bulletin No. 97-01 and technical amendments to OMB Bulletin No. 97-01,
Form and Content oPlgency Financial Statements; the Statements of Federal
Financial Accounting Standards (SFFASs); and the Treasury Financial Manual
(TFM).2 We also reviewed relevant reports issued by the Agency's Inspector
General, the General Accounting Office (GAO), and other Federal agencies.
(U) We had discussions with personnel from Finance, Accounting
Operations, and the Office of the CFO to obtain information on the process
for monitoring FBWT and ensuring that accurate balances are recorded in
Agency general ledger accounts and reconciled with Treasury records. We
also spoke with personnel from Treasury and GAO to obtain clarification of
the proper FBWT reconciliation policies and procedures.
(U) Our audit work was conducted from February to May 2001 in
accordance with generally accepted government auditing standards.
Comments on a draft of this report were received from the Director of
Finance who responded for the CFO and were considered in the preparation
of this report.
(U) BACKGROUND
(U) Financial Statement Reporting and
Accounting Standards
(U) With the enactment of the CFO Act in 1990, Congress called for the
production of financial statements that fully disclose a Federal entity's
financial position and results of operations, and provide information not only
for the effective allocation of resources, but also with which Congress,
agency managers, and the public can assess management performance and
stewardship. One of the requirements of the Act is that designated Federal
organizations annually submit audited financial statements to the Director
of OMB.
2 (U) OMB Bulletin No. 01-09, Form and Content of Agency Financial Statements, dated
25 September 2001, replaced OMB Bulletin No. 97-01.
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(U) The Federal Accounting Standards Advisory Board recommends
accounting principles, standards, or concepts for the Federal Government.
When recommended statements of accounting principles or standards are
agreed to by the Director of OMB, the Secretary of the Treasury, and the
Comptroller General, the Director of OMB issues SSFASs which are
considered generally accepted accounting principles for Federal agencies.
OMB Circular No. A-134, Financial Accounting Principles and Standards,
requires that all executive agencies apply the SFFASs when preparing
financial statements and that auditors consider the SFFASs as authoritative
references when auditing financial statements. OMB Bulletin No. 97-01
defines the form and content of financial statements that are submitted to the
Director of OMB pursuant to the requirements of the CFO Act.
(UHAIU0) As an executive agency, the CIA must follow Federal
financial accounting and reporting standards as promulgated by the Financial
Accounting Standards Advisory Board. The Agency is not currently required
to adhere to the requirements of the CFO Act; therefore, it is not required to
annually submit audited financial statements. The CFO has indicated her
intention to move towards full compliance with Federal financial accounting
standards and the preparation of auditable financial statements. This audit was
the second in a series of audits designed to assist the Agency in its efforts to
comply with Federal financial accounting and reporting standards and prepare�
auditable financial statements.
(U) Fund Balance With Treasury and
Department of Treasury Requirements
(U) OMB Circular No. A-127, Financial Management Systems,
requires Federal agencies to use a financial information classification
structure that is consistent with the US Government standard general ledger.
The standard general ledger supports the financial system management
function by providing a chart of accounts and account definitions. Fund
Balance with Treasury is defined in the chart of accounts as all funds on
deposit with Treasury, excluding seized cash, reported on the Statement of
Transactions. The Treasury Financial Manual adds to this definition, stating
that FBWT accounts are asset accounts representing the future economic
benefit of monies that can be spent for authorized transactions.
(U) The Secretary of the Treasury requires Federal agencies to
reconcile their FBWT accounts on a regular basis to assure the integrity and
accuracy of their internal financial data. The TFM requires Federal agencies
to submit to Treasury, on a monthly basis, a summary of disbursement and
collection activity for each of their Treasury accounts. Disbursement
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transactions include, for example, payments for agency supplies and
services, while collections include the receipt of appropriated funds.
Disbursement and collection activity is summarized on the Statement of
Transactions, which is submitted electronically to Treasury. The TFM
indicates that the Statement of Transactions should be prepared directly
from an agency's general ledger accounts.
(U) Treasury compares the disbursement and collection activity
reported on the Statement of Transactions to the data in its records, which
include transaction activity reported by the RFCs and from the OPAC
application. Any differences are reported back to each agency on a
Statement of Differences. Agencies are responsible for performing detailed
reconciliations of any differences in a timely manner; the TFM requires
differences to be reconciled monthly. Treasury notifies the responsible
CFO and Inspector General when differences are not resolved.
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(C) In fiscal year 2000, Agency officials used 10 general ledger
accounts to record FBWT activity. Exhibit B provides a listing of the
Agency's FBWT general ledger accounts and a description of the activity
that was recorded in each account. The Agency reported a FBWT of
on its 30 September 2000 financial statements.
(U) DETAILED COMMENTS
(C) The amount presented as FBWT on the 30 September 2000 financial
statements is not reliable. As of the end of the fiscal year, the balance
recorded in A ency general ledger accounts and Treasury records differed by
However, this net difference does not accurately reflect the
total amount of unresolved transactions outstanding at year-end. In fact,
transactions totaling absolute value) were recorded in Agency
general ledger accounts that could not be identified in or matched to Treasury
records, and conversely, transactions totaling (absolute value)
were recorded in Treasury records that could not be identified in Agency
general ledger accounts.3 If we were asked to provide an opinion on the
financial statements, the existence of such material unresolved differences at
year-end would preclude the issuance of an unqualified audit opinion.
3 (U) Due to the high risk associated with cash, the GAO recommends that agencies report
unresolved differences at absolute value, rather than netting the positive and negative amounts
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(UHAIU0) The unresolved differences have resulted from ineffective
internal controls related to FBWT. Agency officials are not properly
preparing the monthly reports sent to Treasury, which are used to identify
differences between amounts recorded in Agency general ledger accounts
and records maintained by Treasury. Although the Agency tracks these
differences using a separate process, the differences have not been resolved
in a timely manner, which has resulted in long-standing discrepancies
between Agency and Treasury records. In addition, the FBWT and related
footnote disclosures were not properly presented on the financial statements
and contained numerous inaccuracies.
(U) The Amount Reported as the Fund
Balance With Treasury Is Not Reliable
(C) The amount reported on the Agency's 30 September 2000 balance
sheet for FBWT cannot be relied upon as a fair presentation of the Agency's
cash on deposit with Treasury. As of the end of the fiscal year, the balance
recorded in Agency general ledger accounts and Treasury records differed by
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(S) Agency and Treasury Ending Balances Recorded in FBWT
Accounts as of 30 September 2000
FBVVT General Ledger (GL) Accounts (See Exhibit B)
Balance per
General Ledger
as of 9/30/00
Balance per
Treasury
as of 9/30/00
Net Difference
as of 9/30/00
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(C) The difference displayed in the previous chart
represents the net difference between Agency and Treasury records as of
30 September 2000, but it does not accurately reflect the total amount of
unresolved tr sactions outstanding at year-end. In fact, transactions totaling
absolute value) were recorded in Agency general ledger
accounts that could not be identified in or matched to Treasury records, and
conversely, transactions totaling Absolute value) were recorded
in Treasury records that could not be identified in Agency general ledger
accounts. Several of these transactions date back to fiscal year 1992. The
unresolved transactions (absolute value) outstanding at year-end are
summarized below:
(S) Treasury and Agency Unresolved Transactions Recorded in FBVVT
Accounts as of 30 September 2000
General Ledger (GL) FBVVT Accounts (See Exhibit B)
Transactions Recorded in
Treasury Records, but Not
Identified in GL as of
09/30/00
Transactions Recorded in
GL, but Not Identified in
Treasury Records as
of 09/30/00
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(UHAIUO) Officials within Accounting Operations believe that many
of the unresolved differences are unmatched transactions rather than actual
accounting errors. Unmatched transactions occurred because of differences
in recording OPAC and Agency activity. For example, one OPAC transaction
posted in Treasury records could represent several transactions in Agency
general ledger accounts. If the transactions are not coded adequately, it is
difficult to immediately identify the Agency transactions that make up one
OPAC transaction. These transactions are not errors or timing differences,
rather they represent transactions that need to be researched, matched up, and
removed from the reconciliation records.
(C) The unresolved differences that existed between Agency general
ledger accounts and Treasury records at 30 September 2000 were material
amounts in relation to Agency financial statements.L
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\ As a result, if we
were asked to provide an opinion on the financial statements, the existence of
these material discrepancies at year-end would preclude the issuance of an
unqualified audit opinion.
(U) Disbursement and Collection Data
Submitted to Treasury Was Not From
Agency General Ledger Accounts
(UHAIUO) Internal control procedures designed to ensure the accuracy
of FBWT records have not been effectively implemented in the Agency. In
particular, monthly reports sent to Treasury, which are used to identify
differences between the records of the Agency and Treasury, have not been
properly prepared. Treasury requires each Federal agency to prepare and
submit a monthly Statement of Transactions from its records.
(UHATUO) The Statement of Transactions should show all transactions
recorded in an agency's accounts that affected the FBWT that month.
Treasury compares the Statement of Transactions received from each agency
to transaction activity from the RFCs and the OPAC application and prepares
a Statement of Differences, which is returned to the agency for resolution.
When preparing the Statement of Transactions, Agency Accounting
Operations officials use disbursement and collection activity data from the
RFCs and the OPAC application instead of using the transactions recorded in
Agency general ledger accounts. Consequently, when Treasury reconciles
the activity submitted on the Agency's Statement of Transactions to its own
records, it is in essence reconciling Treasury data to Treasury data. As a
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