oversight

U.S. Department of Agriculture's Closing Package Financial Statements for Fiscal Year 2018

Published by the Department of Agriculture, Office of Inspector General on 2018-11-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        United States Department of Agriculture




  U.S. Department of Agriculture's
  Closing Package Financial Statements
  for Fiscal Year 2018




Audit Report 50401-0017-11
                                                  OFFICE OF INSPECTOR GENERAL
November 2018
U.S. Department of Agriculture’s
Closing Package Financial Statements
for Fiscal Year 2018
Audit Report 50401-0017-11
OIG audited USDA’s closing package financial statements for FY 2018 and
assessed internal controls over financial reporting and compliance with reporting
requirements.


OBJECTIVE                           WHAT OIG FOUND
Our objectives were to determine    U.S. Department of Agriculture (USDA) received an
whether (1) USDA’s closing          unmodified opinion from the Office of Inspector General’s
package financial statements        (OIG) audit of USDA’s closing package financial
were fairly presented in            statements. We determined that USDA’s closing package
accordance with generally           financial statements present fairly, in all material
accepted accounting principles;     respects, the Department’s financial position as of
(2) internal control objectives
                                    September 30, 2018, and were prepared in accordance
for the financial reporting
process were met; and (3) the       with accounting principles generally accepted in the
Department complied with the        United States of America. This includes the USDA’s net
reporting requirements for the      cost, changes in net position, and related notes to the
Financial Report of the United      closing package financial statements.
States Government.
                                    Our consideration of USDA’s internal control over
                                    financial reporting for the closing package financial
REVIEWED                            statements did not identify any deficiencies in internal
The audit encompassed the           control that we consider to be material weaknesses.
internal control and compliance     Also, the results of our tests of compliance with the U.S.
reporting specific to the closing   Department of Treasury’s Treasury Financial Manual,
package financial statements        Volume I, Part 2, Chapter 4700, “Agency Reporting
as well as the internal control     Requirements for the Financial Report of the United
and compliance reporting            States Government,” disclosed no reportable instances of
related to USDA’s consolidated      noncompliance.
financial statements (general-
purpose financial statements),
upon which the closing package
financial statements are based.
We conducted our audit at
the financial offices of various
USDA agencies and offices in
Washington, D.C., at USDA’s
National Finance Center in
New Orleans, Louisiana, and at
selected agencies’ field offices.



RECOMMENDS
This report does not contain
recommendations.
                          United States Department of Agriculture
                                 Office of Inspector General
                                  Washington, D.C. 20250




DATE:         November 16, 2018

AUDIT
NUMBER:       50401-0017-11

TO:           Lynn Moaney
              Deputy Chief Financial Officer
              Office of the Chief Financial Officer

ATTN:         Annie Walker
              Director
              Internal Control Division

FROM:         Gil H. Harden
              Assistant Inspector General for Audit

SUBJECT:      U.S. Department of Agriculture’s Closing Package Financial Statements for
              Fiscal Year 2018


This report presents the results of our audit of the U.S. Department of Agriculture’s (USDA)
closing package financial statements for the fiscal year ending September 30, 2018. This report
contains an unmodified opinion on the financial statements, as well as the results of our
assessment of USDA’s internal control over financial reporting, compliance, and other matters
specific to those statements.

We appreciate the courtesies and cooperation extended to us by members of your staff during our
audit fieldwork and subsequent discussions. This report contains publicly available information
and will be posted in its entirety to our website http://www.usda.gov/oig in the near future.
Table of Contents

Independent Auditor’s Report ..............................................................................1
        Report on the Closing Package Financial Statements ...............................1
        Opinion on the Closing Package Financial Statements .............................2
        Emphasis of Matter .......................................................................................2
        Other Matters.................................................................................................2
        Internal Control Over Financial Reporting Specific to the Closing
        Package Financial Statements ......................................................................5
        Compliance and Other Matters Specific to the Closing Package
        Financial Statements .....................................................................................5
        Purpose of the Other Reporting Required by Government Auditing
        Standards ........................................................................................................6
Abbreviations ..........................................................................................................7
Exhibit A: Additional Note No. 1 – Closing Package Financial Statement
Requirements ..........................................................................................................8
Independent Auditor’s Report
Lynn Moaney
Deputy Chief Financial Officer
Office of the Chief Financial Officer

Report on the Closing Package Financial Statements
We have audited the accompanying Closing Package Financial Statement Report of the U.S.
Department of Agriculture (USDA), which comprise the Governmentwide Treasury Account
Symbol Adjusted Trial Balance System (GTAS) Reconciliation Report – Reclassified Balance
Sheet as of September 30, 2018, and the related GTAS Reconciliation Reports – Reclassified
Statement of Net Cost and Reclassified Statement of Operations and Changes in Net Position for
the year then ended, and the related notes to the financial statements (hereinafter referred to as
the “closing package financial statements”). The notes to the financial statements comprise the
following:

   ·   the GTAS Closing Package Lines Loaded Report;

   ·   Financial Report (FR) Notes Report (except for the information in the FR Notes Report
       entitled “2017 – September,” “Prior Year,” “PY,” “Previously Reported,” “Line Item
       Changes,” “Threshold,” [and the information as of and for the year-ended September 30,
       2017 in the “Text Data” of the FR Notes Report]); and

   ·   the accompanying Additional Note No. 1 (except for the information as of and for the
       year ended September 30, 2017).

Management’s Responsibility for the Closing Package Financial Statements

Management is responsible for the preparation and fair presentation of these closing package
financial statements in accordance with accounting principles generally accepted in the United
States of America (U.S.); this includes the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of the closing package financial
statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these closing package financial statements based
on our audit. We conducted our audit in accordance with auditing standards generally accepted
in the U.S.; the standards applicable to financial audits contained in government auditing
standards, issued by the Comptroller General of the U.S.; and Office of Management and
Budget (OMB) Bulletin No. 19-01, Audit Requirements for Federal Financial Statements.
Those standards and OMB Bulletin No. 19-01 require that we plan and perform the audit to
obtain reasonable assurance about whether the closing package financial statements are free from
material misstatement.


                                                              AUDIT REPORT 50401-0017-11          1
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the closing package financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the closing
package financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the agency’s preparation and fair presentation of
the closing package financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
agency’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
estimates made by management, as well as evaluating the overall presentation of the closing
package financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.

Opinion on the Closing Package Financial Statements

In our opinion, the closing package financial statements referred to above present fairly, in all
material respects, the financial position of USDA as of September 30, 2018, and its net cost and
changes in net position for the year then ended in accordance with U.S. generally accepted
accounting principles.

Emphasis of Matter

We draw attention to Additional Note No. 1 to the closing package financial statements, which
describes that the accompanying closing package financial statements were prepared in
accordance with the requirements of the U.S. Department of the Treasury’s (Treasury) Treasury
Financial Manual (TFM) Volume I, Part 2, Chapter 4700 (TFM 2-4700) for the purpose of
providing financial information to the Treasury and the U.S. Government Accountability
Office (GAO) to use in preparing and auditing the Financial Report of the U.S. Government, and
are not intended to be a complete presentation of the consolidated balance sheet of the USDA as
of September 30, 2018, and the related consolidated statements of net cost, changes in net
position, and the combined statement of budgetary resources for the year then ended (hereinafter
referred to as “general-purpose financial statements”). The notes to the closing package financial
statements are those that the Treasury deemed relevant to the Financial Report of the U.S.
Government. Our opinion is not modified with respect to this matter.

Other Matters

Opinion on the General-Purpose Financial Statements

We have audited, in accordance with auditing standards generally accepted in the U.S.; the
standards applicable to financial audits contained in government auditing standards issued by the
Comptroller General of the U.S.; and OMB Bulletin No. 19-01 the general-purpose financial
statements of USDA as of and for the year ended September 30, 2018, and our report thereon,
dated November 14, 2018, expressed an unmodified opinion on those financial statements.


2    AUDIT REPORT 50401-0017-11
Required Supplementary Information and Required Supplementary Stewardship
Information

U.S. generally accepted accounting principles require that the information, except for such
information entitled “2017 – September,” “Prior Year,” “PY,” “Previously Reported,” “Line
Item Changes,” and “Threshold,” and the information as of and for the year ended September 30,
2017 included in the “Text Data” of the FR Notes Report and “Other Text Data” of the Other
Data Report, included in Other Data Report Nos. 8 and 9 be presented to supplement the basic
closing package financial statements.

Such information, although not a part of the basic closing package financial statements, is
required by the Federal Accounting Standards Advisory Board (FASAB) who considers it to be
an essential part of financial reporting for placing the basic closing package financial statements
in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards
generally accepted in the U.S., which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the closing package financial statements, and other knowledge we
obtained during our audit of the closing package financial statements. Although our opinion on
the closing package financial statements is not affected, Other Data Report Nos. 8 and 9 contain
material departures from the prescribed guidelines because the information included in these
Other Data Reports is limited to USDA’s information that will be used for the Financial Report
of the U.S. Government and does not include all of the information required for USDA’s
component-level financial statements. We do not express an opinion or provide any assurance
on the information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.

Management has omitted Management’s Discussion and Analysis and the combining Statement
of Budgetary Resources that U.S. generally accepted accounting principles require to be
presented to supplement the closing package financial statements. Such missing information,
although not a part of the closing package financial statements, is required by the FASAB who
considers it to be an essential part of financial reporting for placing the closing package financial
statements in an appropriate operational, economic, or historical context. Our opinion on the
closing package financial statements is not affected by this missing information.

Other Information

Our audit was conducted for the purpose of forming an opinion on the closing package financial
statements as a whole. The information other than that described in the first paragraph and the
paragraph labeled Required Supplementary Information and Required Supplementary
Stewardship Information are presented for purposes of additional analysis in accordance with
TFM 2-4700 and are not a required part of the closing package financial statements. We read the
other information included with the closing package financial statements in order to identify
material inconsistencies, if any, with the audited closing package financial statements. Such
information has not been subjected to the auditing procedures applied in the audit of the closing


                                                                AUDIT REPORT 50401-0017-11         3
package financial statements as of and for the year ended September 30, 2018, and, accordingly,
we do not express an opinion or provide any assurances on it.

Restriction on the Use of the Report on the Closing Package Financial Statements

This report is intended solely for the information and use of the management of USDA,
Treasury, OMB, and GAO in connection with the preparation and audit of the Financial Report
of the U.S. Government and is not intended to be and should not be used by anyone other than
these specified parties.

Other Reporting Required by Government Auditing Standards
In accordance with government auditing standards and OMB Bulletin No. 19-01, we have also
issued reports dated November 14, 2018 on our consideration of USDA’s internal control over
financial reporting and the results of our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters that are required to be reported
under government auditing standards. Those reports are an integral part of an audit performed in
accordance with government auditing standards and OMB Bulletin No. 19-01 in considering the
USDA’s internal control and compliance, and should be read in conjunction with this report in
considering the results of our audit of the closing package financial statements.

In our audit of the general-purpose financial statements as of and for the year ended
September 30, 2018, we noted certain matters involving internal control that we consider to be
significant deficiencies. Specifically, we identified weaknesses in USDA’s:

    ·    overall financial management,
    ·    information technology (IT) security program, and
    ·    controls over unliquidated obligations.

We determined that the first two deficiencies are also material weaknesses. Also, our tests
disclosed instances of noncompliance with Federal Financial Management Improvement Act of
1996 requirements and the Anti-Deficiency Act. These material weaknesses and significant
deficiencies in internal control and instances of noncompliance with laws and regulations are
discussed in Audit Report 50401-0016-11, U.S. Department of Agriculture’s Consolidated
Financial Statements for Fiscal Year 2018.

Additionally, during fiscal year 2018, we identified instances of noncompliance with the
requirements of the Improper Payments Elimination and Recovery Act of 2010 (IPERA),
regarding the design of program internal controls related to reporting improper payments. A
separate report will be issued with further details on USDA’s compliance with improper payment
requirements.1




1
 IPERA amended the Improper Payments Information Act of 2002, Public Law 107-300. These two laws address
improper payment requirements.


4       AUDIT REPORT 50401-0017-11
Internal Control Over Financial Reporting Specific to the Closing Package Financial
Statements

In planning and performing our audit of the closing package financial statements as of and for
the year ended September 30, 2018 we also considered USDA’s internal control over financial
reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the closing package financial
statements, but not for the purpose of expressing an opinion of the effectiveness of USDA’s
internal control. Accordingly, we do not express an opinion on the effectiveness of USDA’s
internal control.

A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented,
or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.

Our consideration of internal control for the closing package financial statements was for the
limited purpose described in the first paragraph of this section and was not designed to identify
all deficiencies in internal control that might be material weaknesses or significant deficiencies.
Given these limitations, during our audit we did not identify any deficiencies in internal control
that we consider to be material weaknesses. However, material weaknesses may exist that have
not been identified.

Compliance and Other Matters Specific to the Closing Package Financial Statements

As part of obtaining reasonable assurance about whether USDA’s closing package financial
statements are free from material misstatement, we also performed tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with
which could have a material effect on the closing package financial statements. However,
providing an opinion on compliance with those provisions was not an objective of our audit of
the closing package financial statements, and accordingly, we do not express such an opinion.
The results of our tests of compliance disclosed no instances of noncompliance or other matters
that are required to be reported herein under government auditing standards and OMB Bulletin
No. 19-01.

Management’s Response

There were no findings or recommendations specific to the closing package financial statements
included herein, therefore, no corrective actions are necessary. USDA’s response to the findings
identified in our audit of the general-purpose financial statements is presented within our report
thereon, dated November 14, 2018.



                                                               AUDIT REPORT 50401-0017-11             5
Purpose of the Other Reporting Required by Government Auditing Standards

The purpose of the communication provided in the Other Reporting Required by Government
Auditing Standards section is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the USDA’s internal control or on compliance. This communication is an integral part of an
audit performed in accordance with U.S. generally accepted government auditing standards in
considering internal control and compliance with provisions of laws, regulations, contracts, and
grant agreements noncompliance with which could have a material effect on the closing package
financial statements. Accordingly, this communication is not suitable for any other purpose.




Gil H. Harden
Assistant Inspector General for Audit
Washington, D.C.
November 15, 2018




6    AUDIT REPORT 50401-0017-11
Abbreviations
FASAB ...................Federal Accounting Standards Advisory Board
FR ............................Financial Report
GAO ........................Government Accountability Office
GMRA.....................Government Management Reform Act of 1994 (Public Law 103-356)
GTAS ......................Governmentwide Treasury Account Symbol Adjusted Trial Balance System
OMB .......................Office of Management and Budget
TFM ........................Treasury Financial Manual
Treasury ..................U.S. Department of the Treasury
U.S. .........................United States of America
USDA......................U.S. Department of Agriculture




                                                            AUDIT REPORT 50401-0017-11        7
Exhibit A: Additional Note No. 1 – Closing Package Financial
Statement Requirements
The Budget and Accounting Procedures Act of 1950 allows the Secretary of the Treasury to
stipulate the format and requirements of executive agencies to furnish financial and operational
information to the President and the Congress to comply with the Government Management
Reform Act of 1994 (GMRA) (Pub. L. No. 103-356), which requires the Secretary of the
Treasury to prepare and submit annual audited financial statements of the executive branch. The
Secretary of the Treasury developed guidance in Treasury’s TFM Volume I, Part 2,
Chapter 4700 (TFM 2-4700) to provide agencies with instructions to meet the requirements of
GMRA. The TFM 2-4700 requires agencies to:

    1. Submit a GTAS Adjusted Trial Balance that will be used to populate a Reclassified
       Balance Sheet, Reclassified Statement of Net Cost, and Reclassified Statement of
       Operations and Changes in Net Position;

    2. List closing package financial statement line item amounts identified as Federal by
       trading partner and amount;

    3. Report FR notes information that is based on the Reclassified Balance Sheet line items
       and other notes information required to meet FASAB standards;

    4. Report other data information that is not based on the Reclassified Balance Sheet line
       items and other data noted information required to meet FASAB standards, and

    5. Report the information in the FR Notes Report and Other Data Report entitled “2017 –
       September,” “Prior Year,” “PY,” “Previously Reported,” “Line Item Changes,” and
       “Threshold,” [and the information as of and for the year-ended September 30, 2017
       included in the “Text Data” of the FR Notes Reports and “Other Text Data” of the Other
       Data Reports] and the information in the Additional Note No. 1 related to the prior year
       balances, for purposes of additional analysis in accordance with TFM 2-4700. Such
       information is are not a required part of the closing package financial statements.




8    AUDIT REPORT 50401-0017-11
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