oversight

Financial Audit: Issues Regarding Reconciliations of Fund Balances with Treasury Accounts

Published by the Government Accountability Office on 1999-09-17.

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

JAO)               Report to the Secretary of the 'lreasuly




September 1999     FINANCIAL AUDIT

                   Issues Regarding
                   Reconciliations of
                   Fund Balances With
                   Treasury Accounts




                    :       G AO
GAO/AIMD-99-27 1
       - AGAO
 .Accountability   * Integrity * Rellability

United States General Accounting Office                                                                   Accounting and Information
Washington, D.C. 20548                                                                                          Management Division



                                               B-283392

                                               September 17, 1999

                                               The Honorable Lawrence H. Summers
                                               The Secretary of the Treasury

                                               Dear Mr. Secretary:

                                               Reconciliations of federal agencies' Fund Balances with Treasury accounts
                                               continue to be a significant problem contributing to our inability to render
                                               an opinion on the U.S. government's fiscal year 1998 financial statements.
                                               In our March 1999 audit report on the 1998 Financial Report of the United
                                               States Government, we reported that several major agencies were not
                                               effectively reconciling cash disbursements. We also reported that there
                                               continued to be billions of dollars of unresolved gross differences between
                                               agencies' and the Department of the Treasury's records of cash
                                               disbursements as of September 30, 1998. We previously reported similar
                                               problems for fiscal year 1997.2

                                               Federal agencies record their budget spending authorization in Fund
                                               Balances with Treasury accounts, and increase or decrease these accounts
                                               as they collect or disburse funds. Treasury designed various procedures
                                               and controls-called the reconciliation process-aimed primarily at ensuring
                                               the reliability of receipt and disbursement data reported by agencies. This
                                               monthly reconciliation process-similar in concept to individuals
                                               reconciling personal checkbooks with a bank's records each month-is
                                               intended to be a key internal control over the federal receipts and
                                               disbursements that flow through these accounts.

                                               As part of our audit of the U.S. government's fiscal year 1998 financial
                                               statements, we continued our efforts to monitor and evaluate the overall
                                               effectiveness of agencies' reconciliation processes for Fund Balances with
                                               Treasury accounts. In addition, we followed up on Treasury's actions to
                                               improve its assistance to agencies in their reconciliation efforts. This
                                               report provides the results of that work.


                                               'Financial Audit: 1998 Financial Report of the United States Government (GAO/AIMD-99-130,
                                               March 31,1999).

                                               'Financial Audit: 1997 Consolidated Financial Statements of the United States Government
                                               (GAO/AIMD-98-127, March 31, 1998) and Financial Audit: Issues Regarding Reconciliations of Fund
                                               Balances with Treasury Accounts (GAO/AIMD-99-3, October 14, 1998).




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Results in Brief   Auditors continued to find significant problems with federal agencies'
                   reconciliations of Fund Balances with Treasury accounts in fiscal year
                   1998. 3 Auditors reported reconciliation problems at 11 federal agencies
                   covered by the Chief Financial Officers Act of 1990 (CFO Act). 4 These
                   agencies disbursed about 48 percent of the total federal dollars disbursed
                   in fiscal year 1998 and had billions of dollars in unreconciled differences
                   outstanding at year-end.

                   These agencies were either not timely in reconciling their Fund Balances
                   with Treasury accounts or were adjusting their accounts to match the
                   amounts reported by Treasury. These adjustments were made without
                   adequately researching the causes of the differences and thus without
                   knowing which number, if any, was correct.

                   Auditors reported that the lack of effective internal control procedures
                   was, in general, the underlying cause of agency reconciliation problems.
                   Auditors also reported that improper reconciliations contributed to
                   management not detecting certain instances of fraud and mismanagement
                   of funds at two agencies. We reported that ineffective cash disbursement
                   reconciliations affect the reliability of the U.S. government's fiscal year
                   1998 financial statements and the underlying financial information. We also
                   reported that the failure of certain agencies to properly reconcile their
                   disbursements increases the risks of inaccuracies in the President's budget
                   and contributes to the overall inability of the federal government to
                   accurately measure the full cost of its programs.

                   Agencies depend on Treasury for support in fulfilling their reconciliation
                   responsibilities. Treasury has taken steps to improve its assistance to
                   agencies in performing their reconciliation processes, such as providing
                   more detailed reports to agencies and developing supplemental written
                   guidance and training courses for agencies. However, because of the timing
                   and nature of these actions, at the end of our field work for the audit of the
                   U.S. government's fiscal year 1998 financial statements, it was too early to



                   3The fiscal year 1998 audits were performed by auditors from the Offices of the Inspectors General
                   (OIG), or Independent Public Accounting firms under contract with the OIGs, or by us.
                   4
                    The CFO Act, as expanded by the Government Management Reform Act of 1994, requires the issuance
                   of annual audited financial statements for the 24 executive agencies specified in the law. However, the
                   audit reports fbr four of the agencies covered by the CFO Act were not issued in time for us to include
                   their results in this report. When we refer to agencies in this report, we are referring to the agencies
                   covered by the CFO Act.




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             assess the impact such actions had on improving the overall effectiveness
             of agencies' reconciliations of Fund Balances with Treasury accounts.



Background   We first reported on agencies' long-standing reconciliation problems during
             our preparation for the audit of the U.S. government's fiscal year 1997
             financial statements. At that time, we issued a letter dated June 24, 1997, to
             alert agency Inspectors General and Chief Financial Officers of our
             concerns about large unreconciled differences and improper agency
             adjustments. 5 However, as indicated in our report on the audit of the U.S.
             government's fiscal year 1997 financial statements, several major agencies
             were not effectively reconciling their records with Treasury's records of
             cash disbursements. Thus, agency reconciliation problems, one of several
             material deficiencies included in our March 1998 report, contributed to our
             inability to render an opinion on those financial statements. Further, we
             issued a report in October 1998 which presented a more in-depth analysis
             of the agency reconciliation problems identified in our fiscal year 1997
             audit and recommended ways for Treasury to enhance its assistance to
             agencies to help them fulfill their responsibility to timely and properly
             reconcile Fund Balances with Treasury accounts.

             Because most assets, liabilities, revenues, and expenses stem from or
             result in cash transactions, errors in the receipt or disbursement data affect
             the accuracy of the individual agency financial reports and various U.S.
             government financial reports, including data provided by agencies for
             inclusion in the President's budget concerning fiscal year obligations and
             outlays. Further, the lack of effective reconciliations increases the risk of
             fraud, waste, and mismanagement of government funds. Inaccurate receipt
             and disbursement data also contribute to the overall inability of the federal
             government to accurately measure the full cost of its programs.

              Even though Treasury serves as the central banker for most federal
              agencies, unlike commercial banking institutions, it does not maintain
              independent accounting records of each agency's Fund Balances with
              Treasury accounts.

              Instead, Treasury relies on monthly data reported by agencies for its record
              of agencies' collections and disbursements and Fund Balances with


               Financial Statement Audit: Reconciliation of Fund Balances with IYeasurv (GAO/AIMD-97-104R,
              June 24, 1997).




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Treasury-account balances. Treasury reports these data in the Monthly
Treasury Statement of Receipts and Outlays of the U.S. Government and
other U.S. government financial reports.

Treasury's Financial Management Service (FMS) designed the
reconciliation process primarily to help ensure the reliability of receipt and
disbursement data reported by agencies. FMS also developed the
automated systems used in the reconciliation process. The primary system
used by agencies in transaction processing and in their monthly reporting
to Treasury is the Government On-line Accounting Link System (GOALS).
Also, the GOALS On-line Payment and Collections (OPAC) and Regional
Financial Center/Agency Link applications, and CA$HLINK, the cash
collections system, are used by agencies for processing and reconciling
transactions.

Treasury policies require each agency to submit monthly Statements of
Transactions (Standard Form 224) or Statements of
Accountability/Transactions (Standard Forms 1218/1221 and 1219/1220) to
report agency collection and disbursement activity along with other
financial information. Also, Treasury requires each agency to submit a
Year-End Closing Statement (FMS Form 2108) showing the funds
unobligated under each appropriation and fund account that is included in
an agency's Fund Balances with Treasury account. The balances in the
Year-End Closing Statement, however, would not reflect any unreconciled
differences. Thus, the accuracy of the appropriation and fund account
balances reported on the FMS Form 2108 depends on whether an agency
has properly reconciled its Fund Balances with Treasury accounts. Further,
the balances reported on FMS Form 2108 and related transactions reported
monthly by the agencies are used to prepare the U.S. Government Fiscal
Year 1998 Annual Report and should agree with the corresponding balances
and transactions reported by agencies on their final Standard Form
133 budget execution reports to the Office of Management and Budget
(OMB).

The reconciliation process begins when Treasury compares agency
reported receipts and disbursements to amounts reported by independent
sources, such as Federal Reserve Banks. Treasury then reports the details
of any discrepancies identified to agencies in a monthly Statement of
Differences report (FMS Form 6652). Also monthly, Treasury sends the
Undisbursed Appropriation Account Ledgers (FMS Form 6653) and the
Receipt Account Ledger and Trial Balance (FMS Form 6655) showing the
monthly activity in each appropriation account. This includes



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              disbursements and receipts as well as noncash transactions, such as
              additional allocated budget authority and reprogramming or budget
              recissions. Agencies are responsible for investigating and resolving
              differences (1) reported on the monthly Statement of Differences reports
              and (2) between their fund account records and Treasury's Undisbursed
              Appropriation and Receipt Account ledgers. Once differences are resolved,
              agencies must record any necessary adjustments to their Fund Balances
              with Treasury accounts and report these adjustments to Treasury.

              Treasury sends agencies Statement of Differences reports monthly until the
              differences are cleared. Each month, Treasury also reviews agencies'
              unresolved Statements of Differences and sends reminder letters to each
              agency that has (1) not reconciled a difference of over $50,000 within
              3 months or (2) has 6 or more months of unresolved differences (regardless
              of the dollar amount). Also, a quarterly letter is sent to the Chief Financial
              Officer (CFO) of each agency with unresolved differences to notify the
              CFO of the reconciliation problem and to offer Treasury assistance in
              resolving the differences and improving the agency's reconciliation
              process. Until April 1998, differences that remained outstanding for
              6 months were aggregated by month and each month's net amount was
              transferred to Budget Clearing Accounts (BCAs) by Treasury. 6 After the
              transfer, monthly Statement of Differences reports and reminder letters
              were no longer sent to agencies. Instead, the net transfers and net BCA
              balances were reported monthly to agencies on the Undisbursed
              Appropriation Account Ledger (FMS Form 6653).



Scope and     In order to meet our objectives of monitoring and evaluating the overall
              effectiveness of federal agencies' reconciliation processes and follow up on
Methodology   Treasury's actions to improve its assistance to agencies in their
              reconciliation efforts, we:

              * Determined if agency auditors reported any reconciliation problems by
                reviewing the fiscal year 1998 audit reports issued at the time of our
                review on 20 of the federal agencies covered by the CFO Act.



              6
               'Treasury issued Treasury Financial Manual Bulletin 98-07 in early 1998 to notify agencies that the
              process of transferring unresolved differences over 6 months old to Budget Clearing accounts-called
              the chargeback process-was to be discontinued effective for the April 1998 reporting cycle. This
              bulletin also notified agencies to take the necessary and appropriate actions to clear all BCA balances
              not later than September 30, 1998.




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                       * Selected the same 10 federal agencies as in the prior year (called major
                         agencies in this report) as well as 5 other agencies for which we
                         reported reconciliation problems in our prior year report. We also
                         selected the agency with the largest receipts in fiscal year 1998. The
                         agencies selected accounted for approximately 95 percent of total
                         federal disbursements and about 94 percent of total federal receipts in
                         fiscal year 1998. We obtained detailed information from the auditors of
                         these agencies on any current problems with reconciling Fund Balances
                         with Treasury accounts and actions to correct the problems found in the
                         prior year.
                       * Obtained information on the status of Treasury's actions to implement
                         the recommendations we made in our October 1998 report to improve
                         assistance to agencies. We obtained this information through interviews
                         with Treasury officials and reviews of Treasury action plans and
                         documentation supporting actions taken.

                       We requested comments on a draft of this report from the Secretary of the
                       Treasury or his designee. Treasury's comments are reprinted in appendix I.
                       We performed our work from October 1998 through July 1999 in
                       accordance with generally accepted government auditing standards.



Many Agencies          Auditors reported problems with Fund Balances with Treasury account
                       reconciliations at 11 of the 20 CFO agencies for which audit reports were
Continue to Have       issued as of the completion of our fieldwork.7 In general, the auditors found
Problems Reconciling   that these agencies did not have procedures in place to ensure effective
      TheirBalances
          Fund         reconciliations of Fund Balances with Treasury accounts. These 11
                       agencies accounted for about 48 percent of the total dollars disbursed by
With Treasury          the federal government in fiscal year 1998. Auditors did not report any
Accounts               reconciliation problems at the nine other CFO agencies for which audits
                       had been completed.




                       7
                           These 11 agencies included 7 of the major agencies we reviewed.




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For 7 of the 11 agencies with reported reconciliation problems, the auditors
reported the problems as material weaknesses.8 For the four other
agencies, auditors reported reconciliation problems that they did not
consider to be material weaknesses at the agency level. However, for two
of these agencies, one or more of their components reported material
weaknesses related to Fund Balances with Treasury reconciliations.

In order to effectively reconcile their Fund Balances with Treasury
accounts, agencies must timely research and resolve any differences
between their records and Treasury's records. However, for the second
consecutive year we found that there were billions of dollars of
unreconciled gross differences between agencies' and Treasury's records of
disbursements, as of the end of the fiscal year. While some of these
differences could be related to timing, as noted in our examples below,
auditors identified differences that had been outstanding for several years.
Also, some agencies continued to arbitrarily write off unreconciled
differences in order to match their records with Treasury's reported
balances without adequately determining whether, in fact, their records
may have been correct. In addition, auditors identified certain instances of
fraud and mismanagement of funds that went undetected partly due to the
lack of effective agency reconciliations of Fund Balances with Treasury
accounts. In general, auditors recommended that agency management
 develop and implement procedures, or take other appropriate corrective
 actions, to ensure timely and proper reconciliations of Fund Balances with
_Treasury accounts. Some examples of the problems found at agencies
 follow.

    One major agency had about $1.8 billion in gross unresolved differences
    between records of the checks it issued and Treasury's records of
    checks that had cleared the Federal Reserve Banks. At this same agency,
    auditors identified an instance where long-standing reconciliation
    problems contributed to the mismanagement of funds. Specifically, in
    1991 the agency made a deposit for nearly $2.1 million, but the bank
    mistakenly recorded the deposit for only $3,458.89 (the deposit ticket
    number). Because this agency failed to adequately reconcile its records
    with Treasury's records, this error went undetected until auditors found



 'A material weakness is a reportable condition in which the design or operation of the internal controls
 does not reduce to a relatively low level the risk that losses, noncompliance, or misstatements in
 amounts that would be material in relation to the financial statements may occur and not be detected
 within a timely period by employees in the normal course of performing their duties.




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   the discrepancy. In fiscal year 1998, the bank subsequently paid the
   government the correct deposit amount plus $640,000 in interest.

Auditors found that this agency's reconciliation problems were primarily
caused by inadequate procedures to ensure that timely reconciliations
were performed, but acknowledged that the agency had made some
improvements in its procedures during fiscal year 1998. Although this
agency's auditor issued a disclaimer of opinion because it did not receive
the agency's financial statements in time to perform all the necessary audit
work, the auditor reported that deficiencies in internal controls, including
these reconciliation problems, would also have precluded an audit opinion
on the agency's financial statements.

* The auditor of another major agency reported that in fiscal year 1998,
  this agency had unreconciled differences of $11 million. While this
  amount may be deemed not material, it represents an increase of
  36 percent over the unreconciled amounts at the end of fiscal year 1997.
  Also, this agency still had unreconciled differences in its Budget
  Clearing Accounts totaling $500,000 even though Treasury had
  instructed agencies to reconcile the amounts in these accounts by the
  end of fiscal year 1998. The auditor also found that several payments
  intended for program claimants had been diverted to an employee's
  personal bank account and concluded that this fraudulent situation
  could have been detected if proper reconciliations of Fund Balances
  with Treasury accounts were conducted. Although the auditor issued an
  unqualified opinion on the agency's financial statements, the auditor
  reported that, because of these unreconciled differences, the agency
  could not ensure that all disbursements and deposits were accurately
  recorded.
ยท Another major agency was routinely adjusting the amounts reported on
  the SF 224, Statement of Transactions, to make them agree with
  Treasury's records. In reality, the agency was simply transferring the
  differences to various suspense accounts and did not research the
  differences to determine which accounts were affected. As a result, the
  auditor found that the agency had gross unreconciled differences of
  $4.4 billion for disbursements and $383 million for receipts between the
  agency and Treasury records at the end of fiscal year 1998. According to
  the auditor, this agency had been making these types of unsupported
  adjustments to the SF 224 since 1992. The auditor noted that this agency
  had initiated a corrective action plan to address this serious problem
  and was making progress in fixing it. However, corrective actions are
  not scheduled to be fully completed until March 2000. As a result of the



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                           reconciliation problems, the auditor was unable to conclude as to the
                           accuracy of the over $37 billion in this agency's Fund Balances with
                           Treasury accounts as of September 30, 1998. This was one of the reasons
                           the auditor rendered a disclaimer of opinion on the agency's fiscal year
                            1998 financial statements.
                         * Another agency did not reconcile its Fund Balances with Treasury
                           accounts during fiscal year 1998. When the agency attempted to
                           reconcile for the 12-month period, the auditors found that material
                            amounts on the reconciliations did not agree with supporting records
                            and the reconciling items identified were not investigated and resolved.
                            This lack of timely and thorough reconciliation made it difficult or
                            impossible for the agency to determine if its operating funds had been
                            properly spent or if the reported amounts of expenses, assets, and
                            liabilities were reliable. This weakness affected the agency's ability to
                            ensure that it complies with laws governing the use of its budget
                            authority. Because of these reconciliation problems, the auditor was
                            unable to conclude whether the amount reported for the Fund Balances
                            with Treasury accounts was reliable. In addition, the auditor qualified its
                            opinion on the agency's balance sheet and disclaimed an opinion on the
                            agency's other financial statements, in part, because of these
                            reconciliation problems.



Treasury Has Acted to    In our October 1998 report on Fund Balances with Treasury accounts
                         reconciliation issues, we reported on problems some agencies were having
Improve Its              with Treasury's reconciliation processes and assistance, and we
Reconciliation           recommended improvements to Treasury. Specifically, certain agencies
Processes and                                                                                      and
                         cited that Treasury's reports lacked sufficient details on checks issuedalso
                         on transactions recorded in the Budget Clearing Accounts. Agencies
Assistance to Agencies   expressed problems with Treasury's GOALS reporting system. For
                         example, several agencies expressed frustration over having to manually
                         input their receipt and disbursement data each month into GOALS. Further,
                         agencies mentioned a lack of adequate Treasury assistance in the areas of
                         (1) written guidance on detailed reconciliation procedures,
                         (2) training, and (3) availability of knowledgeable personnel to help with
                         reconciliation problems.

                          In response to our recommendations, Treasury established a Fund Balance
                          with Treasury team to identify ways to improve assistance to agencies and
                          resolve the problems we noted in last year's report and has either
                          completed or initiated actions to address all of our recommendations. For
                          example, Treasury developed training courses for agencies and Treasury



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             personnel on reconciliation of Fund Balances with Treasury accounts, and
             standard operating procedures for reconciling agency Fund Balances with
             Treasury accounts that will soon be available to agencies on Treasury's
             internet web site.

             Treasury has recognized that current GOALS technology is outdated and is
             working on enhancements to update the GOALS system. However, we
             recognize that Treasury faces other priorities such as Year 2000 computer
             conversion issues and significant challenges associated with the
             nonstandardized agency systems across the federal government as it works
             to complete enhancements to GOALS.



Conclusion   Reconciliations of agencies' Fund Balances with Treasury accounts
             continue to be a significant problem that (1) increases the risks of
             misstatements in agencies' and the government's financial statements,
             (2) increases the risks of fraud, waste, and mismanagement, and (3) affects
             the ability to accurately measure the full cost of the federal government's
             programs. Auditors reported that some agencies had improved their
             reconciliation processes. However, to overcome the persistent
             reconciliations problems will require the continued commitment of all
             agencies to develop and implement effective internal control procedures.
             In addition, it is important for Treasury to continue its efforts to work with
             agencies to identify and provide the resources and assistance they need to
             perform efficient and effective reconciliations.

             Because of the nature and timing of the actions taken by Treasury, at the
             end of our field work for the audit of the U.S. government's fiscal year 1998
             financial statements, it was too early to assess the impact of Treasury's
             actions on the overall reconciliation process. Future audits of agencies'
             Fund Balances with Treasury accounts reconciliation processes will help
             determine the effectiveness of Treasury's actions in assisting agencies in
             timely and properly reconciling their Fund Balances with Treasury
             accounts. In addition, we recognize that competing demands associated
             with Year 2000 computer conversion issues should take precedence in
             making system modifications. Considering this priority, we reaffirm our
             recommendation that the GOALS system enhancements be completed as
             soon as practical in order to provide agencies with the technology needed
             to promote efficient and effective reconciliations.




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Agency Comments   Treasury agreed with our findings and recommendation. Treasury stated
                  that it will continue its efforts in training, standardizing policies and
                  procedures, and visiting federal program agencies to identify and provide
                  the necessary assistance for the agencies to perform timely and effective
                  reconciliations. It will also work on enhancing the GOALS system. We will
                  continue to evaluate Treasury and agency actions to address the issues
                  discussed in this report during our audit of the U.S. government's fiscal
                  year 1999 financial statements.


                  We are sending a copy of this report to Senator Robert Byrd, Senator Ben
                  Nighthorse Campbell, Senator Pete Domenici, Senator Byron Dorgan,
                  Senator Frank Lautenberg, Senator Joseph Lieberman, Senator Daniel
                  Moynihan, Senator William Roth, Senator Ted Stevens, and Senator Fred
                  Thompson, and to Representative Bill Archer, Representative Dan Burton,
                  Representative Stephen Horn, Representative Steny Hoyer, Representative
                  John R. Kasich, Representative Jim Kolbe, Representative David R. Obey,
                  Representative Charles Rangel, Representative John M. Spratt, Jr.,
                  Representative Jim Turner, Representative Henry A. Waxman, and
                  Representative C. W. Bill Young in their capacities as Chairmen or Ranking
                  Minority Members of Senate and House Committees and Subcommittees.
                  We are also sending copies of this report to: Donald Hammond, Fiscal
                  Assistant Secretary, Department of the Treasury; Richard L. Gregg,
                  Commissioner of the Financial Management Service, Department of the
                  Treasury; the Honorable Jacob J. Lew, Director, Office of Management and
                  Budget; and the Inspectors General and Chief Financial Officers of the
                  24 federal executive agencies covered by the Chief Financial Officers Act of
                  1990. Copies will be made available to others upon request.




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If you have any questions regarding this report, please contact me or
Christine Robertson at (202) 512-3406. Other key contributors to this
assignment were Suzanne Murphy, Jerry Marvin, and Carolyn Voltz.

Sincerely yours,




Gary T. Engel
Associate Director
Governmentwide Accounting and
 Financial Management Issues




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Page 13   GAO/AIMD-99-271 Agency Reconciliations of Fund Balances
Appendix I

Comments From the Department of the
Treasury



                                               DEPARTMENT OF THE TREASURY
                                                FINANCIAL MANAGEMENT SERVICE
                                                    WASHINGTON, D.C. 20227

             CO.MMASONER



                                                      August 26, 1999


                  Mr. Gary T. Engel
                  Associate Director
                  Governmentwide Accounting and
                    Financial Management Issues
                  General Accounting Office
                  441 G Street, N.W.
                  Washington, DC 20548-0001

                  Dear Mr. Engel:

                  The Financial Management Service (FMS) has received for comment a copy of your recent audit
                  report (GAO/AIMD-99-271), entitled Issues Regardine Reconciliations of Fund Balances with
                  Treasury Acounts. We offer the following comments on the report.

                  We concur -with all of the observations and recommendations contained within the report. We
                  are especially pleased to have all of the work FMS has undertaken both recognized and
                  acknowledged. At the same time, we recognize that more work does remain to be done with
                  FPAs in addressing this issue of achieving efficient and effective agency reconciliations.

                  During the past year we have worked very hard to institute the recommendations you provided in
                  the previous year's report. In the coming months we will continue working with Federal
                  Program Agencies (FPAs) in this effort. Our efforts will concentrate on continued training,
                  standardizing policies and procedures, and visiting FPAs in a focused effort to identify and
                  provide the necessary assistance for them to perform timely and effective reconciliations.

                  Concurrently, we will continue our efforts working on enhancements to the GOALS system. To
                  that end, development of the new GOALS II is well underway. In fact, all of the applications are
                  to be either completed or implemented by September 2001. When this event occurs, these
                  applications will support agency reporting to the central accounting system and various
                  intragovermnental payments activities while, at the same time, replacing the current GOALS
                  system.

                  Thank you fbr the opportunity to respond to this draft GAO report.

                                                              Sincerely,



                                                              Richard L. Gregg




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