oversight

Financial Audit: American Battle Monuments Commission's Financial Statements for Fiscal Years 2011 and 2010

Published by the Government Accountability Office on 2012-03-01.

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

             United States Government Accountability Office

GAO          Report to Congressional Committees




March 2012
             FINANCIAL AUDIT
             American Battle
             Monuments
             Commission’s
             Financial Statements
             for Fiscal Years 2011
             and 2010




GAO-12-404
             A
                                                March 2012

                                                FINANCIAL AUDIT
                                                American Battle Monuments Commission’s Financial
                                                Statements for Fiscal Years 2011 and 2010
Highlights of GAO-12-404, a report to
congressional committees




Why GAO Did This Study                          What GAO Found
Created in 1923, the American Battle            In GAO’s opinion, the financial statements of the American Battle Monuments
Monuments Commission (the                       Commission (the Commission) as of September 30, 2011, and 2010, and for the
Commission) operates and maintains              fiscal years then ended, are presented fairly, in all material respects, in
24 American military cemeteries on              conformity with U.S. generally accepted accounting principles (GAAP). Also, in
foreign soil; 25 federal memorials,             GAO’s opinion, although certain internal controls over financial reporting should
monuments, and markers; and 7                   be improved, the Commission maintained effective internal control over financial
nonfederal memorials. For fiscal year           reporting as of September 30, 2011. In addition, GAO found no reportable
2011, the Commission incurred                   instances of noncompliance with the laws and regulations it tested.
program costs of $71.5 million to
maintain its cemeteries and federal             GAO found a significant deficiency in the Commission’s internal control over
memorials.                                      financial reporting as of September 30, 2011. Specifically, GAO identified
In accordance with 36 U.S.C. § 2103,
                                                vulnerabilities in access controls over the payroll systems that maintain and
GAO is responsible for conducting               process foreign employee payroll. In addition, GAO found that the Commission
audits of the agencywide financial              did not have clear policies and procedures outlining the specific duties and
statements of the Commission. GAO               responsibilities of its Human Resources and Finance Directorates for processing
audited the financial statements of the         of foreign employee payroll. These deficiencies increase the risk of undetected
Commission for the fiscal years ended           errors or irregularities in processing the Commission’s foreign payroll. GAO also
September 30, 2011, and 2010.                   found that the Commission took action to provide an analysis of the agency’s
                                                overall financial position and results of operations in its fiscal year 2011
The audits were done to determine
                                                Management’s Discussion and Analysis as required by U.S. GAAP and Office of
whether, in all material respects,
                                                Management and Budget Circular No. A-136, Financial Reporting Requirements.
(1) the Commission’s financial
statements were presented fairly and            The Commission’s Cambridge American Cemetery in Cambridge, England
(2) Commission management
maintained effective internal control
over financial reporting. GAO also
tested the Commission’s compliance
with selected laws and regulations.

What GAO Recommends
GAO is not making any
recommendations in this report, but will
be reporting separately on matters
identified during its audit, along with
recommendations for strengthening the
Commission’s internal controls.
In commenting via e-mail on a draft of
this report, the Commission concurred
with GAO’s findings and conclusions.




                                                Source: American Battle Monuments Commission.
View GAO-12-404. For more information,
contact Steven J. Sebastian at (202) 512-3406
or sebastians@gao.gov.

                                                                                                United States Government Accountability Office
Contents



Letter                                                                                                  1


Auditor’s Report                                                                                        3
                            Opinion on Financial Statements                                             3
                            Opinion on Internal Control                                                 3
                            Compliance with Laws and Regulations                                        6
                            Consistency of Other Information                                            7
                            Objectives, Scope, and Methodology                                          7
                            Commission Comments                                                        10


Management’s                                                                                           11

Discussion and
Analysis

Financial Statements                                                                                   22
                            Consolidating Balance Sheet                                                22
                            Consolidating Statement of Net Cost and Changes in Net 
                              Position                                                                 23
                            Consolidating Statement of Budgetary Resources                             24
                            Notes to Consolidating and Consolidated Financial Statements               25


Other Information                                                                                      36
                            Required Supplementary Information                                         36
                            Schedules of Heritage Assets                                               37


Appendix
              Appendix I:   Management’s Report on Internal Control over Financial
                            Reporting                                                                  40

                            Abbreviations

                            ABMC      American Battle Monuments Commission (the Commission)
                            FMFIA     Federal Managers' Financial Integrity Act of 1982
                            MD&A      Management’s Discussion and Analysis
                            OMB       Office of Management and Budget




                            Page i                           GAO-12-404 ABMC 2011 and 2010 Financial Audit
Contents




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Page ii                                  GAO-12-404 ABMC 2011 and 2010 Financial Audit
A
United States Government Accountability Office
Washington, D.C. 20548



                                    March 1, 2012                                                                   Leter




                                    The Honorable Patty Murray
                                    Chairman
                                    The Honorable Richard Burr
                                    Ranking Member
                                    Committee on Veterans’ Affairs
                                    United States Senate

                                    The Honorable Jeff Miller
                                    Chairman
                                    The Honorable Bob Filner
                                    Ranking Member
                                    Committee on Veterans’ Affairs
                                    House of Representatives

                                    In accordance with 36 U.S.C. § 2103, this report presents the results of our
                                    audits of the financial statements of the American Battle Monuments
                                    Commission (the Commission) for the fiscal years ended September 30,
                                    2011, and 2010. This report contains our (1) unqualified opinion on the
                                    Commission’s fiscal years 2011 and 2010 financial statements; (2) opinion
                                    that the Commission maintained, in all material respects, effective internal
                                    control over financial reporting as of September 30, 2011; and (3)
                                    conclusion that our tests of the Commission’s compliance with selected
                                    provisions of laws and regulations for fiscal year 2011 disclosed no
                                    instances of reportable noncompliance during fiscal year 2011. The
                                    accompanying report also provides information regarding a significant
                                    deficiency we identified concerning the Commission’s internal control over
                                    financial reporting related to its payroll processes for foreign employees.

                                    We are sending copies of this report to other interested congressional
                                    committees. We are also sending copies to the Acting Director of the
                                    Office of Management and Budget, the Commissioners and Secretary of
                                    the Commission, and other interested parties. In addition, the report is
                                    available at no charge on the GAO website at http://www.gao.gov.

                                    Should you or your staff have any questions concerning this report, please
                                    contact me at (202) 512-3406 or at sebastians@gao.gov. Contact points




                                    Page 1                              GAO-12-404 ABMC 2011 and 2010 Financial Audit
for our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report.




Steven J. Sebastian
Managing Director
Financial Management and Assurance




Page 2                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
A
United States Government Accountability Office
Washington, D.C. 20548



                                    To the Commissioners and Secretary of the American Battle Monuments
                                    Commission                                                                      Aud
                                                                                                                      to
                                                                                                                       R
                                                                                                                       sir’eport




                                    In accordance with 36 U.S.C. § 2103, we are responsible for conducting
                                    audits of the agencywide financial statements of the American Battle
                                    Monuments Commission (the Commission). In our audits of the
                                    Commission’s financial statements for fiscal years 2011 and 2010, we
                                    found

                                    • the consolidating financial statements as of and for the fiscal year
                                      ended September 30, 2011, and comparative consolidated totals as of
                                      and for the fiscal year ended September 30, 2010, are presented fairly,
                                      in all material respects, in conformity with U.S. generally accepted
                                      accounting principles;

                                    • although certain internal controls should be improved, the Commission
                                      had effective internal control over financial reporting as of 
                                      September 30, 2011; and

                                    • no reportable noncompliance with the selected provisions of laws and
                                      regulations we tested.

                                    The following sections discuss in more detail (1) our basis for these
                                    conclusions; (2) our conclusions on the Commission’s Management’s
                                    Discussion and Analysis and other supplementary information; (3) our
                                    audit objectives, scope, and methodology; and (4) Commission
                                    comments.



Opinion on Financial                The Commission’s consolidating balance sheet as of September 30, 2011,
                                    consolidating statement of net cost and changes in net position, and
Statements                          consolidating statement of budgetary resources, with accompanying notes
                                    for the fiscal year then ended, and comparative consolidated totals as of
                                    and for the fiscal year ended September 30, 2010, are presented fairly, in
                                    all material respects, in conformity with U.S. generally accepted
                                    accounting principles.



Opinion on Internal                 Although certain controls should be improved, as discussed below, the
                                    Commission maintained, in all material respects, effective internal control
Control                             over financial reporting as of September 30, 2011. Commission internal



                                    Page 3                              GAO-12-404 ABMC 2011 and 2010 Financial Audit
                         control provided reasonable assurance that misstatements, losses, or
                         noncompliance material in relation to the consolidating financial
                         statements would be prevented or detected and corrected on a timely
                         basis. Our opinion is based upon criteria established under 31 U.S.C. §
                         3512 (c), (d), commonly known as the Federal Managers’ Financial
                         Integrity Act of 1982 (FMFIA).



Significant Deficiency   During fiscal year 2011, we identified several deficiencies in the
                         Commission’s internal controls over its payroll processes for its non-U.S.
                         citizen employees (foreign employees).1 These deficiencies include
                         vulnerabilities in access controls over the Commission’s payroll systems
                         for its foreign employees and weaknesses in its policies and procedures
                         over payroll processing for foreign employees. While these deficiencies,
                         individually and collectively, do not constitute a material weakness in
                         internal control over financial reporting,2 they nevertheless increase the
                         risk of undetected errors or irregularities in the processing of the
                         Commission’s foreign payroll and, ultimately, in the Commission’s financial
                         statements. Consequently, we believe they collectively represent a
                         significant deficiency in the Commission’s internal control.3

                         To fulfill its mission, the Commission employs both U.S. citizens and
                         foreign employees. U.S. citizens are considered federal employees, while
                         foreign employees are hired pursuant to treaty agreements and respective
                         foreign national employment law. Payroll for all of the Commission’s
                         federal employees is managed by the General Services Administration
                         and these employees are paid using electronic funds transfers from the
                         U.S. Department of the Treasury (Treasury). Payroll for the foreign

                         1
                          During fiscal year 2011, the Commission used a total of 396 full-time equivalent positions.
                         U.S. citizens constituted 73 positions, while the remaining 323 positions were non-U.S.
                         citizens employed at the Commission’s regional offices and at the cemeteries in the
                         countries where the Commission operates.
                         2
                           A material weakness is a deficiency, or combination of deficiencies, in internal control over
                         financial reporting, 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 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.
                         3
                           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 the attention of
                         those charged with governance.




                         Page 4                                        GAO-12-404 ABMC 2011 and 2010 Financial Audit
employees, which covers employees located in seven countries, is
maintained by the Commission in three separate payroll systems.4 Foreign
employees enter their time and attendance for each pay period into their
respective country’s payroll system. Time charges at the end of each pay
period are reviewed and certified by designated accountants in the
Commission’s Finance Directorate. The payroll systems then calculate the
payroll and generate reports detailing each foreign employee’s gross and
net pay, including offsetting deductions and other benefits and allowances.
Once these reports are verified and certified as to reasonableness by the
designated accountants, the payroll systems generate payroll files that are
sent to both Treasury for the disbursement of employee wages and to the
Commission’s financial management system for recording in the general
ledger.

During our audit, we identified deficiencies in controls over the three
foreign employee payroll systems that increased the risk of financial
reporting misstatements and unauthorized access and manipulation of the
systems or their data. Specifically, we found that two system
administrators had inappropriate system access allowing them to not only
make system changes but to alter data in systems for which they were
responsible. These administrators were responsible for (1) developing, 
(2) testing, and (3) implementing the foreign payroll systems and any
changes to them, which included the systems used to process their own
payroll. With this level of access, these administrators had inappropriate
authority to alter data in the payroll systems and modify the payroll files
sent to Treasury for payroll disbursement and to the general ledger for
recording. Such actions could enable the administrators to add or alter
system data without authorization and not have any such changes readily
detectable by Commission management. We also found that the
Commission had not installed critical updates on several of its servers,
leaving these servers vulnerable to unauthorized users who could gain full
administrator-level access through a server that communicates with the
Internet. This, in turn, could allow unauthorized users to gain
administrator-level access to the foreign employee payroll systems.

In addition to the deficiencies in controls over access to the foreign payroll
systems, we found that the Commission did not have effective controls to


4
 The Commission maintains payroll for foreign employees located in the following
countries: (1) Belgium, (2) England, (3) France, (4) Italy, (5) Luxembourg, (6) the
Netherlands, and (7) Tunisia.




Page 5                                      GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       minimize the risk of errors in processing of payroll actions for the
                       Commission’s foreign employees. Specifically, we found that the
                       Commission did not have policies and procedures clearly delineating the
                       responsibilities of both the Human Resources and Finance Directorates
                       with respect to ensuring accurate payroll information for foreign
                       employees. While the Human Resources Directorate is responsible for
                       processing all employee personnel actions, such as promotions, salary
                       increases, and benefit changes, the Commission did not have procedures
                       that set out required steps to be followed to transmit employee actions
                       processed by the Human Resources Directorate to the Finance
                       Directorate. Because the Finance Directorate is responsible for verifying
                       and approving employee information in the payroll systems, including the
                       certification of time charges and salary and benefits information, the lack
                       of such sufficiently detailed procedures increases the risk of undetected
                       errors in reporting payroll information. As a result of these deficiencies,
                       during our testing of foreign payroll, we identified instances in which the
                       information in the foreign employee payroll systems was out of date and
                       annual leave hours were incorrectly recorded.

                       While these deficiencies increased the risk of errors and misstatements in
                       foreign employee payroll amounts occurring and not being timely detected
                       and corrected, the Commission also had certain budgetary controls in
                       place that would have detected and corrected any material misstatements
                       in a timely manner. Consequently, we do not believe these control
                       deficiencies constitute a material weakness in the Commission’s internal
                       control over financial reporting. However, we do believe that these
                       deficiencies, collectively, represent a significant deficiency in internal
                       control that merits attention by those charged with governance.

                       We also identified other less significant matters concerning the
                       Commission’s internal control that we will report separately, along with
                       recommended corrective actions for these matters as well as for the
                       matters comprising the significant deficiency in internal control.



Compliance with Laws   Our tests of the Commission’s compliance with selected provisions of laws
                       and regulations for fiscal year 2011 disclosed no instances of
and Regulations        noncompliance that would be reportable under U.S. generally accepted
                       government auditing standards. However, the objective of our audit was
                       not to provide an opinion on overall compliance with laws and regulations.
                       Accordingly, we do not express such an opinion.




                       Page 6                              GAO-12-404 ABMC 2011 and 2010 Financial Audit
Consistency of Other     The Commission’s Management’s Discussion and Analysis (MD&A) and
                         other information related to heritage assets presented in the Commission’s
Information              financial report contain a wide range of data, some of which are not
                         directly related to the financial statements. We do not express an opinion
                         on this information. However, we compared this information for
                         consistency with the financial statements and discussed the methods of
                         measurement and presentation with officials of the Commission. On the
                         basis of this limited work, we found no material inconsistencies with the
                         financial statements, U.S. generally accepted accounting principles, and
                         Office of Management and Budget (OMB) Circular No. A-136, Financial
                         Reporting Requirements.

                         During our audit of the Commission’s fiscal year 2010 financial
                         statements,5 we determined that the Commission did not provide an
                         analysis of the agency’s overall financial position and results of operations
                         in its MD&A as required by U.S. generally accepted accounting principles
                         and OMB Circular No. A-136. However, as part of our fiscal year 2011
                         financial audit, we found the Commission’s fiscal year 2011 MD&A
                         included such an analysis in accordance with U.S. generally accepted
                         accounting principles and OMB Circular No. A-136.



Objectives, Scope, and   Commission management is responsible for (1) preparing the financial
                         statements in conformity with U.S. generally accepted accounting
Methodology              principles, (2) establishing and maintaining effective internal control over
                         financial reporting and evaluating its effectiveness, and (3) complying with
                         applicable laws and regulations. Commission management evaluated the
                         effectiveness of its internal control over financial reporting as of 
                         September 30, 2011, based upon the criteria established under FMFIA.
                         Commission management’s assertion based on its evaluation is included
                         in appendix I.

                         We are responsible for planning and performing the audit to obtain
                         reasonable assurance and provide our opinion on whether (1) the
                         Commission’s financial statements are presented fairly, in all material
                         respects, in conformity with U.S. generally accepted accounting principles
                         and (2) Commission management maintained, in all material respects,


                         5
                           GAO, Financial Audit: American Battle Monuments Commission’s Financial Statements
                         for Fiscal Years 2010 and 2009, GAO-11-320 (Washington, D.C.: Mar. 1, 2011).




                         Page 7                                  GAO-12-404 ABMC 2011 and 2010 Financial Audit
effective internal control over financial reporting as of September 30, 2011.
We are also responsible for (1) testing compliance with selected
provisions of laws and regulations that have a direct and material effect on
the financial statements and (2) performing limited procedures with
respect to certain other information accompanying the financial
statements. In order to fulfill these responsibilities, we

• examined, on a test basis, evidence supporting the amounts and
  disclosures in the financial statements, including evidence supporting
  statistical samples of Commission payroll and nonpayroll expenditures;6

• assessed the accounting principles used and significant estimates
  made by Commission management;

• evaluated the overall presentation of the Commission’s financial
  statements;

• obtained an understanding of the Commission and its operations,
  including its internal control over financial reporting;

• considered the Commission’s process for evaluating and reporting on
  internal control over financial reporting based on criteria established
  under FMFIA;

• assessed the risk of (1) material misstatement in the Commission’s
  financial statements and (2) material weakness in its internal control
  over financial reporting;

• tested relevant internal control over the Commission’s financial
  reporting;

• evaluated the design and operating effectiveness of the Commission’s
  internal control over financial reporting based on the assessed risk; and




6
  These statistical samples were selected primarily to determine the validity of activities
reported in the Commission’s financial statements. We projected any errors in dollar
amount to the population of transactions from which they were selected. In testing some of
these samples, certain attributes were identified that indicated deficiencies in the design or
operation of internal control. These attributes, where applicable, were statistically projected
to the appropriate populations.




Page 8                                       GAO-12-404 ABMC 2011 and 2010 Financial Audit
• tested compliance with selected provisions of the following laws and
  regulations: the Commission’s enabling legislation codified in 36 U.S.C.
  Chapter 21; public laws applicable to the World War II Memorial Fund;
  Buffalo Soldiers Commemoration Act of 2005; Continuing
  Appropriations Resolution, 2010; Consolidated Appropriations Act,
  2010; Continuing Appropriations Act, 2011; Full-Year Continuing
  Appropriations Act, 2011; Antideficiency Act; Pay and Allowance
  System for Civilian Employees; and Prompt Payment Act.

An entity’s internal control over financial reporting is a process affected by
those charged with governance, management, and other personnel, the
objectives of which are to provide reasonable assurance that 
(1) transactions are properly recorded, processed, and summarized to
permit the preparation of financial statements in conformity with U.S.
generally accepted accounting principles, and assets are safeguarded
against loss from unauthorized acquisition, use, or disposition and (2)
transactions are executed in accordance with the laws governing the use
of budget authority and other laws and regulations that could have a direct
and material effect on the financial statements.

We did not evaluate all internal control relevant to operating objectives as
broadly established under FMFIA, such as controls relevant to preparing
statistical reports and ensuring efficient operations. We limited our internal
control testing to testing controls over financial reporting. Our internal
control testing was for the purpose of expressing an opinion on the
effectiveness of internal control over financial reporting and may not be
sufficient for other purposes. Consequently, our audit may not identify all
deficiencies in internal control over financial reporting that are less severe
than a material weakness. Because of inherent limitations in internal
control, internal control may not prevent or detect and correct
misstatements due to error or fraud, losses, or noncompliance. We also
caution that projecting any evaluation of effectiveness to future periods is
subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with policies or
procedures may deteriorate.

We did not test compliance with all laws and regulations applicable to the
Commission. We limited our tests of compliance to those laws and
regulations that have a direct and material effect on the financial
statements for the fiscal year ended September 30, 2011. We caution that
noncompliance may occur and not be detected by these tests and that
such testing may not be sufficient for other purposes.



Page 9                               GAO-12-404 ABMC 2011 and 2010 Financial Audit
             We performed our audit in accordance with U.S. generally accepted
             government auditing standards. We believe our audit provides a
             reasonable basis for our opinions and other conclusions.



Commission   In commenting via e-mail on a draft of this report, the Commission
             concurred with GAO's findings and conclusions.
Comments



             Steven J. Sebastian
             Managing Director
             Financial Management and Assurance

             February 21, 2012




             Page 10                            GAO-12-404 ABMC 2011 and 2010 Financial Audit
Management’s Discussion and Analysis




                               AMERICAN BATTLE MONUMENTS COMMISSION
                                       ANNUAL FINANCIAL REPORT
                             MANAGEMENT'S DISCUSSION AND ANALYSIS (MDA)
                             FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2011

        Mission

        The American Battle Monuments Commission (the Commission) — guardian of America’s
        overseas commemorative cemeteries and memorials — honors the service, achievements and
        sacrifice of the United States armed forces. Since 1923, the Commission has executed this
        mission by (1) commemorating the achievements and sacrifices of America’s armed forces
        through the erection and maintenance of suitable memorial shrines in the U.S. when authorized
        by Congress and where they have served overseas since April 6, 1917; (2) designing,
        constructing, operating, and maintaining permanent American military burial grounds in foreign
        countries; and (3) controlling the design and construction on foreign soil of U.S. military
        memorials, monuments, and markers by other U.S. citizens and organizations, both public and
        private, and encouraging their maintenance. The Commission’s fiscal year 2011 appropriation
        supported its continued commitment to the worldwide responsibilities that flow from this
        mission.

        In performance of its mission, the Commission administers, operates, and maintains 24
        permanent American military cemeteries; 25 federal memorials, monuments, and markers; and
        seven nonfederal memorials. Three memorials are located in the United States; the remaining
        memorials and all of the Commission’s cemeteries are located in 14 foreign countries, the U.S.
        Commonwealth of the Northern Mariana Islands, and the British dependency of Gibraltar. These
        cemeteries and memorials are among the most beautiful and meticulously maintained shrines in
        the world. The Commission’s World War I, World War II, and Mexico City cemeteries are
        closed to future burials except for the remains of U.S. war dead discovered in World War I and II
        battle areas.

        In addition to grave sites, the World War I and II cemeteries, together with three memorials on
        U.S. soil, commemorate by name on Tablets of the Missing those U.S. service members who
        were missing in action or lost or buried at sea during the First and Second World Wars and the
        Korean and Vietnam Wars.

        The Commission also administers trust funds to (1) build memorials authorized by Congress, but
        financed primarily from private contributions, commemorative coin proceeds, and investment
        earnings; (2) decorate grave sites with flowers from private contributions; and (3) maintain and
        repair nonfederal war memorials with private contributions.

        During fiscal year 2011, the Commission continued to ensure that its commemorative cemeteries
        and memorials remain fitting shrines to those who have served our nation in uniform since
        America’s entry into World War I.




                                                    1




                              Page 11                                            GAO-12-404 ABMC 2011 and 2010 Financial Audit
                                   Management’s Discussion and Analysis




The Commission’s mission statement:

                The American Battle Monuments Commission—guardian of America’s
             overseas commemorative cemeteries and memorials—honors the competence,
                         courage, and sacrifice of United States armed forces.

Organizational Structure

The Commission’s organizational structure for fiscal year 2011 is shown in figure 1.


                                                Commissioners *



                                                   Secretary **
                                                                                          Director Overseas Ops
                                                Deputy Secretary



                                                                                              Deputy Director
                       Director
                     HR & Admin.
                                                                         Director                                  Regional Director
                                                                      Human Resources                              World War II North
                        Director
                        Finance                                                                                      7 Cemeteries

                                                                        Director                                   Regional Director
                       Director
                                                                  Engineering & Maint.                             World War II South
                     Public Affairs

                                                                                                                     6 Cemeteries
                       Director
                    U.S. Memorials
                                                                          Director                                  Regional Director
                                                                          Logistics                                   World War I
                        Director
                   Information Tech.                                                                                 8 Cemeteries

                                                                           Director                                 Regional Director
                                                                      Information Tech.                             Central America

                                                                                                                     2 Cemeteries

                                                                          Director                                  Regional Director
                                                                          Finance                                        Pacific

                                                                                                                     1 Cemetery

                                                                         Director                                         Director
                                                                        Horticulture                              Interpretation & Visitor
                                                                                                                          Services

*   Chairman and up to 10 Commissioners appointed by the President

** Appointed by the President



Figure 1: The Commission’s Organizational Structure



                                                                  2




                                   Page 12                                                                  GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Management’s Discussion and Analysis




The Commission’s policy-making body consists of an 11-member Board of Commissioners
appointed by the President of the United States for an indefinite term and whose members serve
without pay. However, the members of the Commission may receive reimbursement for actual
expenses related to the work and travel of the Commission. The commissioners establish policy
and ensure proper staff functioning in carrying out the mission of the Commission. During
inspection visits to Commission cemeteries, they observe, inquire about, comment upon, and
make recommendations on any and all aspects of Commission operations. The Commission’s
daily operations are directed by an Executive Level Secretary, who is appointed by the President
and assisted by a Deputy Secretary.

The Commission’s headquarters is in Arlington, Virginia and an Office of Overseas Operations
is located in Garches, France, just outside Paris. For fiscal year 2011, the Commission had a total
of 396 full-time equivalent (FTE) positions.

Operations Management

Operations management activities in fiscal year 2011 focused on funding salaries and benefits,
service fees, scheduled maintenance and repairs, supplies, materials, spare parts, replacement of
uneconomically repairable equipment, and capital improvements.

For fiscal year 2011, the Commission received $64,071,600 from appropriations in its Salaries
and Expenses account. The Commission’s Foreign Currency Fluctuations Account appropriation
for fiscal year 2011 contained “such sums as may be necessary” language. For fiscal year 2011,
the Commission estimated $15,968,000 be used to offset currency exchange losses. Figure 2
shows how the Commission obligated funding from its Salaries and Expenses account, by object
class.




Figure 2: Fiscal Year 2011 Obligations by Object Class



                                             3




                       Page 13                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Management’s Discussion and Analysis




The Commission has received funding for engineering, maintenance and horticulture programs
that make the Commission’s facilities among the most beautiful memorials in the world. These
shrines to America’s war dead require a formidable annual program of maintenance and repair of
facilities, equipment, and grounds.

The Commission prioritizes the use of its engineering, maintenance and horticulture funds
carefully to ensure the most effective and efficient utilization of its available resources. This care
includes upkeep of more than 131,000 graves and headstones and 73 memorial structures (within
and external to the cemeteries) on approximately 1,650 acres of land. Additionally, the
Commission maintains 65 visitor facilities and quarters for assigned personnel; 67 miles of roads
and paths; 911 acres of flowering plants, fine lawns, and meadows; 3 million square feet of
shrubs and hedges; and 11,000 ornamental trees.

Care and maintenance of these resources requires exceptionally intensive labor at the
Commission’s cemeteries and memorials. Compensation and benefits consumed approximately
44 percent of the Commission’s fiscal year 2011 spending while the remaining 56 percent
supported engineering, maintenance, horticulture, logistics, services, supplies and other
administrative costs critical to its operations.

Financial Analysis

Assets

The Consolidated Balance Sheet reflects total assets of $82.9 million at the end of FY 2011, an
increase of $8.5 million over the $74.4 million at the end of FY 2010. The Fund Balance with
Treasury and Treasury Investment line items increased by $9 million, as construction projects
had been obligated by fiscal year end, but payments had not yet commenced. Total assets are
comprised of $72.2 million in the General Fund and $10.7 million in the Trust Fund. The
Commission’s assets reflected in the Consolidated Balance Sheet are as follows:

ASSETS BY TYPE
Dollars in Thousands                                    2011       %              2010           %

Fund Balance with Treasury                        75,990,111     92%        62,424,270        84%
Investments, Net                                   4,531,154      5%         9,077,064        12%
Cash and Foreign Accounts                            139,225      0%           163,540         0%
Accounts Receivable and Employee Advances              6,751      0%             4,747         0%
General Property and Equipment, Net                2,278,459      3%         2,775,546         4%

Total Assets                                      82,945,700    100%        74,445,167       100%




                                              4




                       Page 14                                               GAO-12-404 ABMC 2011 and 2010 Financial Audit
                          Management’s Discussion and Analysis




Liabilities

The Commission’s Consolidated Balance Sheet reflects total liabilities of $9 million at the end of
FY 2011, which represents a slight increase from the previous year’s total liabilities of $8.6
million. Liabilities are categorized as Intragovernmental liabilities or liabilities held with the
public. Intragovernmental liabilities totaled $1.8 million in fiscal year 2011 compared to $0.5
million in fiscal year 2010. The increase is mainly attributable to the outsourcing of the new
financial management system to the Department of Interior – National Business Center.
Liabilities held with the public totaled $7.2 million in fiscal year 2011 compared to $8 million in
fiscal year 2010. The composition of the Commission’s liabilities is as follows:

LIABILITIES BY TYPE
Dollars in Thousands                                  2011          %           2010          %

Accounts Payable                                 5,319,786      59%        3,847,000        45%
Accrued Salaries and Benefits                      348,853       4%          386,666         4%
Other Liabilities                                3,341,304      37%        4,368,135        51%

Total Liabilities                                9,009,943     100%        8,601,801       100%

Net Position

The Commission’s Consolidated Balance Sheet and Consolidated Statement of Changes in Net
Position reflect a Net Position of $73.9 million at the end of FY 2011, a 12 percent increase from
the $65.8 million net position in fiscal year 2010. The increase is mainly attributable to the
increase in Fund Balance with Treasury. Net Position is the sum of Unexpended Appropriations
and Cumulative Results of Operations.

Net Costs

The Commission’s total net cost of operations for FY 2011 was $73.5 million. This represents
an increase of $3.2 million of the Commission’s net cost of operations of $70.3 million in fiscal
year 2010. The increase is mainly attributable to the cost associated with the implementation of
a new financial management system, increase in engineering, maintenance and horticulture
projects, and a general increase in foreign currency losses. Net costs are summarized in the table
below.

NET COSTS
Dollars in Thousands                              2011         %              2010           %

Operations and Maintenance                 58,626,668        80%        52,783,781         75%
Property and Equipment                      2,180,338         7%         6,482,130          9%
Foreign Currency Losses, Net               12,697,365        17%        11,032,311         16%

Net Costs of Operations                    73,504,371        100%       70,298,222        100%



                                             5




                          Page 15                                          GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Management’s Discussion and Analysis




Budgetary Resources

The Consolidated Statement of Budgetary Resources provides information on how budgetary
resources were made available to the Commission for the year and the status of these resources at
fiscal year-end. For the 2011 fiscal year, the Commission had total budgetary resources of
$127.8 million, which represents a 4% increase from FY 2010 levels of $122.7 million. Budget
Authority of $96.2 million consisted of $80.2 million in appropriations received, $15.5 million in
appropriations transferred in for net foreign exchange loss, and $0.5 million in other receipts.
The Commission incurred obligations totaling $78.0 million in fiscal year 2011 compared with
FY 2010 obligations incurred of $75.3 million.

Net Outlays reflect the actual cash disbursed against previously established obligations. For FY
2011, the Commission had net outlays of $71.3 million, compared to $68.6 million in net outlays
in fiscal year 2010, an increase of 4 percent.

Heritage Assets

Heritage assets are property, plant and equipment that are unique for one or more of the
following reasons: historical or natural significance; cultural, educational, or artistic importance;
or significant architectural characteristics.

Heritage assets are significant to the mission of the Commission to design, construct, and
maintain historical cemeteries and memorials. The Commission presents its heritage assets in
three categories; cemeteries, federal memorials, and nonfederal memorials. Through September
30, 2011, the Commission had 24 cemeteries, 25 federal memorials and 7 nonfederal memorials.
Presently, over 131,000 U.S. war dead are interred in these cemeteries. Commemorated
individually by name on stone tablets at the cemeteries and federal memorials are over 94,000
Honored War Dead, whose remains were not recovered. The cemeteries and federal memorials
encompass over 1,600 acres. This land is provided to the Commission through host nation
agreements for permanent use as cemeteries and memorials.

High Priority Performance Goals and Results

Summarized below are the Commission’s performance goals and results.

Goal 1: Provide an inspirational and educational visitor experience through effective
outreach and interpretive programs.

Objectives for Goal 1

ƒ   Educate the public about the ABMC mission, and the competence, courage, and sacrifice of
    those honored at ABMC commemorative sites.
ƒ   Increase visitation to ABMC cemeteries, memorials, and website.
ƒ   Educate and train all employees who provide visitor services in interpretive skills.
ƒ   Leverage international events and relevant anniversary dates to interpret ABMC cemeteries.
ƒ   Satisfy constituents’ needs through timely distribution of information and products.



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                        Page 16                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Management’s Discussion and Analysis




Strategy for Achieving Goal 1

We will develop educational materials and new technology capabilities to improve visitor
education programs, both on-site and on our website. We will expand Web marketing and
public/media outreach to increase visitation to our website and memorial sites. We will also
develop a methodology to count visitors so that we can document both on-site and website
visitation. We will expand training and mentoring opportunities to enhance professional and
personal development of our employees. We will also create historical reference libraries to assist
in the interpretive mission. We will leverage upcoming milestones to increase the public reach of
the interpretive initiative, including D-Day, Memorial Day, Veterans Day, the 100th anniversary
of World War I, the 70th anniversary of World War II, and the 2012 London Olympics. We will
automate frequently requested services for our constituents in order to improve on-site and
website customer service.

Selected Performance Results toward Achieving Goal 1

ƒ     A contract was awarded to produce 18 educational military campaign interactive programs
      for the agency website and visitor centers. The interactive programs will be comparable in
      scope and content to the “Normandy Campaign” and “Battle of Pointe du Hoc” interactives
      available now at www.abmc.gov.

ƒ     Military units, veterans groups, and local citizens and organizations continued to pay
      tribute to those honored at ABMC cemeteries by visiting individually or participating in
      ceremonies and popular “adopt a grave” programs in several European nations.

ƒ     Interpretive specialists in the Commission's Overseas Operations Office in France
      continued a program to train cemetery-based staffs on interpretive techniques and effective
      visitor services programs. Professional reference libraries comprised of general military
      history as well as books relevant to the wars and campaigns associated with individual
      cemeteries were completed and continue to be updated to enhance our staffs' ability to
      interpret historical events for visitors.

ƒ     Public outreach to the travel and tourism industry was reenergized in fiscal year 2011
      through attendance at several trade shows, conventions, and symposia, generating interest
      in the Commission’s commemorative sites as inspirational and educational tourism
      destinations.

ƒ     New visitor brochures were designed, printed or begun for the final 11 cemeteries
      requiring them, and an initiative was launched to produce similar brochures for several of
      the Commission’s memorials and monuments worldwide. This program is expected to be
      completed by the end of fiscal year 2012, at which time the Commission will begin a
      redesign and rewrite of its cemetery booklets. ABMC continued to respond to customer
      requests for lithographs, no fee passport authorizations, flower placements, and general
      information about the overseas cemeteries and memorials we administer.




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                       Page 17                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Management’s Discussion and Analysis




Goal 2: Develop, operate, maintain, and improve ABMC facilities as the world’s best
commemorative sites.

Objective for Goal 2

ƒ   Review and evaluate facilities and execute approved maintenance, repair, and improvements.

Strategy for Achieving Goal 2

We will continue to operate, maintain, and improve ABMC facilities and infrastructure in like-
new condition, and implement our evaluation processes to ensure compliance with our high
standards. We will work to reduce the growth of operational and routine maintenance costs and
promote more effective long-term planning, operations, and resource management.

Selected Performance Results toward Achieving Goal 2

ƒ The following are examples of the engineering, maintenance and horticulture projects
  executed in fiscal year 2011:

    -   Renovate the perimeter road at Sicily-Rome American Cemetery
    -   Repair the storm drainage system at Luxembourg American Cemetery
    -   Renovate the irrigation system at Manila American Cemetery
    -   Repair and re-level the porphyry stones and travertine slabs near the memorial at Sicily-
        Rome American Cemetery
    -   Repair the exterior cracked wall near the visitor building at Oise-Aisne American
        Cemetery

ƒ The Commission continued a headstone refurbishing program to keep the headstones in “like
  new” condition.

Goal 3: Attract and retain quality employees through personal and professional investment
and development.

Objectives for Goal 3

ƒ   Establish baseline employee satisfaction through an ABMC employee survey.
ƒ   Ensure timely and effective employee recognition.
ƒ   Implement an enhanced performance management program with annual performance work
    plans tied to the strategic plan.
ƒ   Balance employee personal and professional responsibilities through work/life initiatives.
ƒ   Implement a professional development program responsive to agency and employee needs.




                                            8




                        Page 18                                          GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Management’s Discussion and Analysis




Strategy for Achieving Goal 3

We will implement a professional training and development program, clearly map employee
roles and responsibilities to the components of our strategic plan, develop a better understanding
of employee needs and satisfaction, and make sure that truly outstanding performance is
appropriately recognized.

Selected Performance Results toward Achieving Goal 3

ƒ   ABMC was able to recognize employees in a timely manner in response to special acts over
    the last year.

ƒ   Final drafts of a telework policy and new performance appraisal program were nearing
    publication as the fiscal year ended.

ƒ   Human resource hires from 2010 made progress in developing needed HR policies and
    streamlining/establishing procedures required for the proper functioning of a good HR
    program. Among the policies developed and issued were foreign language requirements, a
    voluntary leave transfer program, flexible work schedules for the Headquarters, a category
    rating policy, and a position management policy.

ƒ   The Commission continues to make progress in providing management and supervisory
    training to its most visible and important positions—its cemetery superintendents.

Goal 4: Continually improve business and resource management practices.

Objectives for Goal 4

ƒ   Effectively manage resources.
ƒ   Modernize business processes to utilize new technologies and IT practices.
ƒ   Formalize processes for development and promulgation of policies and procedures.
ƒ   Modernize the Financial Management System and fully utilize the capabilities of the new
    system.

Strategy for Achieving Goal 4

We will focus our efforts on standardizing core processes, identifying opportunities to use
technology to streamline their execution, improving our organizational standards for site
evaluation, and regularly reviewing each site for compliance with standards.

Selected Performance Results toward Achieving Goal 4

ƒ   The Commission’s allocation processes and procedures annually fully fund its mandatory
    and operational requirements in order to achieve its mission requirements.

ƒ   During fiscal year 2011, the Commission completed an effort to implement a new financial
    management system.

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                        Page 19                                           GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Management’s Discussion and Analysis




ƒ   An internal control review and risk assessment was conducted in fiscal year 2011 to examine
    the Commission’s internal control mechanisms and business processes.

ƒ   The Commission continues to report that its internal control policies and procedures provide
    reasonable assurance that it complies with the provisions of 31 U.S.C. 3512 (c), (d) – Federal
    Managers’ Financial Integrity Act (FMFIA).

Financial Statements and Limitations

Since fiscal year 1997, the Commission has been required to produce financial statements and
the Comptroller General of the United States has been required to independently audit these
statements. The Commission earned unqualified opinions, each year, on its financial statements
from the U.S. Government Accountability Office.
The financial statements have been prepared to report the financial position and results of
operations of the Commission, pursuant to the requirements of 31 U.S.C. 3515 (b). While the
statements have been prepared from the books and records of the Commission in accordance
with generally accepted accounting principles for federal entities and the formats prescribed by
the Office of Management and Budget, the statements are in addition to the financial reports used
to monitor and control budgetary resources, which are prepared from the same books and
records. The statements should be read with the understanding that the Commission is a
component of the U.S. Government, a sovereign entity.

Management Integrity: Systems, Controls, Legal Compliance

The Commission is cognizant of the importance of, and need for, management accountability
and responsibility as the basis for quality and timeliness of program performance, mission
accomplishment, productivity, cost-effectiveness, and compliance with applicable laws. It has
taken management actions to ensure that the annual evaluation of these controls is performed in a
conscientious and thorough manner according to Office of Management and Budget regulations
and guidelines and in compliance with 31 U.S.C. 3512 (c), (d), commonly known as the Federal
Manager’s Financial Integrity Act (FMFIA). The objectives of the Commission’s internal
management control policies and procedures are to provide reasonable assurance that

ƒ   obligations and costs are in compliance with applicable law;

ƒ   funds, property, and other assets are safeguarded against waste, loss, unauthorized use, and
    misappropriation;

ƒ   revenue and expenditures applicable to agency operations are promptly recorded and
    accounted for; and

ƒ   programs are efficiently and effectively carried out in accordance with applicable laws and
    management policy.




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                       Page 20                                            GAO-12-404 ABMC 2011 and 2010 Financial Audit
                      Management’s Discussion and Analysis




Based on its evaluation, the Commission concluded that there is reasonable assurance that its
internal control over the effectiveness and efficiency of operations and compliance with
applicable laws and regulations as of September 30, 2011 was operating effectively and revealed
no material weaknesses. The reasonable assurance concept recognizes that the cost of internal
controls should not exceed the benefits expected to be derived and that the benefits reduce the
risk of failing to achieve stated objectives.

The Commission is also responsible for establishing and maintaining effective internal control
over financial reporting. Commission management evaluated the effectiveness of its internal
control over financial reporting as of September 30, 2011, based on the criteria established under
FMFIA. Based on that evaluation, the Commission concluded that, as of September 30, 2011,
internal control over financial reporting was effective.

Future Effects, Risks, and Uncertainties

Changes in the rate of exchange for foreign currencies have a significant impact on the
Commission’s day-to-day operations. In order to insulate the Commission’s annual appropriation
against major changes in its purchasing power, legislation was enacted in 1988 (codified in 36
U.S.C. 2109) to establish a foreign currency fluctuation account in the U.S. Treasury. However,
since the summer of 2006, the U.S. dollar has fallen precipitously against the euro. The
Commission has been closely monitoring this because its budget is disproportionately affected
by foreign currency fluctuation. Legislation was enacted which included “such sums as may be
necessary” language for the Commission’s fiscal year 2011 Foreign Currency Fluctuation
Account (FCFA) appropriation. This allows the Commission to preserve its purchasing power
against a suddenly falling U.S. dollar against the euro. With this language the Commission will
continue to estimate and report its FCFA requirements as it has in the past. However, when a
need arises where the amount forecast by the Commission for this account is insufficient, the
Commission will submit an adjusted estimate to the Office of Management and Budget and then,
to the Congress.

Overall, by maintaining close scrutiny of the Commission’s obligation status, as well as
monitoring and distributing the Foreign Currency Fluctuation Account balance, the Commission
reduces its overall future financial risk to continued operations.




                                           11




                      Page 21                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
Financial Statements


Consolidating Balance Sheet




                                                                     AMERICAN BATTLE MONUMENTS COMMISSION
                                                                          CONSOLIDATING BALANCE SHEET
                                                                                As of September 30, 2011
                                                              (With Comparative Consolidated Total as of September 30, 2010)

                                                                           General Fund           Trust Funds            Total Funds        Total Funds



                                                                          Cemeteries and         WWII and Other
                                                                            Memorials             Trust Funds             Total 2011        Total 2010

                     Assets

                     Intragovernmental:

                     Fund balance with Treasury (note 2)                      $69,798,270            $6,191,841            $75,990,111        $62,424,270
                     Treasury investments, net (note 3)                                               4,531,154              4,531,154          9,077,064

                     Total Intragovernmental                                   69,798,270            10,722,995                80,521,265      71,501,334

                     Cash and foreign accounts (note 4)                           139,225                                        139,225         163,540
                     Accounts receivable                                            4,747                                          4,747           4,747
                     Employee advances                                              2,004                                          2,004
                     Contributions receivable, net (note 5)
                     General property and equipment, net (note 6)               2,278,459                                       2,278,459       2,775,546
                     Heritage property (note 6)

                     Total Assets                                             $72,222,705           $10,722,995            $82,945,700        $74,445,167

                     Liabilities

                     Intragovernmental:

                     Accounts payable                                          $1,435,663                                      $1,435,663       $156,065
                     Accrued salaries and benefits                                348,853                                         348,853        386,666

                     Total Intragovernmental                                    1,784,516                                       1,784,516        542,731

                     Accounts payable                                           3,863,752               $20,371                 3,884,123       3,690,935
                     Other liabilities (note 7)                                 3,341,304                                       3,341,304       4,368,135

                     Total Liabilities                                          8,989,572                20,371                 9,009,943       8,601,801

                     Commitments and contingencies (note 12)

                     Net Position (note 9)

                     Unexpended appropriations                                 63,578,453                                      63,578,453      53,552,402
                     Cumulative results of operations (deficit)                  (345,320)           10,702,624                10,357,304      12,290,964

                     Total Net Position                                        63,233,133            10,702,624                73,935,757      65,843,366

                     Total Liabilities and Net Position                       $72,222,705           $10,722,995            $82,945,700        $74,445,167



                     The accompanying notes are an integral part of these statements.




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                                                           Page 22                                                        GAO-12-404 ABMC 2011 and 2010 Financial Audit
                                                             Financial Statements




Consolidating Statement of Net Cost and Changes in Net Position




                                                                        AMERICAN BATTLE MONUMENTS COMMISSION
                                                          CONSOLIDATING STATEMENT OF NET COST AND CHANGES IN NET POSITION
                                                                             For the Year Ended September 30, 2011
                                                           (With Comparative Consolidated Total for the Year Ended September 30, 2010)

                                                                                General Fund               Trust Funds         Total Funds         Total Funds

                                                                              Cemeteries and              WWII and Other
                                                                                Memorials                  Trust Funds          Total 2011         Total 2010
                      PROGRAM COSTS

                      Intragovernmental program costs:
                       Operations and maintenance                                   $17,022,320                 $1,807,468         $18,829,788       $11,200,299

                      Program costs with the public:
                       Operations and maintenance                                    39,588,001                    208,879          39,796,880        41,583,482
                       Property and equipment (note 6)                                2,180,338                                      2,180,338         6,482,130
                       Foreign currency losses, net                                  12,697,365                                     12,697,365        11,032,311

                      Net Cost of Operations                                        $71,488,024                 $2,016,347         $73,504,371       $70,298,222

                      CHANGES IN NET POSITION

                      Cumulative Results (Deficit) - Start of Year                        $64,530              $12,226,434         $12,290,964       $12,484,799

                      Budgetary Financing Sources

                      Appropriations used                                            69,914,171                                     69,914,171        68,590,164

                      Total Budgetary Financing Sources                              69,914,171                                     69,914,171        68,590,164

                      Other Financing Sources

                      Contributions                                                        33,361                  423,941             457,302           439,847
                      Treasury investment earnings                                                                  68,596              68,596            73,444
                      Imputed financing (note 13)                                        1,099,708                                   1,099,708         1,000,932
                      Gain on disposition of assets                                         30,934                                      30,934

                      Total Other Financing Sources                                      1,164,003                 492,537           1,656,540         1,514,223

                      Total Financing Sources                                        71,078,174                    492,537          71,570,711        70,104,387

                      Less: Net Cost of Operations                                   71,488,024                  2,016,347          73,504,371        70,298,222

                      Net Increase (Decrease) for the Year                                (409,850)             (1,523,810)          (1,933,660)        (193,835)

                      Cumulative Results (Deficit) - End of Year                          (345,320)             10,702,624          10,357,304        12,290,964

                      Unexpended Appropriations

                      Unexpended Appropriations - Start of Year                      53,552,402                                     53,552,402        39,267,566

                      Appropriations received                                        80,200,000                                      80,200,000       82,875,000
                      Appropriations transferred out                                   (190,187)                                       (190,187)
                      Other offsetting receipts and adjustments                         (69,591)                                        (69,591)
                      Appropriations used                                           (69,914,171)                                    (69,914,171)      (68,590,164)
                      Increase (decrease) in unexpended appropriations               10,026,051                                      10,026,051        14,284,836

                      Unexpended Appropriations - End of Year                        63,578,453                                     63,578,453        53,552,402

                      TOTAL NET POSITION - END OF YEAR                              $63,233,133                 $10,702,624         $73,935,757       $65,843,366

                      The accompanying notes are an integral part of these statements.




                                                                                                      2




                                                             Page 23                                                           GAO-12-404 ABMC 2011 and 2010 Financial Audit
                                                                     Financial Statements




Consolidating Statement of Budgetary Resources



                                                                            AMERICAN BATTLE MONUMENTS COMMISSION
                                                                       CONSOLIDATING STATEMENT OF BUDGETARY RESOURCES
                                                                                 For the Year Ended September 30, 2011
                                                               (With Comparative Consolidated Total for the Year Ended September 30, 2010)



                                                                                 General Fund             Trust Funds              Total Funds           Total Funds



                                                                                Cemeteries and          WWII and Other
                                                                                  Memorials              Trust Funds               Total 2011            Total 2010

                     Budgetary Resources

                     Budgetary Authority:
                      Appropriations                                                 $80,200,000                                     $80,200,000           $82,875,000
                      Net transfer in for net foreign exchange loss                   15,461,665                                      15,461,665            11,590,892
                      Other receipts collected                                                                   492,536                 492,536               530,897

                     Unobligated Balances:
                      Start of year                                                   36,121,225               11,228,004             47,349,229             39,276,237
                      Net transfer (out) for net foreign exchange (loss)             (15,461,665)                                    (15,461,665)           (11,590,892)
                      Rescission                                                        (160,400)                                       (160,400)
                      Other adjustments                                                  (42,459)                                        (42,459)               (27,368)

                     Total Budgetary Resources                                     $116,118,366             $11,720,540            $127,838,906           $122,654,766

                     Status of Budgetary Resources

                     Obligations incurred - direct (note 14)                          76,717,678                1,311,036            $78,028,714           $75,305,537
                     Unobligated balances available                                   39,400,688               10,409,504             49,810,193            47,349,229

                     Total Status of Budgetary Resources                           $116,118,366             $11,720,540            $127,838,906           $122,654,766

                     Change in Obligated Balances

                     Obligations incurred for year                                   $76,717,678               $1,311,036            $78,028,714           $75,305,537

                     Plus: Obligated balances, start of year                          23,315,904                1,004,489             24,320,393            17,629,014

                     Less: Gross outlays for year                                    (69,368,783)              (2,002,034)           (71,370,817)           (68,614,158)

                     Obligated Balances, End of Year                                 $30,664,799                $313,491             $30,978,290           $24,320,393

                     Net Outlays

                     Gross outlays for year                                           69,368,783               $2,002,034            $71,370,817           $68,614,158

                     Less: Offsetting collections                                        (52,622)                                        (52,622)               (43,166)

                     Net Outlays                                                     $69,316,161               $2,002,034            $71,318,195           $68,570,992

                     The accompanying notes are an integral part of these statements.




                                                                                                           3




                                                                     Page 24                                                                        GAO-12-404 ABMC 2011 and 2010 Financial Audit
                                                Financial Statements




Notes to Consolidating and Consolidated Financial Statements




                                             AMERICAN BATTLE MONUMENTS COMMISSION
                            NOTES TO CONSOLIDATING AND CONSOLIDATED FINANCIAL STATEMENTS
                                             For the Fiscal Years Ended September 30, 2011 and 2010

                        Note 1. Significant Accounting Policies

                        A. Basis of Presentation

                        The accompanying consolidating and consolidated financial statements present the financial position,
                        net cost of operations, changes in net position, and budgetary resources of the American Battle
                        Monuments Commission (the Commission) in conformity with U.S. generally accepted accounting
                        principles as used by the federal government. There are no intra-entity transactions to be eliminated.
                        Certain assets, liabilities, and costs have been classified as intragovernmental throughout the financial
                        statements and notes. Intragovernmental is defined as transactions made between two reporting
                        entities within the federal government.

                        B. Reporting Entity and Funding Sources

                        The Commission is an independent agency within the executive branch of the federal government and
                        was created by an Act of March 4, 1923, the current provisions of which are now codified in 36
                        U.S.C. Chapter 21. The Commission’s mission is to commemorate the sacrifices and achievements of
                        U.S. Armed Forces where they have served overseas since April 6, 1917, the date of the United States
                        entry into World War I, and at locations within the United States when directed by the Congress. The
                        Commission designs, administers, constructs, operates, and maintains 24 American military
                        cemeteries and 25 federal memorials, monuments, and markers (herein collectively referred to as
                        memorials). Three of the memorials are located in the United States while all of the cemeteries and the
                        remaining memorials are located on foreign soil in 14 foreign countries, the Marianas, and Gibraltar.
                        The Commission is also responsible for maintaining 7 nonfederal memorials with funds received from
                        the memorials’ sponsors. The Commission is headquartered in Arlington, Virginia. Field operations
                        are conducted through offices located near Paris, France and Rome, Italy; and cemeteries in Manila,
                        the Philippines; Mexico City, Mexico; and Panama City, Panama.

                        The Commission also had responsibility for designing and constructing the National World War II
                        Memorial located on the Mall in Washington, D.C. In accordance with 40 U.S.C. 8906(b), the
                        Commission deposited $6.6 million into a separate Treasury account to offset the memorial’s costs of
                        perpetual maintenance. On November 1, 2004, the Commission signed an agreement with the
                        National Park Service to formally transfer the National World War II Memorial to the Service for its
                        future care and maintenance. Remaining funds reside in a trust fund in the U.S. Treasury to be used
                        solely to benefit the World War II Memorial for other than routine maintenance expense.

                        Commission programs are funded primarily through appropriations available without fiscal year
                        limitation (no-year). The Commission also administers several trust funds established to: (1) build
                        memorials authorized by the Congress, but which are funded primarily by private contributions,
                        commemorative coin sales proceeds, and investment earnings; (2) decorate gravesites; and (3)
                        maintain and repair certain nonfederal war memorials.


                                                                           4




                                                Page 25                                               GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Financial Statements




C. Basis of Accounting

The Commission’s proprietary accounts (assets, liabilities, equity, revenue, and expenses) are
maintained on the accrual basis, where appropriated funds are accounted for by appropriation year;
operating expenses are recorded as incurred; and depreciation is taken on property, plant, and
equipment not otherwise classified as heritage assets. Commission budgetary accounts are maintained
on a budgetary basis, which facilitates compliance with legal constraints and statutory funds control
requirements. The functional budget classification is Veterans’ Benefits and Services.

D. Fund Balances with Treasury

The Commission’s cash receipts and disbursements are processed by the U.S. Treasury. Fund
balances with Treasury are composed of appropriated general funds and trust funds. The Fund balance
with Treasury is the aggregate amount for which the Commission is authorized to make expenditures
and pay liabilities.

E. Investments

In accordance with 36 U.S.C. 2113(b), the Commission is authorized to invest World War II
Memorial Trust Fund receipts in U.S. Treasury securities. The Commission is also authorized under a
modification to its original legislation to invest receipts from certain nonfederal war memorial
organizations in U.S. Treasury securities. Treasury investments are recorded at par value plus
unamortized premium or less unamortized discount. Premiums and discounts are amortized using the
interest method.

F. Foreign Currency

The Commission’s overseas offices maintain accounts of foreign currencies to be used in making
payments in foreign countries. Amounts are recorded at a standard budget rate in U.S. dollars and a
gain or loss recognized when paid in foreign currency. Appropriated monies are transferred from the
Commission’s Foreign Currency Fluctuation Account to fund net currency losses. Cash accounts in
foreign currencies are reported at the U.S. dollar equivalent using the Treasury exchange rate in effect
on the last day of the fiscal year.

G. Contributions and Revenue Recognition

The Commission recognizes unrestricted contributions or unconditional promises to give as revenue
in the period of the initial pledge when sufficient verifiable evidence of the pledge exists. Conditional
promises to give are recorded as revenue when the condition has been met. Unconditional promises to
give may be temporarily restricted or permanently restricted. Temporarily restricted promises to give
are released from restriction when the conditions have been met. Permanently restricted promises to
give are recorded as revenue in the period donated; however, donors generally allow only the earned
income to be used for general or specific purposes. In-kind contributions of goods and services are
recognized at fair value by the Commission at the time the goods are received or the services are
performed. Multiyear contributions due over a period of time are discounted to their present value
based upon the short-term Treasury interest rate.


                                                   5




                        Page 26                                               GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Financial Statements




H. Operating Materials and Supplies Inventories

The Commission has determined that operating materials and supplies located at its cemeteries are not
significant amounts and that it is more cost beneficial to record them on the purchase method of
accounting whereby items are expensed as purchased rather than when consumed. Consequently, the
Commission reports no operating materials or supplies inventories.

I. Property and Equipment

Purchases of general property and equipment of $25,000 or less are expensed in the year of
acquisition. Purchases of personal property exceeding $25,000 are capitalized and depreciated on a
straight-line basis over 5 years. Expenditures relating to real property exceeding $25,000 are
capitalized and depreciated on a straight-line basis over 30 years. Heritage assets are assets possessing
significant cultural, architectural, or aesthetic characteristics. The Commission considers its
cemeteries, and federal memorials, monuments, and markers acquired through purchase or donation to
be noncollection heritage assets. Heritage assets acquired through purchase or donation are accounted
for in the Commission’s property records, and are not presented in the balance sheet. Withdrawals of
heritage assets are recorded upon formal agreement with recipients. Additional disclosure on
individual heritage asset cemeteries and memorials are found in the Schedules of Heritage Assets
presented as unaudited other information. Cemetery land is owned by the foreign countries in which
cemeteries are located and is provided to the United States in perpetuity.

J. Employee Benefits

The Commission’s civilian U.S. nationals hired after December 31, 1983 are covered by the Federal
Employees’ Retirement System (FERS), which was implemented on January 1, 1984. The
Commission’s civilian U.S. nationals hired on or before December 31, 1983, could elect to transfer to
FERS or remain with the Civil Service Retirement System (CSRS). For FERS employees, the
Commission withholds .80 percent of base pay and as employer contributes 11.7 percent of base pay
to this retirement system. For Federal Insurance Contribution Act (FICA) tax and Medicare, the
Commission withholds 5.65 percent from FERS employees’ earnings. In addition, the Commission
contributes 7.65 percent and remits the total amount to the Social Security Administration. The
Commission withholds 7.00 percent of base pay plus 1.45 percent for Medicare from CSRS
employees’ earnings and as employer contributes 7.00 percent of base pay plus 1.45 percent for
Medicare. These deductions are then remitted to the Office of Personnel Management (OPM) and the
Social Security Administration. OPM is responsible for governmentwide reporting of FERS and
CSRS assets, accumulated plan benefits, and unfunded liabilities.

On April 1, 1987, the federal government instituted the Thrift Saving Plan (TSP), a retirement savings
and investment plan for employees covered by FERS and CSRS. The Commission contributes a
minimum of 1 percent of FERS employees’ base pay to TSP. For 2011, FERS employees could
contribute up to $16,500 ($22,000 if at least age 50) on a tax-deferred basis to TSP, which the
Commission matches up to 4 percent of base pay. For 2011, CSRS employees may also contribute up
to $16,500 ($22,000 if at least age 50) on a tax-deferred basis; however, they receive no matching
contribution from the Commission.



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                        Page 27                                               GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Financial Statements




Retirement and other benefits for the Commission’s foreign national employees are paid by the
Commission in accordance with the provisions of 10 host nation agreements negotiated by the U.S.
Department of State.

Annual leave is accrued as earned, and the resulting unfunded liability is reduced as leave is taken.
Separation pay is provided in certain countries according to host nation agreements. Separation pay is
accrued as earned, and the resulting unfunded liability is reduced when paid to the foreign national
leaving the employ of the Commission. Each year balances in the accrued separation pay and annual
leave accounts are adjusted to reflect current pay rates. To the extent that current or prior year
appropriations are not available to fund annual leave and separation pay, funding will be obtained
from future financing resources. Sick leave and other types of unvested leave are expensed when
incurred.

K. Program Costs

Program costs are broken out into two categories - "Intragovernmental" and "With the Public".
Intragovernmental costs are costs the Commission incurs through contracting with other federal
agencies for goods and/or services, such as rent paid to U.S. Department of State, payroll
processing services received from the U.S. General Services Administration (GSA), and costs for
retirement and other benefits paid by OPM. With the Public costs are costs the Commission incurs
through contracting with the private sector for goods or services, payments for employee salaries,
depreciation, annual leave and other non-Federal entity expenses.

L. Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities, as well as the disclosure of contingent assets and
liabilities at the date of the financial statements, and the amount of revenues and expenses reported
during the reporting period. Actual results could differ from those estimates.




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                       Page 28                                               GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Financial Statements




 Note 2. Fund Balances with Treasury

 All undisbursed account balances with the U.S. Treasury, as reflected in the Commission’s records, as
 of September 30 are available and were as follows:

                                                   2011                                  2010
                           General Fund          Trust Funds          Total              Total
Appropriated Funds           $46,440,675                            $46,440,675        $36,227,394
Currency Fluctuation          23,357,595                             23,357,595         23,041,447
Other Trust Funds                                 $6,191,841          6,191,841          3,155,429
                              $69,798,270         $6,191,841        $75,990,111        $62,424,270

 Note 3. Treasury Investments, Net

 As of September 30, the Commission’s Trust Fund investments in U.S. Treasury notes, which are
 marketable securities due within 2 years were as follows:
                                          Interest
                                                     Net            Interest           Net
  FY          Cost           Interest Rates        Premium        Receivables      Investments
   11      $4,368,932       4.250 to 4.50%         $162,222                 $0      $4,531,154
   10      $8,834,026         4.250 to 5.0%        $156,464           $86,574       $9,077,064

 Amortization is on the interest method, with amortized cost approximated to market as of September
 30.

 Note 4. Cash and Foreign Accounts

 Outside the United States, the Commission makes payments in U.S. and foreign currencies through
 imprest cash funds and Treasury-designated depository commercial bank accounts, which as of
 September 30 were as follows:
                                   2011         2010
  Imprest Cash Funds                $2,284     $40,636
  Foreign Bank Accounts           136,941      122,142
  Undeposited Cash-Trust                 0         763
                                 $139,225     $163,540


 Note 5. Contributions Receivable

 The Commission has a pledge from a living trust valued at $125,819 as of September 30, 2011.
 However, due to the uncertainty of time and amount when the pledge is collected, the contribution
 will be recognized when received.




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                        Page 29                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
                         Financial Statements




Note 6. General and Heritage Property and Equipment

Non-capitalized assets, such as general property and equipment acquisitions with an aggregate cost
basis of $25,000 or less and all acquisitions of heritage assets, totaling $2,180,338, were expensed by
the Commission in fiscal year 2011. In fiscal year 2010, $6,482,130 was expensed.
Since the 1960s, the Commission’s Office of Overseas Operations near Paris, France, has occupied a
residential structure owned by the United States government. The Commission is responsible for all
utilities, maintenance, and repairs. While the structure has the characteristics of a heritage asset, it has
been used as general property. However, it is now fully depreciated, and no value is contained in the
Commission’s financial statements.
General property and equipment as of September 30 was as follows:

                                        2011                                         2010
                                     Accumulated                                 Accumulated
      Category            Cost       Depreciation    Net              Cost       Depreciation    Net
Buildings               $923,460       $225,507 $697,953            $923,460        $196,068 $727,392
Accounting Systems        384,951        242,179    142,772         2,145,016      1,929,838    215,178
Equipment               4,372,562      2,934,828 1,437,734          4,522,998      2,690,022 1,832,976
                       $5,680,973     $3,402,514 $2,278,459        $7,591,474     $4,815,928 $2,775,546



Heritage assets are significant to the mission of the Commission to design, construct, and maintain
historical cemeteries and memorials. The Commission presents its heritage assets in three categories;
cemeteries, federal memorials, and nonfederal memorials. Changes in heritage assets for fiscal year
2011 were as follows:

                                                                   Federal          Nonfederal
                                                 Cemeteries        Memorials        Memorials
 Beginning of Year 10-1-10                              24                 25                7
 Number Acquired, Fiscal Year 2011                        0                 0                0
 Number Withdrawn, Fiscal Year 2011                       0                 0                0
 End of Year 9-30-11                                    24                 25                7

Through September 30, 2011, Commission cemeteries contain over 131,000 interments. Over 94,000
Honored War Dead, whose remains were not recovered, are memorialized in the cemeteries and
federal memorials that encompass over 1,600 acres. This land is provided to the Commission through
host agreements with foreign countries for permanent use as cemeteries and memorials.




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                         Page 30                                                 GAO-12-404 ABMC 2011 and 2010 Financial Audit
                          Financial Statements




Note 7. Other Liabilities

Other liabilities as of September 30 were as follows:

                                                      2011        2010
 Accrued Salaries and Benefits                       $717,551   $1,657,119
 Unfunded Separation Pay Liability                  1,212,663    1,393,036
 Unfunded Annual Leave                              1,411,090    1,317,980
                                                   $3,341,304   $4,368,135

These liabilities are all classified as current.

Under a host nation agreement, the Commission’s Italian employees earn separation pay for each year
of service with the Commission. The Commission recognized an unfunded liability for separation pay
for these employees of $1,212,663 as of September 30, 2011, and $1,393,036 as of September 30,
2010.

Note 8. Lease Agreements

The Commission has no capital leases. The Commission’s Arlington, Virginia, Headquarters Office
is rented under a 5-year operating lease expiring in July 2012. Future minimum payments due on this
operating lease as of September 30, 2011, are as follows:

                           Fiscal Year
                          2012                     $570,932
                          2013                            0
                          2014                            0
                          2015                            0
                          2016                            0
                          After 5 Years            $570,932

The Commission’s Rome Office moved from commercial leased space to the United States Embassy
in Rome. Lease payments for the Rome office space, and for nine living quarters leases for the
benefit of the Commission’s Office of Overseas Operations, are made through the International
Cooperative Administrative Support Services (ICASS) program with the U.S. State Department.
These leases are on a month-to-month basis and the Commission has no obligation for future
payments associated with these leases.

Rent expense for all operating leases was $829,154 during fiscal year 2011.




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                          Page 31                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Financial Statements




Note 9. Net Position

Net position balances as of September 30, 2011, were as follows:
                                          General Fund        Trust Funds            Total
 Unexpended Appropriations:
 Unobligated                               $39,400,688                            $39,400,688
 Undelivered Orders                         24,177,765                             24,177,765
                                           $63,578,453         $          -       $63,578,453

Cumulative Results of
  Operations (deficit):
Unrestricted                                ($345,320)        $10,409,505         $10,064,185
Restricted for Undelivered Orders                                 293,119             293,119
                                            ($345,320)        $10,702,624         $10,357,304

Total Net Position                         $63,233,133        $10,702,624         $73,935,757

Net position balances as of September 30, 2010, were as follows:
                                          General Fund        Trust Funds           Total
 Unexpended Appropriations:
 Unobligated                               $36,121,225                            $36,121,225
 Undelivered Orders                         17,431,177                             17,431,177
                                           $53,552,402        $          -        $53,552,402

Cumulative Results of
 Operations (deficit):
Unrestricted                                   $64,530       $11,228,004          $11,292,534
Restricted for Undelivered Orders                                998,430              998,430
                                               $64,530       $12,226,434          $12,290,964

Total Net Position                         $53,616,932       $12,226,434          $65,843,366




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                       Page 32                                                GAO-12-404 ABMC 2011 and 2010 Financial Audit
                                    Financial Statements




Note 10. Reconciliation of Net Cost of Operations to Budget

SFFAS No. 7 requires a reconciliation of proprietary and budgetary information in a way that helps
users determine how budget resources obligated for programs relate to net costs of operations. Prior to
fiscal year 2007, this reconciliation was accomplished by presenting a Statement of Financing as a
basic financial statement. Effective for fiscal year 2007, the Office of Management and Budget in its
Circular No. A-136, Financial Reporting Requirements, decided that this information for federal
entities would be better placed and understood in a note. Consequently, this information is presented
as follows:

                                                 General Fund             Trust Funds      Total Funds      Total Funds

                                                 Cemeteries and         WWII and Other
                                                   Memorials             Trust Funds       Total 2011       Total 2010

 Resources Used To Finance Activities

Obligations incurred - direct                       $76,717,678               $1,311,036     $78,028,714      $75,305,537
Offsetting collections and recoveries                  (52,622)                                 (52,622)         (43,166)
Imputed retirement and audit services                 1,099,708                                1,099,708        1,000,932
Other adjustments                                        35,085                                   35,085           98,634

 Total Resources Used to Finance Activities          77,799,848                1,311,036      79,110,884       76,361,937


 Resources That Do Not Fund Net Cost of
 Operations

General property capitalized on the balance
sheet                                                  (259,876)                                (259,876)       (599,582)
Undelivered orders - start of year                    17,431,177                 998,430       18,429,607      12,459,352
Less: Undelivered orders - end of year              (24,177,765)               (293,119)     (24,470,884)    (18,429,607)

 Total Resources That Do Not Fund Net Cost of
 Operations                                          (7,006,464)                705,311       (6,301,153)     (6,569,837)


 Components of Net Cost of Operations Not
 Requiring Resources in the Current Period

 Components Requiring Resources in Future
 Periods:
  (Decrease) Increase in unfunded annual leave           93,110                                   93,110          49,661
  (Decrease) increase in unfunded separation
  pay liability                                        (180,373)                               (180,373)        (281,259)
  Increase in accounts receivable                                                                                   4,747
  Increase in advances                                    2,004                                    2,004

 Components Not Requiring Resources:
  Depreciation                                          746,538                                  746,539         707,413
  In-kind expenses                                      33,361                                    33,361          25,560

 Total Costs Not Requiring Resources in the
 Current Period                                         694,640                                  694,640         506,122

 Total Resources Used to Finance the Net Cost
 of Operations                                      $71,488,024               $2,016,347     $73,504,371      $70,298,222




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                                    Page 33                                                  GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Financial Statements




Note 11. Fiduciary Activities

Fiduciary activities are the collection or receipt, and the management, protection, accounting,
investment and disposition by the Federal Government of cash or other assets in which non-Federal
individuals or entities have an ownership interest that the Federal Government must uphold.

Fiduciary cash and other assets are not assets of the Federal Government and accordingly are not
recognized on the balance sheet.

The Scottish Widows Defined Benefit Scheme was established by a Trust Deed, which authorized the
Commission to collect contributions on behalf of beneficiaries, foreign service national employees of
the Commission’s two cemeteries in England. Fiduciary assets as of September 30 were as follows:

                   Schedule of Fiduciary Activity
                                           2011                 2010
Contributions                             $280,926              $79,791
Investment earnings                          49,231              36,827
Increases in fiduciary fund balances        330,157             116,618

Fiduciary net assets, beginning of year        942,151          825,533

Fiduciary net assets, end of year           $1,272,308        $942,151

                         Fiduciary Net Assets
                                            2011                2010
Fiduciary Assets
Investments                                 $1,272,308        $942,151

Total Fiduciary Assets                      $1,272,308        $942,151

Note 12. Commitments and Contingencies

As of September 30, 2011, the Commission had commitments of $24.5 million from undelivered
orders as a result of open contracts and purchase orders. Also, the Commission had contingencies
related to pending administrative proceedings and personnel actions that will be resolved by future
events. The Commission has determined the likelihood of an unfavorable outcome is remote and is not
expected to have a material effect on the financial statements.




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                       Page 34                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
                       Financial Statements




Note 13. Imputed Financing

The Commission imputes financing for retirement and other benefits paid by OPM, financial audit
costs incurred by the U.S. Government Accountability Office (GAO), and a heritage asset musical
carillon donated each fiscal year. The Commission recognized these expenses and related imputed
financing in its financial statements. A heritage asset musical carillon was also recognized for this
fiscal year as a donation by AMVETS and an in-kind expense.

A portion of pension and other retirement benefits (ORB) expense is funded by an imputed financing
source to recognize the amount of pension and ORB unfunded liabilities assumed by OPM. These
costs are computed in accordance with cost factors provided by OPM. For fiscal year 2011, the
Commission incurred $1,799,724 of pension and ORB costs, $550,708 of which was imputed. For
fiscal year 2010, the Commission incurred $1,496,691 of pension and ORB costs, $501,932 of which
was imputed. Total imputed costs of $1,099,708 for fiscal year 2011 and $1,000,932 for fiscal year
2010 included audit services provided by GAO.

Note 14. Obligations Incurred

All obligations incurred are characterized as category A on the Statement of Budgetary Resources.
Currently, the Commission does not have reimbursable obligations.

Note 15. Budgetary Resource Comparisons to the Budget of the United States Government

Statement of Federal Financial Accounting Standards No. 7, "Accounting for Revenue and Other
Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting", calls for
explanations of material differences between amounts reported in the Statement of Budgetary
Resources and the actual balances published in the Budget of the United States Government
(President's Budget). The President's Budget for fiscal year 2013 was published in February 2012
and can be found at the OMB Web site: http://www.whitehouse.gov/omb/. There were no material
differences between the amounts reported in the fiscal year 2011 Consolidating Statement of
Budgetary Resources and the fiscal year 2011 “Actual” column in the 2013 Budget of the United
States Government.




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                       Page 35                                             GAO-12-404 ABMC 2011 and 2010 Financial Audit
Other Information


Required Supplementary Information


                                             American Battle Monuments Commission
                                                       Other Information
                                                      September 30, 2011
                                                          (Unaudited)


               Maintenance, Repairs, and Improvements

               The following unaudited information is required supplementary information on deferred maintenance
               and the condition of real property at Commission cemeteries and memorials:

               Deferred maintenance is maintenance that was not performed when it should have been or was scheduled
               to be and that, therefore, is put off or delayed for a future period. Maintenance and repairs performed on
               real property consisting of land improvements, buildings, and memorials totaled $6.8 million in fiscal
               year 2011 and $10.0 million in fiscal year 2010. For fiscal years 1998 through 2002, the Commission
               received $11.3 million of additional appropriations from the Congress that enabled it to entirely eliminate
               its deferred maintenance backlog as of September 30, 2002. No deferred maintenance backlog existed as
               of September 30, 2011, and 2010.

               In addition to condition assessment surveys, the Commission uses a Project Prioritization Methodology
               with a “plot area out” focus to identify current and future maintenance and repair projects at cemeteries
               and memorials in order to maintain real property in an acceptable condition. These surveys are reviewed
               and updated at least annually by the Commission’s engineering staff. In addition, engineering projects
               identified improvements in cemetery irrigation, drainage, roads, parking areas, and buildings. As of
               September 30, 2011, the Commission has identified 43 maintenance, repair, and improvement projects,
               with an estimated cost of $7.1 million, scheduled to be performed in fiscal year 2012, subject to available
               funding.


               Schedules of Heritage Assets

               The following three pages present unaudited other information not required by U.S. generally accepted
               accounting principles on the Commission’s 24 cemeteries; 25 federal memorials, monuments, and
               markers; and 7 nonfederal memorials as of September 30, 2011.




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                                             Page 36                                        GAO-12-404 ABMC 2011 and 2010 Financial Audit
                                                   Other Information




Schedules of Heritage Assets

                                                              American Battle Monuments Commission
                                                                   Schedule of Heritage Assets
                                                                       September 30, 2011
                                                                            (Unaudited)


                                                                       24 CEMETERIES

                     Name                                  Location                          Interred   Memorialized   Acres    War

                     Aisne-Marne American Cemetery         Belleau (Aisne), France              2,289          1,060    42.5  WW I
                     Ardennes American Cemetery            Neupre, Belgium                      5,323            462    90.5 WW II
                     Brittany American Cemetery            St. James (Manche), France           4,410            498    27.9 WW II
                     Brookwood American Cemetery           Brookwood, England                     468            563     4.5  WW I
                     Cambridge American Cemetery           Cambridge, England                   3,812          5,127    30.5 WW II
                     Corozal American Cemetery             Panama City, Panama                  5,418              0    16.0   *
                     Epinal American Cemetery              Epinal (Vosges), France              5,255            424    48.6 WW II
                     Flanders Field American Cemetery      Waregem, Belgium                       368             43     6.2  WW I
                     Florence American Cemetery            Florence, Italy                      4,402          1,409    70.0 WW II
                     Henri-Chapelle American Cemetery      Henri-Chapelle, Belgium              7,992            450    57.0  WW II
                     Lorraine American Cemetery            St. Avold (Moselle), France         10,489            444   113.5 WW II
                     Luxembourg American Cemetery          Luxembourg City, Luxembourg          5,076            371    50.5 WW II
                     Manila American Cemetery              Luzon, Phillippines                 17,202         36,285   152.0 WW II
                     Meuse-Argonne American Cemetery       Romagne (Meuse), France             14,246            954   130.5  WW I
                     Mexico City National Cemetery         Mexico City, Mexico                  1,563              0     1.0  **
                     Netherlands American Cemetery         Margraten, Holland                   8,301          1,722    65.5 WW II
                     Normandy American Cemetery            Colleville-sur-Mer, France           9,387          1,557   172.5 WW II
                     North Africa American Cemetery        Carthage, Tunisia                    2,841          3,724    27.0 WW II
                     Oise-Aisne American Cemetery          Fere-en-Tardenois, France            6,012            241    36.5  WW I
                     Rhone American Cemetery               Draguignan, Var, France                861            294    12.5 WW II
                     St. Mihiel American Cemetery          Thiaucourt, Meurthe, France          4,153            284    40.5  WW I
                     Sicily-Rome American Cemetery         Nettuno, Italy                       7,861          3,095    77.0 WW II
                     Somme American Cemetery               Bony (Aisne), France                 1,844            333    14.3  WW I
                     Suresnes American Cemetery            Suresnes, France                     1,565            974     7.5 WW I/II

                     Subtotal for Cemeteries                                                  131,138         60,314 1,294.5

                     *Acquired by Executive Order as a result of the Panama Canal Treaty.
                     **Acquired by Executive Order from the War Department.




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                                                   Page 37                                                GAO-12-404 ABMC 2011 and 2010 Financial Audit
                            Other Information




                                           American Battle Monuments Commission
                                                 Schedule of Heritage Assets
                                                    September 30, 2011
                                                         (Unaudited)



                            25 FEDERAL MEMORIALS, MONUMENTS, AND MARKERS

Name                            Location                     Interred         Memorialized    Acres        War

East Coast Memorial             New York City, NY                                    4,609      0.8       WW II
Honolulu Memorial               Honolulu, HI                                        28,800      1.0 WW II/Korea/Vietnam
West Coast Memorial             San Francisco, CA                                      412      1.3       WW II
Audenarde Monument              Audenarde, Belgium                                              0.4       WW I
Bellicourt Monument             St. Quentin, France                                             1.8       WW I
Brest Naval Monument            Brest, France                                                   1.0       WW I
Cabanatuan Memorial             Luzon, Phillipines                                                        WW II
Cantigny Monument               Cantigny, France                                                0.4       WW I
Chateau-Thierry Monument        Chateau-Thierry, France                                        58.9       WW I
Chaumont Marker                 Chaumont, France                                                          WW I
Gibraltar Naval Monument        Gibraltar                                                       0.1       WW I
Guadalcanal Memorial            Guadalcanal                                                     0.5       WW II
Kemmel Monument                 Ypres, Belgium                                                  0.2       WW I
Marine Monument Belleau Wood    Aisne, France                                                 199.6       WW I
Montfaucon Monument             Montfaucon, France                                              9.6       WW I
Montsec Monument                Thiaucourt, France                                             47.5       WW I
Papua Marker                    Port Moresby, New Guinea                                                  WW II
Pointe du Hoc Ranger Monument   St. Laurent-sur-Mer, France                                    29.8       WW II
Saipan Monument                 Saipan, Northern Mariana Islands                                          WW II
Santiago Surrender Tree         Santiago, Cuba                                                       Sp American War
Sommepy Monument                Sommepy, France                                                15.0       WW I
Souilly Marker                  Souilly, France                                                           WW I
Tours Monument                  Tours, France                                                   0.5       WW I
Utah Beach Monument             Sainte Marie-du-Mont, France                                    0.5       WW II
Western Naval Task
 Force Marker                   Casablanca, Morocco                                                       WW II

Subtotal for Memorials                                                   0          33,821    368.9

Grand Total                                                        131,138          94,135 1,663.4




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                            Page 38                                                          GAO-12-404 ABMC 2011 and 2010 Financial Audit
                        Other Information




                                American Battle Monuments Commission
                                      Schedule of Heritage Assets
                                         September 30, 2011
                                              (Unaudited)




                              7 NONFEDERAL MEMORIALS

Name                                              Location                              War

29th Infantry Division Memorial                   Vierville-sur-Mer, France             WW II
30th Infantry Division Memorial                   Mortain, France                       WW II
6th Engineering Special Brigade Memorial          Vierville-sur-Mer, France             WW II
351st Bomb Group Memorial                         Oundle, England                       WW II
147th Engineer Battalion Monument                 Englesqueville-la-Percee, France      WW II
507th Parachute Infantry Regiment Memorial        Amfreville, France                    WW II
398th Bomb Group Memorial                         Herdfordshire, England                WW II




                                                18




                        Page 39                                            GAO-12-404 ABMC 2011 and 2010 Financial Audit
Appendix I

Management’s Report on Internal Control over                             Appendx
                                                                               ies




Financial Reporting                                                       Append
                                                                               x
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(196245)       Page 40       GAO-12-404 ABMC 2011 and 2010 Financial Audit
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