2010   Financial Report of the United States Government

Appendixes

Appendix B: Material Weaknesses Reported by Auditors and Federal Managers´ Financial Integrity Act (FMFIA) Tables

OMB audit guidance requires auditors to disclose material weaknesses in internal control over financial reporting. The FMFIA and OMB guidance require the head of each executive agency to annually report whether there is reasonable assurance that the agency´s controls are achieving the intended objectives and whether the agency´s financial management systems conform to governmentwide requirements.

Agency heads are required to identify material weaknesses related to agency programs and operations (pursuant to Section 2 of FMFIA) and non-conformances with governmentwide financial systems requirements (pursuant to Section 4 of FMFIA). Reporting material weaknesses under FMFIA is not limited to weaknesses over financial reporting.

The following tables include: the number of material weaknesses reported by independent auditors, the number of material weaknesses reported by agency heads under Section 2 of FMFIA, and the number of financial system non-conformances reported by agency heads under Section 4 of FMFIA. The number of material weaknesses may differ from those identified by independent auditors and those identified by agency heads. This difference is primarily due to the more in-depth review that management is required to perform on its internal control environment over financial reporting, per OMB Circular A-123, which may result in more material weaknesses being identified.

Table Definitions:

Fiscal Year 2010: Auditor-Identified Material Weaknesses
Agency Beginning New Resolved Consolidated Ending
Agriculture 2 0 0 0 2
Commerce 0 0 0 0 0
Defense 13 0 0 0 13
Education 0 0 0 0 0
Energy 0 0 0 0 0
HHS 2 0 0 0 2
Homeland 6 0 0 0 6
HUD 0 0 0 0 0
Interior 0 0 0 0 0
Justice 0 0 0 0 0
Labor 0 4 0 0 4
State 3 0 3 0 0
DOT 0 0 0 0 0
Treasury 2 0 1 0 1
VA 4 0 3 0 1
AID 1 0 0 0 1
EPA 3 0 3 0 0
GSA 0 0 0 0 0
NASA 1 0 1 0 0
NSF 0 0 0 0 0
NRC 0 0 0 0 0
OPM 0 1 0 0 1
SBA 1 0 1 0 0
SSA 0 0 0 0 0
Total 38 5 12 0 31

Fiscal Year 2010 Auditor-Identified Material Weaknesses by Category

This year great strides were made in the area of Financial Management and Reporting, and material weaknesses, were reduced by nearly 30 percent. By improving controls over the reporting process agencies are better positioned to prepare reliable, useful, and timely financial information for decision making. In addition, there were reductions in the material weaknesses over Property, Plant, and Equipment and Accounts Payable and Other Liabilities, both which reduced by a third. While progress is being made at many agencies and across the Government in identifying and resolving internal control deficiencies, continued diligence and commitment are needed.

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In fiscal year 2010, the total number of material weaknesses and the number of repeat material weaknesses decreased from 38 to 31 and from 29 to 26, respectively. A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. The existence of material weaknesses does not necessarily mean the financial statements are unreliable. However, they are indicators and their existence suggests an increased likelihood that the financial statements include material misstatements.

Fiscal Year 2010: FMFIA Section 2—Consolidated Totals

The agency head is responsible for submitting an annual assurance statement on the effectiveness of the agency’s internal control. The OMB Circular A-123 requires the Agency Head to separately address the effectiveness of internal control over operations separately from the internal control over financial reporting. The assurance statement must take one of the following forms: a) Unqualified statement of assurance (no material weaknesses reported); b) Qualified statement of assurance, considering the exceptions explicitly noted (one or more material weaknesses reported); or c) Statement of no assurance (no processes in place or pervasive material weaknesses).

A material weakness over operations includes reportable conditions in which the agency head determines to be significant enough to report outside of the agency. A material weakness over financial reporting is a reportable condition, or a combination thereof which results in more than a remote)1 likelihood that a material misstatement of the financial statements, or other significant financial reports, will not be prevented or detected.

Fiscal Year 2010: FMFIA Section 2–Consolidated Totals

Fiscal Year 2010: FMFIA Section 2–Consolidated Totals
  Adequate and Effective Management Controls Number of Material Weaknesses
  Section 2 Operational Section 2 Financial Reporting Beginning New Resolved Consolidated Reassessed Ending
Agriculture Unqualified Qualified 3 0 0 0 1 2
Commerce Qualified Unqualified 1 0 1 0 0 0
Defense Qualified No Assurance 16 2 0 0 0 18
Education Unqualified Unqualified 0 0 0 0 0 0
Energy Unqualified Unqualified 0 0 0 0 0 0
HHS Qualified Qualified 2 0 0 0 0 2
Homeland Qualified No Assurance 12 0 0 0 3 9
HUD Unqualified Unqualified 0 0 0 0 0 0
Interior Qualified Unqualified 1 0 0 0 0 1
Justice Qualified Unqualified 2 0 1 0 0 1
Labor Unqualified Qualified 0 3 0 0 0 3
State Unqualified Unqualified 0 0 0 0 0 0
DOT Unqualified Unqualified 0 1 0 0 0 1
Treasury Qualified Qualified 5 0 1 0 0 4
VA Unqualified Qualified 1 0 1 0 0 0
AID Unqualified Qualified 0 1 0 0 0 1
EPA Unqualified Qualified 3 0 3 0 0 0
GSA Unqualified Unqualified 0 0 0 0 0 0
NASA Unqualified Unqualified 1 0 1 0 0 0
NSF Unqualified Unqualified 0 0 0 0 0 0
NRC Unqualified Unqualified 0 0 0 0 0 0
OPM Qualified Qualified 1 2 0 0 0 3
SBA Unqualified Unqualified 1 0 1 0 0 0
SSA Unqualified Unqualified 0 0 0 0 0 0
Total     49 9 9 0 4 45

 

Fiscal Year 2010: FMFIA Section 2—Operational
  Adequate and Effective
Management Controls
Number of Material Weaknesses
  Un-
qualified
Qualified No
Assurance
Beginning New Resolved Con-
solidated
Re-
assessed
Ending
Agriculture X     0 0 0 0 0 0
Commerce   X   1 0 1 0 0 0
Defense   X   4 2 0 0 0 6
Education X     0 0 0 0 0 0
Energy X     0 0 0 0 0 0
HHS   X   1 0 0 0 0 1
Homeland   X   6 0 0 0 2 4
HUD X     0 0 0 0 0 0
Interior   X   1 0 0 0 0 1
Justice   X   2 0 1 0 0 1
Labor X     0 0 0 0 0 0
State X     0 0 0 0 0 0
DOT X     0 1 0 0 0 1
Treasury   X   3 0 0 0 0 3
VA X     1 0 1 0 0 0
AID X     0 0 0 0 0 0
EPA X     0 0 0 0 0 0
GSA X     0 0 0 0 0 0
NASA X     0 0 0 0 0 0
NSF X     0 0 0 0 0 0
NRC X     0 0 0 0 0 0
OPM   X   1 1 0 0 0 2
SBA X     1 0 1 0 0 0
SSA X     0 0 0 0 0 0
Total 16 8 0 21 4 4 0 2 19

 

Fiscal Year 2010: FMFIA Section 2—Financial Reporting
  Adequate and Effective
Management Controls
Number of Material Weaknesses
  Un-
qualified
Qualified No
Assurance
Beginning New Re-
solved
Con-
solidated
Re-
assessed
End-
ing
Agriculture   X   3 0 0 0 1 2
Commerce X     0 0 0 0 0 0
Defense     X 12 0 0 0 0 12
Education X     0 0 0 0 0 0
Energy X     0 0 0 0 0 0
HHS   X   1 0 0 0 0 1
Homeland     X 6 0 0 0 1 5
HUD X     0 0 0 0 0 0
Interior X     0 0 0 0 0 0
Justice X     0 0 0 0 0 0
Labor   X   0 3 0 0 0 3
State X     0 0 0 0 0 0
DOT X     0 0 0 0 0 0
Treasury   X   2 0 1 0 0 1
VA   X   0 0 0 0 0 0
AID   X   0 1 0 0 0 1
EPA   X   3 0 3 0 0 0
GSA X     0 0 0 0 0 0
NASA X     1 0 1 0 0 0
NSF X     0 0 0 0 0 0
NRC X     0 0 0 0 0 0
OPM   X   0 1 0 0 0 1
SBA X     0 0 0 0 0 0
SSA X     0 0 0 0 0 0
Total 14 8 2 28 5 5 0 2 26

 

Fiscal Year 2010: FMFIA Section 4—Financial Management Systems
  Systems Conform to Requirements Number of Non-conformances
  Yes Yes, with
Non-confor-mances
No Beginning New Resolved Consolidated Reassessed Ending
Agriculture   X   1 0 0 0 0 1
Commerce X     0 0 0 0 0 0
Defense     X 1 0 0 0 0 1
Education X     0 0 0 0 0 0
Energy X     0 0 0 0 0 0
HHS     X 2 0 0 0 0 2
Homeland     X 3 0 0 0 0 3
HUD X     0 0 0 0 0 0
Interior X     0 0 0 0 0 0
Justice X     0 0 0 0 0 0
Labor     X 0 1 0 0 0 1
State X     0 0 0 0 0 0
DOT X     0 0 0 0 0 0
Treasury X     0 0 0 0 0 0
VA   X   3 0 2 0 0 1
AID X     0 0 0 0 0 0
EPA X     0 0 0 0 0 0
GSA X     0 0 0 0 0 0
NASA X     0 0 0 0 0 0
NSF X     0 0 0 0 0 0
NRC X     0 0 0 0 0 0
OPM X     0 0 0 0 0 0
SBA X     0 0 0 0 0 0
SSA X     0 0 0 0 0 0
Total 18 2 4 10 1 2 0 0 9

Footnotes

1 The term "remote" is defined in SFFAS No. 5, Accounting for Liabilities of the Federal Government, as the chance of the future event, or events, occurring is slight. (Back to Content)



Last Updated:  December 07, 2011