Our objective was to audit the consolidated financial statements for the fiscal years ended September 30, 2010 and 2009 (as well as 2008, 2007, and 2006 with respect to the Statements of Social Insurance), including reporting on internal control over financial reporting and on compliance with selected provisions of laws and regulations.
The Government Management Reform Act of 1994 expanded the requirements of the Chief Financial Officers (CFO) Act of 1990 by making the inspectors general of 24 major federal agencies20 responsible for annual audits of agencywide financial statements prepared by these agencies and GAO responsible for the audit of the U.S. government's consolidated financial statements. The Accountability of Tax Dollars (ATD) Act of 200221 requires most other executive branch entities to prepare and have audited annual financial statements. The Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) have identified 35 federal entities22 that are significant to the U.S. government's consolidated financial statements, consisting of the 24 CFO Act agencies, several other federal executive branch agencies, and some government corporations (35 significant entities). Our work was performed in coordination and cooperation with the inspectors general and independent public accountants for these 35 significant entities to achieve our respective audit objectives. Our audit approach regarding the accrual-based consolidated financial statements focused on determining the current status of the material weaknesses that contributed to our disclaimer of opinion on the accrual-based consolidated financial statements and the other material weaknesses affecting internal control that we had reported in our report on the consolidated financial statements for fiscal year 2009.23 We also separately audited the financial statements of the following significant federal entities and federal agency components:
In addition, we considered the CFO Act agencies' and certain other federal entities' fiscal years 2010 and 2009 financial statements and the related auditors' reports prepared by the inspectors general or contracted independent public accountants. Financial statements and audit reports for these significant entities provide information about the operations of each of these entities. The entity audit reports also contain details regarding any audit findings and related recommendations for the respective entity. We did not audit, and we do not express an opinion on, any of these individual federal entity financial statements.
We considered the Department of Defense's (DOD) assertion included in the DOD Agency Financial Report for 2010 that certain major deficiencies related to noncompliant systems and noncompliant processes continued to impact the department's ability to prepare reliable financial statements. In addition, DOD refers to its ongoing efforts to address related material weaknesses reported by the DOD Inspector General. In the DOD Inspector General's fiscal year 2010 report on internal control over financial reporting, the Inspector General cited material weaknesses in several areas including (1) property, plant, and equipment; (2) inventory and operating material and supplies; (3) environmental liabilities; (4) intragovernmental eliminations; and (5) material amounts of unsupported accounting entries needed to prepare DOD's annual consolidated financial statements.
Because of the significance of the amounts presented in the Statement of Social Insurance related to the Social Security Administration (SSA) and the Department of Health and Human Services (HHS), our audit approach regarding the Statement of Social Insurance focused primarily on these two agencies. For each federal entity preparing a Statement of Social Insurance,32 we considered the entity's fiscal year 2010, 2009, 2008, 2007, and 2006 financial statements and the related auditor's reports prepared by the inspectors general or contracted independent public accountants. We believe our audit, including internal control and substantive audit procedures, reperformance procedures, and review of the other auditors' Statement of Social Insurance-related audit work, provides a reasonable basis for our opinions on the 2009, 2008, and 2007 Statements of Social Insurance.
We performed sufficient audit work to provide this report on the consolidated financial statements, internal control, and compliance with selected provisions of laws and regulations. We considered the limitations on the scope of our work regarding the accrual-based consolidated financial statements and the 2010 and 2006 Statements of Social Insurance in forming our conclusions. Our work was performed in accordance with U.S. generally accepted government auditing standards.
2031 U.S.C. 901(b), 3521(e). The 1994 act authorized the Office of Management and Budget to designate agency components that also would receive a financial statement audit. See 31 U.S.C. 3515(c). (Back to Content)
21 Pub. L. No. 107-289, 116 Stat. 2049 (Nov. 7, 2002); see 31 U.S.C. 3515. (Back to Content)
22 See Treasury Financial Manual, volume I, part 2, chapter 4700, for a listing of the 35 entities. (Back to Content)
23 For our report on the U.S. government's consolidated financial statements for fiscal year 2009, see U.S. Department of the Treasury, Fiscal Year 2009 Financial Report of the United States Government (Washington, D.C.: Feb. 2010), pp. 209-234, which can be found on GAO's Web site at www.gao.gov/financial.html. (Back to Content)
24 GAO, Financial Audit: IRS's Fiscal Years 2010 and 2009 Financial Statements, GAO-11-142 (Washington, D.C.: Nov. 10, 2010). (Back to Content)
25GAO, Financial Audit: Bureau of the Public Debt's Fiscal Years 2010 and 2009 Schedules of Federal Debt, GAO-11-52 (Washington, D.C.: Nov. 8, 2010). (Back to Content)
26 The public holding federal debt is comprised of individuals, corporations, state and local governments, the Federal Reserve Banks, and foreign governments and central banks. (Back to Content)
27 Intragovernmental debt holdings represent federal debt issued by Treasury and held by certain federal government accounts such as the Social Security and Medicare trust funds. (Back to Content)
28 GAO, Financial Audit: Securities and Exchange Commission's Financial Statements for Fiscal Years 2010 and 2009, GAO-11-202 (Washington, D.C.: Nov. 15, 2010). (Back to Content)
29 GAO, Financial Audit: Federal Housing Finance Agency's Fiscal Years 2010 and 2009 Financial Statements, GAO-11-151 (Washington, D.C.: Nov. 15, 2010). (Back to Content)
30 GAO, Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Years 2010 and 2009 Financial Statements, GAO-11-174 (Washington, D.C.: Nov. 15, 2010). (Back to Content)
31 GAO, Financial Audit: Federal Deposit Insurance Corporation Funds' 2009 and 2008 Financial Statements, GAO-10-705 (Washington, D.C.: June 25, 2010). (Back to Content)
32 These entities consist of SSA, HHS, the Railroad Retirement Board, and the Department of Labor. (Back to Content)
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