FINANCIAL REPORTING

The Department is committed to making financial management a priority and significant efforts are being made to further improve the management of its financial resources. The Department has received unqualified opinions on its consolidated financial statements since 1999. In addition, one bureau subject to individual audit has maintained unqualified opinions on its principal financial statements. The Department met or exceeded the accelerated financial statement submission deadlines for FY 2006. These achievements resulted from the Department’s commitment to strong management controls and accountability for its resources. One reportable condition for a bureau’s control over construction work-in-progress was resolved during FY 2006 and the other reportable condition cited relating to deficiencies in general information technology (IT) controls remained from the prior years. Although the Department did not identify any significant problems with erroneous payments, it recognized the importance of maintaining adequate internal controls. The Performance and Accountability Report (PAR) section, Improper Payments Information Act of 2002 (IPIA), and the Appendix C on the IPIA reporting details describe the Department’s implementation efforts of this act along with the results of the Department’s reviews.

The Department accomplished the following initiatives that resulted in meeting the aforementioned goals:

• Successfully implemented the requirements under OMB Circular A-123, Management’s Responsibility for Internal Control, Appendix A, including documentation of the internal controls over financial reporting and an assessment as to the effectiveness of the internal controls. A Senior Management Council (SMC) and a Senior Assessment Team (SAT) worked together to provide oversight guidance and decision-making for the A-123 implementation process. The final report which reported no material weaknesses was incorporated into management’s overall assurance statement provided under the requirements of the FMFIA.
• Continued business process re-engineering to provide optimal service delivery for Accounts Payable through process and data standardization. A Department-wide working group was established to analyze and make recommendations for optimization using a business process re-engineering case implemented by one bureau during the fiscal year as a starting point.
• Prepared and monitored Corrective Action Plans (CAP) for the reportable condition and management letter comments, and progress was monitored throughout the year.
• Published guidance on the preparation and submission of financial statements, including a calendar of milestone dates. Each quarter, with the participation of all bureaus, guidance was reviewed and updated to reflect lessons learned and to identify best practices among the bureaus. When necessary, task forces were formed to resolve issues that impeded the Department’s ability to produce timely and accurate financial statements.
• Held meetings throughout the fiscal year with the Office of the Inspector General (OIG) and independent auditors to ensure timely completion of the audit and issuance of the financial statements.
• Held monthly meetings led by the Department’s Deputy Chief Financial Officer (CFO) with the bureaus’ CFOs to discuss financial management issues, including financial statements, OMB Circular A-123, and financial performance metrics. These meetings were in addition to the Department’s monthly CFO Council meetings led by the Department’s CFO, and the monthly Finance Officer meetings led by the Deputy CFO.
• Monthly financial metrics were compiled, analyzed, and reported in the government-wide consolidated CFO measurement tracking system. This information is also included in the Department’s CRS for senior management’s review. Individual bureaus were provided with a monthly status report comparing and analyzing their results with the Department’s goals, and the Department and government-wide results. The results of bureaus metrics were also discussed at the bureau CFOs individual monthly meetings.
• Facilitated intragovernmental reconciliations using the Department’s Corporate Database application to collect, extract, and report on a quarterly basis its intragovernmental account balances, by trading partner, to the Treasury Department. The Department took a proactive approach of initiating contact with all trading partner agencies to reconcile large differences. Although the Department has seen an improvement in trading partner’s participation, continued improvement is needed in order to reconcile all differences. Although the Department has accomplished much in the area of financial management, there is still a need to improve upon these accomplishments to ensure that the Department produces and reports accurate, reliable, and timely financial information.

In FY 2007 and beyond, the Department plans to accomplish the following:

• Continue to enhance the OMB Circular A-123, Management’s Responsibility for Internal Controls, process and monitor the implementation of the CAP for the identified deficiencies as a result of the A-123 and financial statement audit process.
• Continue to identify areas that will facilitate the acceleration of providing accurate and reliable financial information to Department managers and central agencies. This will be achieved through ongoing meetings and workgroups amongst the Department’s financial managers and participation in government-wide financial management committees and workgroups.
• Continue to monitor and perform reviews of the Department’s progress in preventing improper payments and perform a contract audit recovery review.
• Continue to work with OMB, Treasury Department, and the Government-wide Intragovernmental Subcommittee to improve the intragovernmental reconciliation process.