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Reconciling Intragovernmental Activity and Balances

We are encouraged by continuing congressional oversight of DOD’s business transformation and financial management improvement efforts and the commitment of DOD’s leaders to implementing sustained improvements in the department’s ability to produce reliable, useful, and timely information for decision making and reporting. We will continue to monitor DOD’s progress in addressing its financial management weaknesses and transforming its business operations.

Federal entities are unable to adequately account for and reconcile intragovernmental activity and balances. For both fiscal years 2010 and 2009, amounts reported by federal entity trading partners for certain intragovernmental accounts were not in agreement by significant amounts. Although OMB and Treasury require the CFOs of 35 significant federal entities to reconcile, on a quarterly basis, selected intragovernmental activity and balances with their trading partners, a substantial number of the entities did not adequately perform those reconciliations for fiscal years 2010 and 2009. As a result of these circumstances, the federal government’s ability to determine the impact of the unreconciled differences between trading partners on the amounts reported in the accrual-based consolidated financial statements is significantly impaired.

GAO has identified and reported on numerous intragovernmental activities and balances issues and has made several recommendations to Treasury and OMB to address those issues. Treasury and OMB have generally taken or plan to take actions to address these recommendations. Treasury continues to take steps to help resolve material differences in intragovernmental activity and balances. For example, during fiscal year 2010, Treasury established additional focus groups, consisting of Treasury and agency personnel, to begin identifying and resolving certain reported material differences. Resolving the intragovernmental transactions problem remains a difficult challenge and will require a strong commitment by federal entities to fully implement guidance regarding business rules for intragovernmental transactions issued by OMB and Treasury as well as continued strong leadership by OMB and Treasury.13

13On November 8, 2010, Treasury issued the Treasury Financial Manual (TFM) Bulletin No. 2011-04, Intragovernmental Business Rules, which rescinded and supersedes TFM Bulletin No. 2007-03, Intragovernmental Business Rules (October 31, 2007). This guidance is effective for fiscal year 2011 and has updated the previous guidance to include, among other things, a new Intragovernmental Dispute Resolution Request Form to be certified by federal entity CFOs and disputes to be resolved by Treasury’s Deputy Assistant Secretary— Accounting Policy, Office of Fiscal Assistant Secretary.

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