TREASURY DIRECTIVE: 32-05

Date: April 26, 1990

Sunset Review: TBD

Expiration Date: TBD

SUBJECT: Responsibilities for Establishing and Maintaining Fiscal Accounting Systems

1. PURPOSE. This directive restates the responsibilities and requirements for the review and approval of fiscal accounting systems.

2. BACKGROUND.

a. The Budget and Accounting Procedures Act of 1950, as amended, places the responsibility for establishing and maintaining adequate systems of accounting and internal control upon the head of each executive agency. These systems must conform to the accounting principles, standards, and related requirements prescribed by the Comptroller General of the United States. The Comptroller General's letter, "Modification of General Accounting Office Procedures with Respect to Approval of Executive Agency Accounting Systems," dated April 18, 1983, sets forth their review process.

b. The Accounting and Auditing Act of 1950, as amended, and the Federal Managers' Financial Integrity Act of 1982, require that the head of each executive agency shall, on the basis of an evaluation conducted in accordance with guidelines issued by the Office of Management and Budget (OMB), prepare annual statements that:

(1) the agency's systems of internal accounting and administrative control fully comply with standards prescribed by the Comptroller General; or

(2) such systems do not fully comply with such requirements and report any material weaknesses in the system and describe the plans and schedule for correcting any such weakness.

c. Revised Title 2 of the General Accounting Office (GAO) Policy and Procedures Manual for Guidance of Federal Agencies provides that the system of central accounts maintained by Treasury to comply with statutory requirements for central accounting and the production of overall financial reports for the Federal Government shall be consistent with the overall principles, standards, and related requirements for accounting prescribed by the Comptroller General.

d. Volume I of the Treasury Financial Manual (TFM) provides codified instructions for the guidance of departments and agencies of the Federal Government governing central accounting and reporting, and other fiscal matters. Other TFM volumes contain instructions concerning the Federal Reserve System.

e. Fiscal accounting systems comprise the Treasury systems of central accounting and financial reporting for the Federal Government, structured for the purposes of:

(1) consolidating the accounting results of all operating agencies with those of Treasury to disclose complete and accurate monthly and fiscal year information reflecting the revenues and outlays, and related assets and liabilities directly related to the cash operations of the Treasury;

(2) effectively managing the Government's cash;

(3) safeguarding assets against waste, loss, or improper or unwarranted use; and

(4) conforming to the accounting principles, standards, and related requirements prescribed by law.

3. RESPONSIBILITIES. New and revised principles and standards governing bureau accounting systems and system designs shall be approved by the Fiscal Assistant Secretary when deemed adequate and in conformity with the overall principles, standards, and related requirements prescribed by the Comptroller General. The Fiscal Assistant Secretary will draw, as necessary, on the Fiscal Service bureaus to perform reviews. The Comptroller General will only approve accounting systems in operation, rather than those in the design phase, i;e., GAO staff will not only review system documentation, but will actually observe operations to determine if the system is in accordance with GAO principles and standards. The Fiscal Assistant Secretary has responsibility over the bureau accounting systems listed below:

a. Bureau of Alcohol Tobacco and Firearms: Compliance Operations Revenue Accounting System.

b. U.S. Customs Service: Automated Commercial Systems - revenue accounting.

c. Financial Management Service:

(1) Central Accounting and Reporting Systems accounting for cash operations and public monies.

(2) Foreign Currency System - accounting for foreign currency transactions.

(3) Investment Accounting System - accounting for investment operations.

(4) Treasury Disbursement Accounting System - accounting for disbursements.

(5) Financial Accounting and Reporting System accounting for check claims operations.

d. Internal Revenue Service: Revenue Accounting System.

e. Bureau of the Public Debt: Public Debt Accounting System.

f. United States Mint: Bullion and Monetary Accounting System - bullion and monetary accounting.

g. Other areas of responsibility extend to all Treasurv bureaus or services depending on their involvement in such activities:

(1) Accounting and financial control for disbursing operations.

(2) Accounting and financial control for organizations acting as depositors or custodians of public monies and other monetary assets, including audits of agents acting in such capacity.

(3) Cash management practices as they relate to -significant changes in the flow of funds to the Treasury accomplished through the Bureau of Alcohol, Tobacco and Firearms, the Internal Revenue Service and the U.S. Customs Service revenue collection systems, the Federal Reserve and their depositaries acting as fiscal agents with Treasury tax and loan accounts.

(4) Treasury's participation in the Joint Financial Management Improvement Program (JFMIP) from the standpoint of the central fiscal agency role, along with the OMB, the GAO, and the Office of Personnel Management.

(5) Responsibilities of the Fiscal Assistant Secretary concerning the Federal Reserve System, including the electronic transfer of funds.

4. FORMAL REQUESTS FOR GAO APPROVAL. GAO will only approve accounting systems in operation, rather than those in the design phase. Heads of bureaus, whose complete operating accounting systems require approval, shall formally request approval of the Comptroller General, through the Fiscal Assistant Secretary, after determining that the system is in accordance with GAO principles and standards. Upon request, and as staff resources permit, GAO will provide consultative assistance in the development of systems.

5. FORMAL REQUESTS FOR DEPARTMENTAL APPROVAL. Requests for Departmental approval of fiscal accounting systems shall be in the form of a brief letter addressed to the Fiscal Assistant Secretary containing a specific statement that the head of the bureau has determined that the statement of accounting principles and standards or systems design submitted conforms, in all material respects, to the prescribed principles, standards, and related requirements of the Comptroller General. Significant departures shall be identified and justified. Requests for Departmental approval shall be submitted as follows:

a. Statements of Accounting Principles and Standards. Detailed requirements are contained in Revised Title 2 of the GAO Manual. Submission of a bureau's principles and standards may be in the form of statements of:

(1) complete principles and standards, or

(2) amendments of previously approved principles and standards.

All such statements shall identify choices made among alternatives that conform to the prescribed principles, standards, and related requirements of the Comptroller General and shall disclose why certain principles and standards generally applicable to administrative accounting systems are not appropriate to fiscal accounting systems.

b. System Design. Detailed requirements are contained in Revised Title 2, Appendix III, Accounting System Standards, GAO Manual. System design presentations shall consist of a concise but comprehensive exposition, by combination of description, chart, diagram, and example, of all the essential elements of the system. The design shall demonstrate that the system, in all of its essential elements, conforms to the bureau's approved principles and standards and to the design requirements of the Comptroller General.

6. CHANGES TO APPROVED SYSTEM. Approval of a fiscal accounting system does not signify that the system must remain unchanged. Bureaus shall continually develop improvements and institute necessary changes to keep the system adapted to the needs of management.

a. Changes Requiring OMB Approval are the following:

(1) proposed changes in the systems operations or technology used to gather the financial data that would impact on other agencies;

(2) proposed changes in the time standards for gathering data that would impact on other agencies: and

(3) any modification, upgrade, or development of a financial system whose total costs exceed $500,000.

b. Changes to Accounting System Requiring Departmental Approval are proposed changes:

(1) to fiscal accounting systems which impact on the Treasury's system for central accounting and reporting for cash operations and public monies;

(2) which will result in shifts in the pattern or rate of expenditures or collections;

(3) which will impact on Federal Reserve banks or Government depositaries;

(4) in the basis on which accounting data is accumulated; or

(5) that will result in significant differences in the content of accounts.

c. Chances to Accounting System Not Requiring Departmental Aporoval are those which bring about greater effectiveness or efficiency in the system itself, providing such changes do not alter the accounting basis or the end product of the system.

7. CANCELLATION. Treasury Directive (TD) 32-05, "Responsibilities for Establishing and Maintaining Fiscal Accounting Systems," dated November 10, 1986, is superseded.

8. REFERENCES.

a. 31 U.S.C. 3512.

b. 31 U.S.C. 3513.

c. Revised Title 2 of the General Accounting Office Policy and Procedures Manual for Guidance of Federal Agencies; and

d. TO 40-05, " Treasury Management Control Program Responsibilities," dated April 17, 1987.

e. OMB Financial Management and Accounting Objectives, dated March 1985.

f. OMB Guidelines for Evaluating Financial Management/ Accounting Systems, dated May 1985.

g. JFMIP Core Financial System Requirements, dated January 1988

h. The Treasury Financial Manual.

9. OFFICE OF PRIMARY INTEREST. Office of the Fiscal Assistant Secretary.

Marcus W. Page

Acting Fiscal Assistant Secretary