FY 2002 Financial and Performance Reporting

October 18, 2002

MEMORANDUM FOR CHIEF FINANCIAL OFFICERS AND INSPECTORS GENERAL

FROM:	Mark W. Everson Deputy Director for Management
SUBJECT:	FY 2002 Financial and Performance Reporting

A key goal of the initiative in the President’s Management Agenda to improve financial performance is producing accurate and timely information. We are pleased that all agencies produced timely interim financial statements for the period ending March 31, 2002. Also, as we are meeting with agency CFOs and IGs, we are encouraged by agency efforts to meet the accelerated due date of February 1, 2003 for agency Performance and Accountability Reports. Since February 1 falls on a Saturday in 2003, the Performance and Accountability Reports must be delivered to OMB by close of business January 31, 2003.

As you know, beginning in FY 2003 unaudited financial statements must be prepared and submitted to OMB on a quarterly basis no later than 45 days after the end of the reporting period. Beginning with the second quarter in FY 2004, agencies are required to prepare and submit quarterly unaudited financial statements 21 days after the end of each quarter, building up to the November 15th due date for the FY 2004 Performance and Accountability Reports. As discussed in OMB Circular A-11 and now required by this memorandum, beginning with the fiscal year ending September 30, 2004, Performance and Accountability Reports will be due to the President, OMB, and the Congress by November 15, 2004 and annually thereafter. The U.S. Treasury will be required to issue the Financial Report of the United States Government to the President and the Congress by December 15, 2004.

Attachment A is a summary schedule with the accelerated reporting due dates for the FY 2002 reporting cycle. Please note that the Office of Personnel Management (OPM) has revised the agreed-upon procedures (AUPs) that are contained in paragraph 10 and Appendix I of OMB Bulletin 01-02, Audit Requirements for Federal Financial Statements. Also note that distribution procedures have changed for a number of the reports.

Attachment B includes guidance on the preparation of agency FY 2002 Performance and Accountability Reports.

Thank you for your commitment to meeting the goals of the President’s Management Agenda. I look forward to continuing the progress we have made in bringing in a new era of accountability and meaningful disclosure to the Federal government.

Attachment A

Key Due Dates for FY 2002 Performance and Accountability Reports
Agency Financial Statements and Financial Report of the U.S. Government

Key Due Date	Requirement	Recipients¹	Source of Requirement²
11/15/02	IG’s Agreed-Upon Procedures Reports (AUPs)	OPM OIG³	Audit Bulletin⁴
11/15/02	Justice’s consolidated Interim Legal Representation Letter	GAO	Annual OMB Request Letter to Justice
01/03/03	CFO’s FACTS I submission (ATB data and NOTES reports)	Treasury	TFM, Vol. 1, Part 2, Ch. 4000
01/17/03⁵	CFO’s draft Performance and Accountability Reports	OMB Resource Mgmt Office (RMO) and OFFM	Form and Content
01/22/03	CFO’s FACTS I adjustment data (ATB and Notes)	Treasury	TFM, Vol.1, Part 2, Ch. 4000
01/31/03	CFO’s Management Representation Letter⁶	OMB/OFFM	OMB 6/4/02 Memorandum, andForm and Content
01/31/03	Agency Head’s final Performance and Accountability Report	President, OMB, and the Congress	Form and Content
01/31/03	IGs submit General Counsel’s final legal representation letter⁷ and CFO’s Management Schedule of disposition of legal responses for financial reporting purposes	GAO⁸	OMB 6/4/02 Memorandum and Audit Bulletin⁹
02/03/03	CFO’s final FACTS I Account Groupings Worksheet with explanation of differences	Agency IG, Treasury, and GAO	TFM, Vol. 1, Part 2, Ch. 4000
02/03/03	CFO’s Representations for Intragovernmental Activity and Balances	Agency IG, Treasury, and GAO	TFM, Vol.1, Part 2, Ch. 4000
02/06/03	IG’s FACTS I Agreed-upon Procedures Report	Treasury, GAO, and Agency CFO	TFM, Vol.1, Part 2, Ch. 4000
02/06/03	IG’s Reports on CFO Representations for Intragovernmental Activity and Balances	Agency CFO, Treasury, and GAO	TFM, Vol. 1, Part 2, Ch. 4000
02/14/03	Quarterly unaudited financial statements¹⁰	OMB/OFFM	Form and Content
03/04/03	IG’s Representation Letter on Independence and Related Matters	GAO	Annual GAO Request Letter
03/19/03	Justice’s consolidated final Legal Representation Letter	GAO and Treasury	Annual OMB Request Letter to Justice
03/31/03	Secretary of the Treasury’s Financial Report of the United States Government	President and the Congress	GMRA

ENDNOTES FOR ATTACHMENT A:

1. Required documents should be provided to the following recipients by the due dates indicated. Agencies should generally hand-carry, fax, or e-mail the information due to the difficulty experienced last year using normal mailing routes.

Department of Justice Attn: Stephanie Willson 950 Pennsylvania Avenue, NW Civil Division, Room 3140 Washington, DC 20503 E-mail: stephanie.willson@usdoj.gov Telephone: 202-514-3886	Department of the Treasury Attn: Director, Financial Reports Division Financial Management Service, Room 509B 3700 East-West Highway Hyattsville, MD 20782 Telephone: (202) 874-9910 Fax: (202) 874-9907 E-mail: financial.reports@fms.treas.gov
Office of Management and Budget Office of Federal Financial Management (OFFM) Attn: Ginger Moench/Kim Geier New Executive Office Building, Room 6025 725 17th Street, NW Washington, DC 20503 Telephone: (202) 395-3993 Fax: (202) 395-3952 or 395-4915 E-mail questions to: kgeier@omb.eop.gov gmoench@omb.eop.gov	U.S. General Accounting Office Attn: John Fretwell 441 G Street, NW, Room 5970 Washington, DC 20548 Telephone: (202) 512-9382 Fax: (202) 512-9596 E-mail: USCFS@gao.gov
	U.S. Office of Personnel Management Office of Inspector General, Rm 6400 1900 E Street, N.W. Washington, D.C. 20415

2. Source Documents:

OMB 6/4/02 Memorandum:	Everson memorandum “Legal and Management Representation Letters,” dated 6/4/02 at http://www.whitehouse.gov/omb/financial/legal_process2002.pdf
Audit Bulletin:	OMB Bulletin No. 01-02, Audit Requirements for Federal Financial Statements, at http://www.whitehouse.gov/omb/bulletins/b01-02.pdf
Form and Content:	OMB Bulletin No. 01-09, Form and Content of Agency Financial Statements, at http://www.whitehouse.gov/omb/bulletins/b01-09.html
TFM:	Treasury Financial Manual, Volume I, Part 2-- Chapter 4000 at http://www.fms.treas.gov/tfm/vol1/v1p2c400.html
FMFIA:	Federal Manager’s Financial Integrity Act of 1982 (P.L. 97-255)
GMRA:	Government Management Reform Act of 1994 (P.L. 103-356)
GAGAS:	Generally Accepted Government Auditing Standards

3. Three copies are required by OPM OIG. Notify OPM by 10/15/02 of any anticipated delays.

4. Revised AUPs are located at at http://www.opm.gov/oig/index.htm

5. CFOs may negotiate shorter review periods with their respective RMO.

6. Statement of Auditing Standard (SAS) Number 89, Audit Adjustments, which became effective for FY 2001 audits, requires a management representation regarding the materiality of uncorrected financial statement misstatements aggregated by the auditor. A list of any uncorrected misstatements should be attached to the management representation letter.

7. Cases that have not changed from the 9/30/02 interim letter do not have to be individually listed again.

8. IGs may submit the legal representation letters with management schedules electronically to USCFS@gao.gov with electronic signatures or follow up with a fax containing signatures from the agency IG. If hand delivering, three copies must be delivered by a Federal employee with government ID; call Mr. Fretwell at (202) 512-9382 prior to delivery.

9. DOJ has provided additional guidance at http://www.usdoj.gov/civil/forms/legalrepinstructions.htm.

10. Interim unaudited financial statements should be submitted electronically to Sheila_Conley_Statements@omb.eop.gov.

Attachment B

PREPARING FY 2002 PERFORMANCE AND ACCOUNTABILITY REPORTS

The following guidance is applicable for the FY 2002 reporting cycle. Guidance for future reporting periods will be included in an OMB circular that will consolidate, establish, and update government-wide policies and procedures related to agencies’ Performance and Accountability Reports. For this year, this report satisfies the reporting requirements of the:

Chief Financial Officers Act of 1990,
Federal Managers’ Financial Integrity Act of 1982,
Government Management Reform Act of 1994,
Government Performance and Results Act of 1993, and
Reports Consolidation Act of 2000.

I. OBJECTIVE

A Performance and Accountability Report should provide financial and performance information that enables Congress, the President, and the public the ability to assess the performance of an organization relative to its mission and for management to be accountable for its actions and resources.

II. CONTENT

There will be three parts to the Performance and Accountability Reports:

Part I. Management’s Discussion and Analysis,
Part II. Performance Section, and
Part III. Financial Section.

Parts II and III should be included with Part I. Management’s Discussion and Analysis, available in hard and soft copy (on the internet). Agencies may, however, find it useful to publish the overview, also known as the “Management’s Discussion and Analysis” (MD&A), as a separate pamphlet in addition to including it in the Performance and Accountability Report. Content requirements for each section are described below.

Part I. Management’s Discussion and Analysis

A. A dated transmittal letter signed by the agency head should be located at the beginning of the report. It must include:

(1) a brief message from the agency head;

(2) an assessment of whether financial and performance data in the report is reliable and complete, identifying material inadequacies and actions the agency is taking to resolve them, (the letter may reference a more detailed discussion of this topic elsewhere in the report); and

(3) a Federal Manager’s Financial Integrity Act (Integrity Act) statement of assurance indicating whether (a) management controls are in place and (b) financial systems conform with government-wide standards. The statement must take one of the following forms: statement of assurance; qualified statement of assurance, with exceptions explicitly noted; or statement of no assurance.

B. A concise overview of the entire Performance and Accountability Report should follow the agency head transmittal letter. The overview includes most important matters that could:

lead to significant actions or proposals by top management of the reporting unit;
be significant to the managing, budgeting, and oversight functions of Congress and the Administration; or
significantly affect the judgment of citizens about the efficiency and effectiveness of their Federal Government.

OMB has determined that the Performance and Accountability Report overview, described below, meets FASAB requirements for a MD&A. The overview is not expected to contain all items that are material to the other sections of the report. The overview should include (in no specific order):

(1) a brief mission statement and organizational structure or overview;

(2) highlights of “most important” performance goals and results (positive and negative) for the applicable year, including trend data where available (this applies to goals being evaluated by quantitative and descriptive criteria);

(3) actions being taken or planned where “most important” goals are not yet being met;

(4) if appropriate, forward-looking information regarding significant demands, risks, uncertainties, events, conditions, and trends;

(5) a brief analysis of financial statements;

(6) a brief description of systems, controls, and legal compliance;

(7) a summary description of Integrity Act material weaknesses and non-conformances, the year first identified, the targeted corrective action date, key milestones for corrective action, and instances where an agency failed to meet key milestones from the prior year (Agencies have the option of including this information in either the overview or the CFO letter.); and

(8) other “most important” information identified by the agency head, such as the agency progress in implementing the President’s Management Agenda and/or OMB’s most recent scorecard evaluation of status and progress.

The MD&A should be supported and supplemented by detailed information contained in Part II. Performance Section and Part III. Financial Section. Accrual based accounting and performance and other financial information include reasonable estimates as a part of actual information reported for quarterly and/or fiscal year data. Estimates should be supported by reasonable estimable assumptions and data.

Part II. Performance Section

The annual program performance information required by the Government Performance and Results Act (GPRA) should contain all of the required elements of an annual program performance report as specified in OMB Circular A-11, Preparing, Submitting, and Executing the Budget, section 231.1, “Required Elements of an Annual Program Performance Report”and section 231.9, “Other Features of the Annual Program Performance Report.” Section 231.1 applies to all performance reports. Section 231.9 contains content that is not required by statute but is encouraged by OMB or content that is required by statute which may not be applicable to all agencies.

Part III. Financial Section

A. A letter from the Chief Financial Officer (CFO) that briefly summarizes:

(1) planned time frames for correcting audit weaknesses and noncompliance;

(2) major impediments to correcting audit weaknesses and noncompliance;

(3) progress made in correcting previously reported problems; and

(4) Integrity Act information, if the agency chooses not to include it in the Performance and Accountability Report overview.

B. Agency financial statements and related auditor’s reports

C. An Inspector General (IG) Summary of Serious Management Challenges must be provided to the agency head at least 30 days before the report due date. Comments by the agency head may be appended to the Inspector General’s statement. The agency head may comment on, but not modify, the IG’s statement.

The IG statement must include:

(1) a summary of the most serious management and performance challenges facing the agency; and

(2) a brief assessment of the agency's progress in addressing those challenges.

D. Other agency-specific statutorily required reports pertaining to an agency's financial or performance management may be included in the Performance and Accountability Report after consultation with OMB and Congress. The head of the agency must determine if inclusion of an agency-specific report will make the reported information more useful to decision makers. Consultation with Congress includes the Committee on Governmental Affairs of the Senate, the Committee on Government Reform of the House of Representatives, and any other committee of Congress having jurisdiction with respect to the report being proposed for consolidation.

III. PRESENTATION

A. Performance and Accountability Reports should be easily read and understood, and direct and concise in the information they convey. Form and style should not be elevated over content.

B. Performance and Accountability Reports should be integrated to come across as a single document that has been subject to overall editing that assures consistency in format, emphasis, appearance rather than as an compilation of sections prepared by different parts of the organization.

C. Performance and Accountability Reports should be posted on the Internet with the site listed on the cover or in the table of contents of the report. OMB encourages all agencies to post their Performance and Accountability Reports on the Internet when they are formally transmitted to Congress, the President, and OMB.