Reconciling and Eliminating Intragovernmental Activity/Balances 2005 Federal Investment Seminar May 17, 2005 Presented by: Lena Lewis Financial Management Service, Governmentwide Accounting

Topics of Discussion Intragovernmental Impact on Governmentwide Audit IFCS – Intragovernmental Fiduciary Confirmation System IRAS – Intragovernmental Reporting & Analysis System Intragovernmental Reporting Process Performance Measures Intragovernmental Authority IFCS Key Dates Websites Contact Information Questions

Intragovernmental Impact on Governmentwide Audit  Material Weakness cited by the Government Accountability Office (GAO):  FMS is not able to fully eliminate intragovernmental activity in the preparation of the Financial Report of the U.S. Government (FR).  Impact of Agencies Intragovernmental Reconciliation on the Financial Report:  Assurance that FR is not viewed as possible material misstatement.  Meaningful eliminations.

Intragovernmental Fiduciary Confirmation System (IFCS) GOALS II Internet Application GOALS II Internet Application Official confirmation system for federal agencies that engage in fiduciary intragovernmental transactions. Official confirmation system for federal agencies that engage in fiduciary intragovernmental transactions. Agencies are required to confirm and reconcile the following transactions: Agencies are required to confirm and reconcile the following transactions:  Investments with BPD  Borrowings with BPD and FFB  FECA transactions with DOL  Employee Benefit Program transactions with OPM

IFCS Access Enterprise System Access Request Form (ESAAS) located at: Enterprise System Access Request Form (ESAAS) located at: Rules of Behavior must be signed and returned to FMS. Rules of Behavior must be signed and returned to FMS. Select One Role and provide a back-up for all roles. Select One Role and provide a back-up for all roles. Fax ESAAS form and Rules of Behavior to Sheila Miller or Lena Lewis at (202) Fax ESAAS form and Rules of Behavior to Sheila Miller or Lena Lewis at (202)

IFCS Roles & Functions Department Administrator: assigns fund symbols to confirmation users; view/print forms and reports Department Administrator: assigns fund symbols to confirmation users; view/print forms and reports Department User: read-only access Department User: read-only access Confirmation User: edit/view/print confirmation form (assigned only) Confirmation User: edit/view/print confirmation form (assigned only) Fiduciary User: read-only access (fiduciary agency only) Fiduciary User: read-only access (fiduciary agency only) Governmentwide User: FMS & GAO access only Governmentwide User: FMS & GAO access only Dept Admin/Confirmation User: assigns fund symbols to confirmation users, view/print forms and reports, edit/view/print confirmation forms (assigned only) Dept Admin/Confirmation User: assigns fund symbols to confirmation users, view/print forms and reports, edit/view/print confirmation forms (assigned only) Dept User/Confirmation User: edit/view/print confirmation forms (assigned department only) Dept User/Confirmation User: edit/view/print confirmation forms (assigned department only) Dept Admin/Fiduciary User: assigns fund symbols to confirmation users; view/print forms and reports (fiduciary agency only) Dept Admin/Fiduciary User: assigns fund symbols to confirmation users; view/print forms and reports (fiduciary agency only)

IFCS User Recertification Annual process to re-verify Annual process to re-verify each IFCS user's need for access and the level of that access. A recertification form with accompanying instructions is sent to each user's supervisor via . The form is completed by indicating either "continued" access or "revoke" access for the specified user's role in the system. The recertification form must be signed by the supervisor and faxed to FMS by the designated due date. All IFCS users will need to be recertified by May 2005.

Intragovernmental Reporting and Analysis System (IRAS) Microsoft Access database software application used as a tool to facilitate reconciliation between reporting agency and its trading partners. Microsoft Access database software application used as a tool to facilitate reconciliation between reporting agency and its trading partners. Developed to conduct detail analysis to the fund group level, and to synthesize quarterly intragovernmental trial balance data extracts, IFCS, and GFRS data. Developed to conduct detail analysis to the fund group level, and to synthesize quarterly intragovernmental trial balance data extracts, IFCS, and GFRS data.

IRAS Capabilities Isolates intragovernmental activity by reciprocal category, trading partner, and USSGL account. Isolates intragovernmental activity by reciprocal category, trading partner, and USSGL account. Compares federal agencies quarterly intragovernmental trial balance extracts to IFCS confirmations and Closing Package reporting. Compares federal agencies quarterly intragovernmental trial balance extracts to IFCS confirmations and Closing Package reporting. Generates reports at the detail and summary levels for submission to 35 CFO/Non-CFO agencies, in order to facilitate reconciliation at the reporting level. Generates reports at the detail and summary levels for submission to 35 CFO/Non-CFO agencies, in order to facilitate reconciliation at the reporting level.

Reciprocal Categories for Fiduciary Transactions Reciprocal Category Description Accounting Impact 01 Investments in Treasury/BPD Securities Assets/Liabilities related to Principle, Discount, Premium, Amortization, Debt 02 Interest on Investments (BPD) with Treasury Assets/Liabilities related to Interest Receivable/Payable 03 Interest on Investments (BPD) with Treasury Revenue/ExpenseGains/Losses 05 Interest on Borrowings (BPD & FFB) with Treasury Revenue/Expense 06 Federal Borrowings Gains/Losses

Reciprocal Categories for Fiduciary Transactions (cont.) Reciprocal Category Description Accounting Impact 17 BPD/FFB Borrowings from Treasury Asset/Liabilities related to Loans Receivable/Payable 21 Employee Benefits: Labor – FECA OPM – Health, Life, Retirement Assets/Liabilities related to Benefits Receivable/Payable 26 Employee Benefits: Labor – FECA OPM – Health, Life, Retirement Revenue/Expense related to Employee Benefits

Intragovernmental Reporting Process IFCS confirmations (quarterly) IFCS confirmations (quarterly) Agency “F” transaction files (quarterly) Agency “F” transaction files (quarterly) IRAS Reports (quarterly & year-end) IRAS Reports (quarterly & year-end) CFO Representations (year-end) CFO Representations (year-end) IG Agreed-Upon Procedures (year-end) IG Agreed-Upon Procedures (year-end)

IFCS Confirmation Process Central Fiduciary Agencies submit files to FMS quarterly (BPD, FFB, DOL, OPM). Central Fiduciary Agencies submit files to FMS quarterly (BPD, FFB, DOL, OPM). System Administrators upload fiduciary files into IFCS. System Administrators upload fiduciary files into IFCS. Agencies are able to confirm balances within a designated time period. Agencies are able to confirm balances within a designated time period. Explanations must be provided for all differences Explanations must be provided for all differences  Accounting Error  Timing Difference  Accounting Methodology  Unknown  Rounding Difference  Confirmed Reporting

Accounting Methodology Differences for BPD Investments OMB Business Rules state that “BPD and trading partner agencies will use the effective interest method for amortization on market- based notes, bonds, and zero-coupon bond securities. BPD and the trading partner agencies will use the straight-line method for market-based bills.” OMB Business Rules state that “BPD and trading partner agencies will use the effective interest method for amortization on market- based notes, bonds, and zero-coupon bond securities. BPD and the trading partner agencies will use the straight-line method for market-based bills.” Provisions: Provisions:  Amortization of market-based premiums to call date  Held-to-maturity vs. Available-for-sale  Inventory Relief Method for redemptions prior to maturity Differences in accounting methodology for investments is a reporting/reconciliation issue for BPD and Federal Agencies. Differences in accounting methodology for investments is a reporting/reconciliation issue for BPD and Federal Agencies.

Agency “F” Transaction Files Quarterly submission of intragovernmental balances for all proprietary USSGL accounts (only transactions with the Federal “F” attribute). Quarterly submission of intragovernmental balances for all proprietary USSGL accounts (only transactions with the Federal “F” attribute). Agencies derive intragovernmental balances directly from their departmental trial balances used as the basis for constructing quarterly unaudited financial statements for OMB. Agencies derive intragovernmental balances directly from their departmental trial balances used as the basis for constructing quarterly unaudited financial statements for OMB. Text or Excel File Format Text or Excel File Format Elements of Text/Excel File: Elements of Text/Excel File:  Department Code (2-digit)  Bureau Code (2-digit)  Fund Group (4-digit)  USSGL Account  Federal “F” Attribute  Trading Partner (2-digit)  Dollar Amount  Exchange “X” or Nonexchange “T” Attribute  Duplicate Partner Code Identifier (DPCI)

IRAS Reports Generated from agency “F” transaction files: Generated from agency “F” transaction files:  Intragovernmental Activity Detail Report  Intragovernmental Activity Summary Report  Intragovernmental Reciprocal Category Detail Report  Intragovernmental Reciprocal Category Summary Report   Quarterly Data vs. IFCS Agency Benefits Report   Quarterly Data vs. IFCS Funds (Investments & Borrowings) Report   Material Differences/Status of Disposition Certification   Intragovernmental Comparative Explanations of Differences Report   Intragovernmental Closing Package vs. Fourth Quarter Submission Comparative Data Report (only at year-end)

CFO Representations Chief Financial Officer (CFO) provides responses to representations for each intragovernmental issue cited on the representation form. Chief Financial Officer (CFO) provides responses to representations for each intragovernmental issue cited on the representation form. Elements of CFO Representation: Elements of CFO Representation:  Consistency between agency audited financial statements and Closing Package data.  Closing Package reconciliation with trading partner, by reciprocal category.  Explanation of Closing Package Material Differences.

IG Agreed-Upon Procedures Inspector General (IG) uses the Agreed-Upon Procedures to assist with accounting for and eliminating intragovernmental activity & balances in the preparation of agency and Governmentwide financial statements. Inspector General (IG) uses the Agreed-Upon Procedures to assist with accounting for and eliminating intragovernmental activity & balances in the preparation of agency and Governmentwide financial statements. Elements of IG Agreed-Upon Procedures: Elements of IG Agreed-Upon Procedures:  Attest to all elements of representations from CFO.  Compare IRAS (Closing Package) data to subsidiary records.  Test reconciliation of material intragovernmental activity/balances with trading partners.  Test intragovernmental controls for financial reporting. IG must perform the procedures regardless of audit opinion on agency’s financial statements. IG must perform the procedures regardless of audit opinion on agency’s financial statements.

Performance Measures Annually, FMS reviews reporting efficiency of federal agencies and provides feedback to the agency CFO & IG on their performance. Annually, FMS reviews reporting efficiency of federal agencies and provides feedback to the agency CFO & IG on their performance. IFCS Performance Indicator: Reconciliation of Unexplained Differences IFCS Performance Indicator: Reconciliation of Unexplained Differences  Element: 4 th Qtr unexplained difference is less than 10% of agency’s IFCS reporting total for each central fiduciary agency.  Overall Results: 30 agencies in compliance (86%) 5 agencies non-compliance (14%) Differences with BPD Investments/Borrowings were all explained. Differences with BPD Investments/Borrowings were all explained.

Intragovernmental Authority FASAB Standards FASAB Standards OMB Bulletin (Form & Content) OMB Bulletin (Form & Content) OMB Business Rules (Memo # M-03-01) OMB Business Rules (Memo # M-03-01) Treasury Financial Manual (TFM) Treasury Financial Manual (TFM) Vol I, Part 2, Chapter 4700 Federal Intragovernmental Accounting Policies Guide Federal Intragovernmental Accounting Policies Guide

IFCS Key Dates 3 rd Quarter, FY 2005 IFCS Opens:7/11/05 IFCS Closes:7/25/05 4 th Quarter, FY 2005 IFCS Opens:10/7/05 IFCS Closes:10/19/05

Websites IFCS: Intragovernmental:

Contacts  IFCS System Administrators  Lena Lewis  Sheila Miller  IRAS/Treasury Intragovernmental Liaison  Benjamin Sussman  Intragovernmental Team Leader  Ella Hughes-Bailey

QUESTIONS?