Report of Independent Auditors - Cover Letter

FY 2003 Performance and Accountability Report
Bureau of Resource Management
December 2003
Report

Image of United States Department of State logo on letterhead from the Deputy Inspector General dated December 24, 2003.

United States Department of State
and the Broadcasting Board of Governers

Office of Inspector General

December 24, 2003

BRIEFING MEMORANDUM

UNCLASSIFIED

TO:

THE SECRETARY

FROM:

OIG - Anne W. Patterson, Deputy Inspector GeneralImage of Anne W. Patterson's initials, the Deputy Inspector General, approving this letter for release.

SUBJECT:

Audit of the U.S. Department of State 2003 and 2002
Principal Financial Statements
(Report AUD/FM-04-12)

In compliance with the Chief Financial Officers Act, as amended, the Office of Inspector General (OIG) contracted with Leonard G.
Birnbaum and Company, LLP (LGB), an independent certified public accounting firm, to audit the Department's principal financial
statements as of September 30, 2003, and for the year then ended.

During its audit, LGB found:

  • that the financial statements were fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles;
  • four reportable conditions related to internal controls over information system security, the financial and accounting system, undelivered orders, and the implementation of managerial cost accounting standards.
  • that the Department's financial management systems did not substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996; and
  • instances of noncompliance with selected provisions of applicable laws and regulations involving the Department's
    financial management systems.

The internal control and noncompliance issues underscore the need for the Department to continue its efforts to improve its financial management systems. Although the Department was able to provide information much earlier than in previous years, the auditor's unqualified opinion was achieved for the most part through the extensive efforts of financial management staff to overcome system weaknesses and produce auditable information. Because of the internal control and noncompliance issues, reliable information was not readily available during the year, and there is a risk of materially misstating financial information. In addition, OIG is concerned that the Department has not implemented the processes necessary to meet the accelerated deadline for FY 2004.

LGB's report, dated December 24, 2003, is attached for your review. LGB is responsible for this report and the opinions and conclusions expressed therein. OIG is responsible for technical and administrative oversight regarding performance under the terms of the contract, including assuring the audit was performed in accordance with Government Auditing Standards and Office of Management and Budget Bulletin 01-02, Audit Requirements for Federal Financial Statements. OIG made appropriate inquiries of LGB representatives and monitored the audit by:

  • evaluating the nature, timing, and extent of the work;
  • evaluating the qualifications and independence of the auditors;
  • monitoring progress throughout the audit;
  • examining audit workpapers and evaluating key judgments;
  • reviewing the audit report to ensure compliance with appropriate standards; and
  • performing other procedures that OIG deemed appropriate in the circumstances.

OIG's review, as differentiated from an audit in accordance with Government Auditing Standards, was not intended to enable OIG to express, and OIG does not express, an opinion on the Department's financial statements or conclusions about the effectiveness of internal control and compliance with certain laws and regulations. However, OIG's review disclosed no instances where LGB did not comply, in all material respects, with Government Auditing Standards.

The Bureau of Resource Management (RM) agreed with the findings and conclusions, and its comments are included as Appendix A to the report. In addition to this report, OIG will transmit a separate management letter to RM discussing several other matters that were identified during the audit. OIG appreciates the cooperation extended to it by the Department's managers and staff during the audit.

UNCLASSIFIED