Intragovernmental Transaction Material Weakness: The Buy/Sell Contribution Kirstie Pottmeyer April 7, 2016

L EAD ∙ T RANSFORM ∙ D ELIVER Page 2 IGT Material Weakness Buy/Sell Fundamentals Buy/Sell by the Numbers Final Thoughts Questions Agenda

L EAD ∙ T RANSFORM ∙ D ELIVER Page 3 IGT Material Weakness History of Material Weakness for the U.S. Government o As it has for each of the past 19 fiscal years, the U.S. Government Accountability Office (GAO) issued a disclaimer of opinion on the FY 2015 Financial Report of the U.S. Government. In its report, GAO cited the government's difficulty to "adequately account for and reconcile intra- governmental activity and balances between federal entities" as a material weakness and a major impediment to expressing an opinion. DoD Compilation IGT Three Primary Impediments Disclaimer

L EAD ∙ T RANSFORM ∙ D ELIVER Page 4 IGT Material Weakness The Issue “If two federal entities engaged in an intragovernmental transaction do not both record the same intragovernmental transaction in the same year and for the same amount, the intragovernmental transactions will not be in agreement, resulting in errors in the consolidated financial statements.” - FY 2015 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT The Simplicity of the IGT Issue:

L EAD ∙ T RANSFORM ∙ D ELIVER Page 5 o Buy/Sell activities are transactions between agencies managed through an interagency agreement, often called a reimbursable agreement. o Agreements typically cover: o Exchange related to goods and services rendered o Accounts receivable and other assets o Accounts payable and other liabilities o Advances o Prepayments from/to o Deferred Credits o Buy/Sell eliminations occur in three Reciprocal Categories (RC): o RC 22 – Accounts Receivable / Accounts Payable, and Other Liabilities o RC 23 – Advances to Others and Prepayments / Advances from Others and Deferred Credits o RC 24 – Buy/Sell Costs / Revenues Buy/Sell Fundamentals

L EAD ∙ T RANSFORM ∙ D ELIVER Page 6 o USSGL Accounts in each Reciprocal Category can be found in Appendix 7 of I TFM (Table 3): Buy/Sell Fundamentals

L EAD ∙ T RANSFORM ∙ D ELIVER Page 7 o Accurate reporting of buy/sell balances and proper elimination of buy/sell activity depends largely upon…. Buy/Sell Fundamentals COMMUNICATION

L EAD ∙ T RANSFORM ∙ D ELIVER Page 8 Buy/Sell by the Numbers Total IGT Differences– FY2015 (Year End)

L EAD ∙ T RANSFORM ∙ D ELIVER Page 9 Buy/Sell by the Numbers Accomplishments – Trend Analysis

L EAD ∙ T RANSFORM ∙ D ELIVER Page 10 Buy/Sell by the Numbers Agency IGT Scorecard and Metrics

L EAD ∙ T RANSFORM ∙ D ELIVER Page 11 Buy/Sell Fundamentals What Agencies are Saying… o Agency A reported an expense that was too low for the year. Both Agencies communicated throughout the year to resolve as many differences as possible. On 12/1 Agency A acknowledged the difference is likely due to their error and is working on resolving their problem with identifying the proper trading partner. o Part of the variance related to interagency agreements results from revenue and expenses not reported by both trading partners in the same period. Agency B expensed the amount of the agreement in the year it occurred. Agency C periodically posts revenue in the current year and expired years of the fund. o Agency D has verified its reported amounts and that the agency’s documents are in agreement with its quarterly source documentation. The variance primarily relates to the accrual status of one reimbursable agreement between the two agencies.

L EAD ∙ T RANSFORM ∙ D ELIVER Page 12 Final Thoughts Remediating the Material Weakness o Ultimate goal is to eliminate IGT differences at the governmentwide level for the Consolidated FR. “Resolving the intragovernmental transactions problem remains a difficult challenge and will require a strong and sustained commitment by federal entities to timely resolve differences with their trading partners” - FY 2015 U.S. GOVERNMENT ACCOUNTABILITY OFFICE INDEPENDENT AUDITOR’S REPORT

L EAD ∙ T RANSFORM ∙ D ELIVER Page 13 Contact Information Kirstie Pottmeyer Manager Fiscal Accounting Bureau of the Fiscal Service (304)