Report Slams CFO Act Agency Disclosures

During FY 2005, at least seven of the 24 CFO Act agencies restated to correct misstatements, according to the Government Accountability Office.

The Federal Government's auditor has raised new concerns about how certain federal agencies have restated previously issued financial statements. The Government Accountability Office said in a new report that all nine agencies it recently reviewed "could have greatly enhanced the adequacy, effectiveness, and timeliness of their restatement disclosures to users."

The GAO added that similar transparency issues existed with the associated audit reports regarding disclosure of all the essential information that would clearly explain the restatements. As a result, the GAO made 11 recommendations to the Office of Management and Budget "to further improve the restatement guidance" available to agencies’ management and the agencies' respective auditors. The auditor said the OMB agreed to take GAO’s recommendations under advisement.

"GAO reiterates its concern that it is critical for OMB to timely provide additional restatement guidance," it said in the report. Among other issues, the auditor said it would like federal agencies to better label the certain restated columns of data, and to improve footnote disclosures and the Management Discussion and Analysis section of their financial reports.

The report noted that the agencies did not report material misstatements, and potential material misstatements, to auditors or financial statement users in a timely fashion. "The primary contributing factor for the restatement disclosure issues that GAO identified was insufficient guidance available at the time to both the agencies' management and their respective auditors for disclosure of the restatements and the timeliness of such disclosures," it noted.

GAO also commented that the OMB needs to timely provide additional, though complementary, restatement guidance to both the agencies' management and their respective auditors.

The auditor noted that during fiscal 2005, at least seven of the 24 Chief Financial Officers Act agencies restated certain fiscal year 2004 financial statements to correct misstatements. In addition, 11 CFO Act agencies had restatements for fiscal year 2003. Nine of those 11 received unqualified opinions on their originally issued fiscal year 2003 financial statements.

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