Audit of USAID's Financial Statements for Fiscal Years 2012 and 2011

Agency for International Development's (USAID) financial statements for fiscal years 2012 and 2011. The audit was performed to determine whether USAID's principal financial statements present fairly the assets, liabilities, net position, net costs, changes in net position, and budgetary resources for the respective years. The audit identified two material weaknesses in internal control, which relate to USAID's processes for reconciling its fund balance with the U.S. Treasury and recording adjustments to the general ledger. Additionally, six significant deficiencies in internal control were identified, including issues with reconciling loans receivable, accounting for unliquidated obligations, accounting for advances, estimating and recording accounts payable and accrued expenses, recording payroll deductions and entitlement payments, and reconciling intragovernmental transactions. The audit also found no instances of substantial noncompliance with requirements for federal financial management systems, federal accounting standards, or the U.S. Standard General Ledger at the transaction level. However, a significant deficiency was reported in the Agency's annual Federal Information Security Management Act (FISMA) report, which was classified as an instance of substantial noncompliance with FFMIA. USAID was created in 1961 to advance U.S. foreign policy interests by promoting broad-based sustainable development and providing humanitarian assistance. The Agency has missions in more than 100 countries, with 46 countries having full accounting operations with USAID controllers. For the fiscal year ended September 30, 2012, USAID reported total budgetary resources of approximately $23 billion. The audit objective was to determine whether USAID's principal financial statements present fairly the financial position of the Agency as of September 30, 2012 and 2011, and its net cost, net position, and budgetary resources for the years then ended. The audit identified no instances of substantial noncompliance with requirements for federal financial management systems, federal accounting standards, or the U.S. Standard General Ledger at the transaction level. The audit report contains six recommendations to improve USAID's internal control over financial reporting. The recommendations are intended to address the material weaknesses and significant deficiencies identified during the audit. The audit team considered the management's response to the draft report and the recommendations included therein. The audit team acknowledges the management's decisions on the recommendations and requests that all information be forwarded to the Office of Audit, Planning and Coordination for final action. The audit report also includes a summary of results, background information on USAID, and a discussion of the audit objective. The report provides an overview of the audit findings and recommendations, as well as a description of the audit scope and methodology. The report also includes appendices that provide additional information on the audit, including the management's comments and the status of prior year findings and recommendations.