Audit Report
OIG-05-009
Audit of the Financial Management Service's Fiscal Years 2004
and 2003 Schedules of Non-Entity Assets, Non-Entity Costs and
Custodial Revenue
November 15, 2004
Office of
Inspector General
Department of the Treasury
DEPARTMENT OFTHE TREASURY
WASHINGTON, D.C. 20220
OFFICE OF
INSPECTORGENERAL
MEMORANDUM FOR
FROM
:
SUBJECT
:
November 15, 2004
RICHARD L. GREGG, COMMISSIONER
FINANCIAL MANAGEMENT SERVICE
William H. ugh
~!Lk&m
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Deputy Assistant Inspector ~engral
for Financial Management and Information
Technology Audits
Audit of the Financial Management Service's
Fiscal Years 2004 and 2003 Schedules of Non
- Entity
Assets, Non
- Entity Costs and Custodial Revenue
I am pleased to transmit the attached audited Financial
Management Service's
(FMS) Fiscal Years (FY) 2004 and 2003
Schedules of Non
- Entity Assets, Non - Entity Costs and Custodial
Revenue (the Schedules). We contracted with the independent
certified public accounting firm of Clifton Gunderson LLP to
audit the Schedules of Non
- Entity Assets, Non - Entity Costs and
Custodial Revenue for Fiscal Years 2004 and 2003. The contract
required that the audit be performed in accordance with generally
accepted government auditing standards; applicable provisions of
Office of Management and Budget
(OMB) Bulletin No. 01-02, Audit
Requirements for Federal Financial Statements; and the
GAO/PCIE
Financial Audit Manual.
The following reports, prepared by Clifton Gunderson LLP, are
incorporated in the attachment:
* Independent Auditor's Report;
0
Independent Auditor's Report On Internal Control; and
Independent Auditor's Report On Compliance With Laws and
Regulations.
In its audit of EMS' Schedules, Clifton Gunderson LLP found:
the Schedules present fairly, in all material respects,
the Non
- Entity Assets as of September 30, 2004 and 2003,
and Non
-Entity Costs and Custodial Revenue for the years
Page 2
then ended in conformity with accounting principles
generally accepted in the United States of America,
• no matters involving internal control and its operation that
are considered material weaknesses, and
• no instances of reportable noncompliance with laws and
regulations tested.
In addition, Clifton Gunderson LLP issued a management letter
dated October 22, 2004, discussing various issues that were
identified during the audit, which were not required to be
included in the audit reports.
In connection with the contract, we reviewed Clifton
Gunderson LLP's reports and related documentation and inquired of
its representatives. Our review, as differentiated from an audit
in accordance with generally accepted government auditing
standards, was not intended to enable us to express, and we do
not express, an opinion on FMS' Schedules or conclusions about
the effectiveness of internal control or compliance with laws and
regulations. Clifton Gunderson LLP is responsible for the
attached auditor's reports dated October 22, 2004 and the
conclusions expressed in the reports. However, our review
disclosed no instances where Clifton Gunderson LLP did not
comply, in all material respects, with generally accepted
government auditing standards.
Should you have any questions, please contact me at
(202) 927-5400, or a member of your staff may contact
Mike Fitzgerald, Director, Financial Audits at (202) 927-5789.
Attachment
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
Washington, DC
INDEPENDENT AUDITOR'S REPORTS
AND SCHEDULES OF NON-ENTITY
ASSETS, NON-ENTITY COSTS AND
CUSTODIAL REVENUE
September 30, 2004 and 2003
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
INDEPENDENT AUDITOR'S REPORTS
AND SCHEDULES OF NON-ENTITY ASSETS,
NON-ENTITY COSTS AND CUSTODIAL REVENUE
September 30, 2004 and 2003
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT ................................................................................... 1
INDEPENDENT AUDITOR'S REPORT ON
INTERNAL CONTROL ........................................................................................................ 2
INDEPENDENT AUDITOR'S REPORT ON
COMPLIANCE WITH LAWS AND REGULATIONS ...................................................... 4
SCHEDULES OF NON-ENTITY ASSETS, NON-ENTITY
COSTS AND CUSTODIAL REVENUE ............................................................................... 5
NOTES TO SCHEDULES ........................................................................................................... 6
Offices in 13 states and Washington, DC
1
Independent Auditor's Report
To the Office of Inspector General
of the Department of the Treasury and the
Commissioner of the Financial Management Service
We have audited the accompanying Schedules of Non-Entity Assets as of September 30, 2004
and 2003, and Non-Entity Costs and Custodial Revenue for the years then ended (the Schedules)
of the U. S. Department of the Treasury's Financial Management Service (FMS). These
Schedules are the responsibility of FMS's management. Our responsibility is to express an
opinion on these Schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America; the standards applicable to financial audits contained in Government Auditing
Standards , issued by the Comptroller General of the United States; and applicable provisions of
Office of Management and Budget (OMB) Bulletin No. 01-02, "Audit Requirements for Federal
Financial Statements." Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Schedule is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
Schedule. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall Schedule presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Schedules referred to above present fairly, in all material respects, the Non-
Entity Assets as of September 30, 2004 and 2003, and Non-Entity Costs and Custodial Revenue
for the years then ended in conformity with accounting principles generally accepted in the
United States of America.
In accordance with Government Auditing Standards, we have also issued our reports dated
October 22, 2004, on our consideration of FMS's internal control over financial reporting
relating to the amounts reflected in the Schedule and on our tests of FMS's compliance with
certain provisions of laws and regulations relating to the amounts reflected in the Schedule. The
purpose of those reports is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. Those reports are an integral part of
an audit performed in accordance with Government Auditing Standards and should be considered
in assessing the results of our audit.
Calverton, Maryland
October 22, 2004
Offices in 13 states and Washington, DC
2
Independent Auditor's Report On Internal Control
To the Office of Inspector General
of the Department of the Treasury and the
Commissioner of the Financial Management Service
We have audited the Schedule of Non-Entity Assets as of September 30, 2004, and Non-Entity
Costs and Custodial Revenue for the year ended September 30, 2004 (the Schedule) of the U. S.
Department of the Treasury's Financial Management Service (FMS), and have issued our report
thereon dated October 22, 2004. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America; the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the United
States; and applicable provisions of Office of Management and Budget (OMB) Bulletin No. 01-
02, "Audit Requirements for Federal Financial Statements."
In planning and performing our audit, we considered FMS's internal control over financial
reporting for the amounts reflected in the Schedule by obtaining an understanding of relevant
internal controls, determined whether these internal controls had been placed in operation,
assessed control risk, and performed tests of controls in order to determine our auditing
procedures for the purpose of expressing our opinion on the Schedule. We limited our internal
control testing to those controls necessary to achieve the objectives described in OMB Bulletin
No. 01-02. We did not test all internal controls relevant to operating objectives as broadly
defined by the Federal Managers' Financial Integrity Act of 1982, such as those controls relevant
to ensuring efficient operations. The objective of our audit was not to provide assurance on
internal control. Consequently, we do not provide an opinion on internal control.
Our consideration of the internal control over financial reporting for the amounts reflected in the
Schedule would not necessarily disclose all matters in the internal control over financial
reporting for the amounts reflected in the Schedule that might be reportable conditions. Under
standards issued by the American Institute of Certified Public Accountants, reportable conditions
are matters coming to our attention relating to significant deficiencies in the design or operation
of the internal control that, in our judgment, could adversely affect FMS's ability to record,
process, summarize, and report financial data consistent with the assertions by management in
the Schedule. Material weaknesses are reportable conditions in which the design or operation of
one or more of the internal control components does not reduce to a relatively low level the risk
that misstatements caused by error or fraud in amounts that would be material in relation to the
Schedule being audited may occur and not be detected within a timely period by employees in
the normal course of performing their assigned functions. Because of inherent limitations in
internal controls, misstatements, losses, or noncompliance may nevertheless occur and not be
detected. We noted no matters involving the internal control and its operation that we consider
to be a material weakness.
3
However, we noted other matters involving the internal control over financial reporting for the
amounts reflected in the Schedule that we have reported to management of FMS in a separate
letter dated October 22, 2004.
This report is intended solely for the information and use of the management of FMS, the
Department of the Treasury Office of Inspector General, OMB and Congress and is not intended
to be and should not be used by anyone other than these specified parties.
Calverton, Maryland
October 22, 2004
Offices in 13 states and Washington, DC
4
Independent Auditor's Report On Compliance With Laws and Regulations
To the Office of Inspector General
of the Department of the Treasury and the
Commissioner of the Financial Management Service
We have audited the Schedule of Non-Entity Assets as of September 30, 2004, and Non-Entity
Costs and Custodial Revenue for the year ended September 30, 2004 (the Schedule) of the U. S.
Department of the Treasury's Financial Management Service (FMS), and have issued our report
thereon dated October 22, 2004. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America; the standards applicable to financial audits
contained in Government Auditing Standards , issued by the Comptroller General of the United
States; and applicable provisions of Office of Management and Budget (OMB) Bulletin No. 01-
02, "Audit Requirements for Federal Financial Statements."
The management of FMS is responsible for complying with laws and regulations applicable to
the amounts reflected in the Schedule. As part of obtaining reasonable assurance about whether
the amounts reflected in the Schedule are free of material misstatement, we performed tests of its
compliance with certain provisions of laws and regulations, noncompliance with which could
have a direct and material effect on the determination of the amounts reflected in the Schedule
and certain other laws and regulations specified in OMB Bulletin No. 01-02. We limited our
tests of compliance to those provisions, and we did not test compliance with all laws and
regulations applicable to FMS.
The results of our tests of compliance disclosed no instances of noncompliance with the laws and
regulations described in the preceding paragraph that are required to be reported under
Government Auditing Standards and OMB Bulletin No. 01-02.
Providing an opinion on compliance with certain provisions of laws and regulations was not an
objective of our audit and, accordingly, we do not express such an opinion.
This report is intended solely for the information and use of the management of FMS, the
Department of the Treasury Office of Inspector General, the OMB and Congress and is not
intended to be and should not be used by anyone other than these specified parties.
Calverton, Maryland
October 22, 2004
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
SCHEDULES OF NON-ENTITY ASSETS
AS OF SEPTEMBER 30, 2004 AND 2003 AND
NON-ENTITY COSTS AND CUSTODIAL REVENUE
FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003
(In Thousands)
These schedules should be read only in connection
with the accompanying notes to schedules.
5
2004 2003
NON-ENTITY ASSETS
Intra-governmental:
Fund balance with Treasury (Note 2)
$ 667,302 $ 858,627
Accounts receivable, net (Note 3)
542,820 749,689
Other
14,071 13,406
Total intra-governmental
1,224,193 1,621,722
With the public:
Receivable on deposit of earnings, Federal Reserve System
412,129 1,467,674
Accounts receivable, net (Note 3)
7,962 5,591
Total with the public
420,091 1,473,265
TOTAL NON-ENTITY ASSETS
$ 1,644,284 $ 3,094,987
NON-ENTITY COSTS (Notes 4 and 6)
Credit reform - interest on uninvested funds
$ 3,711,673 $ 3,689,095
Temporary state fiscal relief/assistance fund
5,000,000 5,000,000
Judgments
869,230
1,007,449
Presidential election campaign fund
177,725
29,184
Resolution Funding Corporation
2,186,981 1,717,297
Public Broadcasting Fund, Corporation for Public Broadcasting
437,404 411,237
Legal services
335,890 337,319
Anti-terrorism judgments
- 21,480
District of Columbia
175,446 162,893
Restitution of foregone interest
- 463,301
Other
34,366 35,651
TOTAL NON-ENTITY COSTS
$ 12,928,715 $ 12,874,906
CUSTODIAL REVENUE (Note 5)
Deposit of earnings, Federal Reserve System
$ 19,652,404 $ 21,878,497
Interest received from tax and loan depositaries
135,860 129,908
Recoveries from Federal Agencies for settlement of
claims from contract dispute
497,618
279,269
General fund proprietary receipts, not otherwise classified
35,993
58,570
Fines, penalties, and forfeitures
258,392
3,613
Other
26,634 41,031
Total cash collections
20,606,901 22,390,888
Accrual adjustment
(1,259,179) 899,525
TOTAL CUSTODIAL REVENUE
$ 19,347,722 $ 23,290,413
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
6
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
The Financial Management Service (FMS) is a bureau of the U. S. Department of the Treasury
(Treasury). FMS's mission is to improve the quality of government financial management.
FMS's commitment and responsibility is to help its customers achieve success. FMS does this
by linking program and financial management objectives and by providing financial services,
information, advice, and assistance to its customers. FMS serves taxpayers, Treasury, Federal
program agencies, and government policy makers.
Non-Entity accounts are those accounts that FMS holds but are not available to FMS in its
operations. For example, FMS accounts for certain cash that the Federal Government collects
and holds on behalf of the U. S. Government or other entities. However, the Schedules of Non-
Entity Assets, Non-Entity Costs and Custodial Revenue (the Schedules) do not include Non-
Entity Operating Cash of the Federal Government (commonly known as Government-wide
Cash). These Schedules include the activity of Non-Entity account symbols managed by FMS.
Some Non-Entity accounts receive appropriations for specific Federal programs. Some of the
appropriations are permanent, indefinite appropriations. They are not subject to budgetary
ceilings established by Congress. Both types of appropriations are used for payments to Federal
program agencies and others.
Some Non-Entity accounts receive cash collections. These types of accounts are miscellaneous
receipt accounts. Examples of collections include interest payments, contributions, and
collections of fines and penalties.
Basis of Presentation
The Schedules have been prepared from the accounting records maintained by FMS and are
meant to report Non-Entity Assets, Non-Entity Costs and Custodial Revenue of FMS in
accordance with generally accepted accounting principles. Such principles require the use of the
accrual method of accounting to record transactions. Under the accrual method, revenues are
recognized when earned and costs are recognized when a cost is incurred, without regard to
receipt or payment of cash. These Schedules were prepared following accrual accounting.
The standards used in the preparation of these Schedules are issued by the Federal Accounting
Standards Advisory Board (FASAB), as the body authorized to establish generally accepted
accounting principles for Federal government entities.
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
7
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Balances reflected on these Schedules may differ from those on financial reports prepared by
FMS pursuant to certain OMB directives that are primarily used to monitor and control FMS's
use of budgetary resources.
Use of Estimates in Preparing Schedules
The preparation of these Schedules, in conformity with generally accepted accounting principles,
requires management to make estimates and assumptions. These estimates affect the reported
amounts of assets at the date of the Schedules and the amounts of revenues and costs during the
reporting period for the Schedules. Actual results may differ from these estimates.
Fund Balance with Treasury
The Fund Balance with Treasury (FBWT) is an asset account that reflects the available budget
spending authority of Federal Agencies. Collections and disbursements by agencies will,
correspondingly, increase or decrease the balance in the account.
Accounts Receivable
Accounts receivable is comprised of Intra-governmental accounts (i.e. amounts due from other
Federal agencies) and accounts with the Public. Accounts with the Public include amounts due
from the Federal Reserve System. FMS records an allowance for uncollectible accounts based
on projections of future collections (based on prior year collection trends) and the aging of
outstanding accounts receivable at September 30.
Receivable on Deposit of Earnings, Federal Reserve System
Reserve Banks are required by the Board of Governors of the Federal Reserve System to transfer
to the U. S. Treasury excess earnings, after providing for the cost of operations, payment of
dividends, and reservation of an amount necessary to equate surplus with capital paid in. In the
event of losses, or a substantial increase in capital, a Reserve Bank will suspend its payments to
the U. S. Treasury until such losses or increases in capital are recovered through subsequent
earnings. Weekly payments to the U. S. Treasury may vary significantly. The Receivable on
Deposit of Earnings, Federal Reserve System, represents the earnings due Treasury as of
September 30, but not collected by the U. S. Treasury until after the end of the fiscal year.
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
8
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Custodial Revenue
Custodial revenue is initially recorded on a cash basis when amounts are deposited into receipt
accounts. However, an adjustment is reflected on the Schedules at September 30 to accrue for
collections in a fiscal year relating to prior year's Non-Entity Accounts Receivable, and to
account for other changes in the Non-Entity Accounts Receivable not resulting in a collection of
cash in the current period (i.e. new reimbursements and change in the allowance for uncollectible
accounts).
Intra-governmental Financial Activities
The financial activities of FMS are affected by, and are dependent upon, those of U.S.
Department of the Treasury and the Federal Government as a whole. Thus, the accompanying
Schedules do not reflect the results of all-financial decisions and activities applicable to FMS as
if it were a stand-alone entity.
Reclassifications
Certain reclassifications were made to the 2003 schedule to conform to the presentation used in
2004. These reclassifications have no effect on previously reported total non-entity assets, total
non-entity costs, or total custodial revenue.
NOTE 2 - FUND BALANCE WITH TREASURY
The Fund Balance with Treasury is funded through various sources depending on the specific
legislative authority and purpose, and may be used only for specific purposes. Such amounts
may be in escrow or other special accounts. These accounts are primarily funded through
appropriations, collections, tax receipts, gifts to the Government, and settlements from foreign
countries.
Obligated balances are funds against which budgetary obligations have been incurred, but
disbursements have not been made. The Unobligated Available balance is the amount of funds
available to FMS against which no claims have been recorded. The Unobligated Unavailable
balance is the amount of unobligated funds remaining from appropriations that have expired,
appropriations that have not been apportioned, authority that is not available pursuant to public
law, and the amount of funds in deposit funds, clearing accounts and receipt accounts. Fund
Balance with Treasury as of September 30, 2004 and 2003 consisted of the following (amounts
in thousands):
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
9
NOTE 2 - FUND BALANCE WITH TREASURY (CONTINUED)
2004
Account Type
Obligated
Unobligated
Available
Unobligated
Unavailable
Total
Appropriated funds
$ 287,101$ 69,400 $ 15,464 $ 371,965
Revolving funds
248 7,149 - 7,397
Trust funds
28
12 - 40
Other fund types
- - 287,900 287,900
Total
$ 287,377$ 76,561 $ 303,364 $ 667,302
2003
Account Type
Obligated
Unobligated
Available
Unobligated
Unavailable
Total
Appropriated funds
$ 375,236$ 186,427 $ 18,153 $ 579,816
Revolving funds
592 8,090 - 8,682
Trust funds
14
6 - 20
Other fund types
- - 270,109 270,109
Total
$ 375,842$ 194,523 $ 288,262 $ 858,627
The fund balance unobligated available supports the budgetary resources available except for
$310 thousand in 2004 and 2003, which is invested. The fund balance, unobligated unavailable
for appropriated funds, supports the budgetary resources not available. The fund balance,
unobligated unavailable for other fund types, includes only deposit funds and suspense accounts
which do not have a budgetary impact.
NOTE 3 - ACCOUNTS RECEIVABLE, NET
Intra-governmental Accounts Receivable, Net
Intra-governmental accounts receivable principally includes amounts for which Federal agencies
are required to reimburse the Treasury's Judgment Fund for settlements paid or accrued on their
behalf for contract disputes (pursuant to the Contracts Dispute Act) and No Fear Act. While the
Contracts Dispute Act (CDA) and No Fear Act (No Fear) require Federal Agencies reimburse the
Judgment Fund for payments, CDA and No Fear do not authorize FMS collection action against
those Agencies. Accordingly, FMS has historically had difficulty in collecting amounts owed to
them under the CDA. An allowance for uncollectible accounts has been established to recognize
losses on receivables that may not be collected under this Program. The activity in the allowance
account each year is reflected in the "Accrual Adjustment" line in the custodial revenue section
of the schedules.
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
10
NOTE 3 - ACCOUNTS RECEIVABLE, NET (CONTINUED)
Intra-governmental accounts receivable as of September 30, 2004 and 2003 consist of the
following (amounts in thousands):
2004
2003
Claims for contract disputes
$ 1,195,146 $ 1,569,689
Claims for No Fear Act
7,674
-
Less allowance for uncollectible accounts
(660,000) (820,000)
Accounts receivable, net
$ 542,820 $ 749,689
Accounts Receivable With the Public, Net
Accounts receivable with the Public, exclusive of amounts due from the Federal Reserve System,
as of September 30, 2004 and 2003 consist of the following (amounts in thousands):
2004
2003
U. S. Treasury Check Forgery Insurance Fund receivables
$ 2,541 $ 4,397
Interest received from tax and loan depositories
5,669
2,353
Interest payments from states
319
399
German Democratic Republic settlement fund
63 63
Gross accounts receivable
8,592
7,212
Less allowance for uncollectible accounts
(630) (1,621)
Accounts receivable, net
$ 7,962 $ 5,591
The U. S. Treasury Check Forgery Insurance Fund was established to expedite payments on
claims and provide a dependable source of funds to meet the Federal Government's
responsibility for the payment of settlement checks issued to replace checks paid over forged
endorsements. The receivable represents the amount due from banks that cashed the forged
checks.
The receivable for Interest Received from Tax and Loan Depositaries represents interest accrued
and owed to the Treasury, from the depositories participating in the Investment Programs, for the
interest earned on Treasury Tax and Loan funds. The Treasury Tax and Loan (TT&L) program
invests funds collected by the Federal Government in short-term loans to commercial financial
institutions. These funds can be withdrawn on demand to meet the Federal Government's
immediate cash requirements.
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
11
NOTE 4 - NON-ENTITY COSTS
Non-Entity Costs represent payments made on behalf of other Federal Agencies through various
Treasury Managed Accounts (TMA) described below. In addition, Non-Entity Costs also
include accruals for which FMS has made a commitment to make a payment for claims existing
as of September 30, 2004 and 2003.
Credit Reform: Interest on Uninvested Funds - Direct loan and loan guarantee financing
accounts receive various payments, repayments and fees, and make payments on defaults. When
cash receipts exceed outlays or when an Agency does not disburse all of its borrowings, these
balances are held in the Treasury and earn interest. The interest earned on these balances is
disbursed by FMS to the Agency.
Temporary State Fiscal Relief/Assistance Fund - This account was established under Public Law
108-27 (Title VI, Sec. 601(a)) to make certain payments for fiscal years 2004 and 2003. Upon
submission of a certification to the Financial Management Service (FMS), FMS made payments
to the States, the District of Columbia, and U.S. territories (Commonwealth of Puerto Rico, the
U. S. Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and American
Samoa). The certification stated how the funds would be used and that such purposes were in
accordance with the P.L. requirements.
Judgments - FMS processes payments from the Judgment Fund for certain judicially and
administratively ordered monetary awards against the United States, as well as amounts owed
under compromise agreements negotiated by the United States Department of Justice in
settlement of claims arising under actual or imminent litigation.
Presidential Election Campaign Fund - The Presidential Election Campaign Fund (PECF) is
maintained in accordance with Internal Revenue Code. The purpose of the PECF is to defray the
qualified campaign expenses which were incurred by eligible presidential candidates or
nominating conventions. The PECF is a special fund financed through the collections of the $3
check off option selected by taxpayers. These amounts are collected by the Internal Revenue
Service and deposited into the PECF.
The PECF is broken down into the following accounts: Presidential Primary Matching Payment
Account; Presidential Nominating Convention Account; and Presidential and Vice Presidential
Nominee Account. Each account is funded in accordance with budget estimates provided by the
Federal Election Commission (FEC). Payments from PECF are made to qualified recipients
upon certification from the FEC.
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
12
NOTE 4 - NON-ENTITY COSTS (CONTINUED)
Resolution Funding Corporation - The Resolution Funding Corporation (REFCORP) account is
maintained pursuant to the Federal Home Loan Bank Act. FMS provides payments to
REFCORP to cover the interest expenses of REFCORP.
Public Broadcasting Fund, Corporation for Public Broadcasting - This account is used to make
annual payments to the Corporation for Public Broadcasting pursuant to the enacted Public Law.
The payment is used to assist and facilitate the full development of public telecommunications in
which programs of high quality, diversity, creativity, excellence, and innovations will be made
available to public telecommunications.
Legal Services - This account is used to pay the Legal Services Corporation through letter of
credit drawdowns. The Legal Services Corporation distributes appropriated funds to local
nonprofit organizations that provide free civil legal assistance, according to locally determined
priorities, to people living in poverty. Congress chartered the Corporation as a private, nonprofit
entity outside of the Federal Government.
Anti-Terrorism Judgments - This account was established by the authority of Section 2002 of the
Victims of Trafficking and Violence Protection Act, Public Law 106-386, for the purpose of
making payments to persons who hold certain categories of judgments against Iran in suits
brought under 28 U.S.C. 1605(a)(7). For purposes of funding payments in connection with
judgments against Iran, Section 2002 provides that the Department of the Treasury shall make
payments from amounts paid and liquidated from (a) rental proceeds accrued on the date of the
enactment of the Act from Iranian diplomatic and consular property located in the United States
and (b) funds not otherwise made available in an amount not to exceed the total of the amount in
the Iran Foreign Military Sales program account within the Foreign Military Sales Fund on the
date of the enactment of the Act.
District of Columbia - Payments to the District of Columbia cover certain operations of the
District of Columbia. It includes payments for a program of management reform, for the
administration and operation of correctional facilities, and for construction and repair of the
District's infrastructure.
Restitution of Foregone Interest - This account is used to restore "lost" interest to investing
program agencies such as the Civil Service Retirement and Disability Fund and the Thrift
Savings Fund after a Debt Issuance Suspension Period (debt crisis) has ended.
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
13
NOTE 4 - NON-ENTITY COSTS (CONTINUED)
Other - Other non-entity costs include the following payments: Moneys Erroneously Received
and Covered, Payments to the States, Payments to Agencies for Interest on Uninvested Funds,
Payment to the Institute of American Indian and Alaskan Native Culture and Arts Development,
Payments from the U. S. Treasury Check Forgery Insurance Fund, Payments to Individuals under
Private and Public Relief Laws, and Payments from Biomass Energy Development.
NOTE 5 - COLLECTIONS OF CUSTODIAL REVENUE
FMS collects Custodial Revenue that is not related to its mission and distributes the full amount
collected to the Treasury General Fund. For the years ended September 30, 2004 and 2003 cash
collections were as follows (amounts in thousands):
2004
October to
December,
2003
January to
September,
2004
Total
Deposit of Earnings, Federal Reserve System
$ 6,564,579 $ 13,087,825 $19,652,404
Interest received from tax and loan
depositaries
27,808
108,052
135,860
Recoveries from Federal Agencies for
settlement of claims from contract dispute
31,034
466,584
497,618
General fund proprietary receipts, not
otherwise classified
8,065
27,928
35,993
Fines, penalties and forfeitures
304 258,088 258,392
Other
249 26,385 26,634
Total
$ 6,632,039 $ 13,974,862 $ 20,606,901
2003
October to
December,
2002
January to
September,
2003
Total
Deposit of Earnings, Federal Reserve System
$ 5,880,584 $ 15,997,913 $ 21,878,497
Interest received from tax and loan
depositaries
63,473
66,435
129,908
Recoveries from Federal Agencies for
settlement of claims from contract dispute
81,580
197,689
279,269
General fund proprietary receipts, not
otherwise classified
11,661
46,909
58,570
Fines, penalties and forfeitures
120 3,493 3,613
Other
5,901 35,130 41,031
Total
$ 6,043,319 $ 16,347,569 $ 22,390,888
DEPARTMENT OF THE TREASURY,
FINANCIAL MANAGEMENT SERVICE
NOTES TO SCHEDULES
SEPTEMBER 30, 2004 AND 2003
This information is an integral part of the accompanying schedules.
14
NOTE 6 - CONTINGENCIES
A contingency is an existing condition, situation or set of circumstances involving uncertainty as
to possible payment by FMS. The uncertainty will ultimately be resolved when one or more
future events occur or fail to occur. For pending, threatened or unasserted litigation, a
liability/cost is recognized when a past transaction or event has occurred, a future outflow or
other sacrifice of resources is probable, and the related future outflow or sacrifice of resources
can be reasonably estimated.
There are numerous legal actions pending against the United States in Federal courts in which
claims have been asserted that may be based on action taken by FMS. Management intends to
vigorously contest all such claims. Management believes, based on information provided by
legal counsel, that losses, if any, for the majority of these cases would not have a material impact
on the Schedules. There are other cases that could result in significant payouts; however, legal
counsel is unable to determine the probability of an unfavorable outcome, or determine an
estimate or range of potential loss, for these matters, if any. No loss accrual has been made for
these cases outstanding at September 30, 2004 or 2003. Below is an example of one such case:
Cobell, et al. v. Norton, et al.
In this case, the plaintiffs allege that the Departments of the Interior and Treasury have
breached trust obligations with respect to the management of the plaintiffs' Individual
Indian Monies (IIM). The plaintiffs have not made claims for specific dollar amounts.
However, their claims are complex, and if an unfavorable decision is rendered, a material
loss could be incurred.
In addition, FMS manages several accounts that may be used for the payment of claims against
other Federal Agencies. Such payments are reflected in the following non-entity cost accounts
reflected in the Schedules: Judgments, Moneys Erroneously Received and Covered, and Anti-
Terrorism Judgments. At September 30, 2004 and 2003, such claims were in various stages of
settlement.
Pursuant to the provisions of the Federal Accounting Standards Advisory Board (FASAB)
Interpretation No. 2, "Accounting for Treasury Judgment Fund Transactions," claim amounts
will be reflected in the Schedules upon completion of certain judicial procedures and the Federal
Agency's request for payment of these claims from the Judgment Fund. At September 30, 2004
and 2003, $220 million and $240 million, respectively, has been accrued and reflected in the
appropriate line items in the Schedules for the estimated future expenditure expected to satisfy
these claims.