ADVISORY MEMORANDUM REPORT

ON SBA’S CLOSING PACKAGE INTRAGOVERNMENTAL

ACTIVITY AND BALANCES

ADVISORY MEMORANDUM REPORT NO: 6-06

DECEMBER 2, 2005 This report may contain proprietary information subject to the provisions of 18 USC 1905 and must not be released to the public or another agency without permission of the Office of the Inspector General.

U.S. SMALL BUSINESS ADMINISTRATION

OFFICE OF INSPECTOR GENERAL WASHINGTON, D.C. 20416

ADVISORY MEMORANDUM REPORT

Issue Date: December 2, 2005

Number: 6-06

To: Thomas A. Dumaresq Chief Financial Officer /S/ original signed From: Robert G. Seabrooks Assistant Inspector General for Auditing Subject: Agreed-upon Procedures Report on SBA’s Closing Package Intragovernmental

Activity and Balances We contracted with the independent certified public accounting firm of Cotton & Company LLP (Cotton) to perform procedures agreed-upon by the Department of Treasury’s Financial Management Service (FMS), the Government Accountability Office (GAO) and the Office of Management and Budget (OMB) on the Small Business Administration’s (SBA) closing package intragovernmental activity and balances. Attached is Cotton’s report on the results of these procedures. Cotton identified five items as a result of these procedures, which are explained in further detail in their report.

This report is intended solely for the information and use of FMS, GAO, and OMB and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes. The Office of the Chief Financial Officer (OCFO) reviewed Cotton’s draft of the agree-upon procedures report and agreed with the results. The OCFO was pleased to further note that the results reflected a substantial improvement from the prior year’s review. Should you or your staff have any questions, please contact Jeff Brindle, Director, Information Technology and Financial Management Group at (202) 205-[FOIA Ex. 2]. Attachment

ClWurn b. C . 0 1 ~ 1 ) ' LU 635 SSaters Lane 4 h k

VA 22314

hspmtor Gmm& U.S. S d Business A d m i n i i o n

We have @md the procedures described in Attachment I, which were agreed to by the Department of ibe Treasury's Finencia1 Management Service (F'h4S), the U. S. Government Acwuntability Office

* - - . I w a d Budget ( O M ) - as - stated - - in the - F'MS - - Agency - Reporting R e q h m f o r the Financial Report of the United States Government guidance, somytoi i s tFMSiK the p r e p d o n of, and GAO in the audit of the consolidated financial statements of the U.S. Government as of and for the year ended September 30,2005. The U.S. Small Business Administration's management is respmible far the proper accounting, presentation and reporting of its consolidated financial statements .and reporting of information to FMS.

This aped-tpan procedures engagement was conducted in accordance with attestation standards d i i s b e d by the American Institute of Certified Public Accountants and the Government Auditing B&&, issued by the Comptroller General of the United Stabs. The sufficiency of these procedures is solely tbe responsibility of FMS, GAO and OMB. Consequently, we make no representations r e g d i g the sufficiency of the procedures described in Attachment I either for the purpose for which this report has been requested or for any other purpose. The procedures we performed and our associated findings are presented in Attachment I.

We were not mgaged to, and did not perForm an audit of the matters addressed herein, the objective of which would be the expression of an opinion on such information. Accordingly, we do not express w h m opisim Had we performed additional procedures, other matters might have come to our attention that would Irwe been reported to you.

This report is intended solely for the information and use of the U.S. Small Business Administration, OMB, FMS and GAO and is not intended to be, and should not be, used by those who have not agreed to the produres and taken responsibility for the sufficiency of the procedures for their purposes.

L Charles Hayward, CPA

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achm

ent 1

F

isca

l 200

5 A

gree

d-U

pon

Pro

cedu

res R

epor

t for

Fed

eral

Int

rago

vern

men

tal A

ctiv

ity a

nd B

alan

ces

gmce

dm

3

Com

pare

had

ing

part

ner a

ctiv

ity/b

alan

ces f

rom

in

trag

ovem

mm

tal RSI s

ched

ules

in th

e ag

ency

's au

dite

d fm

cia

l sta

vten

aent

s to the

agen

cy's

Iktr

agov

ernm

ntal

Clo

sing

Pac

kage

vs

. Q

uart

er S

ubm

issio

n C

ompa

rativ

e Dat

a R

epor

t and

the

Intr

agov

ernm

enta

l Clo

sing

Pac

kage

Mat

eria

l Dzj

Jere

nces

/Sta

tus

of D

ispo

sitio

n C

ertiJ

icat

ion R

epor

t (Se

ctio

n I1

of t

he C

FO

Rep

rese

ntat

ions

). Fo

r ite

ms w

here

age

ncy

repo

rting

dif

fere

nces

ex

ist,

com

pare

the

expl

anat

ions

to s

uppo

rtin

g do

cum

enta

tion

and

iden

tify

any

disc

repa

ncie

s.

On

Nov

embe

r 29,

2005

, FM

S w

ill g

ener

ate

and

dist

ribu

te th

e In

trag

over

mnt

al C

ompa

rativ

e C

losi

ng P

acka

ge E

xpla

natio

n of

D

fler

ence

s R

epor

t for

intm

gove

men

tal a

ctiv

ity/b

alan

ces t

o agency In

sptx

tor G

ener

als (

IQs)

.

For t

he re

cipr

ocal

cat

egor

y/tr

dhg

part

ner a

mou

nts w

hich

wen

? rep

orte

d h

SBA

's in

trag

ove~

nmen

tal R

SI sc

hedu

les,

we

iden

tifie

d th

e ag

ency

repo

rting

di

ffue

nces

and c

ompm

ed th

em to

SB

A's

expl

anat

ions

don

g with

supp

ortin

g do

cum

enta

tion.

The

pro

vide

d ex

plan

atio

hs e

xpla

in th

e r

ep

ow

di

ffer

ence

s and

ther

e ar

e no

dis

crep

anci

es b

etw

een

the

exp

hti

on

s an

d th

e su

ppor

ting

docu

men

tatio

n, w

ith o

ne e

xcep

tion.

($2

8.3

mill

ion

whi

ch w

as

repo

rted

as tr

adin

g pa

rtne

r 99

(Tre

asur

y G

ener

al F

und)

as p

art o

f the

4&

qu

arte

r sub

mis

sion

was

recl

assi

fied

to tr

adin

g pa

rtner

20

(Dep

artm

ent o

f T

reas

ury)

in th

e cl

osin

g pa

ckag

e.)

The

expl

anat

ions

pro

vide

d by

SB

A d

o no

t exp

lain

why

this

am

ount

was

recl

assi

fied.

The

tota

l of S

BA

's di

ffer

ence

s as

iden

tifie

d by

Tre

asur

y pe

r the

In

frag

over

nmen

tal C

losi

ng P

acka

ge v

. 4th

Qua

rter

Sub

miss

ion

Com

para

tive D

ata

Rep

ort i

s $1

0.6

mill

ion.

Thi

s am

ount

was

less

than

10%

of

SB

A's

tota

l int

rago

vern

men

tal a

ctiv

ity am

ount

of $

10.8

bill

ion,

in

aggr

egat

e an

d by

rec

ipro

cal c

ateg

ory.

Con

sequ

ently

, SB

A w

as n

ot re

quire

d to

exp

lain

the

diff

eren

ces o

n th

e C

FO re

pres

enta

tion

sect

ion

LE.

SBA

's re

spon

se to

this

que

stio

n sh

ould

hav

e be

en "

No"

.

SBA

's in

trago

vern

men

tal R

SI s

ched

ules

do

not a

gree

to th

e C

losi

ng

Pack

age

Mat

eria

l Dz~

eren

cedS

taf us o

f Dis

posi

tion

Cer

tific

atio

n R

epor

t, be

caus

e th

e si

ngle

iden

tifie

d m

ater

ial d

iffer

ence

occ

urs i

n a

net p

ositi

on

Fede

ral l

ine

item

and S

BA

was

not

requ

ired

to p

rese

nt a

n R

SI s

ched

ule

for

net p

ositi

on li

ne it

ems.

The

Intr

agov

ernm

enta

l Com

para

tive

Clo

sing

Pac

hge

Exp

lana

tion

of

Di_

$ere

nces

Rep

ort i

dent

ifie

s a s

ingl

e m

ater

ial t

radi

ng p

tutn

er/~

cipr

ocal

ca

tego

ry d

iffer

ence

. This a

mou

nt traced

to S

BA

'a C

losi

ng P

acka

s M

ater

ial D

z~re

nc@

s/S

ta~

us

of D

ispo

sitio

n C

empc

atio

on R

epor

t whi

ch

wn

tab

SBA's

qla

nat

ion

for t

he d

iffm

?nce

, The

mulb

of o

ur w

odr a

re

Atta

chm

ent 1

F

isca

l 200

5 A

gree

d-U

pon

Proc

edur

es R

epor

t for

Fed

eral

Intr

agov

ernm

enta

l Act

ivity

and

Bal

ance

s

Age

ncy

IGsI

audi

tors

will

use

this

repo

rt to

:

(1)

Com

pare

the

diff

eren

ces

betw

een

the

agen

cy a

nd it

s tr

adin

g pa

rtne

rs b

y re

cipr

ocal

cat

egor

yflin

e-ite

m

from

FM

S' I

ntra

gove

rnm

enta

l Com

para

tive

Clo

sing

Pac

kage

Exp

lana

tion

of D

zfle

renc

es R

epor

t to

exp

lana

tions

from

the

agen

cy s

uppo

rtin

g do

cum

enta

tion.

For

item

s whe

re a

genc

y re

port

ing

diff

eren

ces e

xist

, com

pare

the

expl

anat

ions

to

supp

ortin

g do

cum

enta

tion

and

iden

tify

any

disc

repa

ncie

s.

(2)

Iden

tify

any

inco

nsis

tenc

ies i

n am

ount

s or

expl

anat

ions

bet

wee

n FM

S' I

ntra

gove

rnm

enta

l C

ompa

rativ

e C

losi

ng P

acka

ge E

xpla

natio

ns o

f D

zffe

renc

es re

port

s an

d th

e ag

ency

's su

ppor

ting

docu

men

tatio

n.

(3)

In th

e ev

ent o

f non

-rep

ortin

g by

trad

ing

part

ners

, as

indi

cate

d in

the

foot

er se

ctio

n of

FM

S'

Intr

agov

ernm

enta

l Com

para

tive

Clo

sing

Pac

kage

E

xpla

natio

ns o

f Dzf

lere

nces

repo

rts,

iden

tify

whe

ther

th

e di

ffer

ence

is d

ue to

a n

on-r

epor

ting

part

ner a

nd d

o no

t pro

ceed

fur

ther

with

the

revi

ew o

f the

dif

fere

nces

.

(1)

SBA

inco

rrec

tly re

cord

ed $

662.

7 m

illio

n un

der t

radi

ng p

artn

er

20 (D

epar

tmen

t of T

reas

ury)

. It

sho

uld

have

bee

n re

cord

ed a

nd

repo

rted

und

er tr

adin

g pa

rtne

r 99

(Tre

asur

y G

ener

al F

und)

. Thi

s di

scre

panc

y w

as id

entif

ied

by T

reas

ury

and

SBA

sub

sequ

ently

co

rrec

ted

it.

(2)

The

re w

ere

no i

ncon

sist

enci

es in

the

amou

nts o

r exp

lana

tions

be

twee

n FM

S' I

ntra

gove

rnm

enta

l Com

para

tive

Clo

sing

Pac

kage

E

xpla

natio

n of

Dzr

eren

ces R

epor

t and

SB

A's

supp

ortin

g do

cum

enta

tion.

(3)

The

dif

fere

nces

repo

rted

in th

e In

trag

over

nmen

tal C

ompa

rativ

e C

losi

ng P

acka

ge E

xpla

natio

ns o

f Dzr

eren

ces

Rep

ort a

re n

ot d

ue to

a

non-

repo

rtin

g tr

adin

g pa

rtne

r.