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INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS U.S. Office of Government Ethics We have audited the accompanying consolidated balance sheets of the U.S. Office of Government Ethics (OGE) as of September 30, 2005 and 2004, and the related consolidated statements of net cost, and changes in net position and of financing and the combined statement of budgetary resources for the years then ended. These financial statements are the responsibility of OGE's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated and combined statements referred to above present fairly, in all material respects, the financial position of OGE as of September 30, 2005 and 2004, and the results of its net costs of operations, changes in its net position, budgetary resources and financing 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 a report dated October 28, 2005 on our consideration of OGE's internal control over financial reporting and a report dated October 28, 2005 on its compliance with laws and regulations. These reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
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INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER U.S. Office of Government Ethics We have audited the financial statements of the U.S. Office of Government Ethics (OGE) as of and for the year ended September 30, 2005 and have issued our report thereon dated October 28, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. In planning and performing our audit, we considered OGE's internal control over financial reporting by obtaining an understanding of OGE's internal control, determined whether 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 financial statements. 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 would not necessarily disclose all matters in the internal control over financial reporting 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 OGE's ability to record, process, summarize, and report financial data consistent with the assertions by management in the financial statements. 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 in amounts that would be material in relation to the financial statements 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 non-compliance may nevertheless occur and not be detected. However, we noted no matters involving the internal control and its operation that we considered to be material weaknesses as defined above. This report is intended solely for the information and use of the management of the U.S. Office of Government Ethics, OMB, and Congress, and is not intended to be and should not be used by anyone other than these specified parties.
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INDEPENDENT AUDITOR'S REPORT ON U.S. Office of Government Ethics We have audited the financial statements of the U.S. Office of Government Ethics (OGE) as of and for the year ended September 30, 2005, and have issued our report thereon dated October 28, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
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The accompanying notes are an integral part of these statements. 5 |
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements.
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The accompanying notes are an integral part of these statements. |
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U.S. OFFICE OF GOVERNMENT ETHICS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
Basis of Presentation The financial statements have been prepared to report the financial position, net cost of operations, changes in net position, status and availability of budgetary resources, and the reconciliation between proprietary and budgetary accounts of Office of Government Ethics (OGE). The statements are a requirement of the Chief Financial Officers Act of 1990, the Government Management Reform Act of 1994, the Accountability of Tax Dollars Act of 2002 and the Office of Management and Budget (OMB) Circular A-136, Financial Reporting Requirement. They have been prepared from, and are fully supported by, the books and records of OGE in accordance with the hierarchy of accounting principles generally accepted in the United States of America, standards approved by the principals of the Federal Accounting Standards Advisory Board (FASAB), OMB Circular A-136, Financial Reporting Requirement and OGE accounting policies which are summarized in this note. These statements, with the exception of the Statement of Budgetary Resources, are different from financial management reports, which are also prepared pursuant to OMB directives that are used to monitor and control OGE's use of budgetary resources. The statements consist of the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary Resources, Statement of Financing, and the Statement of Custodial Activity. In accordance with OMB Circular A-136, the financial statements and associated notes are presented on a comparative basis. Unless specified otherwise, all dollar amounts are presented in dollars.
B.
Reporting Entity The Office of Government Ethics (OGE), a small agency within the executive branch, was established by the Ethics in Government Act of 1978. In partnership with executive branch agencies and departments, OGE fosters high ethical standards for employees and strengthens the public's confidence that the Government's business is conducted with impartiality and integrity.
C.
Budgets and Budgetary Accounting OGE receives all funding through Congressional appropriation from the budget of the United States. Annual appropriations are used, within statutory limits, to incur obligations for specified purposes. OGE also has reimbursable authority to conduct an Annual Ethics Conference. Budgetary resources are recorded when funds on deposit with the Department of Treasury are made available to OGE through a warrant(s) for expenditures and liabilities.
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U.S. OFFICE OF GOVERNMENT ETHICS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D.
Basis of Accounting Transactions are recorded on both an accrual accounting basis and a budgetary basis. Under the accrual method, revenues are recognized when earned, and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal requirements on the use of federal funds.
E.
Revenues & Other Financing Sources Congress enacts annual and multi-year appropriations to be used, within statutory limits, for operating and capital expenditures. Additional amounts are obtained from service fees and reimbursements from other government entities and the public. Appropriations are recognized as a financing source when expended. Revenues from service fees associated with reimbursable agreements are recognized concurrently with the recognition of accrued expenditures for performing the services. We recognize as an imputed financing source the amount of accrued pension and post-retirement benefit expenses for current employees paid on our behalf by the Office of Personnel Management (OPM).
F.
Taxes OGE, as a Federal entity, is not subject to Federal, State, or local income taxes, and, accordingly, no provision for income taxes has been recorded in the accompanying financial statements.
G.
Fund Balance with Treasury The U.S. Treasury processes cash receipts and disbursements. Funds held at the Treasury are available to pay agency liabilities. OGE does not maintain cash in commercial bank accounts or foreign currency balances.
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U.S. OFFICE OF GOVERNMENT ETHICS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H.
Accounts Receivable Accounts receivable consists of amounts owed to OGE by other Federal agencies and the public. Amounts due from Federal agencies are considered fully collectible. Accounts receivable from the public include reimbursements from employees. An allowance for uncollectible accounts receivable from the public is established when either (1) based upon a review of outstanding accounts and the failure of all collection efforts, management determines that collection is unlikely to occur considering the debtor's ability to pay, or (2) an account for which no allowance has been established is submitted to the Department of the Treasury for collection, which takes place when it becomes 180 days delinquent. For the fiscal years ended September 30, 2005 and 2004, accounts receivable with the public was $4,539 and $147, respectively.
I.
Property, Plant and Equipment, Net Description Useful Life (years) Leasehold Improvements 9 Office Furniture 5 Computer Equipment 3 Office Equipment J. Advances and Prepayments Advance and prepayments are generally prohibited by law. There are some exceptions, such as reimbursable agreements, subscriptions and payments to contractors and employees. Payments made in advance of the receipt of goods and services are recorded as advances or prepaid charges at the time of prepayment and recognized as expenses when the related goods and services are received. For the fiscal years ended September 30, 2005 and 2004, advances were $0 and $7,829, respectively.
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U.S. OFFICE OF GOVERNMENT ETHICS
K.
Liabilities
L.
Accounts Payable
M.
Annual, Sick, and Other Leave
N.
Accrued Workers' Compensation
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0. Retirement Plans OGE employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). The employees who participate in CSRS are beneficiaries of AB's matching contribution, equal to seven percent of pay, distributed to their annuity account in the Civil Service Retirement and Disability Fund. FERS went into effect on January 1, 1987. FERS and Social Security automatically cover most employees hired after December 31, 1983. Employees hired prior to January 1, 1984 elected to join either FERS and Social Security, or remain in CSRS. FERS offers a savings plan to which OGE automatically contributes one percent of pay and matches any employee contribution up to an additional four percent of pay. For FERS participants, OGE also contributes the employer's matching share of Social Security. FERS employees and certain CSRS reinstatement employees are eligible to participate in the Social Security program after retirement. In these instances, OGE remits the employer's share of the required contribution. OGE recognizes the imputed cost of pension and other retirement benefits during the employees' active years of service. OPM actuaries determine pension cost factors by calculating the value of pension benefits expected to be paid in the future and communicates these factors to OGE for current period expense reporting. OPM also provides information regarding the full cost of health and life insurance benefits. OGE recognized the offsetting revenue as imputed financing sources to the extent these expenses will be paid by OPM. OGE does not report on its financial statements information pertaining to the retirement plans covering its employees. Reporting amounts such as plan assets, accumulated plan benefits, and related unfunded liabilities, if any, is the responsibility of the OPM.
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U.S. OFFICE OF GOVERNMENT ETHICS NOTES TO THE FINANCIAL STATEMENTS
Q.
Imputed Costs/Financing Sources Federal Government entities often receive goods and services from other Federal Government entities without reimbursing the providing entity for all the related costs. In addition, Federal Government entities also incur costs that are paid in total or in part by other entities. An imputed financing source is recognized by the receiving entity for costs that are paid by other entities. For the fiscal years ended September 30, 2005 and 2004, imputed financing sources was $896,778 and $894,609, respectively.
R.
Contingencies Liabilities are deemed contingent when the existence or amount of the liability cannot be determined with certainty pending the outcome of future events. OGE recognizes contingent liabilities, in the accompanying balance sheet and statement of net cost, when it is both probable and can be reasonably estimated. OGE discloses contingent liabilities in the notes to the financial statements when the conditions for liability recognition are not met or when a loss from the outcome of future events is more than remote. In some cases, once losses are certain, payments may be made from the Judgment Fund maintained by the U.S. Treasury rather than from the amounts appropriated to OGE for agency operations. Payments from the Judgment Fund are recorded as an "Other Financing Source" when made.
S.
Expired Accounts and Cancelled Authority Unless otherwise specified by law, annual authority expires for incurring new obligations at the beginning of the subsequent fiscal year. The account in which the annual authority is placed is called the expired account. For five fiscal years, the expired account is available for expenditure to liquidate valid obligations incurred during the unexpired period. Adjustments are allowed to increase or decrease valid obligations incurred during the unexpired period but not previously reported. At the end of the fifth expired year, the expired account is cancelled.
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U.S. OFFICE OF GOVERNMENT ETHICS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004
NOTE 2. FUND BALANCE WITH TREASURY
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U.S. OFFICE OF GOVERNMENT ETHICS
OGE occupies office space under a lease agreement that is accounted for as an operating lease. The lease term is for a period of ten (10) years commencing on February 2, 2004 and ends February 1, 2014.
The operating lease amount does not include estimated payments for leases with annual renewal options.
The accrued liabilities for OGE are comprised of program expense accruals, payroll accruals, and annual leave (funded and unfunded) earned by employees. Program expense accruals represent expenses that were incurred prior to year-end but were not paid. Similarly, payroll accruals represent payroll expenses that were incurred prior to year-end but were not paid. The liabilities on OGE's Balance Sheet as of September 30, 2005 and 2004, include liabilities not covered by budgetary resources, which are liabilities for which congressional action is needed before budgetary resources can be provided. Although future appropriations to fund these liabilities are likely and anticipated, it is not certain that appropriations will be enacted to fund these liabilities. There are no intragovernmental liabilities not covered by budgetary resources. Other liabilities not covered by budgetary resources consist entirely of unfunded leave. Unfunded leave balances are $613,435 and $609,124 as of September 30, 2005 and 2004, respectively. 16 |
U.S. OFFICE OF GOVERNMENT ETHICS NOTE 4. LIABILITIES (CONTINUED)
NOTE 5. CONTINGENCIES OGE is a named party in two pending civil actions. The first was decided in OGE's favor at the U.S. District Court level, but has been appealed to the U.S. Court of Appeals for the 10th Circuit. The amount of potential loss is estimated at $115,000. The second case is an ongoing litigation with the potential loss exceeding $115,000. NOTE 6. OPERATING/PROGRAM COSTS OGE's operating and programs costs as of September 30, 2005 and 2004 were $12,733,880 and $11,690,780 respectively. Earned revenues for their Annual Ethics Conference was $277,830 for 2005 and $249,950 for 2004. Net Cost of Operations as of September 30, 2005 and 2004 were $12,456,050 and $11,440,830, respectively. 17 |
U.S. OFFICE OF GOVERNMENT ETHICS NOTE 6. OPERATING/PROGRAM COSTS (CONTINUED)
NOTE 7. BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE UNITED STATES GOVERNMENT The 2007 Budget of the United States Government, with the Actual Column completed for fiscal year 2005, has not yet been published as of the date of these financial statements. The Budget is expected to be published and delivered to Congress in early February 2006. The 2006 Budget of the United States Government, with the Actual Column completed for 2004, has been reconciled.
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OFFICE OF GOVERNMENT ETHICS
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