Financial Management

This report assesses the adequacy and status of the Food and Drug Administration's (FDA) actions to correct internal control weaknesses over property and equipment identified in earlier financial statement audit reports. The weaknesses cited were primarily that FDA (1) had inadequate controls over the physical quantities of property and equipment and their locations and (2) lacked proper reconciliations between its general ledger and property subsidiary ledger systems. GAO also reviews FDA's internal controls over the safeguarding and reporting of automated data processing equipment that is lost, stolen, destroyed or surplussed.

GAO noted that: (1) FDA developed an action plan that should correct the weaknesses identified in the financial audit reports regarding property and equipment; (2) FDA has made progress in implementing various actions, but it has not yet resolved some of the reported weaknesses; (3) according to FDA officials, as of January 21, 1999, 23 of the 41 tasks in the corrective action plan related to property and equipment had been completed; (4) GAO found 9 of these 23 tasks had not yet fully achieved their anticipated outcomes; (5) one of these tasks was for FDA's management to create and validate a new property database; (6) while FDA conducted several physical inventories to create this database, GAO's testing showed that the database was not accurate; (7) FDA did not have adequate controls in place to effectively monitor the loss, theft, or destruction of ADP equipment; (8) FDA procedures for reporting and recording missing equipment were ineffective, with the result that information on missing equipment sometimes never reached the property management database, thus compromising database accuracy and completeness; (9) the reliability of the database was further hampered because FDA used the same code to identify lost, stolen, and destroyed property and thus could not determine individual quantities and values in each of these categories; (10) this was the case for $10.1 million in property, including ADP equipment, that FDA reported in 1998 as having been lost, stolen, or destroyed; (11) for $7.4 million of the $10.1 million, FDA was unable to determine how much represented lost versus stolen or destroyed property even when it reviewed source documents; (12) FDA management could not effectively analyze the nature and severity of problems related to missing equipment and develop related management strategies to address its risks; (13) FDA was unable to provide assurance that the proper authorizations were in place before ADP equipment was designated for surplus and removed from FDA premises; (14) FDA's procedures for surplussing equipment called for filing related paperwork that included the original signatures of the property management personnel who authorized the surplus; (15) GAO found that in 8 of the 27 cases it reviewed, FDA staff altered the forms used to designate equipment for surplus; (16) such alterations of required paperwork seriously compromised the control environment and increased the risk of theft and inappropriate removal of equipment; and (17) GAO also found an instance in which a computer donated to a school contained information that should have been removed before it was donated.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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