Allegations of Accounting System Improprieties Leading to Undetected Overpayments of Principal and Interest at the Bureau of the Public Debt

GAO reviewed allegations made by a former employee of the Bureau of the Public Debt concerning waste, mismanagement, and fraudulent use of Federal funds within the Bureau. Specifically, the employee alleged that: (1) problems in the accounting and internal control systems are permitting overpayments of public debt principal and interest to remain undetected; (2) information on these problems was withheld in a report to the Office of Management and Budget (OMB) on debt collection efforts; and (3) the interest on some types of public debt securities was not recognized on an accrual basis as required by law.

GAO stated that the former employee's allegations of overpayments and their untimely detection related primarily to the Bureau's efforts to process principal and payment transactions for sales of Treasury bills handled by the Bureau rather than by banking institutions. GAO found that the accounting subsystem used was primarily a manual operation. A manual accounting system normally provides opportunities for error, especially when dealing with a high volume of transactions. In this case, the Bureau's subsystem has been handling an extremely high transaction volume in relation to its intended capabilities. GAO also found that, in response to a request from OMB, the Bureau did report on all receivables recorded in its accounts, but it understated receivables resulting from savings bond adjustments. Additionally, the report did not adequately disclose the severity of the Bureau's accounting system inadequacies and internal control weaknesses. Thus, there appears to be some basis for concern about the adequacy of the report on the Bureau's debt collection efforts. Finally, GAO found that, contrary to law, the Bureau was operating some of its interest accounts on a cash basis. GAO concluded that the former employee's allegations deal with some complex accounting system deficiencies that have apparently existed at the Bureau for some time. The Bureau's management has, and is, taking action to correct some of the deficiencies; however, GAO believes that other improvements may be needed to bring about better accountability for public debt transactions.