Control Improvements Needed in Accounting for Treasury Securities at the Federal Reserve Bank of New York

GAO summarized the results of its internal control review of the Federal Reserve Bank of New York's accounting systems for Treasury securities.

Although the Bank has extensive controls in place to identify errors and abuse, GAO found weaknesses in both the automated and manual controls. GAO identified 15 incorrect payments totalling $2.7 million. Inadequate records prevented GAO from verifying that only these incorrect payments occurred. Furthermore, the Bank has not isolated the cause of these incorrect payments to take appropriate corrective action. In addition, GAO found that the Bank did not require individual operator passwords to access one automated system, the passwords required for access through other types of terminals were not adequately safeguarded, and it was difficult to determine who processed a given transaction. Procedures for verifying data input accuracy were not always followed and need improvement. As a result, no assurance existed that verification took place or that all transactions were properly processed. Errors detected during the data input phase were not always adequately controlled to ensure that they were corrected and reentered promptly. No documentation was available for the automated system which contains the master file of securities account balances. When securities account balances were reconciled to prove their accuracy, the Bank did not always properly document either how any differences were resolved or that any related adjustments to the account balances were accurate. Finally, the Bank did not always detect inaccurate information generated by an automated system and, as a result, erroneous payments occurred when the securities were redeemed.

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.

Director: John F. Simonette Team: General Accounting Office: Accounting and Financial Management Division Phone: (202) 275-9490