Internal Controls

Pursuant to a legislative requirement, GAO provided information on the effectiveness of the Financial Management Service's (FMS) internal controls, focusing on the processes for: (1) recording adjusting journal entries (adjustments) needed to accurately reflect FMS' records of agencies' cash receipts and disbursements; (2) opening, amending, or closing agency location codes (ALC) which identify agencies and individual reporting locations within agencies on monthly reports of cash receipts and disbursements; and (3) assigning or discontinuing account symbols, which are used to identify individual appropriations or spending authorizations.

GAO noted that: (1) although FMS policies and procedures require review and approval of transactions processed by staff, GAO found that supervisors were not reviewing critical aspects of staff work; (2) GAO also found that staff were not following FMS' established procedures requiring documentation of transactions; (3) FMS did not have adequate reconciliation controls in place for some of its processes; (4) undetected errors in FMS' records could hinder agencies' ability to properly reconcile their fund balances with Treasury accounts because they rely on information recorded and reported to them by FMS; (5) FMS' Financial Analysis Branch (FAB) staff make adjustments to assist agencies in clearing differences identified between the agency records of receipts and disbursements and those reported by independent sources; (6) specifically, GAO found: (a) FAB had no internal controls in place for its adjustments to the statement of differences accounts, thus increasing the risk of errors occurring and not being detected in a timely manner; (b) FAB supervisors had not reviewed and approved 5 of the 45 journal voucher forms that support the budget clearing accounts (BCA) adjustments GAO tested; (c) FAB staff were not properly documenting BCA adjustments; (d) for 33 of the 45 adjustments tested, GAO found no documentation to support either the ALC charged, the account charged, or the amount of the adjustment; and (e) FAB did not require staff to reconcile the journal voucher forms or control logs to the adjustments they recorded in the BCAs; (7) GAO found: (a) Budget Reports Branch (BRB) and Checks Reconciliation Branch (CRB) supervisors were not adequately reviewing all transactions; (b) for 7 of the 45 transactions tested, BRB staff did not adequately document the transactions in the ALC control logs as required; (c) CRB staff were not required to reconcile information on the ALC request forms to the information recorded in the ALC Master Table in FMS' central accounting system; and (d) BRB staff were not properly reconciling all of their ALC transactions even though branch procedures require reconciliation; and (8) FMS staff were not adequately documenting account symbol transactions.