Internal Controls

Pursuant to a legislative requirement, GAO provided information on the Financial Management Service's (FMS) controls over safeguarding of assets and documenting disbursements and reconciliation of reports as well as the results of previously suggested improvements.

GAO noted that: (1) testing of manual controls and procedures indicated weaknesses related to the safeguarding of vulnerable negotiable assets at FMS regional centers that increase the risk of fraud and unauthorized disbursements; (2) FMS centers' employment screening practices are inconsistent among the centers and less rigorous than those at another federal entity where employees have access to negotiable assets and related records; (3) some centers are not following FMS' procedures for control over checks awaiting destruction and issued checks returned for cancellation; (4) additionally, one center was not performing a required reconciliation of its returned check cancellations; (5) FMS did not have its revised Automated Standard Application for Payments (ASAP) system enrollment processing procedures in place at September 30, 1999, and the three centers that process ASAP system enrollments continued to have inadequate segregation of duties related to the bank confirmation process; (6) subsequently, FMS advised GAO that as of October 1, 1999, it had implemented its revised procedures; (7) testing indicated internal control weaknesses related to documenting the verification of the disbursement authorization process and the reconciliation of certain reports to assure that the disbursements are valid and FMS' financial records are complete and accurate; (8) for the date tested, one center did not document the supervisory or independent review of the agency certifying officer's signature to verify the validity of the disbursement requests; (9) for the date tested at another center, an unauthorized person signed forms crediting funds for a returned Fedwire to the originating agency; (10) for the month tested, two centers had not completely reconciled their monthly outstanding courtesy disbursement reports; (11) GAO's fiscal year (FY) 1999 testing disclosed that FMS' and the centers' corrective actions resolved previously reported weaknesses relating to: (a) the supervisory review, approval, and documentation of the disbursement processing progress sheets; and (b) enrollment processing and supervisory review related to ASAP; and (12) FMS informed GAO that it had completed corrective actions to address the ASAP segregation of duties and the reconciliation of courtesy disbursement weaknesses during FY 2000.

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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