Senate Preservation Fund
Key Transaction-Related Operating Practices Have Been Established but Additional Practices Are Needed Gao ID: GAO-09-89R July 28, 2009In September 2003, the Senate Preservation Fund (Fund) was established within the U.S. Treasury. The Fund is available to the Senate Commission on Art (Commission) to fund various activities related to works of art, historical objects, documents, and materials relating to historical matters, or exhibits in the Capitol and Senate Office buildings. The Library of Congress (Library) provides financial management and disbursing services and support to the Commission. The Government Accountability Office (GAO) is required to audit the Fund and report the results to the Commission. This report presents the results of our audit of the Fund's transactions during the first 5 years of its operations, fiscal years 2004 through 2008. Our audit objectives were to determine whether the Commission and Library had established operating practices to help ensure that (1) the Fund's transactions were authorized in advance, supported by documentation, accurately accounted for, and in compliance with significant provisions of laws and (2) regular transaction reporting and monitoring were in place to effectively oversee transaction execution and safeguard Fund assets.
For the Fund's initial 5 years of operations, Commission and Library staff established operating practices that generally resulted in transactions being authorized in advance, supported by documentation, accurately accounted for, and in compliance with selected statutory provisions considered significant to our audit objectives. These practices were generally consistent with federal internal control standards. However, many of these practices--those related to processing operating receipts and disbursements--had not been documented and formally approved, which may have contributed to instances in which they were not followed, including selected events and transactions not being authorized in advance, fully supported, or accurately accounted for. We also noted that, although compliance was achieved later through the Commission's ratification, the established practices did not provide for timely compliance with one statutory provision we reviewed. In addition, the established operating practices did not provide for (1) regular reporting by the Library of transaction information, (2) using the reported information to monitor transaction execution, or (3) conducting needed follow-up to help prevent or timely detect transaction errors and safeguard Fund assets. Establishing and effectively implementing such practices could have helped to prevent or more timely detect various transaction processing and accounting errors we identified. Without effective approved operating practices related to processing transactions and related reporting, monitoring, and follow-up, the Commission and Library are at risk that other Fund transaction errors or problems may occur in the future and not be timely detected.
RecommendationsOur 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: Team: Phone:GAO-09-89R, Senate Preservation Fund: Key Transaction-Related Operating Practices Have Been Established but Additional Practices Are Needed
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GAO-09-89R:
United States Government Accountability Office:
Washington, DC 20548:
July 28, 2009:
The Honorable Robert C. Byrd:
President Pro Tempore of the Senate:
The Honorable Harry Reid:
Majority Leader:
The Honorable Mitch McConnell:
Republican Leader:
United States Senate:
The Honorable Charles E. Schumer:
Chairman:
The Honorable Robert F. Bennett:
Ranking Member:
Committee on Rules and Administration:
United States Senate:
Subject: Senate Preservation Fund: Key Transaction-Related Operating
Practices Have Been Established but Additional Practices Are Needed:
In September 2003, the Senate Preservation Fund (Fund) was established
within the U.S. Treasury.[Footnote 1] The Fund is available to the
Senate Commission on Art (Commission) to fund various activities
related to works of art, historical objects, documents, and materials
relating to historical matters, or exhibits in the Capitol and Senate
Office buildings. The Library of Congress (Library) provides financial
management and disbursing services and support to the Commission. The
Government Accountability Office (GAO) is required to audit the Fund
and report the results to the Commission.[Footnote 2]
This report presents the results of our audit of the Fund's
transactions during the first 5 years of its operations, fiscal years
2004 through 2008. Our audit objectives were to determine whether the
Commission and Library had established operating practices to help
ensure that (1) the Fund's transactions were authorized in advance,
supported by documentation, accurately accounted for, and in compliance
with significant provisions of laws and (2) regular transaction
reporting and monitoring were in place to effectively oversee
transaction execution and safeguard Fund assets.
To address these objectives, we reviewed the Fund's enabling
legislation and the operating practices established by the Commission
and Library staff with respect to the execution and processing of Fund
transactions, including those related to advance authorization,
supporting documentation, accounting, and approval for Fund
disbursements. We reviewed the Fund's transactions and related
supporting documentation to determine whether established operating
practices were followed and whether the Fund's transactions were in
compliance with laws considered significant to our audit objectives. We
also determined whether regular reporting and other oversight practices
had been established to effectively monitor the execution of Fund
transactions and safeguard Fund assets.
Results in Brief:
For the Fund's initial 5 years of operations, Commission and Library
staff established operating practices that generally resulted in
transactions being authorized in advance, supported by documentation,
accurately accounted for, and in compliance with selected statutory
provisions considered significant to our audit objectives. These
practices were generally consistent with federal internal control
standards. However, many of these practices--those related to
processing operating receipts and disbursements--had not been
documented and formally approved, which may have contributed to
instances in which they were not followed, including selected events
and transactions not being authorized in advance, fully supported, or
accurately accounted for. We also noted that, although compliance was
achieved later through the Commission's ratification, the established
practices did not provide for timely compliance with one statutory
provision we reviewed.
In addition, the established operating practices did not provide for
(1) regular reporting by the Library of transaction information, (2)
using the reported information to monitor transaction execution, or (3)
conducting needed follow-up to help prevent or timely detect
transaction errors and safeguard Fund assets. Establishing and
effectively implementing such practices could have helped to prevent or
more timely detect various transaction processing and accounting errors
we identified. Without effective approved operating practices related
to processing transactions and related reporting, monitoring, and
follow-up, the Commission and Library are at risk that other Fund
transaction errors or problems may occur in the future and not be
timely detected.
We are making recommendations to the Commission's Executive Secretary
to enhance existing Commission and Library operating practices,
including taking actions to implement practices related to transaction
reporting, monitoring, and follow-up. In commenting on a draft of this
report, the Chief Financial Officer of the Library of Congress and
Commission's Executive Secretary agreed with our recommendations and
cited actions underway to implement them.
Background:
In 1988, the Senate Commission on Art was authorized to supervise,
hold, place, protect, and make known all works of art, historical
objects, and exhibits in the Senate wing of the Capitol and Senate
office buildings, and in all rooms, spaces, and corridors thereof.
[Footnote 3] The Commission is made up of five U.S. Senators--the
President (pro tempore) of the Senate, the majority and minority
leaders of the Senate, and the Chairman and Ranking Member of the
Senate Committee on Rules and Administration.
In September 2003, the Fund was established within the U.S. Treasury
and appropriated--by transfer from the contingent fund of the Senate--
$500,000 in initial funding. Specifically, the Fund is available to the
Commission to pay for expenses associated with:
* acquisition of any work of art, historical object, document, or
material related to historical matters, or exhibit for placement or
exhibition within the Senate wing of the Capitol and the Senate Office
Buildings;
* official activities of any advisory board established by the
Commission pursuant to Public Law 108-83, including actual and
necessary expenses incurred in the performance of its official duties;
* meals and refreshments, subject to limitation, in connection with
official activities of the Commission; and:
* any purposes for which funds from the contingent fund of the Senate
may be used pursuant to Public Law 101-302, as amended (2 U.S.C. §
2107).
On behalf of the Commission, the Commission's Executive Secretary and
staff provide operational support and assistance for activities
financed by the Fund, including managing and overseeing the
authorization, approval, and processing of operating disbursements and
amounts received by the Commission for deposit to the Fund. They are
responsible for ensuring that (1) Fund transactions are authorized,
supported by documentation, and in accordance with applicable law and
(2) related operating practices and internal controls[Footnote 4] are
established and followed.
Pursuant to Public Law 108-83, the Library is required to provide
financial management and disbursing services and support to the
Commission as may be required and mutually agreed to by the Librarian
of Congress and the Commission's Executive Secretary.[Footnote 5] The
Library's principal services and support include the purchase and
redemption of U.S. Treasury investments with funds not needed for
immediate withdrawal, the processing of receipt and disbursement
transactions, and the development and maintenance of the Fund's
accounting records and related support. The Library is also responsible
for ensuring appropriate operating practices and internal controls
related to its service and support to the Commission are established
and followed.
Over the initial 5 years, the Fund's transactions consisted of 370
investment and operating transactions, 368 of which were recorded and
accounted for by the Library and 2 unrecorded transactions we
identified during our review of the supporting documentation for the
Fund's activities. There were 319 investment-related transactions which
represented (1) the use of the Fund to purchase U.S. Treasury
securities and (2) amounts received and deposited to the Fund resulting
from the redemption of U.S. Treasury securities. There were 51
operating transactions which included 4 receipt-related transactions
for deposit to the Fund and 47 disbursement-related transactions
related to the use of Fund assets for activities related to the
Commission's Advisory Boards and the purchase of paintings for the
Senate Collection.[Footnote 6] Table 1 provides a summary of the types
and numbers of transactions we reviewed.
Table 1: Total Fund Transactions for Fiscal Years 2004-2008:
Category of transaction: Operating receipt transactions: Donations;
Total: 3.
Category of transaction: Operating receipt transactions: Other;
Total: 1.
Category of transaction: Operating receipt transactions: Total receipt-
related transactions;
Total: 4.
Category of transaction: Operating disbursement transactions:
Acquisition;
Total: 2.
Category of transaction: Operating disbursement transactions: Event-
related;
Total: 8.
Category of transaction: Operating disbursement transactions: Travel;
Total: 37.
Category of transaction: Operating disbursement transactions: Total
disbursement-related transactions;
Total: 47.
Category of transaction: Investment transactions: Purchases of U.S.
Treasury Securities;
Total: 161.
Category of transaction: Investment transactions: Redemptions of U.S.
Treasury Securities;
Total: 158.
Category of transaction: Investment transactions: Total Investment-
related transactions;
Total: 319.
Total number of identified Fund transactions: 370.
Source: GAO analysis.
Note: Table 1 includes provision for the two unrecorded operating
transactions--an unpaid travel reimbursement and small missing
donation--we identified during our audit. We did not consider the two
unrecorded transactions which totaled $221 to be significant to the
accounting for or operation of the Fund. Excluded from this analysis is
the initial $500,000 transfer from the contingent fund of the Senate,
which was deposited to the Fund in October 2003.
[End of table]
Table 2 presents a summary of Fund-related financial information
covering its initial 5 years, which were recorded by the Library
(fiscal years 2004 through 2008).
Table 2:Summary of Total Recorded Fund Transactions and Balances for
Fiscal Years 2004-2008:
Fiscal Year: 2004;
Beginning Fund balance: $500,000[A];
Operating related Receipts: $0;
Operating related Disbursements: $817;
Investment related Net cash provided by investments: $3,910;
Ending Fund balance: $503,093.
Fiscal Year: 2005;
Beginning Fund balance: $503,093;
Operating related Receipts: $20,000;
Operating related Disbursements: $33,098;
Investment related Net cash provided by investments: $11,357;
Ending Fund balance: $501,352.
Fiscal Year: 2006;
Beginning Fund balance: $501,352;
Operating related Receipts: $30,000;
Operating related Disbursements: $10,131;
Investment related Net cash provided by investments: $20,271;
Ending Fund balance: $541,492.
Fiscal Year: 2007;
Beginning Fund balance: $541,492;
Operating related Receipts: $524;
Operating related Disbursements: $2,094;
Investment related Net cash provided by investments: $25,693;
Ending Fund balance: $565,615.
Fiscal Year: 2008;
Beginning Fund balance: $565,615;
Operating related Receipts: $0;
Operating related Disbursements: $33,293;
Investment related Net cash provided by investments: $16,004;
Ending Fund balance: $548,326.
Source: GAO analysis (in dollars).
Note: Table 2 does not include amounts related to the two unrecorded
operating transactions identified during our audit.
[A] The opening balance represents the initial transfer from the
contingent fund of the Senate that was deposited to the Fund in October
2003. For purposes of this analysis, we did not consider it to be an
operating receipt.
[End of table]
Operating Practices Generally Supported Appropriate Transaction
Processing and Accounting:
For the Fund's initial 5 years of operations, Commission and Library
staff established operating practices that generally resulted in Fund
transactions being authorized in advance, supported by documentation,
accurately accounted for, and in compliance with selected statutory
provisions considered significant to our audit. These established
practices were generally consistent with federal internal control
standards. The Library's operating practices for processing of
investment transactions and accounting for the Fund's transactions were
generally documented, approved, and consistently followed. In contrast,
key practices related to the processing of operating receipt and
disbursement transactions by Commission and Library staff were not
documented and formally approved and their informal nature may have
contributed to them not always being followed.
In addition, we found that operating practices established by
Commission staff did not provide for obtaining advance Commission
approval for each disbursement from the Fund (a statutory requirement
we reviewed (2 U.S.C. § 2108(c)(3)(C))) but in December 2008 the
Commission acted to ratify the expenses previously disbursed. Without
consistently following documented and approved operating practices, the
Commission and the Library are vulnerable to the risk that Fund
transactions may not be properly executed and processed or in
accordance with applicable operating practices, internal control, and
statutory requirements and that Fund assets may not be adequately
safeguarded against loss or unauthorized use or distribution.
Practices Related to Advance Authorization:
To help ensure that only valid transactions and events are initiated or
entered into, federal internal control standards[Footnote 7] provide
that such transactions should be authorized by appropriate officials.
Operating practices established by Commission and Library staff reflect
the importance of authorization, and they provide for advance written
authorization of actions that later result in the use of Fund assets.
While we noted certain exceptions, our review of the Fund's investment
purchase and operating disbursement transactions generally found
advance written authorization in accordance with established operating
practices.
* All but 1 of the 161 purchases of U.S. Treasury securities with Fund
assets were authorized in writing by the Library's Disbursing Officer
prior to the investment purchase.
* The Commission's Executive Secretary gave advance written
authorization for events leading to 37 of the Fund's 46 operating
disbursement transactions. For the other 9--each involving Advisory
Board member travel--the Executive Secretary did not give written
authorization prior to the travel as noted below.
- The Executive Secretary verbally authorized 1 of the 9 trips.
- Advanced notice of the need to travel was given to the Executive
Secretary for 4 trips but there was no evidence of the Executive
Secretary's prior written authorization.
- There was no evidence of either advance written or verbal
authorization or notice of the need to travel for the remaining 4
trips.
While the nine trips were taken and related requests for travel
reimbursements were signed by the Executive Secretary, without advanced
authorization of events that result in a claim against Fund assets
those who manage and oversee the Fund face a risk that unauthorized
expenses may be incurred and subsequent requests for reimbursement may
be denied.
Practices Related to Supporting Documentation:
Federal internal control standards provide that transactions and
related events should be clearly documented and the documentation
should be readily available for examination. The operating practices
established by the Commission and Library staff reflect the value of
supporting documentation by requiring that it be developed and
maintained for Fund transactions. While we noted certain exceptions,
our review of supporting documentation generally found that Fund
transactions were fully supported by documentation in accordance with
their established operating practices.
* The Fund's 319 investment-related transactions were fully supported
by documentation from the Library and the Department of the Treasury's
Bureau of the Public Debt.
* The documentation for the Fund's 4 operating receipt transactions and
41 of its 46 operating disbursement transactions fully supported the
nature and amount of each transaction. For the other 5--each involving
Advisory Board member travel--the documentation did not include all the
support called for by the related operating practices. The
documentation for:
- 3 transactions did not include support for the amount paid by the
traveler for transportation expense (either a receipt for air or train
fare).
- 1 transaction did not include evidence of the traveler's signature to
support the total amounts being claimed for reimbursement.
- 1 transaction did not agree with the amount paid to the traveler
after the traveler made a small ($10) computational error that was not
detected by Commission staff resulting in a small overpayment.
Practices Related to Transaction Accounting:
Federal internal control standards provide that transactions should be
promptly recorded to most effectively support management in controlling
operations and making decisions. In addition, generally accepted
accounting principles provide that transactions and other accounting
events should be promptly and accurately recognized. The established
operating practices reflect the need for (1) Commission staff to
forward approved operating transactions to the Library for processing
and recording and (2) Library staff to promptly and accurately record
accounting transaction information related to Fund investment, receipt,
and disbursement transactions. While we noted several exceptions, our
review of the Library's accounting records and related supporting
documentation maintained by Commission and Library staff otherwise
found that the Fund's transactions were accurately accounted for.
* A signed 2004 travel disbursement request sent to the Library for
processing and payment went unpaid through the end of fiscal year 2008.
Library staff obligated the funds needed to make the disbursement in
2004. However, the Library staff did not make the disbursement and the
obligation remained open. In 2007, Library staff reviewed the unpaid
obligation and incorrectly determined that it was invalid and canceled
the obligation without following up with Commission staff to see if
they had relevant information about the unpaid obligation. Neither the
Library nor the Commission staff had identified the fact that the
traveler had not been paid prior to our audit. After follow-up with the
traveler regarding the unpaid travel reimbursement, the traveler
directed that the unpaid amount should not be paid and instead treated
as a gift to the Fund.
* Library staff processed and paid a signed travel reimbursement
request in January 2006 after receiving a copy of the request, which
had been faxed by Commission staff. Later, after Commission staff
mailed over a copy of the original signed travel reimbursement request
with accompanying supporting documentation, Library staff mistakenly
treated it as a new request and paid the traveler a second time for the
same travel. The resulting duplicate payment was not detected by the
Library or Commission staff until August 2006, when the traveler
returned the payment.
* Separate disbursements--a 2005 investment purchase and a 2008 travel
payment--resulted in transaction processing and accounting errors when
the payments by Library staff exceeded the funds available resulting in
negative balances in the Fund's cash account with Treasury, which are
procedural violations of U.S. Treasury operating guidance.[Footnote 8]
In the first instance, Library staff purchased a Treasury security
after relying on information that did not accurately reflect the Fund's
actual cash balance. In the second instance, the evidence indicates
that the Library staff involved in processing the travel payment did
not contact other Library staff with responsibility for knowing when
sufficient cash would be available to make the disbursement. The
negative balances were subsequently eliminated through the scheduled
redemption of Treasury securities.
* In 2006, the Commission staff received a small ($10) check donation
for the Fund that was not deposited in the Fund by the end of fiscal
year 2008. The missing donation went undetected by the Commission and
Library staff until we inquired about it during our audit. After
receiving the check, Commission staff said that they sent the check to
the Library as directed by the Library's Disbursing Officer, but
Library staff said that there was no record of the check having been
received and deposited to the Fund. After learning of the missing
check, Commission and Library staff made reasonable attempts to locate
the missing check but were unsuccessful. After follow-up with the
donor, the donor sent in another donation for the same amount, which
was later deposited to the Fund.
Practices Related to Compliance with Significant Laws:
Compliance with relevant laws and regulations is an important objective
of internal control, and management is responsible for developing
operating practices needed to help ensure compliance. In reviewing the
Fund's transactions, we identified three statutory provisions related
to the Fund's authorizing legislation that we considered significant to
our audit objectives. The three significant statutory provisions we
identified involve use of Fund assets for investment and other purposes
and required advance approvals for Fund disbursements.
* Investment of Fund assets: Fund assets not needed to meet current
withdrawals can be invested in interest-bearing obligations of the
United States or an obligation guaranteed as to principal and interest
by the United States that, as determined by the Commission, has a
maturity suitable for the Fund.[Footnote 9] Our review of the operating
practices established by Library staff and the Fund's investment
transactions found that each of the Fund's 161 investment purchases
complied with this provision regarding the investment of Fund assets in
U.S. Treasury securities.
* Use of Fund assets: Fund assets are available to the Commission for
various purposes, including the acquisition of works of art and
historical objects, official activities of the Commission's Advisory
Boards, and any purposes for which the contingent fund of the Senate is
available under 2 U.S.C. § 2107(a).[Footnote 10] Our review of the
operating practices established by Commission staff found that each of
the 45 operating disbursements[Footnote 11] was consistent with the
purposes for which assets in the Fund were made available to the
Commission.
* Approvals of Fund disbursements: Prior to disbursement, disbursements
from the Fund must be approved by the Commission and signed by the
Commission's Executive Secretary.[Footnote 12] Our review of the
operating practices established by Commission staff found that the
Commission's Executive Secretary signed the disbursement request for
each of the 45 operating disbursements from the Fund. However, the
established operating practices did not provide for obtaining prior
Commission approval. As a result, 43 of the 45 operating disbursements-
-each involving Advisory Board travel and events--were not approved by
the Commission prior to disbursement, as required by statute.
Commission staff said that they informally coordinated upcoming
Advisory Board activities, including meetings and related events, with
staff representing each Commission member.
After we noted the lack of advance Commission approval for the
disbursements, the Senate Commission on Art acted in December 2008 to
approve, through ratification, the 43 disbursements which served, after
the fact, to satisfy the statutory requirement for Commission approval
of Fund disbursements. In addition, the Commission approved a formal
prospective delegation of its approval authority that will permit the
Commission's Executive Secretary, on behalf of the Commission, and
subject to certain limitations, to approve in advance future Fund
disbursements for uses which are consistent with the purposes for which
the Fund is available to the Commission.
Lack of Reporting, Monitoring, and Follow-Up Practices:
Federal internal control standards provide that pertinent information,
such as Fund transaction activities, should be reported in a form and
time frame that enables those who need the information to carry out
their responsibilities effectively and efficiently. These standards
also recognize that monitoring activities such as regular review and
oversight activities, comparisons, reconciliations, and other actions,
generally should be designed to occur as part of normal operations.
However, during the Fund's initial 5 years, the operating practices
established by the Library and Commission staffs did not provide for
(1) regular Library reporting of transaction processing information to
Commission representatives, (2) using the reported information to
monitor transaction execution, or (3) conducting needed follow-up to
help prevent or timely detect transaction errors and safeguard Fund
assets. Library staff did not report to Commission staff on the
Library's execution and processing of the Fund's operating receipt and
disbursement transactions, and Commission staff did not request such
information from the Library staff. Without effective reporting,
monitoring, and follow-up practices, Commission and Library staff did
not have the information they needed to help ensure that Fund
transactions were executed as intended and Fund assets were
safeguarded.
Several of the previously discussed instances of transaction processing
and accounting errors--a duplicate payment, an unpaid disbursement, and
the missing donation--should have been prevented or more timely
detected had there been effective transaction reporting, monitoring,
and follow-up by Commission and Library staff. Without practices in
place, the Commission and Library will continue to face the risk that
transactions will not be executed as intended and that Fund assets will
not be properly safeguarded from loss or unauthorized use or
disposition.
In addition to the transaction processing and accounting errors found
during our audit, we noted another matter that illustrates the
importance of effective follow-up and coordination between the Library
and Commission staff. The matter involved a decision by the Library's
Disbursing Officer at the time--a decision which was not shared with
Commission staff--that resulted in a missed opportunity to earn
interest for the Fund on a $30,000 donation that was made to help pay
for the purchase of a portrait for the Senate Collection. After the
Fund's establishment, the Commission's Executive Secretary advised the
Library to invest funds not needed for immediate disbursement in U.S.
Treasury securities over periods ranging from 2 weeks to 1 year. After
the Library received the $30,000 donation in July 2006, the Commission
staff provided the Library's Disbursing Officer information indicating
that the donation might not be needed for disbursement for up to 2
years. However, the Library did not invest the donated funds, but
instead held the funds until January 2008 when they were used to help
pay for the portrait.
We found no evidence that the Disbursing Officer, who was no longer
with the Library at the time of our audit, documented the reason for
his decision not to invest the funds or discussed his decision with
Commission staff. We estimate that had the donated funds been invested
in 2-week Treasury securities, the Fund would have earned approximately
$2,000 in interest over the 18 months that the donated funds were not
needed for disbursement. Without effective follow-up and coordination
by the Library's Disbursing Officer, Commission staff did not have the
opportunity to review and approve the Disbursing Officer's decision.
Conclusions:
While practices related to the Fund's operating receipts and
disbursements have generally resulted in transactions and related
events being authorized in advance, supported by documentation,
accurately accounted for, and in compliance with selected provisions of
law considered significant to our audit, they have not been documented
and formally approved, which may have contributed to several instances
where they were not followed. Further, while Commission staff said that
they informally coordinated with Commission Members' staff about the
upcoming Advisory Board activities during the Fund's initial 5 years,
their operating practices did not provide for obtaining advance
Commission approval for 43 Fund disbursements as required by statute.
However, in December 2008, the Commission ratified the 43 disbursements
which served to satisfy the statutory requirement for Commission
approval. Further, the Commission formally delegated its disbursement
approval authority for certain future Fund disbursements. In addition,
the lack of practices related to regular transaction reporting,
monitoring, and follow-up contributed to various transaction execution
and processing errors not being prevented or more timely detected by
Commission and Library staff. Prompt action by the Commission and
Library staff to formalize and enhance existing operating practices
will help ensure that Fund transactions are executed as intended and
that Fund assets are safeguarded against loss or unauthorized
disposition or use.
Recommendations:
We recommend that the Senate Commission on Art's Executive Secretary
take the following actions.
* Work with the Library's Chief Financial Officer to ensure that the
Library documents and formally approves its operating practices related
to the Library's:
- processing of Fund-related operating receipt and disbursement
transactions,
- regular reporting to the Commission's Executive Secretary on Fund
transaction processing and balance information (e.g., quarterly), and:
- conducting timely follow-up and coordination with the Commission on
Fund-related matters warranting further action.
* Work with Commission staff to document and formally approve operating
practices related to the Commission's:
- processing of Fund-related operating receipts and disbursement
transactions,
- use of Fund-related financial information to monitor Fund
transactions and safeguard Fund assets, and:
- conducting timely follow-up and coordination with the Library on Fund-
related matters warranting further action.
Agency Comments:
On May 20, 2009, we provided a draft of our report to the Chief
Financial Officer of the Library of Congress and the Executive
Secretary of the Senate Commission on Art to obtain official comments
on the draft report's findings and recommendations. In commenting on
the draft report (see enclosure 1), the Library's Chief Financial
Officer concurred with the draft report's overall findings and
recommendations and noted that the Library has established new
practices including a process for providing quarterly reports of the
detailed Fund transactions to Commission representatives. In commenting
on the draft report, the Commission's Executive Secretary agreed with
the draft report's recommendations and noted that actions were underway
to implement the recommendations.
Scope and Methodology:
To achieve our audit objectives, we reviewed the Fund's enabling
legislation and federal internal control standards and discussed with
staff from the Commission and the Library's Office of Financial
Management the nature and extent of the Fund's transactions and related
transaction processing practices, available supporting documentation,
and accounting records. We used these discussions along with our
reviews of available supporting documentation to develop an
understanding of those operating practices established by Commission
and Library staff related to the execution and processing of the Fund's
investment and operating transactions. We also considered whether the
established operating practices were consistent with federal internal
control standards.
We used established operating practices as our criteria for determining
whether the Fund's transactions and related events were authorized in
advance, supported by documentation, and accurately accounted for. To
do so, we reviewed and reconciled available transactions records and
supporting documentation including the Bureau of the Public Debt's
investment confirmation statements, travelers' itemization of claimed
expenses and related receipts, receiving or acceptance signatures on
vendor invoices, approved acquisition agreements, and donation-related
supporting records.
We reviewed applicable laws and regulations to determine those we
considered significant to our audit objectives and concluded that three
statutory provisions within the enabling legislation for the Commission
and the Fund were significant to our performance audit. We did not
identify any regulations we considered significant to our audit
objectives. The three significant statutory provisions related to the
use of Fund assets for investments and other purposes and required
approvals for disbursements from the Fund. To assess whether
transactions were executed in compliance with laws considered
significant to our audit objectives, we reviewed the relevant statutory
requirements, applicable operating practices, supporting documentation,
and transaction accounting.
With regard to whether regular reporting of transaction processing
information and other oversight practices were in place to help monitor
Fund transactions and safeguard Fund assets from unauthorized use or
disposition, we interviewed Commission and Library staff to gain an
understanding of the nature and extent of (1) reporting on Fund
transactions by the Library staff, (2) monitoring activities by
Commission and Library staff, and (3) transaction-related
communications between and among the Commission and Library staff. We
also considered federal internal control standards and reviewed
available supporting documentation related to these activities.
In our review of Fund transactions, we evaluated advance authorization,
supporting documentation, accounting, and compliance for those
transactions where the related practices applied. For authorization,
supporting documentation, and compliance related to operating
disbursement transactions, we evaluated 46 of the Fund's 47
disbursement-related transactions, excluding the 1 because it was a
duplicate payment mistakenly initiated by Library staff based on a
single authorization and related supporting documentation. Further,
regarding compliance with statutory requirements related to
disbursements of Fund assets, we did not evaluate a second disbursement-
related transaction--a request for disbursement which had been signed
by the Commission Executive Secretary but not been paid by the Library--
because no disbursement was made from the Fund. As a result, we
reviewed 45 Fund disbursements for compliance with provisions of law
significant to our audit.
We conducted this performance audit between March 2008 and January 2009
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions, based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
We are sending copies of this report to the Commission's Executive
Secretary, and the Chief Financial Officer of the Library of Congress.
The report also is available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-9471 or by e-mail at franzelj@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. Key contributors to this
report include John Reilly, Jr. (Assistant Director), John Craig,
Jacquelyn N. Hamilton, and Maxine Hattery.
Signed by:
Jeanette M. Franzel:
Managing Director:
Financial Management and Assurance:
[End of section]
Enclosure 1: Comments from the Library of Congress:
The Library Of Congress:
Office Of The Chief Financial Officer:
101 Independence Avenue, S.E.
Washington, D.C. 20540-9100:
June 12, 2009:
Ms. Jeanette M. Franzel:
Managing Director:
Financial Management and Assurance:
U.S. Government Accountability Office:
Room 5Q24:
441 G St. NW:
Washington, DC 20548:
Dear Ms. Franzel:
I have reviewed your report entitled Senate Preservation Fund: Key
Transaction-Related Operating Practices Have Been Established but
Additional Practices Are Needed (GAO-08-89R). I concur with your
overall findings and recommendations related to opportunities to
improve operating practices related to the Library's processing of and
reporting on Senate Preservation Fund transactions. To this end, the
Library has sent the Commission representatives cumulative quarterly
reports of the detailed fund activity (i.e., all transactions) for
fiscal year 2009. The Library has also provided narrative highlights of
key activity in the fund for the fiscal year. In addition, the Library
has sought guidance from the Commission on matters related to the fund,
such as reserve levels, whereas in the past we had defaulted to
practices used previously for the fund or for the Capitol Preservation
Commission, the fund on which the Senate Preservation Fund was modeled.
The Library will continue these new practices unless instructed to do
otherwise.
Sincerely,
Signed by:
Jeffrey Page:
Chief Financial Officer:
Library of Congress:
202-707-7350:
[End of section]
Footnotes:
[1] Legislative Branch Appropriations Act, 2004, Pub. L. No. 108-83,
title I, § 3(c), 117 Stat. 1007, 1012 (Sept. 30, 2003), classified, as
amended, at 2 U.S.C. § 2108(c).
[2] 2 U.S.C. § 2108(c)(6).
[3] See 2 U.S.C. § 2101-2108.
[4] Federal internal control standards recognize that an entity's
management is responsible for designing and implementing appropriate
internal controls to achieve objectives related to (1) the
effectiveness and efficiency of operations, including the use of
resources; (2) the reliability of internal and external financial
reporting; and (3) compliance with applicable laws and regulations. A
subset of each of these control objectives is the need to safeguard
assets, and related internal controls should be designed to provide
reasonable assurance regarding the prevention or prompt detection of
unauthorized acquisition, use, or disposition of assets. An entity's
management is also responsible for monitoring and evaluating the
effectiveness of the internal control. See GAO, Standards for Internal
Control in the Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
November 1999).
[5] 2 U.S.C. § 2108(c)(5)
[6] 2 U.S.C. § 2107(b) defines the "Senate Collection" as all works,
objects, documents, or materials purchased or obtained by the Senate
Commission on Art using appropriations from the Contingent Expenses of
the Senate, Secretary of the Senate.
[7] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00.21.3.1]
(Washington, D.C.: November 1999).
[8] While the Fund had adequate budget authority to cover all its
obligations, procedurally, U.S. Treasury operating guidance requires
that sufficient funds be available in the account (Fund) before a
payment is made to vendors or to invest funds. See the Department of
the Treasury, Operating Circular, Responsibilities Relating to
Government Investment Accounts and Investment in Government Account
Series (GAS) Treasury Securities, at [hyperlink,
www.publicdebt.treas.gov], effective November 15, 2002. Chapter 6000,
Responsibilities Relating to Disbursement of Moneys from Government
Investment Accounts, Section 6010, requires that investment accounts
have a cash balance at least equal to the amount planned to be
disbursed before making the disbursement. In addition, Chapter 4000,
Responsibilities, Procedures, and Policies Relating to Investment of
Moneys in Government Investment Accounts, Sections 4035 and 4060,
requires that funds to be invested in Treasury securities be available
to the Department of the Treasury general fund to pay for the purchase
of Treasury investments.
[9] 2 U.S.C. § 2108(c)(4).
[10] 2 U.S.C. § 2108(c)(2).
[11] As noted later in our Scope and Methodology, we evaluated 45
relevant disbursements from the Fund for compliance with statutory
provisions considered significant to our audit objectives. In doing so
we did not consider 2 of the 47 disbursement-related transactions
identified in table 1 for compliance as one did not result in a Fund
disbursement and another was an erroneous duplicate disbursement made
by the Library staff.
[12] 2 U.S.C. § 2108(c)(3)(C).
[End of section]
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