Continuing and Widespread Weaknesses in Internal Controls Result in Losses Through Fraud, Waste, and Abuse

Most federal agencies are operating accounting systems that are vulnerable to physical losses and waste of federal money as well as fraudulent and otherwise improper uses. These conditions, noted in a series of GAO reports issued between December 1976 and October 1979 covering financial operations in 11 major federal organizations, are summarized.

System vulnerability results from a series of longstanding, undetected weaknesses. While agencies usually correct specified deficiencies, they are generally slow to correct systemwide deficiencies in collection, disbursement, obligation, and imprest fund activities. Inadequate controls over collection could not ensure that amounts owed the government were recorded as accounts receivable or that overdue accounts were identified and collected. Often, accounts receivable were so poorly controlled and safeguarded that the potential for theft, loss, or other misuse was high. Controls over disbursement activities were found to be deficient. Disregard for basic control procedures prescribed in manuals resulted in waste and overpayments. About half of the offices reviewed had serious weaknesses in controls over obligations that could result in improper or illegal payments. The most widespread deficiencies were noted in imprest fund activities. Weak controls together with the susceptibility of imprest funds to misuse allowed substantial losses to the government. It was concluded that adequate internal audit coverage could have detected most of the deficiencies found. Legislation under consideration would place greater responsibilities on the heads of federal agencies for improving their agencies' financial systems. Under this legislation, agencies would be required to undertake evaluations of their organizations' systems of internal control and report annually to Congress and to the President the results of such evaluations.

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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