First-Year Implementation of the Federal Managers' Financial Integrity Act by the Department of the Treasury

GAO reviewed the Department of the Treasury's initial efforts to implement the requirements of the Federal Managers' Financial Integrity Act of 1982 and Office of Management and Budget (OMB) Circular A-123. The review focused on Treasury's evaluation of internal controls, its reviews of accounting systems, and the improvements being made as a result of the identified problems.

GAO found that Treasury acted promptly to establish the internal control process required by the act and the circular. However, Treasury differed from the OMB Internal Control Guidelines in the segmentation and vulnerability assessment phases. In the segmentation phase, Treasury divided its assessable units too broadly, which resulted in some activities' and functions' being inadequately considered or inadvertently excluded from assessment. In the vulnerability assessment phase, three weaknesses were identified: (1) the quality of the assessments was questionable, since most were inadequately documented and did not include all three OMB-required steps; (2) most field managers did not participate in the assessments; and (3) most of the automatic data processing assessments were incomplete. GAO found that Treasury's evaluations of its accounting systems were reasonably consistent and generally adequately documented. However, several important accounting operations were not included in the evaluations, and few transactions were tested. Treasury officials plan to rectify these omissions and deficiencies in second-year evaluations. Finally, Treasury did not evaluate the internal controls and accounting systems for the Exchange Stabilization Fund and the Saudi Arabian Deposit Account because it concluded that they were not subject to the act. GAO disagreed with this conclusion in regard to the Exchange Stabilization Fund, since its assets are U.S. Government Funds. Therefore, until the fund is evaluated, Treasury is not in compliance with the act.