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GAO-09-714R: 

United States Government Accountability Office: 
Washington, DC 20548: 

June 17, 2009: 

Brigadier General William J. Leszczynski, Jr. USA (Retired): 
Executive Director:
American Battle Monuments Commission: 

Subject: American Battle Monuments Commission: Management Action Needed 
to Improve Internal Control Procedures: 

Dear General Leszczynski: 

On February 27, 2009, we issued our report expressing our opinion on 
the American Battle Monuments Commission's (the Commission) fiscal 
years 2008 and 2007 financial statements and our opinion on the 
Commission's internal control as of September 30, 2008.[Footnote 1] We 
also reported on the results of our tests of the Commission's 
compliance with selected provisions of laws and regulations during 
fiscal year 2008. We reported that the Commission maintained, in all 
material respects, effective internal control over financial reporting 
(including safeguarding of assets) and compliance as of September 30, 
2008. 

During our fiscal year 2008 audit, we identified accountability and 
internal control deficiencies that, while not individually or in the 
aggregate material to the Commission's financial statements, warrant 
management's attention. The purpose of this report is to present these 
deficiencies, to provide recommendations to address these matters, and 
to provide an overview of the status of our prior year findings and 
recommendations. Because of the sensitive nature of some of the issues 
we identified, we are communicating detailed information regarding our 
findings and recommendations on information systems and physical 
security in a separately issued Limited Official Use Only report. 

Results in Brief: 

During our fiscal year 2008 financial statement audit, we identified 13 
control deficiencies related to accounting procedures of the American 
Battle Monuments Commission (the Commission). These issues existed at 
Commission headquarters, its European Regional (ER) and Mediterranean 
Regional (MR) offices, and its Manila American Cemetery. Specifically: 

At the Commission's headquarters, we identified the following 
accounting procedure deficiencies: 

1. Significant intragovernmental transactions lacked supporting 
documentation. 

2. Some expenditure transactions lacked evidence of receipt dates and 
approvals. 

3. Trust funds did not adequately invest and account for donated funds. 

4. Trust fund receipts were not effectively reconciled with the 
Department of the Treasury (Treasury). 

5. Miscellaneous receipts fund balance was not removed from the general 
ledger. 

6. Strategic plan was not updated in 3 years. 

At the Commission's ER office, we identified the following accounting 
procedure deficiencies: 

1. Euro bank account transactions were not recorded and reconciled. 

2. English employees pension plan liability was not accrued timely. 

3. Some expenditure transactions lacked evidence of receipt dates and 
approvals. 

4. Undelivered orders report did not support the general ledger 
balance. 

5. Some vendors had multiple identification numbers. 

At the Commission's MR office, we identified as a control deficiency 
that some post allowances were not paid when due. At the Commission's 
Manila American Cemetery, we identified as a control deficiency that 
some expenditure transactions lacked evidence of receipt dates and 
approvals. 

To assist Commission management in addressing these findings, this 
report contains 24 detailed recommendations. We also identified 8 
control deficiencies in information systems and physical security at 
Commission headquarters and its ER and MR offices. Due to the sensitive 
nature of these issues, they are being communicated to the Commission 
in a Limited Official Use Only report, along with another 20 detailed 
recommendations. As stated in its letter dated June 10, 2009, the 
Commission agreed with the issues in the report. (See appendix I). 

As a result of our fiscal years 2004 through 2007 financial statement 
audits, we have provided the Commission's worldwide locations with 233 
information system and noninformation system recommendations to improve 
its information technology systems, security, and accounting 
procedures. Through January 31, 2009, the Commission had implemented 
220 of our recommendations, or 94 percent, and was working to implement 
the remaining 13 recommendations. 

Scope and Methodology: 

As part of our fiscal year 2008 financial statement audit of the 
Commission, we obtained an understanding of the Commission's internal 
controls related to the recording and processing of transactions, and 
we tested compliance with selected provisions of applicable laws and 
regulations. In conducting the audit, we reviewed applicable Commission 
policies and procedures, examined relevant documents and records, and 
interviewed management and staff. We also tested internal control over 
financial reporting, including the safeguarding of assets. We did not 
evaluate all internal controls relevant to operating objectives, such 
as controls relevant to ensuring efficient operations. We limited our 
internal control testing to those controls over financial reporting and 
compliance. 

As part of our financial statement audit of the Commission for fiscal 
year 2008, we performed a limited general controls and security review 
on the critical computer servers and selected computer workstations 
supporting the Commission's PeopleSoft Financial Management application 
system and related office automation local area networks (LAN). The 
PeopleSoft system is a client-server-based financial accounting system 
built on Microsoft Windows and Oracle database technology. The 
Commission's contractor, USinternetworking (USi), an application 
service provider, hosts the primary access, application, and database 
servers for the Commission's systems at the USi facility in Annapolis, 
Maryland. 

We performed our financial audit and general controls and security 
review at the Commission's headquarters in Arlington, Virginia; its 
contract service provider's facility in Annapolis, Maryland; its ER 
office in Garches, France; and its MR office in Rome, Italy. Analytical 
reviews and other audit procedures were performed on the Commission's 
Manila American Cemetery in the Philippines. We also conducted reviews 
of computer workstations at the Commission's Florence American Cemetery 
in Florence, Italy; its Meuse-Argonne American Cemetery in Romagne 
(Meuse), France; its Aisne Marne American Cemetery in Belleau (Aisne), 
France; and its Henri-Chapelle American Cemetery in Henri-Chapelle, 
Belgium. Our work was conducted from May 15, 2008, through February 6, 
2009, pursuant to our authority to conduct an annual audit of the 
Commission's financial statements under 36 U.S.C. 2103, and in 
accordance with U.S. generally accepted government auditing standards. 

Findings At Commission Headquarters: 

During our fiscal year 2008 audit, we identified control deficiencies 
related to accounting procedures at the Commission's headquarters in 
Arlington, Virginia. After the discussion of each of our findings, we 
present related recommendations for corrective action. 

1. Significant intragovernmental transactions lacked supporting 
documentation. 

During our fiscal year 2008 audit, we identified $3.4 million (44 
percent) of the $7.8 million of intragovernmental transactions reported 
on the Commission's consolidated trial balance that did not have proper 
supporting documentation as of September 30, 2008. Intragovernmental 
activity involving the exchange of goods and services, investments and 
borrowings, and transfers between federal entities are referred to as 
intragovernmental transactions. Federal entities use Treasury's Intra- 
governmental Payment and Collection (IPAC) System as the primary system 
to settle their intragovernmental exchange transactions. 

Office of Management and Budget Circular No. A-136, Financial Reporting 
Requirements (June 3, 2008), provides that reporting agencies reconcile 
and confirm intragovernmental activity and balances quarterly. Treasury 
also provides detailed guidance on accounting and reconciling 
intragovernmental balances in the Federal Intragovernmental 
Transactions Accounting Policies Guide and in the Treasury Financial 
Manual, Volume 1, Chapter 4700. Headquarters accounting personnel told 
us that IPAC charges are not timely and, because they are in an 
electronic format, do not specify the authority or reason for the 
charge. When transactions lack supporting documentation, the Commission 
is unable to determine if it has been properly charged for 
intragovernmental goods and services. 

Recommendation: 

We recommend that the Director of Finance at Commission headquarters: 

1. Obtain documentation from other federal agencies to support its 
intragovernmental charges paid through Treasury's Intra-governmental 
Payment and Collection (IPAC) system. 

2. Some expenditure transactions lacked evidence of receipt dates and 
approvals. 

During a Commission-wide statistical test of expenditures conducted as 
part of our fiscal year 2008 audit, we examined 24 transactions for 
Commission headquarters and identified control deficiencies in four 
transactions as follows: 

* Two transactions for construction-related expenditures had no 
evidence of the date services were provided. 

* One transaction for training expenses was approved after the service 
was provided. 

* One transaction for consulting services was approved for payment 15 
days before the service was invoiced. 

When approving officials do not provide receipt dates, and payments are 
indicated as made before approval, improper payments may occur. 
Commission financial procedures require that transactions be dated and 
approved for payment by an authorized official before payments are 
made. 

Recommendation: 

We recommend that the Director of Finance at Commission headquarters: 

2. Instruct and monitor approving officials to ensure that expenditure 
transactions are dated when goods and services are received and 
approved before payment is made. 

3. Trust funds did not adequately invest and account for donated funds. 

During our fiscal year 2008 audit, we identified several investing and 
accounting deficiencies at Commission headquarters related to trust 
funds for seven monuments in Europe. The Commission has agreed to 
repair and maintain these monuments upon donation of private funds to 
be invested for their long term care. Specifically, we found the 
following: 

* Funds were not being invested as stated in the Commission's agreement 
letters to donors. The letters provide that private donations are to be 
invested in interest-bearing securities of the U.S. government to fund 
future memorial maintenance. As of September 30, 2008, the Monuments 
Trust Fund Program had an accumulated balance totaling $231,250, of 
which $58,000 had been invested, but only through August 2007. The 
Commission's European Regional (ER) office repairs and maintains these 
private monuments and was to provide the headquarters trust accountant 
with an estimate of funds needed for their immediate care so the 
balance of funds could be invested. However, the estimates were not 
provided. As a result, trust funds were not invested in fiscal year 
2008 to earn interest towards the long-term care of these seven private 
monuments. 

* Since the first three monuments were accepted into the Monuments 
Trust Fund Program during fiscal year 2002, the Commission had not 
calculated and allocated investment interest to the funds which we 
cited in a prior-year recommendation. During fiscal year 2008, the 
Commission implemented our recommendation by crediting the program with 
$11,329 of interest earnings that was allocated as a percentage to 
individual monument accounts. However, the Commission did not provide 
support on how interest earnings were calculated to include the 
interest rates used and the period of time invested. Although not 
material to the Commission's financial statements, it is important that 
interest earned be accurately calculated and allocated to reduce future 
costs of the program and for audit verification. The trust fund 
accountant stated that the interest calculation was done quickly and he 
would need to prepare a more detailed supporting schedule. 

* During fiscal year 2008, the Commission allocated interest earned to 
six of the seven private monument trust accounts. However, one monument 
accepted into the program on February 5, 2007, had no interest 
allocated despite a balance of over $60,000 since that date. The trust 
fund accountant stated that no funds were invested for this account 
because an undetermined amount was to be spent for immediate repairs. 
However, the Commission has a fiduciary responsibility, as evidenced by 
agreement letters to the donors, to invest funds in Treasury securities 
to earn interest. 

* Trust fund balances, including allocated interest, agreed to trial 
balances for headquarters and the ER office as of September 30, 2008. 
However, while the ER office trial balance also presents amounts by 
program code for each private memorial, the HQ trial balance presents 
only a total amount for all commemorative trust funds. This makes it 
difficult to track amounts by individual accounts and can result in 
errors or misallocations between accounts. 

Recommendations: 

We recommend that the Director of Finance at Commission headquarters: 

3. Invest monument trust funds to earn interest as provided in the 
Commission's acceptance letter to donors. 

4. Prepare documentation to support the complete and accurate 
calculation of interest earned on investments for monument trust funds. 

5. Allocate interest to all monument trust accounts with funds on 
deposit. 

6. Establish monument trust fund accounts by program code in the 
headquarters trial balance. 

7. Transfer monument trust funds needed for immediate operations as 
determined by Commission engineering to the European Regional (ER) 
office and maintain the balance of the funds at Commission headquarters 
for investment. 

4. Trust fund receipts were not effectively reconciled with Treasury. 

During our fiscal year 2008 audit, we noted that total trust fund 
receipts reported in the general ledger for fiscal year 2008 did not 
agree with the total amount reported by Treasury in the Government Wide 
Accounting (GWA) system. This was the result of a lack of effective 
monthly reconciliations by headquarters personnel. We identified a net 
difference of $141,000 between the $699,000 of trust fund receipts 
reported by the Commission and the $558,000 reported by Treasury's GWA 
system. At our request, Commission personnel investigated the 
differences and found they were caused by: 

* collections the Commission incorrectly reported to Treasury as 
expenditures, 

* investment interest the Bureau of Public Debt did not report to 
Treasury, 

* amounts reported by Treasury incorrectly on the GWA statement, and: 

* amounts omitted from the Commission's general ledger. 

Although it is not uncommon to find differences between the general 
ledger and Treasury due to timing differences in the recording of 
transactions, there have been significant differences between 
Commission and Treasury balances in this account for the last 2 years 
resulting from errors that were not identified until reconciliation at 
year end. According to the Treasury Financial Manual, Volume 1, Chapter 
5100, Reconciling Fund Balance with Treasury Accounts, agencies are to 
reconcile accounts and post transactions monthly. This facilitates the 
timely identification and correction of differences before they 
accumulate at year end. 

Recommendations: 

We recommend that the Director of Finance at Commission headquarters: 

8. Timely investigate any differences identified during monthly 
reconciliations of Fund Balances with Treasury to the Government Wide 
Accounting system for trust funds. 

9. Post adjusting entries monthly for items within the Commission's 
control. 

10. Communicate adjustments identified through monthly reconciliations 
to be made by other entities and track such adjustments until 
corrected. 

5. Miscellaneous receipts fund balance was not removed from the general 
ledger. 

During our audit, we found that Commission headquarters reported a 
miscellaneous receipts fund balance with Treasury of over $92,000 as of 
September 30, 2008, which Treasury reports for the Commission indicated 
as zero. The Miscellaneous Receipts statute [31 U.S.C. 3302(b), (c)] 
and Treasury regulations (31 C.F.R. 206.5) require agencies to remit 
miscellaneous receipts from third parties to Treasury at which time the 
balance on hand becomes zero. However, the Commission reported an 
opening balance in fund 3220 of $65,799 as of September 30, 2007, 
fiscal year 2008 collections of $26,674, and an ending balance of 
$92,473 as of September 30, 2008. GWA reports from Treasury indicated 
only the $26,674 of fiscal year 2008 collections for the 3220 account 
and showed beginning and ending fund balances as zero, indicating that 
amounts had been transferred to miscellaneous receipts of Treasury. 

According to Treasury, miscellaneous receipts collected during the year 
are recorded in the GWA system receipts account ledger and fund 3220 
amounts are closed at the end of the fiscal year. However, Commission 
accounting staff stated that these balances mistakenly were not 
adjusted and amounts were rolled over into fiscal year 2009. Although 
not material to the Commission's September 30, 2008, financial 
statements, fund 3320 amounts resulted in the Fund Balance with 
Treasury and Net Position accounts and line items to be overstated by 
$92,473. 

Recommendation: 

We recommend that the Director of Finance at Commission headquarters: 

11. Adjust current balances to correct accounts for fund 3320 for 
miscellaneous receipts received and transferred to Treasury. 

12. Reconcile Fund Balance with Treasury to the Government Wide 
Accounting system for the miscellaneous receipts fund balance on a 
monthly basis. 

6. Strategic plan was not updated in 3 years. 

During our fiscal year 2008 audit, we found that the Commission had not 
timely updated its Commission-wide 5-year strategic plan. Specifically, 
the Commission headquarters prepared a strategic plan covering fiscal 
years 2005 through 2010 in fiscal year 2005 but had not updated this 
plan for fiscal years 2006 through 2008. The Government Performance and 
Results Act (GPRA) of 1993 (Public Law 103-62) requires federal 
agencies, including the Commission, to develop strategic plans for 5 
future years and to update the plan at least every 3 years. The plans 
are to include a mission statement; goals and objectives by major 
function; summary of resources, systems, and processes to achieve 
goals; how goals and objectives will be achieved; and key external 
factors. 

The Commission stated that its fiscal year 2005 strategic plan covered 
its planning, mission, and objectives through 2010 that had not changed 
and therefore, did not need an update. The Commission further stated 
that its annual budget process with the Office of Management and Budget 
(OMB) lays out its plans and performance goals for the year and is 
covered in testimony for congressional budget hearings. For annual 
reporting, the Commission stated that its management's discussion and 
analysis and its annual report update and report on its current 
mission, organization, operations, and performance goals and results. 
Further, in its fiscal year 2009 budget request to OMB, the Commission 
included its goals and objectives and outlined the means and resources 
required for achieving its stated objectives. However, in order to 
ensure that these activities are consistent with the Commission's 5- 
year strategic plan, the plan should be updated at least every 3 years. 

Recommendation: 

We recommend that the Director of Finance at Commission headquarters: 

13. Update the strategic plan for fiscal years 2009-2013 to comply with 
the 3-year period specified by the Government Performance and Results 
Act (GPRA) of 1993. 

Findings At The Commission's European Regional Office: 

During our fiscal year 2008 audit, we identified control deficiencies 
related to accounting procedures at the Commission's European Regional 
(ER) office in Garches, France. After the discussion of each of our 
findings, we present related recommendations for corrective action. 

1. Euro bank account transactions were not recorded and reconciled. 

The ER office maintains a euro bank account primarily for petty cash 
reimbursements, to pay vendors who do not take credit cards, and for 
deposit of miscellaneous reimbursements. During our fiscal year 2008 
audit, we identified errors and omissions in the ER office's recording 
of activity related to its euro bank account. Specifically, we found 
the following: 

* The account balance reported in the general ledger as of September 
30, 2008, was 14,300 euros converted to dollars at the Treasury 
exchange rate as of year end. The account balance of 14,300 euros had 
remained unchanged since September 30, 2001, when the amount was 
established with the conversion of the account from French francs. 
However, changes in the bank balance due to other receipts and 
disbursements had occurred since September 30, 2001, which had not been 
recorded in the general ledger. We identified about 29,700 euros of net 
transactions (about $43,600) which increased the account balance during 
fiscal year 2008 from about $21,000 as of September 30, 2007, to about 
$64,600 as of September 30, 2008. 

* The ER office had not been periodically reconciling the euro account 
balance according to its general ledger to the balance reported by the 
bank. As of September 30, 2008, the bank balance exceeded the general 
ledger balance by almost 30,000 euros. 

* The correct balance was not accurately reported on the monthly SF 
1219 report, Statement of Accountability, filed with Treasury. Each 
month since fiscal year 2001, the ER office reported 14,300 French 
francs (at a weighted average exchange rate as of September 30, 2001), 
or about $1,900. 

The ER office person assigned responsibility for the euro bank account 
was instructed by the former ER finance director to maintain this 
account on an imprest basis whereby reconciling items and the cash 
balance equal a set amount. For many years this was the case. However, 
in the last 2 years, other transactions have occurred in this account 
that were not recorded in the general ledger. Federal standards for 
internal control state that transactions should be promptly recorded to 
maintain their relevance and value to management in controlling 
operations and making decisions.[Footnote 2] Additionally, these 
standards state that reconciliations are control activities to ensure 
the completeness and accuracy of information processing. Further, 
Commission accounting procedures require periodic reconciliation of 
financial accounts. The lack of timely recording and reconciliation 
creates errors and omissions in the financial statements and Treasury 
reporting and weakens internal controls over cash that can result in 
theft or loss. 

Recommendations: 

We recommend that the Finance Officer at the Commission's European 
Regional (ER) office: 

14. Identify all unrecorded transactions pertaining to the euro bank 
account and timely record them in the general ledger. 

15. Prepare monthly reconciliations of euro bank account balances to 
the general ledger. 

16. Accurately present the euro account balance in the monthly SF 1219 
report, Statement of Accountability, filed with Treasury. 

2. English employees pension plan liability was not timely accrued. 

The ER office participates in a defined benefit pension plan to provide 
retirement benefits to its 11 Foreign Service National employees at the 
two American cemeteries in England. A defined benefit plan is intended 
to provide benefits at a future date and the present value of these 
benefits is compared to the funded amount. A net pension liability is 
created if benefits exceed assets or a surplus is created if assets 
exceed benefits. During our fiscal year 2008 audit, we identified a 
control deficiency in the timely accrual of liabilities regarding this 
plan. Specifically, we found the following: 

* Due to recent decreases of values in the securities markets, the plan 
actuary determined in February 2008 that the plan was underfunded and 
ER needed to make additional payments of £90,000 (about $138,000) to 
make up the shortfall. However, the ER office did not obligate this 
liability until a purchase order was created on September 19, 2008. 

* After three quarterly payments of £5,000 through September 30, 2008, 
ER decided to pay the balance of £75,000 in a lump sum and did so on 
October 14, 2008. However, it did not accrue this liability as of 
September 30, 2008. We proposed an audit adjustment for about $115,000, 
which was not booked by the Commission as it considered the amount 
immaterial to its September 30, 2008, financial statements. 

Recommendation: 

We recommend that the Finance Officer at the Commission's European 
Regional (ER) office consult with headquarters regarding the English 
defined benefit pension plan to: 

17. Obligate and timely record pension liabilities when identified by 
the plan actuary. 

3. Some expenditure transactions lacked evidence of receipt dates and 
approvals. 

During a Commission-wide statistical test of expenditures conducted as 
part of our fiscal year 2008 audit, we examined 80 transactions for the 
ER office and identified control deficiencies in three transactions as 
follows: 

* One transaction for the purchase of a tractor at the Netherlands 
American Cemetery had no evidence of a date when the tractor was 
received. 

* One transaction for reimbursement of packaging fees had no evidence 
of payment approval. 

* A transaction for per diem travel was processed for payment before 
the payment approval date. 

When approving officials do not provide receipt dates and payments are 
processed before approval, improper payments may occur. Commission 
financial procedures require that transactions be dated and approved 
for payment by an authorized official before payments are made. 

Recommendation: 

We recommend that the Finance Officer at the Commission's European 
Regional (ER) office: 

18. Instruct and monitor approving officials to ensure that expenditure 
transactions are dated when goods and services are received and 
approved before payments are processed. 

4. Undelivered orders report did not support the general ledger 
balance. 

During our fiscal year 2008 audit, we found that the September 30, 
2008, undelivered orders report for the ER office was higher than the 
balance in the undelivered orders general ledger account by $39,629. 
The undelivered orders report provides details of purchase orders and 
contracts that have been obligated against budget authority to support 
the general ledger and therefore, total amounts for each should agree. 
However, if a transaction is not entered into both the general ledger 
and the supporting undelivered orders report, differences will occur 
creating an out-of-balance condition that affects accurate financial 
statement reporting. An example would be an adjusting journal entry to 
the general ledger where individual contracts and purchase orders in 
the undelivered orders report were not identified and adjusted 
accordingly. 

The Anti-Deficiency Act prohibits federal entities from obligating or 
spending more than their available budgetary resources. Inaccurate 
accounting increases an entity's vulnerability to a violation of the 
act. Additionally, standards for internal control in the federal 
government and Commission financial procedures require accounts to be 
adequately reconciled and supported. We proposed an audit adjustment to 
correct the general ledger account as of September 30, 2008, which was 
not booked by the Commission as the amount is immaterial to its 
financial statements. However, this was the same amount as a proposed 
audit adjustment for fiscal year 2007 that was not booked and will 
continue to appear if not corrected. 

Recommendation: 

We recommend that the Finance Officer at the Commission's European 
Regional (ER) office: 

19. Research differences between the undelivered orders report balance 
and the general ledger account balance and make necessary adjustments 
to agree totals. 

5. Some vendors had multiple identification numbers. 

During our fiscal year 2008 audit, we found that some contractors at 
the ER office had multiple vendor identification numbers in the 
PeopleSoft payment system. We were told by ER staff that this was 
because a few contractors perform contract work out of more than one 
location and each location was assigned a number to track the work. 
However, paying vendors with multiple identification numbers increases 
the risk that: 

* payments may be sent to an incorrect location, 

* duplicate payments may occur, and: 

* funds may be diverted by a vendor employee by establishing a 
fictitious account for a location. 

In addition to weakening internal controls over vendor payments, 
multiple vendor identification numbers may interfere with the ability 
to track obligations against expenditures as required by federal 
budgetary accounting in OMB Circular No. A-11, Preparation, Submission, 
and Execution of the Budget (June 26, 2008). 

Recommendations: 

We recommend that the Finance Officer at the Commission's European 
Regional office: 

20. Review identification numbers to eliminate duplicates for vendors 
assigned more than one vendor number. 

21. Assign unique identification numbers to each vendor. 

Finding At The Commission's Mediterranean Regional Office: 

During our fiscal year 2008 audit, we identified the following control 
deficiency related to accounting procedures at the Commission's 
Mediterranean Regional (MR) office in Rome, Italy. 

1. Some post allowances were not paid when due. 

Overseas post allowances are calculated by the U.S. State Department to 
pay for foreign living expenses for American employees overseas and are 
based on individual countries, employee pay levels, the number of 
employee dependents, and the percentage rate of reimbursement based 
upon foreign currency fluctuations. During a walk-through of internal 
controls over MR office payroll conducted as part of our fiscal year 
2008 audit, we identified some post allowance increases that were not 
paid when due. Specifically, we found the following: 

* On January 6, 2008, a General Schedule (GS) employee received a pay 
increase that moved him to a higher annual pay level. While his regular 
pay reflected this increase, his post allowance continued to be paid at 
a rate based on his previous pay level. Based upon a U.S. State 
Department Post Allowance Table for three persons at a 70 percent 
reimbursement level, we recalculated his post allowance and determined 
that he had been underpaid through the end of fiscal year 2008. This 
underpayment continued through November 10, 2008 when we conducted the 
walk-through. 

* At our request, the Human Resources Assistant for the MR office 
checked the post allowances for its remaining seven GS employees. She 
identified the same underpayment for another GS employee who was at the 
same pay and post allowance level as the employee we tested. 

These underpayments were caused by a lack of clear accountability 
between the MR office and the GSA Finance Center in Kansas City, 
Missouri, which processes all Commission GS employee payroll worldwide. 
As a service provider, the GSA Finance Center has responsibilities for 
processing pay, but the Commission is ultimately responsible for 
ensuring that its GS employees are accurately and timely paid. 

Recommendations: 

We recommend that the Director of the Commission's Mediterranean 
Regional (MR) office have the Human Resource Assistant: 

22. Arrange with payroll processing to pay GS employees their correct 
post allowances from January 6, 2008. 

23. Establish and implement procedures for post allowances, 
particularly when changes occur, to document that amounts are 
accurately and timely paid. 

Finding At The Commission's Manila American Cemetery: 

During our fiscal year 2008 audit, we identified the following control 
deficiency related to expenditure accounting at the Commission's Manila 
American Cemetery in the Philippines. 

1. Some expenditure transactions lacked evidence of receipt dates and 
approvals. 

During a Commission-wide statistical test of expenditures conducted as 
part of our fiscal year 2008 audit, we examined 12 transactions for the 
cemetery and identified control deficiencies in 6 transactions as 
follows: 

* Five transactions had no evidence of a date when goods or services 
were received. 

* A transaction for security guard services was paid before the payment 
approval date. 

When approving officials do not provide receipt dates and payments are 
indicated as made before approval, improper payments may occur. 
Commission financial procedures require that transactions be dated and 
approved for payment by an authorized official before payments are 
made. 

Recommendation: 

We recommend that the superintendent of the Commission's Manila 
American Cemetery: 

24. Provide dates when goods and services are received and approve all 
transactions before payment is made. 

Follow-Up On Prior-Year Findings And Recommendations: 

Table 1 summarizes the status of Commission efforts during fiscal year 
2008 and through April 30, 2009, to implement and close open 
information system (IS) and non-IS recommendations from our fiscal 
years 2004 through 2007 management reports. 

Table 1: Status of Fiscal Years 2004 through 2007 Audit 
Recommendations: 

Fiscal year ended September 30 2004: 
Total number of recommendations, IS: 113; 
Total number of recommendations, Non-IS: 18; 
Number of closed recommendations, IS: 112; 
Number of closed recommendations, Non-IS: 18; 
Number of open recommendations, IS: 1; 
Number of open recommendations, Non-IS: 0. 

Fiscal year ended September 30 2005: 
Total number of recommendations, IS: 16; 
Total number of recommendations, Non-IS: 14; 
Number of closed recommendations, IS: 16; 
Number of closed recommendations, Non-IS: 10; 
Number of open recommendations, IS: 0; 
Number of open recommendations, Non-IS: 4; 

Fiscal year ended September 30 2006: 
Total number of recommendations, IS: 43; 
Total number of recommendations, Non-IS: 15; 
Number of closed recommendations, IS: 42; 
Number of closed recommendations, Non-IS: 11; 
Number of open recommendations, IS: 1; 
Number of open recommendations, Non-IS: 4. 

Fiscal year ended September 30 2006: 
Total number of recommendations, IS: 9; 
Total number of recommendations, Non-IS: 5; 
Number of closed recommendations, IS: 9; 
Number of closed recommendations, Non-IS: 2; 
Number of open recommendations, IS: 0; 
Number of open recommendations, Non-IS: 3. 

Total: 
Total number of recommendations, IS: 181; 
Total number of recommendations, Non-IS: 52; 
Number of closed recommendations, IS: 179; 
Number of closed recommendations, Non-IS: 41; 
Number of open recommendations, IS: 2; 
Number of open recommendations, Non-IS: 11. 

Grand Total: 
Total number of recommendations: 233; 
Number of closed recommendations: 220; 
Number of open recommendations: 13. 

Source: GAO analysis. 

[End of table] 

The Commission has strengthened internal controls over its accounting 
procedures to include reconciliation of accounts, accruing expenses, 
tracking engineering projects, and reporting. However, opportunities 
exist for further improvements. Appropriate actions by Commission 
management to implement our recommendations will further improve 
control at Commission locations worldwide. 

Commission Comments and Our Evaluation: 

In its written comments, reprinted in appendix I, the Commission stated 
that it agreed with the issues raised in the report and that it was 
considering our recommendations and would provide a full response to 
each recommendation as part of its 31 U.S.C. 720 letter to the 
Congress. As part of our fiscal year 2009 financial statement audit, we 
will follow up on all of these matters to determine the status of 
related corrective actions. 

This report contains recommendations to you which have also been 
included in a separately issued Limited Official Use Only report. The 
head of a federal agency is required by 31 U.S.C. 720 to submit a 
written statement on actions taken on our recommendations to the Senate 
Committee on Homeland Security and Governmental Affairs and the House 
Committee on Oversight and Government Reform within 60 days of this 
report. You must also send a written statement to the House and Senate 
Committees on Appropriations with the Commission's first request for 
appropriations made over 60 days after the date of this report. 

We are sending copies of this report to interested congressional 
committees and the Director of the Office of Management and Budget. In 
addition, this report is available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

We acknowledge and appreciate the cooperation and assistance provided 
by Commission management and staff during our audit of the Commission's 
fiscal year 2008 financial statements. If you have any questions 
regarding this report, please contact me at (202) 512-3406 or at 
sebastians@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Contributors to this report were Roger R. Stoltz, Assistant 
Director; Patricia A. Summers; and Cara L. Bauer. 

Sincerely yours, 

Signed by: 

Steven J. Sebastian:
Director:
Financial Management and Assurance: 

[End of section] 

Appendix I: 

Comments from the American Battle Monuments Commission: 

American Battle Monuments Commission: 
Established by Congress in 1923: 
Courthouse Plaza 11, Suite 500: 
2300 Clarendon Boulevard: 
Arlington, VA 22201-3367: 

June 10, 2009: 

Mr. Steven J. Sebastian: 
Director, Financial Management and Assurance: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Sebastian: 

This responds to your June 4, 2009, memorandum regarding your proposed
report: American Battle Monuments Commission: Management Action Needed 
to Improve Internal Control Procedures (GAO-09-714R). 

We agree with the issues raised in your report and are considering its 
recommendations, but we have no specific response at this time. 
However, we do not anticipate that we will disagree with any of the 
recommendations. The Commission will provide a full response to each 
recommendation as part of our 31 U.S.C. 720 letter to the Congress, 
which is due 60 days after the issuance of the report. 

Sincerely, 

Signed by: 
William J. Leszczynski, Jr. 
Brigadier General, U.S. Army (Retired): 
Executive Director and Chief Operating Officer: 

[End of section] 

Footnotes: 

[1] GAO, Financial Audit: American Battle Monuments Commission's 
Financial Statements for Fiscal Years 2008 and 2007, [hyperlink, 
http://www.gao.gov/products/GAO-09-293] (Washington, D.C.: Feb. 27, 
2009). 

[2] 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). 

[End of section] 

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