B-161457, AUG 1, 1969

B-161457, AUG 1, 1969

SUBJECT: AUDIT AND SETTLEMENT OF ACCOUNTABLE OFFICERS' ACCOUNTS PURPOSE THE PURPOSE OF THIS LETTER IS TO: 1. REEMPHASIZE TO HEADS OF DEPARTMENTS AND AGENCIES THEIR RESPONSIBILITIES FOR PROPER ACCOUNTING AND INTERNAL CONTROL, INCLUDING INTERNAL AUDIT, FOR FUNCTIONS OF THEIR ACCOUNTABLE OFFICERS, AND 2. NOTIFY THOSE AGENCIES OF (A) REDUCED REQUIREMENTS FOR REPORTING IRREGULARITIES TO THE GENERAL ACCOUNTING OFFICE, (B) PROVISIONS BEING MADE FOR ADMINISTRATIVE RESOLUTION OF IRREGULARITIES UNDER SPECIFIED AMOUNTS, AND (C) CHANGES IN GENERAL ACCOUNTING OFFICE SETTLEMENT PROCEDURES.

HEADS OF FEDERAL DEPARTMENTS AND AGENCIES:

AGENCY RESPONSIBILITIES

SECTION 113 OF THE ACCOUNTING AND AUDITING ACT OF 1950 (31 U.S.C. 66A) REQUIRES THE HEAD OF EACH EXECUTIVE AGENCY TO ESTABLISH AND MAINTAIN SYSTEMS OF ACCOUNTING AND INTERNAL CONTROLS, INCLUDING APPROPRIATE INTERNAL AUDIT, TO PROVIDE, AMONG OTHER THINGS, EFFECTIVE CONTROL OVER AND ACCOUNTABILITY FOR ALL FUNDS, PROPERTY, AND OTHER ASSETS FOR WHICH THE AGENCY IS RESPONSIBLE. THE ACCOUNTING SYSTEMS ARE REQUIRED TO CONFORM TO THE PRINCIPLES, STANDARDS AND RELATED REQUIREMENTS PRESCRIBED BY THE COMPTROLLER GENERAL PURSUANT TO SECTION 112(A) (31 U.S.C. 66(A)). THOSE PRINCIPLES, STANDARDS AND RELATED REQUIREMENTS ARE SET FORTH BASICALLY IN TITLE 2 OF THE GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL FOR THE GUIDANCE OF FEDERAL AGENCIES AND ARE SUPPLEMENTED IN THE OTHER TITLES OF THAT MANUAL. TITLE 7 - FISCAL PROCEDURES - IS PARTICULARLY PERTINENT TO THE FUNCTIONS OF ACCOUNTABLE OFFICERS.

UNDER THE ABOVE SECTION OF THE ACCOUNTING AND AUDITING ACT OF 1950, IT IS THE RESPONSIBILITY OF THE HEAD OF EACH EXECUTIVE DEPARTMENT AND AGENCY TO MAINTAIN APPROPRIATE ACCOUNTING AND INTERNAL CONTROLS FOR THE ASSETS FOR WHICH THEY ARE RESPONSIBLE. RELATIVE TO FUNCTIONS OF ACCOUNTABLE OFFICERS, THIS RESPONSIBILITY INCLUDES PROVIDING ASSURANCE OF THE LEGALITY, PROPRIETY, AND CORRECTNESS OF DISBURSEMENTS AND COLLECTIONS OF PUBLIC FUNDS.

FOR DEPARTMENTS AND AGENCIES TO ADEQUATELY DISCHARGE THESE RESPONSIBILITIES, WE CONSIDER IT APPROPRIATE TO REEMPHASIZE THAT DEPARTMENT AND AGENCY PROCEDURES AND CONTROLS SHOULD INCLUDE:

1. ADEQUATE ADMINISTRATIVE PROCEDURES FOR SYSTEMATICALLY EXAMINING DISBURSEMENT AND COLLECTION TRANSACTIONS TO VERIFY THEIR LEGALITY, PROPRIETY, AND CORRECTNESS AT THE POINT IN TIME WHEN ANY NEEDED PREVENTIVE OR CORRECTIVE ACTION CAN BE MOST EFFECTIVELY TAKEN. THIS EXAMINATION SHOULD BE MADE PRIOR TO DISBURSEMENT OR DEPOSIT. WHERE A SATISFACTORY EXAMINATION CANNOT BE COMPLETED PRIOR TO DISBURSEMENT OR DEPOSIT, ANY STEPS NEEDED TO COMPLETE THE PROCEDURE SHOULD BE TAKEN AT THE EARLIEST PRACTICABLE TIME, SO THAT EFFECTIVE CORRECTIVE ACTION CAN BE TAKEN.

2. RECONCILIATION OF ACCOUNTABLE OFFICERS' ACCOUNTS WITH DEPARTMENT OR AGENCY ACCOUNTING RECORDS PRIOR TO THE TIME THE ACCOUNTS ARE MADE AVAILABLE TO THE GENERAL ACCOUNTING OFFICE FOR AUDIT. (THIS IS ALSO PRESCRIBED BY 7 GAO 28.11 AS PART OF THE ADMINISTRATIVE EXAMINATION OF ACCOUNTS REQUIRED BY THE BUDGET AND ACCOUNTING ACT OF 1921 (31 U.S.C. 82).)

3. THE CONDUCT OF SYSTEMATIC INTERNAL REVIEWS INDEPENDENT OF ACCOUNTABLE OFFICERS TO ASSURE THAT PROCEDURES 1 AND 2 ABOVE ARE BEING FOLLOWED; THAT EFFECTIVE CONTROLS ARE MAINTAINED OVER DISBURSEMENTS, COLLECTIONS, AND BALANCES FOR WHICH ACCOUNTABLE OFFICERS ARE RESPONSIBLE; AND THAT APPROPRIATE ADMINISTRATIVE ACTIONS ARE TAKEN TO OBTAIN ANY NECESSARY CORRECTIVE ACTION REQUIRED.

AUDIT EMPHASIS ON EFFECTIVENESS OF ACCOUNTING AND INTERNAL CONTROL

IN RECOGNITION THAT THE BASIC RESPONSIBILITY FOR PROPER ACCOUNTING AND INTERNAL CONTROL IS THAT OF EACH AGENCY, THE GAO AUDIT OF ACCOUNTABLE OFFICERS' FUNCTIONS WILL PLACE ITS MAJOR EMPHASIS ON THE ADEQUACY AND EFFECTIVENESS OF THE ACCOUNTING AND INTERNAL CONTROLS, INCLUDING INTERNAL AUDIT, OF THE DEPARTMENTS AND AGENCIES IN ASSURING THAT THE ACCOUNTABLE OFFICERS' FUNCTIONS ARE DISCHARGED CORRECTLY AND IN ACCORDANCE WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS AND REGULATIONS.

TO TEST THE EFFECTIVENESS WITH WHICH DEPARTMENTS AND AGENCIES CARRY OUT THEIR RESPONSIBILITIES FOR ACCOUNTABLE OFFICERS' FUNCTIONS, THE GAO AUDIT WILL INCLUDE SELECTIVE EXAMINATIONS OF INDIVIDUAL TRANSACTIONS AND IT WILL CONTINUE TO ISSUE NOTICES OF EXCEPTIONS AND OTHERWISE ADVISE THE AGENCIES OF IRREGULARITIES FOUND AS REQUIRED. IN DETERMINING THE EXTENT TO WHICH SELECTIVE EXAMINATIONS OF INDIVIDUAL TRANSACTIONS ARE MADE, CONSIDERATION WILL BE GIVEN TO THE EFFECTIVENESS OF THE ACCOUNTING AND INTERNAL CONTROLS OF THE AGENCY INVOLVED.

REDUCED REQUIREMENTS FOR REPORTING IRREGULARITIES TO THE GENERAL ACCOUNTING OFFICE

7 GAO 28.13 NOW PROVIDES THAT ALL IRREGULARITIES AFFECTING THE ACCOUNTS OF ACCOUNTABLE OFFICERS THAT ARE REQUIRED BY STATUTE TO BE RENDERED TO AND SETTLED BY THE GENERAL ACCOUNTING OFFICE WILL BE REPORTED TO THE GENERAL ACCOUNTING OFFICE AS SOON AS POSSIBLE AFTER DISCOVERY OF THE IRREGULARITIES. IRREGULARITIES AS DEFINED IN 7 GAO 28.13 INCLUDE ALL ITEMS ADVERSELY AFFECTING THE ACCOUNTS OF ACCOUNTABLE OFFICERS, INCLUDING THOSE DISCLOSED BY AGENCY EXAMINATIONS OF DISBURSEMENT AND COLLECTION TRANSACTIONS AND SUBSEQUENT INTERNAL REVIEW.

THESE REPORTING REQUIREMENTS ARE SIMPLIFIED AND REDUCED IN THE FOLLOWING RESPECTS:

1. IRREGULARITIES NEED NOT BE REPORTED UNTIL TWO YEARS AFTER OCCURRENCE OF THE INCIDENT (WHICH WILL NORMALLY BE ONE YEAR PRIOR TO THE END OF THE THREE YEAR PERIOD PROVIDED BY 31 U.S.C. 82I FOR SETTLING THE ACCOUNTS AND PERIOD INVOLVED) AND NEED BE REPORTED THEN ONLY IF THEY HAVE NOT BEEN RESOLVED BY THE TIME REQUIRED FOR REPORTING.

2. ADDITIONAL IRREGULARITIES THAT APPLY TO THE SAME ACCOUNTABLE OFFICER AND PERIOD BEING SETTLED THAT ARE DISCOVERED SUBSEQUENTLY SHALL BE REPORTED IMMEDIATELY ON DISCOVERY.

3. SUBSEQUENT DEVELOPMENTS ON IRREGULARITIES PREVIOUSLY REPORTED, SUCH AS COLLECTIONS, SET-OFFS, OR AUTHORIZED RELIEF ACTIONS SHALL ALSO BE REPORTED IMMEDIATELY.

EXCEPTIONS TO THE FOREGOING REPORTING PROCEDURES ARE AS FOLLOWS:

1. FRAUD OR OTHER SERIOUS IRREGULARITIES OF SUBSTANTIAL AMOUNT OR SIGNIFICANCE SHALL CONTINUE TO BE REPORTED TO THE GAO THROUGH ESTABLISHED ADMINISTRATIVE CHANNELS AS SOON AS POSSIBLE AFTER DISCOVERY.

2. WHERE, UNDER THE PARTICULAR CIRCUMSTANCES INVOLVED, THE ACTIVITY OF THE GAO RESPONSIBLE FOR SETTLING THE ACCOUNTS OF AN AGENCY'S ACCOUNTABLE OFFICERS FINDS (A) THAT IT IS NECESSARY AS IN OVERSEAS OPERATIONS TO HAVE PROMPT REPORTING OF IRREGULARITIES OF SPECIFIED CATEGORIES, OR (B) THAT IT IS FEASIBLE TO EFFECTIVELY DISCHARGE GAO SETTLEMENT RESPONSIBILITIES BY ALTERNATIVE METHODS OF CONSIDERING EXCEPTIONS RAISED BY THE DEPARTMENT OR AGENCY. IN EITHER OF THE CIRCUMSTANCES UNDER THIS EXCEPTION, THE DEPARTMENT OR AGENCY WILL BE SPECIFICALLY NOTIFIED OF THE ALTERNATIVE ARRANGEMENTS BY THE GAO ACTIVITY HAVING SETTLEMENT AUDIT RESPONSIBILITY.

ADMINISTRATIVE RESOLUTION OF IRREGULARITIES

AN IRREGULARITY ARISING FROM A SINGLE INCIDENT OR SERIES OF SIMILAR INCIDENTS OCCURRING ABOUT THE SAME TIME AMOUNTING TO LESS THAN $150 MAY BE RESOLVED BY ADMINISTRATIVE ACTION APPROPRIATE TO THE CIRCUMSTANCES. SUCH CASES WILL BE PROPERLY DOCUMENTED AND AVAILABLE FOR GAO REVIEW ON A SITE AUDIT BASIS. A CENTRAL CONTROL RECORD SHALL BE MAINTAINED BY EACH DEPARTMENT AND AGENCY OF ALL SUCH ACTIONS.

THE PROVISIONS OF THIS SECTION DO NOT APPLY TO EXCEPTIONS OR CHARGES RAISED BY THE GAO.

CHANGES IN GENERAL ACCOUNTING OFFICE SETTLEMENT PROCEDURES

GAO CERTIFICATES OF SETTLEMENT OF ACCOUNTABLE OFFICERS' ACCOUNTS WILL BE ISSUED ONLY WHEN THERE ARE EXCEPTIONS OUTSTANDING. THE PRACTICE OF ISSUING SETTLEMENT CERTIFICATES AGAINST DISBURSING OFFICERS WITH NO OUTSTANDING EXCEPTIONS IS BEING DISCONTINUED.

THE CHANGES PROVIDED FOR BY THIS LETTER ARE AUTHORIZED IMMEDIATELY AND SHOULD BE PUT INTO EFFECT AS SOON AS PRACTICABLE. THE ACTIVITY OF THE GAO RESPONSIBLE FOR THE SETTLEMENT OF THE ACCOUNTS OF AN AGENCY'S ACCOUNTABLE OFFICERS SHOULD BE CONSULTED ON QUESTIONS OF TIMING AND IMPLEMENTATION (SEE 3 GAO 39.1).

THE GENERAL ACCOUNTING OFFICE POLICY AND PROCEDURES MANUAL FOR GUIDANCE OF FEDERAL AGENCIES IS BEING AMENDED IN ACCORDANCE WITH THESE CHANGES.