Control Improvements Needed in Accounting for Treasury Securities at the Federal Reserve Bank of New York

AFMD-84-10: Published: May 2, 1984. Publicly Released: May 2, 1984.

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GAO summarized the results of its internal control review of the Federal Reserve Bank of New York's accounting systems for Treasury securities.

Although the Bank has extensive controls in place to identify errors and abuse, GAO found weaknesses in both the automated and manual controls. GAO identified 15 incorrect payments totalling $2.7 million. Inadequate records prevented GAO from verifying that only these incorrect payments occurred. Furthermore, the Bank has not isolated the cause of these incorrect payments to take appropriate corrective action. In addition, GAO found that the Bank did not require individual operator passwords to access one automated system, the passwords required for access through other types of terminals were not adequately safeguarded, and it was difficult to determine who processed a given transaction. Procedures for verifying data input accuracy were not always followed and need improvement. As a result, no assurance existed that verification took place or that all transactions were properly processed. Errors detected during the data input phase were not always adequately controlled to ensure that they were corrected and reentered promptly. No documentation was available for the automated system which contains the master file of securities account balances. When securities account balances were reconciled to prove their accuracy, the Bank did not always properly document either how any differences were resolved or that any related adjustments to the account balances were accurate. Finally, the Bank did not always detect inaccurate information generated by an automated system and, as a result, erroneous payments occurred when the securities were redeemed.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Chairman of the Federal Reserve Board should require the Federal Reserve Bank of New York to: (1) restrict access to the automated systems through terminals with properly safeguarded passwords; (2) strengthen other controls over data input by ensuring key verification of input, separating keying and verifying duties among employees, and monitoring error correction activities; (3) develop documentation for the automated system which contains the master file of securities account balances; (4) fully document all changes to the manual reconciliation of account balances to ensure that all transactions are properly executed and resulting account adjustments are appropriate; and (5) determine the causes of inaccurate information and related incorrect payments to prevent their recurrence.

    Agency Affected: Federal Reserve System: Board of Governors

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Treasury should verify that the corrective actions are fully implemented.

    Agency Affected: Department of the Treasury

 

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