Internal Audit:

Nonstatutory Audit and Investigative Groups Need To Be Strengthened

AFMD-86-11: Published: Jun 3, 1986. Publicly Released: Jun 27, 1986.

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Pursuant to a congressional request, GAO: (1) identified and verified the names of various audit and investigative groups not subject to inspector general legislation; (2) determined audit group missions, their staffing levels, and the existence of follow-up procedures; and (3) reviewed selected aspects of audit operations.

GAO found that: (1) 12 of the 41 agencies with audit groups not subject to statutory requirements had impairments to the independence of their audit organizations; (2) at four agencies, important agency functions received little or no audit coverage; (3) audit and investigative staffs did not evaluate most of the investigations of alleged fraud and abuse or track the causes of illegal activities; and (4) audit resolution and follow-up systems did not meet governmental requirements.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Justice contends that action is not needed because the audit group reports to the head of the agency in those instances where it is auditing the organization it reports to.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Department of Justice

  2. Status: Closed - Not Implemented

    Comments: Treasury contends that the heads of the law enforcement audit offices, who report to the head of its bureaus and not to the agency head or deputy, are independent because: (1) they are overseen by the Inspector General (IG), who reports to the agency head; and (2) their significant findings are reported monthly to the agency head by IG.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Implemented

    Comments: In October 1987, ACTION established an Office of Inspector General reporting to the Deputy Director, ACTION.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: ACTION

  4. Status: Closed - Not Implemented

    Comments: On December 23, 1986, Eximbank responded that it did not plan to comply with the recommendation because it is a small agency whose programs are closely monitored by its Office of Policy and Planning, which reports to the President and Chairman of the Board. GAO also conducts annual financial audits, as well as other audits, and reports the results to Congress.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Export-Import Bank of the United States

  5. Status: Closed - Implemented

    Comments: In July 1987, the Federal Reserve established a nonstatutory Office of Inspector General reporting to the Vice Chairman of the Board of Governors.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Federal Reserve System

  6. Status: Closed - Not Implemented

    Comments: ICC has not taken action because the audit group does not audit the organization of which it is a part.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Interstate Commerce Commission

  7. Status: Closed - Implemented

    Comments: On April 1, 1987, MSPB established an independent, nonstatutory Office of Inspector General reporting directly to the Chairman of the Board.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Merit Systems Protection Board

  8. Status: Closed - Not Implemented

    Comments: The NLRB audit group reports to the Director of Administration, who is responsible for accounting and other functions subject to audit. As of November 12, 1987, NLRB was developing a proposal to contract for the audit function.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: National Labor Relations Board

  9. Status: Closed - Not Implemented

    Comments: NSF contends that the audit group has full and immediate access to it, as well as, the National Science Board Committee on Audit and Oversight. Also, whenever an audit of the Controller's activities, to whom the audit group reports, is proposed or conducted, the agency head will make all decisions.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: National Science Foundation

  10. Status: Closed - Not Implemented

    Comments: The Peace Corps contends that current organizational status results in sufficient audit independence. While the audit group reports organizationally to the Associate Director for Management, it does have direct access to the agency head.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: Peace Corps

  11. Status: Closed - Not Implemented

    Comments: Amtrak claims that the audit function reports directly to the President on all substantive matters. However, GAO found that the head of audit reports organizationally to the Vice President for law whose activities are subject to audit.

    Recommendation: The heads of ACTION, the Peace Corps, the Export-Import Bank (Eximbank), the Interstate Commerce Commission (ICC), the Department of Justice, the Merit Systems Protection Board (MSPB), the National Labor Relations Board (NLRB), the National Railroad Passenger Corporation (Amtrak), the National Science Foundation (NSF), the Department of the Treasury, and the Federal Reserve System should take immediate steps to ensure that the heads of audit units report directly to them or their deputies.

    Agency Affected: National Railroad Passenger Corporation (AMTRAK)

  12. Status: Closed - Implemented

    Comments: A comprehensive audit plan to cover all agency operations has been developed and approved. Several audits have already been completed, including one audit to assess how effectively FCA carries out its responsibility to supervise and oversee Farm Credit Bank operations.

    Recommendation: The Directors of the Federal Emergency Management Agency (FEMA), NSF, the Office of Personnel Management (OPM), and the Acting Chairman of the Farm Credit Administration (FCA) should ensure that all important and vulnerable agency programs and functions are reviewed.

    Agency Affected: Farm Credit Administration

  13. Status: Closed - Implemented

    Comments: An audit plan for reviewing all vulnerable and important FEMA programs has been developed and approved. A procurement audit has been completed.

    Recommendation: The Directors of the Federal Emergency Management Agency (FEMA), NSF, the Office of Personnel Management (OPM), and the Acting Chairman of the Farm Credit Administration (FCA) should ensure that all important and vulnerable agency programs and functions are reviewed.

    Agency Affected: Federal Emergency Management Agency

  14. Status: Closed - Implemented

    Comments: Audits of all areas identified by GAO as needed are either completed or underway.

    Recommendation: The Directors of the Federal Emergency Management Agency (FEMA), NSF, the Office of Personnel Management (OPM), and the Acting Chairman of the Farm Credit Administration (FCA) should ensure that all important and vulnerable agency programs and functions are reviewed.

    Agency Affected: National Science Foundation

  15. Status: Closed - Implemented

    Comments: IG established a Program Benefits Branch with four staff to review retirement and insurance benefit programs. IG plans to ask for six more staff positions for this branch.

    Recommendation: The Directors of the Federal Emergency Management Agency (FEMA), NSF, the Office of Personnel Management (OPM), and the Acting Chairman of the Farm Credit Administration (FCA) should ensure that all important and vulnerable agency programs and functions are reviewed.

    Agency Affected: Office of Personnel Management

  16. Status: Closed - Implemented

    Comments: An instruction concerning follow-up on recommendations was developed. The Deputy Director, FEMA, was appointed the audit follow-up official.

    Recommendation: The Directors, FEMA and NSF, should establish audit resolution and follow-up procedures.

    Agency Affected: Federal Emergency Management Agency

  17. Status: Closed - Implemented

    Comments: The follow-up and audit resolution system is in place.

    Recommendation: The Directors, FEMA and NSF, should establish audit resolution and follow-up procedures.

    Agency Affected: National Science Foundation

  18. Status: Closed - Not Implemented

    Comments: FCA does not plan to take action on this recommendation and contends it is not a proper role for the audit group; however, the head of internal audit disagrees.

    Recommendation: The Inspector General, OPM, and the Director of Audit, FCA, should evaluate all of the significant fraud problems confronting their agencies to determine underlying causes and systemic weaknesses in order to identify preventive measures needed.

    Agency Affected: Farm Credit Administration

  19. Status: Closed - Not Implemented

    Comments: OIG agreed that it should conduct fraud analysis, but it currently has no resources to do so and does not routinely receive the information needed to accomplish this objective. OIG plans to ask for access to retirement fraud information so that analyses can be done. Additional resources were requested, but denied.

    Recommendation: The Inspector General, OPM, and the Director of Audit, FCA, should evaluate all of the significant fraud problems confronting their agencies to determine underlying causes and systemic weaknesses in order to identify preventive measures needed.

    Agency Affected: Office of Personnel Management

 

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