Internal Controls:

Food and Nutrition Service Lacks Effective Controls

AFMD-88-16: Published: Mar 18, 1988. Publicly Released: Mar 18, 1988.

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GAO reviewed the Department of Agriculture's Food and Nutrition Service's (FNS) accounting operations to: (1) determine whether its controls, systems, and procedures were effective; and (2) identify any internal and accounting control weaknesses.

GAO found that FNS: (1) had several areas of internal control weaknesses, including undocumented and unauthorized transactions, incorrect and untimely transactions, inaccurate external reporting, and ineffective action on previous audit findings; (2) did not adequately account for letter-of-credit disbursements, advances receivable from grantees, and uncollectible accounts; (3) did not include information on bad debts on its external reports; (4) lacked the necessary controls and documentation for accounting system changes; and (5) did not have an adequate contingency plan for continuing its computer system operations in the event of a natural disaster. GAO also found that FNS: (1) did not disclose these internal and accounting control weaknesses in its annual Federal Managers' Financial Integrity Act (FMFIA) report to the Secretary of Agriculture; and (2) could not ensure that its system complied with internal control standards and accounting principles and standards.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Month-end accrual of advance payments.

    Recommendation: In order to ensure proper accounting, the Administrator, FNS, should direct the headquarters' Accounting Division to record letters of credit as advances and to reduce the advances substantially by the amount of program expense shown in the periodic reports submitted by grantees.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  2. Status: Closed - Implemented

    Comments: A regulation change requires approval.

    Recommendation: In order to ensure the reliability and security of FNS financial information, the Administrator, FNS, should direct that proposed system changes be submitted for formal management approval prior to implementation. Criteria for determining when formal review and approval are necessary should include the nature of the proposed change and not solely the dollar amount or staff years of effort involved.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  3. Status: Closed - Implemented

    Comments: Agency procedures were changed to require separation of duties.

    Recommendation: In order to ensure the reliability and security of FNS financial information, the Administrator, FNS, should direct that appropriate separation of duties be maintained to reduce the risk of error or fraud and to ensure effective checks and balances.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  4. Status: Closed - Implemented

    Comments: FNS now requires full documentation of system changes.

    Recommendation: In order to ensure the reliability and security of FNS financial information, the Administrator, FNS, should direct that written documentation be updated to include all changes made to the system.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  5. Status: Closed - Implemented

    Comments: FNS directed OIRM to identify problems.

    Recommendation: The Administrator, FNS, should request that the Director, Office of Information Resources Management (OIRM), identify the difficulties encountered by FNS during its attempt to operate its backup plan and work with FNS to establish an operating contingency plan.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  6. Status: Closed - Implemented

    Comments: The Office of Financial Management will monitor implementation of the plan.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FNS, to submit a comprehensive plan for implementing the recommendations made in this report. This plan should be approved and its implementation monitored by the Secretary.

    Agency Affected: Department of Agriculture

  7. Status: Closed - Implemented

    Comments: The Administrator, FNS, will ensure that this is done.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FNS, to improve FNS evaluations of its internal controls and accounting systems by performing them in sufficient depth to disclose all material weaknesses. Such weaknesses and planned corrective actions should be disclosed in the Service's annual FMFIA report.

    Agency Affected: Department of Agriculture

  8. Status: Closed - Implemented

    Comments: Operating procedures were changed.

    Recommendation: In order to ensure that a disciplined internal control system is maintained, the Administrator, FNS, should require that all accounting transactions be properly and fully documented.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  9. Status: Closed - Implemented

    Comments: Operating procedures were changed.

    Recommendation: In order to ensure that a disciplined internal control system is maintained, the Administrator, FNS, should require that transactions be processed in a timely manner.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  10. Status: Closed - Implemented

    Comments: All other changes will result in this.

    Recommendation: In order to ensure that a disciplined internal control system is maintained, the Administrator, FNS, should require that accurate and fully supported financial reports be prepared and distributed.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  11. Status: Closed - Implemented

    Comments: The Administrator has stated his belief that this should occur.

    Recommendation: In order to ensure that a disciplined internal control system is maintained, the Administrator, FNS, should require that audit findings and recommendations be promptly resolved.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  12. Status: Closed - Implemented

    Comments: LOC drawdowns are to be recorded as advances.

    Recommendation: In order to ensure proper accounting, the Administrator, FNS, should direct the headquarters' Accounting Division to record advances receivable in its accounting system.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  13. Status: Closed - Implemented

    Comments: This is now required.

    Recommendation: In order to ensure that a disciplined internal control system is maintained, the Administrator, FNS, should require that employees and their work be properly supervised.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

  14. Status: Closed - Implemented

    Comments: An allowance was established.

    Recommendation: In order to ensure proper accounting, the Administrator, FNS, should direct headquarters' Accounting Division to revise accounting procedures to require that an allowance for uncollectible amounts be recorded in the accounting system and that losses for bad debts be recorded as expenses against the allowance.

    Agency Affected: Department of Agriculture: Office of the Secretary: Food, Nutrition and Consumer Services: Food and Nutrition Service

 

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