Financial Audit:

Commodity Credit Corporation's Financial Statements for 1987 and 1986

AFMD-88-47: Published: Jul 7, 1988. Publicly Released: Jul 7, 1988.

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GAO reported on the Commodity Credit Corporation's (CCC): (1) financial statements for the years ended September 30, 1987 and 1986; and (2) system of internal accounting controls and compliance with laws and regulations.

GAO found that CCC: (1) did not include in its financial statements an allowance for the uncollectible portion of $15 billion in outstanding loans to countries experiencing financial difficulties; (2) had estimated cumulative losses ranging from $5 billion to $8 billion on those loans as of September 30, 1987; (3) did not have a reserve for losses associated with $5 billion in outstanding guaranteed loans to foreign countries; (4) during 1987, instituted a new automated system which transferred the responsibility for recording and reconciling loan disbursements and repayment receipts from its Kansas City Management Office to local county offices; and (5) did not adequately control conversion to that system, resulting in unreconciled differences in receipts and disbursements. GAO also found that: (1) except for their failure to establish an allowance for estimated loan losses and a reserve for guaranteed loan losses, the financial statements presented fairly the financial position of CCC as of September 30, 1987 and 1986, and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis; and (2) internal accounting controls and procedures had several weaknesses that were not material to the CCC financial statements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: CCC has developed a computerized error listing and has cleared the remaining outstanding errors. As part of the GAO fiscal year (FY) 1989 audit, GAO noted that the systems are functioning adequately.

    Recommendation: CCC should give prompt attention to controls over conversions to new automated systems.

    Agency Affected: Department of Agriculture: Commodity Credit Corporation

  2. Status: Closed - Implemented

    Comments: The Agricultural Stabilization and Conservation Service (ASCS) has directed that reconciliation listings of all unmatched paid checks and unmatched cash be sent to county offices on a periodic basis for corrective action. As part of the GAO FY 1989 audit, GAO noted that timely reconciliations are now being made.

    Recommendation: The Chairman of the Board of Directors, CCC, should direct the Controller, CCC, and the Director of the Kansas City Management Office to ensure that local offices are provided with a monthly listing of unreconciled differences between internal and external sources.

    Agency Affected: Department of Agriculture: Commodity Credit Corporation

  3. Status: Closed - Implemented

    Comments: ASCS has drafted policy instructing state offices to closely monitor county offices to ensure differences are resolved in a timely manner. Additionally, procedures for national area offices have been enhanced to ensure that state and county offices comply with new reconciliation procedures. As part of the GAO FY 1989 audit, GAO noted that local offices are being monitored and reconciliations made.

    Recommendation: The Chairman of the Board of Directors, CCC, should direct the Controller, CCC, and the Director of the Kansas City Management Office to ensure that local offices' efforts are monitored to resolve the differences in a timely manner.

    Agency Affected: Department of Agriculture: Commodity Credit Corporation

  4. Status: Closed - Implemented

    Comments: CCC has established a new policy giving priority to correcting problems associated with current systems and completing projects already underway before starting any new projects, except where new programs require establishing a system. As part of the GAO FY 1989 financial audit, GAO noted that CCC is complying with the policy.

    Recommendation: The Chairman of the Board of Directors, CCC, should direct the Controller, CCC, and the Director of the Kansas City Management Office to ensure that consideration is given to suspending further conversions to automated systems until problems associated with current implementation efforts are resolved and CCC accounts are accurate and current.

    Agency Affected: Department of Agriculture: Commodity Credit Corporation

 

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