Financial Audit:

Food and Nutrition Service's Financial Statements for 1987

AFMD-89-22: Published: Mar 15, 1989. Publicly Released: Mar 15, 1989.

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GAO examined the Food and Nutrition Service's (FNS) financial statements for the fiscal year ended September 30, 1987.

GAO found that: (1) the statement of financial position presented fairly the FNS financial position as of September 30, 1987, in conformity with generally accepted accounting principles; (2) FNS failed to adjust the food stamp benefits issued and the related liability of undelivered coupons, resulting in a 70-percent increase in liability between 1984 and 1987, with no significant growth in program benefits over the same period; and (3) FNS did not effectively use its financial accounting and reporting system in preparing its financial reports.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Effective September 30, 1991, FNS has developed procedures for preparing financial reports, recording adjustments, calculating bad debt allowances, and determining the food stamp redemption liability. The effectiveness of these procedures is being examined by USDA IG as part of its 1991 audit of FNS.

    Recommendation: To correct these weaknesses, the Secretary of Agriculture should direct the Administrator, FNS, to record all relevant accounting transactions, such as year-end liability accruals, in the accounting system.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: FNS has sent out instructions to its regional offices to perform recommendations and promptly record adjustments, and has verified compliance through site visits.

    Recommendation: To correct these weaknesses, the Secretary of Agriculture should direct the Administrator, FNS, to reconcile account balances to the relevant supporting documentation, such as Treasury account balances, and to supporting subsystem balances, such as the accounts receivable subsystem balance. Adjusting entries resulting from this reconciliation process should be recorded promptly.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: In October 1989, FNS reduced the redemption liability account for amounts that would not be needed to cover future coupon redemptions. In August 1990, FNS proposed a methodology to analyze the redemption account at year-end to ensure that the account only includes amounts needed to cover future coupon redemptions. This methodology has not been evaluated to determine its effectiveness.

    Recommendation: To correct these weaknesses, the Secretary of Agriculture should direct the Administrator, FNS, to reduce the food stamp expense and unredeemed food coupon liability accounts for the value of the coupons returned to inventory, as reported by the issuance points.

    Agency Affected: Department of Agriculture

  4. Status: Closed - Implemented

    Comments: FNS has revised its FNS-250 reporting with new instructions issued on December 31, 1991, and is obtaining issuance data from a new issuance and reconciliation report (FNS-46) effective November 13, 1991. The effectiveness of these reports is being examined by the USDA IG as part of its 1991 audit of FNS.

    Recommendation: To correct these weaknesses, the Secretary of Agriculture should direct the Administrator, FNS, to determine whether all issuance points are properly reporting food coupons returned to inventory on the FNS-250 reports and direct those that are not properly reporting them to do so.

    Agency Affected: Department of Agriculture

  5. Status: Closed - Implemented

    Comments: These internal control weaknesses were included in the FNS Financial Integrity Act report, dated November 28, 1988.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FNS, to include the two internal control weaknesses disclosed in the next FNS Financial Integrity Act report.

    Agency Affected: Department of Agriculture

 

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