Financial Audit: First Audit of the Library of Congress Discloses Significant Problems

Although he has not designated anyone with the title chief financial officer, the Librarian of Congress has identified the Director of Financial Services as the person responsible for overseeing the Library's day-to-day financial operations and providing policy advice. The Director now provides agencywide leadership on financial management matters and reports directly to the Librarian.

The Librarian of Congress has adopted GAO internal control and financial management standards and selected accounting standards from title 2. Other standards are being developed. A comprehensive financial systems requirements document was prepared and a request for proposals for a new financial management system was put out in July 1993. A new financial management system (Federal Financial System from American Management Systems), which uses the Standard General Ledger and meets the Joint Financial Management Improvement Program's core financial system requirements, was purchased in November 1993. It was implemented satisfactorily, including front-end systems such as Desk Top Procurement, and used for all of fiscal year 1995. Prior-year information was also converted to the new financial management system. The Library is now working toward integrating the financial system with its program division systems.

The Librarian of Congress has developed a financial management improvement plan with milestones for corrective actions. This plan provides for limited reviews by program managers. The Library is working toward bibliographic, inventory, and physical control of its collection (adding cameras and limiting access to the collection), but this is a long-term project. Through a contract with Price Waterhouse, GAO audited the Library for FY 1995 and testified before the Joint Committee on the Library of Congress on May 7, 1996 (GAO/T-GGD/AIMD-96-115). Price Waterhouse found that the Library had corrected many of the weaknesses previously identified by GAO. Price Waterhouse was able to opine on the Library's statement of financial position. Price Waterhouse also identified 11 reportable conditions and made recommendations to correct these weaknesses.

The Librarian of Congress implemented procedures in fiscal year 1991 to provide assurance that appropriations transferred from other agencies are used in the appropriate year, which the Inspector General verified in a August 21, 1992 report (92-101).

The Librarian of Congress submitted legislation for authority to operate revolving funds. In June 1991, Senator Claiborne Pell introduced S. 1416. On the basis of comments from interested parties and hearings held in July 1992, revised legislation was submitted in late 1992 (S. 2748) and in January 1993 (S. 345). The Senate Committee on Rules and Administration reported out an amended version of S. 345 on May 26, 1993, and recommended approval. H.R. 4945 was introduced in the House in 1994 and S. 2419 in the Senate, but it was too late in the session for action. In 1995 the Library again submitted legislation to its oversight committees. Congress has not taken action. Price Waterhouse found this reportable noncompliance situation continued to exist.

The Librarian of Congress terminated the practice of accepting nonappropriated funds as reimbursement for FEDLINK services. Action was reported complete by IG in audit report 92-201, dated August 21, 1992.

The Librarian of Congress has implemented a policy of periodic studies by consultants to determine the cost of providing services and establishing new cost recovery schedules. The studies are now done once every 2 years. Results of the third study were used to modify cost recovery rates for FYs 1995 and 1996. A new study in FY 1996 will be used to set rates for FYs 1997 and 1998. Over time, refinements to the new accounting system will allow it to better determine time spent on the various program activity codes. However, this is not a high priority since the biennial study gives a reasonable basis for cost recovery rates.

The number of staff positions financed from Economy Act reimbursements has diminished dramatically. In FY 1992 and FY 1993, only 29 and 31 positions were budgeted whereas 66 positions were authorized. The Library does not yet have a cost accounting system to ensure reimbursements of only indirect costs are used to fund these positions.