Internal Controls:

Disbursement Processing Controls Need Improvement

AIMD-00-236R: Published: Aug 7, 2000. Publicly Released: Aug 7, 2000.

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Pursuant to a legislative requirement, GAO provided information on the Financial Management Service's (FMS) controls over safeguarding of assets and documenting disbursements and reconciliation of reports as well as the results of previously suggested improvements.

GAO noted that: (1) testing of manual controls and procedures indicated weaknesses related to the safeguarding of vulnerable negotiable assets at FMS regional centers that increase the risk of fraud and unauthorized disbursements; (2) FMS centers' employment screening practices are inconsistent among the centers and less rigorous than those at another federal entity where employees have access to negotiable assets and related records; (3) some centers are not following FMS' procedures for control over checks awaiting destruction and issued checks returned for cancellation; (4) additionally, one center was not performing a required reconciliation of its returned check cancellations; (5) FMS did not have its revised Automated Standard Application for Payments (ASAP) system enrollment processing procedures in place at September 30, 1999, and the three centers that process ASAP system enrollments continued to have inadequate segregation of duties related to the bank confirmation process; (6) subsequently, FMS advised GAO that as of October 1, 1999, it had implemented its revised procedures; (7) testing indicated internal control weaknesses related to documenting the verification of the disbursement authorization process and the reconciliation of certain reports to assure that the disbursements are valid and FMS' financial records are complete and accurate; (8) for the date tested, one center did not document the supervisory or independent review of the agency certifying officer's signature to verify the validity of the disbursement requests; (9) for the date tested at another center, an unauthorized person signed forms crediting funds for a returned Fedwire to the originating agency; (10) for the month tested, two centers had not completely reconciled their monthly outstanding courtesy disbursement reports; (11) GAO's fiscal year (FY) 1999 testing disclosed that FMS' and the centers' corrective actions resolved previously reported weaknesses relating to: (a) the supervisory review, approval, and documentation of the disbursement processing progress sheets; and (b) enrollment processing and supervisory review related to ASAP; and (12) FMS informed GAO that it had completed corrective actions to address the ASAP segregation of duties and the reconciliation of courtesy disbursement weaknesses during FY 2000.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On October 31, 2000, FMS issued guidance, for the Centers' immediate implementation, requiring that an authorized person sign the SF 146 and that a list of authorized personnel be posted in the Fedwire area. Additionally, FMS conducted unannounced visits to the Centers and found that the Centers were adhering to the guidance.

    Recommendation: To address the disbursement internal control weaknesses, the Commissioner of the Financial Management Service should direct the Assistant Commissioner for Regional Operations to monitor the consistent implementation of required procedures to ensure that only authorized persons sign the SF 146, Schedule of Cancelled Fedwire Item, crediting funds from cancelled Fedwires to the originating agency.

    Agency Affected: Department of the Treasury: Financial Management Service

  2. Status: Closed - Implemented

    Comments: On November 16, 2000, FMS' Chief Disbursing Officer directed the Centers to fully comply with the applicable sections of the Field Operations Manual(FOM)regarding the safeguarding of ruined and returned checks. In addition, FMS conducted an unannounced visit to one of the Centers and found that the Center was in full compliance with the guidance.

    Recommendation: To address the disbursement internal control weaknesses, the Commissioner of the Financial Management Service should direct the Assistant Commissioner for Regional Operations to monitor the centers' adherence to FMS policies regarding the safeguarding of ruined and returned checks.

    Agency Affected: Department of the Treasury: Financial Management Service

  3. Status: Closed - Implemented

    Comments: On November 30, 2000, FMS issued policies and procedures relating to periodic background updates for employees who occupy positions with access to vulnerable negotiable assets or related records.

    Recommendation: To address the disbursement internal control weaknesses, the Commissioner of the Financial Management Service should direct the Assistant Commissioner for Regional Operations to develop and implement policies and procedures for periodic background investigation updates for employees who occupy positions with access to vulnerable negotiable assets or related records.

    Agency Affected: Department of the Treasury: Financial Management Service

  4. Status: Closed - Implemented

    Comments: In December 2000, FMS issued Field Operations Manual (FOM) policies and procedures prohibiting new employees access to sensitive information before successfully passing a fingerprint investigation.

    Recommendation: To address the disbursement internal control weaknesses, the Commissioner of the Financial Management Service should direct the Assistant Commissioner for Regional Operations to develop and implement uniform policies and procedures requiring, at a minimum, initiation of a fingerprint background check prior to the start date of new employees and prohibiting new employees from being assigned with access to negotiable assets and related records until the results of fingerprint checks are received and reviewed.

    Agency Affected: Department of the Treasury: Financial Management Service

  5. Status: Closed - Implemented

    Comments: After the end of fiscal year 2000, FMS issued a combination of Field Operations Manual (FOM) guidance and memorandums from the Chief Disbursing Officer requiring documentation of the supervisory or independent review of paper SF 1166 verification processing. In addition, FMS, during unannounced visits at two of the Centers, found that the Centers had implemented the guidance. On December 20, 2000, FMS issued FOM guidance relating to the reconciliation of the return check cancellation. GAO noted, during its fiscal 2000 work, that the guidance was being implemented effectively at the three Centers GAO tested.

    Recommendation: The Financial Management Service needs to establish procedures to ensure the documentation of the supervisory or independent review of paper SF 1166 Voucher and Schedule of Payments verification processing and the reconciliation of the returned check cancellations.

    Agency Affected: Department of the Treasury: Financial Management Service

  6. Status: Closed - Implemented

    Comments: FMS issued Field Operations Manual (FOM) guidance relating to (1) documentation of supervisory or independent review of SF 1166 payment verification processing, (2) reconciliation of returned check cancellations, and (3) prohibiting new employees from being assigned access to negotiable assets and related records until the results of fingerprint checks are received and reviewed.

    Recommendation: Because of the recurring nature of some of the identified weaknesses, the Commissioner of the Financial Management Service should direct the Assistant Commissioner for Regional Operations to ensure that applicable guidance related to these matters be incorporated in the Field Operations Manual to ensure consistent and uniform operating procedures among all the centers.

    Agency Affected: Department of the Treasury: Financial Management Service

 

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