Internal Controls:

Matters Regarding Certain Transactions Processed by FMS

AIMD-99-147R: Published: May 17, 1999. Publicly Released: May 17, 1999.

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Pursuant to a legislative requirement, GAO provided information on the effectiveness of the Financial Management Service's (FMS) internal controls, focusing on the processes for: (1) recording adjusting journal entries (adjustments) needed to accurately reflect FMS' records of agencies' cash receipts and disbursements; (2) opening, amending, or closing agency location codes (ALC) which identify agencies and individual reporting locations within agencies on monthly reports of cash receipts and disbursements; and (3) assigning or discontinuing account symbols, which are used to identify individual appropriations or spending authorizations.

GAO noted that: (1) GAO previously reported on and suggested internal control improvements over adjusting journal entries, ALC, and account symbol transactions; (2) FMS' corrective actions resolved all of GAO's concerns regarding account symbol transactions; (3) FMS has also acted to resolve all of GAO's concerns about the supervisory review and approval of adjustments and the Check Reconciliation Branch's internal controls over its ALC actions; (4) however, this year GAO's suggested improvements include matters it reported on last year for which FMS' corrective actions were incomplete; (5) specifically, GAO reaffirms its prior year suggestions for improvements to the: (a) Financial Analysis Branch's documentation and reconciliation of adjustments; and (b) Budget Reports Branch's supervisory review and approval, documentation, and reconciliation of its ALC actions; (6) although the internal control matters discussed in this letter are not material in relation to the federal government's fiscal year 1998 financial statements, GAO believes they warrant attention; (7) also, some federal agencies continue to have problems reconciling their fund balances with Treasury accounts; and (8) sound controls at FMS over the processes GAO tested will help improve all agencies' ability to reconcile these accounts.

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