Financial Management: FDA's Controls Over Property Have Improved, But Weaknesses Remain
AIMD-99-51
Published: Feb 22, 1999. Publicly Released: Feb 22, 1999.
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Highlights
Pursuant to a congressional request, GAO assessed the adequacy and status of the Food and Drug Administration's (FDA) planned actions to correct internal control weaknesses related to property and equipment identified in prior financial statement audit reports, focusing on FDA's: (1) inadequate controls over the physical quantities of property and equipment and their locations; (2) improper reconciliations between its general ledger and property subsidiary ledger systems; and (3) internal controls related to the safeguarding and reporting of automated data processing (ADP) equipment that is lost, stolen, destroyed, or surplussed.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Food and Drug Administration | To correct weaknesses identified in prior audit reports and strengthen controls over ADP equipment, the Commissioner of the Food and Drug Administration should finalize and implement proposed procedures for conducting comprehensive property inventories and component-specific spot audits. |
Closed – Implemented
FDA completed the "Personal Property Management Guide" in 1998, the "FDA Internal Audit Program Management Guide," and the "Lost, Stolen, Damaged or Destroyed Property Guide" in 1999. During fiscal years 1999, 2000, and 2001, inventories were taken according to these procedures, which are continually updated as needed. According to officials in FDA's Division of Central Services-Administrative Branch, FDA components at Headquarters, and all components nationwide, conduct a comprehensive inventory of all accountable/sensitive assets each year. FDA also conducts 100 percent annual observations of all capital assets acquired by every major component in the current fiscal year. In addition, a spot audit of accountable/sensitive assets of every major component is carried out annually during an internal audit at FDA headquarters. Furthermore, a national internal audit program is carried out at selected sites among the five FDA national regional/district operational locations. Beginning in fiscal year 1999, and for each fiscal year subsequently, FDA has received a "clean" audit opinion for fiscal years 1999, 2000, and 2001, and resolved reportable conditions related to property.
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| Food and Drug Administration | To correct weaknesses identified in prior audit reports and strengthen controls over ADP equipment, the Commissioner of the Food and Drug Administration should ensure that interim reconciliations of the general ledger system to the property subsidiary ledger system using manual processes are performed until the new property management system is fully operational, as stipulated in FDA's corrective action plan. |
Closed – Implemented
FDA continues to perform manual interim reconciliations of property transactions between its current property asset management subsidiary and financial management system (general ledgers). FDA replaced its prior property subsidiary system with a commercial, off-the-shelf, Peoplesoft system called the "Asset Management System" in fiscal year 2002. FDA conducts monthly (manual) reconciliations for all accountable/sensitive assets acquired during the fiscal year. For example, capital assets are recorded at cost, per line item, in the Asset Management System, and subsequently in the general ledger. Other assets, characterized as non-capital, are recorded at cost in the subsidiary ledger and expensed in the general ledger as required using generally accepted accounting principles. The FDA's financial management system is currently being modified to implement an "automated" transaction for property acquisitions. For example, capital asset transactions will be recorded in the general ledger at the same time they are recorded in the subsidiary ledger (property asset management system). According to FDA management, the Division of Accounting plans to continue these manual reconciliations until a fully automated Asset Management System is completed in fiscal year 2004. This approach has proven to be sustainable to address the recommendation.
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| Food and Drug Administration | To correct weaknesses identified in prior audit reports and strengthen controls over ADP equipment, the Commissioner of the Food and Drug Administration should finalize and implement proposed procedures to ensure the reliability of information on lost, stolen, and destroyed property and equipment and conduct periodic quality control reviews to ensure that new procedures are followed. |
Closed – Implemented
FDA has updated its policies and procedures for the treatment of lost, stolen, and damaged property and equipment. GAO's analysis indicates that these policies and procedures include appropriate guidance to account for and dispose of personal property, including ADP resources. Also, FDA included steps to address these policies and procedures in its quality control reviews that are carried out annually. GAO's review of the most recent quality control program, and the results of two of these quality control reviews provide assurance that FDA's procedures are being followed.
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| Food and Drug Administration | To correct weaknesses identified in prior audit reports and strengthen controls over ADP equipment, the Commissioner of the Food and Drug Administration should ensure compliance with established policies and procedures that address the surplus of ADP equipment. Specifically, during the March 1999 training for the Personal Property Coordinators and the Property Custodial Officers, ensure that proper documentation procedures are covered to prevent the use of altered documents. |
Closed – Implemented
FDA has made progress in following surplus procedures through improved monitoring and providing training to property officials. FDA continually updates its policies and procedures that address accounting, inventory controls, utilization, and disposal of personal property (including ADP equipment). Also, each property custodial officer must satisfactorily complete a Department of Health and Human Services Property Custodial Officer Certificate program with a score of 80 percent or better. In addition, a review of staff performance in this area is verified at the same time the FDA performs its personal property internal audits each year. Specifically, the quality control reviewers ensure that the property custodial officers have (1) been designated and confirmed in writing, (2) have received training, and (3) have been certified to perform custodial property functions.
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Topics
Data integrityEquipment inventoriesFederal property managementFinancial statement auditsInformation resources managementInternal controlsInventory control systemsSurplus federal propertyDatabasesDatabase management systems