B-167710(1),L/M, NOV 5, 1981

B-167710(1),L/M: Nov 5, 1981

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FEDERAL EMERGENCY MANAGEMENT AGENCY ENTERTAINMENT FUND WAS ERRONEOUSLY INCLUDED AS AN UNVOUCHERED ACCOUNT IN OFFICE OF MANAGEMENT AND BUDGET'S ANNUAL LISTING. HOUSE OF REPRESENTATIVES: THIS LETTER IS TO BRING YOU UP TO DATE ON OUR ACTIVITIES WITH REGARD TO UNVOUCHERED ACCOUNTS. WHICH WE WERE AUTHORIZED TO AUDIT BY THE GENERAL ACCOUNTING OFFICE (GAO) ACT OF 1980 (31 U.S.C. 67). UNVOUCHERED ACCOUNTS ARE THOSE FROM WHICH EXPENDITURES ARE NORMALLY MADE SOLELY ON THE APPROVAL. THE PURPOSE OF OUR EXAMINATION IS TO DETERMINE WHETHER EXPENDITURES FROM SUCH ACCOUNTS ARE FOR AUTHORIZED PURPOSES. WE HAVE RECENTLY COMPLETED OUR AUDIT WORK FOR FISCAL 1980 ON THESE FIVE ACCOUNTS AND. HAVE A REPORT IN PROCESS.

B-167710(1),L/M, NOV 5, 1981

DIGEST: LETTER TO CHAIRMAN OF HOUSE COMMITTEE ON GOVERNMENT OPERATIONS UPDATING GAO'S ACTIVITIES WITH REGARD TO AUDIT OF UNVOUCHERED ACCOUNTS, AS AUTHORIZED BY 31 U.S.C. SEC. 67. FEDERAL EMERGENCY MANAGEMENT AGENCY ENTERTAINMENT FUND WAS ERRONEOUSLY INCLUDED AS AN UNVOUCHERED ACCOUNT IN OFFICE OF MANAGEMENT AND BUDGET'S ANNUAL LISTING. RELATED LETTER TO HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES ALSO ENCLOSED, REQUESTING THAT THEY TAKE ACTION TO IDENTIFY AMOUNTS SUBJECT TO AUDIT, SEGREGATE POTENTIALLY EXEMPT TRANSACTIONS, AND OBTAIN REQUIRED EXEMPTIONS.

JACK BROOKS, HOUSE OF REPRESENTATIVES:

THIS LETTER IS TO BRING YOU UP TO DATE ON OUR ACTIVITIES WITH REGARD TO UNVOUCHERED ACCOUNTS, WHICH WE WERE AUTHORIZED TO AUDIT BY THE GENERAL ACCOUNTING OFFICE (GAO) ACT OF 1980 (31 U.S.C. 67). UNVOUCHERED ACCOUNTS ARE THOSE FROM WHICH EXPENDITURES ARE NORMALLY MADE SOLELY ON THE APPROVAL, AUTHORIZATION, OR CERTIFICATION OF AN EXECUTIVE AGENCY OFFICIAL. THE PURPOSE OF OUR EXAMINATION IS TO DETERMINE WHETHER EXPENDITURES FROM SUCH ACCOUNTS ARE FOR AUTHORIZED PURPOSES.

ON JULY 16, 1980, WE ISSUED OUR FIRST REPORT TO THE CONGRESS ON UNVOUCHERED EXPENDITURES. THAT REPORT COVERED FISCAL 1979 EXPENDITURES FROM FIVE ACCOUNTS IN THE EXECUTIVE OFFICE OF THE PRESIDENT. WE HAVE RECENTLY COMPLETED OUR AUDIT WORK FOR FISCAL 1980 ON THESE FIVE ACCOUNTS AND, AS REQUIRED BY PUBLIC LAW 95-570, HAVE A REPORT IN PROCESS. THESE ACCOUNTS WERE ALSO REPORTED TO YOU BY THE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, PURSUANT TO THE GAO ACT OF 1980. IN OUR WORK TO DATE ON THESE ACCOUNTS WE HAVE IDENTIFIED NO UNAUTHORIZED EXPENDITURES.

WITH REGARD TO THE REMAINING ACCOUNTS IN THE EXECUTIVE AGENCIES, WE HAVE ENCOUNTERED SOME DIFFICULTIES IN CARRYING OUT OUR AUDIT RESPONSIBILITIES. ANTICIPATING PROBLEMS WITH ACCOUNTING AND RECORDKEEPING, WE SENT A LETTER TO HEADS OF DEPARTMENTS AND AGENCIES ON JUNE 12, 1980, CALLING THEIR ATTENTION TO THE REQUIREMENTS OF THE ACT AND REQUESTING THAT THEY ESTABLISH APPROPRIATE ACCOUNTS. WE ADVISED THEM THAT THE LAW ALLOWS THE PRESIDENT TO EXEMPT CERTAIN EXPENDITURES FROM THE EXAMINATIONS AND THAT THOSE ORGANIZATIONS HAVING EXPENDITURES THAT MAY QUALIFY SHOULD TAKE STEPS TO OBTAIN THE EXEMPTION IN ORDER TO MINIMIZE THE QUESTIONS RAISED DURING OUR EXAMINATIONS. EXPENDITURES THAT WOULD QUALIFY FOR EXEMPTIONS RELATE TO FOREIGN INTELLIGENCE OR COUNTERINTELLIGENCE ACTIVITIES OR SENSITIVE LAW ENFORCEMENT INVESTIGATIONS.

WE HAVE PERFORMED PRELIMINARY WORK AT SEVERAL AGENCIES. THIS WORK HAS DISCLOSED THAT SOME OF THE AGENCIES VISITED HAVE SENSITIVE LAW ENFORCEMENT AND INTELLIGENCE TRANSACTIONS AND HAVE NOT TAKEN THE ACTION WE CALLED FOR IN OUR JUNE 12 LETTER. AS A RESULT, A NUMBER OF THE ACCOUNTS WE INITIALLY SELECTED FOR EXAMINATION ARE, IN OUR VIEW, UNAUDITABLE UNTIL SUCH TIME AS THE AGENCIES SEGREGATE AND OBTAIN EXEMPTIONS FOR THE EXCLUDABLE TRANSACTIONS.

I HAVE TODAY SIGNED A FOLLOWUP LETTER TO HEADS OF DEPARTMENTS AND AGENCIES REQUESTING THAT THEY TAKE ACTION TO IDENTIFY THE AMOUNTS SUBJECT TO AUDIT, SEGREGATE POTENTIALLY EXEMPT TRANSACTIONS, AND OBTAIN THE REQUIRED EXEMPTIONS.

WITH REGARD TO YOUR SPECIFIC REQUEST OF OCTOBER 6, 1981, TO AUDIT TWO ACCOUNTS - ONE AT THE DEPARTMENT OF STATE AND THE OTHER AT THE FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) - WE HAVE BEGUN OUR WORK AT THE DEPARTMENT OF STATE. THE ACCOUNT AT FEMA IS A $500 ENTERTAINMENT FUND AND WAS ERRONEOUSLY INCLUDED IN THE LIST FURNISHED TO YOU BY THE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET. IT IS NOT AUTHORIZED TO BE AN UNVOUCHERED ACCOUNT AND BY AGREEMENT WITH YOUR OFFICE WILL NOT BE INCLUDED IN OUR REVIEW.

I SHALL KEEP YOU PERIODICALLY ADVISED ON THE STATUS AND PROGRESS OF OUR WORK ON UNVOUCHERED ACCOUNTS.

HEADS OF DEPARTMENTS AND AGENCIES

SUBJECT: AUDIT OF UNVOUCHERED EXPENDITURES

THE GENERAL ACCOUNTING OFFICE ACT OF 1980 (31 U.S.C. 67) ASSIGNS TO THE GENERAL ACCOUNTING OFFICE (GAO) RESPONSIBILITY AND AUTHORITY FOR EXAMINING UNVOUCHERED ACCOUNTS OF THE FEDERAL GOVERNMENT. THE STATUTE ALSO PROVIDES AUTHORITY FOR THE PRESIDENT TO EXEMPT FROM GAO OVERSIGHT ANY EXPENDITURES INVOLVING SENSITIVE FOREIGN INTELLIGENCE, FOREIGN COUNTERINTELLIGENCE, OR SENSITIVE LAW ENFORCEMENT INVESTIGATIONS.

IN ANTICIPATION OF THE ACCOUNTING AND RECORDKEEPING PROBLEMS THIS LEGISLATION COULD CREATE, ON JUNE 12, 1980, WE SENT A LETTER TO HEADS OF DEPARTMENTS AND AGENCIES (COPY ATTACHED) CALLING YOUR ATTENTION TO THE PROVISIONS OF THE ACT, REMINDING YOU OF THE RECORDS NECESSARY TO BE MAINTAINED FOR GAO AUDITS, AND SUGGESTING THAT IF CERTAIN EXPENDITURES IN THE ACCOUNTS QUALIFY FOR AN EXEMPTION ACTIONS BE TAKEN TO OBTAIN SUCH AN EXEMPTION.

IN CARRYING OUT OUR RESPONSIBILITY UNDER THE ACT, WE CONTACTED OFFICIALS AT SEVERAL AGENCIES, INCLUDING THE DEPARTMENTS OF DEFENSE, STATE, JUSTICE, AND THE TREASURY, TO COMMENCE OUR AUDIT OF SELECTED ACCOUNTS. OUR WORK TO DATE HAS REVEALED THAT SOME OF THE ACCOUNTS INCLUDE INTELLIGENCE TRANSACTIONS OR TRANSACTIONS PERTAINING TO SENSITIVE LAW ENFORCEMENT INVESTIGATIONS. IN THESE CASES THE ACCOUNTING FOR THOSE TRANSACTIONS SUBJECT TO AUDIT HAD NOT BEEN SEGREGATED FROM THOSE SUBJECT TO EXEMPTION, NOR HAD ANY ACTIONS BEEN TAKEN TO OBTAIN THE EXEMPTIONS. AT THE TIME WE BEGAN OUR WORK NO EXEMPTIONS HAD BEEN GRANTED BY THE PRESIDENT.

I AGAIN CALL YOUR ATTENTION TO THE REQUIREMENTS OF THE GAO ACT OF 1980 AND ASK YOU TO IMMEDIATELY TAKE ACTIONS TO ENSURE THAT APPROPRIATE ACCOUNTING RECORDS ARE MAINTAINED FOR THESE ACCOUNTS AND THAT ANY NECESSARY EXEMPTIONS ARE OBTAINED SO THAT WE MAY CARRY OUT OUR AUDIT RESPONSIBILITY WITH A MINIMUM OF DISRUPTION TO ALL PARTIES.

ANY QUESTIONS REGARDING THESE MATTERS SHOULD BE DIRECTED TO MR. W. D. CAMPBELL, ACTING DIRECTOR, ACCOUNTING AND FINANCIAL MANAGEMENT DIVISION.

HEADS OF DEPARTMENTS AND AGENCIES:

SUBJECT: AUDIT OF UNVOUCHERED EXPENDITURES

THIS IS TO ADVISE YOU OF THE IMPACT OF RECENT LEGISLATION ON YOUR AGENCY. THE GENERAL ACCOUNTING OFFICE ACT OF 1980, SIGNED INTO LAW BY THE PRESIDENT ON APRIL 3, 1980, MAKES VARIOUS AMENDMENTS TO THE LAW REGARDING THE GENERAL ACCOUNTING OFFICE'S OPERATIONS. ONE OF THE PROVISIONS OF THIS ACT SPECIFICALLY ASSIGNS TO THE GENERAL ACCOUNTING OFFICE RESPONSIBILITY AND AUTHORITY FOR EXAMINING UNVOUCHERED ACCOUNTS USED BY FEDERAL AGENCIES. UNVOUCHERED ACCOUNTS ARE THOSE FROM WHICH EXPENDITURES ARE NORMALLY ACCOUNTED FOR SOLELY ON THE APPROVAL, AUTHORIZATION, OR CERTIFICATE OF AN OFFICIAL OF AN EXECUTIVE AGENCY. THE PURPOSE OF THE EXAMINATIONS WILL BE TO DETERMINE WHETHER EXPENDITURES FROM SUCH ACCOUNTS ARE FOR AUTHORIZED PURPOSES.

THE LAW ALLOWS THE PRESIDENT TO EXEMPT CERTAIN EXPENDITURES FROM THE EXAMINATIONS. THOSE ACTIVITIES WHICH BELIEVE THAT SOME OF THEIR EXPENDITURES QUALIFY FOR THE EXEMPTION SHOULD NOW TAKE STEPS NECESSARY TO OBTAIN THEM IN ORDER TO MINIMIZE QUESTIONS RAISED DURING THE COURSE OF OUR EXAMINATIONS.

ACCORDINGLY, YOU SHOULD TAKE APPROPRIATE ACTIONS TO INSURE THAT YOUR ORGANIZATION MAINTAINS ADEQUATE RECORDS AND ACCOUNTS FOR ITS UNVOUCHERED EXPENDITURES. IN GENERAL, WE WOULD EXPECT AGENCIES TO KEEP RECORDS OVER THESE ACCOUNTS SIMILAR TO THOSE MAINTAINED OVER REGULAR FINANCIAL TRANSACTIONS AND ACCOUNTS.

WE RECOGNIZE THAT THERE MAY BE UNUSUAL REQUIREMENTS FOR CONFIDENTIALITY OVER CERTAIN TRANSACTIONS AND THAT SPECIAL ACCOUNTING PROCEDURES MAY HAVE TO BE DEVELOPED TO MAINTAIN CONFIDENTIALITY. WE WOULD BE PLEASED TO WORK WITH AGENCIES IN DEVELOPING SUCH PROCEDURES. IF THIS TYPE OF ASSISTANCE IS REQUIRED, IT SHOULD BE REQUESTED NOW TO PREVENT DELAYS LATER. SUCH REQUESTS SHOULD BE DIRECTED TO D. L. SCANTLEBURY, DIRECTOR, DIVISION OF FINANCIAL AND GENERAL MANAGEMENT STUDIES.

YOU MAY BE SURE THAT THE GENERAL ACCOUNTING OFFICE IS AWARE OF THE SENSITIVE NATURE OF SUCH FUNDS. IN THIS REGARD, YOUR ATTENTION IS INVITED TO THE FACT THAT THE GENERAL ACCOUNTING OFFICE ACT OF 1980 SPECIFICALLY PROHIBITS THE GENERAL ACCOUNTING OFFICE FROM DISCLOSING INFORMATION OBTAINED DURING THE COURSE OF SUCH EXAMINATION EXCEPT UNDER CIRCUMSTANCES SPECIFIED IN THE LAW. OUR PERSONNEL CONDUCTING THE EXAMINATIONS WILL, OF COURSE, HAVE THE APPROPRIATE LEVEL OF SECURITY CLEARANCE.

IN THE EVENT ACCOUNTS FROM YOUR AGENCY ARE SELECTED FOR AUDIT, THE GENERAL ACCOUNTING OFFICE WILL FORMALLY NOTIFY YOU IN ADVANCE SO THAT APPROPRIATE AND CONVENIENT ARRANGEMENTS CAN BE MADE WITH A MINIMUM OF DISRUPTION TO YOUR STAFF'S WORK SCHEDULE.