Internal Controls:

Federal Disbursement Controls Can Be Strengthened

GAO-01-910R: Published: Aug 13, 2001. Publicly Released: Aug 13, 2001.

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GAO tested certain internal controls over federal disbursements processed by the Department of the Treasury's Financial Management Service (FMS) in fiscal year 2000. With some exceptions, FMS makes disbursements for all federal agencies through its Regional Financial Centers and Debt Management Operations Center. For fiscal year 2000, FMS reported processing approximately 890 million disbursements totaling more than $1.2 trillion. The centers disburse funds by check, electronic funds transfer (EFT), or Fedwire. FMS reported that these disbursements for fiscal year 2000 included approximately 265 million checks amounting to more than $265 billion, approximately 625 million EFTs amounting to more than $720 billion, and approximately 47,000 Fedwires amounting to more than $275 billion. The centers also process Automated Standard Application for Payments (ASAP) system enrollments. FMS reported the federal agencies authorized payments of over $254 billion in fiscal year 2000 using the ASAP system. This report reviews the results of GAO's (1) follow-up work on previously recommended improvements and corrective actions taken to address such recommendations and (2) fiscal year 2000 testing and related recommendations for improving controls over safeguarding assets and processing and documenting delegation and designation of agency certifying officers. GAO found that FMS' and the centers' corrective actions resolved weaknesses reported for fiscal year 1999 relating to (1) controls over checks awaiting destruction and returned checks, (2) segregation of duties for the ASAP system, (3) documenting agency certifying officer's signature verification, (4) authorized signature for return of canceled Fedwire disbursements, and (5) reconciling courtesy disbursements. Similar to fiscal year 1999, FMS had internal control weaknesses in personnel screening, inventory control, audit procedures, and reporting requirements.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure effective implementation of actions taken to address the remaining disbursement internal control weaknesses from GAO's prior year audits, the Commissioner of FMS should direct the Assistant Commissioner for Management to monitor efforts relating to the Security Branch's policies and procedures requiring initiation of fingerprint background checks prior to the start dates of new employees.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: In their response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of implementation of the corrective actions, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that, based on its review, FMS has fully implemented its procedures to initiate fingerprint background checks prior to the start dates of new employees.

    Recommendation: To ensure effective implementation of actions taken to address the disbursement internal control weaknesses GAO identified, the Commissioner of FMS should direct the Assistant Commissioner for Regional Operations to monitor efforts relating to ASB's adherence to written procedures requiring (1) supervisory approval of system overrides of designations of authority to designate certifying officers, (2) documentation of system overrides, and (3) performance of a supervisory review of these actions.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: During fiscal year 2001, FMS issued formal written procedures requiring supervisory approval of system overrides. In addition, the procedures require that these actions be fully documented by the system operator and reviewed by the system supervisor. In their response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of implementation of these procedures, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that, based on its review, FMS has fully implemented its procedures requiring supervisory approval of system overrides of designations of authority to designate certifying officers, documentation of system overrides, and performance of supervisory review of these actions.

    Recommendation: To ensure effective implementation of actions taken to address the disbursement internal control weaknesses GAO identified, the Commissioner of FMS should direct the Assistant Commissioner for Regional Operations to monitor efforts relating to the Administrative Service Branch's (ASB) adherence to written procedures requiring documentation of the head of agency self-delegation verifications.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: During GAO's fiscal year 2000 audit, FMS issued formal written procedures requiring documentation of the Head of Agency (HOA) delegation verification. In their response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of these procedures, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that, based on its review, FMS has fully implemented its procedures requiring documentation of HOA self-delegation verifications.

    Recommendation: To ensure effective implementation of actions taken to address the disbursement internal control weaknesses GAO identified, the Commissioner of FMS should direct the Assistant Commissioner for Regional Operations to monitor efforts relating to the centers' processing of ASAP "Classification/Reclassification" return payments.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: During fiscal year 2001, the center modified its internal operating guidelines for processing return payments and implemented procedures for handling ASAP "Classification/Reclassification" return payments. In its response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain results of FMS' 2004 review of these procedures. On July 6, 2005, FMS' Management Control Branch stated that the 2001 revised procedures were still in place and followed. Further, based on FMS' review of ASAP transactions from February 2005 through May 2005, which included one "classification/reclassification" return payment, FMS' Management Control Branch stated that FMS has fully implemented its procedure for an independent ASAP staff person--not the person who performed the return payment classification--to verify that the "classification/reclassification" return payment was processed correctly.

    Recommendation: To ensure effective implementation of actions taken to address the disbursement internal control weaknesses GAO identified, the Commissioner of FMS should direct the Assistant Commissioner for Regional Operations to monitor efforts relating to the centers' adherence to a Field Operations Manual revision requiring a daily review of blank check stock issued to, but not yet used by, the print operators.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: In the latter part of fiscal year 2000, FMS issued FOM guidance requiring that two independent staff members at each center perform daily reviews of all unused checks issued to, but not yet used by, the print operators. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of implementation of this guidance, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that, based on its review, FMS has fully implemented its procedures to require a daily reconciliation of blank check stock issued to, but not yet used by, print operators.

    Recommendation: To ensure effective implementation of actions taken to address the disbursement internal control weaknesses GAO identified, the Commissioner of FMS should direct the Assistant Commissioner for Regional Operations to monitor efforts relating to the centers' adherence to Field Operations Manual policies regarding physical access and segregation of duties relating to key check disbursement processing areas.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: Approximately two weeks before the end of fiscal year 2000, FMS issued Field Operations Manual (FOM) guidance relating to physical access and segregation of duty controls over key check disbursement processing areas. In their response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of these corrective actions, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that FMS routinely verifies that these controls are in place and working by means of periodic on-site Vulnerability Assessments at the Regional Finance Centers (RFC). Based on its review, FMS stated the two RFCs visited followed the FOM guidance regarding the segregation of duties related to key check disbursement processing areas. At one of the centers, FMS' review team found that physical access to the key check disbursement processing areas was adequately controlled. However, at the other center visited, after the checks were printed, including signature, physical access to the checks was not adequately controlled. The review team noted that a purchase order was issued in September 2004 for closed circuit television upgrades (CCTV) at this center. When the CCTV upgrades are complete, the CCTV system is expected to provide adequate coverage to satisfy FMS' physical security standards for CCTV coverage. The CCTV upgrade installation is expected to be completed by the end of FY 2005.

    Recommendation: To ensure effective implementation of actions taken to address the disbursement internal control weaknesses GAO identified, the Commissioner of FMS should direct the Assistant Commissioner for Regional Operations to monitor efforts relating to the centers' adherence to Field Operations Manual policies prohibiting new employees from being assigned 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

    Status: Closed - Implemented

    Comments: During fiscal year 2000, FMS issued policies and procedures relating to (1) initiation of fingerprint checks prior to the start dates of new employees, (2) background investigation updates, 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. In their response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of these procedures, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that, based on its review, FMS has fully implemented the above procedures.

    Recommendation: To ensure effective implementation of actions taken to address the remaining disbursement internal control weaknesses from GAO's prior year audits, the Commissioner of FMS should direct the Assistant Commissioner for Management to monitor efforts relating to the Security Branch's policies and procedures requiring periodic background investigation updates for employees in positions that require access to vulnerable negotiable assets or related records.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: In their response to the draft of this report (GAO-01-910R), FMS stated that they initiated a comprehensive review program to ensure that all related corrective actions are being followed. GAO has been working with the FMS Management Control Branch Audit Liaison to obtain the results of FMS' 2004 review of implementation of the corrective actions, which was done by the Branch as part of a regional operations review. On July 1, 2005, FMS' Management Control Branch stated that FMS has fully implemented its procedures to perform periodic background investigation updates for employees in positions that require access to vulnerable negotiable assets or related records.

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