American Battle Monuments Commission:

Management Action Needed to Improve Internal Control Procedures

GAO-09-714R: Published: Jun 17, 2009. Publicly Released: Jun 17, 2009.

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On February 27, 2009, we issued our report expressing our opinion on the American Battle Monuments Commission's (the Commission) fiscal years 2008 and 2007 financial statements and our opinion on the Commission's internal control as of September 30, 2008. We also reported on the results of our tests of the Commission's compliance with selected provisions of laws and regulations during fiscal year 2008. We reported that the Commission maintained, in all material respects, effective internal control over financial reporting (including safeguarding of assets) and compliance as of September 30, 2008. During our fiscal year 2008 audit, we identified accountability and internal control deficiencies that, while not individually or in the aggregate material to the Commission's financial statements, warrant management's attention. The purpose of this report is to present these deficiencies, to provide recommendations to address these matters, and to provide an overview of the status of our prior year findings and recommendations. Because of the sensitive nature of some of the issues we identified, we are communicating detailed information regarding our findings and recommendations on information systems and physical security in a separately issued Limited Official Use Only report.

During our fiscal year 2008 financial statement audit, we identified 13 control deficiencies related to accounting procedures of the American Battle Monuments Commission (the Commission). These issues existed at Commission headquarters, its European Regional (ER) and Mediterranean Regional (MR) offices, and its Manila American Cemetery. Specifically: At the Commission's headquarters, we identified the following accounting procedure deficiencies: (1) Significant intragovernmental transactions lacked supporting documentation (2) Some expenditure transactions lacked evidence of receipt dates and approvals (3) Trust funds did not adequately invest and account for donated funds (4) Trust fund receipts were not effectively reconciled with the Department of the Treasury (Treasury) (5) Miscellaneous receipts fund balance was not removed from the general ledger (6) Strategic plan was not updated in 3 years. At the Commission's ER office, we identified the following accounting procedure deficiencies: (1) Euro bank account transactions were not recorded and reconciled (2) English employees pension plan liability was not accrued timely (3) Some expenditure transactions lacked evidence of receipt dates and approvals (4) Undelivered orders report did not support the general ledger balance (5) Some vendors had multiple identification numbers. At the Commission's MR office, we identified as a control deficiency that some post allowances were not paid when due. At the Commission's Manila American Cemetery, we identified as a control deficiency that some expenditure transactions lacked evidence of receipt dates and approvals. To assist Commission management in addressing these findings, this report contains 24 detailed recommendations. We also identified 8 control deficiencies in information systems and physical security at Commission headquarters and its ER and MR offices. Due to the sensitive nature of these issues, they are being communicated to the Commission in a Limited Official Use Only report, along with another 20 detailed recommendations. As stated in its letter dated June 10, 2009, the Commission agreed with the issues in the report. As a result of our fiscal years 2004 through 2007 financial statement audits, we have provided the Commission's worldwide locations with 233 information system and noninformation system recommendations to improve its information technology systems, security, and accounting procedures. Through January 31, 2009, the Commission had implemented 220 of our recommendations, or 94 percent, and was working to implement the remaining 13 recommendations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: During our fiscal year 2012 audit, we tested intragovernmental transactions (IPACs) during operations and maintenance testing. The Commission provided the reports (for example, the Charleston report) they obtain for all intragovernmental charges paid through Treasury's IPAC system and we found no issues. We also tested the Commission's fund balance with treasury reconciliation process and found no issues or unreconciled amounts for the IPAC transactions. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Director of Finance at Commission headquarters should obtain documentation from other federal agencies to support its intragovernmental charges paid through Treasury's Intra-governmental Payment and Collection (IPAC) system.

    Agency Affected: American Battle Monuments Commission

  2. Status: Closed - Implemented

    Comments: In response to this recommendation, ABMC stated that they will ensure that approving officials date all invoices that are received for goods and services in a timely manner before payment is made. During our fiscal year 2009 audit, we tested 23 transactions for ABMC headquarters. Based on the results of the items tested, we found that vendor payments were supported by documentation, goods/services were received and dated, and payments were certified and approved before payment for headquarters. As a result, ABMC headquarters has improved internal control and mitigated the potential for improper payments to occur.

    Recommendation: The Director of Finance at Commission headquarters should instruct and monitor approving officials to ensure that expenditure transactions are dated when goods and services are received and approved before payment is made.

    Agency Affected: American Battle Monuments Commission

  3. Status: Closed - Implemented

    Comments: During our FY 2009 audit, the headquarters Senior Accountant prepared documentation to support the calculation of interest earned on investments in fiscal year 2009 for the monument funds, including interest rates used and the period of time invested. As a result, the Commission now has fulfilled its fiduciary responsibility for the Monuments Trust Fund Program.

    Recommendation: The Director of Finance at Commission headquarters should prepare documentation to support the complete and accurate calculation of interest earned on investments for monument trust funds.

    Agency Affected: American Battle Monuments Commission

  4. Status: Closed - Implemented

    Comments: During our fiscal year 2009 audit, the Chief Accountant provided documentation of the memorial program funds invested, the interest earned, and the amount of interest allocated to each trust fund by percentage of the total interest earned. These amounts were supported by reports from the Bureau of the Public Debt and the U.S. Department of the Treasury.

    Recommendation: The Director of Finance at Commission headquarters should allocate interest to all monument trust accounts with funds on deposit.

    Agency Affected: American Battle Monuments Commission

  5. Status: Closed - Implemented

    Comments: During our fiscal year 2009 audit, we were provided a headquarters trial balance by program code that included each of the seven private memorial trust fund program codes individually. As a result, the Commission has improved its fiduciary responsibility for its private memorial trust funds.

    Recommendation: The Director of Finance at Commission headquarters should establish monument trust fund accounts by program code in the headquarters trial balance.

    Agency Affected: American Battle Monuments Commission

  6. Status: Closed - Implemented

    Comments: During our fiscal year 2009 audit, we were briefed on the Commission's Procedures for Execution of Funds Transfer for Private Memorials that detailed how private memorial monies should be received, deposited, invested, and interest allocated. On July 14, 2009, pursuant to the determination of the amount of residual funds to be invested, HQ invested $209,500 of private memorial trust funds in one year U.S. Treasury securities. As a result, the Commission has fulfilled its fiduciary duty to invest residual memorial trust funds in Treasury securities to earn interest.

    Recommendation: The Director of Finance at Commission headquarters should transfer monument trust funds needed for immediate operations as determined by Commission engineering to the European Regional (ER) office and maintain the balance of the funds at Commission headquarters for investment.

    Agency Affected: American Battle Monuments Commission

  7. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that they had taken measures to ensure that monthly reconciliations are done to identify any differences between the agency's fund balance with the GWA system. The process will be done on a monthly basis. Based on our fiscal year 2009 reconciliation of the trust fund cash balance on the Commission's consolidated trial balance to Treasury GWA Statement as of September 30, 2009, we identified no differences. However, we do not have any assurance that reconciliation of Fund Balance with Treasury to the GWA statement for trust funds was being conducted on a monthly basis during fiscal year 2009 as required by Treasury Financial Manual. During our fiscal year 2010 audit, we confirmed that monthly reconciliations were taking place and accounts balanced at year end. We found that entries were made as items arose throughout the year.

    Recommendation: The Director of Finance at Commission headquarters should timely investigate any differences identified during monthly reconciliations of Fund Balances with Treasury to the Government Wide Accounting system for trust funds.

    Agency Affected: American Battle Monuments Commission

  8. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it will identify any differences and ensure adjusting entries are made monthly (if needed) that are within the Commission's control. All adjusting entries (if needed) will be completed before fiscal year end. During our fiscal year 2009 audit, we identified four adjusting and reconciling entries that should have been made to the trust funds before the end of the fiscal year. During our fiscal year 2010 audit, we found that all adjusting and reconciling entries had been made.

    Recommendation: The Director of Finance at Commission headquarters should post adjusting entries monthly for items within the Commission's control.

    Agency Affected: American Battle Monuments Commission

  9. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it would communicate differences found with the appropriate agency to ensure all identified or unidentified differences are corrected in a timely fashion and reported in the GWA system. This will be an ongoing effort to identify and communicate issues on a monthly basis or as the need arises. During our fiscal year 2009 audit, we determined that the trust fund accountant reconciled trust fund accounts and posted transactions monthly as required by the Treasury Financial Manual and we found no exceptions.

    Recommendation: The Director of Finance at Commission headquarters should communicate adjustments identified through monthly reconciliations to be made by other entities and track such adjustments until corrected.

    Agency Affected: American Battle Monuments Commission

  10. Status: Closed - Implemented

    Comments: In response to this recommendation, ABMC stated that they took immediate action to correctly state the fund account 3220 for miscellaneous receipts. The correction was made in March 2009 to correctly state the fund account. Based on fiscal year 2009 audit procedures, we confirmed that there was $52,638 remaining in fund 3220 agency wide. However, during October 2009, we confirmed that fund 3220 funds were transferred to Treasury and were zero as of October 31, 2009. ABMC transferred its miscellaneous receipts to Treasury as required by statute. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Director of Finance at Commission headquarters should adjust current balances to correct accounts for fund 3320 for miscellaneous receipts received and transferred to Treasury.

    Agency Affected: American Battle Monuments Commission

  11. Status: Closed - Implemented

    Comments: During our fiscal year 2010 audit, the Chief of Finance and Accounting stated that reconciliation of the miscellaneous receipts fund balance was being conducted monthly. Our interim and year-end testing confirmed that reconciliations were taking place. As a result of its actions, the Commission had strengthened internal controls over cash and improved the accuracy of its financial reporting.

    Recommendation: The Director of Finance at Commission headquarters should reconcile Fund Balance with Treasury to the Government Wide Accounting system for the miscellaneous receipts fund balance on a monthly basis.

    Agency Affected: American Battle Monuments Commission

  12. Status: Closed - Implemented

    Comments: The Commission issued its fiscal years 2010 through 2015 Strategic Plan on December 22, 2009.

    Recommendation: The Director of Finance at Commission headquarters should update the strategic plan for fiscal years 2009-2013 to comply with the 3-year period specified by the Government Performance and Results Act (GPRA) of 1993.

    Agency Affected: American Battle Monuments Commission

  13. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it would identify all unrecorded transactions pertaining to the euro bank account and timely record them in the general ledger. During our fiscal year 2009 audit, we found that there were unrecorded transactions pertaining to the euro bank account and the remaining balance in the account was not reported on the general ledger. During our fiscal year 2010 audit, we found that the Commission timely identified and reported in the general ledger all transactions related to the Euro bank account.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should identify all unrecorded transactions pertaining to the euro bank account and timely record them in the general ledger.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  14. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it would prepare monthly reconciliations of euro bank account balances to the general ledger. During our fiscal year 2009 audit site visit, we verified that the Commission was, in fact, reconciling the general ledger balance in its euro bank account to the bank statements monthly. By taking this action, the Commission has resolved the risk of error and theft or loss.

    Recommendation: The Finance Officer at the Commission's ER office should prepare monthly reconciliations of euro bank account balances to the general ledger.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  15. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it would accurately present the euro account balance in the monthly SF 1219 report, Statement of Accountability, filed with the U.S. Treasury. During our fiscal year 2009 audit, we noted that on the September 2009 FMS 1219, there were no collection or disbursement item amounts for the euro bank account reported and the imprest cash amount in the euro account was not reported correctly. During our fiscal year 2010 audit, we found that the Commission had accurately accounted for the euro bank account's funds and associated transactions on the September 2010 SF 1219 report the Commission submitted to Treasury.

    Recommendation: The Finance Officer at the Commission's ER office should accurately present the euro account balance in the monthly SF 1219 report, Statement of Accountability, filed with Treasury.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  16. Status: Closed - Implemented

    Comments: During our fiscal year 2010 audit, we found that the Paris office Finance Officer did obligate and accrue the plan deficit as of September 30, 2010. Therefore, we consider this recommendation closed as implemented.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should consult with headquarters regarding the English defined benefit pension plan to obligate and timely record pension liabilities when identified by the plan actuary.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  17. Status: Open

    Comments: During our fiscal years 2009, 2010, and 2011 audits, we continued to find expenditure transactions being processed prior to the goods and services being received and approved for payment. During our fiscal year 2012 audit, the Commission informed us that since the transition to a new financial management system in August 2011, all receiving is conducted in the iProcurement system (part of the Oracle accounting system) and must be complete before an invoice is processed for payment in Oracle. Although we found that invoices were approved before payment, we continued to find instances where the invoices were not dated and/or signed when goods or invoices were received. During fiscal year 2014, the Commission informed us that they plan to develop and implement related standard operating procedures to address our recommendation. Therefore, we will follow up on this open recommendation at a later date.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should instruct and monitor approving officials to ensure that expenditure transactions are dated when goods and services are received and approved before payments are processed.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  18. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it was taking appropriate measures to identify differences in the undelivered orders report and the general ledger account balance. During our fiscal year 2009 audit, the HQ System Accountant provided us with a complete and detailed reconciliation of the ER undelivered orders account to the balance per the general ledger as of September 30, 2009. We analyzed the reconciliation of the ER obligated balances (SGL 4801) in the general ledger to the supporting ER purchase order detail database provided. We concluded that all differences between the undelivered orders balance and the general ledger had been researched and the necessary adjustments identified.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should research differences between the undelivered orders report balance and the general ledger account balance and make necessary adjustments to agree totals.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  19. Status: Closed - Implemented

    Comments: During our fiscal year 2009 audit, we found that ABMC initiated a project to address this issue which involved both the issuance of detailed instructions and tools. During the audit, we found that the ER office had effectively initiated the instructions and tools to eliminate duplicate vendor numbers and that the procedures put in place to prevent duplicates appear to be working. Therefore, we consider this recommendation closed.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should review identification numbers to eliminate duplicates for vendors assigned more than one vendor number.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  20. Status: Closed - Implemented

    Comments: In response, ABMC implemented new procedures to prevent duplicate vendors within its system. During our fiscal year 2009 audit, we found that ABMC's actions effectively addressed this issue that gave rise to our recommendation. As a result, ABMC has mitigated the problem of paying vendors more than once because of multiple identification numbers. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should assign unique identification numbers to each vendor.

    Agency Affected: American Battle Monuments Commission: European Regional Office

  21. Status: Closed - Implemented

    Comments: During our fiscal year 2010 audit, we confirmed that the Commission properly calculated and paid overseas post allowances. Therefore, we consider this recommendation closed as implemented.

    Recommendation: The Director of the Commission's Mediterranean Regional (MR) office have the Human Resource Assistant arrange with payroll processing to pay GS employees their correct post allowances from January 6, 2008.

    Agency Affected: American Battle Monuments Commission: Mediterranean Regional Office

  22. Status: Closed - Implemented

    Comments: SEC implemented new procedures to address this recommendation. During our fiscal year 2010 audit, we found that a new control procedure had been implemented to check the accuracy of post allowances, particularly in instances when changes had occurred.

    Recommendation: The Director of the Commission's Mediterranian Regional (MR) office should have the Human Resource Assistant establish and implement procedures for post allowances, particularly when changes occur, to document that amounts are accurately and timely paid.

    Agency Affected: American Battle Monuments Commission: Mediterranean Regional Office

  23. Status: Closed - Implemented

    Comments: In response to this recommendation, the Commission stated that it would ensure that approving officials date all invoices that are received for goods and services in a timely manner before payment is made. During our fiscal year 2009 Commission-wide statistical test of non-payroll expenditures, we again tested 12 transactions and found twice as many attribute errors including no evidence of a receiving stamp or signature or date, a signature to indicate receipt but no date of receipt, no purchase order or indication of the vendor ID number on supporting documentation, payment approval signed by not dated. During our fiscal year 2010 Commission-wide statistical test of non-payroll expenditures, our tests of transactions for the Manila American Cemetery found no exceptions. Officials had approved the transactions prior to payment.

    Recommendation: The superintendent of the Commission's Manila American Cemetery should provide dates when goods and services are received and approve all transactions before payment is made.

    Agency Affected: American Battle Monuments Commission: Manila American Cemetery

  24. Status: Closed - Implemented

    Comments: During our fiscal year 2009 audit, the Chief Accountant provided documentation to support interest earned on monument trust fund investments as of September 30, 2009, and a schedule of interest allocation by percentage to each memorial trust fund, along with investment support from the Bureau of Public Debt and the U.S. Department of the Treasury.

    Recommendation: The Director of Finance at Commission headquarters should invest monument trust funds to earn interest as provided in the Commission's acceptance letter to donors.

    Agency Affected: American Battle Monuments Commission

 

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