American Battle Monuments Commission:

Improvements Needed in Internal Controls and Accounting Procedures - Fiscal Year 2010

GAO-11-577R: Published: Jul 28, 2011. Publicly Released: Jul 28, 2011.

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On March 1, 2011, we issued our report expressing our opinion on the American Battle Monuments Commission's (the Commission) fiscal years 2010 and 2009 financial statements and our opinion on the Commission's internal control as of September 30, 2010. We also reported on the results of our tests of the Commission's compliance with selected provisions of laws and regulations during fiscal year 2010. During the fiscal year 2010 audit, we identified several internal control deficiencies that, while not material individually or in the aggregate to the Commission's financial statements, warrant management's attention. The purpose of this report is to present these deficiencies, provide recommendations to address these matters, and provide an update on the status of our prior years' recommendations.

During our fiscal year 2010 financial statement audit, we identified nine deficiencies in the Commission's internal controls and accounting procedures at Commission headquarters and its Paris Overseas Office. At the Commission's headquarters, we identified the following internal control and accounting procedure deficiencies: (1) Management's discussion and analysis did not include a financial analysis. (2) Not all budgetary information was fully disclosed in the financial statements. (3) Monitoring controls over cash accounts were not fully effective. (4) Active Contracts List was not current, complete, or reconciled to accounting information. (5) Budgetary procedures were not fully effective in ensuring contracts were signed before funds were obligated. (6) Year-end reconciliation of accounts payable detail to the general ledger was not timely and accurate. At the Commission's Paris Overseas Office, we identified the following internal control and accounting procedure deficiencies: (7) Documentation of personnel actions was not current. (8) Controls over approvals and invoice dates were not always effective. (9) Rome office contract files were not current. To assist the Commission management, we present at the end of our discussion of each of the findings, our recommendations for corrective action. We are making a total of 15 recommendations to address the internal control deficiencies discussed in this report.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: During our fiscal year 2011 audit of the American Battle Monuments Commission's financial statements, we found that the Commission took action to provide an analysis of the agency's overall financial position and results of operations in its fiscal year 2011 Management's Discussion and Analysis. We consider the Commission's actions sufficient to close this recommendation.

    Recommendation: The Secretary of the Commission should instruct the Director of Finance at Commission headquarters to include a financial analysis as part of its Management Discussion and Analysis within its reporting process to accompany future annual financial statements.

    Agency Affected: American Battle Monuments Commission

  2. Status: Closed - Implemented

    Comments: During our fiscal year 2012 audit, we found that the Commission did include a disclosure regarding budgetary resource comparisons to the Budget of the United States Government in its May 2, 2013 draft of the notes to the financial statements. However, we also noted material differences that were excluded from the disclosure. We brought this to the Commission's attention and in its May 28, 2013 draft, the disclosure was presented as well as the material differences. Because the Commission did not initially ensure completeness and full disclosure, we determined controls had not been strengthened sufficiently to ensure adequate disclosure. During our fiscal year 2014 follow-up, the Commission informed us that they had implemented a standard operating procedure (SOP) to review the financial statements. We reviewed the SOP for Completing the Financial Reporting Checklist and the related Checklist for Financial Disclosures, and verified that Budgetary Resources Statement Disclosures were required to be addressed as part of this review. We consider these actions to have addressed our recommendation.

    Recommendation: The Secretary of the Commission should instruct the Director of Finance at Commission headquarters to strengthen controls over financial reporting to ensure the complete disclosure of budgetary activity, including an explanation of any differences between amounts reported in the Commission's Statement of Budgetary Resources and actual amounts reported for the entity in the Budget of the United States Government, along with the availability of published information.

    Agency Affected: American Battle Monuments Commission

  3. Status: Open

    Comments: During fiscal year 2012, the Commission contracted with the Interior Business Center (IBC) to perform its monthly cash reconciliations with Treasury. During our testing, we found that IBC effectively reconciled cash on hand to Treasury records. However, we found that ABMC did not effectively monitor IBC's reconciliations. Specifically, ABMC did not document its review of the FMS-224 and Fund Balance with Treasury reconciliations performed by IBC. To fully address this recommendation, ABMC needs to document its review of the IBC prepared reconciliations to ensure they are accurate and complete. We will follow up on this open recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Finance at Commission headquarters to monitor monthly cash reconciliations for all Fund Balance with Treasury accounts Commissionwide to ensure their completeness and accuracy.

    Agency Affected: American Battle Monuments Commission

  4. Status: Open

    Comments: During our fiscal year 2012 audit, although the Commission provided GAO with active contract lists, we determined that these lists were not consolidated nor were they adequately maintained by the director of Engineering. We also continued to find instances where the Commission did not properly close contracts and deobligate funds. In addition, the Commission could not identify any specific actions taken to address this recommendation. During our fiscal year 2014 follow-up, the Commission informed us that they plan to develop and implement procurement-related standard operating procedures to address our recommendation in the future. Therefore, we will follow up on this open recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Human Resources and Administration at Commission headquarters to maintain a consolidated Active Contracts List, or require the Paris Overseas Office to maintain a separate list, with information on each contract including the name of the contact person; the status of work completed; whether retainage amounts had been paid; and whether any amounts were pending due to disagreements on work performed.

    Agency Affected: American Battle Monuments Commission

  5. Status: Open

    Comments: During our fiscal year 2012 audit, we found that the Headquarters active contracts list had not been reconciled to the undelivered orders account. In addition, we concluded that these lists were not adequately maintained. We also continued to find instances where the Commission did not properly close contracts and deobligate funds. In addition, the Commission could not identify any specific actions taken to address this recommendation. During our fiscal year 2014 follow-up, the Commission informed us that they plan to develop and implement procurement-related standard operating procedures to address our recommendation. Therefore, we will follow-up on this recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Human Resources and Administration at Commission headquarters to ensure that the Active Contracts List is reconciled to contracts on the undelivered orders report produced by the Commission's accounting system.

    Agency Affected: American Battle Monuments Commission

  6. Status: Open

    Comments: During our fiscal year 2011 audit of the American Battle Monuments Commission's financial statements, the Commission informed us that this recommendation was implemented with FMS and that ABMC now follows commitment accounting which prevents contracts from being signed before funds are reserved. During our 2012 testing we continued to monitor and we found no related issues. However, the Commission was unable to provide documentation or support for the corrective action instituted with FMS. During our fiscal year 2014 follow-up, the Commission informed us that they plan to develop and implement procurement-related standard operating procedures to address our recommendation. Therefore, we will follow up on this open recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Finance at Commission headquarters to follow existing budgetary procedures to ensure that contracts are officially agreed to and executed as of or before the date of obligation.

    Agency Affected: American Battle Monuments Commission

  7. Status: Closed - Implemented

    Comments: During our fiscal year 2011 audit of the American Battle Monuments Commission's financial statements, we found that the Commission took action to ensure that timely reconciliations of accounts payable general ledger balances and the Aged Vendor Liability Report were performed. The Commission issued a directive to accounting staff providing additional guidance to ensure staff perform timely reconciliation of the accounts payable ledger balances to the Aged Vendor Liability Report balances. During our fiscal year 2011 testing of the accounts payable balance, we verified that the Commission performed the required timely reconciliation of the accounts payable general ledger balance to the Aged Vendor Liability Report to materially reflect the accounts payable balance at year-end. By taking this corrective action, the Commission helped ensure that the accounts payable general ledger balance was in agreement with supporting documentation and reduced the risk of misstatements in the Commission's financial statements. We consider the Commission's actions sufficient to close this recommendation.

    Recommendation: The Secretary of the Commission should instruct the Director of Finance at Commission headquarters to direct accounting staff to follow existing accounting procedures to perform timely reconciliations of accounts payable general ledger balances to the Aged Vendor Liability Report balances to ensure reporting of accurate information, particularly at year-end.

    Agency Affected: American Battle Monuments Commission

  8. Status: Open

    Comments: During our fiscal year 2012 audit, we tested a sample of payroll transactions and found that not all personnel files contained accurate forms to support current payroll information. In one sample, the ABM-87 was not approved by a Director or designee. In another sample, the salary for the grade and step did not match that of the employee's local compensation plan. In a third sample, the employee's salary was not updated for a General Schedule step increase until almost a year later. In addition, the Commission has informed us that its corrective actions are ongoing and will be implemented in fiscal year 2014. Therefore, we will follow up on this open recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Human Resources at the Commission's Paris Overseas Office to follow existing policy to prepare, approve, and file current forms to support pay changes in foreign employee's official personnel file.

    Agency Affected: American Battle Monuments Commission

  9. Status: Open

    Comments: During our FY 2012 audit we discussed this recommendation with the Commission, and they informed us that they are developing procedures to review personnel files for completeness which should be implemented in fiscal year 2014. Therefore, we will follow up on this open recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Human Resources at the Commission's Paris Overseas Office to direct the Rome office personnel specialist to follow existing policy to prepare, approve, and file current forms to support pay changes in employee's official personnel files.

    Agency Affected: American Battle Monuments Commission

  10. Status: Open

    Comments: During fiscal year 2012, we determined that the Commission's policy is to use two forms for payroll actions. The headquarters office processes SF-50s for General Schedule (GS) employees and the Paris office uses SF-50s for GS employees and ABM-87s for foreign employees. We did not find any exception with this policy as the SF-50 is a required form for processing payroll actions for GS employees and the ABM 87 is a standard form for processing payroll actions for foreign employees. However, this policy is not documented. To clarify the intent of this recommendation, which is for the Commission to be consistent in processing payroll actions, we issued a subsequent recommendation that calls for the the Commission to direct appropriate officials to establish written policies and procedures outlining the key tasks, roles, and responsibilities of both the Human Resources Directorate and the Finance Directorate, including a formal mechanism for communicating all decisions and actions related to processing payroll for foreign employees. This would include the processing of payroll actions. During our fiscal year 2014 follow-up, the Commission informed us they will be establishing procedures to review personnel files for completeness. Therefore, we will follow-up on this recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Director of Human Resources at the Commission's Paris Overseas Office to establish a consistent policy for Paris and Rome offices to support changes in employee's official personnel files by using an SF-50, Notification of Personnel Action, for all employees.

    Agency Affected: American Battle Monuments Commission

  11. Status: Closed - Implemented

    Comments: During our fiscal year 2012 audit, we found that the Director of Logistics communicates the procedures for receiving goods to the superintendents via email. Approval stamps with respective names have been created for all superintendents and other approving personnel. During our testing of the Commission's operations and maintenance transactions, we did not find instances where the invoices were not signed or approved by appropriate approving personnel when goods/services were received. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Secretary of the Commission should instruct the Finance Directorate's Finance Officer at the Commission's Paris Overseas Office to instruct Commission personnel to print their name and sign when approving the receipt of goods and services.

    Agency Affected: American Battle Monuments Commission

  12. Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2010 financial statements, we found that Commission controls were not always effective in ensuring that the receipt and acceptance of goods and services were properly authorized and that invoice dates were accounted for in a consistent manner. The Commission informed us that it implemented a new financial management system in August 2011 that should address this recommendation. According to the Commission, the new financial management system enforces internal controls that allow only individuals with proper access to approve invoices. Further, the Commission stated that within the next fiscal year, the Commission will require all invoices to be stamped and signed prior to payment and a listing of stamps issued will be maintained to verify approving officials. During fiscal year 2014, the Commission documented the list of authorized approving officials to be used by personnel to verify the approval of invoices before payment. We consider the Commission's actions sufficient to meet the recommendation.

    Recommendation: The Secretary of the Commission should instruct the Finance Directorate's Finance Officer at the Commission's Paris Overseas Office to maintain an authorized list of approving Commission officials with their signature that Finance Directorate personnel can verify when processing invoices for payment.

    Agency Affected: American Battle Monuments Commission

  13. Status: Open

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2010 financial statements, we found that Commission controls were not always effective in ensuring that the receipt and acceptance of goods and services were properly authorized and that invoice dates were accounted for in a consistent manner. The Commission informed us that all Finance personnel were instructed to enter both the invoice receipt date and the invoice date when processing invoices for payment. However, during our fiscal year 2012 audit, we found that the date on the invoice was not consistently entered into the accounting system. For example, we found inconsistencies with the invoice receipt date being entered into the accounting system as either the date the goods were received, the date the invoice was received, or the date the invoice was being entered into the financial system. In addition, we could not verify whether current accounting procedures included this requirement. During our fiscal year 2014 follow-up, the Commission informed us that they plan to implement procedures, outside of those required steps in Oracle, for entering the invoice date. We will follow up on this recommendation at a later date.

    Recommendation: The Secretary of the Commission should instruct the Finance Directorate's Finance Officer at the Commission's Paris Overseas Office to modify existing accounting procedures to instruct Finance Directorate personnel to enter the date on the invoice into the accounting system.

    Agency Affected: American Battle Monuments Commission

  14. Status: Closed - Implemented

    Comments: In response to our recommendation, the Commission updated its accounting records to reflect contract files from the Rome office. During our fiscal year 2011 audit, we verified that the Paris Overseas Office maintained engineering and maintenance contract files, including those pertaining to the Rome Office. We consider the Commission's actions sufficient to close this recommendation.

    Recommendation: The Secretary of the Commission should instruct the Director of the Engineering Directorate at the Commission's Paris Overseas Office to instruct personnel to update and maintain all engineering and maintenance contract files for which the office is responsible to include the Rome office.

    Agency Affected: American Battle Monuments Commission

  15. Status: Closed - Implemented

    Comments: In response to our recommendation, the Commission updated its accounting records to reflect contract files from the Rome office and prepared an accrual report to include engineering contracts from the Rome office. During our fiscal year 2011 audit, we verified that the Paris Overseas Office maintained engineering and maintenance contract files, including those pertaining to the Rome Office, and that it prepared an accrual report on engineering contracts, including the Rome Office. This allowed the Commission to determine and report the proper accrual amounts for work performed but not yet paid at year-end in its fiscal year 2011 financial statements. By taking this corrective action, the Commission helped ensure the Commission's financial statement balances at year-end were complete and accurate. We consider the Commission's actions sufficient to close this recommendation.

    Recommendation: The Secretary of the Commission should instruct the Director of the Engineering Directorate at the Commission's Paris Overseas Office to prepare an accrual report on all engineering contracts to determine the amount of work performed but not yet paid at year-end for accounting and inclusion in financial statements to include the Rome office.

    Agency Affected: American Battle Monuments Commission

 

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