U.S. Merchant Marine Academy:
Additional Actions Needed to Establish Effective Internal Control
GAO-12-369: Published: Jul 6, 2012. Publicly Released: Jul 6, 2012.
What GAO Found
The U.S. Merchant Marine Academy (Academy) has made progress in improving its internal control since GAOs August 2009 report, but has not yet fully addressed one key recommendation related to fundamental weaknesses in its overall internal control system. GAO found that while the Academy had appointed an Internal Control Officer responsible for coordinating reviews of internal controls, it had not yet established a comprehensive risk-based internal control system to ensure effective and efficient operations, reliable financial reporting, and compliance with laws and regulations, including a monitoring system to help ensure that control deficiencies are proactively identified and promptly corrected. Maritime Administration (MARAD) officials stated that their strategy had been to focus on the deficiencies that could be readily resolved. As of September 30, 2011, Academy and MARAD officials had addressed 32 of the other 46 prior recommendations regarding control activity deficiencies.
Importantly, for many of the specific control-related recommendations that remained open, the Academy and MARAD had not yet identified the cause of the related internal control deficiencies, a critical step for designing effective controls.
GAO also found that the Academy and MARAD have taken steps to improve Capital Improvement Program (CIP) oversight. For example, the Academy filled a new Assistant Superintendent position responsible for oversight of the Academys capital improvements and facilities maintenance. However, the Academy did not yet have an up-to-date, comprehensive plan for capital improvements to provide a basis for oversight. Specifically, the Academy did not have a capital improvement plan that identified long-term capital improvement needs aligned with the Academys strategic objectives, reliable cost estimates for planned improvements, and a phased implementation approach for prioritizing capital improvement needs. Such plan elements are consistent with Office of Management and Budget guidance and GAO-identified leading practices.
Why GAO Did This Study
The Academy, a component of the Department of Transportations (DOT) MARAD, was established in 1938 and built during World War II to provide undergraduate education programs for midshipmen to become shipboard officers and leaders in the maritime transportation field. DOT allocated $80 million to the Academy for fiscal year 2011 for its operations, CIP, and facilities maintenance.
In August 2009, GAO issued a report that identified numerous internal control deficiencies and made 47 recommendations for corrective action. This report provides the results of GAOs assessment of (1) the extent to which the Academy has taken actions to address the prior recommendations and (2) the Academys CIP oversight. To address these objectives, GAO evaluated corrective actions and supporting documentation; interviewed Academy, MARAD, and DOT officials; and performed walk-throughs of several processes revised in response to GAOs prior recommendations.
What GAO Recommends
In addition to reiterating the need to fully implement the remaining open recommendations, GAO is making one new recommendation directed at updating the Academys capital improvement plan to include reliable cost estimates and phased investment priorities aligned with the Academys strategic objectives in accordance with leading practices. In commenting on a draft of this report, DOT stated that it had recently established a comprehensive plan to manage CIP, and plans to keep GAO apprised as it completes actions addressing other GAO open recommendations.
For more information, contact Beryl Davis at (202) 512-2600 or DavisBH@gao.gov.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: DOT's Marine Administration (MARAD) provided GAO with a copy of the Academy's Capital Improvement Program (CIP) Fiscal Year 2014 Annual Report, Fiscal Years 2015-2019 Plan, and the Academy's Capital Improvement Programs as of September 2014 and December 2014. These reports include (1) a description and current status of the active CIP projects; (2) a list of completed CIP projects; (3) the CIP appropriation history; (4) the CIP five-year plan; and (5) documentation of the review and approval of CIP programs by the Academy's Senior Advisory Council. Further, the Academy's planned construction projects were listed by fiscal year, thus allowing a prioritization and phased investment approach for the Academy's capital improvement needs. Finally, an analysis of the cost data for the completed construction projects showed that the Academy's cost estimates had an accuracy rate of almost 99 percent when compared to total expenditures indicating the Academy had reliable estimates of capital improvement costs. The development of the annual CIP report and five-year plan, along with the review and oversight by the Senior Advisory Board and reliable cost estimates, provided the Academy with an inventory of long-range capital improvements aligned with its strategic objectives to help improve the management and cost analysis of CIP projects.
Recommendation: To improve oversight of the Academy's capital improvement program, the Secretary of Transportation should direct MARAD to work with Academy officials to develop and maintain a current and comprehensive plan in accordance with leading practices and guidance. At a minimum, such plan should include (1) an inventory of long-range capital improvements that align with the Academy's strategic objectives, (2) reliable estimates of cost specific to each capital improvement, and (3) a phased investment approach for prioritizing capital improvement needs.
Agency Affected: Department of Transportation