Management Report:

Improvements Are Needed to Strengthen the American Battle Monuments Commission's Internal Controls and Accounting Procedures

GAO-14-105R: Published: Nov 12, 2013. Publicly Released: Nov 12, 2013.

Additional Materials:

Contact:

Cheryl E. Clark
(202) 512-9377
clarkce@gao.gov

 

Nabajyoti Barkakati
(202) 512-4499
barkakatin@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

During its audit of the American Battle Monuments Commission’s (the Commission) fiscal year 2012 financial statements, GAO identified two material weaknesses that resulted in ineffective internal control over financial reporting as of September 30, 2012. Specifically, the material weaknesses concern the Commission’s financial reporting process and its monitoring process. Because of these control weaknesses, GAO found significant errors in the Commission’s financial reporting that were not detected by the Commission. The Commission made the necessary adjustments and was able to prepare financial statements that were fairly stated in all material respects by fiscal year-end. However, these material weaknesses increase the risk that a material misstatement of the Commission’s financial statements will not be prevented, or detected and corrected, on a timely basis. GAO also found that a previously reported significant deficiency concerning foreign payroll processing continued to exist during fiscal year 2012. These material weaknesses and the significant deficiency in internal control warrant the attention of those charged with governance of the Commission.

GAO also found one area of noncompliance with laws and regulations it tested. The area of noncompliance concerns the Commission not properly using its Foreign Currency Fluctuation Account for fluctuations in foreign currency exchange rates related to payments made in foreign currencies.

Further, GAO's work allowed it to close 12 of the 30 recommendations to improve the Commission’s internal controls and accounting procedures from GAO's prior financial audits that remained open at the beginning of the fiscal year 2012 financial audit. In addition, the Commission had completed corrective action on 2 of the 24 recommendations to improve information systems from GAO's prior financial audits that remained open at the beginning of the fiscal year 2012 financial audit. As a result, the Commission currently has 24 recommendations related to internal control and accounting procedures, which consist of the previous 18 open recommendations as well as 6 new recommendations GAO is making in this report, and 22 recommendations related to information systems that need to be addressed.

Why GAO Did This Study

The purpose of this report is to present internal control deficiencies identified during GAO's audit of the Commission's fiscal years 2012 and 2011 financial statements, along with 6 new recommendations to address the deficiencies for which GAO did not already have outstanding recommendations. This report also presents the status of the Commission’s corrective actions taken to address GAO's 54 previous recommendations from its prior Commission financial audits that remained open at the beginning of the fiscal year 2012 financial audit.

What GAO Recommends

GAO is making six new recommendations pertaining to the Commission’s material weaknesses in internal control over financial reporting and noncompliance with laws and regulations. These recommendations are intended to improve the Commission’s internal controls over its financial management and accountability of resources as well as to bring the Commission into conformance with its own policies, Standards for Internal Control in the Federal Government, or both. The Commission agreed with the issues raised and stated that corrective actions were under way to address the control deficiencies described in this report.

For more information, contact Cheryl E. Clark at (202) 512-9377 or clarkce@gao.gov.

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: The Commission should direct the appropriate officials to establish, document, and implement policies and procedures governing the financial statement preparation process that include detailed instructions and timelines for performing key steps in preparing the financial statements and related note disclosures, as well as supervisory review and documentation requirements.

    Agency Affected: American Battle Monuments Commission

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commission should direct the appropriate officials to establish, document, and implement a policy and related procedures for valuing its foreign currency transactions in its financial statements in accordance with applicable accounting standards and guidance for federal agencies.

    Agency Affected: American Battle Monuments Commission

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commission should direct the appropriate officials to establish and implement written policies and procedures requiring timely and continuous supervisory review of all financial transactions.

    Agency Affected: American Battle Monuments Commission

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To improve its monitoring of internal control, the Commission should direct the appropriate officials to establish and implement written policies and procedures for planning and conducting the Commission's annual assessment of internal control over financial reporting as required by OMB A-123. The policies and procedures should include; (1) documenting an understanding of its internal control environment, which entails such elements as the tone at the top, ethical standards, and personnel management, which can have a significant effect on how the organization functions and the integrity of its financial accounting and reporting; (2) documenting its assessment of the risk of material misstatement to its financial statements; (3) establishing and documenting its internal control objectives and related internal control activities in place to meet those objectives; (4) documenting the tests to be performed and the results of each test, clearly identifying exceptions and resulting deficiencies; and (5) establishing a corrective action plan for all identified deficiencies that specifies how and when each deficiency will be corrected, and assigning responsibility for its effective and timely resolution.

    Agency Affected: American Battle Monuments Commission

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To improve its monitoring of internal control, the Commission should direct the appropriate officials to establish and implement written policies and procedures for monitoring the activities of the external service organizations that perform significant aspects of the Commission's financial transaction processing and reporting, including implementing relevant complementary user entity controls identified by the service auditors.

    Agency Affected: American Battle Monuments Commission

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commission should direct the appropriate officials to revise its policy and implement procedures to comply with the Foreign Currency Fluctuation Account's (FCFA) governing statutes in section 2109 of title 36, United States Code, and the Consolidated Appropriations Act, 2012, by only using the FCFA to cover costs derived from fluctuations in Treasury foreign currency exchange rates that occurred after the submission of the budget request to Congress.

    Agency Affected: American Battle Monuments Commission

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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