EPA-FMFIA:

EPA's Implementation of the Federal Managers' Financial Integrity Act

RCED-86-34: Published: Nov 13, 1985. Publicly Released: Nov 13, 1985.

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GAO reviewed the Environmental Protection Agency's (EPA) second-year implementation of the Federal Managers' Financial Integrity Act (FMFIA), focusing on: (1) improvements in EPA internal controls and the process EPA uses to evaluate and correct internal control weaknesses; (2) the status of the EPA accounting system and evaluations made to determine whether it conforms to the Comptroller General's requirements for such systems; and (3) the accuracy and completeness of the EPA annual FMFIA report.

GAO found that, while EPA has made progress in evaluating and improving its internal controls, it did not have an adequate basis for reporting that its systems of internal control met the objectives of FMFIA because: (1) the material weaknesses it reported for 1984 encompassed over 60 percent of its budget; (2) it failed to identify two uncorrected material weaknesses in its Superfund and Resource Conservation and Recovery Act programs that it reported in 1983; (3) it failed to identify material weaknesses in its automatic data processing (ADP) activities; (4) it did not uniformly implement its FMFIA process throughout the agency; and (5) it failed to perform internal control reviews (ICR) for a number of highly vulnerable program areas. GAO also found that EPA did not: (1) have an adequate basis to report that its accounting system was in conformance with the Comptroller General's requirements; (2) properly record and charge certain contract costs; (3) properly deobligate unspent grant funds; (4) establish documentation and data controls for its payroll accounting subsystem; (5) completely correct material weaknesses in its accounting system that it reported in 1983; or (6) adequately test its accounting system in operation to ensure conformance.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: EPA agreed and issued Order 2550.1 in June 1985 to implement this recommendation.

    Recommendation: To ensure that the accounting system evaluation made under FMFIA is thorough and comprehensive, the Administrator, EPA, should establish and implement a formal plan, including policies and procedures, on how EPA will implement section 4. The plan should include requirements for: (1) reviewing and testing the Financial Management System in operation to determine conformance with EPA policies and procedures and the Comptroller General's requirements; and (2) using Office of the Inspector General-reported accounting system weaknesses to determine whether planned actions have been implemented and whether they resolve the reported problems.

    Agency Affected: Environmental Protection Agency

  2. Status: Closed - Implemented

    Comments: EPA disagreed with this recommendation at the time of the report; however, extensive testing throughout all financial areas is now being performed through an ongoing quality assurance program.

    Recommendation: The Administrator, EPA, should not report that the EPA accounting system is in conformance with the Comptroller General's principles, standards, and related requirements until the system has been adequately evaluated while in operation.

    Agency Affected: Environmental Protection Agency

  3. Status: Closed - Implemented

    Comments: In fiscal year 1985, EPA trained 600 managers and supervisors in the FMFIA process.

    Recommendation: To more effectively implement the FMFIA process and to provide a stronger basis to report on the status of EPA internal controls, the Administrator, EPA, should assess FMFIA training needs and train staff as necessary.

    Agency Affected: Environmental Protection Agency

  4. Status: Closed - Implemented

    Comments: EPA presently requires program managers to do this.

    Recommendation: To more effectively implement the FMFIA process and to provide a stronger basis to report on the status of EPA internal controls, the Administrator, EPA, should require responsible program managers in the various EPA functional areas to validate that actions taken to correct weaknesses reported as corrected are adequate to prevent or reduce their recurrence.

    Agency Affected: Environmental Protection Agency

  5. Status: Closed - Implemented

    Comments: EPA has taken actions to update its corrective action tracking system to monitor uncorrected internal control weaknesses.

    Recommendation: To more effectively implement the FMFIA process and to provide a stronger basis to report on the status of EPA internal controls, the Administrator, EPA, should have the FMFIA tracking system monitor and follow up on all internal control weaknesses.

    Agency Affected: Environmental Protection Agency

  6. Status: Closed - Implemented

    Comments: EPA used several of the Office of Management and Budget suggested techniques to address the high and medium vulnerability areas.

    Recommendation: To more effectively implement the FMFIA process and to provide a stronger basis to report on the status of EPA internal controls, the Administrator, EPA, should schedule ICR for identified high and medium vulnerability weakness areas, where other forms of corrective actions were unsuccessful or inappropriate.

    Agency Affected: Environmental Protection Agency

  7. Status: Closed - Implemented

    Comments: EPA established the Resource Management Division to coordinate, monitor, and provide guidance for FMFIA implementation. Order 1000.24 FMFIA instructions have been superceded by Resource Management Directive Section 25.60, Internal Controls issued in July 1988, which defines program managers roles. This is supplemented by a guidebook issued on August 1, 1988.

    Recommendation: To more effectively implement the FMFIA process and to provide a stronger basis to report on the status of EPA internal controls, the Administrator, EPA, should fully define the role of EPA program managers in the FMFIA process, with a view toward having managers be more involved in evaluating internal controls.

    Agency Affected: Environmental Protection Agency

  8. Status: Closed - Implemented

    Comments: EPA completed its resegmentation process.

    Recommendation: In future FMFIA annual reports, the Administrator, EPA, should list all EPA internal control material weaknesses until they have been substantially corrected.

    Agency Affected: Environmental Protection Agency

  9. Status: Closed - Implemented

    Comments: EPA agreed with this recommendation and instituted a procedural change through a directive issued in October 1987 to comply with it.

    Recommendation: To ensure that the accounting system evaluation made under FMFIA is thorough and comprehensive, the Administrator, EPA, should properly record letter-of-credit payments.

    Agency Affected: Environmental Protection Agency

 

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