Weak Financial Controls Make the Community Services Administration Vulnerable to Fraud and Abuse

FGMSD-80-73: Published: Aug 22, 1980. Publicly Released: Aug 22, 1980.

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On a number of occasions, GAO has testified before Congress on embezzlement, apparent abuse, and questionable transactions involving grantees of the Community Services Administration (CSA). A study was made to determine: (1) whether CSA itself had a system of internal controls to adequately protect against fraud, theft, and abuse; and (2) how grantees protect against improper use of federal funds and the assets purchased with federal funds. CSA and its grantees annually handle about $2 billion in federal, state, local, and public funds. Some of this money is appropriated to other agencies but is spent by grantees whose operating expenses are provided by CSA.

CSA headquarters and its regional offices lacked some necessary internal controls over grant and payroll disbursements, grantee monitoring, cash receipts, and property management and have yet submitted their accounting system design for Comptroller General review and approval. Because of the lack of sound controls and an approved accounting system design, CSA is more vulnerable to fraud and abuse in these areas than is acceptable. The computer facility of CSA was highly vulnerable to unauthorized entry of the computer, manipulation or theft of computer programs and files, and fire. GAO found that the auditing efforts of CSA had recently improved, but more must be done if the agency's vulnerability to fraud and abuse is to be minimized. Grantee organizations continue to disregard the need for strong internal controls even after audits have identified weaknesses. GAO believes that federal funds at grantees and delegate agencies are highly susceptable to fraud and abuse because essential internal controls are lacking in almost every functional area. Furthermore, grantees could strengthen their internal controls at little or no additional cost.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of CSA should: (1) emphasize to all management levels the significance of good fiscal internal controls and the need for managers to make sure that tasks and functions for which they are responsible are adequately controlled; (2) implement a timely and accurate grant monitoring system; (3) reduce or suspend funding of grantees who are found repeatedly to have inadequate internal controls or have withdrawn excess Federal cash; (4) design, implement, update, and maintain proper controls and documentation of the computer system that will further reduce the risk of erroneous payroll and grant disbursements and improve the efficiency of data processing; (5) write, distribute, and implement detailed procedures for headquarters and regional offices to use in receiving, recording, and dispositing cash receipts; (6) properly separate property management functions; (7) improve the physical control and recordkeeping of furniture and equipment; (8) complete the formal security risk analysis of the computer center; (9) correct the remaining computer security and system control deficiencies; (10) continue testing the quality of audits; (11) require each grantee to arrange with an independent public accounting firm to document the internal controls; and (12) follow up on the specific grantee deficiencies for recovering money owed to CSA.

    Agency Affected:


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