Commodity Certificates:

Backlog of 200,000 Unreconciled Certificates Affects Financial Reporting

RCED-89-14: Published: Oct 25, 1988. Publicly Released: Oct 25, 1988.

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John W. Harman
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Pursuant to a congressional request, GAO investigated: (1) the size of the backlog in redeemed commodity certificates that the Agricultural Stabilization and Conservation Service (ASCS) has not reconciled to issuance records; (2) ASCS plans for resolving the backlog; and (3) the extent to which the Department of Agriculture (USDA) has achieved a mandated $230-million reduction in storage, transportation, and handling expenditures for fiscal years 1988 and 1989.

GAO found that the ASCS Kansas City Management Office, which is responsible for issuing and redeeming certificates: (1) reported that the backlog of redeemed certificates with unresolved exceptions increased from over 170,000 in January 1988 to over 204,000 in April 1988 and would increase to about 320,000 by October 1988; (2) assigned 11 personnel to research and correct unreconciled certificates; (3) concentrated on unmatched redeemed certificates because of the large backlog in that category; (4) did not keep detailed records on the number of exceptions occurring each month, but estimated that it corrected about 25,000 each month; and (5) did not have a plan to resolve the increasing backlog, but outlined eight proposed backlog reduction plans as part of its year-end closing plan, which included developing software, writing off low-dollar-value exceptions, and assigning priorities to certain categories of exceptions. GAO also found that ASCS: (1) has not identified the root cause of the backlog to minimize the occurrence of future exceptions; (2) did not report that a material weakness existed in this area in its 1987 Financial Integrity Act report; and (3) projected a $610-million reduction in storage, transportation, and handling expenditures due to a significantly lower volume of government-owned grain.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Training was held in January 1989 for all state offices. Listings of exceptions were sent to counties and a 95-percent response was received. The Kansas City Management Office is evaluating the response to close out certificates. To date, USDA has reduced its backlog from 200,000 certificates to 12,000. It processed claims over $1.1 million and received actual collections of $769,000.

    Recommendation: The Secretary of Agriculture should direct the Administrator, ASCS, to develop a plan to address the remaining backlog of certificates with unresolved exceptions that ensures the accountability for commodity certificates and reduces the potential that undetected fraud could be occurring. This plan should: (1) clearly establish priorities so that high-dollar-value certificates are researched and corrected first regardless of the exception category; (2) be as specific as possible with regard to the methods that will be used, the resources to be allocated, and a schedule for completion; and (3) include steps to identify and correct the root causes of the exceptions, to minimize the number of exceptions that may occur in the future.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: As recommended, the unreconciled certificates were included in the Federal Managers' Financial Integrity Act report issued in December 1989. An accomplishment report will be prepared in July 1990.

    Recommendation: The Secretary of Agriculture should direct the Administrator, ASCS, to report in its Financial Integrity Act statement that a material weakness exists and provide an assessment detailing: (1) the impact of the backlog of certificates with unresolved exceptions on its financial statement; and (2) management's plans to correct the problem.

    Agency Affected: Department of Agriculture


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