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Highlights

GAO examined the financial statements of the Pension Benefit Guaranty Corporation's (PBGC) Single-Employer and Multiemployer Funds for the years ended September 30, 1992 and 1991, focusing on PBGC: (1) financial condition; (2) internal controls; and (3) compliance with applicable laws and regulations.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Pension Benefit Guaranty Corporation 1. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct the Chief Financial Officer (CFO) to establish controls over the development and use of personal computer-based accounting applications.
Closed - Implemented
PBGC installed a PC-based software package to provide formalized controls over the development and use of PC accounting applications. In addition, PBGC implemented procedures for the electronic transfer of data between PC-based systems and instituted procedures to require supervisory review and approval of such processes. Recently, PBGC installed a standard general ledger system that will accumulate trust and revolving account balances and prepare the fiscal year 1995 financial statements, rather than performing these functions on PC-based spreadsheets outside the general ledger systems.
Pension Benefit Guaranty Corporation 2. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to require the use of security access software to limit and detect unauthorized access to computerized application software.
Closed - Implemented
The Corporation implemented policies and procedures to limit and detect unauthorized access to computerized application software. The Corporation implemented a computer security policy and reduced excessive privileges of systems programming personnel. However, immaterial internal control weaknesses continue to exist; for example, some programming personnel continue to have access to security privileges not necessary for their assigned duties.
Pension Benefit Guaranty Corporation 3. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to implement a formal system methodology to govern the consistent development and modification of computerized application systems and controls.
Closed - Implemented
PBGC is addressing this recommendation as part of its broader ongoing efforts to further integrate its financial systems, an area in which it has made significant progress. In contracting for its recent systems development projects, PBGC required its contractors to follow an appropriate systems development methodology. PBGC established a new division for systems applications and assigned it the primary responsibility for developing and implementing a corporation-wide methodology for system development and modification. PBGC plans for a methodology expert to head this task. The Inspector General will monitor PBGC's further systems improvement efforts.
Pension Benefit Guaranty Corporation 4. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to implement a financial system improvement plan which effectively utilizes integrated financial systems to address current and anticipated information requirements.
Closed - Implemented
PBGC developed financial systems improvement plans and made significant progress integrating its financial systems and reducing risks from its financial systems which presently remain nonintegrated. PBGC implemented an automated Standard General Ledger system, which facilitated its financial statement preparation and the related reconciliations and internal controls. PBGC also implemented a revised Premium Accounting System, enhanced its Multiemployer Evaluation System, and continued other projects to enhance or replace its systems. In addition, PBGC took steps, including implementing certain compensating supervisory reviews and approvals, to reduce risks from systems not presently integrated. The Inspector General will monitor PBGC's continuing financial systems improvement efforts.
Pension Benefit Guaranty Corporation 5. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to require the preparation of financial statements more frequently that annually.
Closed - Implemented
Beginning for the second quarter of fiscal year 1994, PBGC has prepared quarterly financial data. Beginning for the first quarter of fiscal year 1995, PBGC enhanced this process by including additional key data, such as estimates of terminated and probable plan benefit liabilities and related losses, actuarial charges, and adjustments, so that the quarterly financial data represent interim financial statements.
Pension Benefit Guaranty Corporation 6. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to implement a formal process that uses current and accurate financial information to: (1) monitor all financially troubled multiemployer plans; and (2) determine the fund's current financial exposure from those financially troubled plans that are likely to require future financial assistance.
Closed - Implemented
For FY 1993, PBGC initiated a more comprehensive assessment process to obtain the data needed to identify and monitor financially troubled plans and report its exposure to those plans that may require financial assistance. However, the internal controls over this process were ineffective, and GAO made recommendations on those weaknesses in its report on PBGC's FY 1993 financial statements. In auditing PBGC's FY 1994 financial statements, GAO found that, although improvements had been made, significant deficiencies existed in computer security controls for PBGC's Multiemployer Evaluation System and in certain supervision and review functions. PBGC completed computer system enhancements to address the security control deficiencies and assigned additional responsibilities to address the other deficiencies. PBGC is monitoring at-risk plans and calculating financial exposure from those plans likely to need future financial assistance.
Pension Benefit Guaranty Corporation 7. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to implement a process for audits and/or other tests of financial information of multiemployer plans requesting future financial assistance to provide reasonable assurance that the amounts provided are actually needed and used to pay guaranteed benefits and related expenses.
Closed - Implemented
PBGC implemented a program for performing audits of multiemployer plans that request financial assistance and is establishing procedures for performing other tests to obtain assurance that amounts provided to multiemployer plans are needed and used to pay guaranteed benefits and related expenses. During the audit of PBGC's fiscal year 1994 financial statements, GAO found that PBGC had obtained sufficient evidence from multiemployer plans requesting financial assistance to support the need for requested amounts and to demonstrate the amounts provided were used to pay allowable plan benefits and expenses.
Pension Benefit Guaranty Corporation 8. To strengthen financial systems and corporate-wide financial accounting and reporting controls, the Executive Director, PBGC, should direct CFO to implement the Inspector General's recommendations on strengthening internal controls over participant data and field benefit administrators as reported in Inspector General Report No. 93-6/23069-1.
Closed - Not Implemented
During fiscal year 1993 PBGC strengthened controls over the activities of field benefit administrators by implementing procedures to perform audits of field benefit administrators and to reconcile benefit payment information provided by the field benefit administrators with other PBGC records. PBGC is implementing programs that will perform online edits of participant data. However, the audit of PBGC's fiscal year 1994 financial statements found that significant control weaknesses remained with respect to participant data. This recommendation is no longer applicable because the recommendations in Inspector General Report No. 93-6/23069-1 have been updated and superseded by recommendations in Inspector General Report No. 94-6/23079-1, which is addressed in an open GAO recommendation (GAO/AIMD-94-109).

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