American Battle Monuments Commission:

Management Action Needed to Improve Internal Control Procedures

GAO-09-714R: Published: Jun 17, 2009. Publicly Released: Jun 17, 2009.

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On February 27, 2009, we issued our report expressing our opinion on the American Battle Monuments Commission's (the Commission) fiscal years 2008 and 2007 financial statements and our opinion on the Commission's internal control as of September 30, 2008. We also reported on the results of our tests of the Commission's compliance with selected provisions of laws and regulations during fiscal year 2008. We reported that the Commission maintained, in all material respects, effective internal control over financial reporting (including safeguarding of assets) and compliance as of September 30, 2008. During our fiscal year 2008 audit, we identified accountability and internal control deficiencies that, while not individually or in the aggregate material to the Commission's financial statements, warrant management's attention. The purpose of this report is to present these deficiencies, to provide recommendations to address these matters, and to provide an overview of the status of our prior year findings and recommendations. Because of the sensitive nature of some of the issues we identified, we are communicating detailed information regarding our findings and recommendations on information systems and physical security in a separately issued Limited Official Use Only report.

During our fiscal year 2008 financial statement audit, we identified 13 control deficiencies related to accounting procedures of the American Battle Monuments Commission (the Commission). These issues existed at Commission headquarters, its European Regional (ER) and Mediterranean Regional (MR) offices, and its Manila American Cemetery. Specifically: At the Commission's headquarters, we identified the following accounting procedure deficiencies: (1) Significant intragovernmental transactions lacked supporting documentation (2) Some expenditure transactions lacked evidence of receipt dates and approvals (3) Trust funds did not adequately invest and account for donated funds (4) Trust fund receipts were not effectively reconciled with the Department of the Treasury (Treasury) (5) Miscellaneous receipts fund balance was not removed from the general ledger (6) Strategic plan was not updated in 3 years. At the Commission's ER office, we identified the following accounting procedure deficiencies: (1) Euro bank account transactions were not recorded and reconciled (2) English employees pension plan liability was not accrued timely (3) Some expenditure transactions lacked evidence of receipt dates and approvals (4) Undelivered orders report did not support the general ledger balance (5) Some vendors had multiple identification numbers. At the Commission's MR office, we identified as a control deficiency that some post allowances were not paid when due. At the Commission's Manila American Cemetery, we identified as a control deficiency that some expenditure transactions lacked evidence of receipt dates and approvals. To assist Commission management in addressing these findings, this report contains 24 detailed recommendations. We also identified 8 control deficiencies in information systems and physical security at Commission headquarters and its ER and MR offices. Due to the sensitive nature of these issues, they are being communicated to the Commission in a Limited Official Use Only report, along with another 20 detailed recommendations. As stated in its letter dated June 10, 2009, the Commission agreed with the issues in the report. As a result of our fiscal years 2004 through 2007 financial statement audits, we have provided the Commission's worldwide locations with 233 information system and noninformation system recommendations to improve its information technology systems, security, and accounting procedures. Through January 31, 2009, the Commission had implemented 220 of our recommendations, or 94 percent, and was working to implement the remaining 13 recommendations.

Status Legend:

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  • 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 Director of Finance at Commission headquarters should invest monument trust funds to earn interest as provided in the Commission's acceptance letter to donors.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we identified several investing and accounting deficiencies at Commission headquarters related to trust funds for seven monuments in Europe. Specifically, we found that funds were not being invested as stated in the Commission's agreement letters to donors. These letters provide that private donations be invested in interest-bearing securities of the U.S. government to fund future memorial maintenance. Since the first three monuments were accepted into the Monuments Trust Fund Program in fiscal year 2002, the Commission had not calculated and allocated investment interest to the funds. As a result, trust funds were not invested to earn interest towards the long-term care of these seven private monuments. Although not material to the Commission's financial statements, it is important that interest earned be accurately calculated and allocated to reduce future costs of the program and for audit verification. We recommended that the Director of Finance at Commission headquarters invest monument trust funds to earn interest as provided in the Commission's acceptance letter to donors. In its response to the Congress, the Commission stated that this recommendation had been implemented. During our fiscal year 2009 audit, the Chief Accountant provided documentation to support interest earned on monument trust fund investments as of September 30, 2009, and a schedule of interest allocation by percentage to each memorial trust fund, along with investment support from the Bureau of Public Debt and the U.S. Department of the Treasury.

    Recommendation: The Director of Finance at Commission headquarters should adjust current balances to correct accounts for fund 3320 for miscellaneous receipts received and transferred to Treasury.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our American Battle Monuments Commission (ABMC) fiscal year 2008 financial statements audit, we found that ABMC headquarters reported a miscellaneous receipts fund balance with Treasury of over $92,000 as of September 30, 2008, which Treasury reported for ABMC as zero. The Miscellaneous Receipts statute [31 U.S.C. 3302(b), (c)] and Treasury regulations (31 C.F.R. 206.5) require agencies to remit miscellaneous receipts from third parties to Treasury, at which time the balance on hand for ABMC becomes zero. However as of September 30, 2007, ABMC reported an opening balance in fund 3220 of $65,799, fiscal year 2008 collections of $26,674, and an ending balance of $92,473 as of September 30, 2008. Government Wide Account (GWA) reports from Treasury indicated only the $26,674 of fiscal year 2008 collections for the 3220 account and showed beginning and ending fund balances as zero, indicating that these amounts had been transferred to Treasury's miscellaneous receipts. According to Treasury, miscellaneous receipts collected during the year are recorded in the GWA system receipts account ledger and fund 3220 amounts are closed at the end of the fiscal year. However, ABMC accounting staff stated that these balances mistakenly were not adjusted and amounts were rolled over into fiscal year 2009. Therefore, ABMC's September 30, 2008, financial statements, fund 3320 accounts were overstated by $92,473. In GAO-09-714R, we recommended that the Director of Finance at ABMC headquarters adjust current balances to correct accounts for fund 3320 for miscellaneous receipts received and transferred to Treasury. In its July 23, 2009, 31 USC 720 response to the Congress, ABMC stated that they have taken immediate action to correctly state the fund account 3220 for miscellaneous receipts. The correction was made in March 2009 to correctly state the fund account. Based on fiscal year 2009 audit procedures, we confirmed that there was $52,638 remaining in fund 3220 agencywide. However, During October 2009, we confirmed that fund 3220 funds were transferred to Treasury and were zero as of October 31, 2009. ABMC transferred its miscellaneous receipts to Treasury as required by statute. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Director of Finance at Commission headquarters should communicate adjustments identified through monthly reconciliations to be made by other entities and track such adjustments until corrected.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission (ABMC) fiscal year 2008 financial statements, we noted that total trust fund receipts reported in the general ledger for fiscal year 2008 did not agree with the total amount reported by Teasury in the Government Wide Accounting (GWA) system. This was the result of a lack of effective monthly reconciliations by headquarters personnel. We identified a net difference of $141,000 between the trust fund receipts reported by the Commission and the receipts reported by Terasury's GWA system. At our request, Commission personnel investigated the differences and found they were caused by collections the Commission incorrectly reported to Treasury as expenditures, investment interest the Bureau of the Public Debt did not report to Treasury, amounts reported by Treasury incorrectly ont he GWA statement, and amounts omitted from the Commission's general ledger. Although it is not uncommon to find differences between the general ledger and Treasury due to timing differences in the recording of transactions, there ahve been significant differences beween Commission and Treasury balances in this account for the last 2 years resulting from errors that were not identified until reconciliation at year end. According to the Treasury Financial Manual, agencies are to reconcile accounts and post transactions monthly. This facilitates the timely identification and correction of differences before they accumulate at year end. We recommended that the Director of Finance at Comission headquarters take actions to communicate adjustments identified through monthly reconcilaitions to b e made by other entities and track such adjustments until corrected. In its response, the Commission stated that it would communicate differences found with the appropriate agency to ensure all identified or unidentified differences are corrected in a timely fashion and reported in the GWA system. This will be an ongoing effort to identify and communciate issues on a monthly basis or as the need arises. During our fiscal year 2009 audit, we determined that the trust fund accountant is now reconciling trust fund accounts and posting transactions monthly as required by the Treasury Financial Manual and we found no exceptions.

    Recommendation: The Director of Finance at Commission headquarters should post adjusting entries monthly for items within the Commission's control.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we noted that total trust fund receipts reported in the general ledger for fiscal year 2008 did not agree with the total amount reported by Treasury in the Government Wide Accounting (GWA) system. This was the result of a lack of effective monthly reconciliations by headquarters personnel. We identified a net difference of $141,000 between the $699,000 of trust fund receipts reported by the Commission and the $558,000 reported by Treasury's GWA system. At our request, Commission personnel investigated the differences and found they were caused by collections the Commission incorrectly reported to Treasury as expenditures, investment interest the Bureau of Public Debt did not report to Treasury, amounts reported by Treasury incorrectly on the GWA statement, and amounts omitted from the Commission's general ledger. Although it is not uncommon to find differences between the general ledger and Treasury due to timing differences in the recording of transactions, there have been significant differences between Commission and Treasury balances in this account for the last 2 years resulting from errors that were not identified until reconciliation at year end. According to the Treasury Financial Manual, Volume 1, Chapter 5100, Reconciling Fund Balance with Treasury Accounts, agencies are to reconcile accounts and post transactions monthly. This facilitates the timely identification and correction of differences before they accumulate at year end. In GAO-09-714R we recommended that the Director of Finance at Commission headquarters take actions to post adjusting entries monthly for items within the Commission's control. In its July 23, 2009, 31 USC 720 response to the Congress, the Commission stated that it will identify any differences and ensure adjusting entries are made monthly (if needed) that are within the Commission's control. All adjusting entries (if needed) will be completed before fiscal year end. During our fiscal year 2009 audit, we identified four adjusting and reconciling entries that should have been made to the trust funds before the end of the fiscal year. During our fiscal year 2010 audit, we found that all adjusting and reconciling entries had been made.

    Recommendation: The Director of Finance at Commission headquarters should timely investigate any differences identified during monthly reconciliations of Fund Balances with Treasury to the Government Wide Accounting system for trust funds.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we noted that total trust fund receipts reported in the general ledger for fiscal year 2008 did not agree with the total amount reported by Treasury in the Government Wide Accounting (GWA) system. This was the result of a lack of effective monthly reconciliations by headquarters personnel. We identified a net difference of $141,000 between the $699,000 of trust fund receipts reported by the Commission and the $558,000 reported by Treasury's GWA system. At our request, Commission personnel investigated the differences and found they were caused by collections the Commission incorrectly reported to Treasury as expenditures, investment interest the Bureau of Public Debt did not report to Treasury, amounts reported by Treasury incorrectly on the GWA statement, and amounts omitted from the Commission's general ledger. Although it is not uncommon to find differences between the general ledger and Treasury due to timing differences in the recording of transactions, there have been significant differences between Commission and Treasury balances in this account for the last 2 years resulting from errors that were not identified until reconciliation at year end. According to the Treasury Financial Manual, Volume 1, Chapter 5100, Reconciling Fund Balance with Treasury Accounts, agencies are to reconcile accounts and post transactions monthly. This facilitates the timely identification and correction of differences before they accumulate at year end. In GAO-09-714R we recommended that the Director of Finance at Commission headquarters take actions to timely investigate any differences identified during monthly reconciliations of Fund Balances with Treasury to the GWA system for trust funds. In its July 23, 2009, 31 USC 720 response to the Congress, the Commission stated that they have taken measures to ensure that monthly reconciliations are done to identify any differences between the agency's fund balance with the GWA system. The process will be done on a monthly basis. Based on our fiscal year 2009 reconciliation of the trust fund 8569 cash balance on the Commission's consolidated trial balance to Treasury GWA Statement as of 9/30/09, we identified no differences. However, we do not have any assurance that reconciliation of Fund Balance with Treasury to the GWA statement for trust funds was being conducted on a monthly basis during fiscal year 2009 as required by Treasury Financial Manual. During our fiscal year 2010 audit, the Chief of Finance and Accounting stated that reconciliations were being conducted monthly. Our interim and year-end testing confirmed that reconciliations were taking place and accounts balanced at year end. We found that entries were made as items arose throughout the year.

    Recommendation: The Director of Finance at Commission headquarters should transfer monument trust funds needed for immediate operations as determined by Commission engineering to the European Regional (ER) office and maintain the balance of the funds at Commission headquarters for investment.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we identified several investing and accounting deficiencies at Commission headquarters related to trust funds for seven monuments in Europe. The Commission agreed to repair and maintain these monuments upon donation of private funds to be invested for their long term care. Specifically, we found that funds were not invested as stated in the agreement letters with 7 organizations donating money under the Private Memorials Programs. We recommended that the Director of Finance at Commission headquarters take actions to transfer monument trust funds needed for immediate operations as determined by Commission engineering to the European Regional (ER) office and maintain the balance of the funds at Commission headquarters for investment. In its response, the Commission stated that this recommendation has been implemented. During our fiscal year 2009 audit, we were briefed on the Commission's Procedures for Execution of Funds Transfer for Private Memorials that detailed how private memorial monies should be received, deposited, invested, and interest allocated. On July 14, 2009, pursuant to the determination of the amount of residual funds to be invested, HQ invested $209,500 of private memorial trust funds in one year U.S. Treasury securities. As a result, the Commission has fulfilled its fiduciary duty to invest residual memorial trust funds in Treasury securities to earn interest.

    Recommendation: The Director of Finance at Commission headquarters should establish monument trust fund accounts by program code in the headquarters trial balance.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we identified several investing and accounting deficiencies at Commission headquarters related to trust funds for seven monuments in Europe. The Commission agreed to repair and maintain these monuments upon donation of private funds to be invested for their long term care. Specifically, we found that trust fund balances, including allocated interest, agreed to trial balances for headquarters and the ER office as of September 30, 2008. However, while the ER office trial balance also presents amounts by program code for each private memorial, the HQ trial balance presents only a total amount for all commemorative trust funds. This makes it difficult to track amounts by individual accounts and can result in errors or misallocations between accounts. We recommended that the Director of Finance at Commission headquarters take actions to establish monument trust fund accounts by program code in the headquarters trial balance. In its response to the Congress, the Commission stated that this recommendation had been implemented. During our fiscal year 2009 audit, we were provided a headquarters trial balance by program code that included each of the seven private memorial trust fund program codes individually. As a result, the Commission has improved its fiduciary responsibility for its private memorial trust funds.

    Recommendation: The Director of Finance at Commission headquarters should allocate interest to all monument trust accounts with funds on deposit.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we identified several investing and accounting deficiencies at its headquarters office related to trust funds. Specifically, we found that during fiscal year 2008, the Commission allocated interest earned to only six of the seven private monument trust accounts. One monument accepted into the program on February 5, 2007, had no interest allocated despite a balance of over $60,000 since that date. The trust fund accountant stated that no funds were invested for this account because an undetermined amount was to be spent for immediate repairs. However, the Commission has a fiduciary responsibility to invest funds in Treasury securities to earn interest. We recommended that the Director of Finance at Commission headquarters take actions to allocate interest to all monument trust accounts with funds on deposit. In its response, the Commission stated that this recommendation has been implemented. During our fiscal year 2009 audit, the Chief Accountant provided documentation of the memorial program funds invested, the interest earned, and the amount of interest allocated to each trust fund by percentage of the total interest earned. These amounts were supported by reports from the Bureau of the Public Debt and the U.S. Department of the Treasury.

    Recommendation: The Director of Finance at Commission headquarters should prepare documentation to support the complete and accurate calculation of interest earned on investments for monument trust funds.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission (Commission) fiscal year 2008 financial statements, we identified an accounting deficiency at Commission headquarers related to providing documentation for the calculation of interest earned for trust funds. Since the first three monuments were accepted into the Monuments Trust Fund Program in fiscal year 2002, the Commission had not calculated and allocated investment interest to the funds. Although subsequently, the Commission did credit interest earnings to individual monument accounts, it did not provide the support on how interest earnings were calculated to include the interest rates used and the period of time invested. Although not material to the Commission's financial statements, it is important that interest earned be accurately calculated and allocated as a fiduciary responsibility. We recommended that the Director of Finance at Commission headquarters take action to prepare documentation to support the complete and accurate calculation of interest earned on investments for monument trust funds. In its response to the Congress, the Commission stated that this recommendation had been implemented. During our FY 2009 audit, the headquarters Senior Accountant prepared documentation to support the calculation of interest earned on investments in fiscal year 2009 for the monument funds, including interest rates used and the period of time invested. As a result, the Commission now has fulfilled its fiduciary responsibility for the Monuments Trust Fund Program.

    Recommendation: The Director of Finance at Commission headquarters should instruct and monitor approving officials to ensure that expenditure transactions are dated when goods and services are received and approved before payment is made.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During a Commission-wide statistical test of expenditures conducted as part of our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we examined 24 transactions for Commission headquarters and identified control deficiencies in four transactions: two construction-related expenditures had no evidence of the date services were provided; one transaction for training expenses was approved after the service was provided; and one transaction for consulting services was approved for payment 15 days before the service was invoiced. When approving officials do not provide receipt dates, and payments are made before approval, improper payments may occur. Commission financial procedures require that transactions be dated and approved for payment by an authorized official before payments are made. We recommended that the Director of Finance at Commission headquarters instruct and monitor approving officials to ensure that expenditure transactions are dated when goods and services are received and approved before payment is made. In its response, ABMC stated that they will ensure that approving officials date all invoices that are received for goods and services in a timely manner before payment is made. During our fiscal year 2009 audit, we tested 23 transactions for ABMC headquarters. Based on the results of the items tested, we found that vendor payments were supported by documentation, goods/services were received and dated, and payments were certified and approved before payment for headquarters. As a result, ABMC headquarters has improved internal control and mitigated the potential for improper payments to occur.

    Recommendation: The Director of Finance at Commission headquarters should obtain documentation from other federal agencies to support its intragovernmental charges paid through Treasury's Intra-governmental Payment and Collection (IPAC) system.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our fiscal year 2012 audit, we tested intragovernmental transactions (IPACs) during operations and maintenance testing. The Commission provided the reports (for example, the Charleston report) they obtain for all intragovernmental charges paid through Treasury's IPAC system and we found no issues. We also tested the Commission's fund balance with treasury (FBWT) reconciliation process and found no issues or unreconciled amounts for the IPAC transactions. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Director of Finance at Commission headquarters should reconcile Fund Balance with Treasury to the Government Wide Accounting system for the miscellaneous receipts fund balance on a monthly basis.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we found that Commission headquarters reported a miscellaneous receipts fund balance with Treasury of over $92,000 as of September 30, 2008, which Treasury reports for the Commission indicated as zero. The Miscellaneous Receipts statute [31 U.S.C. 3302(b),(c)] and Treasury regulations (31 C.F.R. 206.5) require agencies to remit miscellaneous receipts from third parties to Treasury at which time the balance on hand becomes zero. However, the Commission reported an opening balance in fund 3220 of $65,799 as of September 30, 2007, fiscal year 2008 collections of $26,674, and an ending balance of $92,473 as of September 30, 2008. Government Wide Accounting (GWA) reports from Treasury indicated only the $26,674 of fiscal year 2008 collections for the 3220 account and showed beginning and ending fund balances as zero, indicating that amounts had been transferred to miscellaneous receipts at Treasury. According to Treasury, miscellaneous receipts collected during the year are recorded in the GWA system receipts account ledger and fund 3220 amounts are closed at the end of the fiscal year. Commission accounting staff stated that these balances mistakenly were not adjusted and amounts were rolled over into fiscal year 2009. Fund 3220 amounts resulted in the Fund Balance with Treasury to be overstated by $92,473. We recommended that the Director of Finance at Commission headquarters take actions to reconcile Fund Balance with Treasury to the GWA system for the miscellaneous receipts fund balance on a monthly basis. During our fiscal year 2010 audit, the Chief of Finance and Accounting stated that reconciliation of the miscellaneous receipts fund balance was being conducted monthly. Our interim and year-end testing confirmed that reconciliations were taking place. As a result of its actions, the Commission had strengthened internal controls over cash and improved the accuracy of its financial reporting.

    Recommendation: The Director of Finance at Commission headquarters should update the strategic plan for fiscal years 2009-2013 to comply with the 3-year period specified by the Government Performance and Results Act (GPRA) of 1993.

    Agency Affected: American Battle Monuments Commission

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we found that the Commission had not timely updated its Commission-wide 5-year strategic plan. Specifically, the Commission headquarters prepared a strategic plan covering fiscal years 2005 through 2010 in fiscal year 2005 but had not updated this plan for fiscal years 2006 through 2008. The Government Performance and Results Act of 1993 (Public Law 103-62) requires federal agencies, including the Commission, to develop strategic plans for 5 future years and to update the plan at least every 3 years. The plans are to include a mission statement; goals and objectives by major function; summary of resources, systems, and processes to achieve goals; how goals and objectives will be achieved; and key external factors. The Commission stated that its fiscal year 2005 strategic plan covered its planning, mission, and objectives through 2010 that had not changed and therefore, did not need an update. The Commission further stated that its annual budget process with the Office of Management and Budget (OMB) lays out its plans and performance goals for the year and is covered in testimony for congressional budget hearings. For annual reporting, the Commission stated that its management's discussion and analysis and its annual report update and report on its current mission, organization, operations, and performance goals and results. Further, in its fiscal year 2009 budget request to OMB, the Commission included its goals and objectives and outlined the means and resources required for achieving its stated objectives. However, in order to ensure that these activities are consistent with the Commission's 5-year strategic plan, the plan should be updated at least every 3 years. In GAO-09-714R we recommended that the Director of Finance at Commission headquarters take actions to update the strategic plan for fiscal years 2009-2013 to comply with the 3-year period specified by the Government Performance and Results Act of 1993. In its July 23, 2009, 31 USC 720 response to Congress, the Commission stated that its strategic plan would be completed by September 30, 2009. The Commission issued its fiscal years 2010 through 2015 Strategic Plan on December 22, 2009.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should identify all unrecorded transactions pertaining to the euro bank account and timely record them in the general ledger.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we identified errors and omissions in the Paris office's (formerly known as the European Regional office) recording of activity related to its euro bank account. The Paris office maintains a euro bank account primarily for petty cash reimbursements, to pay vendors who do not take credit cards, and for deposit of miscellaneous reimbursements. Specifically, we found that the account balance reported in the general ledger as of September 30, 2008, had remained unchanged since September 30, 2001, when the amount was established with the conversion of the account from French francs. However, changes in the bank balance due to other receipts and disbursements had occurred since September 30, 2001 and had not been recorded in the general ledger. The Paris office person assigned responsibility for the euro bank account was instructed by the former Paris office finance director to maintain this account on an imprest basis whereby reconciling items and the cash balance equaled a set amount. Federal standards for internal control state that transactions should be promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. Further, Commission accounting procedures require periodic reconciliation of financial accounts. The lack of timely recording and reconciliation creates errors and omissions in the financial statements and Treasury reporting and weakens internal controls over cash that can result in theft or loss. In GAO-09-714R, we recommended that the Finance Officer at the Commission's Paris office take actions to identify all unrecorded transactions pertaining to the euro bank account and timely record them in the general ledger. In its response, the Commission stated that it would identify all unrecorded transactions pertaining to the euro bank account and timely record them in the general ledger. During our fiscal year 2009 audit, we found that there were unrecorded transactions pertaining to the euro bank account and the remaining balance in the account was not reported on the general ledger. During our fiscal year 2010 audit, we found that the Commission timely identified and reported in the general ledger all transactions related to the Euro bank account.

    Recommendation: The superintendent of the Commission's Manila American Cemetery should provide dates when goods and services are received and approve all transactions before payment is made.

    Agency Affected: American Battle Monuments Commission: Manila American Cemetery

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, a Commission-wide statistical test of expenditures was conducted. We examined 12 transactions for the Manila American Cemetery and identified control deficiencies in 6 transactions: five transactions had no evidence of a date when goods or services were received, and one transaction for security guard services was paid before the payment approval date. When approving officials do not provide receipt dates and payments are indicated as made before approval, improper payments may occur. The Commission's financial procedures require that transactions be dated and approved for payment by an authorized official before payments are made. In GAO-09-714R we recommended that the Superintendent of the Commission's Manila American Cemetery take actions to provide dates when goods and services are received and approve all transactions before payment is made. In its July 23, 2009, 31 USC 720 response to the Congress, the Commission stated that it would ensure that approving officials date all invoices that are received for goods and services in a timely manner before payment is made. During our fiscal year 2009 Commission-wide statistical test of non-payroll expenditures, we again tested 12 transactions and found twice as many attribute errors including no evidence of a receiving stamp or signature or date, a signature to indicate receipt but no date of receipt, no purchase order or indication of the vendor ID number on supporting documentation, payment approval signed by not dated. During our fiscal year 2010 Commission-wide statistical test of non-payroll expenditures, we tested five transactions for the Manila American Cemetery and found no exceptions. Officials had approved the transactions prior to payment.

    Recommendation: The Director of the Commission's Mediterranian Regional (MR) office should have the Human Resource Assistant establish and implement procedures for post allowances, particularly when changes occur, to document that amounts are accurately and timely paid.

    Agency Affected: American Battle Monuments Commission: Mediterranean Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we identified the following control deficiency related to payroll at the Rome office (formerly known as the Mediterranean Regional office). Overseas post allowances are calculated by the U.S. State Department to pay for foreign living expenses for American employees overseas and are based on individual countries, employee pay levels, the number of employee dependents, and the percentage rate of reimbursement based upon foreign currency fluctuations. During a walk-through of internal controls over Rome office payroll, we identified one post allowance increase that was not paid when due. At our request, the Human Resources Assistant for the Rome office checked the post allowances for its remaining American employees. She identified the same underpayment for other American employees who were at the same pay and post allowance level as the employee we tested. These underpayments were caused by a lack of clear accountability between the Rome office and the General Services Administration (GSA) Finance Center in Kansas City, Missouri. As a service provider, the GSA Finance Center has responsibilities for processing pay, but the Commission is ultimately responsible for ensuring that its American employees are accurately and timely paid. In GAO-09-714R, we recommended that the Director of the Rome Office have the Human Resource Assistant take action to establish and implement procedures for post allowances, particularly when changes occur, to document that amounts are accurately and timely paid. In its July 2009, 31 USC 720 response to the Congress, the Commission stated that procedures have been implemented. During our fiscal year 2010 audit, we found that a new control procedure had been implemented to check the accuracy of post allowances, particularly in instances when changes had occurred.

    Recommendation: The Director of the Commission's Mediterranean Regional (MR) office have the Human Resource Assistant arrange with payroll processing to pay GS employees their correct post allowances from January 6, 2008.

    Agency Affected: American Battle Monuments Commission: Mediterranean Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (the Commission) fiscal year 2008 financial statements, we identified the following control deficiency related to payroll at the Rome office (formerly known as the Mediterranean Regional office). Overseas post allowances are calculated by the U.S. State Department to pay for foreign living expenses for American employees overseas and are based on individual countries, employee pay levels, the number of employee dependents, and the percentage rate of reimbursement based upon foreign currency fluctuations. During a walk-through of internal controls over Rome office payroll, we identified certain post allowance increases that were not paid when due. Specifically, we found that on January 6, 2008, a General Schedule (GS) employee received a pay increase that moved him to a higher annual pay level. While his regular pay reflected this increase, his post allowance continued to be paid at a rate based on his previous pay level. We recalculated his post allowance and determined that he had been underpaid through the end of fiscal year 2008 and this underpayment continued through November 10, 2008, when we conducted the walk-through. At our request, the Human Resources Assistant for the Rome office checked the post allowances and identified the same underpayment. These underpayments were caused by a lack of clear accountability between the Rome office and the General Services Administration (GSA) Finance Center in Kansas City, Missouri. As a service provider, the GSA Finance Center has responsibility for processing pay, but the Commission is ultimately responsible for ensuring that its GS employees are accurately and timely paid. In GAO-09-714R we recommended that the Director of the Rome office have the Human Resource Assistant take actions to arrange with payroll processing to pay GS employees their correct post allowances January 6, 2008. In its July 23, 2009, 31 USC 720 response to the Congress, the Commission stated that payroll has been corrected and paid. During our fiscal year 2010 audit, we confirmed that the Commission properly calculated and paid overseas post allowances. Therefore, we consider this recommendation closed as implemented.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should assign unique identification numbers to each vendor.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's fiscal year 2008 financial statements, we found that some contractors at the European Regional (ER) office had multiple vendor identification numbers in the PeopleSoft payment system. We were told by ER staff that this was because a few contractors perform contract work out of more than one location and each location was assigned a unique number to track the work. However, paying vendors with multiple identification numbers increases the risk that payments may be sent to an incorrect location, duplicate payments may occur, and funds may be diverted by a vendor employee by establishing a fictitious account for a location. In addition to weakening internal controls over vendor payments, multiple vendor identification numbers may interfere with the ability to track obligations against expenditures as required by federal budgetary accounting. We recommended that the Finance Officer at the ER office assign unique identification numbers to each vendor. In its response, ABMC stated that it concurred with the recommendation and took action to address the recommendation. This action entailed putting new procedures in place to prevent duplicate vendors within its system. During our fiscal year 2009 audit, we found that ABMC's actions effectively addressed this issue that gave rise to our recommendation. As a result, ABMC has mitigated the problem of paying vendors more than once because of multiple identification numbers. Therefore, we consider this recommendation implemented and closed.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should review identification numbers to eliminate duplicates for vendors assigned more than one vendor number.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's fiscal year 2008 financial statements, we found that some contractors at the European Regional (ER) office had multiple vendor identification numbers in the PeopleSoft payment system. We were told by ER staff that this was because some contractors perform contract work from more than one location and each location was assigned a unique number to track the work. However, paying vendors with multiple identification numbers increases the risk that payments may be sent to an incorrect location, duplicate payments may occur, and funds may be diverted by a vendor employee by establishing a fictitious account for a location. In addition to weakening internal controls over vendor payments, multiple vendor identification numbers may interfere with the ability to track obligations against expenditures as required by federal budgetary accounting. We recommended that the Finance Officer at the ABMC's ER office review identification numbers to eliminate duplicates for vendors assigned more than one vendor number. In its response, ABMC stated that it concurs with the recommendation. During our fiscal year 2009 audit, we found that ABMC initiated a project to address this issue which involved both the issuance of detailed instructions and tools. During the audit, we found that the ER office had effectively initiated the instructions and tools to eliminate duplicate vendor numbers and that the procedures put in place to prevent duplicates appear to be working. Therefore, we consider this recommendation closed.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should research differences between the undelivered orders report balance and the general ledger account balance and make necessary adjustments to agree totals.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we found that the September 30, 2008, undelivered orders report for the European Regional (ER) office was higher than the balance in the undelivered orders general ledger account. The undelivered orders report provides details of purchase orders and contracts that have been obligated against budget authority to support the general ledger and therefore, total amounts for each should agree. When differences occur, an out-of-balance condition is created that affects accurate financial statement reporting. The Anti-Deficiency Act prohibits federal entities from obligating or spending more than their available budgetary resources. Inaccurate accounting increases an entity's vulnerability to a violation of the act. Standards for internal control in the federal government require accounts to be adequately reconciled and supported. We recommended that the Finance Officer at the Commission's ER office take actions to research differences between the undelivered orders report balance and the general ledger account balance and make necessary adjustments to agree totals. In its response, the Commission stated that it was taking appropriate measures to identify differences in the undelivered orders report and the general ledger account balance. During our fiscal year 2009 audit, the HQ System Accountant provided us with a complete and detailed reconciliation of the ER undelivered orders account to the balance per the general ledger as of 9/30/2009. We analyzed the reconciliation of the ER obligated balances (SGL 4801) in the general ledger to the supporting ER purchase order detail database provided. We concluded that all differences between the undelivered orders balance and the general ledger had been researched and the necessary adjustments identified.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should instruct and monitor approving officials to ensure that expenditure transactions are dated when goods and services are received and approved before payments are processed.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Open

    Comments: During our fiscal years 2009, 2010, and 2011 audits, we continued to find expenditure transactions being processed prior to the goods and services being received and approved for payment. During our fiscal year 2012 audit, the Commission informed us that since the transition to a new financial management system in August 2011, all receiving is conducted in the iProcurement system (part of the Oracle accounting system) and must be complete before an invoice is processed for payment in Oracle. Although we found that invoices were approved before payment, we continued to find instances where the invoices were not dated and/or signed when goods or invoices were received. Therefore, we will follow up on this open recommendation at a later date.

    Recommendation: The Finance Officer at the Commission's European Regional (ER) office should consult with headquarters regarding the English defined benefit pension plan to obligate and timely record pension liabilities when identified by the plan actuary.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: The Paris office (formerly known as the European Regional office) of the American Battle Monuments Commission (the Commission) participates in a defined benefit pension plan to provide retirement benefits to its 11 Foreign Service National employees at the two American cemeteries in England. A defined benefit plan is intended to provide benefits at a future date and the present value of these benefits is compared to the funded amount. A net pension liability is created if benefits exceed assets or a surplus is created if assets exceed benefits. During our fiscal year 2008 audit, we identified a control deficiency in the timely accrual of liabilities regarding this plan. Specifically, we found that, due to recent decreases of values in the securities markets, the plan actuary determined in February 2008 that the plan was under funded and the Paris office needed to make additional payments to make up the shortfall. However, the Paris office did not obligate this liability until a purchase order was created on September 19, 2008. Moreover, it did not accrue its 4th quarter liability as of September 30, 2008. In GAO-09-714R, we recommended that the Finance Officer at the Commission's Paris office consult with headquarters regarding the English defined benefit pension plan to obligate and timely record pension liabilities. In its July 23, 2009, 31 USC 720 response to the Congress, the Commission stated that it concurs with this recommendation. During our fiscal year 2009 audit, we found that the Paris office Finance Officer again did not obligate its 4th quarter liability for the UK Pension Fund Scheme as of September 30, 2009. During our fiscal year 2010 audit, we found that the Paris office Finance Officer did obligate and accrue the plan deficit as of September 30, 2010. Therefore, we consider this recommendation closed as implemented.

    Recommendation: The Finance Officer at the Commission's ER office should accurately present the euro account balance in the monthly SF 1219 report, Statement of Accountability, filed with Treasury.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we identified errors and omissions in the Paris office's (formerly known as the European Regional office) recording of activity related to its euro bank account. The Paris office maintains a euro bank account primarily for petty cash reimbursements, to pay vendors who do not take credit cards, and for deposit of miscellaneous reimbursements. We found that the correct balance was not accurately reported on the monthly SF 1219 report, Statement of Accountability, filed with Treasury. The Paris office person assigned responsibility for the euro bank account was instructed by the former Paris office's finance director to maintain this account on an imprest basis whereby reconciling items and the cash balance equal a set amount. In the last 2 years, other transactions have occurred in this account that were not recorded in the general ledger. Federal standards for internal control state that transactions should be promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. These standards also state that reconciliations are control activities to ensure the completeness and accuracy of information processing. The lack of timely recording and reconciliation creates errors and omissions in the financial statements and Treasury reporting and weakens internal control over cash that can result in theft or loss. In GAO-09-714R, we recommended that the Finance Officer at the Commission's Paris office take actions to accurately present the euro account balance on the monthly SF 1219 report, Statement of Accountability, filed with Treasury. In its response, the Commission stated that it would accurately present the euro account balance in the monthly SF 1219 report, Statement of Accountability, filed with the U.S. Treasury. During our fiscal year 2009 audit, we noted that on the September, 2009 FMS 1219, there were no collection or disbursement item amounts for the euro bank account reported and the imprest cash amount in the euro account was not reported correctly. During our fiscal year 2010 audit, we found that the Commission had accurately accounted for the euro bank account's funds and associated transactions on the September 2010 SF 1219 report the Commission submitted to Treasury.

    Recommendation: The Finance Officer at the Commission's ER office should prepare monthly reconciliations of euro bank account balances to the general ledger.

    Agency Affected: American Battle Monuments Commission: European Regional Office

    Status: Closed - Implemented

    Comments: During our audit of the American Battle Monuments Commission's (Commission) fiscal year 2008 financial statements, we identified errors and omissions in the European Regional (ER) Office's recording of activity related to its euro bank account. The ER office maintains a euro bank account primarily for petty cash reimbursements, to pay vendors who do not take credit cards, and for deposit of miscellaneous reimbursements. We found that the ER office had not been periodically reconciling the euro account balance according to its general ledger to the balance reported by the bank. As of September 30, 2008, the bank balance exceeded the general ledger balance by almost 30,000 euros. The ER office person assigned responsibility for the euro bank account was instructed by the former ER finance director to maintain this account on an imprest basis whereby reconciling items and the cash balance equal a set amount. However, in the last 2 years, other transactions have occurred in this account that were not recorded in the general ledger. The Commission's accounting procedures require periodic reconciliation of financial accounts. The lack of timely recording and reconciliation may create errors and omissions in the financial statements and Treasury reporting and can also weaken internal control over cash that could result in theft or loss. We recommended that the Finance Officer at the Commission's ER office take actions to ensure monthly reconciliations of euro bank account balances to the general ledger. In its response, the Commission stated that it would prepare monthly reconciliations of euro bank account balances to the general ledger. During our fiscal year 2009 audit site visit, we verified that the Commission was, in fact, reconciling the general ledger balance in its euro bank account to the bank statements monthly. By taking this action, the Commission has resolved the risk of error and theft or loss.

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