UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, DC 20548 IN REPLY REFERTO COMMUNITY AND ECONOMIC DEVELOPMENT’ OlVlSlON July 11, 1977 Mr. Donald C. Cole Acting President and Chief Executive Officer United States Rallway Assoclatlon Dear Mr. Cole. In accordance with the Government Corporation Control Act, we have completedfan audit of the flnanclal statements of the Unzted States Rallway Assoclatlon (USRA) for the period July 1, 1975, through June 30, 1976, and issued our report to the Congress entltled,"Examlnatlon of the Unlted States Railway Assoclatlon's Flnanclal Statements and Other Matters Concerning Its Operations" (CED-77-64 dated July 8, 1977). We also observed several other matters during our examlnatlon which we wish to bring to your attention These matters were discussed with the Comptroller, the former Asslstant Comptroller, and the Director of Audits who indicated that corrective actlon would be taken INTERNAL CONTROLS OVER CASH TO BE IMPROVED We noted that USRA had not reconciled Its bank statements regularly, followed-up on checks outstandlng for an undue amount of time, or stamped supporting documentation to indicate that a payment had been made Allowlng checks to remain outstandlng for long periods and not lnsurlng that bank statements are reconciled regularly weakens the controls over cash disbursements. For example, a cash shortage may be concealed merely by omlttlng a check from the outstanding list. After we informed the Assistant Comptroller of this matter, he assured us that corrective actlon would be taken The Comptroller stated that stamping supporting documents "CHECK ISSUED" to lndlcate payment had been made was an addltlonal safeguard lnstltuted to help eliminate the recurrence of an embezzlement rncldent lnvolvlng the resubmlsslon of the same documents to receive two payments. He said that addltlonal personnel had been asslgned to his offlce so that, m the future, supporting documents would be stamped, bank statements would be reconciled within 25 days of receipt, and outstanding checks over 90 days old would be Investigated. Petty Cash Fund Since the establishment of the petty cash checkwrltrng system on July 31, 1974, USRA Internal auditors have conducted two audits of the fund. They reported on February 7, 1975, and February 25, 1976, that controls over petty cash fund actrvltles needed improvement, but the Comptroller took no actron. Two of the deflclencles noted m both audrt reports were: --lack of documentation to support voucher payments, --lack of notation on supporting documents to indicate the check had been Issued. Our review of petty cash vouchers totalrng about $6,000 disclosed deflclencles slmrlar to those reported by the internal auditors. After our audit, the USRA Comptroller informed us that to prevent recurrence of these deflclencles, a new cashier for the petty cash fund had been appointed and a r&vised order on petty cash procedures Issued. We noted that during fiscal year 1976 there were 20 instances where petty cash funds were used to pay $190 of traffic fines assessed against USRA messengers. We noted that four of the vlolatlons occurred at USRA's ofrice bullding where ample parking 1s normally available in its garage We also noted that USRA pald penalltles for late payment of parklng vlolatlons on two occasions. USRA offrclals told us they had evaluated the propriety of using petty cash funds to pay parkrng fines and had concluded that although additional personnel could have been hlred so that at least one employee remained with the vehicle while the other delivered the item, rt 1s more efflclent to incur and pay the fines. They also advised us that the payment of traffic fines 1s a proper exercise of Its admmlstratlve drscretlon. We disagree and belleve that the payment of traffic fines 1s an unauthorized expenditure of appropriated funds and should be dlscontrnued. REGULAR ANALYSIS OF ACCOUNT BALANCES AND ADDITIONAL SUPERVISORY REVIEW COULD HELP MINIMIZE ERRORS Our tests of accounting records revealed that many errors could have been avoided rf accounts were regularly reviewed. For example, we noted that -2- --two subsidiary accounts receivables had erroneous credrt balances and one subsldlary accounts receivable should never have been established; --the "vouchers payable-ConraIl" account and the "deferred credit“ account--both normally credit balance accounts--had deblt balances at June 30, 1976, --fourteen subsldlary travel advance accounts had been outstanding for at least 6 months at June 30, 1976, --four of the subsldlary travel advance accounts which existed at June 30, 1976, totalllng $414 were those of former USRA employees The Comptroller later told us that all of the errors had been corrected. During our'revlew of travel and representation expenses, we also noted numerous instances where the accounting codes were In error and amounts were charged to incorrect accounts For example: --$2,?30 was charged to travel expenses which should have been charged to representation; --$769 which should have been recorded In the relocation account was recorded in the travel expense account; --$213 was charged to representation for tax1 fares or parklng costs which should have been charged to the travel expense account. In addltlon, portions of vouchers 6464 and 8680 should have been charged to the travel account rather than to representaLlon. We believe that routine analysis and closer supervlslon would help to avoid the recurrence of many of these errors. FINANCIAL STATEMENT PREPARATION We found a number of errors in USRA's June 30, 1976, flnanclal statements. The cumulative total for obllgatlons should have been $46,156,828 instead of $46,151,414 a dzfference of $5,414. Although a small portion of the difference could be attributed to rounding, the maJor portion resulted from mathematical errors. The Comptroller agreed to make the necessary correctlons. -3- We also compared USRA's statement of expenditures to the state- ment of obllgatlons and found that cumulative expenditures exceeded the cumulative total for obllgatlons for the Offlce of Manpower Planning by $19,256 because two deobllgatlons were improperly recorded and several vouchers were erroneously recorded m the Manpower Planning cost center. Expenditures also exceeded obllgatlons in the Offlce of the Chairman by $71. The Comptroller told us that the items would be corrected In the accounting records. In addltlon to these errors, we found that USRA does not prepare a statement of sources and applxcatron of funds with its financial statements. This statement 1s only prepared when speclflcally requested by us. Title 2 of the General Accounting Office Policy and Procedures Manual for Guidance of Federal Agencies provides that the statements of financial posltlon and results of operations should be accompanied by a statement of sources and application of funds. Section 203 of the Government Corporation Control Act also requires that a statemenlt of sources and appllcatlon of funds be included m the report made by the Comptroller General to the Congress. We belleve the statement of sources and appllcatlon of funds provides information on all slgnlflcant transactions that affect the financial Qosltlon and thus assists management in evaluating the ways in which the current resources are used. Because we are only required to audit the financial statements of USFLAat least once every 3 years, several years may lapse during which no statement of sources and appllcatlon of funds will be prepared under USRA's current practice. Therefore, we suggest that you require a statement of source and appllcatlon of funds be prepared at the end of each fiscal year. Because of our contlnulng interest In USRA's flnanclal management system we would appreciate being advlsed of any actlons taken on our flndlngs or suggestions, We also wish to extend our appreclatlon to your staff for the courtesy and cooperation given to our representatives during this audit. Associate Director -4-
Other Matters Concerning the Financial Operations of the United States Railway Association
Published by the Government Accountability Office on 1977-07-11.
Below is a raw (and likely hideous) rendition of the original report. (PDF)