oversight

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)

                                   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-