b UNITED STATES GEMERAL~CCCIUMTING BFFKE WASHINGTON REGIONAL OFFICE FIFTH FLOOR 803 WEST BROAD S-I REET FALLS CHURCH, VIRGINIA 22046 FEE! 2 8 KU’7 Mr. Harvey J. Baine III Assrstant Adms.nlstrator for Fztscal Affairs National Credit Union Administration 1 f 2267 2025 M Street, NW. Washington, D.C 20456 Dear Mr. Baine: As you know, we have recently completed our annual audit of the National Credit Union Admlnlstratlon's flnanclal statements In connecti<nwlth that-effort, we revlewed selected aspects of the Internal -- control system In effect * Based on our review, we found controls over payments to contractors, cash receipts and deposits, and voucher reviews could be strengthened and recommended improvements as dls- cussed below In addition, we found the Admlnlstratlon's lidblllty for security services Drovlded had not been prop- erly recorded In the accounting records We discussed these points with the Director, Division of Financial Management :s2qc/ f nwmn \ m-x- .--a+-. TTT. rrmc. #Y.-b \UAL’/, and &i-i all cases w2re ,nformed that b”LLcrLL.l.“cz UbLJ.“II would oe iza~erl Payments to contractors The Administration had 18 active\ non-Federal Government contracts totaling in excess of $346,000 as of June 24, 1976. These are contracts for products and services to various offices throughout the Adminlstratlon Offlclals in the receiving offlces are aware of contractual terms and contrac- tor performance, and effective fund control requires that such offlclals play a key role in processing contractor bill- ings for payment We found, however, that lnvolces against contracts are not sub3ect to approval by the reclplert prior to payment by DFM DFM personnel do not routinely verify that the terms of the contract were met and that the charges do not exceed the contract price before processing an invoice for payment This practice could result in erroneous payments to con- tractors or payments for inadequate contractor performance We recommended action be taken to insure effectrve management control of disbursements to contractors The Director, DFM, also recognized tne weaknesses in this system He informed us that a new procedure would be lnstltuted that would require prior approval of certlfylng contractor per- formance by the cognizant offlclal recelvlng the service before any payments are made and would develop a control wlthln DFM to insure payments do not exceed contract price ceilings. Cash receipts Daily receipts through the mall are logged by the cash clerk for DFM Mailroom personnel occasionally open mall when the clerk 1s not present, and some receipts are not recorded lmmedlately. The risk of theft or loss could be mlnlmlzed by requiring the presence of the cash clerk when mall 1s opened. l We recommended to the Director, DFM, that mail be opened only when the cash clerk 1s present to record the cash receipts. He agreed and informed us that corrective action would be taken Daily deposits An aCC:OuilkiG$ LLEChiilClXi iii v-+tT,h prepares YI II dSi:f Cash receipts for deposit wrth the Admlnlstratlon's bank account. The deposits are taken to the DFM Director's office and remain without safeguard in his secretary's outgoing mail box until picked up by a messenger and taken to the bank. The messenger signs for deposits but does not obtain a bank receipt for funds deposlted. These practices provide Inade- quate control and unclear responslblllty for cash receipts, and could result in the loss of cash receipts. We dlscussed this matter with the Director, DFM, and he assured us that dally deposits would be locked in a bag and safeguarded while awaltlng messenger pickup and that the messenger would carry dally deposits to the bank in the locked bag. Voucher review The Administration's procedures require documentary evidence that the transaction voucher review phase of the system of internal control LS being practiced. Our review of the Administration's accounting records showed that trans- actlon vouchers in many cases were not signed by approving officials. Personnel in DFM should indicate their reviews by 2 signature or lnltlal to substantiate the system of Internal control is being followed In DFM. We discussed this matter with the Director, DFM, and he informed us he would emphasize this internal control point to his staff. Liability for security services Security services for the Administration's headquarters office are provided by the General Services Admlnlst~ation (GSA) under contract on a fiscal year basis. The Administra- tlon recorded no llablllty for fiscal year 1976 services at yearend pendlng receipt of a bill from GSA. Accounting prin- ciples require the recognltlon of llabllltles lnrflnanclal statements even when precise amounts are unknown, in order to provide a proper matching of revenue and expenses. The secu- rity service expense could be reasonably estimated and recorded In the accounting records based upon periodic bill- ings from GSA. As a result of our dlscusslons with officials in DFM, t_he ~c~ountln~ records wp~- adpcted In flccal. year 1977 L LO rzflozt the sech~it3 5.2.~<ice I~i;Li.litg Gf $9,2CC IiGf fiscal year 1976, and the expense ~111 be recognized as Incurred in the future. We appreciate the corrective actions promised and taken by the Director, DFiY. If you have any questions concerning the matters discussed in this letter, please contact us Thank you for the courtesy and cooperation provided our staff during the review. Sincerely, David P. Sorando Regional Manager $ ",rs- 3
Review of the National Credit Union Administration's Internal Control System
Published by the Government Accountability Office on 1977-02-28.
Below is a raw (and likely hideous) rendition of the original report. (PDF)