I -’ t “‘b . UNITED STATES GENERAL ACcQUNTlNG OWKE WASHINGTON, D.C. 20548 INTERNATIONAL DIVISION B-146703 MAR2 2 1971 I= Dear Mr. Meyer: We recently completed a survey of activities at the ,%gional Finance and Data Processing Zenter in Pzbris, Franoe, to obtain information needed for planning and performing future reviews. As a result of that work, we want to call your attention to sever& matters that we believe should be considered at this time. Weidentified three possibilities for improving the activities that were being performed at the Pari,e Center at the time of our survey. They consist of (1) making a current appraisal of ADPequipment requirements at the Center so that excess equipment capacity can be eliminated, (2) tightening controls over the issuance of checks by the Center so that the issuance of erroneous checks can be prevented, and (3) modifying the Center's practices in the managementof foreign currency bank accounts so that exchange sate losses can be reduced. Our views in each of these areas are included in the attachment to this letter entitled GAOViews on Internal Activities of the Regional Finance and Data Processing Center in &ris, France, dated Yarch 22, 1971. As indicated in the attachment, the suggested applTaisa1 of ADPequipment requirements will require consideration of future activities to be performed at the Center. Wewere informed by responsible officials at the Center that they recognized the existence of excess A.DPequipment capacity, but they thought that additional applications would be developed to achieve full utilization. FJebelieve, however, that changing fTinancia1 mxnagoment practices, as well as contemplated changes in the foreign assistance program, call for a reevaluation of the need to perform functions now performed at the Center. 5aJehave noted that the Department recently sent a special study group to Paris to make a current review of operations at the Center. Although we understand that the review was intended to be Umited to the consideration of Ideal data processing programs for Finance Zenters, particularly the Washington Finance Center, we believe that the scope of the review should be expandedto take into account the possibilities for removing or modifying functions now performed at the F%ris I=enter. 50 TH ANNIVERSARY 1921- 1971j+-iiKj To us, the most evident prosper t for eventually removing functions now performed at the R&.s 'Jenter is provided by the planned installation at Washington of a commondata processing facility for the foreign affairs community. We have advocated the establishment of %hat facility and have expressed the view that, to fully realize the benefits that are possible, emphasis should be placed on developing, to the maxQmmetient practicable, commonsystems for the foreign affairs agencies. One of the recognized opportunities for utilizing the facility as a part of a commonsystem is in the centralized prccess~ of payrolls-- an activity now conducted on a regional basis by the Paris Center. We believe that the continued processing of payroll on a regional- basis can- not be expected to eventually lead to a commonpayroll system for the foreign affairs community unless there is a strong coordinated effort amongthe agencies to develop such a syslxm. We believe also that to provide for adequate internal control the payroll system should be appropriately interfaced with the personnel system. However, we under- stand t&hat the Department is centralizd3g its personnel system in Washington. Accordingly, we suggest that the Department give consideration to the development of a centralized payroll system that is compatible with systems to be utilized by the other foreign affairs agenoies, and is appropriately interfaced with the personnel system. Ve believe that immediate benefits would result from the installation of such a centra- lized system as a replacement for the regional concept now governing the payroll operation at the Paris center, and that this change could then facilitate the eventual processing of alI. payroLls for the foreign affairs conmaiP;y under a commonpayroll system. The ut%U.zation by overseas organizations of the services of disbursing officers is another area where ehsnging conditions are creat- ing opportunities for improved financial managementpractices. For some time now, the Department has protided most of the overseas disbursing services for the other agencies , and the disbursing opemtion at the Paris Center has represented an advancementunder that corxept. Mow, however, Treasury is pm-forming the disbursing funotfon for Latin Amerkan loca- tions from kkhington, not only for the other agencies but also for the Departmat. In our opinion, the Department could substantially Improve its internal controls over financial transactions by expanding its use of disbursing services provided by Treasury. Webelieve that a transfer of the Center's disbursing function to Treasury would be especial2.y appropriate beoause the Center performs a fund accounting as weU 8~ a disbursing fum t&on, both of which are under the supervision of the Paris Center disbursing officer. A transfer of the disbursing func- tion, therefore, would completely segregate these two -functions, which would have the desirable result of establishing independently maintained controls over the validity of disbursements, -2- -. . Because Treasury now perform the disbursing function for Latin American locations from Wshington, we suggest that the Dewstment con- sider the feasibi.lity of having the Center's disbursing function performed by Treasury from Waehfngton.. It appears to u8 that a satisfactory solu- tion of the 'Mm factor should elkninate the Depax-trnent's need for maintainUg a disburssing offtie at Paris, Any efforPt to segregate the disbursing and the fund accounting functions now performed at the Center would seem to call for revisions in procedures followed by Posts serviced by the 3enter. Because it would no longer be necessary for the Posts to deal with the Center in connection with disbursing services b suoh revisions would seem to be dosimble 5-n both the disbursing and the accounting for Postsf aUolments. In this oonnectiond we believe that immediate consideration should be given to the de&.x-ability of eventually controlling overseas financial transactions under a comnonsystem for aL-1,the foreign affairs agencies, utilizing the planned commondata pmessL.ng facility at Washington for any processing to be performed centmlly under the system. Accordingly, we mggsat that the Department begin now to fomulate the concepts that will best seme all the ageracies under a common system, 80 that procedures within the k3.s region can be revised on a basis consistent with those oo?mepts. Copies of this letter with at~chment are being sent to the Director, Office of Managementand Budget, Comnissioner, Ekmeauof Accounts, Depament of the Tmasury, and the Foreign Operations and Government Information Subcommittee, House Committee on Government Operations. WC>wKl.3.appscaciate receiting your views on the xnatters discussed above, imluding advice of actions taken OF to be taken on the suggestions imorpomted in the attachment to this letter,, Frank Hbf. COSti Assistant Director Attachment The Monomble Frank G. Meyes Assistant Secretary, Bureau of AMnistmtion Department of State The GAOviews summarizedbebow are based on observations and limited inquiries made during a survey of activities at the Department of State's Regional Finame and Data Processing Center in Paris, Frame. We performed the survey during calendar year 1970. The results of the survey, together with related knowledge obtained elsewhere, have convinced us that the Department should reevaluate the need to perform furrctions now performed at the Paris Center. Our views on this subject are included in the letter to which this document is attached. Webelieve, however, that efforts should be initiated to -rove the titernal activities of the Paris Center, as it is now constituted, while the larger question about the Center's future role is being considered. These are the views that are included in the remaining portion of this document. Suggestion for making a current appraisal of JLDPequipment requirements We noted that the Paris Center was utilizing, on a less than full time basis, ADP equipment that appeared to be more sophisticated than the equipment needed for the current workload. accordingly, the Center is apparently incurring unnecessary costs for the rental of unused equipment capacity. We understand that the present equipment was acquired to permit the added processing of tisa activities, but tit the pJans for visa proces- sing were subsequently dropped. Ye understand also that it required time to revise the prior equipment programs to permit the efficient use of the present equipment, so that the excess capacity of the present squiprmnt has only recently becomea reafity. Officials at the Center informed us that, although general ideas had been advanced for additional applications of the equipment, no specific plans had been formulated for eliminating the mess equipment capacity. We suggest that a current appraisal be made of the ADPequipment retirements at Rmis so that al.1 excess capacity can be eliminated. We believe that the appraisal should take into account the Bepartment~s long- range plans with respect to the Center's future role. %sedfor a review of control5 over -- issuance of chsoks the J&:noted that the Paris Center has been finding it necessary, on a recurring basis, to take action to correct for check5 previously issued. Many of the action5 consisted of canceltig checks that had been returned for cancellation by the Posts. Someconsisted of action to recover funds from payees who had received and retained duplicate payments. The Center, of cour5e, is necessarily mare of the circumstances that caused known instances of duplicate payments requiring recovery action by the Center. Tn the case, of check cancellations z-quested by the Posts9 however, the Center does not always know why the cancell.ations have been requested. The cancellation of checks previously issued could be nezes- 5ary for a variety of reasons, imlud3-ng erroneous actions be the Posts -2” in authorizing the iasuanoe of checks as well as erroneous actions by the Center in complying with the PostsJ authorizing submissions. Wewere infomed by a responsible official at the Paris 3enter that9 although the Center does not have complete records to show why checks had to be cancelled, most of the check cancellations were probably attributable to opemtions at the Posts rather than the Center. The reasons given for suoh canoellations tiluded incorreot coding or duplicate transmittals by the Posts and changes in the status of payees by the time :suthori.zed cheeks were received for payment, In the case of identified instances of the Center issuing dupU.cate eheoks, we were Lnformed that the types of errors made by the Center have included (1) the issuanos of a check, on request, without the normal authorizing voucher. and the subsequent fssuance of a duplicate check when the authorizing voucher was received, and (2) the issuance of dupli- cate cheeks as a result of the Center processing an authorizing voucher ttie. In addition, we noted that a third type of discrepay has occurred at the Center when a check that was intended to be voided was unintentionally released, which resulted in the issuance of duplicate checks when the valid cheek was subsequently issued. Webelieve that the Center should have firm controls to ensure that checks are released from the Center only on the basis of valid disbursement authorizations, and to prevent the release of' checks that do not conform with authorizations. We beLLeve also that the Center should investigate and determine the preuise causes of every identified instance in which corrective action was required with respect to a check previously issnred so that both the Center's and the Posts' controls can be maintained at maximumeffectiveness. -3- We suggest that the Center make a crLtioa1 review of its internal controls over the issuanue of checks, strengthen them wherever necessary, and establish a pmgml for recording, revLe, and taking actions to prevent the r~c~urrs.no~of saoh ooaztinuing discrepancy as it is idsntlfied. We observed that,, during fiscal year 1970, the Paris Senter lost $273, 622 as a result of the downwardmovementof emhangs rates applicable to foreign ourrsnafes h&d in ths disbursing officer's bank accounts. The Center also gained $292,215 dur~ the sameperiod as a result of exchange rate movementsin the opposite direction. IJe noted, however, that ths losses had been incurred primarU.y on a small number of currencies, and that these currsnoies had accounted for very little of the gains. We therefors believe that the center has an opportunity to reduoe its exchange rate losses through tighter managementof sslected foreign currencybankaocounte. Obviously, any reduction in such losses would be beneficial to the monetary position of the United States. The follwting schhsduleajhms the net losses incurred as a result of exc~e, rate fhotuahions appltiable to currencies that accounted for most of the losses during fisoal year 19700 Net Losses c-%xlns -- Losses s v CFA franc $ 46,820 $23,329 $ 23,491 Turkish Zira 12,837 7,722 59115 Afghani 2,714 46,497 Ifikliall franc 2,383 1,660 French franc Congo saire 7,491 32 4?2! 9 LC30nf3 Iklagasy franc Total -b- Someof the losses shown above were incurred fairly consistently throughout the year, while others followed a more sporadic pattern. For example, losses inourred on the currency of Afghanistan were spread over nine of the twelve months, whereas the losses incurred an the French franc ocaurred primarily in one month, and to a muoh lesser extent, three other months. Officials at the I%ris Center have recognized that it may be possible to reduce someof the exchange rate losses through tighter managementof foreign currency bank accounts, but they have cited the sudden devaluations such as the devaluation of the French f,ranc as svi- dance of their inability to predict that losses of that type -KLl be iracurred. We recognize that currency devaluations are sometdmesbssed on political deoisions that cannot always be forecasted, Ye believe, however,, that the Department has the expertise needed to identify the currencies that are monetarily weak even when official exohange rates do not yet reflwt the weakness. Personnel at the Paris Center have informed us that they have the ability to replenish foreign currenoy accounts within 48 hours or less. Under these conditions, and because the ",enter also controls disbursements, it seems that absolute minimumamounts could be maintarlned in the accounts for foreign currencies known to be weak, Accordingly, we suggest that consideration be given to the development of modified approaches to the managementof foreign currency ba-nkaccounts. At the present time, Departmental regulations allow the Taris 3enter to maintain an amount in any foreign currency account which is sufficient
Activities at the Regional Finance and Data Processing Center in Paris, France
Published by the Government Accountability Office on 1971-03-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)