oversight

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)

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                                    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,



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              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



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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.


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     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


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      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