oversight

Need for Improved Controls in the Automated Central Payroll System of the Department of Agriculture

Published by the Government Accountability Office on 1971-11-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Need For Improved Controls In The
Automated Central Payroll System
Of The Department Of Agriculture
                              B-   146951




UNITED  STATES
GENERAL ACCOUNTING   OFFICE
                                        UNITED STATES GENERAL               ACCOUNTING        OFFICE
                                                      WASHiNGTON,         D.C.     20548


CIVIL       DIVISION


                    B- 146951

        I           Dear     Mr.   Secretary:         e-5.”

                             This is our report             on the need for improved            controls    in your     au-
                    tomated      central payroll           system.     The report      contains      recommenda-
                    tions   to you for attaining            the improved     controls.

                              Your attention       is invited      to section     236 of the Legislative           Reorga-
                    nization      Act of 1970 which          requires     that you submit        written     statements
                    of the action       take% with respect           to the recommendations.              The state-
                                                                                                                                   !y:    :
                    ments      are to be sent to the House              and Senate     Committees         on Govern-          ..
                    ment     Operations        not later    than 00 days after        the date of this report
                    and to the House           and Senate      Committees        on Appropriations          in con-                  _>
                    nection     with the first       request     for appropriations         submitted      by your
                    agency      more     than 60 days after          the date of this report.           We shall
                    appreciate       receiving      copies     of the statements        sent to these
                    Committees        .

   ,-        “..i            A copy of this report           is being sent to Congressman               L. H. Fountain,’
                    pursuant     to his request.          Copies    of this report       are being    sent today to
                    the Chairmen,         House      and Senate     Committees        on Government        Operations;
                    the Chairmen,         House      and Senate     Committees        on Appropriations;        and the
                    Senate    Appropriations          Subcommittee        on Agriculture       and Environmental         .. 2 :. r
                    and Consumer          Protection;      the Director,       Office    of Management        and
                     Budget;   and the Office         of the Inspector      General.

                                                                                 Sincerely    yours,




                                                                                     (l~-+&wJ
                                                                                 Director,     Civil   Division

                    The    Honorable
                    The    Secretary      of Agriculture




                                                  50TH        ANNIVERSARY         1921-1971
I
I


II      'GENERiL ACCOUNTINGOFFICE                                     NEED FOR IMPROVED CONTROLS IN THE
I        REPORTTO THE SECRETARY                                       AUTOMATED CENTRAL PAYROLL SYSTEM OF THE
I        OF AGRICULTURE                                               DEPARTMENT OF AGRICULTURE  B-146951

I
I
I       DIGEST
        ------
I
I
I       WHYTHE REVIEW WASMADE
I
I
I           The General    Accounting       Office   (GAO) is required      by law                                   to review      from
I           time to time accounting          systems of executive       agencies.                                      This review       of
I
I         ! the automated     central     payroll   system of the Department                                         of Agriculture
I
I           was undertaken     accordingly.        The review&did     t~&t include                                     a payroll      audit,i
I
I
I
I               The Department's      payroll             system processes      annual  payrolls                             of about
II
I               $1.2 billion     for about             100,000   employees.      The system is                          operated  by the
I               Department's     Management             Data Service     Center    at a cost of                         about $4.3 mil-
I
,               lion   annually.

I
I
I       FINDINGS AND CONCLUSIONS

                The network          of controls        in an automatic          data processing       system is the key
                factor      to the reliability             of the system and the products                 it produces.       The
                controls       built      or programmed       into the Department            of Agriculture         computer
                to ensure        the accuracy         and reliability         of the input       data and its proc-
                essing      generally        were functioning          properly      and the processing         of the pay-
                roll     usually       produced     reliable results.             Management     controls     over certain
                manual aspects            of the system,        however,       need to be strengthened            to increase
                its efficiency             and effectiveness          and to minimize        the possibility         of im-
                proper     manipulation          of the information            in the system and thereby              lessen
                the potential            for irregularities.

                GAO noted          that     there   was a need        to       provide         for

                   --proper         segregation    of         duties between             the         programming         and computer
                                                                                                                               *+
                                                                                                                                                    op-
                      erations         of the system           (see      p. 6);

                   --current          documentation           for the      primary system                 to    facilitate          future          re-
                         visions      and management            review     (see p. 8);

                   --an adequate    and safe backup                      system for contingency                      use      in   case      the
                      primary  system was destroyed                        (see p. 8);

                   --more   effective             programs       to improve   controls   over (1) the maximum                                      num-
                      ber of hours             for which       an employee    could be paid in a pay period,
                         (2) overtime          payments,       (3) payroll    deductions    for savings bonds,                                     and
                         (4)   retirement         deduction        rates  (see p. 9);

                   --supervisory     review    of manual pay operations     to                                 ensure     that established
                      procedures   were properly     implemented   to prevent                                   duplicate      payments
                      and overpayments-     (see pl 12);

    I
    I    Tear    Sheet                                                     1
     --adequate    control     over incoming    and rejected       documents  to ensure     that       ,   :
        all documents      were received     at the center      and that all documents        re-
        jected  by the computer       were properly     corrected      before reentry   into
        the system    (see p. 12); and

     --a      periodic     review    of agency reporting     needs   and the   usefulness   of   the
           reports     produced     by the payroll    system  (see   p. 14).


RECOMMENDATIONS
            ORSUGGESTIONS
   Although   the center     has corrected        or is correcting   some of the weaknesses,
   GAO is making a number of recommendations               to the Secretary      of Agricul-
   ture to strengthen       management      controls   over the payroll      system by taking
   additional     actions   necessary     to correct    the weaknesses     in the system as
   described    in this   report.      (See p. 15.)
                          Contents
                                                                       Page

DIGEST                                                                   1

CHAPTER

  1       INTRODUCTION AND SCOPE                                        3

  2       NEED TO STRENGTHENMANAGEMENTCONTROLS
          OVER THE PAYROLL SYSTEM                                        5
             Access to equipment and data                                6
             Documentation for the primary system                        8
             Maintenance of emergency system                             8
             More effective       programs for increased
                control     over certain   transactions                  9
             Supervisory      review of manual operations               12
             Control over incoming and rejected            doc-
                uments                                                  12
             Reporting                                                  14
             Recommendations to the Secretary           of
                Agriculture                                             15

                           ABBREVIATIONS

GAO       General   Accounting   Office

OIG       Office of the Inspector         General,   Department   of
            Agriculture
GENERALACCOUNTINGOFFICE                               NEED FOR IMPROVED CONTROLS IN THE
l&PORT TO THE SECRETARY                               AUTOMATED CENTRAL PAYROLL SYSTEM OF THE
OF AGRICULTURE                                        DEPARTMENT OF AGRICULTURE  B-146951


DIGEST
_-----

M?Y TdE REVIEW WASMADE

   The General        Accounting Office            (GAO) is required      by law               to review      from
   time to time            accounting      systems    of executive    agencies.                  This review       of
   the automated            central      payroll   system of the Department                    of Agriculture
   was undertaken             accordingly.       The review      did not include                 a payroll      audit.

   The Department's      payroll           system processes      annual  payrolls                  of about
   $1.2 billion     for about           100,000   employees.      The system is                   operated  by the
   Department's     Management           Data Service     Center    at a cost of                  about $4.3 mil-
   lion   annually.


FINDINGS AND CONCLUSIONS

   The network          of controls        in an automatic           data processing       system is the key
   factor      to the reliability             of the system and the products                  it produces.       The
   controls       built       or programmed       into the Department           of Agriculture          computer
   to ensure        the accuracy         and reliability          of the input       data and its proc-
   essing      generally         were functioning         properly       and the processing         of the pay-
   roll     usually       produced     reliable       results.        Management     controls     over certain
   manual aspects             of the system,        however,      need to be strengthened             to increase
   its efficiency             and effectiveness          and to minimize         the possibility         of im-
   proper      manipulation          of the information            in the system and thereby              lessen
   the potential            for irregularities.

   GAO noted        that     there   was a need       to     provide     for

      --proper       segregation   of duties            between        the     programming         and computer            op-
         erations      of the system    (see          p. 6);

      --current        documentation           for the      primary system          to    facilitate        future          re-
         visions       and management            review     (see p. 8);

      --an adequate    and safe backup                    system for contingency               use in     case       the
         primary  system was destroyed                      (see p. 8);

      --more   effective           programs      to improve    controls   over (1) the maximum                             num-
         ber of hours           for which       an employee    could be paid in a pay period,
         (2) overtime           payments,       (3) payroll    deductions    for savings bonds,                            and
         (4) retirement            deduction       rates   (see p. 9);

      --supervisory     review    of manual pay operations     to                        ensure     that  established
         procedures   were properly     implemented   to prevent                          duplicate      payments
         and overpayments      (see p. 12);


                                                            1
     --adequate control  over incoming    and rejected    documents     to ensure                   that
       all documents were received     at the center   and that     all documents                     re-
           jected  by the computer   were properly          corrected      before     reentry   into
           the system   (see p. 12); and

     --a      periodic     review    of agency reporting     needs      and the     usefulness of the
           reports     produced     by the payroll    system  (see      p. 14).


RECOMMENDATIONS
            OR SUGGESTIONS
   Although   the center     has corrected or is correcting       some of the weaknesses,
   GAO is making a number of recommendations            to the Secretary       of Agricul-
   ture to strengthen       management     controls over the payroll      system by taking
   additional     actions   necessary    to correct  the weaknesses     in the system as
   described    in this   report.      (See p. 15.)




                                                        2
                               CHAPTER 1

                     INTRODUCTION AND SCOPE

       The Department of Agriculture's        payroll  system, which
was centralized      in 1961, is operated by the Department's
Management Data Service Center in New Orleans, Louisiana,
Automatic data processing        equipment of the Agricultural
Stabilization      and Conservation    Service, located in the same
building     as the center,   is used in processing     the payroll.

      The center provides data on payroll,           personnel,    leave0
budget, and accounting       to the constituent      agencies and or-
ganizations   of#the Department.       The center also develops
appropriate   data for submission to other Federal agencies,
such as the Civil     Service Commission and the Internal            Reve-   .
nue Service,.  and  to   State  taxing  authorities,      health   in-
surance carriers,     labor unions, and charitable         organizations.

        The constituent   agencies' and organizations"         personnel
offices    and time and attendance    control    units submit the
necessary personnel and payroll       information      to the center
for the payment of employees.       The center processes the-pay-
roll and maintains      accounts on amounts paid, deductions made,
and leave accrued.       From this data, magnetic tapes are pro-
duced for use by U.S. Treasury Disbursing           Offices    in issu-
ing payroll     checks and bonds.   Other payroll        deductions   are
sent to the proper organizations.

      The center processes the payroll      and related    data for
an average of 100,000 employees biweekly.          The payroll
amounts to about $1.2 billion    annually.     The cost of operat-
ing the system is about $4.3 million       annually.    Over 400 com-
puter programs are used to process the payroll         and related
data on two large-scale   computers and several medium-sized
computers.    In a few special cases, payments are processed
manually at the center.

      In addition    to time and attendance   reports for the ap-
proximately    100,000 employees, the center receives and pro-
cesses biweekly about 35,000 personnel and other documents
from over 9,000 reporting     offices.    The system produces



                                    3
                                                                          .
biweekly about 300 outputs in ,various forms, such as print-
outs or reports, magnetic tapes, and punched cards.

       The Department's   payroll     system was approved by the
Comptroller   General in September 1967. Our current review
was made to examine into the controls            incorporated    in the
system and the effectiveness         and accuracy of the system in
producing the payroll     and related      reports    and data for the
constituent   agencies and organizations          of the Department.
We did not audit the Department's          payroll.      The review was
made at the center,     which i&located        in New Orleans, Loui-
siana, and at 16 reporting       offices    of the Department of
Agriculture.

        The matters  in t3is report were discussed. with center
officials    and with officials   of the Department%   Office of
Budget and Finance.       Their comments are included in the
body of the report where appropriate.




                                    4
                                CHAPTER2

              NEED TO STRENGTHENMANAGEMENTCONTROLS

                         OVER THE PAYROLL SYSTEM

        The objectives    of controls  in an automatic data proc-
essing system are to ensure that the system (1) accepts and
processes only valid data, (2) processes such data com-
pletely    and accurately,    and (3) produces the necessary in-
formation,     records,   and reports.   To attain  these objec-
tives,    controls   are needed over such elements of the system
as

      --the   machines,
      --the   machine programs,
      --the   system personnel,
      --the   data entering   the system,
      --the   processing   of the data in the system, and
      --the   output products that are produced by the system.

     Although the control      techniques   to be employed depend
upon individual     conditions  and requirements     of each system,
the adequacy of the network of controls         present in a system
is, in the final analysis,       the key factor    in determining
the reliance    to'be placed on the system.

        Our review showed that generally          the controls     built  or
programmed into the computer to ensure the accuracy and
reliability      of the input data and its processing were func-
tioning     properly   and that the processing        of the payroll
usually produced reliable         results.     Management controls       over
certain     manual aspects of the system, however, need to be
strengthened       to increase its efficiency        and effectiveness
and to minimize the possibility            of improper manipulation
of the information         in the system and thereby lessen the po-
tential     for irregularities.       Our review showed that better
controls      were needed to provide for

      --restricted       access to equipment     and data,

      --current      documentation   for   the primary    system,

      --an    adequate    and safe emergency backup system,

                                      5
      --more   effective         programs       for   certain    transactions,

      --supervisory        review    of manual pay operations,

      --adequate      controls      over incoming          documents,     and

      --a periodic      review of agency reporting needs and the
         usefulness     of reports produced by the payroll system.

      A discussion      of these matters              follows.

ACCESS TO EOUIPtiNT AND DATA

     One of the most essential      elements of effective    inter-
nal control   in a computerized    operation  is the separation
of duties of individuals     concerned with systems planning
and programming from those concerned with day-to-day         opera-
tion of the system.     In a computerized    operation,   many of
the procedures which ordinarily      would be included in a
conventional    system of-checks   and balances are eliminated.

       Consequently data can be altered       or manipulated    without
leaving a readily   discernible    trace.      Small, even minute,
changes could result    in substantial     irregularities     and a
programmer or a computer operator        could make such changes
with access to the data for only a minute, or even seconds.
The weaknesses in this element of internal            control at the
center can nullify   the effectiveness       of all other system
controls,   both machine and manual.

        In the centerPs system, the duties and operations           of
the programmers and the computer operators             are separate and
distinct     organizationally--the       programmers are center em-
ployees;     the operators       are employees of the Agricultural
Stabilization       and Conservation     Service.   In actual practice,
however, programmers at the center have access to the com-
puter and to data files           and computer operators   have access
to program run books which describe the objectives              and de-
tailed    operation     of the programs.

        With this access to the computer and payroll   data, the
programmer or the computer operator     could alter or manipu-
l&e the data or the instructions      to the computer,   Center
officials    told US that this access was necessary because


                                            6
programmers and computer operators         needed to make changes
during payroll runs to meet critical         deadlines.

        Department officials     disagreed with the need to re-
strict    the access of the programmers and computer operators
to each other's     operations.      The officials told us that re-
stricted     access would cause delays and additional       costs and
that the risk .of loss because of unrestricted         access was
not significant.      The officials     could not specify the
amount of additional       costs involved or the basis for their
belief    that the risk of loss was not significant.

      We believe that,   in a payroll    operation     involving       the
expenditure    of about $1.2 billion    annually,    there is       an in-
herent risk of loss which warrants the incurrence,             if    nec-
essary, of additional    costs to preserve the integrity             of
the payroll.     In our opinion,    such costs need not be          exces-
sive and are justifiable     as normal operating       expenses      to
provide adequate control     over the payroll      expenditures        of
the Department.
DOCUMENTATIONFOR THE PRIMARY SYSTEM

       Complete, comprehensive,     and current documentation   on
system operations     is necessary for the continued efficient
operation   and success of any data processing     system.    Such
documentation    permits management and others to understand
and review the system and, in the absence of the original
programmer, facilitates     certain   operations, such as making
program changes or reprogramming to improve machine effi-
ciency.

       The center has not maintained a current    record of the
essential    elements of its computer programs and the logic
followed   in the programs.    Our review of 33 of the center's
major payroll    programs showed that only five programs were
completely    documented.   The remaining programs had deficient
documentation,    such as outdated or nonexistent    run books,
and numerous undocumented changes.

       Program run books provide basic program information,
 such as narrative     descriptions      of the program objectives,
flow charts of the documents, and diagrams of the logic or
reasoning for the program steps.             Poorly documented run
books are difficult       to revise,     especially    if the changes
have to be made by other than the original               programmer.  Of
the 33 programs which we reviewed,             seven had no run books
and nine had no narrative         descriptions      of the program objec-
tives.      The logic diagrams of 12 programs were either out-
dated or nonexistent.        Without this basic documentation,         it
is difficult      to modify programs.        During our review, the
center established      documentation       standards for its run books
and program changes and started updating the documentation
for the programs.

MAINTENANCE OF EMERGENCYSYSTEM

        The center did not have adequate backup programs and
run books for emergency use nor did it have adequate facil-
ities    to preserve such items,     Backup programs and run books
are important     in a computerized   system to provide for con-
tinuation    of the computer operations     in the event the pri-
mary system is destroyed.        The backup programs and run books
should be stored at a location       away from the primary system


                                    8
.

    so that   they would ordinarily         survive   the destruction   of the
    primary   system.

           Of the 33 programs which we reviewed,     14 had no backup
    run books and 14 had outdated run books., The backup run
    books were stored in an open hallway directly         across from
    the regular    run books and therefore    were susceptible     to de-
    struction    simultaneously   with the primary system.      Most
    emergency program tapes were stored in a vault located in
    the same building      as the center.  Center officials     told us
    that the vault was not fireproof.

          The documentation   standards issued by the center during
    our review included standards for the preparation        of backup
    programs and run books.      Also the center has started to up-
    date documentation    on several of the backup programs.      At
    the conclusion   of our review, center officials     told us that
    they had obtained space at a distant      location to store back-
    up programs and run'books.

    MORE EFFECTIVE PROGRAMSFOR INCREASED
    CONTROLOVER CERTAIN TRANSACTIONS

         Our tests of the system's internal       processing controls
    showed that certain   revisions  of the computer programs were
    needed to provide more effective    control    over (1) the maxi-
    mum number of hours for which an employee could be paid in
    a pay period,   (2) overtime payments, (3) payroll      deductions
    for savings bonds, and (4) retirement       deduction rates,

    Number of hours

           Generally   payroll   systems should be programmed to re-
    ject for manual review a time and attendance report showing
    a number of hours worked in excess of a predetermined              limit.
    The predetermined      limit  for a biweekly system should be the
    total   of the normal W-hour work period plus a reasonable
    allowance for overtime work appropriate             to the circum-
     stances.    The centerts    predetermined    limit    is 280 hours, an
    equivalent    of 20 hours a day over a 14-day period.            Such a
    high limit    negates the control      that it is intended to pro-
    vide!.




                                        9
      Department officials     told us that    consideration    would
be given to the feasibility       of setting   a lower limit.

Overtime

      The program permitted personnel to be paid for overtime
at their  base rate which at certain    grade levels was higher
than the overtime rate permitted     by law.    A center official
told us that the program was corrected       to prevent payments
at higher than the legal rate.

Bond deductions

       The programs for bond deductions      needed to be revised
to eliminate    continuous bond carry-overs.      When an employee
authorizes    a change in his biweekly bond deduction,     a re-
sidual amount from previous deductions may remain in his
account as a permanent carry-over      unless specific   action is
taken to clear it,

        On the basis of our review of about one third       of the
carry-over    balances as of August 22, 1970, we estimated that
460 employees each had a constant carry-over         balance suffi-
cient to purchase a bond and that 2,000 other employees had
constant carry-over       balances of lesser amounts.     We esti-
mated also that the carry-over        balances of the 460 employees
totaled    $13,000.     These funds would have been sufficient      to
purchase bonds having a total       face value of about $15,000.
The carry-over      balances of the 2,000 other employees totaled
$12,500.

       At the completion    of our review, center officials  told
us that the bond deduction program had been revised to
eliminate    constant carry-overs    and that refunds had been
made to the appropriate      employees.

Retirement   deductions

       The programs for retirement     deductions     needed also to
be revised.     In several instances,    employees were overpaid
because deductions were made at social security           rates rather
than at higher civil     service retirement     rates.    The employ-
ees had converted    from positions    covered by the social se-
curity   program.   The center,   however, continued to make
deductions on the basis   of social   security   coverage   after
the conversion.

      Department officials      told us that this situation   was
the result   of improper coding of personnel change documents
by the field offices.        They stated that they would reempha-
size to the field    offices    the need to correctly   code such
documents.




                                11
SUPERVISORYREVIEW OF MANUAL OPERATIONS

      The center needed to strengthen   supervisory   reviews
over manual operations   to ensure that procedures were prop-
erly implemented,    Because of inadequate supervisory     reviews
over manually prepared documents, center personnel had pro-
cessed several duplicate   payments and overpayments.

       For'example, 12 employees stationed     in a Forest Service
office   received duplicate payments totaling     about $3,000
for one pay period in 1970. Th? center processed the first
payment on the basis cf telephone information       because the
employees' time and attendance reports were late.          The cen-
ter paid the employees again when the time and attendance
reports were received in a subsequent pay period.          Although
the center had established     a mechanical control     to prevent
this type of overpayment,    a center employee had not coded
the time reports properly    to utilize   this control.     A super-
visory review of the coding on a test basis might have shown
that the mechanical control was not being adhered to.

      Also employees who manually computed severance payments
for persons whose jobs had been abolished had not always
recorded appropriate    information   in the records to prevent
overpayments.    For example, the amounts and dates of all
severance payments were not always recorded correctly        on
the individual   pay records.     A supervisory  review of the
records might have shown that the records were incomplete
and that procedures to prevent erroneous payments were not
being followed,

        Although these errors had been noted previously       by cen-
ter or field      office  personnel and had been corrected,     the
center had not taken any action to eliminate         the cause of
these errors.        In a discussion of these matters,   center
officials     informed us that supervisory    reviews of manual
payments would be made to prevent recurrence         of such errors.

CONTROL OVER INCOMING AND REJECTED DOCUMFXTS

      Controls over payroll     documents received from the De-
partment's    reporting offices   were not adequate to ensure
(1) that all documents were received at the center and pro-
cessed through the system and (2) that documents rejected


                                  12
          .
          by the computer    were properly    corrected    before   reentry   into
          the system.

          Incoming   documents

                The center had not established         adequate procedures for
          ascertaining      that it had received all incoming documents.
          Instead,     if the employee's pay was not received or if the
          amount was incorrect,      the center relied     on the reporting  of-
          fice or the employee affected        to notify   it,

                We noted that,      in several instances,    documents submitted
          by reporting   offices      for bond deductions  and optional      life
          insurance deductions had not been received by the center.
          Because the center was not aware that the documents were
          missing,   it had not adjusted its master files until            notified
          by the reporting     office     or the employee affected    that the
          changes had not been made. Also the reporting            offices     had
          to submit duplicate       documents to provide for the deductions
          which had been requested previously.

                 Because all offices        submitting  payroll    documents to the
          center are required         to group or batch related       documents be-
          ing submitted at the same time, we believe that an effective
          control     would be provided if the center were to acknowledge
          receipt     of the batches,       All batches are accompanied by a
          transmittal      slip containing      control totals    relating  to the
          number of documents contained in the batch.                After verifying
          the batch control        totals,   the center could return a copy of
          the transmittal       slip to the reporting      office    to acknowledge
          receipt     of the batch.

                 Department officials    disagreed with the need for posi-
          tive control    over incoming documents and stated that they
          believed that their present method of control             by exception
          was adequate.     In our opinion,     the present method inherently
          lacks control    and can result     in such irregularities      as ter-
          minated employees continuing        to be paid or promoted or de-
          moted employees being paid at incorrect          rates.     In the case
          of missing time and attendance reports,          the employees' pay
          could be delayed until      duplicate    reports could be processed
          manually,




                                              13



_.----.
Rejected   documents

       The weakness in controls       over rejected   documents pri-
marily involved time cards which were rejected           by the com-
puter because they did not meet the requirements           for proc-
essing.    Initially   the time cards and other documents were
subj'ect to batch control      totals   and to supervisory    review
to ensure that the data was properly          entered and processed.
After being rejected      by the computer, however, the data was
corrected    and reentered by the same employee who corrected
the document without being reviewed or made subject to batch
controls.

       Although our review showed no irregularities            resulting
from this weakness, the lack of controls            over rejected     doc-
uments could be especially       critical      with respect to time
cards.     For example, employees having access to these doc-
uments could increase the number of hours shown on their
own time cards or otherwise change pertinent             data to result
in higher pay for themselves or others.             We discussed this
matter with center officials        who told us that supervisory
reviews of selected document corrections            would be made prior
to reentering    the data into the system.          They told us also
that a control    being instituted        provided for the pay of
center employees to be test checked and for any unexplained
variances    to be questioned.

REPORTING

      The payroll   system was centralized     in 1961. Since that
time the Department has not effectively        determined whether
the reports produced by the payroll       system and furnished    to
its agencies are needed or used.        Our review and a review
by the Department's     Office of the Inspector     General (OIG)
in 1968 showed that numerous reports were being furnished           to
agencies which did not need or use them. Because resources
used to produce the reports are wasted if the reports are
not used, we believe that the Department should periodically
review the need for and the use made of the reports produced
by the center.

     Our interviews with officials     at 16 field offices
showed that many of the reports    they received from the cen-
ter were not being used and that report needs varied from
    office   to office,   although the offices         may have been within
    the same agency.      For example, at two of the four personnel
    offices   we visited,    the monthly report entitled        "Report of
    Retirements"     was not being used.         Also a biweekly report
    entitled    "Position   Organization      Listing"   was not being used
    at two of these offices.        Officials       at one of the personnel
    offices    told us that only one of the 13 reports           they re-
    ceived from the center was needed.

            The 1968 OIG audit showed that, of the 79 reports        in-
    ciuded in its review, 41 were not being used by some of the
    offices    receiving   them, For example, the audit showed that,
    at four of the 15 personnel offices       visited,    a semiannual
    report entitled      "Summary of Promotions for Past Six Months,"
    was not being used and that a quarterly         report entitled
    "Roster of Employees" was not needed or used at eight of the
    15 personnel offices.

           The OIG audit report recommended that the Department
    require that all constituent      agencies survey and report
    annually on their needs for payroll        and personnel reports.
    Although this recommendation was not specifically          adopted,
    the center mailed questionnaires      in October 1968 to the
    recipients   of each of the reports     requesting   that the users
    evaluate the need for the reports and suggest improvements,
    Only a few questionnaires     were returned and the survey was
    not pursued further.      The survey did not result      in the cen-
    ter's making any changes in the number and type of reports
    it produced.

           In our opinion,     it is important    that the Department
    periodically   evaluate the reports produced by the system
    and furnished   to the agencies to determine whether the re-
    ports are needed and are used to contribute           to effective
    management.    Department officials       told us that they would
    analyze reporting      requirements   with the objective     of putti   ng
    the reporting   activity      on a more effective    basis.
‘
    RECOMMENDATIONSTO THE
.   SECRETARYOF AGRICULTURE

          To strengthen  management controls   over the payroll
    system, the Secretary   should provide for



                                       15
                                                                               r




--proper  segregation   of duties between the programming
   and computer operations   of the system,

--current        documentation    for         the primary system to fa-
   cilitate       future  revisions           and management review,

--an adequate and safe backup system for emergency use
   in case the primary system is destroyed,

--more        effective     programs        to improve   control   over cer-
   tain       transactiors,

--supervisory         review of manual pay operations   to en-
   sure that        established procedures are properly   imple-
   mented,

--adequate   controls over incoming and rejected  documents
   to ensure that all documents that are received at
   the center and all documents that are rejected   by the
   computer are properly  corrected before being reentered
   into the system, and

--a periodic         review of agency reporting needs and the
   usefulness        of the reports produced by the payroll
   system.




                                       16
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