oversight

Food and Drug Administration: Status of Actions to Address Property Control Weaknesses

Published by the Government Accountability Office on 1999-08-10.

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

         united
           statea
X0       General Accounting Ofllce
         Washin&on, D.C. 20548

         Accounting and Information
         Management Division

         B-282922


     August 10,lQQQ

         The Honorable Tom Bliley
         Chairman,Committeeon Commerce
         House of Representatives
         Subject: Food and Drug Administration: Status of Actions to Address Prooeg=tvControl
                  Weaknesses

     Dear Mr. chairman:

     This letter respondsto your requestthat we update you on the Food and Drug
     AdminMration’s @‘DA)corrective actions taken to addressthe recommendations we made in
     our February 1999’report The recommendationswere intended to address weaknessesin
     FDA’s controls over automateddata processing (ADP) equipment and other accountable
     properly, including an inaccuratedatabaseof property items, inadequate controls over the
     surplussingof equipment,and inadequatecontrols to effectively monitor the loss, theft, or
     destruction of property and equipment. Specifically, we recommended that the
     Commissionerof FDA
     l      perform interim reconciliations between the general and subsidiary accounting ledgers;
     l      ensure compliancewith establishedpolicies and procedures for surphrssingADP
            equipment,including tmining property officials in these procedures;
     l      finalize and implementproposedprocedures for conducting comprehensiveproperty
            inventories and component-specifkspot audits; and
     l      finalize and implement new proceduresfor monitoring lost, stolen, and damagedproperty
            and equipment,as well as conducting quality control reviews.

     At our July 19, 1999,briefing to your staff, we discussedthe status of the proper& actions
     taken by FDA related to our recommendations. The following provides a high-level summary
     of the issuesdiscussed We requestedcomments on our draft briefing slides from FDA FDA
     concurred with the information presented. The briefing slides are enclosed




                         FDA’s Controls Over Prowrtv Have Imrroved. Bu t Weaknesses Remain (GAOhUMD-9%i1, February 22,




                                               GAO/AIMD99-257RFDA’s Property Control Weaknesses
B-282922


Results in Brief

Overall,FDA has madegood progressin addressingthe recommendauonsmadein our
report Our follow-up found that FDA was performing interim reconciliations of property
transactionsrecordedin the generaland subsidiaryledgers, and had beguntrain@ agency
personnelin proper surphxssingproceduresfor property and equipment. In addition,FDA
had written proceduresfor completing a I%& year 1999comprehensiveinventory of
property and equipmentagencywide,which was underway during this review. However,FDA
had not yet developedwritten proceduresfor conducting component-specificspot audits to
ensurecompliancewith proceduresrelated to property management,nor had FDA meed
and implementedproceduresfor the processingand reporting of lost, stolen and damaged
property and equipment.
          . .   .
Beconuhaixons of Pronertv Transactions

FDA has madegood progressin performing interim reconciliations of property kansactions.
Previously,FDA did not perform periodic reconciliations betweenits generalledger system
and its property subsidiaryledger system-the Property ManagementInformation System
(PMIS) database-resulting in significant year-endadjustmentsin order to prepareits
Cnancialstatements.For fiscal year 1999,the Division of Accounting completedthree
interim reconciliationsbetween the property generalledger and the PMIS subsidiaryledger.
As a result of thesereconciliations,numerousentries were madeto adjust the accounting
records and supporting documentationwas availablein support of these a&rstments.
According to FDA management,the Division of Accounting plans to continue thesemanual
reconciliationsuntil completion of the installation of the new property subsidiaryledger
scheduledfor June 2001,which will automatethis process.
                               .
Surplu.s&uz of ProFertv and Eaumme nt

FDA has also madegood progressin following property and equipmentsurplussing
procedures. In our February 1999report, we found that controls over surplussingand
ksnsferring property and equipmentwere inadequatein that FDA staff were altering the
Requestfor Property Action forms (HHS-22)used to conk01 the surpl~        of ADP
equipment In addition, we identified one instance in which FDA did not properly remove
sensitivedata from ADP equipmentthat was donated to a school, even though FDA policy
requiredthat computerhard drives be ‘scrubbed”2prior to surplussing.

During our follow-up review, we found no alterations of data on the 54 -22    forms
examined. While we did not confirm whether hard drives had been scrubbed,we noted that
each of the HlXS22sreviewed containeda signed statement certifying that all computerhard
drives had beenscrubbed. This certifying requirement was not in effect for the items that we
tested at the time of our February 1999report Someprogressis still neededin following
surplussingproceduressince we noted that 12 of the 54 forms we reviewed did notcontsin a
reviewingofficial’s signatureas required by FDA’s Staff Manual Guide (FDA 2620.2).

%crubbing ensures that all proprietaxy information has been removed from the hard drives.




Page2                                            GAO/A&ID-QQ-257R
                                                                FDA’s Property Control Wealmesses
Basedon our previous review, FDA managementplannedto improve surplussingprocedures
by providing formal FDA kaining in property proceduresto the PersonalProperty
Coordinators3(PPC) and Property Custodial Officers”(PCO). Our follow-up noted that FDA
has implementedtraining in surplussingprocedures for the PPCsand PCOsusing computer
basedtraining (CBT) dish provided by the Departmentof Health and HumanServices
(HHS). As of May 27,1QQQ,  45 percent of the PPCsand PCOshad completedthis tmining.
However,based on discussionswith the PPCsand PCOs,there was a generalconsensusthat
they would benefit from the more FDA-specific training initially planned. Sincea number of
processingprocedures describedin the HHS CBT were not applicableto FDA, we agreewith
the PPCsand PCOsthat more specific training would be beneficial. FDA plans to provide
more FDA specific training by December 1999.

~onductina        Inventories       and Spot Audits

Prior to fiscal year 1998,FDA had not performed a comprehensivephysicalinventory for
property and equipmentin more than 3 years, which resulted in numerouserrors reported in
FDA’s PMIS database. Based on discussionswith FDA managementat the completion of the
review related to our February 1999report, FDA planned to write proceduresfor conducting
comprehensiveinventories annually until the FDA components’statisticsreflect an inventory
accuracyof greater than 98 percent and these inventories reflect adherenceto sound
property management.The Office of Facility Acquisitions and CentralServices(OFACS),a
componentof the Office of the Commissioner,isresponsible for writing theseprocedures.
Although OFACShad written procedures for completing the fiscal year 1999inventory, there
was no referenceto how often the inventories will be conducted Accordingto OFACS,by
December1999,it plans to finalize the inventory procedures,which would also addressthe
frequencyof conducting comprehensiveinventories.
In following up on the status of our recommendations,we noted that the FDA centerswere in
the processof completing a comprehensiveinventory. At the four largestcenters,we
accompaniedthe PPCsand PCOsduring this inventory and observedthat the PCOshad a
clearer knowledge of their inventories’locations and disposition than they had demonstrated
at the time of our earlier review. However, challengesstill remain For example,in
conductingthese inventories, the PPCsnoted that a number of computersat the centerswere
not on the PMIS list becausethe technical support Help Desk had replacedthem without
documentingthe exchangethrough a property pass and/or a HHS22. The PPCalso noted
that some computersthat had been listed in the old PMIS databasewere not included in the
new PMIS database. Completingthese comprehensiveinventorieswill help improve the
accuracyof the PMlS databaseand ensure that PPCsare aware of the location and
disposition of property under their responsibility.



?ersonal Roper@ Coordinators are responsible for managing the acquisition and barcoding of all property and ensuring that
receiving data are promptly submitted to the FVoperty Management and Finance offices to update their records.
%opertJ Custodial OfBcers are responsible for the day-to-day management of property charged to a specitic area within an FDA
center.




Page3                                            GAOMMD-QQ-257R
                                                              FDA’s PropertyControl Weaknesses
B-282922


Becauseof the errors found in the previous comprehensiveinventory,FDAplanned to
(1) begin conducting agencyinternal (spot) auditsand (2) write proceduresto ensureproper
implementation of property and equipmentprocedures.We noted during our follow-up
review that OFACScompletedone inventory spot audit that testedthe completenessand
existence of the inventory acrossFDA However,this audit did not addressthe adequacyor
implementation of property policies and proceduresas initially intended. We found that
progresswas still neededin performing thesespot audits. OFACShad not yet established
policies and procedures addressinghow the audits are to be conductedor how
recommendationsbased on these audits are to be implemented. OFACSplans to finalize and
implement procedures for spot audits by December1999.
                     . o
Processiua and Reuortm~  f Lost, Stolen. and Damaged Protirtg

We previously reported that FDA lacked,reliableinformation to account for missing ADP
equipment becauseof ineffective proceduresfor reporting lost, stolen, and damaged
equipment.At that time, we found that documentationfor missingitems was not maintained
centrally nor were missingitems recordedin PMISpromptly. For each center, OFACShas
now created separatefolders for Incident Reports(to documentstolen items) and for RepoaS
of Survey {to record lost and damageditems). The use of thesefolders has resulted in easier
accessibility and monitoring of reports of missingitems.

However, new policies and procedures for recordingand reporting lost, stolen, and dwed
items have yet to be finalized. OFACSplans to &u&e theseproceduresby December 1999.
It is critical that it finalize and implement thesepolicies becauseour follow-up review
indicated that Incident Reports were neither accuratelycompletednor recorded in PMIS
promptly. Also, according to OFACS,no Reportsof Surveyhad been filed from January
through June 1999,even though, basedon past experience,lossesprobably occurred during
this time period In addition, since theseprocedureshave not yet been finalized, OFACShad
not conducted quality control reviews to ensurethat proceduresfor lost, stolen, and damaged
items were followed as recommended.
Scone and Methodolosq

As requested,our objective was to determinethe status of FDA’sproperty actions made per
our recommendations. To determinethis status,we interviewedproperty officials and
reviewed FDA’s current policies and proceduresfor property management,including any
draftupdates.
 During this follow-up review, we visited the Centerfor Drug Evaluation and Research
 (CDER), Center for Biologics E&x&ion and Research(CBER),Center for Devices and
 Radiological Health (CDRH), and Center for Food Safely andApplied Nutritions (CFSAN),
 vhich are FDA’s four largest centers. At these centers,we reviewedinventory procedures;
 reviewed reports of lost, stolen, and damagedproperty; and reviewedsurplm      procedures
‘and documentation. We also reviewed the spot audit performed at FDA centers. In addition,
 we reviewed the interim reconciliatio~performed betweenthe property general and
 subsidiary ledgers to determine whether they were being properly performed and whether
 required adjustments were made. Our work was performedfrom May 26 through June 30,


Page4                               GAOLAIMD-QQ-257R
                                                 FDA’sProperty Control Weaknesses
B-282922


1999,in accordancewith generallyacceptedgovernmentauditing standards. We provided a
draft of this letter and the enclosedslidesto FDA for review and comment. On August 5,
1999,a senior FDA official told us that the agencyconcurred with the content of our letter
and had no comments.



We are sending copiesof this letter to RepresentativeJohn D. Dingell, Ranking Minority
Member of your Committee;the HonorableDonnaE. Shalala,Secretaryof Health and Human
Services;and Dr. JaneHenney,Commissionerof the Food and Drug Admmi&&ion; and
other interested parties. Copieswill also be madeavailableto others upon request.

If you have any questionsabout this letter or the earlier brietig, please contact me at (202)
5124476. Key contributors to this assignmentwere Chinero Thomasand HeidiKilt Winter.

Sincerely yours,


,&Q(
GloriaL Jarmon
Director, Health, Education,and HumanServices
  Accounting and FinancialManagement

Enclosure




(916288)


Page 5                              GAO/AIMD-QQ-257R
                                                  FDA’s Property Control Weaknesses
G-A0 Accounting and Information
     Management Division

     House Committee   on Commerce

     Briefing on the Status of FDA’s
      Actions to Address Property
      Control Weaknesses
     July 19,1999
GAo Introduction

     l   GAO’s February 22, 1999, report entitled
         FDA’s Controls Over Property Have Improved,
         But Weaknesses Remain (GAO/AIMD-99-51)
         made four recommendations.
     l   The House Committee on Government
         Reform did not receive a letter from FDA
         detailing corrective actions planned to address
         these recommendations per 31 USC 720.           ’
     l   The House Committee on Commerce
         requested that we brief them on the status of
         property actions.

2
GAo   Objective

      * To determine the status of FDA’s corrective
        actions related to the recommendations
        made in GAO’s February 22, 1999 report.




3
‘*’   Scope and Methodology

      l   Reviewed FDA’s current policies and
          procedures for property management.

      l   At the four largest centers, we
           l reviewed inventory procedures
           l reviewed lost, stolen, and damaged
             property reports
           l reviewed surplussing procedures and
             documentation

      l   Reviewed agency internal (spot) audits
          performed.
GAo   Scope and Methodology

      l   Reviewed interim general ledger/subsidiary
          ledger reconciliations.

      l   Our work was performed in accordance with
          generally accepted government auditing           .
          standards.

      l   Work was performed between May 26 and
          July 2, 1999.


                                                       i

5
GAo February 1999 Report
    Recommendations
     l   Finalize and implement procedures for
         inventories and component-specific spot
         audits.

     l   Perform interim reconciliations between the
         general and property subsidiary ledgers.




6
GAo       February 1999 Report
          Recommendations
      l    Finalize and implemer I’t new procedures for
           monitoring lost, stolen and damaged property
           and equipment, as we I as conducting quality
           control reviews.

      l    Ensure compliance with policies and
           procedures for surplussing ADP equipment.
           This should include training property officials
           in surplussing procedures.
GAO Overall Status of Property Actions

     l   Good progress has been made in
         0   performing reconciliations of property
             transactions.
         l   surplussing of property and equipment.

     9 Some progress has been made in the
       performance of comprehensive
       inventories.



8
                                                      -



      GAo Overall Status of Property Actions

           l   Progress is still needed in
               a   updating and implementing policies and
                   procedures
               l   performing spot audits
               l
                   processing and reporting of lost, stolen, and
                   damaged property




      9

.--
GAo   Implementation of Recommendations

      l   Six Areas Addressed:
          l Status of policies and procedures
          l Performance of comprehensive inventories
          l Results of spot audits
          * Reconciliations of property transactions
          0 Processing and reporting of lost, stolen,
            and damaged property
          l Surplussing of property and equipment
GAo   Status of Policies and Procedures

      l   Improvements
          l Personal Property Coordinators (PPCs)
            met regularly to provide input to the Office
            of Facility Acquisitions and Central
            Services (OFACS) on needed policy
            changes.
          * PPCs were given Policies and Procedures
            Manuals.




11
GAo   Status of Policies and Procedures

      l   Challenges Remaining
          l       Have not fully updated policies and
                  procedures.
          l       Have not established whether OFACS or
                  the centers are responsible for updating
                  policies and procedures.
              0   Have not clearly defined PPC position
                  description.




12
GAo       Performance of Comprehensive
          Inventories
      l    Improvements
           l   Comprehensive inventory was being
               performed.
           l   Property Custodial Officers (PCOs) had
               clearer knowledge of their inventories’
               locations and dispositions.




13
         GAo Performance of Comprehensive
             Inventories
              l   Challenges Remaining
                  l   Errors in inventory records occurred as a
                      result of
                       l time lag in processing inventory items
                       l not following proper procedures for
                         computers undergoing repair




         14

:y..7”
‘:i?:
GAo       Results of Spot Audits

      l    Improvements
            l   OFACS completed inventory audit at both
                the field, and headquarters offices.
            l   One center’s PPC initiated an audit related
                to receiving property. The audit resulted in
                numerous improvements to the receiving
                process.




15
GAo   Results of Spot Audits

      l   Challenges Remaining
          l   No policies or procedures addressing how
              OFACS audits are to be conducted or how
              recommendations are to be implemented.




16
GAO   Reconciliations of Property
      Transactions
      l   Improvements
          0 Three interim reconciliations of the general
            and subsidiary ledgers were performed.
          l Numerous adjusting journal entries (AJEs)
            made at the end of the reconciliation
            period.
          l Supporting documentation existed for
            these AJEs.




17
GA’   Processing and Reporting of Lost,
      Stolen, and Damaaed ProDertv
      0 Improvement
        l   OFACS began maintaining folders of
            Incident Reports (IRS) and Reports of
            Survey (ROS) for each center, resulting in
            easier accessibility and monitoring of
            reports of missing items.




18
GAo Processing and Reporting of Lost,
    Stolen, and Damaged Property
     l   Challenges Remaining
         a   Related policies and procedures have not
             yet been finalized.
         a   Of the three IRS filed, one did not contain
             correct barcode or serial number
             information.
         a   OFACS did not update the transaction and
             status codes after receiving the IRS.




19
GAo Processing and Reporting of Lost,
    Stolen, and Damaged Property
     * Challenges Remaining
       l   OFACS is not receivina timelv information
           on lost and damaged $opert;. According
           to OFACS:
            l Centers did not file ROSS from January -
              June 1999.
            l Losses probably occurred during this
              period.
            l Centers will probably submit reports
              upon completion of the inventory.


20
GAo   Surplussing of Property and
      Eauipment
      l   Improvements
           No alterations of data were found on the
           54 HHS-22s reviewed.
           Each HHS-22 contained a signed
           statement certifying that all computer hard
           driveS had been scrubbed.
           45 percent of the PPCs and PCOs
           completed the HHS Computer Based
           Training, (CBT) in surplussing procedures.



21
GAo   Surplussing        of Property and Equipment

      l   Challenges Remaining
          l   Reviewing officials did not sign 12 out of 54
              HHS-22s reviewed.
          l   PPCs and PCOs stated that formal FDA
              specific training is needed in addition to the
              HHS CBT.




22
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