oversight

Senate Preservation Fund: Audit of Fiscal Years 2009 and 2010 Transactions

Published by the Government Accountability Office on 2012-02-16.

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

______________________________________________________________________________
United States Government Accountability Office
Washington, DC 20548

February 16, 2012

The Honorable Daniel K. Inouye
President Pro Tempore of the United States Senate

The Honorable Harry Reid
Majority Leader
The Honorable Mitch McConnell
Minority Leader
United States Senate

The Honorable Charles E. Schumer
Chairman
The Honorable Lamar Alexander
Ranking Member
Committee on Rules and Administration
United States Senate

Subject: Senate Preservation Fund: Audit of Fiscal Years 2009 and 2010
Transactions

In September 2003, the Senate Preservation Fund (Fund) was established within the
U.S. Treasury (Treasury). 1 The Fund is available to the Senate Commission on Art
(Commission) to fund various activities related to works of art, historical objects,
documents, and materials relating to historical matters, or exhibits in the Capitol and
Senate office buildings. The Library of Congress (Library) provides financial
management and disbursing services and support to the Commission. GAO is required
to audit the Fund and report the results to the Commission. 2

This report presents the results of our audit of the Fund’s transactions during fiscal
years 2009 and 2010. Our objectives were to determine (1) whether the Fund’s
recorded transactions for fiscal years 2009 and 2010 were authorized in advance,
supported by documentation, accurately accounted for, and in compliance with
applicable laws; (2) whether operating, reporting and oversight practices were
documented and in place at the Commission and the Library to help ensure that Fund
transactions were properly executed and Fund assets were adequately safeguarded;
and (3) what actions the Commission’s Executive Secretary, in coordination with Library

1
 Legislative Branch Appropriations Act, 2004, Pub. L. No. 108-83, title I, § 3(c), 117 Stat. 1007, 1012
(Sept. 30, 2003), classified, as amended, at 2 U.S.C. § 2108 (c).
2
 2 U.S.C. § 2108(c)(6).
    Page 1                                                  GAO-12-271R Senate Preservation Fund
and Commission staff, had taken to address recommendations from our prior audit of
the Fund. 3

To address these objectives, we reviewed the Fund’s enabling legislation and the
operating practices 4 established by Commission and Library staff to determine whether
the Fund’s recorded transactions were authorized in advance, supported by
documentation, and accurately accounted for. We reviewed the Fund’s transactions and
related supporting documentation to determine whether established operating practices
were followed and whether the Fund’s transactions were in compliance with laws
considered significant to our audit objectives. We also determined whether operating,
reporting, and oversight practices were documented and in place at the Commission
and the Library to help ensure that Fund transactions were properly executed and Fund
assets were adequately safeguarded. To review actions taken to address prior GAO
recommendations, we reviewed our prior report on the Fund. We also held discussions
with Commission and Library staff and examined all support provided in response to the
recommendations.

We conducted this performance audit from January 2011 to February 2012 in
accordance with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives. See enclosure I for a more
detailed discussion of our scope and methodology.

Results in Brief

For fiscal years 2009 and 2010, the Fund’s recorded transactions consisted of 136
investment and operating transactions recorded and accounted for by the Library. The
Fund’s recorded transactions were authorized in advance, supported by documentation,
and accurately accounted for. However, while the Fund’s transactions were generally
recorded promptly, we did identify five instances where transactions were not promptly
recorded by the Library. We found that all recorded transactions were in compliance
with the applicable laws that we deemed significant to the objectives of our audit.

For fiscal years 2009 and 2010, the Commission’s operating and oversight practices for
the Fund were documented and in place. For the same period, the Library’s operating
and reporting practices for the Fund were documented and in place with the exception
of investment practices. The documented practices at both the Commission and the
Library helped to ensure that Fund transactions were properly executed and Fund
assets were adequately safeguarded. The Commission had documented operating

3
 See GAO, Senate Preservation Fund: Key Transaction-Related Operating Practices Have Been
Established but Additional Practices Are Needed, GAO-09-89R (Washington, D.C.: July 28, 2009).
4
 Operating practices are activities carried out related to authorization; documentation; accounting of
receipts, disbursements and investments; and compliance with laws to ensure that Fund transactions are
properly executed.
    Page 2                                                     GAO-12-271R Senate Preservation Fund
practices used to account for the receipts, disbursements, investments, and oversight of
the Fund. These practices are described in legislation, a Commission Delegation Letter,
the United States Senate Acquisition Policy, a memorandum from the Commission to
the Library, and accounting guidelines for the Fund. The Library had documented
operating practices that it used to account for Fund disbursements in its payment
directive. In addition, the Library’s accounting guidelines provided documented
procedures for the Library to process receipts and report to the Commission on a
quarterly basis. However, during the period covered by our audit, fiscal years 2009 and
2010, the Library’s investment practices used in providing services to the Commission
were not documented and approved. In September 2011, the Library formally
documented and approved investment procedures that will help provide assurance that
the Fund’s assets will be consistently invested in accordance with applicable operating
practices.

The Commission’s Executive Secretary worked with the Library’s Chief Financial Officer
and Commission staff to address our recommendations from our prior audit of the Fund 5
to document and formally approve operating practices related to the Library’s and the
Commission’s processing of Fund transactions, reporting, monitoring, and follow-up by
the Commission and Library on Fund-related matters. During the period covered by our
audit, the Library’s Chief Financial Officer worked with Commission staff to issue
accounting guidelines for the Fund that formally documented procedures for reporting
and processing of Fund transactions. In addition, the Commission issued a letter to the
Executive Secretary delegating the authority to approve certain disbursements and
documenting and formally approving the Commission’s operating practices for
disbursements. In September 2011, the Commission and the Library amended the
guidelines to include procedures for follow-up between the two entities and to document
the Commission’s responsibilities for monitoring Fund transactions and safeguarding
Fund assets. In commenting on a draft of this report the Library’s Chief Financial Officer
and the Commission’s Executive Secretary concurred with the findings and conclusions.

Background

In 1988, the Senate Commission on Art was authorized to supervise, hold, place,
protect, and make known all works of art, historical objects, and exhibits in the Senate
wing of the Capitol and Senate office buildings and in all rooms, spaces, and corridors
thereof. 6 The Commission is made up of five U.S. Senators—the President (pro
tempore) of the Senate, the majority and minority leaders of the Senate, and the
Chairman and Ranking Member of the Senate Committee on Rules and Administration.

In September 2003, the Fund was established within the Treasury and appropriated—
by transfer from the contingent fund of the Senate—$500,000 in initial funding.
Specifically, the Fund is available to the Commission to pay for expenses associated
with


5
GAO-09-89R.
6
See 2 U.S.C. § 2101-2108.
  Page 3                                           GAO-12-271R Senate Preservation Fund
•   acquisition of any work of art, historical object, document, or material related to
    historical matters, or exhibit for placement or exhibition within the Senate wing of the
    Capitol and Senate office buildings;
•   official activities of any advisory board established by the Commission pursuant to
    Public Law 108-83, including actual and necessary expenses incurred in the
    performance of its official duties;
•   meals and refreshments, subject to limitation, in connection with official activities of
    the Commission; and
•   any purposes for which funds from the contingent fund of the Senate may be used
    pursuant to Public Law 101-302, as amended (2 U.S.C. § 2107).

On behalf of the Commission, the Commission’s Executive Secretary and staff provide
operational support and assistance for activities financed by the Fund, including
managing and overseeing the authorization, approval, and processing of operating
disbursements and amounts received by the Commission for deposit to the Fund. The
Executive Secretary is responsible for ensuring that (1) Fund transactions are
authorized, supported by documentation, and in accordance with applicable law and
(2) related operating practices and internal controls 7 are established and followed.

Pursuant to Public Law 108-83, the Library is to provide financial management and
disbursing services and support to the Commission as may be required and mutually
agreed to by the Librarian of Congress and the Commission’s Executive Secretary. 8
The Library’s principal services and support include the purchase and redemption of
Treasury securities with funds not needed for immediate withdrawal, the processing of
receipt and disbursement transactions, and the development and maintenance of the
Fund’s accounting records and related support. The Library, through its Chief Financial
Officer, is also responsible for ensuring that appropriate operating practices and internal
controls related to its service and support to the Commission are established,
documented, and followed.

Fund Transactions Were Authorized in Advance, Supported, Accurately
Accounted for, and in Compliance with Applicable Laws

For fiscal years 2009 and 2010, the Fund’s recorded transactions consisted of 136
investment and operating transactions recorded and accounted for by the Library. The
Fund’s recorded transactions were authorized in advance, supported by documentation,
and accurately accounted for. However, while the Fund’s transactions were generally

7
 Federal internal control standards recognize that an entity’s management is responsible for designing
and implementing appropriate internal controls to achieve objectives related to (1) the effectiveness and
efficiency of operations, including the use of resources; (2) the reliability of internal and external financial
reporting; and (3) compliance with applicable laws and regulations. Further, an entity’s management is to
safeguard assets, and design related internal controls to provide reasonable assurance regarding the
prevention or prompt detection of unauthorized acquisition, use, or disposition of assets. An entity’s
management is also responsible for monitoring and evaluating the effectiveness of the internal control.
See GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington,
D.C.: November 1999).
8
 2 U.S.C. § 2108(c)(5).
     Page 4                                                     GAO-12-271R Senate Preservation Fund
recorded promptly, we did identify five instances where transactions were not promptly
recorded by the Library. We found that all recorded transactions were in compliance
with the applicable laws that we deemed significant to the objectives of our audit.

Fund Activity for Fiscal Years 2009 and 2010

As summarized in table 1, the Fund’s recorded transactions consisted of 136
investment and operating transactions. There were 121 investment-related transactions
that represented (1) the use of available Fund resources to purchase Treasury
securities and (2) amounts received and deposited to the Fund resulting from the
redemption of Treasury securities. The Fund’s investment-related transactions
consisted of 60 purchases of investments and 61 redemptions of investments. There
were 15 operating-related transactions which included 1 deposit to the Fund and 14
disbursements of Fund assets for activities related to the Commission’s Advisory
Board. 9 Table 1 presents a summary of Fund-related financial information covering
fiscal years 2009 and 2010, as recorded by the Library.

Table 1: Summary of Total Recorded Fund Transactions and Balances for Fiscal Years 2009 and 2010

                                                                                               Investment-
                                                         Operating-related
                                                                                                 related
                                                                                                Net cash
                        Beginning Fund                                                                               Ending Fund
     Fiscal year                               Disbursements             Receipts             provided by
                           balance                                                                                     balance
                                                                                              investments

        2009                $548,326                $1,966                  $10                   $3,437               $549,807


        2010                $549,807                $3,308                    0                   $1,104               $547,603 a


Source: GAO analysis of Library of Congress records for the Senate Preservation Fund.
a
 During fiscal year 2010, an obligation was created for the purchase of an artist’s sketches; however, the disbursement for this
purchase occurred in fiscal year 2011.


There was one operational disbursement from the Fund subsequent to fiscal year 2010
that we included in our audit because it occurred shortly after the end of fiscal year
2010. Specifically, on September 30, 2010, the Commission entered into an obligation
to purchase four sketches painted by artist Constantino Brumidi. During fiscal year
2010, the U.S. Senate Curator Office’s staff provided operational support and
assistance to the Commission for this purchase by gathering background, appraisal,
and authenticity information on the sketches. The disbursement for the sketches was
made on October 5, 2010 using $80,125 in funds from the Fund. On October 6, 2010,
the Curator’s Office, on behalf of the Commission, took physical possession of the
sketches. 10

9
 The Commission’s Advisory Board provides advice and assistance to the Commission on the acquisition,
care, and disposition of items for or within the United States Senate Collection, and on such other matters
as the Commission determines appropriate.
10
  The total cost of the Brumidi sketches was $235,300. The Capitol Preservation Fund paid $155,175
toward the purchase of the sketches and the remaining cost of $80,125 was paid from the Senate
Preservation Fund.
    Page 5                                                 GAO-12-271R Senate Preservation Fund
Advance Authorization of Recorded Transactions

To help ensure that only valid transactions and events are initiated or entered into,
federal internal control standards provide that such transactions should be authorized
by appropriate officials. 11 During our audit, we found that all Fund transactions were
authorized in advance by written authorization in accordance with the Library’s and the
Commission’s established practices.

Supporting Documentation of Recorded Transactions

Federal internal control standards also provide that transactions and related events
should be clearly documented and that the documentation should be readily available
for examination. Our review of supporting documentation found that all Fund
transactions were fully supported by documentation in accordance with the Library’s
and the Commission’s established practices.

Accounting for Recorded Transactions

Federal internal control standards provide that transactions should be promptly
recorded to maintain their relevance and value to management in controlling operations
and making decisions. In addition, generally accepted accounting principles provide that
transactions and other accounting events should be promptly and accurately recorded.
During our audit, we found that 131 of 136 Fund transactions were recorded promptly
and accurately. However, 5 investment transactions were recorded in the Fund’s
accounting system between 2 and 5 weeks after the transaction occurred, resulting in
instances where financial information used by the Library for making investment
decisions did not accurately reflect the Fund’s cash balance. These five instances
occurred because the Library staff member responsible for approving the transactions in
the accounting system was on an extended leave of absence. At that time, the Library
did not have procedures in place to provide for other Library staff to approve the
transactions during the responsible party’s absence. In one of the instances noted
above, Library staff purchased a Treasury security for an amount that exceeded the
funds available after relying on information that did not accurately reflect the Fund’s
cash balance. This caused a negative balance in the Fund’s cash account at the
Treasury, which is not in accordance with the Treasury operating guidance. 12 This
investment purchase also did not contain a primary supervisory review by the Library
prior to the purchase as required by established operating practices. The Library’s staff
detected the error the following week, and the negative balance was subsequently
eliminated through the early redemption of a Treasury security. 13

11
  GAO/AIMD-00-21.3.1.
12
   See Department of the Treasury Operating Circular, Responsibilities Relating to Government
Investment Accounts and Investment in Government Account Series (GAS) Treasury Securities, at
www.publicdebt.treas.gov, effective October 1, 2008. Chapter 4000, Responsibilities, Procedures, and
Policies Relating to Investment of Moneys in Government Investment Accounts, Section 4035 and 4060,
requires that funds to be invested in Treasury securities be available to the Department of the Treasury
general fund to pay for the purchase of Treasury investments.
13
   No significant financial loss occurred because of the early redemption of the Treasury security.
    Page 6                                                     GAO-12-271R Senate Preservation Fund
In response to the exceptions found during our audit, in September 2011, the Library
formally documented and approved operating procedures for investment transactions.
The procedures address prompt entry of investment transactions by setting a goal for all
entries to be made in the Fund’s accounting system within 2 to 3 days of an investment
date. The procedures also provide steps to ensure that the Fund’s accounting system
reflects the actual cash balance of the Fund by requiring reconciliations to be performed
between the accounting system’s trial balance and schedules maintained by Library
staff before all investment purchases. In addition, the procedures identify actions the
Library will take to execute an investment when key staff are not available.

Compliance with Significant Laws for Recorded Transactions

Management is responsible for developing operating practices to help ensure
compliance with relevant laws. In reviewing the Fund’s transactions, we determined that
there were three statutory provisions within the enabling legislation related to our audit
objectives. The three significant statutory provisions we identified involved
(1) investment of Fund assets, (2) use of Fund assets for investment and other
purposes, and (3) required approvals for Fund disbursements.

     •   Investment of Fund assets—Pursuant to the Fund’s enabling legislation, Fund
         assets not needed to meet current withdrawals are to be invested in an interest
         bearing obligation of the United States or an obligation guaranteed as to principal
         and interest by the United States that, as determined by the Commission, has a
         maturity suitable for the Fund. 14 Our review of the recorded transactions of the
         Fund found that all of the Fund’s 60 investment purchases complied with this
         provision regarding the investment of Fund assets in Treasury securities.

     •   Use of Fund assets—Fund assets are available to the Commission for various
         purposes, including the acquisition of works of art and historical objects, official
         activities of the Commission’s advisory boards, and any purposes for which the
         contingent fund of the Senate is available under 2 U.S.C. § 2107(a). 15 Our review
         of the recorded transactions of the Fund during the period covered by our audit
         found that all of the Fund’s 14 operating disbursements were related to official
         activities of the Commission’s Advisory Board, which is consistent with the
         purposes for which assets in the Fund were made available to the Commission.

     •   Required approvals for use of Fund assets—Under the Fund’s enabling
         legislation, disbursements from the Fund are to be made on vouchers approved
         by the Commission and signed by the Executive Secretary of the Commission. 16
         In December 2008 the Commission delegated the authority to approve
         disbursements under $10,000 for expenses and vouchers consistent with
         purposes of the Fund to the Commission’s Executive Secretary. During the

14
  2 U.S.C. § 2108(c)(4).
15
  2 U.S.C. § 2108(c)(2).
16
  2 U.S.C. § 2108(c)(3)(C).
    Page 7                                            GAO-12-271R Senate Preservation Fund
      period covered by our audit, all 14 operating disbursements were under $10,000
      and were made on vouchers approved by the Commission’s Executive
      Secretary.

Documented Commission Practices Were in Place but the Library’s Investment
Practices Were Not Documented

For fiscal years 2009 and 2010, the Commission’s operating and oversight practices for
the Fund were documented and in place. For the same period, the Library’s operating
and reporting practices for the Fund were documented and in place with the exception
of investment practices. The documented practices at both the Commission and the
Library helped to ensure that Fund transactions were properly executed and Fund
assets were adequately safeguarded. The Commission had documented operating
practices used to account for the receipts, disbursements, investments, and oversight of
the Fund. These practices are described in legislation, a Commission Delegation Letter,
the United States Senate Acquisition Policy, a memorandum from the Commission to
the Library, and accounting guidelines for the Fund. The Library had documented
operating practices used to account for Fund disbursements in its payment directive.
The Library’s accounting guidelines provided documented procedures for the Library to
process receipts and report to the Commission on a quarterly basis. However, during
the period covered by our audit, the Library’s investment practices used in providing
services to the Commission were not documented and approved. Subsequent to the
audit period, in September 2011, the Library formally documented and approved
investment procedures that will help provide assurance that the Fund’s assets will be
consistently invested in accordance with applicable operating practices.

Commission Practices for Fund Operations and Oversight

Receipts: The Commission’s documented practices for receipts provide that the
Commission may accept gifts of money and that any such gifts must be deposited in the
Fund’s account at the Treasury. During the period covered by our audit, the
Commission’s receipt practices were in place, as evidenced by one donation made to
the Commission for $10, which was deposited in the Fund’s account at the Treasury.

Disbursements: The Commission’s documented practices for disbursements provide
that disbursements may only be made for (1) costs incurred in carrying out the purposes
of the Commission, (2) official activities of advisory boards established by the
Commission, and (3) the acquisition of works of art and historical objects or any
purposes for which the contingent fund of the Senate is available under 2 U.S.C. §
2107(a). The practices also provide that disbursements over $10,000 from the Fund are
to be made using vouchers approved by the Commission and signed by the Executive
Secretary of the Commission. Furthermore, the practices provide that disbursements
under $10,000 are to be made using vouchers approved by the Commission’s
Executive Secretary. During the period covered by our audit, the Commission’s
disbursement practices were in place. There were 14 operating disbursements related
to the use of Fund assets for activities associated with the Commission’s Advisory

   Page 8                                         GAO-12-271R Senate Preservation Fund
Board and one disbursement subsequent to this period (discussed previously) related to
the purchase of the Brumidi sketches. We found that all 15 disbursements were
executed in accordance with the Commission’s disbursement practices. Specifically we
found that

   •   all operating disbursements related to the Commission’s Advisory Board were
       less than $10,000 and were approved by the Commission’s Executive Secretary;
   •   all obligating documents for operating disbursements related to the
       Commission’s Advisory Board were transmitted to the Library to notify it of the
       scheduled disbursement;
   •   the Commission communicated to the Library its intent to purchase the Brumidi
       sketches;
   •   the purchase of the Brumidi sketches was approved by the Commission;
   •   the Commission appropriately transmitted the bill of sale for the purchase of the
       Brumidi sketches to the Library to notify it of the scheduled disbursement; and
   •   the sketches were properly safeguarded and transferred to the fine arts inventory
       of the Senate Commission on Art.

Investments: The Commission’s documented practices for investments provide that any
portion of the Fund that is not needed to meet current withdrawals is to be invested in
an interest-bearing obligation of the United States or an obligation guaranteed as to
principal and interest by the United States. During the period covered by our audit, we
found that the Commission’s documented investment practices were in place. All funds
not needed to meet current withdrawals were invested in Treasury securities.

Oversight: The Commission’s documented practices for oversight set out required steps
for how acquisitions, gifts, disbursements, communication, and investments are to be
processed and accounted for at the Commission and the Library. Federal internal
control standards provide that monitoring and oversight activities are to be incorporated
into an entity’s normal operations. The Commission's oversight practices, which were
consistent with federal internal control standards, were in place during the audit period
and were designed to ensure that transactions were properly executed and assets of
the Fund were adequately safeguarded. The Library’s financial management services
on behalf of the Fund include reporting to the Commission on the activity of the Fund.
During the period covered by our audit, the Library provided the Commission quarterly
financial reports which enabled the Commission to monitor the Fund’s financial activity.

Library Practices Supporting Fund Operations and Reporting

Disbursements: In 2009, the Library issued a payment directive that documented its
operating practices for paying vendors on behalf of the Commission. The directive is
consistent with federal internal control standards and sets out required steps for the
Library to ensure that Fund payments are properly authorized, accurate, approved, and
recorded, and are made on a timely basis. The directive also requires the Library to
have the appropriate segregation of duties between authorizing, approving, and
recording payments. During the period covered by our audit, we found that the Library’s
   Page 9                                          GAO-12-271R Senate Preservation Fund
payment practices were in place. There were 14 operating disbursements of Fund
assets for activities related to the Commission’s Advisory Board and 1 disbursement
subsequent to this period (discussed previously) related to the purchase of the Brumidi
sketches. We found that all 15 disbursements were executed in accordance with the
Library’s disbursement practices. Specifically we found that

   •   the Library followed its payment directive appropriately to ensure that the
       payments were properly authorized, accurate, approved, and recorded, and were
       made on a timely basis; and
   •   all transactions were fully supported by documentation, and the Library had the
       proper segregation of duties in the processing of the payments.

Receipts: In 2009, the Library, in coordination with the Commission, issued accounting
guidelines for the Fund which formally documented and approved the processing of
Fund-related receipt transactions. During the period covered by our audit, the Library’s
receipt practices were in place, as evidenced by one donation made to the Commission
for $10 which was deposited in the Fund’s account at the Treasury.

Investments: During the period covered by our audit, we found that while the Library
had established investment practices, it had not documented such practices. Federal
internal control standards provide that procedures should be clearly documented to
effectively support management in controlling operations and making decisions. While
the Library’s undocumented investment practices generally resulted in transactions that
were authorized in advance, supported by documentation, accurately accounted for,
and in compliance with law, we also identified instances where they were not followed.
Specifically, we found the following

   •   58 of 60 investment purchases contained primary supervisory review prior to the
       investment purchase as required by the Library’s established investment
       practices. Two investment purchases did not contain primary supervisory review
       prior to the purchase.
   •   59 of 60 investment purchases contained secondary supervisory review prior to
       the investment purchase as required by the Library’s established investment
       practices. One investment purchase did not contain secondary supervisory
       review prior to the purchase.

In response to the exceptions found during our audit, the Library’s Office of the Chief
Financial Officer formally documented and approved standard operating procedures for
investments in September of 2011. The procedures outline the detailed responsibilities
of staff and reviewers during the preparation and review of investment transactions. The
procedures address prompt entry of investment transactions by setting a goal for all
entries to be made in the Fund’s accounting system within 2 to 3 days of the investment
date. The procedures also provide steps to ensure that the Fund’s accounting system
reflects the Fund’s actual cash balance by requiring reconciliations to be performed
between the accounting system’s trial balance and schedules maintained by Library


   Page 10                                        GAO-12-271R Senate Preservation Fund
staff before all investment purchases. In addition, the procedures include actions the
Library will take to execute an investment purchase when key staff are not available.

Reporting: In 2009, the Library formally issued guidelines on accounting for the Fund
which documented the Library’s operating practices for reporting on a quarterly basis to
the Commission. The guidelines are consistent with federal internal control standards
which provide that pertinent information, such as Fund transaction activities, be reported
in a form and timeframe that enables those who need the information to carry out their
responsibilities efficiently and effectively. During the period covered by our audit, we
found that the Library’s reporting practices were in place. Specifically, we found that the
Library transmitted quarterly financial reports to the Commission, which provided
adequate information for the Commission to monitor the Fund’s activities.

The Library and the Commission Took Action to Address Prior GAO
Recommendations

In our previous report on the results of our audit of the Senate Preservation Fund’s
transactions for fiscal years 2004 through 2008, 17 we made recommendations to the
Commission’s Executive Secretary to work with the Library’s Chief Financial Officer and
Commission staff to document and formally approve operating practices related to the
Library’s and the Commission’s processing of Fund transactions, reporting, monitoring,
and follow-up by the Commission and Library on Fund-related matters. During our audit,
we found that the Library and the Commission took action to address these
recommendations.

Actions Taken to Address Recommendations

In August 2009, the Library, in coordination with the Commission, issued accounting
guidelines for the Fund that formally documented and approved the processing of Fund-
related receipt and disbursement transactions. The guidelines also require that the
Library prepare a report highlighting Fund financial transaction activities and send it to
the Commission on a quarterly basis. In December 2008, the Commission issued a
letter to the Commission’s Executive Secretary that documented and formally approved
operating practices of the Commission related to the processing of Fund-related
disbursement transactions. In addition, the letter delegates to the Executive Secretary
the authority to approve disbursements of less than $10,000 for expenses consistent
with the purposes of the Fund. In September 2011, the Commission and the Library
amended the guidelines to include procedures for the entities to follow-up on Fund-
related matters and to highlight the responsibilities of the Commission to monitor Fund
transactions and safeguard assets. Specifically, the amended guidelines state that the
Commission will review the financial information of the Fund and follow-up in a timely
manner with the Library on any inquiries on Fund-related matters. Furthermore, in
September 2011, the Library formally documented and approved its operating practices
for executing investment transactions.


17
 GAO-09-89R.
  Page 11                                          GAO-12-271R Senate Preservation Fund
Agency Comments

We provided a draft of our report to the Chief Financial Officer of the Library of
Congress and the Executive Secretary of the Senate Commission on Art to obtain
official comments on the draft report’s findings and conclusions. In commenting on the
draft report (see enclosure II), the Library’s Chief Financial Officer concurred with the
draft report’s findings and conclusions. In oral comments received on the draft report,
the Executive Secretary of the Senate Commission on Art also concurred with the draft
report’s findings and conclusions.


We are sending copies of this report to the Senate Commission on Art’s Executive
Secretary and the Chief Financial Officer of the Library of Congress. In addition, the
report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202)512-
9521 or by e-mail at sebastians@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page of this report.
Key contributors to this report include Julie Phillips, Assistant Director; Alan MacMullin;
and Jacquelyn N. Hamilton.




Steven J. Sebastian
Director
Financial Management and Assurance

Enclosures – 2




   Page 12                                          GAO-12-271R Senate Preservation Fund
Enclosure I                                                                                Enclosure I
                                      Scope and Methodology

To achieve our audit objectives, we reviewed the Senate Preservation Fund’s (Fund)
enabling legislation and federal internal control standards and met with staff from the
Senate Commission on Art (Commission) and the Library of Congress’s (Library’s)
Office of the Chief Financial Officer to discuss the nature and extent of the Fund’s
financial transactions and related transaction execution, processing, and accounting
practices; available supporting documentation; and accounting records. We used our
discussions with Commission and Library staff, and our reviews of available supporting
documentation, to develop an understanding of the operating practices established by
the Commission and the Library related to the execution and processing of the Fund’s
investments and operating receipt and disbursement transactions. We also considered
whether the established operating practices were consistent with federal internal control
standards.

We used the Commission’s and the Library’s established operating practices as our
criteria for determining whether the Fund’s transactions and related events for fiscal
years 2009 and 2010 were authorized in advance, supported by documentation, and
accurately accounted for. To do so, we reviewed and reconciled all transactions for
fiscal years 2009 and 2010 with supporting documentation maintained by the Library
and the Commission. Furthermore, we verified the Library’s recorded transactions with
the Bureau of the Public Debt’s (BPD) FedInvest Transaction History Reports18 and the
U.S. Treasury’s Governmentwide Accounting and Reporting (GWA) Account
Statements. 19

We reviewed applicable laws and regulations to determine if any were significant to our
audit objectives. We concluded that there were three statutory provisions within the
enabling legislation related to the objectives of our performance audit. The three
significant statutory provisions we identified involved (1) investment of Fund assets,
(2) use of Fund assets for investment and other purposes, and (3) required approvals
for Fund disbursements. To assess whether transactions were executed in compliance
with laws considered significant to our audit objectives, we reviewed the relevant
statutory requirements, supporting documentation, and accounting for all Fund
transactions. We did not identify any regulations we considered significant to our audit
objectives.

With regard to whether operating, reporting, and oversight practices were documented
and in place at the Commission and the Library to help ensure that Fund transactions
were properly executed and Fund assets were adequately safeguarded, we obtained an
understanding of the Commission’s and Library’s operating, reporting, and oversight

18
  BPD maintains the Fund’s transaction records, which provided third-party verification of the Library’s
records of Fund transactions.
19
 The GWA account statements provide the Fund’s balance and transaction information at the Treasury
and were used to verify the Library’s records of Fund transactions.
   Page 13                                                   GAO-12-271R Senate Preservation Fund
practices by reviewing the available documented practices and conducting walk-
throughs. We reviewed documentation supporting communications between and among
the Library and the Commission staff regarding recorded transactions and Fund
activities. We also considered federal internal control standards when reviewing
supporting documentation related to these activities.

To review actions taken to address prior GAO recommendations, we reviewed GAO’s
prior report on Fund, titled, Senate Preservation Fund: Key Transaction-Related
Operating Practices Have Been Established but Additional Practices Are Needed. 20 We
held discussions with Commission and Library staff and examined all support provided
in response to the recommendations.

We conducted this performance audit from January 2011 to February 2012 in
accordance with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions, based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.




20
 GAO-09-89R.
  Page 14                                          GAO-12-271R Senate Preservation Fund
Enclosure II                                                    Enclosure II
               Comments from the Library of Congress




(196236)
   Page 15                            GAO-12-271R Senate Preservation Fund
This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.
                      The Government Accountability Office, the audit, evaluation, and
GAO’s Mission         investigative arm of Congress, exists to support Congress in meeting its
                      constitutional responsibilities and to help improve the performance and
                      accountability of the federal government for the American people. GAO
                      examines the use of public funds; evaluates federal programs and
                      policies; and provides analyses, recommendations, and other assistance
                      to help Congress make informed oversight, policy, and funding decisions.
                      GAO’s commitment to good government is reflected in its core values of
                      accountability, integrity, and reliability.

                      The fastest and easiest way to obtain copies of GAO documents at no
Obtaining Copies of   cost is through GAO’s website (www.gao.gov). Each weekday afternoon,
GAO Reports and       GAO posts on its website newly released reports, testimony, and
                      correspondence. To have GAO e-mail you a list of newly posted products,
Testimony             go to www.gao.gov and select “E-mail Updates.”

Order by Phone        The price of each GAO publication reflects GAO’s actual cost of
                      production and distribution and depends on the number of pages in the
                      publication and whether the publication is printed in color or black and
                      white. Pricing and ordering information is posted on GAO’s website,
                      http://www.gao.gov/ordering.htm.
                      Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
                      TDD (202) 512-2537.
                      Orders may be paid for using American Express, Discover Card,
                      MasterCard, Visa, check, or money order. Call for additional information.
                      Connect with GAO on Facebook, Flickr, Twitter, and YouTube.
Connect with GAO      Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts.
                      Visit GAO on the web at www.gao.gov.
                      Contact:
To Report Fraud,
Waste, and Abuse in   Website: www.gao.gov/fraudnet/fraudnet.htm
                      E-mail: fraudnet@gao.gov
Federal Programs      Automated answering system: (800) 424-5454 or (202) 512-7470

                      Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-
Congressional         4400, U.S. Government Accountability Office, 441 G Street NW, Room
Relations             7125, Washington, DC 20548

                      Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
Public Affairs        U.S. Government Accountability Office, 441 G Street NW, Room 7149
                      Washington, DC 20548




                        Please Print on Recycled Paper.