oversight

Financial Management: Internal Control Weaknesses in FRA's Civil Penalty Program

Published by the Government Accountability Office on 1990-12-26.

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

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                                                           FINANCIAL
                                                           MANAGEMENT
                                                           Internal Control
                                                           Weaknessesin l?FWs
                                                           Civil Penalty Program


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                        United States
GAO                     General Accounting Office
                        Washington, D.C. 20648

                       Resources, Community, and
                       Economic Development Division

                       B-241898

                       December26,199O

                       The Honorable Samuel K. Skinner
                       The Secretary of Transportation
                       Dear Mr. Secretary:
                       As part of our continuing effort to describe how federal agenciesare
                       improving internal controls under the Federal Managers’Financial
                       Integrity Act of 1982 (31 U.S.C.3612 (b)), we are issuing this report on
                       internal control weaknesseswe identified within the financial manage-
                       ment of the Federal Railroad Administration’s (FXA)civil penalty pro-
                       gram. This program, which is managedby FRA’SOffice of Chief Counsel
                       (occ) and Office of Financial Services(OF@,assessesrailroads’ penalties
                       for violations of safety regulations that pose an immediate safety
                       hazard. We performed this work during our review of the effectiveness
                       of FRA’S safety enforcement program which we will be reporting on to
                       the Chairman, HouseEnergy and CommerceCommittee, in the next few
                       months.

                       We found internal control weaknessesin the financial managementof
Results in Brief       FRA’S civil penalty program that undermined compliance with federal
                       standards for settlement, collection, accounting, and recordkeeping.
                       Additionally, FRA’S actions did not comply with its own internal stan-
                       dard operating procedures and policies, Specific problems included the
                       following:
                   l   occ  did not keep adequate records of railroad correspondencein
                       numerous casesand was therefore unable to readily determine which
                       railroads had and had not respondedto notifications of safety violations
                       and potential civil penalty assessments.
                   .   OFSdid not establish accountsreceivable for millions of dollars in civil
                       penalty payments becauseocc staff did not follow required procedures,
                       resulting in a loss of control over government receipts.
                   .   CKXdid not processand   OFS   did not deposit somereceipts in a timely
                       manner, leading to a loss of revenuesdue to foregone interest earned on
                       deposits.
                   .   occ frequently did not enforce provisions for charging interest and
                       administrative costs for overdue civil penalty payments. As a result, the
                       federal government lost potential revenues.
                   .   occ was not timely in settling railroad violation casesand collecting civil
                       penalties, resulting in increased federal government borrowing.


                       Page 1                             GAO/RCED-91-47 Financial Management Systems
_______--.-
              R-241898




              FRA is responsiblefor establishing and enforcing safety regulations for
Background    the railroad industry. FRA inspectors monitor railroads’ compliance with
              these regulations by routinely inspecting railroads. When inspectors
              identify violations (defects) that pose an immediate safety hazard, they
              prepare violation reports that are submitted to FRA’SOffice of Chief
              Counsel.The occ Safety Division reviews the reports for adequacy of
              evidenceand consistencywith enforcement policy and aggregatesthem                                    ’
              into casesfor assessmentagainst individual railroads. occ determines
              the appropriate penalties for each caseand issuesa notification letter to
              a railroad that summarizesthe violations contained in the caseand iden-
              tifies evidencesupporting FRA’Sposition.
              Oncea railroad is notified of a safety violation and of associatedcivil
              penalties, the processfor settling the casebegins. In hazardous materials
              cases,railroads have 30 days to reply to FXAon the validity of the viola-
              tions, according to federal regulations, If a railroad doesnot reply
              within the allowed time, it must pay the fine immediately and forfeit its
              rights to an administrative hearing, However, in casesinvolving the rail
              safety acts,’ FRAgives railroads more time to investigate. After their
              own investigations, the railroads may negotiate a settlement with FRA.
              Larger railroads usually negotiate settlements annually with FRA in con-
              ferencesthat include technical experts and attorneys from both the rail-
              road and FRA. When FRAand the railroad reach agreementon the
              settlement amount, CKCputs the agreementin writing and requests pay-
              ment. The railroad then has 30 days to pay the full settlement amount to
              avoid paying interest and late charges.

              When a civil penalty casehas been settled, the responsibleocc attorney
              prepares a settlement sheet including the basis of settlement and a
              “Railroad Accounting Division (RAD) - 41” memorandum. This memo-
              randum indicates the fines and fees to be collected from the subject rail-
              road, as well as the due date(s). The attorney delivers these documents
              to occ administrative staff, who then deliver the RAD41memorandum to
              FIU’SOffice of Financial Services,which operates FRA’S centralized
              accounting system, and file the others. When OFSreceivesthe RAD-41
              memorandum, it establishesan account receivable for the settlement
              amount in m’s accounting system.



              *The Safety Appliance Ad, 46 USC. 1716;the Locomotive Inspection Act, 46 USC. 22-34; the Acci-
              dent Reports Act, 46 USC, 3843; the Hours bf Service Act, 46 U.S.C. 61-64b; Feakai Railroad Safety
              Act of 1970,46 USC. 421 5 s; and the Signal Inspection Act, 49 USC. app. Sec. 26.



              Page 2                                        GAO/RCED-9147 I4nancia.l Management Systems
                           R-241898




                           In fiscal year 1989, FRA sent letters to railroads concerningviolation
                           reports that occurred mostly in fiscal year 1987 or before. These viola-
                           tions were potentially worth $5.6 million in civil penalties. Additionally,
                           through negotiation of 800 cases,FRA settled 6,577 violation reports
                           received in fiscal year 1989 and before totalling $4.62 million in civil
                           penalties.
                           Standards for the financial managementof the federal government’s
                           claims, such as FRA's ci        alties, have been establish
                           Congressand GAO.                1Claims Collection Act o&a
                           508,80 Stat. 308 (1966)), as amended,2sets federal requirements for the
                           prompt settlement of the government’s claims, including the civil penal-
                           ties FRA assessesagainst railroads for safety violations. Additionally,
                           GAO'S Policy and ProceduresManual for Guidanceof Federal Agencies
                           provides financial managementguidance and establishesrequired proce-
                           dures for accounting and internal controls. FRA’SOFS has also developed
                           standard operating procedures for managing FXA’Scivil penalty collec-
                           tion activities. (App. II contains details on internal financial control
                           requirements.)

                           We found internal control weaknessesthat undermined the integrity of
Internal Control           the financial managementsystem for FRA'S civil penalty program. FE4
Weaknesses                 complied with neither governmentwide requirements nor its own
                           internal standard operating procedures and policies in four areas. First,
                           records of significant transactions were frequently inadequate or non-
                           existent. Second,FRA did not establish accountsreceivable for millions of
                           dollars in civil penalties assessedagainst railroads. Third, FRA deposited
                           numerous civil penalty receipts later than federal standards allow. Last,
                           FRA enforced neither statutory nor FRA'S policy for assessinginterest and
                           administrative chargeson late railroad penalty payments. These
                           problems resulted from a general inattention and lack of importance
                           attached to internal control standards as well as from strained
                           resources.Although occ’s Safety Division hired four additional attor-
                           neys to alleviate staff resource strains between May 1988 and March
                           1990, these internal control problems continued to exist.


Recordkeeping Inadequate   GAO'S Policy and ProceduresManual, Title 8, “Records Management,”
             ”             informs federal agenciesthat they are required to keep records of
                           agency transactions and functions in order to protect the government’s
                           2Amended by Ikbt Collection Act of 1982 (P.L. 97-366,96 Stat. 1749 (1982)).



                           Page 3                                         GAO/RCED91-47 Financial Management Systems
B241898




interests. However, occ did not comply with these federal recordkeeping
requirements. For example, occ has records that were designedto
account for casesthat have been settled; however, as of May 1990, these
records were not current. Administrative staff responsible for updating
the records were involved in other duties and had not made any entries
between September 1989 and May 1990, even though FRAhad settled
civil penalty casesfor more than 3,000 violations during that period.

GAO'S Policy  and ProceduresManual, Title 8, points out that federal
agenciesare required to make and preserve records of agency transac-
tions so that the legal and financial rights of the government are pro-
tected. Thus, records of railroad responseto FRA’Sletters stating that
rail safety violations have occurred must be maintained in order to pro-
tect the government’s legal and financial interests. Railroad responseis
especially important‘in,hazardous materials cases.Federal hazardous
materials regulations (49 C.F.R.209.107) state that a failure to respond
to a Notice of Probable Violation constitutes forfeiture of all rights to
any administrative hearing and requires the railroad to pay the penalty
immediately. For both hazardous materials and rail safety violations,
FRA'S letters that notify railroads that violations have occurred request a
response,in accordancewith these requirements. Railroads respond
both in writing and by telephone. occ attorneys are responsible for
maintaining records of these responses.An occ official told us that rail-
road correspondenceis generally retained by the responsible attorney
and not put in the official casefile.
We found that FRA’Srecords of railroad responsesto civil penalty notifi-
cation letters were inadequate in certain cases.For example, only 27 of
197 official files we reviewed for civil penalty casesclosed during fiscal
year 1988 contained records of railroad responses.Similarly, only 25 of
49 official files for “top priority” civil penalty casesinitiated during
fiscal year 1986 through December1989 contained records of railroad
responsesto notifications of violations, even though FM'S letters clearly
requested a railroad responsewithin 30 days of receipt of the letter.
Therefore, in these cases,it was impossible to determine from the offi-
cial files which railroads had and had not responded.As a result, in sev-
eral hazardous materials casesclosedduring fiscal year 1988, we found
it difficult to determine whether a railroad owed an immediate payment.
Furthermore, in over 60 percent of the top priority casefiles reviewed,
we could not determine how quickly railroads respondedto FRA’Snotifi-
cation becauseno record of railroad responsewas evident.




Page 4                             GAO/RCRD-91-47 Financia.l Management Systems
                          R-241898




Accounts Receivable       GAO'S Policy  and ProceduresManual, Title 2, requires federal agenciesto
System Ineffective        establish accountsreceivable. FRA'S centralized accounting system is
                          operated by OFSand includes standard operating procedures for the
                          establishment and maintenance of accountsreceivable which consist pri-
                          marily of civil penalty payments from railroads. However, from October
                          1988 through January 3 1, 1990, civil penalty checkstotalling $3.26 mil-
                          lion were received by OFSwithout corresponding accountsreceivable
                          records. In these cases,the ~~-41 memorandum was not prepared by
                          occ attorneys and forwarded to 01%to initiate an account receivable, as
                          required. Consequently,there was a loss of control over these govern-
                          ment receipts becauseOFSstaff did not know how much money was
                          owed by specific railroads or when payments were due. Furthermore, in
                          certain casesin which FRA followed its procedures for establishing
                          accountsreceivable, control over civil penalty receipts was compro-
                          mised. For example, in October 1988,two civil penalty checkstotalling
                          $139,000 were lost in occ offices. Although an account receivable had
                          been established, occ staff did not realize the checkswere missing.
                          These checks were not discovered and deposited until nearly 3 months
                          later. Additionally, OFSdid not record dates of payment receipt in many          .
                          cases,thereby undermining FRA'S ability to monitor the status of pay-
                          ments being processed.


Debt Payments Deposited   GAO'S Policy and ProceduresManual, Title 7, describesDepartment of
Late                      the Treasury standards that require agenciesto deposit debt payments
                          within 5 days from their receipt. Furthermore, FRA'S internal provisions
                          require occ to forward monies mistakenly sent by railroads to occ to
                          FRA'S 0~swithin 2 businessdays. However, FRAregularly did not comply
                          with requirements for timely deposit and handling of debt payments. In
                          someof the casesin which railroads mistakenly sent civil penalty
                          checksto occ instead of to OES,the checkswere not forwarded to OFSor
                          deposited within the established time limits. We found that normally one
                          administrative staff member is responsible for opening OCC’S mail,
                          accounting for civil penalty checks sent to occ, and handcarrying these
                          checksto OF%This individual had numerous other administrative duties
                          in addition to handling payments.

                          We found that between October 1,1987, and December31,1989, rail-
                          roads made 263 civil penalty payments totalling $8.94 million to FRA.Of
                          these, at least 16 were received in occ and not forwarded to OFSwithin
                          established time limits. Furthermore, FFSdeposited 24 payments total-
                          ling $1.68 million, about 19 percent of the total payments, between 3
                          and 92 days later than required. As a result, FRApostponed interest that


                          Page 5                            GAO/RCED-91-47 l!imu~cial Management Systems
                          B241898




                          should have been paid to the federal government on deposited railroad
                          debt payments. An FRAofficial told us that checksmistakenly sent by
                          railroads to occ attorneys occasionally remained unprocessedfor
                          extended periods and were therefore not deposited within required time
                          limits. For example, in October 1988, two civil penalty checkstotalling
                          $139,000 which a railroad sent to occ remained in an occ attorney’s
                          inbox until January 1989. The attorney said that he did not sort through
                          hi8 inbox until January 1989 becausehe was temporarily assignedto
                          writing regulations.


Provisions for Charging   Both the Federal Claims Collection Act and FRA'S own statements in set-
Interest and              tlement agreementsrequire that late payment penalties be assessedon
                          overdue debts owed to the government. However, FRA regularly did not
Administrative Expenses   enforce these requirements. For example, during the period October 1,
Not Enforced              1987, through December31,1989,10 accountstotalling over $325,000
                          were either overdue or paid in installments. FXA’Ssettlement notices sent
                          to railroads state that interest and administrative chargeswill be levied
                          for failure to pay the full settlement amount by the date specified. How-
                          ever, no interest, penalties, or administrative chargeswere assessedfor
                          these late or extended payments. Instead, occ attorneys simply amended
                          the settlement agreementswith new due dates. As a result, the federal
                          government lost potential revenuesfrom interest and administrative
                          chargesthat FFUshould have collected. However, due to data limita-
                          tions, we could not determine the amount.

                          GAO'S Policy  and ProceduresManual, Title 4, requires effective agency
Settlement Goals Not      debt-collection programs that are comprehensive,vigorous, and uni-
Met                       formly applied. These programs should provide for timely, forceful, and
                          persistent action to collect payment of debts. We found that occ’s debt
                          collection efforts do not meet these financial managementobjectives.
                          Since 1986, a backlog of casesawaiting transmittal to railroads has
                          existed becauseattorney staff turnover, combined with an administra-
                          tive staff shortage, affected the rate at which an increasing number of
                          violation reports and casescould be processed.Currently, FRA takes
                          about 3 years to transmit and settle a civil penalty case.
                          FRA’Sbacklog has undermined efforts to set and maintain firm goals for
                          transmitting and settling outstanding civil penalty casesand collecting
                          penalty payments. In May 1988, occ issued its 1988 enforcement proce-
                          dures that listed December31, 1988, as the goal for settlement of pre-
                          1987 civil penalty cases.However, since as early as 1986, a backlog of


                          Page 6                            GAO/RCED-9147 Financial Management Systems
                  B-241898




                  civil penalty caseswaiting to be transmitted to railroads has existed and
                  continues to grow. In May 1986, there were 5,334 violation reports in
                  the backlog. In February 1988, the backlog had grown to 11,000viola-
                  tion reports. By the end of 1989, the backlog was almost 18,000 viola-
                  tion reports. Thus, when it becameapparent that the 1988 goal would
                  not be met, occ issued a subsequentmemorandum that changedthe set-
                  tlement goal for pre-1987 casesto December31,1989. However, as of
                  that date, 1,241 pre-fiscal year 1987 violation reports contained in cases
                  transmitted to railroads had not been settled. Furthermore, occ had
                  taken no action on an additional 363 pre-fiscal year 1987 violation
                  reports received in cxc from FRAregional offices.

                  These untimely actions to settle and collect civil penalties resulted in
                  reduced federal revenuesbecausethe funds accruing from these settle-
                  ments were not available to offset potential federal borrowing of the
                  settlement amounts. For example, if FRAhad collected the $3.04 million
                  from pre-fiscal year 1987 casesthat were settled in fiscal year 1989 6 to
                  12 months earlier, the potential interest savings to the federal govern-
                  ment would have been between $140,000 and $240,000.


                  FRA’Scompliance with federal financial managementstandards has been
Conclusions       undermined by internal control weaknessesin its civil penalty program.
                  As a result, FRA (1) could not ascertain whether or not railroads
                  respondedto numerous civil penalty notification letters; (2) lost control
                  over millions of dollars in government receipts; (3) postponed interest
                  that would have been paid on timely deposits of receipts; (4) lost poten-
                  tial federal revenuesfrom interest and administrative chargesnot levied
                  on late civil penalty payments; and (6) increasedfederal borrowing
                  costs as a consequenceof not meeting its claims settlement goals.
                  Although the systems and procedures we discussedabove were in place
                  to effectively managethese activities, inattention to internal financial
                  control standards coupled with strained resourcesresulted in noncom-
                  pliance in this important area. A rigorous program to enforce adherence
                  to internal control principles, which could include training and more
                  continuous oversight, would help to prevent a recurrence of these condi-
                  tions. Furthermore, such a program will both strengthen the financial
                  managementof FRA’Scivil penalty program and increaserevenuesto the
                  government.


                  We recommendthat you direct the Administrator, FRA,to initiate a pro-
Recommendations   gram to enforce adherenceto internal controIs by FRApersonnel so that


                  Page 7                             GAO/RCED-91-47 Financial Management Systems
                      B-241898




                      the integrity of the civil penalty program’s financial managementis not
                      compromised.In particular, this program should emphasize
                  . updating and maintaining civil penalty caserecords, including docu-
                       menting railroads’ responsesto penalty notifications and negotiations in
                      official casefiles;
                  . establishing formal accountsreceivable records when railroads are ini-
                      tially notified that violations have been cited and civil penalties
                       assessed;
                  l   forwarding receipts directly received by occ to OFSwithin required time
                      limits and ensuring that deposits are made in accordancewith federal
                      requirements; and
                  l   enforcing statutory and agency provisions for charging interest, penal-
                      ties, and administrative costs on overdue civil penalty debts.
                   ‘,,
                      In addition, we recommendthat you direct the Administrator to set real-
                      istic goals for the settlement of claims against railroads basedon analy-
                      sesof attorney and administrative staff workloads.

                      We also recommendthat occ begin enclosing envelopesthat are pread-
                      dressedto OFSwhen settlement agreementsare sent to railroads. This
                      would reduce the recurrence of situations in which railroads mistakenly
                      send civil penalty checksdirectly to occ.


                      We obtained information for this report during our review of FRA’S
Scopeand              safety enforcement program. We contacted FRAofficials and reviewed
Methodology           documentsand records from FRAheadquarters in Washington, D.C. The
                      Chairman, HouseCommittee on Energy and Commerce,requested that
                      we report on our findings directly to the Secretary of Transportation. A
                      more complete description of our objectives, scope,and methodology
                      appears in appendix I. Our review was conducted between April and
                      September 1990 in accordancewith generally acceptedgovernment
                      auditing standards.

                      We discussedthe contents of this report with the FRAAdministrator and
Views of Agency       the FRA Chief Counsel,who generally agreedwith our findings.
Officials



                      Page 8                            GAO/RCEB91-47 Financial Management Systems
 B-241898




 The head of a federal agency is required by 31 U.S.C.720 to submit a
 written statement on actions taken on our recommendationsto the
 SenateCommittee on Governmental Affairs and the HouseCommittee
 on Government Operations not later than 60 days after the date of this
 letter and to the House and SenateCommittees on Appropriations with
 the agency’s first request for appropriations made more than 60 days
 after the date of this letter.
 We are sending copies of this report to the FRA Administrator. We are
 also sending copiesto the House and SenateCommittees mentioned
 above; the Chairman, HouseCommittee on Energy and Commerce;and
 the Director, Office of Managementand Budget. Copieswill also be made
 available to others upon request.
 This work was performed under the direction of Kenneth M. Mead,
 Director, Transportation Issues,who may be reached at (202) 275-1000.
 Major contributors to this report are listed in appendix III.

 Sincerely yours,




jtDFq
 Assistant Comptroller General




 Page 9                            GAO/WED-9147   Financial Management Systems
Contents


Letter
Appendix I
Objectives, Scope,and
Methodology
Appendix II
Financial Management
Requirements
Appendix III
Major Contributors to
This Report




                        Abbreviations

                        FRA       Federal Railroad Administration
                                  General Accounting Office
           Y


                        GAO
                        occ       Office of Chief Counsel(FRA)
                        OFS       Office of Financial Services(FRA)


                        Page 10                           GAO/RCED-9147 Financial Management Systems
Page 11   GAO/RCEBBl-i?   Financial Management Syatema
Appendix I

Objectives,Scope,and Methodology


              During our review of the Federal Railroad Administration’s (FRA)
              enforcement activities, requested by the Chairman, HouseCommittee on
              Energy and Commerce,we found a number of internal control weak-
              nessesin FRA'S financial managementof its civil penalty program. As
              agreed with the Chairman’s office, we are reporting on these findings
              directly to the Secretary of Transportation. Our objective was to deter-
              mine the extent to which the financial managementof FRA'S civil penalty
              program complied with federal claims collection standards, our
              accounting and internal control requirements, and FRA'S own standard
              operating procedures.
              We conducted our work at FRA headquarters in Washington, DC. We col-
              lected and reviewed documents and records from FRA'S Offices of Chief
              Counsel(OCC),Financial Services(OF@,and ManagementSystems.We
              also interviewed officials from each of these offices.
              To determine the standards with which FRAmust comply, we reviewed
              federal laws and regulations, as well as policy and procedure guidance,
              pertaining to debt collection and internal financial controls. We also
              reviewed FRA'S policy and procedural guidance documentson this
              subject.
              To determine the extent to which FRAcomplied with internal control and
              financial managementstandards, we examined FRA occ records for the
              civil penalty program. Specifically, we reviewed (1) log books showing
              penalty collections status and checksreceived, (2) computer records
              showing the aging of advances,receivables,and payables, and (3) files
              and documents regarding accountsreceivable and deposit records.
              We also obtained, through discussionwith FRA officials, information on
              FRAinternal controls procedures,occ processingof civil penalty settle-
              ments and collections, and procedures for processingrailroad payments
              made to FRA. Additionally, to determine what internal control weak-
              nessesFRA had previously identified and addressed,we examined recent
              FRAFederal Managers’Financial Integrity Act reports.
              We conducted our review between April and September 1990 in accor-
              dance with generally acceptedgovernment auditing standards.




              Page 12                           GAO/RCED-9147 Financial Management Systems
Appendix II

F’inancid Management Requirements


              GAO'S Policy  and ProceduresManual for Guidanceof Federal Agencies
              sets forth the financial managementrequirements that all federal agen-
              cies must follow. Title 2 of the Manual states that the head of each
              agency is responsible for establishing and maintaining adequate systems
              of accounting and internal control. These systemsmust conform to the
              accounting principles, standards, and related requirements and internal
              control standards prescribed by the Comptroller General. In addition,
              the Federal Claims Collection Act of 1966, as amended,sets legal
              requirements for prompt settlement of the government’s claims,
              including FRA'S civil penalties against railroads. Also, FRA’SOffice of
              Financial Serviceshas developedstandard operating procedures for
              managing m’s civil penalties program.

              According to GAO'S Policy and ProceduresManual, Title 2, “Accounting,”
              sound agency financial managementdependson strong financial man-
              agementsystems including sufficiently disciplined accounting systems,
              reliable financial information, and effective internal controls. Included
              in these systems are standards for recordkeeping, accountsreceivable,
              and handling and deposit of debt collections. A principal requirement is
              that federal agenciesmake and preserve records containing adequate
              documentation of essential transactions so that the legal and financial
              rights of the government are protected. Additionally, Title 7 of GAO'S
              Policy and ProceduresManual points out that records must be main-
              tained of all collections in sufficient detail to readily identify the collec-
              tions if called upon to do so. Agenciesmust also establish and maintain
              accountsreceivable in their accounting records. According to Title 2 of
              GAO'S Policy and ProceduresManual, amounts receivable by the agency
              from other entities should be recorded and accounted for as assetsfrom
              the time events giving rise to such claims are completed. These amounts
              should be categorizedinto agency accounting records under the heading
              “Accounts Receivable.”
              There are also requirements intended to minimize the potential for loss
              of government revenues.For example, GAO'S Policy and Procedures
              Manual, Title 7, describesthe standards for the timely handling and
              deposit of debt payments found in the Treasury Financial Manual,
              Volume I, part 6, chapter 8000. Receiptsof $1,000 or more should be
              deposited daily, while receipts of less than $1,000 may be accumulated
              and deposited when that total reaches$1,000. In no caseshould the date
              of deposit exceed5 days from receipt. Additionally, the Federal Claims
              Collection Act, as amended,requires agenciesto assessinterest, penal-
              ties, and administrative costs on overdue debts owed to the United
              States. Specifically, 4 C.F.R. 102.13 requires that (1) interest accrue


              Page 13                              GAO/RCED-9147 Financial Management Systems
A~pendlr II
Financial Management Requirement8




from the date on which the notice of debt is first delivered, (2) the rate
of interest assessedbe the rate of the current value of funds to the U.S.
Treasury, and (3) administrative chargesto cover the additional costs
incurred in processingand handling the debt becauseit becamedelin-
quent be assessed.No interest or penalties may be collected on debts
paid within 30 days of notice. When a debt is paid in partial or install-
ment payments, amounts received from the debtor must be applied first
to outstanding penalty and administrative cost charges,secondto
accrued interest, and third to outstanding principal.
In addition to the above requirements, FRA’SOffice of Financial Services
has developedstandard operating procedures for managing FRA’S civil
penalty collections. Theseprocedures describethe responsibilities and
steps for managing accountsreceivable for civil penalty fines. Also, FRA
has accounting proceduresto record interest receivable which is levied
for failure to pay settlement amounts on time. Furthermore, occ’s
enforcement.procedures set forth standards for handling civil penalty
payment receipts.




Page 14                             GAO/RCED-91-47 l%ancial   Management Systems
Appendix III

Major Contributors to This Report


                        Roy J. Kirk, Assistant Director
Resources,              John S. Kalmar, Jr., Assignment Manager
Community, and          Peter E. Plumeau, Evaluator-in-Charge
Economic
Development Division,
Washington, D.C.

                        Michael G. Burros, Attorney
Office of the General
Counsel,
Washington, D.C.

                        Gwenetta A. Blackwell, Site Senior
Chicago Regional        Sarah R. Brandt, Evaluator
Office                  Jacqueline B. McFarlane, Evaluator




(342820)                Page 15                          GAO/lWED-9147 Finanti   Management Systems
1J.S. Gc~ueral Accounting  Offi~
I’. 0. Hex 60 15
Gait.h(~rsburg,  MI) 20877

Orcl(brs may also bet placed   by calliug   (202)   275(i241.
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