Report No. 01-22
Office of the Inspector General
OFFICE OF JUSTICE PROGRAMS' RESPONSE TO THE DRAFT AUDIT REPORT
||Guy K. Zimmerman
Assistant Inspector General for Audit
Mary Lou Leary
Acting Assistant Attorney General
||Draft Fiscal Year 2000 Annual Financial Statement
Audit Report for the Office of Justice Programs
This is in reference to your correspondence dated May 15, 2001, regarding the draft Fiscal Year (FY) 2000 Annual Financial Statement Audit Report for the Office of Justice Programs (OJP). For ease of review, each audit recommendation is stated in bold, followed by responses from the Office of the Comptroller (OC), and the Office of Administration's (OA) Information Resources Management Division (IRMD).
The draft OJP audit report contains: (1) eight recommendations, none of which were material findings; and (2) no questioned costs. Based on the information included in this memorandum, we consider the subject report resolved and request written acceptance of this action from your office.
Recommendation 1 (Resolved)
We recommend that:
Recommendation 2 (Resolved)
- OC and OA implement a receipt and acceptance process that includes the signature of the receiving officer, as well as the date of receipt and acceptance of the goods and services. (Resolved)
- The OC and OA agree with the recommendation. The OC and OA are in process of reviewing existing automated systems; i.e., IFMIS and IDEAS-PD (Interior
Department Electronic Acquisition System - Procurement Desktop) to determine the best approach to record the receipt and acceptance date of goods and services. The capabilities of the latter system are being assessed to determine if it can be used to record receipt and acceptance dates. We anticipate feedback from the vendors and will develop a receipt and acceptance process during the second quarter of FY 2002. However, in the interim, OC is developing and will implement by the fourth quarter of FY 2001 a manual process for tracking receipt and acceptance dates until an automated system is implemented.
- OC and OA develop comprehensive accrual policies and procedures for contract and other vendor disbursements that will require the recording of an accounts payable based upon the receipt and acceptance date. Also, the policies and procedures should include detailed procedures to be performed in the process, the need for documentation of significant management conclusions, the process for developing estimates, and the required level of supervisory review. (Resolved)
- The OC and OA agree with the recommendation. OC, in conjunction with OA, will develop written policies and procedures by the fourth quarter of FY 2001 specifying the process for properly recording accounts payables at fiscal year-end. The policies and procedures will accurately detail processes including the necessary supporting documentation and management approval.
We recommend that OC and OA establish a process to identify and record contract retainages that have been earned but have not been paid due to contract retainage requirements.
- The OC and OA agree with the recommendation and will develop and implement written policies and procedures by the fourth quarter of FY 2001 as they relate to Statements of Federal Financial Accounting Standards (SFFAS) No. 5, Accounting for Liabilities of the Federal Government. The written procedures will include a process for identifying and proper recording of contract retainages.
Recommendation 3 (Resolved)
We recommend that:
- OC establish a detailed process, with timelines, for gathering information for financial statements preparation and to ensure that the financial statements
are reviewed for accuracy prior to distribution. Review personnel should preferably be independent of the financial statements preparation process. (Resolved)
- The OC agrees with the recommendation. In FY 2000, OC established and utilized time lines for preparing the financial statements. In FY 2001, the time lines will be expanded to include additional details including the oversight responsibility of the Manager, Reports Branch, for independent review of the financial statements for accuracy prior to distribution. The IFMIS software upgrade implemented on May 16, 2001, automated the financial statements preparation process in accordance with OMB and Treasury requirements. This can be verified during Fiscal Year 2001 auditor testwork.
- Ensure that the General Accounting Office (GAO)'s Checklist for Reports Prepared Under the CFO Act and OMB 97-01 Disclosure Checklist are completed during the preparation of the financial statements. (Resolved)
- The OC agrees with the recommendation and will ensure that the GAO and OMB checklists are completed in conjunction with the preparation of the financial statements, first quarter of FY 2002.
- Ensure that all financial statement account relationships are reviewed to identify all inconsistencies between financial statements. If differences do exist, they should be researched so they can be adequately explained or corrected. (Resolved)
- The OC agrees with the recommendation and is preparing a comprehensive listing of the financial statement account relationships. Testing is currently being performed and will be incorporated in the preparation and review of the financial statements beginning with the first quarter of FY 2002. Also, a process will be developed beginning with the first quarter of FY 2002 to address differences that are identified.
- Prepare interim financial statements at least semi-annually, and consider preparing them quarterly. (Resolved)
- The OC agrees with the recommendation and is currently preparing semi-annual financial statements. The IFMIS software upgrade implemented on May 16, 2001, automated the financial statement preparation process, which will enable OC to prepare and analyze financial statements on a more frequent basis. This can be verified during Fiscal Year 2001 auditor testwork.
Recommendation 4 (Resolved)
We recommend that OC modify IFMIS to produce a consolidated trial balance, produce financial statements, and properly post revenue and expense transactions for the Crime Victims Fund (CVF).
- The OC agrees with the recommendation. The IFMIS software upgrade implemented on May 16, 2001, includes the ability to generate consolidated trial balances and financial statements.
The OC processed journal entries on a quarterly basis in the general ledger to properly reflect the transactions for the CVF prior to the IFMIS software upgrade implemented on May 16, 2001. The IFMIS software now includes the necessary revenue and expense transaction posting logic to properly reflect CVF transactions. This can be verified during Fiscal Year 2001 auditor testwork.
Recommendation 5 (Resolved)
We recommend that OC develop procedures that can be used by OJP personnel when preparing the following sections of the financial statements:
- Management discussion and analysis,
- Principal financial statements,
- Related financial statement footnotes, and
- Required supplementary information.
The OC agrees with the recommendation. The OC and OBMS will work in conjunction to ensure that the management discussion and analysis is reflective of the information presented in the financial statements, in particular, linking budget authority, program accomplishments, and expenditures. By the fourth quarter of FY 2001, the OC will develop policies and procedures in accordance with SFFAS and OMB Bulletin No. 97-01, Form and Content of Agency Financial Statements, for the principal financial statements and related footnotes and supplementary information.
Recommendation 6 (Resolved)
We recommend that:
- OC develop a policy and review procedures to ensure that:
- Audit adjustments are posted timely to IFMIS.
- An analysis is performed to determine the effects of prior year audit adjustments on current and subsequent year financial statements.
- Adjusting journal vouchers are properly reviewed to determine if the correct standard general ledger accounts have been used.
The OC agrees with the recommendation and will revise its policies by the fourth quarter of FY 2001 to address the appropriate methodology for recording audit adjustments.
OC will also update procedures by the first quarter of FY 2002 to include validating the results of the year end closing process, prior year adjustments and ensuring the accuracy of the general ledger balances.
Recommendation 7 (Resolved)
We recommend that OA, OJP, arrange via a service level agreement for an alternate data processing facility.
- The OA agrees with the recommendation and is working with the Computer Services Staff (CSS), Justice Management Division (JMD), in Rockville, Maryland, to establish a Memorandum of Agreement (MOA) for a disaster
recovery site. The draft MOA is currently under review by CSS/JMD. OA is awaiting CSS/JMD comments and anticipates finalizing the MOA during the fourth quarter of FY 2001.
Recommendation 8 (Resolved)
We recommend that OC and OA implement their proposal/plan for hosting the IFMIS production and development server on a segmented subnet.
- The OC and OA agree with the recommendation. The IFMIS production and development servers were migrated to their own isolated subnet on December 15, 2000. The router has been set up with Access Control Lists to tightly restrict traffic flow to and from the IFMIS subnet. Traffic flow is monitored 24x7, not only by security personnel, but through the implementation of intrusion detection software which monitors traffic for any suspicious activity on the IFMIS subnet. If unusual activity is detected, notification emails are broadcast to key computer security personnel. Also, the contractors (Digital Systems Group, Inc.[DSG]) authenticate using the SecurID when dialing in.
In further support of security concerns, the Defense Security Service conducted an Industrial Security Review of DSG on August 29, 2000. The purpose of the review was to evaluate DSG's security procedures as they apply to the National Industrial Security Program Operating Manual. No security issues were identified during the review. Additionally, a risk assessment of IFMIS was conducted, and the system was certified and accredited in December 2000. This can be verified during Fiscal Year 2001 auditor testwork.
If you have any questions or need additional information about this response, please contact me on (202) 307-3186 or Denise Christodoulopoulos, OJP Audit Liaison, on (202) 616-5968. Thank you for your continued cooperation and assistance.
Cynthia J. Schwimer
Gary N. Silver, Director
Office of Administration
Patricia Thackston, Director
Office of Budget and Management Services
Robert Balin, Acting Director
Office of the Comptroller
OJP Audit Liaison
Vickie L. Sloan
DOJ Audit Liaison
OAAG Executive Secretariat
Control No. 20011029