Implementation or the remaining segments of AID's overall accounting system in conformity with the principles and standards prescribed by the Comptroller General. Also, in our review of the design aspects of the accounting system for the advance acquisition of excess property, Agency officials agreed to revise the manual to: Recognize rehabilitation costs applicable to future periods as inventory rather than as expense in order to achieve a more appropriate matching of costs and revenue in a given accounting period; Allocate as part of the program, a portion of the applicable expenses paid from the administrative expenses appropriation; and Establish appropriate budgetary accounts and procedures to provide for adequate fund control in each of the branch offices. STATUS OF AID ACCOUNTING SYSTEM-DECEMBER 31, 1968 The Agency for International Development has one complete accounting system subject to approval of the Comptroller General which consists of 10 principal parts, one of which is divided into five subparts. As of December 31, 1968, AID has submitted all parts and subparts to the Comptroller General for approval. Segments approved As of December 31, 1968, the Comptroller General has approved the following segments of AID's overall accounting system: Segment Accounting for the investment guaranty program_ Accounting policies. Loan program accounting system.. Date approved June 28, 1967. Feb. 19, 1968.1 Accounting for the advance acquisition of excess property. Dec. 31, 1968.1 1 Systems design only. Segments returned The GAO has returned the following segments for additional development: Segment Date returned Centralized payroll procedures for U.S.-direct hire and foreign June 30, 1967.1 national employees. AID's financial reporting accounting manual......... 1 Resubmitted for approval December 9, 1968. June 19, 1968. Major problem areas precluding approval of these segments are described on page 62. AID had planned to resubmit its financial reporting accounting manual to the Comptroller General for approval by December 31, 1968, but was unable to meet this overly ambitious target date because of the actions required to fully develop this segment on a basis integrated with the other aspects of the overall financial management information system of the Agency. Segments under consideration The following segments are under consideration by the GAO staff: Allotment accounting Accounting for supplemental activities, such as, advances, Aug. 13, 1968. etc. Accounting for AID-owned property Resubmission of payroll procedures.. 1 System design approved by Comptroller General January 16, 1969. Nov. 26, 1968. Approval of the system design of the individual subparts of the appropriation and allotment accounting system is contingent upon the completion of our review and evaluation of all parts because of the interrelationship of the individual segments to the appropriation and allotment accounting system. DISTRICT OF COLUMBIA GOVERNMENT The recently reorganized District of Columbia Government (establishing the Offices of Commissioner-City Council) has not fully developed plans as to how the financial management improvement and accounting systems development work is to be organized and responsibility established. The statement of accounting concepts, principles, and standards which was submitted for approval prior to the reorganization has been reviewed and needed revisions to the statement have been discussed with District Government staff. However, because of circumstances prevailing since the reorganization, efforts to obtain clarification and agreement to needed revisions to the statement, or to establish target dates under a time-phased development plan, have not been successful. The organization problems, the accounting systems problems, and the need for a development plan, summarized below, were brought to the attention of the new management in the Comptroller General's letter to the Commis-sioner of the District of Columbia, dated July 17, 1968, returning the statement unapproved. ORGANIZATIONAL PROBLEMS The central problem that we believe should receive consideration relates to how the financial management improvement and accounting systems development work is to be organized and responsibility established. For example, the basic accounting concepts, principles, and standards for the payroll system apparently cannot be adopted and implemented by the Chief, Accounting Systems Staff, Executive Office of the Commissioner, since responsibility for the important segment of the system has been delegated to the Department of General Administration. Also, the concepts, principles, and standards. for cost accounting have been largely left to the discretion of the many agency heads, some of whom have authority by Commissioner's. Orders to prescribe their own accounting systems. The leadership required for developing an overall financial management system, of which the accounting system is an important and integral part, is not established by the several delegations of authority. We believe that simplification and clarification of responsibility and related authority for financial management work would expedite needed improvements. We realize that the recently reorganized District of Columbia Government is confronted by problems of major import on many fronts and that any substantial amount of time for the assessment of financial management policies and practices is difficult to find. One important step, however, has already been taken when on April 1, 1968, the Budget officer issued notice that, in accordance with the wishes of the Commissioner of the District of Columbia, a system of program budgeting would be employed beginning with fiscal year 1970. The system would emphasize programs of work and services to be rendered, and the costs thereof, including unit costs. We believe that the change to program budgeting offers a favorable opportunity for concurrent development of a system of accounting and reporting for programs, activities, and functions primarily in terms of costs. The linking of program budgeting and accounting for program costs as the basis for financial management improvement would seem to go far toward resolving major problems which have precluded our approval of the statement of accounting principles and standards. By memorandum conveyed to the Office of the Assistant to the Commissioner on April 24, 1968, we suggested this revised approach to accounting and financial management. ACCOUNTING SYSTEMS PROBLEMS As an adjunct to the decision already made to adopt program budgeting, an overall plan calling for integration of programing, budgeting, accounting, and reporting systems could be quite readily adopted and outlined. The conceptual framework indicated in the statement submitted would not be adequate to carry out such a plan. Certain improvements that we believe are needed appear to be largely traceable to the absence from the statement of certain guidelines that an overall financial management plan would provide. The statement, for example, should be more definitive and specific with regard to (1) the degree of centralization of the system, (2) the relationship between municipal fund, program, Federal grant, and appropriation accounting, (3) the principles and standards which will be employed to account for personnel compensation costs, (4) the concept of recording obligations at the highest practical level, (5) the capitalization of certain fixed assets, (6) the treatment of unfunded costs, and (7) a standard system which will be required in accounting for and controlling materials, supplies, and capitalized equipment. The central feature of the accounting system envisioned under the accounting principles and concepts presented to our office for approval consisted mainly of allotment, obligation, and expenditure accounting and left to the discretion of the major departments and agencies such accounting for program costs as may be considered to be needed by management at these levels... NEED FOR A DEVELOPMENT PLAN We understand that systems development and implementation work is continuing primarily in accordance with the above approach. We believe this work may be hampered if it is to be conducted without the benefit of an adequate overall plan for an integrated financial management system that will satisfy the requirements of management, applicable laws and regulations, and the principles and standards prescribed by the Comptroller General. We were informed that the above matters have, in major part, been brought to the attention of the Assistant to the Commissioner by memorandum dated January 31, 1968, prepared by the Chief, Accounting Systems Staff. We agree with the suggestionin the memorandum for developing a formalized overall plan setting forth the concepts and objectives for financial management in the District so that accounting principles and standards can be coordinately formulated to meet all internal needs for cost and other financial data for planning, programing, budgeting, control, and reporting of District operations. We agree also that the suggested centering of responsibility and authority for the overall systems development effort in one adequately staffed office merits serious consideration. We believe that as soon as possible, an overall formal plan for financial management in the District Government should be adopted which would serve as a guide for revision of the accounting principles and standards into a statement that can, upon resubmission, be approved. Also, there should be established the organizational setting coupled with appropriate authority to carry out the essential improvement program. In a letter to the Comptroller General, dated August 19, 1968, the Mayor-Commissioner recognized that our letter returning the District's statement went deeply into a number of critical areas, policies and decisions related to the development and implementation of an overall financial management system for the District of Columbia Government. He advised that certain policies must be discussed thoroughly before an official decision can be made and these are, at least in part, related to some far-reaching changes in District organization and practices. We were subsequently informed by the District representative that the planning of important organization changes was in process and that some plans had been completed. However, the strengthening of financial management largely remains to be accomplished. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION The National Aeronautics and Space Administration (NASA) submitted its accounting system for the approval of the Comptroller General on April 14, 1966. After our review of the system in operation at four field installations and the headquarters office, we held a number of discussions with NASA officials regarding various aspects of the system. Some changes to the accounting principles and standards. have been made as a result of these discussions, the most recent change having been made in November 1968. One of the more significant changes made by NASA, as a result of our review, should provide for a more complete reporting and recording of Government-owned, contractor-held equipment. The NASA accounting system provides for contractors to maintain accounting records for Government-owned, contractor-held property and to submit semiannual reports to NASA, showing the changes in accountability of certain types of Government-owned property furnished to, or acquired or fabricated by the contractors. These reports form the basis for recording the property in the NASA accounting records as assets of the Government. Our review disclosed that NASĂ procedures did not provide for contractors to report all property for which they were accountable. GAO discussions with NASA officials resulted in a revision to the NASA Financial Management Manual, which was submitted for GAO approval on June 14, 1968. In addition, a related handbook for contractors on the procedures to be used in reporting Governmentowned, contractor-held property was issued in August 1968. Under the revised system, significant amounts of previously unreported Government-owned, contractor-held property are to be reported by the contractors and recorded in NASA's accounting records. The accounting principles and standards of NASA, as initially presented and revised, are in conformity with those prescribed by the Comptroller General and, with the systems design, were approved June 20, 1969. However, approval of the system in operation was being deferred until significant deficiencies in property accounting noted during and subsequent to our review are corrected. The deficiencies noted during our accounting systems review work at one installation were included in our report to the Congress on the need for improved compliance by Goddard Space Flight Center (GSFC) with established accounting procedures for control of equipment (B-164674, August 28, 1968). Similar problems in the accounting for the property of the Goldstone tracking stations were reported to the House Committee on Science and Astronautics in February 1968. The reported deficiencies were the result of inadequate implementing procedures and practices at the center level. In audit work performed since completion of the field work at GSFC, we have found indications of inadequate implementing procedures and practices for property accounting at other NASA installations. Although corrective action has been initiated by NASA in connection with the earlier deficiencies in property accounting identified by GAO, the more recent disclosures of additional deficiencies at other NASA installations were still being evaluated by NASA prior to the implementation of corrective action. GAO plans to review the effectiveness of the corrective actions before approving the NASA accounting system in operation. NATIONAL SCIENCE FOUNDATION The National Science Foundation has one complete accounting system which was originally approved on November 5, 1954. The Foun dation is in the process of revising the system to conform to the current principles, standards, and related requirements of the Comptroller General. During 1968, the Foundation prepared and submitted for approval a brief statement of accounting principles and standards. Certain efforts to improve the overall accounting system were undertaken but documentation of the revised system in operation is not expected for another 2 years. |