Independent Auditor's Report – Account De-obligation and Closing Processes Need Improvement
| Summary: USAID’s account de-obligation, budget carryover, and annual account closing processes need improvement. FY 2005 budget and obligation post-closing balances in Phoenix were not accurate because of obligation reporting issues between USAID missions and USAID/Washington. This had occurred at a time in fiscal year 2006 when USAID was still not using Phoenix worldwide. Throughout fiscal year 2006, USAID then experienced difficulty accounting for the budget activity providing the underlying support for its Statement of Budgetary Resources. As a result of post-closing problems, Phoenix budget and obligation opening balances at the start of fiscal year 2006 were not accurate. USAID later posted manual adjustments to reflect accurate budget and obligation balances. Budget and obligation balances from seven of USAID’s fund accounts were still not successfully carried forward at the beginning of FY 2007. As a result, USAID continued to perform a manual adjustment for these seven fund accounts at the start of FY 2007. |
Core financial system requirements under FFMIA require Federal agency systems to have the ability to:
- Collect accurate, timely, complete, reliable, and consistent information;
- Provide for adequate agency management reporting;
- Support government-wide and agency level policy decisions;
- Support the preparation and execution of agency budgets;
- Facilitate the preparation of financial statements, and other financial reports in accordance with Federal accounting and reporting standards;
- Provide information to central agencies for budgeting,
analysis, and government-wide reporting, including consolidated
financial statements; and
- Provide a complete audit trail to facilitate audits.
In accordance with ADS 621, deobligations are entered in Phoenix using information on funding sources and fiscal year. For prior-year unilateral obligations, deobligations are recorded as recoveries and returned to the correct appropriation. USAID’s CFO then compiles a “Recoveries” report and requests apportionment from OMB to make the funds available for re-obligation. Further, it states that, after program funds have been deobligated, apportioned by OMB, and made available in the accounting system for reprogramming, USAID will return 50 percent of each of its Bureau’s remaining current year recoveries, after taking out amounts necessary to fund upward adjustments, and 100 percent of originating Bureau’s fund accounts that are designated for specific Bureaus. Operating expense funds, however, are not available for return to recovering offices since projected recoveries of prior year balances are incorporated into the Operating Year Budget levels.
USAID had difficulty properly recording deobligated funds. We identified no activity during the year in Account 4871 (Recoveries), and discovered that Phoenix was systematically recording Recoveries of prior-year obligated funds improperly against Account 4801 (Undelivered Orders – Obligations, Unpaid).
We noticed significant activity in Account 4119 (Other Appropriations Realized) not supported by Treasury warrants and discovered that much of this activity should have been posted to different accounts as part of the automated account closing in Phoenix. The automated closing process in Phoenix contained errors that posted accounts more regularly to 4119 than to the proper accounts, however, so USAID had to make manual adjustments for this activity also.
Some USAID transactions systematically posted to the 2006 general ledger after the financial statements were prepared, creating many differences between reported 2005 year-end balances and 2006 beginning balances. This occurred because USAID’s general ledger remained open for new fiscal year 2005 activity after the 2005 financial statements were prepared. USAID also did not have a policy to review and delete unprocessed held transactions from Phoenix in a timely manner. Our analysis showed that over 9,000 held and rejected transactions were residing in Phoenix as of October 20, 2006. USAID is currently developing policies to address the management of all held and rejected documents.
Recommendation No 6: We recommend that the Office of the Chief Financial Officer (a) research Phoenix problems causing manual adjustments to the account closing and deobligation processes and implement a plan to resolve these deficiencies in FY 2007 and (b) ensure that Phoenix properly records Recoveries of prior year obligations throughout the year.
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