A little-known federal commission with a $72 million budget has so few controls and such poor financial processes that it is inappropriately spending at least 10 percent of its budget, according to new a report by the Government Accountability Office.
The American Battle Monument Commission constructs and maintains overseas memorials and cemeteries commemorating American battle sites, many from World Wars I and II. The commission's budget goes toward salaries, maintenance of memorials and foreign currency fluctuations, since most of its 400 employees are overseas.
But the commission has been overcharging for its foreign currency conversions by using its own conversion rate to report how much it paid employees who receive paychecks in euros. The commission is allowed to request reimbursements for salary costs that are higher than budgeted because of currency fluctuations, but its improper conversion rate resulted in millions in overcharges.
"The Commission charged significantly more costs to the [Foreign Currency Fluctuation Account] than were allowable by law for the transactions we evaluated," the GAO said.
In transaction the GAO evaluated, the commission charged its FCFA $1,005 more for an invoice than it actually cost based on the Treasury rate, instead using its own internal — and incorrect — conversion rate.
"Based on our statistical evaluations, we estimate that of the $8.6 million charged to the FCFA during fiscal year 2012, as much as $7.3 million of that amount shares characteristics with the FCFA funds in the transactions we fully evaluated and found to be noncompliant," the GAO said. "Until the Commission changes its policy to conform to FCFA’s governing statutes, the Commission is at increased risk of charging significantly more costs to this account than are allowable by law."
The commission's lack of controls over its foreign payroll system is leaves it vulnerable to unauthorized access and manipulation of payroll data. Two administrators had inappropriate access to the system that allowed them to make changes to the data, although the GAO didn't identify any changes made.
Poor and nonexistent internal controls is a common theme throughout the commission's systems, despite federal guidelines requiring it closely monitor internal controls. The GAO found several weaknesses in its financial reporting, including a lack of supervisory review, accounts that don't reconcile, ineffective review of transactions and improper accounting of its accrued foreign transaction funds, all of which led to "significant errors" in the commission's financial statements.
"Ineffective supervisory review and a lack of continuous monitoring of financial transactions increase the risk that errors or fraud may not be detected and corrected in time to prevent misstatement of the financial statements or misappropriation of assets."
On top of the significant problems GAO identified in the report released earlier this month, it hadn't even addressed recommendations from fiscal 2010 and 2011 reviews. That left the commission with 24 recommendations for its internal controls and accounting procedures uncompleted as of Sept. 30. The commission also hadn't installed the security fixes GAO previously recommended it make on its servers or acted on 22 other sensitive information systems recommendations.
The commission agreed with the GAO's assessment and said it will act on the recommendations.