Working Capital Fund
Management Letter Report
Fiscal Year 1996
Audit Report 98-02, (1/98)
TABLE OF CONTENTS
OFFICE OF THE INSPECTOR GENERAL COMMENTARY AND SUMMARY
REPORT TO MANAGEMENT
ACCOUNTABILITY OVER INVENTORY
OVERESTIMATION OF ACCOUNTS RECEIVABLE
CARRY-OVER OF ANNUAL LEAVE BALANCES IN EXCESS OF 240 HOURS
STATUS OF PRIOR YEAR AUDIT RECOMMENDATIONS
APPENDIX - AUDIT DIVISION ANALYSIS AND SUMMARY OF ACTIONS NECESSARY TO CLOSE REPORT
OFFICE OF THE INSPECTOR GENERAL
COMMENTARY AND SUMMARY
The Department of Justice Working Capital Fund (WCF) is a revolving fund authorized to finance, on a reimbursable basis, administrative services provided by the Justice Management Division (JMD) to other components of the Department and to other federal agencies. The services provided are generally commercial functions, such as data processing, publications, building services, financial operations, employee data, telecommunications, property management, and space management.
The WCF generates its revenue through collections from customers. Customer billings are based on rates that are intended to fully recover the actual expenses. WCF is also authorized to receive transfers of unobligated balances of appropriations from other Department of Justice (DOJ) components. These transfers are to be used to fund the acquisition of capital equipment, develop and implement law enforcement or litigation related automated data processing systems and improve and implement the DOJ's financial management and payroll/personnel systems. The Congress must be notified of the DOJ's intentions to use these funds.
The Office of the Inspector General (OIG) contracted with Brown & Company, Certified Public Accountants to perform the FY 1996 and FY 1995 audits of the WCF Annual Financial Statement (Report Number 97-30A) as part of the DOJ's efforts to implement the Government Management Reform Act of 1994 (GMRA). The WCF received an unqualified opinion on its FY 1996 and FY 1995 financial statements. The GMRA requires an annual financial statement audit of the DOJ beginning with FY 1996. The audit was conducted in accordance with generally accepted government auditing standards and Office of Management and Budget Bulletin No. 93-06, "Audit Requirements for Federal Financial Statements." The OIG performs an oversight role in the audit process which includes monitoring the progress of the audit, reviewing supporting workpapers, coordinating the issuance of reports, following up on previously issued findings and recommendations, and ensuring overall compliance with the GMRA.
Brown & Company prepared the management letter as part of its audit of the WCF's FY 1996 and FY 1995 financial statements. The auditors were not contracted to perform control testing sufficient to enable them to express an opinion on the management's assertion over the effectiveness of internal controls or compliance with laws and regulations. Accordingly, they did not express such opinions. However, they did note certain conditions involving the internal control structure and its operations that in the auditors' judgment, do not have a material effect on the financial statements, but are areas that could be strengthened. Specifically, Brown & Company noted conditions with regard to inventory, accounts receivable, and accrual of annual leave balances in excess of 240 hours.
OFFICE OF THE INSPECTOR GENERAL, AUDIT DIVISION
ANALYSIS AND SUMMARY OF ACTIONS NECESSARY
TO CLOSE THE REPORT
1. Resolved. This recommendation can be closed when we receive notification that the new automated stockroom inventory software package has been fully implemented and is operational for all areas of the warehouse.
2. Closed. Subsequent to their response, JMD Finance Staff provided us with a copy of the memorandum in which they emphasized to WCF service providers the need to accurately report earned reimbursements. The Finance Staff also provided a copy of the agenda from the FMIS Users Meeting in which they reviewed procedures for reimbursement billings and accruals.
3. Closed. Based on Management's response, this recommendation is closed. The auditors will continue to test the annual leave carry-over balances in subsequent audits.