Performance And Accountability Report - Fiscal Year 2013 - Federal Aviation Administration - U.s. Department Of Transportation Page 80
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150 Federal Aviation Administration
Independent Auditors’ Report
Internal Control Over Financial Reporting
EXHIBIT I
SIGNIFICANT DEFICIENCIES
______________________________________________________________________________________
Improvements Needed in Management Review Controls
Criteria
The Government Accountability Office’s (GAO) Standard for Internal Control in the Federal Government
(the Standards) states that, “… control activities help to ensure that all transactions are completely and
accurately recorded.”
The Standards further define internal control as “an integral component of an organization’s management
that provides reasonable assurance that the following objectives are being achieved: effectiveness and
efficiency of operations, reliability of financial reporting, and compliance with applicable laws and
regulations.” Furthermore, the Standards list examples of control activities that include (1) top-level
reviews of actual performance, (2) reviews by management at the functional or activity level …
(4) controls over information processing … (6) Establishment and review of performance measures and
indicators, (7) segregation of duties, (8) proper execution of transactions and events, (9) accurate and
timely recording of transactions and events, (10) access restrictions to and accountability for resources and
records, and (11) appropriate documentation of transactions and internal control.
The Standards also state, “Internal control should generally be designed to assure that ongoing monitoring
occurs in the course of normal operations. It is performed continually and is ingrained in the agency’s
operations. It includes regular management and supervisory activities, comparisons, reconciliations, and
other actions people take in performing their duties.”
Appendix A, Section I, of the Office of Management and Budget (OMB) Circular No. A-123,
Management’s Responsibility for Internal Controls, states that “Internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting.
Reliability of financial reporting means that management can reasonably make the following assertions:
•
All reported transactions actually occurred during the reporting period and all assets and liabilities
exist as of the reporting date (existence and occurrence);
•
All assets, liabilities, and transactions that should be reported have been included and no
unauthorized transactions or balances are included (completeness); and,
•
All assets and liabilities have been properly valued, and where applicable, all costs have been
properly allocated (valuation).”
Conditions
During the fiscal year (FY) 2013 audit, we noted several instances whereby the FAA did not have adequate
controls in place to ensure that all transactions were properly recorded in the general ledger, including
sufficient review controls to validate the completeness and accuracy of key inputs and assumptions of
certain estimated amounts. For example, we identified errors totaling over $100 million in three of eight
overflight fee revenue transactions tested for the period July 1, 2013 through September 30, 2013.
One error was identified and corrected by management; however, the correction was not made timely.
Two errors were identified by us.
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Federal Aviation Administration
Fiscal Year 2013
Performance and Accountability Report
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