Report Contents
What OIG Audited
The Foreign Assistance Act of 1963, codified at 22 U.S. Code § 2684, established the Department of State’s (Department) Working Capital Fund (WCF), which is funded by reimbursements or advanced payments for “supplies and services at rates which will approximate the expense of operations.” The law states that “[t]here shall be transferred into the Treasury as miscellaneous receipts, as of the close of each fiscal year, earnings which the Secretary of State determines to be excess to the needs of the fund.”
The Office of Inspector General (OIG) conducted this audit to determine whether the Department transferred excess working capital funds to the Department of the Treasury (Treasury) annually, as prescribed by the Foreign Assistance Act of 1963, codified at 22 U.S. Code § 2684.
What OIG Recommends
OIG made three recommendations to the Bureau of Administration and one recommendation to the Bureau of Budget and Planning that are intended to improve the Department’s pricing methodologies, internal controls, and processes for the WCF. On the basis of the Department’s responses to a draft of this report, OIG considers one recommendation unresolved and three recommendations resolved pending further action. A synopsis of the Department’s responses to the recommendations offered and OIG’s reply follow each recommendation. The Department’s responses to a draft of this report are reprinted in their entirety in Appendices B and C. Summaries of the Department’s general comments and OIG’s replies are presented in Appendices D and E.
What OIG Found
The Department could not demonstrate that it annually determined whether excess earnings exist in its WCF accounts, and it has not transferred any excess earnings to Treasury. Specifically, as of December 2017, Bureau of Administration, Office of the Executive Director, Working Capital Fund Division (A/EX/WCF) officials had provided no documentation that it determined if excess earnings exist within any of the nine service centers that A/EX/WCF manages, nor has the Department transferred any excess earnings to Treasury. Federal law, however, has required the Secretary to determine and return excess WCF earnings to Treasury since 1963.
This occurred, in part, because the Department has not established adequate policies and procedures to implement the statutory requirement to evaluate and remit excess earnings to Treasury. Specifically, OIG found that A/EX/WCF did not have policies and procedures to annually determine the appropriate carry forward fund amounts for WCF cost centers or the amount in excess earnings to transfer to Treasury. As the Department bureau responsible for the oversight of nine WCF service centers, A/EX/WCF should have established appropriate policies and procedures to comply with all laws and regulations pertaining to the WCF.
As a result of these deficiencies, OIG is unable to independently determine the extent to which excess earnings should have been transferred to Treasury from FY 2015 to FY 2017. Moreover, until A/EX/WCF establishes the means to determine excess earnings and implement the WCF transfer requirement, the Department will remain unable to advance a primary purpose of the WCF, namely, to provide an effective means for controlling the costs of goods and services and encourage cost consciousness and efficiency for users and suppliers of services.
Report Terms
Report Recommendations
OIG recommends that the Bureau of Administration revise and update policies and procedures for determining appropriate Working Capital Fund fees for each cost center. The updated policies and procedures should include, at a minimum, guidance on how to estimate the amount of funds needed to maintain operations for each cost center, including revenue, expenses, and overhead amounts. The procedures should also include guidance on determining appropriate target carry forward fund amounts for each cost center, estimated costs of capital improvements, instructions on documenting and retaining analyses and calculations, and documentation for establishing a reasonable maximum threshold for carry forward balances for each cost center.
OIG recommends that the Bureau of Administration develop and implement a policy for maintaining historical documentation of fees charged for goods and services of the Working Capital Fund and carry forward fund amount determinations. The policy, at a minimum, should include keeping a documented list of previous fees and carry forward fund amounts and the basis by which they were determined, as required by the Government Accountability Office’s Standards for Internal Control in the Federal Government and the Department of State Domestic Records Disposition Schedule.
OIG recommends that the Bureau of Budget and Planning develop and implement procedures for determining excess earnings within the Working Capital Fund on an annual basis, as required by 22 U.S. Code § 2684. The procedures, at a minimum, should include a methodology to determine the amount of excess earnings in the Working Capital Fund, a process to communicate the determination to the Secretary of State, and the manner in which excess earnings will be remitted to the U.S. Department of the Treasury when determined to be in excess to the needs of the fund.
OIG recommends that the Bureau of Administration, as part of its annual review of the Working Capital Fund cost centers and in coordination with the Bureau of Budget and Planning, determine the amount of excess earnings in the Working Capital Fund for FY 2018, report the results to OIG, and remit the identified excess to the U.S. Department of the Treasury, as required by 22 U.S. Code § 2684.