Summary
In October 2000, Congress established the U.S.-China Economic and Security Review Commission to assess the national security implications of the trade and economic relationship between the United States and the People's Republic of China and issue an annual report by June 1. The 12-member commission has a budget of about $3 million. As requested, GAO assessed the extent to which the commission has (1) complied with its charter, (2) had an organizational structure and policies and procedures for managing its operations effectively, and (3) had internal control over the financial management and reporting that provides reasonable assurance that resources are not at risk. To address these objectives, GAO analyzed the commission's charter, annual reports, records, and management policies and procedures and interviewed commissioners, executive directors, and staff. GAO focused on fiscal years 2005 and 2006 financial transactions.
Although the contents of the commission's annual reports have complied with statutory reporting requirements, the commission has not met the annual reporting deadline. It issued its 2005 and 2006 reports over 5 months late because the commissioners' appointment dates and the commission work cycle activities are not aligned with the annual reporting deadline. For example, over half the commissioners' terms will expire in December, 5 months before they are to approve and issue the 2008 report. However, the commission has taken steps to comply with applicable provisions of the Federal Advisory Committee Act. The commission's organizational structure and management policies and procedures have weaknesses and are not in accordance with GAO's internal control standards for the federal government. The commission has not formally defined and assigned key management duties and responsibilities that are typically divided or segregated among different people. Also, policies and procedures were insufficient, incomplete, or not adequately documented. For example, GAO found that the commission had no written policies or procedures to ensure that the procurement of certain goods and services was transparent, competitive, and at the best value. Internal control over financial management and reporting was not adequate to provide reasonable assurance that activities were properly processed and recorded and complied with federal laws and regulations. GAO noted weak or missing internal controls in three broad areas. In examining non-payroll-related financial transactions, GAO found inadequate documentation, lack of proper authorization and approval, and improper classification, including $13,000 in questionable purchases. The purchase and travel card programs lacked written guidance, proper segregation of duties, and adequate training. Also, time and attendance records were not always approved according to the commission's policies and procedures. As a result of inadequate control in these areas, the commission's financial resources are at an increased risk of fraud, waste, abuse, and mismanagement.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Loren Yager
Government Accountability Office: International Affairs and Trade
(202) 512-4347
Matters for Congressional Consideration
Recommendation: To improve the timeliness of the commission's annual reports, Congress may wish to consider aligning the U.S.-China Economic and Security Review Commissioners' appointment dates with the annual report issuance date. Depending on its needs, Congress could, for example, either move the commissioners' appointment date from January to July, so that the commission has enough time to plan and issue its report by June 1 the following year, or keep the commissioners' appointment date in January and move the report issuance date to December 1.
Status: Implemented
Comments: In September 2007, GAO recommended in a report entitled "U.S.-China Economic and Security Review Commission: Actions Needed to Improve Controls Over Key Management Functions" (GAO-07-1128) that, to improve the timeliness of the commission's annual reports, Congress should consider aligning the commissioners' appointment dates with the annual report issuance date. The recommendation further stated that, depending on its needs, Congress could, for example, either move the commissioners' appointment date from January to July, so that the commission has enough time to plan and issue its report by June 1 the following year, or keep the commissioners' appointment date in January and move the report issuance date to December 1. Congress relied on GAO's report while considering legislation affecting the commission. On December 26, 2007, the President signed Public Law 110-161, which moves the commission's report issuance date from June to December. Specifically, the law amends section 1238(c)(1) of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 by striking "June" and inserting "December."
Recommendations for Executive Action
Recommendation: To improve management of its operations and reduce risks, the commission should apply internal control standards aimed at (1) strengthening its organizational structure so that key management duties and responsibilities are segregated and (2) improving its management policies and procedures so that they are well-documented, communicated, and consistently applied and reflect expert legal and managerial advice where appropriate. Specifically, the U.S.-China Economic and Security Review Commission should review the organization's staffing needs for management functions, including human capital, procurement, budgeting, and financial management; properly segregate key duties and responsibilities among specific officials; and ensure that these officials have appropriate knowledge, experience, and training to perform these management functions.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: To improve management of its operations and reduce risks, the commission should apply internal control standards aimed at (1) strengthening its organizational structure so that key management duties and responsibilities are segregated and (2) improving its management policies and procedures so that they are well-documented, communicated, and consistently applied and reflect expert legal and managerial advice where appropriate. Specifically, the U.S.-China Economic and Security Review Commission should fully implement recently developed human capital polices and procedures for evaluating the commission's professional and administrative staff, and put in place comprehensive written hiring, training, and EEO-related procedures.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: To improve management of its operations and reduce risks, the commission should apply internal control standards aimed at (1) strengthening its organizational structure so that key management duties and responsibilities are segregated and (2) improving its management policies and procedures so that they are well-documented, communicated, and consistently applied and reflect expert legal and managerial advice where appropriate. Specifically, the U.S.-China Economic and Security Review Commission should establish comprehensive written research and non-research-related procurement policies and procedures that ensure transparency and competition as much as possible.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: To improve management of its operations and reduce risks, the commission should apply internal control standards aimed at (1) strengthening its organizational structure so that key management duties and responsibilities are segregated and (2) improving its management policies and procedures so that they are well-documented, communicated, and consistently applied and reflect expert legal and managerial advice where appropriate. Specifically, the U.S.-China Economic and Security Review Commission should expand the ethics guidance for commissioners to include guidelines for speaking engagements and payment of related travel expenses, and require that commissioners and staff review and formally acknowledge the ethics guidance periodically.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: To improve management of its operations and reduce risks, the commission should apply internal control standards aimed at (1) strengthening its organizational structure so that key management duties and responsibilities are segregated and (2) improving its management policies and procedures so that they are well-documented, communicated, and consistently applied and reflect expert legal and managerial advice where appropriate. Specifically, the U.S.-China Economic and Security Review Commission should put in place policy and procedures manuals and obtain advice from legal and management experts to make sure that policies and procedures are technically sound.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: Furthermore, to improve internal control over financial management and reporting, the commission should document applicable policies and procedures and communicate them to applicable commission staff, and segregate key duties and responsibilities, to the extent possible, so that no one individual controls all key aspects of a transaction. Specifically, the U.S.-China Econmic and Security Review Commissioners should strengthen key controls over non-payroll-related transactions by ensuring that all transactions are supported by adequate documentation and are properly authorized, approved, and classified; and developing and documenting criteria for classifying transactions for the purpose of official representation, and developing and documenting a means to track such transactions within its accounting and reporting structure.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: Furthermore, to improve internal control over financial management and reporting, the commission should document applicable policies and procedures and communicate them to applicable commission staff, and segregate key duties and responsibilities, to the extent possible, so that no one individual controls all key aspects of a transaction. Specifically, the U.S.-China Econmic and Security Review Commissioners should implement key controls over the commission's government travel and purchase card programs by providing training for staff who administer and use the government travel and purchase card programs, and developing and documenting commission policies and procedures with regard to food provided at commission hearings, quarterly business meetings, or any related events, in compliance with federal appropriations law prohibiting free food to government employees.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
Recommendation: Furthermore, to improve internal control over financial management and reporting, the commission should document applicable policies and procedures and communicate them to applicable commission staff, and segregate key duties and responsibilities, to the extent possible, so that no one individual controls all key aspects of a transaction. Specifically, the U.S.-China Econmic and Security Review Commissioners should conduct all Time and Attendance (T&A) reporting in accordance with commission policies and procedures by checking for proper authorization and approval before processing T&A records as part of the biweekly payroll procedures, and verifying that approval and certification is documented.
Agency Affected: U.S.-China Economic and Security Review Commission
Status: In process
Comments: No action taken yet.
