Summary

GAO evaluated the Small Business Administration's (SBA) implementation of the Federal Managers' Financial Integrity Act (FMFIA) to determine: (1) the progress it has made to identify and correct internal control weaknesses and to evaluate systems of internal controls; (2) whether SBA accounting systems and evaluations conform to GAO requirements; and (3) the accuracy and completeness of the Administrator, SBA, annual report on internal controls and accounting systems.

GAO found that SBA has: (1) reported the correction of 6 of the 17 material internal control weaknesses which it identified in 1984; (2) made progress in implementing corrective actions pertaining to the 16 material weaknesses it identified in 1983; (3) implemented corrective actions pertaining to 40 of the 225 weaknesses that were not categorized as material; and (4) implemented a follow-up system, in accordance with Office of Management and Budget (OMB) guidelines, to keep track of actions taken to correct material weaknesses. In addition, GAO found that: (1) the internal control reviews (ICR) completed in 1984 were generally in accordance with OMB guidelines; and (2) the SBA computerized ICR system provided a good basis for reviewing internal controls at field offices where most SBA programs are delivered. However, GAO found that SBA has not adequately reviewed its automatic data processing (ADP) controls because testing was not performed and guidelines were not issued on how to evaluate ADP controls. Finally, although the annual report stated that two of the six SBA accounting systems were in conformance with the Comptroller General's principles, standards, and requirements, GAO believes that the report was misleading because it failed to: (1) disclose that the two systems accounted for less than 5 percent of the funds accounted for by SBA; and (2) clearly identify and summarize accounting system weaknesses.