2000 Census: Analysis of Fiscal Year 2000 Budget and Internal
Control Weaknesses at the U.S. Census Bureau (28-DEC-01,
GAO-02-30).
The decennial census is the nation's most comprehensive and
expensive data-gathering program. The Constitution requires a
decennial census of the population in order to apportion seats in
the House of Representatives. Public and private decisionmakers
also use census data on population counts and social and economic
characteristics for a variety of purposes. The 2000 decennial
census covers a 13-year period of effort from fiscal years 1991
through 2003 at an estimated cost of $6.5 billion. On September
27, 2000, the U.S. Census Bureau reported to the Congress that it
had at least $305 million of budget savings out of its $4.5
billion fiscal year 2000 no-year appropriations for the 2000
decennial census. Of the $4.5 billion appropriated to the U.S.
Census Bureau for periodic censuses and programs in fiscal year
2000. lower expenditures and obligations than planned resulted in
available balances of at least $415 million. The primary reason
for the available balances was a lower support staff workload
than planned. This resulted in about $348 million of lower salary
and benefit costs for over 11,000 fewer support staff than
planned. Enumerator workload is largely determined by the initial
mail response rate for returned census questionnaires. The
initial mail response of 64 percent resulted in over three
million American households less than planned that did not
require visits by census enumerators. However, the available
balances from the higher mail response rate and the lower support
staff workload were partially offset by about $100 million of
higher salary and benefit costs for enumerators, including a
higher workload for unanticipated recounts. According to bureau
data, enumerator productivity did not have a significant impact
on budget variances for the 2000 decennial census. The bureau
reported the national average time to visit a household and
complete a census questionnaire was about the one hour estimated.
The bureau had significant internal control weaknesses for fiscal
year 2000 that resulted in an inability to develop and report
complete, accurate, and timely information for managing
decision-making. This was due to specific internal control
weaknesses as well as a weak overall internal control environment
at the bureau. Specific control weaknesses for fiscal year 2000
were related to the lack of controls over financial reporting and
financial management systems. Financial reporting issues included
(1) the inability to produce accurate and timely financial
statements and other financial management reports needed for
oversight and day-to-day management, (2) the lack of timely and
complete reconciliations needed to validate the balances of key
accounts, and (3) unsupported and inaccurate reported balances
for accounts payable and undelivered orders, two key accounts
needed to manage and report on unliquidated obligations.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-30
ACCNO: A02624
TITLE: 2000 Census: Analysis of Fiscal Year 2000 Budget and
Internal Control Weaknesses at the U.S. Census Bureau
DATE: 12/28/2001
SUBJECT: Population statistics
Census
Budget surplus
Budget obligations
Unexpended budget balances
Reporting requirements
Internal controls
Financial statements
Department of Commerce Administrative
Management System 2000 Decennial Census
******************************************************************
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GAO-02-30
Report to Congressional Requesters
United States General Accounting Office
GAO
December 2001 2000 CENSUS Analysis of Fiscal Year 2000 Budget and Internal
Control Weaknesses at the U. S. Census Bureau
GAO- 02- 30
Page i GAO- 02- 30 Census Budget and Controls Letter 1
Results in Brief 2 Background 5 Budget Variances Were at Least $415 Million
9 Lower Workload and Costs Generated Budget Variances 11 Weaknesses in Key
Internal Controls 17 Review of Other Selected Areas 27 Recommendations for
Executive Action 28 Agency Comments and Our Evaluation 29
Appendix I Objectives, Scope, and Methodology 34
Appendix II Explanations for Fiscal Year 2000 Project Variances of $5
Million or More 37
Appendix III Review of Other Selected Areas 44 Review of Personnel and
Benefits Expenditures 44 Review of Fund Balance With Treasury 44 Review of
Property and Equipment 45 Review of Government Credit Cards 45
Appendix IV Comments From the Department of Commerce, U. S. Census Bureau 47
GAO Comments 59
Appendix V GAO Contact and Staff Acknowledgments 61 GAO Contact 61
Acknowledgments 61
Tables
Table 1: September 30, 2000, Undelivered Orders Available for Potential
Deobligation 10 Table 2: Fiscal Year 2000 Budget Variances by Framework 12
Table 3: Enumeration Effort and Costs for Fiscal Year 2000 15 Table 4:
Fiscal Year 2000 Project Variances of $5 Million or More 37 Contents
Page ii GAO- 02- 30 Census Budget and Controls Abbreviations
ACE Accuracy and Coverage Evaluation APMS Accountable Property Management
System CAMS Commerce Administrative Management System FASAB Federal
Accounting Standards Advisory Board FFMIA Federal Financial Management
Improvement Act
of 1996 FMFIA Federal Managers? Financial Integrity Act of 1982 FTE full-
time equivalent GAAP generally accepted accounting principles GAGAS
generally accepted government auditing standards GSA General Services
Administration IG inspector general JFMIP Joint Federal Management
Improvement Program NPC National Processing Center OMB Office of Management
and Budget PAMS/ ADAMS Pre- Appointment Management System and
Automated Decennial Administrative Management System SGL U. S. Standard
General Ledger
Page 1 GAO- 02- 30 Census Budget and Controls
December 28, 2001 The Honorable Dan Miller Chairman The Honorable William
Lacy Clay, Jr. Ranking Minority Member Subcommittee on the Census Committee
on Government Reform House of Representatives
The Honorable Carolyn B. Maloney House of Representatives
The decennial census is the nation?s most comprehensive and expensive data-
gathering program. The Constitution requires a decennial census of the
population in order to apportion seats in the House of Representatives.
Public and private decisionmakers also use census data on population counts
and social and economic characteristics for a variety of purposes. The 2000
decennial census covers a 13- year period of effort from fiscal years 1991
through 2003 at an estimated cost of $6.5 billion. During fiscal year 2000,
the U. S. Census Bureau mailed census forms (questionnaires) to almost 119
million American households asking the occupants to complete the forms as of
April 1, 2000, and mail them back. The bureau reported that for some 42
million nonresponding households, it hired over 500,000 temporary workers,
known as enumerators, to visit households that had not responded by April
18, 2000. 1 Enumerators gathered the requested information in slightly less
than the planned 10- week period that ended July 2, 2000.
On September 27, 2000, the bureau reported to the Congress that it had at
least $305 million of budget savings 2 out of its $4. 5 billion fiscal year
2000 no- year appropriation 3 for the 2000 decennial census. As agreed with
your
1 The bureau refers to this activity as ?nonresponse follow- up.? 2 As used
by the bureau, ?budget savings? describes those budgetary resources that
were not needed in fiscal year 2000 and are available to offset the bureau?s
fiscal year 2001 budget request. More broadly used, the term ?budget
savings? is used in the federal budget process to describe a downward change
from either the Office of Management and Budget or Congressional Budget
Office budget baselines.
3 No- year funds are available for their original purpose until they are
either expended, rescinded, transferred, or reprogrammed or the account is
closed.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 02- 30 Census Budget and Controls
offices, this report responds to your joint request to review the accuracy
of this reported amount and to identify budget variances for the 2000
decennial census, including the reasons for these variances. 4 To fulfill
this first objective, we examined planning and financial documents,
conducted interviews with bureau personnel, audited all undelivered order 5
balances of $1 million or more, reviewed accounts payable and accrued
liability accounts, and examined subsequent disbursements. 6 However, we did
not review the efficiency of expenditures and obligations against planned
budget appropriations.
You also asked us to review key internal controls of the U. S. Census Bureau
and to report on any significant weaknesses and how they might be corrected.
To fulfill this second objective, we reviewed recent Department of Commerce
financial reports that included bureau activities as well as separate
financial reports of the bureau that have reported a number of weaknesses in
internal controls, and examined internal controls over bureau undelivered
orders and accounts payable. We also obtained financial system information
and reviewed financial policies in other selected areas that are presented
in appendix III.
Our work was performed from December 2000 through June 2001 in accordance
with U. S. generally accepted government auditing standards. Further details
on our scope and methodology are presented in appendix I. This report is one
of several we will issue in the coming months on lessons learned from the
2000 census that can help improve the planning effort for the 2010 census.
Of the $4. 5 billion appropriated to the U. S. Census Bureau for periodic
censuses and programs in fiscal year 2000, lower expenditures and
obligations than planned resulted in available balances of at least $415
million. Since these no- year funds remain available until expended,
4 Budget variances represent the difference between estimated amounts from
all available appropriations and actual obligations for fiscal year 2000. 5
Undelivered orders represent the value of goods and services that have been
obligated but that have not been received. If all deliveries have been made
and accepted, any unused amounts should be deobligated.
6 Subsequent disbursements are examined to search for goods or services that
have been delivered prior to year- end that should also be recorded as
accounts payable or other accrued liabilities as of year- end. Results in
Brief
Page 3 GAO- 02- 30 Census Budget and Controls
and the Department of Commerce has the authority to transfer amounts to
other programs, $360 million of this amount was carried over and made
available for fiscal year 2001 bureau programs. The remaining $55 million
represented amounts obligated for contracts for which activity had been
completed. These funds potentially can be deobligated and made available for
other programs. Additional amounts may be identified for deobligation as the
bureau closes out about $90 million of undelivered order balances under $1
million that we did not review.
The primary reason for the available balances was a lower support staff
workload than planned. This resulted in about $348 million of lower salary
and benefit costs for over 11,000 fewer support staff than planned. The
lower support workload also reduced infrastructure costs for temporary
office space rental, equipment and supply costs, and contractual services
that resulted in further available balances of $167 million. This included
lower local travel reimbursement because fewer households were visited than
planned.
Enumerator workload is largely determined by the initial mail response rate
for returned census questionnaires. The initial mail response of 64 percent,
3 percent higher than the 61 percent estimated by the bureau, resulted in
over 3 million American households less than planned that did not require
visits by census enumerators. However, the available balances from the
higher mail response rate and the lower support staff workload were
partially offset by about $100 million of higher salary and benefit costs
for enumerators, including a higher workload for unanticipated recounts. The
bureau was concerned about high staff turnover and having a sufficient
number of enumerators for nonresponse follow- up in a tight labor market. As
a result, the bureau hired almost 3,300 more full- time equivalent
enumerators and paid them almost $1 an hour more than the average $11.77 an
hour that was planned. In addition, enumerator workload was increased due to
unanticipated recounts of almost 800,000 incomplete, lost, or inaccurate
questionnaires.
According to bureau data, enumerator productivity did not have a significant
impact on budget variances for the 2000 decennial census. The bureau
reported the national average time to visit a household and complete a
census questionnaire was about the 1 hour estimated.
With regard to our second objective, the bureau had significant internal
control weaknesses for fiscal year 2000 that resulted in an inability to
develop and report complete, accurate, and timely information for management
decision- making. This was due to specific internal control
Page 4 GAO- 02- 30 Census Budget and Controls
weaknesses as well as a weak overall internal control environment at the
bureau. The bureau?s control environment was characterized by human capital
weaknesses, including the lack of experienced accounting staff, which
contributed to heavy reliance upon contractors. In addition, management
oversight was not sufficient to ensure adherence to established policies and
procedures, which created opportunities for inconsistencies and errors,
particularly in year- end closing procedures and financial statement
preparation.
Specific control weaknesses for fiscal year 2000 were related to the lack of
controls over financial reporting and financial management systems.
Financial reporting issues included (1) the inability to produce accurate
and timely financial statements and other financial management reports
needed for oversight and day- to- day management, (2) the lack of timely and
complete reconciliations needed to validate the balances of key accounts,
and (3) unsupported and inaccurate reported balances for accounts payable
and undelivered orders, two key accounts needed to manage and report on
unliquidated obligations. These findings were in large part due to serious
weaknesses in the bureau?s financial management systems, which encompass the
software, hardware, personnel, manual and automated processes, procedures,
controls, and data necessary to carry out financial management functions,
manage financial operations, and report financial status.
The bureau has experienced persistent financial management systems problems
for many years and has candidly acknowledged the material nonconformance of
its financial systems in recent annual reports required by the Federal
Managers? Financial Integrity Act of 1982 (FMFIA). 7 Despite these reports,
the bureau has asserted in its fiscal years 1999 and 2000 financial
statement reports that its financial management systems were in substantial
compliance with the provisions of Federal Financial Management Improvement
Act of 1996 (FFMIA). 8 In our view, the bureau?s
7 31 U. S. C. 3512 (c), (d), commonly referred to as FMFIA, requires federal
agencies to annually self assess their management controls and disclose any
material weaknesses and assess their financial systems and disclose any
noncompliance with standards prescribed by the Comptroller General. The U.
S. Census Bureau reports its FMFIA information to the Department of
Commerce, which discloses all weaknesses departmentwide in its annual
accountability report.
8 FFMIA was intended to advance federal financial management by ensuring
that federal financial management systems can and do provide reliable,
timely, and consistent disclosure of financial data across the federal
government.
Page 5 GAO- 02- 30 Census Budget and Controls
financial management systems did not substantially comply with the
requirements of FFMIA as of September 30, 2000.
We are recommending a number of actions to improve U. S. Census Bureau
policies, procedures, internal controls, and preparation of its financial
statements. In commenting on a draft of this report, the Department of
Commerce, U. S. Census Bureau, agreed with five of our seven recommendations
and made a number of specific comments on our findings. The most significant
disagreement related to our assessment that the bureau?s financial
management systems did not substantially comply with the requirements of
FFMIA as of September 30, 2000. We believe that our findings, as well as
those of the bureau?s independent auditor, provide ample evidence that the
systems did not substantially comply with the act?s three primary
requirements. These issues are addressed in the
?Agency Comments and Our Evaluation? section of this report. The full text
of the bureau?s letter is reprinted in appendix IV, which also includes our
evaluation of the bureau?s specific comments.
The U. S. Census Bureau performs large surveys and censuses that provide
statistics about the American people and the U. S. economy. The business
activities of the bureau can be divided into four categories: decennial and
other periodic census programs, demographic programs, economic programs, and
reimbursable work programs that are conducted mainly for other federal
agencies. During fiscal year 2000, the bureau conducted the actual decennial
count of U. S. population and housing as of April 1, 2000, which is its
largest and most complex activity. The results of the 2000 decennial census
are used to apportion seats in the U. S. House of Representatives, draw
congressional and state legislative districts, and form the basis for the
distribution of an estimated $200 billion annually of federal program funds
over the next decade to state and local governments.
The bureau receives two appropriations from the Congress: (1) salaries and
expenses and (2) periodic censuses and programs. The salaries and expenses
appropriation provides 1- year funding for a broad range of economic,
demographic, and social statistics. The periodic censuses and programs
appropriation provides no- year funding to plan, conduct, and analyze the
decennial censuses every decade and other authorized periodic activities.
The 2000 decennial census covers a 13- year period of effort from fiscal
years 1991 through 2003 at an estimated cost of $6.5 billion. The bureau
prepared its fiscal year 2000 budget request for the Background
Census Appropriations
Page 6 GAO- 02- 30 Census Budget and Controls
2000 decennial census in eight broad ?frameworks? of effort that were
submitted to the Office of Management and Budget (OMB) and the Congress. As
part of the Department of Commerce and Related Agencies Appropriation Act,
2000, the appropriation for Periodic Censuses and Programs earmarked $4. 476
billion by framework for the bureau and the Census Monitoring Board to
remain available until expended. 9 While these amounts were earmarked for
the frameworks, section 205 of the act authorized the Department of Commerce
to transfer amounts not to exceed 5 percent of any appropriation to another
appropriation, but no appropriation could be increased by more than 10
percent. Section 205 also required the Department of Commerce to comply with
the procedures set forth for reprogramming under section 605 of the act. 10
For management, program, financial, staffing, and performance purposes, the
8 frameworks were further divided by the bureau into 23 activities and
within these activities, further divided into 119 projects. Bureau financial
management reports provided appropriated amounts, expended and obligated
amounts, and variances to a project level.
The President?s fiscal year 2000 budget, which was submitted by OMB to the
Congress on February 1, 1999, included nearly $2.8 billion for the bureau to
perform the 2000 decennial census. This original budget request reflected
the bureau?s plan to gather information based in part on statistical
estimation for nonresponding households and to adjust undercounting and
other coverage errors. However, only a few days earlier on January 25, 1999,
the Supreme Court, in Department of Commerce v. U. S. House of
Representatives (525 U. S. 316), held that the Census Act prohibited the
bureau from using statistical sampling for purposes of congressional
apportionment. Because the original budget
9 The Department of Commerce and Related Agencies Appropriations Act, 2000,
is Title II of Appendix A of the Consolidated Appropriations Act for Fiscal
Year 2000, P. L. 106- 113, 113 Stat. 1501, 1501A- 26 (1999). Amounts
earmarked for the eight frameworks were: $20 million for Program Development
and Management (framework 1); $195 million for Data Content and Products
(framework 2); $3.450 billion for Field Data Collection and Support Systems
(framework 3); $44 million for Address List Development (framework 4); $477
million for Automated Data Processing and Telecommunication (framework 5);
$16 million for Testing and Evaluation (framework 6); $71 million for
activities related to Puerto Rico, the Virgin Islands, and Pacific Areas
(framework 7); $199 million for Marketing, Communications and Partnerships
activities (framework 8); and $4 million for the Census Monitoring Board.
10 Section 605 procedures for reprogramming funds require the Department of
Commerce to notify the Appropriations Committees of both Houses of Congress
15 days in advance of reprogramming. However, the appropriation for Periodic
Censuses and Programs established a 3- day notification period for
reprogramming funds provided by the appropriation.
Page 7 GAO- 02- 30 Census Budget and Controls
request was submitted with the plans for statistical sampling, the bureau
had to amend its plans in accordance with the Supreme Court?s decision.
According to the bureau, the effect of this decision was that an estimated
12 million additional nonresponding households would require visits by
enumerators. In addition, various programs designed to address undercounting
and other coverage errors would have to be expanded. The bureau also planned
to visit about 4 million additional addresses for which the Postal Service
had returned the questionnaires because it believed the housing units to be
vacant or nonexistent.
In light of the need for additional enumeration and other programs to ensure
accuracy, OMB requested and the Congress approved additional funding of $1.7
billion to the bureau?s original budget request of $2.8 billion. The
bureau?s total fiscal year 2000 appropriation of about $4.5 billion for the
2000 decennial census was within the periodic censuses and programs account.
The preparation of annual financial statements by federal agencies and their
subsequent audit is intended to provide for complete, reliable, timely, and
consistent financial information for use by agency management and the
Congress in the financing, management, and evaluation of federal programs.
The Department of Commerce is required to prepare annual consolidated
financial statements and have them audited under the mandate of the Chief
Financial Officers Act of 1990, as expanded by the Government Management
Reform Act of 1994. The Commerce IG is responsible for the financial audit
but may use its contract authority to hire an independent accounting firm to
perform the audit. Commerce consists of 13 bureaus, including the U. S.
Census Bureau. The Commerce IG contracted with several certified public
accounting firms to conduct financial audits of the various bureaus for
fiscal year 2000.
OMB provides implementing guidance for agencies, including guidance on
preparing and auditing financial statements. 11 This guidance requires that
financial statements be prepared in accordance with U. S. generally accepted
accounting principles (GAAP) 12 and the audit of such financial
11 OMB Bulletin No. 97- 01, Form and Content of Agency Financial Statements,
as amended, and OMB Bulletin No. 01- 02, Audit Requirements for Federal
Financial Statements.
12 The Federal Accounting Standards Advisory Board promulgates GAAP for
federal government entities. Annual Financial
Statement Audit
Page 8 GAO- 02- 30 Census Budget and Controls
statements must be in accordance with generally accepted government auditing
standards (GAGAS). 13 GAGAS require the auditor to obtain an understanding
of internal controls to plan the audit and determine the nature, timing, and
extent of tests to be performed and to report deficiencies considered to be
reportable conditions as defined in the auditing standards. 14 Some
reportable conditions are material weaknesses 15 and all reportable
conditions are presented in a report on internal controls. Lesser internal
control or operational matters are usually reported in separate management
letters. Criteria for internal controls are contained in GAO?s Standards for
Internal Control in the Federal Government. 16
The Federal Financial Management Improvement Act of 1996 (FFMIA) requires
that agencies implement and maintain financial management systems 17 that
substantially comply with federal financial management systems requirements,
applicable GAAP, and the U. S. Standard General Ledger (SGL) at the
transaction level. As part of the annual financial statement audit, FFMIA
requires the auditors to report any instances in which they noted that the
agency?s financial management systems did not substantially comply with
FFMIA requirements.
13 GAO promulgates GAGAS that incorporate American Institute of Certified
Public Accountants fieldwork and reporting standards for financial audits by
reference. 14 A reportable condition includes matters coming to the
auditor?s attention, that, in the auditor?s judgment, should be communicated
because they represent significant deficiencies in the design or operation
of internal controls, which could adversely affect the entity?s ability to
meet the internal control objectives described in the report.
15 A material weakness is a reportable condition in which the design or
operation of the internal controls does not reduce to a relatively low level
the risk that losses, noncompliance, or misstatements in amounts that would
be material in relation to the financial statements may occur and not be
detected within a timely period by employees in the normal course of their
assigned duties.
16 GAO/ AIMD- 00- 21. 3. 1, November 1999. 17 Under OMB Circular A- 127,
Financial Management Systems, revised July 23, 1993, each agency must
establish and maintain a single, integrated financial management system that
is a unified set of financial systems that are planned for and managed
together. They are operated in an integrated fashion and are linked together
electronically in an efficient and effective manner to provide agencywide
system support necessary to carry out an agency?s mission and support its
financial management needs.
Page 9 GAO- 02- 30 Census Budget and Controls
Of the $4. 5 billion appropriated to the U. S. Census Bureau for fiscal year
2000, lower expenditures and obligations than planned resulted in available
balances of at least $415 million. These no- year funds remain available
until expended, and the Department of Commerce has the authority to transfer
amounts to other programs. By April 2001, $360 million of this amount was
made available for fiscal year 2001 bureau programs. We identified the
remaining $55 million that represented amounts obligated for contracts for
which activity had been completed. These funds potentially can be
deobligated and made available for other programs. Additional amounts may be
identified for potential deobligation as the bureau examines about $90
million of undelivered order balances under $1 million.
On September 27, 2000, the bureau reported to the Congress that it had ?at
least $305 million of budget savings? out of its $4.5 billion fiscal year
2000 appropriation for the 2000 decennial census. Based in part upon our
discussions with the Chairman and staff of the Subcommittee on the Census,
House Committee on Government Reform, and staff of the Senate and House
Committees on Appropriations, and as authorized by law, unobligated fiscal
year 2000 appropriations were made available for other census programs. By
April 2001, $360 million of unobligated fiscal year 2000 appropriations were
made available for fiscal year 2001 bureau programs in two phases.
In December 2000, based upon information the bureau provided to the House
Committee on Appropriations, $300 million of unobligated balances from prior
years were used to offset the amount needed for the bureau?s fiscal year
2001 appropriation. From this amount, $260 million was used to fund the
decennial census program and $40 million was used to fund other periodic
census programs for fiscal year 2001.
On March 27, 2001, the bureau identified an additional $60 million of
unobligated balances from fiscal year 2000 funds. On April 11, 2001, $56
million was used to fund the decennial census program and $4 million was
used to fund other periodic census programs for fiscal year 2001.
From our test of all bureau undelivered order balances over $1 million,
which totaled $367 million as of September 30, 2000, we identified potential
deobligations of $55 million. This resulted from contracts for which
activity had been completed and obligated balances were not needed to close
out the contracts. Thus, amounts can be made available for other purposes.
An agency should identify and deobligate funds no Budget Variances
Were at Least $415 Million
Fiscal Year 2000 Funds Available for Fiscal Year 2001 Were $360 Million
Potential Deobligation of $55 Million From Undelivered Orders
Page 10 GAO- 02- 30 Census Budget and Controls
longer needed after the agency is certain no related costs remain. Table 1
shows the contractor, the applicable framework number within the bureau?s
eight frameworks of effort, and the potential amount available for
deobligation.
Table 1: September 30, 2000, Undelivered Orders Available for Potential
Deobligation
Dollars in millions
Contractor Framework Amount Lockheed Martin 5 $16 TRW Incorporated 5 13
General Services Administration 3 12 Young & Rubicam 8 7 Electronic Data
Systems Corporation 3 6 UNISYS Corporation 3 1
Total $55
Source: GAO analysis of U. S. Census Bureau undelivered orders files.
The contracts we identified as of September 30, 2000, were multiple phase or
task contracts with future completion dates stretching to December 31, 2003.
Bureau officials stated that its Finance Division conducted a quarterly
review of contracts for deobligation. We found these reviews to be
ineffective because we noted several contracts for which the bureau was not
promptly deobligating amounts associated with completed contracts. In our
view, some contracts should have been deobligated as of September 30, 2000,
while other contracts were completed and amounts were available for
potential deobligation by the time we completed our review in June 2001.
Specifically, we found the following.
Lockheed Martin provided services in three phases that included (1) the
architectural design, testing, and implementation of a data capture system,
(2) deployment of this system to data capture centers, and (3) preparation
of images for transfer to long- term storage. Services for phase one were
completed on September 30, 1998, phase two by February 28, 2001, and phase
three is to be completed by December 31, 2003. Most of the remaining funding
of $16 million related to phase two was no longer needed and was available
for potential deobligation by the time we completed our review in June 2001.
TRW Incorporated provided services to design and staff the data capture
centers. The last of these services were completed in June 2001, and
sufficient amounts were obligated to close out the contract. Remaining
Page 11 GAO- 02- 30 Census Budget and Controls
obligated amounts of $13 million were no longer needed and were available
for potential deobligation by June 30, 2001.
The General Services Administration (GSA) rented building space and
provided other services. One GSA communication service agreement for over $1
million for fiscal year 2000 was never performed under the planned project.
Also, about $5 million obligated for rent and another $6 million obligated
for services were not needed after the contract?s period of performance
ended on December 31, 1999. This resulted in total funding of $12 million
that was no longer needed for the purpose intended. Since the period of
performance had ended and there was no further billing on these contracts
after September 30, 2000, we believe that this $12 million should have been
deobligated as of September 30, 2000.
Young & Rubicam provided advertising to promote the 2000 census and
encourage people to complete and return the census forms and cooperate with
enumerator follow- up. The contract also required a follow- up study on the
effect of the advertising that was completed by February 2001. About $7
million remained obligated for the advertising campaign that was no longer
needed after May 31, 2000. We believe that this amount should have been
deobligated as of September 30, 2000.
Electronic Data Systems Corporation staffed the telephone questionnaire
assistance center and provided other services with a contract through May
31, 2001. The assistance center was shut down on August 13, 2000. Other
services were completed by May 31, 2001, and sufficient amounts remained
obligated to close out the contract. The remaining $6 million was available
for potential deobligation as of May 31, 2001.
UNISYS Corporation provided telecommunications equipment and other
services for the local census offices with a contract through October 31,
2000. The last of these offices was closed down in early November 2000, and
sufficient amounts remained obligated to close out the contracts. We believe
that the remaining unused contract funding of $1 million could have been
deobligated as of September 30, 2000, during the subsequent year- end
closing process.
Additional amounts may be identified for deobligation as the bureau closes
out about $90 million of undelivered order balances under $1 million that we
did not review.
Historically, workload and enumerator productivity have been two of the
largest drivers of census costs, and the bureau developed its budget for the
2000 decennial census using a model that contained key assumptions about
these two variables. The largest cause of the fiscal year 2000 available
balances was a lower support staff workload than planned. This Lower
Workload and
Costs Generated Budget Variances
Page 12 GAO- 02- 30 Census Budget and Controls
resulted in about $348 million of lower salary and benefit costs for over
11,000 fewer support staff than planned. The lower support workload also
reduced infrastructure costs for temporary office space rental, equipment
and supply costs, and contractual services that resulted in further
available balances of $167 million. However, these available balances were
partially offset by about $100 million of higher salary and benefit costs
than planned for enumerators, including a higher workload for unanticipated
recounts.
The U. S. Census Bureau prepared its fiscal year 2000 plan for the 2000
decennial census in eight frameworks of effort as shown in table 2.
Table 2: Fiscal Year 2000 Budget Variances by Framework
Dollars in millions
Framework number and title Appropriation a Obligated Budget variances
1. Program Development and Management $22 $22 $0 2. Data Content and
Products 222 222 0 3. Field Data Collection and Support Systems 3,385 3,043
342 4. Address List Compilation 50 45 5 5. Automated Data Processing and
Telecommunications Support 512 464 48 6. Testing, Evaluation, and Dress
Rehearsal 16 13 3 7. Puerto Rico, Virgin Islands, and Pacific Areas 65 57 8
8. Census Marketing, Communication, and Partnerships 200 191 9 Census
Monitoring Board 4 4 0
Total $4,476 $4,061 b $415
a These amounts are after transfers between earmarked funds described in
footnote 9. b The bureau amount is $4, 116 million before potential
deobligation of $55 million from table 1.
Source: GAO analysis of U. S. Census Bureau data.
As indicated above, framework 3, Field Data Collection and Support Systems,
was the largest effort of the 2000 census, amounting to about 75 percent of
both appropriated funds and expended and obligated funds and accounting for
82 percent of total budget variances. Significant reasons for the larger
budget variances are discussed in the following sections. Budget Variances
by
Framework
Page 13 GAO- 02- 30 Census Budget and Controls
A lower support staff workload than planned in framework 3 resulted in a
significant budget variance of about $348 million in salary and benefit
costs as follows.
The bureau recognized $309 million for lower local and regional census
office support staff salaries and benefits. The bureau planned about 30,167
full- time equivalent (FTE) support staff for 520 local and 12 regional
census offices. However, according to bureau records, only 18,787 FTEs or
about 62 percent were actually employed, resulting in over 11,000 fewer FTEs
than planned.
The bureau recognized $39 million primarily for lower staff salaries and
benefit costs from an activity known as Accuracy and Coverage Evaluation
(ACE). ACE interviewed more people than planned by telephone, thus reducing
the need for household visits by enumerators.
Another $167 million of budget variances were primarily due to lower
infrastructure costs and other costs. This included temporary office space
rental, local travel reimbursement, equipment and supply costs, and
contractual services that were contained mostly in frameworks 3 and 5.
Projects with significant budget variances- over $10 million- included the
following.
The variance for data capture systems, building rent, advertising,
telecommunications, and other contractual services was about $55 million.
This amount in table 1 was previously discussed as undelivered orders
available for potential deobligation.
The variance for regional and local census offices in framework 3 was
about $36 million. This was the result of lower support staffing levels and
resulted in lower temporary office space and equipment costs than planned.
The variance for telecommunications in framework 3 was about $31 million.
This was due to renegotiations of a 90- percent reduction in long- distance
phone costs from a planned 10 cents a minute to an actual 1 cent a minute.
The variance for National Processing Center (NPC) data capture operations
in framework 5 was about $22 million. This was because there were fewer
forms to process than planned for, and there was higher productivity for
data entry. About 5 million fewer mail back, enumerator, and group quarters
forms were processed, and data entry productivity of 6,500 keystrokes per
hour was higher than 5, 200 keystrokes per hour planned. Budget Variances in
Support Staff Salary and Benefit Costs
Further Budget Variances in Infrastructure and Other Costs
Page 14 GAO- 02- 30 Census Budget and Controls
The variance for telephone questionnaire assistance in framework 3 was
about $14 million. This was due to lower contract costs in running the
program because inbound calls of 6 million were 45 percent lower than the 11
million calls planned.
Enumerator workload is largely determined by the initial mail response rate
for returned census questionnaires. By April 27, 2000, when the bureau
prepared its assignment lists for the start of follow- up operations, the
response rate was 64 percent- 3 percent higher than the 61- percent rate
estimated by the bureau. 18 Considering that a 1- percent change in the
response rate represents about 1.2 million households, the 3- percent
difference was significant since over 3 million households would not require
follow- up visits by enumerators. Although the additional forms were
received after the start of nonresponse follow- up, they served as a cross-
check to information gathered by enumerators. The bureau attributed the
higher response rate, in part, to a professional advertising campaign that
it conducted under framework 8, which urged people to return the
questionnaires and cooperate with census enumerators.
However, budget variances from the higher mail response rate and the lower
support staff workload were partially offset by over $100 million of higher
salary and benefit costs than planned for enumerators in framework 3,
including a higher workload for unanticipated recounts. Enumerator efforts
and costs for fiscal year 2000 are presented in table 3.
18 Initial bureau data on the postcensus mail return rate- which is a more
precise indicator of public cooperation- was 72 percent, a decline of 2
percentage points from the 74percent mail return rate the bureau achieved in
1990. (The bureau?s figures are preliminary and subject to verification upon
receipt of final data.) See 2000 Census: Better Productivity Data Needed for
Future Planning and Budgeting (GAO- 02- 4, October 4, 2001). Higher
Enumerator Costs
Partially Offset Budget Variances
Page 15 GAO- 02- 30 Census Budget and Controls
Table 3: Enumeration Effort and Costs for Fiscal Year 2000
Dollars in millions
Framework 3: Enumerator effort Appropriation Obligated Over (under)
appropriation
Nonresponse follow- up: household visits $1,092 $1,179 $87 Nonresponse
follow- up: assignment, control, and coverage improvement 154 253 99 Other
enumerator workload 175 89 (86)
Total $1,421 $1,521 $100
Source: GAO analysis of U. S. Census Bureau data.
Enumerator Visits. Enumerators visited almost 42 million American households
during the 10- week nonresponse follow- up period that ended July 2, 2000.
This effort resulted in about $87 million of higher enumerator salaries and
benefits in framework 3 than planned. This occurred because the bureau was
concerned about high staff turnover and having a sufficient number of
enumerators in a tight labor market to complete nonresponse follow- up in a
shortened 10- week period compared to the 14week period for the 1990 census.
To address this issue, the bureau adopted a front- loaded staffing strategy,
which resulted in the bureau hiring and training more temporary personnel up
front to reduce the 150percent staff turnover estimated for the 2000 census.
19 This staffing strategy increased salary and benefit costs of temporary
personnel, as well as training, quality assurance, and supervisory staffing
costs. Also, the bureau hired almost 3,300 more FTE enumerators and paid
them almost $1 an hour more than the average $11. 77 an hour that was
planned. In addition, enumerator workload increased due to unanticipated
recounts of almost 800,000 incomplete, lost, or inaccurate questionnaires as
follows.
Over 600,000 returned questionnaires were incomplete because they did not
indicate the number of persons living in the household, and the households
had to be visited.
About 122,000 questionnaires were lost between completion by local census
offices and processing by the data capture centers, and enumerators had to
revisit each household and complete another questionnaire.
19 The bureau is currently evaluating staffing issues, including
determination of staff turnover for the 2000 census.
Page 16 GAO- 02- 30 Census Budget and Controls
About 68,000 questionnaires were recounted in three Florida local census
offices because serious errors and irregularities were detected, including
enumerator falsification of census data. In September 2000, the Commerce IG
conducted an investigation and issued a report indicating that the offices
had not followed proper procedures and quality controls, and concurred with
the bureau?s response to recount the areas in question. 20
Enumerator Assignment, Control, and Coverage Improvement. This effort
resulted in about $99 million of higher salary and benefit costs in
framework 3 for nonresponse follow- up than planned. This included assigning
and scheduling enumerators, preparing information packages for household
visits, and verifying addresses. These higher costs included the
reprocessing of the almost 800,000 incomplete, lost, and inaccurate
questionnaires that were recounted by enumerators, as well as an
unanticipated effort to verify 1.5 million new addresses as vacant.
Other Enumerator Workload. This effort offset the above budget variances by
about $86 million in framework 3 due primarily to the following.
Service- based enumeration was conducted in soup kitchens, homeless
shelters, and areas frequented by persons with no fixed addresses. This
effort resulted in about $32 million of budget variances. According to the
bureau, about 69,000 sites were estimated for this project based upon
national and local data. However, only about 14,000 actual sites, or about
20 percent of the planned workload, were actually identified and counted.
According to the bureau, this occurred because the majority of sites
estimated did not exist based upon enumerator visits.
Group quarters enumeration was conducted in places like prisons, nursing
homes, military barracks, and school dormitories. This effort resulted in
about $31 million of budget variances. According to the bureau, about
519,000 units were estimated for this project. However, only about 172,000
actual units, or one- third of the expected amount, were actually identified
and counted. According to the bureau, this occurred because addresses for
estimated sites erroneously included businesses, commercial establishments,
and duplications, or simply did not exist.
List enumeration was conducted in areas where households do not receive
direct mail delivery, such as rural areas where mail is sent to a local post
office box. This effort resulted in about $8 million of budget variances.
20 Final Audit Report ESD- 13215- 0- 0001, September 2000.
Page 17 GAO- 02- 30 Census Budget and Controls
According to the bureau, about 500,000 housing units were estimated for this
project. However, only about 372,000 actual units, or about 75 percent of
the planned workload, were actually identified and counted. According to the
bureau, this occurred due to inaccurate address lists.
Further details and explanations for 27 project budget variances with a
minimum threshold of $5 million or more are presented in appendix II. These
27 variances represented over 90 percent of the budget variance of $415
million for fiscal year 2000.
Historically, enumerator productivity has been a factor affecting decennial
census costs. Although the bureau has been trying to improve productivity,
data from past decennial censuses has been largely unavailable, incomplete,
or not comparable. 21 According to recent bureau data, enumerator
productivity did not have a significant impact on budget variances for the
2000 decennial census because the actual national average time to visit a
household and complete a census questionnaire was about the 1 hour estimated
by the bureau. Information on enumerator productivity rates by type of local
census office, the bureau?s methodology for refining the productivity data,
and lessons learned to assist the planning effort for the 2010 census is
presented in a recent GAO report. 22
For fiscal year 2000, the U. S. Census Bureau had significant internal
control weaknesses that resulted in an inability to develop and report
complete, accurate, and timely information for management decisionmaking.
This was due to specific internal control weaknesses as well as the bureau?s
overall internal control environment being assessed as high risk by its
independent auditor. The bureau?s control environment was characterized by
human capital weaknesses, including the lack of experienced accounting
staff, which contributed to heavy reliance upon contractors. In addition,
management oversight was not sufficient to ensure adherence to established
policies and procedures, which created opportunities for inconsistencies and
errors, particularly in year- end closing procedures and financial statement
preparation.
21 Decennial Census: Historical Data on Enumerator Productivity Are Limited
(GAO- 01- 208R, January 5, 2001). 22 2000 Census: Better Productivity Data
Needed for Future Planning and Budgeting
(GAO- 02- 4, October 4, 2001). Enumerator Productivity
Did Not Affect Budget Variances
Weaknesses in Key Internal Controls
Page 18 GAO- 02- 30 Census Budget and Controls
The specific control weaknesses for fiscal year 2000 were related to the
lack of controls over financial reporting and financial management systems.
Financial reporting issues included (1) the inability to produce accurate
and timely financial statements and other financial management reports
needed for oversight and day- to- day management, (2) the lack of timely and
complete reconciliations needed to validate the balances of key accounts,
and (3) unsupported and inaccurate reported balances for accounts payable
and undelivered orders, two key accounts needed to manage and report on
unliquidated obligations. For financial management systems, the bureau has
experienced persistent financial management systems problems for many years
and has candidly acknowledged the material nonconformance of its financial
systems in annual reports required by FMFIA. Despite these reports, the
bureau has asserted in its fiscal years 1999 and 2000 financial statement
reports that its financial management systems were in substantial compliance
with the provisions of FFMIA. In our view, the bureau?s financial management
systems did not substantially comply with the requirements of FFMIA as of
September 30, 2000.
Internal controls are a major part of managing an organization to meet
mission goals, support performance measures, and safeguard assets. GAO?s
Standards for Internal Control in the Federal Government
emphasize that a positive internal control environment provides discipline,
structure, and a climate that forms a foundation for effective internal
controls. We concurred with an assessment of the bureau?s overall internal
control environment by its auditor as high risk for fiscal year 2000. 23
This assessment was contained in the auditor?s work papers, which cited a
human capital issue in the bureau?s lack of experienced accounting staff,
heavy reliance upon contractors, and insufficient management oversight and
review. The auditor reported and we observed during our work that the bureau
did not have a sufficient number of experienced accountants familiar with
the financial statement process;
23 The control environment incorporates bureau management?s attitude,
awareness, and actions concerning its internal controls. The auditor?s
assessment of risk affects the nature, timing, and extent of audit testing
to be performed. The Bureau?s High- Risk
Internal Control Environment
Page 19 GAO- 02- 30 Census Budget and Controls
relied extensively on contractors to reconcile its accounts, close its
books after millions of dollars of year- end adjustments, and prepare its
annual financial statements and related disclosures; and
did not ensure that account reconciliations were properly reviewed by
bureau management.
Further, the auditor noted that the bureau?s policies and procedures were
not consistently adhered to, which created opportunities for inconsistencies
and errors, particularly in year- end closing procedures and financial
statement preparation. During our work, we concurred with the auditor?s
observations and noted that the overall control environment was impaired by
the lack of management oversight to ensure that policies and procedures were
followed. We also found that the bureau did not have an internal review
function designed to assist management in identifying areas where adherence
to policies and procedures could be improved.
For example, the bureau established a written policy for determining proper
cutoff at year- end to identify accounts payable and other liabilities when
goods or services had been delivered but not yet paid. This is necessary to
fairly present account balances in accordance with GAAP. However, we found
that bureau accounting personnel frequently did not adhere to the policy and
used the date of the invoice to determine the appropriate accounting period
rather than the date that goods, and particularly services, were delivered.
Accounting personnel used the wrong date even though most invoices we
examined for services clearly indicated the date that services were actually
received.
Given the overall weaknesses in the bureau?s control environment, it is not
surprising that the independent auditors and we identified significant
control weaknesses in two broad categories: (1) financial reporting and (2)
financial management systems.
Weaknesses in the bureau?s financial reporting affect the internal and
external reports produced by the bureau for both oversight and day- to- day
management. These problems relate to the bureau?s ability to produce timely
and accurate financial statements and other financial reports, perform
reconciliations to validate accounts, and report accurate amounts for key
accounts including accounts payable and undelivered orders.
Difficulties in Preparing Financial Statements and Other Reports.
The bureau stated in its 1999 and 2000 FMFIA reports that it did not have
adequate procedures in place to produce timely or accurate financial
Weaknesses in Financial
Reporting
Page 20 GAO- 02- 30 Census Budget and Controls
statements and related performance data. This weakness seriously affected
the bureau?s ability to conform with GAAP. In these reports, the bureau also
acknowledged a need for a proper analysis of its financial reports to ensure
the completeness of disclosures and the adequacy of the presentation of
financial information. A contributing factor to this weakness is the human
capital issue previously discussed as part of the control environment
coupled with systems weaknesses as presented in the next section. The
bureau?s auditor noted the following conditions with which we concur.
The bureau continues to experience significant difficulties and delays in
producing complete and accurate financial statements. The auditor reported
this condition as a material weakness in its internal control reports on the
bureau for fiscal years 1999 and 2000.
Numerous technical and clerical errors were found, including
inconsistencies in the form and content of the financial statements and
related notes. Because of these difficulties, the bureau?s financial
statements were manually compiled instead of being generated directly from
its financial management systems.
Compounding the potential for error, adjustments to the financial
statements must be posted manually and each adjustment must be crosswalked
to the financial statements instead of being posted directly by the
financial management systems. For example, the bureau did not post a fourth
quarter 2000 entry to deferred revenue and accounts receivable balances,
which resulted in a material overstatement of these accounts in its draft
financial statements.
Further, the bureau was unable to use its financial management system to
produce required Treasury reports such as the Statement of Transactions
(SF- 224) and Report on Budget Execution and Budgetary Resources (SF133).
The bureau prepared these reports manually, which required additional time
and effort to meet due dates and increased opportunities for error.
Ineffective Reconciliations. The lack of adequate account reconciliation
seriously affected the ability of the bureau to prepare timely and accurate
financial statements at year- end. The bureau stated in its 1999 and 2000
FMFIA reports that it did not promptly reconcile its financial information
system with its subsidiary records. The bureau also reported that when
reconciliations were performed, it did not sufficiently document and account
for all reconciling items. According to the bureau, critical reports
required to prepare the financial statements from the financial management
systems were not fully developed as part of the standard
Page 21 GAO- 02- 30 Census Budget and Controls
reporting package. In addition, the bureau?s auditor reported and we concur
with the following findings.
Many key financial statement balances in the general ledger were not
reconciled by the bureau to supporting subsidiary records in a timely manner
through the first 6 months of fiscal year 2000. The auditor reported this
condition as a material weakness in its internal control reports on the
bureau for fiscal years 1999 and 2000.
Bureau accountants who performed reconciliations were unfamiliar with the
nature and details of the accounts they were reconciling and the
reconciliations were not adequately supported. The auditor noted that for
the last half of fiscal year 2000, the bureau resorted to hiring contractors
to perform many of the monthly reconciliations. This resulted in most
balances being adequately supported and reviewed by year- end.
Deferred revenue and accounts receivable, however, were not properly
reconciled throughout the year. The bureau?s Division of Finance did not
reconcile financial transactions with information from program offices, and
folders by reimbursable project did not contain adequate information on
amounts collected from customers or accumulation of costs for projects.
Without proper and timely accounting, collections are subject to increased
risk of loss or theft. The bureau did not update cash balance reports
throughout the fiscal year and did not bill a large amount of work to
customers in a timely manner, impeding timely collection efforts.
Additionally, accounts receivable from the public for economic and
demographic data were not aged properly and the bureau did not establish an
allowance for uncollectable accounts until after year- end in order to
fairly present statements in accordance with GAAP.
The bureau also did not reconcile its intragovernmental balances with its
trading partner agencies other than the Department of Commerce, at least
annually, to comply with the provisions of OMB Bulletin 97- 01. The bureau
experienced difficulties in producing intragovernmental account information
and, as a result, reports had to be prepared manually, were incomplete,
contained errors, and were submitted late. In addition, the bureau?s core
financial management system was not designed to identify separately amounts
that should be eliminated for intragovernmental purposes in accordance with
GAAP.
Accounts Payable and Undelivered Order Weaknesses and Errors.
As part of analysis of bureau budget variances discussed earlier in this
report, we focused on the timely and accurate reporting of these two
accounts. Controls over unliquidated obligations, which include accounts
payable and undelivered orders, are an important part of the structured
process needed to reconcile and deobligate funds in a timely manner. The
Page 22 GAO- 02- 30 Census Budget and Controls
bureau disclosed in its 1999 and 2000 FMFIA reports that it lacked adequate
support for its accounts payable and undelivered orders balances. Further,
both the bureau and its auditor have reported significant weaknesses in
account reconciliation, as previously discussed, including accounts payable
and undelivered orders. For example, we noted that the bureau had not
promptly reconciled its subsidiary records with its general ledger control
account for undelivered orders as of September 30, 2000. Adjustments for
this reconciliation were not recorded until almost 7 months later on April
28, 2001. Further, subsidiary records of accounts payable and undelivered
orders by vendor were not included as part of the standard system reports,
hampering efforts to appropriately manage these accounts.
Our review and testing of key internal controls for these accounts found
conditions to be much worse than reported by the bureau or its auditor. The
weaknesses we identified included (1) erroneous information that had not
been promptly corrected and (2) ineffective controls to accrue liabilities
when goods or services have been delivered but not paid. These weaknesses
contributed to additional errors in accounts payable and undelivered order
balances as of September 30, 2000. Specifically, the effect of the errors we
identified as of September 30, 2000, was a 10percent overstatement of the
audited $457 million undelivered order balance and a 20- percent
understatement of the audited $134 million accounts payable balance. While
these errors were evidence of weak internal controls and were significant to
the undelivered orders and accounts payable line items, these errors alone
were not material 24 to the U. S. Census Bureau?s $1.2 billion fiscal year
2000 balance sheet and other financial statements.
The primary cause of these problems was erroneous information in subsidiary
records for undelivered orders that was not corrected in a timely manner as
noted in the following examples.
Year- end adjustments of $65 million had to be manually posted, which did
not occur until 7 months later on April 28, 2001.
Undelivered orders subsidiary records as of September 30, 2000, contained
$46 million for a contract that had been liquidated in February 1999. This
24 Materiality is a measurement of the magnitude of an omission or
misstatement of an item in a financial report over which a change would be
made.
Page 23 GAO- 02- 30 Census Budget and Controls
error was finally corrected as part of the above $65 million of year- end
adjustments to reconcile a subsidiary report to the general ledger.
Subsidiary records for three undelivered orders balances totaling $5
million were duplicated. This duplication occurred because the bureau
changed the document type code of these undelivered orders but did not
remove the old document type code from the subsidiary records.
Undelivered orders for services for three contracts totaling $20 million
(previously discussed as part of our $55 million of proposed deobligations)
had been completed as of September 30, 2000, and could have been
deobligated.
Undelivered orders also included $27 million of goods and services that
had been delivered prior to September 30, 2000. The effect of these
deliveries is a decrease in undelivered order balances and a corresponding
increase in accounts payable balances as of September 30, 2000. We
identified about $26 million by reviewing 95 subsequent disbursements over
$500, 000 from October 1, 2000, through January 31, 2001. The remaining $1
million was identified from a further examination of contracts, interagency
agreements, purchase orders, invoices, and payments for account balances
over $1 million through June 4, 2001.
The U. S. Census Bureau?s financial management systems encompass the
software, hardware, personnel, manual and automated processes, procedures,
internal controls, and data necessary to carry out financial management
functions, manage financial operations, and report financial status.
Weaknesses in the bureau?s financial management systems affect the
completeness, accuracy, and timeliness of data needed for oversight and
informed management decisions. The bureau has experienced persistent
financial management systems problems for many years and has candidly
acknowledged the material nonconformance of its financial systems in annual
FMFIA reports. The bureau?s fiscal years 1999 and 2000 FMFIA reports stated
that further work was required to improve routine bureau reporting and
systems controls.
Extensive systems weaknesses and errors were found by the bureau and its
auditors, and by us during our work on certain fiscal year 2000 bureau
account balances. In addition, Commerce officials acknowledged significant
fiscal year 2001 efforts to correct existing weaknesses in the bureau?s core
financial management system. We do not agree with the bureau?s assertion in
its annual financial report for fiscal year 2000 that its financial
management systems substantially comply with FFMIA requirements. FFMIA was
intended to advance federal financial management by ensuring that federal
financial management systems can Financial Management
Systems Weaknesses
Page 24 GAO- 02- 30 Census Budget and Controls
and do routinely provide reliable, timely, and consistent disclosure of
financial data. FFMIA requires that agencies implement and maintain systems
that substantially comply with
federal financial management systems requirements, as contained in OMB
Circular A- 127, Financial Management Systems, the Joint Federal Management
Improvement Program?s (JFMIP) Framework for Federal Financial Management
Systems, and JFMIP?s Core Financial System Requirements;
applicable federal accounting standards; and
the U. S. Standard General Ledger (SGL) at the transaction level. In its
fiscal year 1999 and 2000 reports of compliance with laws and regulations,
the bureau?s auditing firm stated that the results of its tests disclosed no
instances in which the bureau?s financial management systems did not
substantially comply with FFMIA. However, in its fiscal year 1998 report on
compliance with laws and regulations, the bureau?s previous auditing firm
stated that the bureau did not substantially comply with FFMIA, and many of
the same weaknesses this firm reported have continued. In our view, the
bureau?s financial management systems did not substantially comply with the
three requirements of FFMIA as of September 30, 2000, as discussed below.
First, we believe that the bureau?s systems did not substantially comply
with the federal financial management systems requirements. This is because
the systems could not provide reliable and timely financial information to
manage current government operations and prepare financial reports. 25 The
systems weaknesses were the result of a number of factors, including data
quality and systems design issues. For example, the bureau?s auditors
reported the following weaknesses in the bureau?s core
25 OMB Circular A- 127 states ?The agency financial management system shall
be able to provide financial information in a timely and useful fashion to
(1) support management?s fiduciary role; (2) support the legal, regulatory
and other special management requirements of the agency; (3) support budget
formulation and execution functions; (4) support fiscal management of
program delivery and program decision making; (5) comply with internal and
external reporting requirements, including, as necessary, the requirements
for financial statements prepared in accordance with the form and content
prescribed by OMB and reporting requirements prescribed by Treasury; and (6)
monitor the financial management system to ensure the integrity of financial
data.?
Page 25 GAO- 02- 30 Census Budget and Controls
financial management system, the Commerce Administrative Management System
(CAMS). 26
For fiscal year 1999, the auditors reported a material weakness in the
ability of CAMS to produce necessary reports routinely and on time to meet
internal and audit requirements. For example, CAMS was unable to prepare
usable undelivered order and accounts payable subsidiary reports. In
addition, the auditors reported a material weakness in certain information
system controls, including the lack of a security plan for CAMS and needed
improvements in the operating system that supported CAMS.
For fiscal year 2000, the auditors determined that the bureau had made
some systems improvements in CAMS and concluded that the reporting and
controls were a reportable condition rather than a material internal control
weakness. For example, the auditors reported in fiscal year 2000 that CAMS
could not distinguish adjustments that occur between preliminary and final
balances. In addition, reports required by Treasury, such as the SF- 224,
Statement of Transactions, and the SF- 133, Report on Budget Execution and
Budgetary Resources, were not supported by CAMS and had to be manually
prepared. Further, the auditors continued to have concerns about weaknesses
in bureau security planning, management, and access controls. A penetration
test conducted by the auditors indicated that bureau systems and data were
vulnerable to unauthorized access, although no actual instances of
unauthorized access were detected. GAO?s Standards for Internal Controls in
the Federal Government highlight the need for adequate control over
automated information systems to ensure protection from inappropriate access
and unauthorized use by hackers and other trespassers or inappropriate use
by agency personnel.
We concurred with these auditor reports and, in conducting our test work of
accounts payable and undelivered orders, identified several other serious
systems deficiencies as follows.
For fiscal year 2000, CAMS could not produce subsidiary records of
accounts payable and undelivered orders by vendor to support its general
26 CAMS is a financial management system currently being implemented
throughout the Department of Commerce. It consists of three categories of
systems: the core financial system, department functional systems, and
bureau- specific feeder systems. The U. S. Census Bureau was the pilot
agency for CAMS, which has been the bureau?s accounting system of record
starting in fiscal year 1998.
Page 26 GAO- 02- 30 Census Budget and Controls
ledger balances. Bureau officials stated that CAMS is a transaction- based
system that has accumulated about 18 million records since it was initially
installed on October 1, 1997. These records represent transactions for
invoices, payments, and adjustments that would have to be sorted by vendor
codes in order to obtain detail balances by vendor. Even if this were done,
bureau officials expect their efforts to be hampered by thousands of
balances of less than $1 because of small differences created by estimating
and rounding of invoices and payments.
CAMS had no archive capability to store millions of completed transactions
to reduce volume and processing time and highlight errors, duplicates, and
larger balances. According to Commerce officials responsible for CAMS, the
archiving capability has not been a priority since new and faster computer
hardware in fiscal year 2001 has reduced processing time for accounts
payable and undelivered order subsidiary transaction reports from 22 hours
to 2 hours. However, these subsidiary reports still remain unusable as a
day- to- day reporting and control tool because they continue to include a
large volume of completed transactions and are not sorted by vendor.
Because CAMS subsidiary records for payables, receivables, property, and
undelivered orders were not integrated with the general ledger, extensive
manual reconciliation and workarounds were required, which are timeconsuming
and error prone. As a result of these deficiencies, the bureau took 3 months
to provide us with an electronic file of undelivered order transactions that
reconciled to the CAMS general ledger before intraagency elimination
entries. Even after this lengthy delay in obtaining the file, we still had
to sort the transactions by vendor to obtain the September 30, 2000,
undelivered order balance by vendor in order to conduct our testing.
Further, the bureau was unable to provide a usable accounts payable listing
by vendor as of September 30, 2000.
Second, we believe that the bureau?s financial management systems for fiscal
year 2000 did not produce information that substantially complied with
applicable federal accounting standards. This occurred because systems
weaknesses affected the ability of the bureau to prepare its fiscal year
2000 financial statements and reports in accordance with GAAP. According to
the January 4, 2001, OMB guidance for determining compliance with FFMIA,
indicators of noncompliance with accounting standards would include the
material weakness reported by the auditors on the bureau?s difficulties and
delays in producing complete and accurate financial statements and related
disclosures. The material adjustments necessary to fairly present statements
at year- end and the significant errors we found in accounts payable and
undelivered order balances are evidence of serious weaknesses that impede
compliance with GAAP.
Page 27 GAO- 02- 30 Census Budget and Controls
Finally, we believe that the bureau?s financial management systems did not
substantially comply with the last requirement of FFMIA regarding the SGL at
the transaction level. This is because the bureau?s subsidiary feeder
systems do not interface with the CAMS core financial system general ledger
for timely posting to the SGL at the transaction level. We noted that for
fiscal year 2000, CAMS did not support reconciliation of SGL control
accounts to their respective subsidiary records, such as the Undelivered
Orders Report (FM 109) to the CAMS control accounts. Further, CAMS could not
provide a usable accounts payable listing by vendor as of September 30,
2000, that would indicate the SGL accounts at the transaction level.
According to Commerce officials, a number of improvements to the CAMS core
financial system were made during fiscal year 2001, including
improved capability to routinely generate usable detail subsidiary reports
for advances, accounts receivable, accounts payable, undelivered orders, and
unfilled customer orders;
a new process to test closing entries and run trial balances, enter audit
adjustments, and generate postclosing balances;
certification tests of software that examined 176 functional areas and
identified 9 exceptions for a compliance rate of 95 percent; and
cleanup of large volumes of unmatched transactions due to missing or
erroneous vendor, customer, or document numbers from faulty feeder systems
to improve reports needed for the annual audit process.
We did not assess these reported improvements. The fiscal year 2001
financial closing and independent audit of the bureau will help determine
the effectiveness of these actions. Further, Commerce officials stated that
standard interfaces for accounts receivable and payable, which will allow
source feeder system data to be posted at the transaction level to the CAMS
general ledger more timely and accurately, are being built and are expected
to be available by July 2002.
As agreed, we also obtained financial system information and reviewed
financial policies on other selected financial areas at the U. S. Census
Bureau. These areas, presented in appendix III, were personnel and benefit
expenditures, fund balance with Treasury, property and equipment, and
government credit cards. The following are two areas of concern. Review of
Other
Selected Areas
Page 28 GAO- 02- 30 Census Budget and Controls
For personnel expenditures, some salary amounts were charged to the wrong
projects due to errors in time charge coding. This distorted variances when
compared to planned amounts and created inaccurate measures of performance
for selected projects. Projects affected were remote Alaska enumeration and
advance visits for service- based enumeration. These errors occurred because
bureau supervisors and timekeepers did not closely review project codes used
by employees on timesheets.
For property and equipment, over $158 million, about 57 percent, of total
undepreciated accountable property in the bureau?s records was not reported
on the bureau?s balance sheet as of September 30, 2000. Federal accounting
standards state that property with a useful life of 2 years or more be
capitalized but allow each agency to establish its own dollar threshold for
capitalization. 27 Any amounts under that limit would be expensed. However,
a limit that is too high understates the reported amount of property and
equipment possessed by the bureau. For fiscal years 1996 and prior, the
bureau capitalized property and equipment with an acquisition cost of $5,000
or more; it changed to a $25,000 limit for new property acquired in fiscal
year 1997 and subsequent years.
We recommend that the Secretary of Commerce ensure that the U. S. Census
Bureau take the following actions:
deobligate at least $55 million for contracts we identified for which work
has been completed and amounts are not needed to close out contracts;
review the remaining $90 million of undelivered order balances as of
September 30, 2000, to identify and deobligate amounts not needed for those
orders;
instruct accounting personnel to follow the written policy for
establishing accruals and proper cutoff for goods and services received at
year- end;
post accounting adjustments to subsidiary records in a timely manner;
complete efforts to modify the bureau?s financial systems to produce
usable accounts payable and undelivered order subsidiary reports by vendor,
close out thousands of completed transactions with small balances, and
archive all completed transactions;
27 Statement of Federal Financial Accounting Standard (SFFAS) No. 6,
Accounting for Property, Plant, and Equipment.
Recommendations for Executive Action
Page 29 GAO- 02- 30 Census Budget and Controls
amend policies and procedures to require supervisors to closely review
employee time charges and project codes to more accurately reflect project
costs for salaries and benefits; and
reconsider the bureau?s property and equipment capitalization threshold,
as the current policy did not recognize about 57 percent of the bureau?s
total gross accountable property and equipment as of September 30, 2000.
In commenting on a draft of this report, the Department of Commerce, U. S.
Census Bureau, agreed with five of our seven recommendations and made a
number of comments on our specific findings. The most significant of the
bureau?s specific comments relates to our finding that the bureau did not
comply with FFMIA requirements for the year ended September 30, 2000. This
section of the report addresses the bureau?s disagreement with the two
recommendations and our conclusion regarding compliance with FFMIA. The
bureau?s remaining specific comments are addressed in appendix IV.
In general, the bureau stated that it is important to underscore its
overarching success in managing the $4.5 billion budget appropriated for the
2000 census and that any analysis of the bureau?s financial management
system should acknowledge this significant achievement. However, the
objectives of our budget review did not include assessing the efficiency of
expenditures and obligations against planned budget appropriations. Rather,
the objective of our review was to analyze budget variances reported by the
U. S. Census Bureau and to identify other potential variances for the 2000
decennial census, including the reasons for these variances. Further, the
bureau is still assessing the efficiency of the 2000 census in its
postenumeration review, which will not be completed until fiscal year 2003.
As stated in the introduction to this report, this product is one of several
we will be issuing in the coming months on lessons learned from the 2000
census. As was done after the 1990 census, we are currently reviewing key
operations of the 2000 census.
With regard to the two recommendations with which the bureau did not agree,
the first related to our call for the bureau to deobligate at least $55
million for contracts for which the work had been completed and no further
amounts were needed. The bureau stated that the $55 million should not have
been deobligated as of September 30, 2000, because final closeout, which may
include late cost determinations, often occurs well after the period of
performance has expired. However, the bureau indicated its agreement with
the estimated amounts to be deobligated, stating that it had included an
estimated $28 million in its fiscal year 2001 Agency Comments
and Our Evaluation
Page 30 GAO- 02- 30 Census Budget and Controls
budget for prior- year recoveries and that the remaining $27 million would
be used to partially offset its fiscal year 2002 appropriation. The bureau?s
primary concern was the timing of when these funds would be available.
As indicated in the body of this report, three contracts had amounts
totaling $20 million that should have been deobligated as of September 30,
2000, while three other contracts were completed and had amounts totaling
$35 million that were available for potential deobligation by the time we
completed our review in June 2001. As stated in our report, we recognize
that an agency should identify and deobligate funds no longer needed after
the agency is certain no related costs remain to be paid. Thus, the report
takes into account the bureau?s point that contract closeout may take some
time beyond the end of the fiscal year.
The second recommendation with which the bureau disagreed related to the
bureau?s property and equipment capitalization threshold. The bureau stated
that the Department of Commerce had issued a capitalization threshold of
$25,000 for individual purchases, which Census then adopted. We did not
evaluate the appropriateness of the $25,000 threshold for the Department of
Commerce as a whole and agree that the amount of the bureau?s net property
and equipment appears to be insignificant at that level. However, we
continue to recommend that the threshold be considered and evaluated
separately for the U. S. Census Bureau in light of the fact that the higher
threshold resulted in eliminating 57 percent of the bureau?s accountable
property and equipment from its balance sheet- which is significant to the
bureau.
Finally, the primary finding with which the bureau disagreed in its specific
comments was our assessment that the bureau?s financial management systems
did not substantially comply with the requirements of FFMIA as of September
30, 2000. The bureau stated that its financial management system complied
with all FFMIA requirements and identified three issues as key support for
its position. We disagree with each of these points and continue to believe
that the bureau?s financial management systems were not FFMIA compliant.
First, the bureau indicated that its financial systems were able to support
a $4.5 billion budget, and bureau managers used financial management reports
to meet all statutory deadlines and complete the 2000 operations on time and
under budget. As stated previously, the objectives of this report did not
include a qualitative analysis of the bureau?s performance in conducting the
2000 census. However, our report does describe several instances of
noncompliance with FFMIA requirements. For example, as
Page 31 GAO- 02- 30 Census Budget and Controls
stated in the body of this report, the bureau?s auditors reported as a
material internal control weakness that reports required by Treasury such as
the SF- 224, Statement of Transactions, and the SF- 133, Report on Budget
Execution and Budgetary Resources, were not supported by the bureau?s
financial management systems and had to be manually prepared. While the
bureau?s response cited OMB?s January 4, 2001, guidance on FFMIA
implementation in support of its position, the bureau did not include a key
sentence from the guidance, which states, ?Auditors then need to use
judgement in assessing whether the adverse impacts caused by identified
deficiencies are instances of substantial noncompliance with FFMIA.? In our
view, the above material weakness was clearly evidence of substantial
noncompliance as of September 30, 2000.
Second, the bureau stated that CAMS met 95 percent of JFMIP core
requirements and used standard general ledger accounts as required. Also,
although the bureau agreed that manual processes are required, it cited OMB
guidance that states systems need not be entirely automated to be FFMIA
compliant. Our report acknowledges that, according to bureau officials, a
number of improvements were made to the CAMS core financial system
subsequent to September 30, 2000. Although we did not assess these reported
subsequent improvements, their description, number, and significance
supports our belief that CAMS did not comply with FFMIA as of September 30,
2000. Further, Commerce officials cited additional work to be done such as
building standard interfaces for accounts receivable and payable, which are
not expected to be available until July 2002. In addition, we agree that the
use of manual processes does not necessarily indicate FFMIA noncompliance.
However, the deficiency we pointed out was the CAMS lack of integrated
subsidiary records with the general ledger, requiring extensive manual
reconciliation and workarounds, which are time consuming and error prone. At
the transaction level, we reported problems with timely posting to the SGL
and the reconciliation of SGL control accounts to their respective
subsidiary records, as well as the inability to provide a usable accounts
payable listing by vendor.
Third, according to the bureau, its financial management systems
substantially comply with federal accounting standards because the errors
and year- end adjustments we identified in accounts payable and undelivered
orders were not ?material enough? to warrant a finding of noncompliance. Our
report contains several indicators of noncompliance with accounting
standards, which are consistent with OMB guidance on this issue.
Specifically, evidence of serious weaknesses that impede compliance with
accounting standards includes (1) the material weakness
Page 32 GAO- 02- 30 Census Budget and Controls
reported by its auditor on the bureau?s difficulties and delays in producing
complete and accurate financial statements and related disclosures, (2) the
material adjustments necessary to fairly present statements at yearend, and
(3) the significant errors we found in accounts payable and undelivered
order balances.
We are sending copies of this report to the Chairman and Ranking Minority
Member, Senate Committee on Governmental Affairs, and the Chairman and
Ranking Minority Member, Committee on Government Reform. We are also sending
copies to the Acting Director, U. S. Census Bureau; the Secretary and
Inspector General of the Department of Commerce; the Director of the Office
of Management and Budget; and the Secretary of the Department of the
Treasury, and other interested parties. This report will also be available
on GAO?s home page at http:// www. gao. gov.
Page 33 GAO- 02- 30 Census Budget and Controls
If you or your staffs have any questions on this report, please contact me
at (202) 512- 9095 or by e- mail at kutzg@ gao. gov or Roger R. Stoltz,
Assistant Director, at (202) 512- 9408 or by e- mail at stoltzr@ gao. gov.
Key contributors to this report are listed in appendix V.
Gregory D. Kutz Director Financial Management and Assurance
Appendix I: Objectives, Scope, and Methodology
Page 34 GAO- 02- 30 Census Budget and Controls
The objectives of our work were to (1) analyze budget variances reported by
the U. S. Census Bureau and to identify other potential variances for the
2000 decennial census, including the reasons for these variances, and (2)
review key financial internal controls of the bureau and report on any
weaknesses noted in selected financial areas. We did not assess the
efficiency of expenditures and obligations against planned budget
appropriations.
To fulfill the objective on budget variances, we obtained and reviewed
bureau documents to support the reported savings, analyzed financial
variances, and interviewed bureau personnel for explanations on variances
down to the project level. We reconciled supporting balances of undelivered
orders by vendor subsidiary accounts to the general ledger balance and
examined supporting contracts, interagency agreements, purchase orders,
invoices, and subsequent payments on all vendor balances of $1 million or
more as of September 30, 2000, through June 4, 2001.
To determine the validity of undelivered orders we examined supporting
documentation and discussed their status with bureau officials. The 70
vendor balances of $1 million or more that we tested constituted about 73
percent of the total bureau undelivered orders of $504 million as of
September 30, 2000. Interagency adjustments for the bureau?s working capital
fund of $33 million and year- end closing adjustments of $14 million reduced
undelivered orders to $457 million in the bureau?s financial statements as
of September 30, 2000. We did not test about $90 million representing over
7,300 balances summarized by vendor and over 43,000 individual transactions
under $1 million of undelivered orders as of September 30, 2000.
Additionally, the scope of our work did not include determining whether the
use of contractors was appropriate for the involved activities.
We also tested for unrecorded liabilities as of September 30, 2000, by
examining bureau disbursements over $500,000 from October 1, 2000, through
January 31, 2001, to determine when goods or services had been received and
to identify potential unrecorded liabilities for the 2000 decennial census.
We did not audit the bureau?s fiscal year 2000 financial statements and
therefore we do not express an opinion on them. We also obtained but did
Appendix I: Objectives, Scope, and
Methodology
Appendix I: Objectives, Scope, and Methodology
Page 35 GAO- 02- 30 Census Budget and Controls
not audit preliminary enumerator productivity data provided by the bureau.
Productivity issues were recently addressed in a separate GAO report. 1
To fulfill the objective on key financial internal controls, we read bureau
reports, performed undelivered order balance and unrecorded liability tests
discussed above, and interviewed bureau officials. For selected financial
areas, we also obtained bureau system information and read policies and
procedures. For fiscal year 1999 and 2000, we reviewed FMFIA weaknesses
reported by the bureau to the Department of Commerce for inclusion in the
Department?s annual accountability reports. We also reviewed the bureau?s
fiscal year 1998, 1999, and 2000 audited financial statement reports, and
two fiscal year 2000 management letters and noted internal control
weaknesses reported by the bureau?s independent auditors. We also identified
internal control weaknesses as a result of our testing and observations at
the bureau. In addition, we reviewed financial system information and
financial polices and interviewed bureau officials on fund balance with
Treasury, property and equipment, salaries and benefits, and government
small purchase and travel credit cards, but did not audit this information.
We also met with Commerce IG officials and representatives of the
independent auditing firm to discuss the fiscal year 2000 audit of the
bureau?s financial statements. We reviewed the auditing firm?s working
papers in selected areas of accounts payable, other liabilities, undelivered
orders, fund balance with Treasury, and property and equipment as of
September 30, 2000, and personnel salaries and benefits for fiscal year
2000. We also reviewed the auditor?s audit approach, interim work, and
compliance work on FFMIA.
We performed our work at bureau headquarters in Suitland, Maryland, and in
the office of the bureau?s fiscal year 2000 auditing firm in Washington, D.
C. Our work was performed from December 2000 to June 2001 in accordance with
U. S. generally accepted government auditing standards.
1 2000 Census: Better Productivity Data Needed for Future Planning and
Budgeting
(GAO- 02- 4, Oct. 4, 2001).
Appendix I: Objectives, Scope, and Methodology
Page 36 GAO- 02- 30 Census Budget and Controls
On December 7, 2001, we received comments on a draft of this report from the
Department of Commerce, U. S. Census Bureau. These comments are presented in
the ?Agency Comments and Our Evaluation? section of this report and are
reprinted in appendix IV.
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 37 GAO- 02- 30 Census Budget and Controls
Table 4: Fiscal Year 2000 Project Variances of $5 Million or More
Dollars in millions
Reference number Framework and project number Project title Appropriation a
Obligated
Positive (negative)
variance
1 3- 6301 Definition of Geographic Area $14 $8 $6 2 3- 6331 Assignment
Control- Nonresponse Followup 2 22 (20)
3 3- 6333 Assignment Preparation- Nonresponse Follow- up 2 28 (26) 4 3- 6335
Be Counted 25 17 8 5 3- 6336 Coverage Improvement Follow- up 150 203 (53) 6
3- 6337 Group Quarters Enumeration 74 43 31 7 3- 6338 List Enumeration 28 20
8 8 3- 6339 Enumerate- Nonresponse Follow- up 1, 092 1,179 (87) 9 3- 6341
Remote Alaska 7 - 7 10 3- 6342 Service Based Enumeration 41 9 32 11 3- 6447
Data Collection A 217 122 95 12 3- 6448 Data Collection B 109 54 55 13 3-
6449 Data Collection C 425 291 134 14 3- 6450 Data Collection D 59 45 14 15
3- 6455 Kit Preparation 22 29 (7) 16 3- 6470 Regional Direction and Control
80 69 11 17 3- 6480 ACE Collection Activity 132 93 39 18 3- 6510 Regional
and Local Census Office Support 276 240 36 19 3- 6516 Enumerating Special
Populations 2 20 (18) 20 3- 6540 Telecommunications 54 23 31 21 3- 6910
Automated Acquisitions 38 32 6 22 3- 6912 Telephone Questionnaire Assistance
102 88 14 23 4- 6406 Address List Capture 7 12 (5) 24 4- 6408 Non- ID
Processing 10 3 7 25 5- 6918 DCS 2000 Contract 94 103 (9) 26 5- 6922 NPC
Data Capture Operations 43 21 22
Total for 26 projects with variances of $5 million or more 3,105 2,774 331
Total projects with variances less than $5 million 1,371 1,342 29
Subtotal 4,476 4,116 360
27 Undelivered order deobligations - (55) 55
Total $4,476 $4,061 $415
a These amounts are after transfers between earmarked funds described in
footnote 9. Source: GAO analysis of U. S. Census Bureau financial management
reports.
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 38 GAO- 02- 30 Census Budget and Controls
Based on analysis and interviews with U. S. Census Bureau officials, the
following are bureau explanations for fiscal year 2000 project variances
over $5 million (by reference number noted in table 4).
1. According to the bureau, half of the positive variance of $6 million for
project 6301 for definition of geographic area was caused by overestimating
the number of geographic staff required to carry out the participant
statistical area program. The remaining half of the positive variance is
attributed by the bureau to fewer geographic clerks in the National
Processing Center (NPC) for the Boundary and Annexation Survey mailing and
response processing. This resulted in lower salary and benefit costs for
about 224 FTEs.
2. The negative variance of $20 million for project 6331 for nonresponse
follow- up assignment control was caused by an underestimate of funds for
salary, travel, and other costs. According to the bureau, the underestimate
was caused by an unanticipated activity of rescheduling and assigning
enumerators to recount about 122,000 questionnaires that were lost between
the local census offices and the data capture centers.
3. The negative variance of $26 million for project 6333 for nonresponse
follow- up assignment preparation was because of an underestimate of funds
for salary, travel, and other costs. According to the bureau, this
underestimate was caused by unplanned activity of preparing information
packages for enumerator to recount over 600,000 cases in which
questionnaires did not indicate the number of persons living in the
household.
4. The positive variance of $8 million for project 6335 for the Be Counted
and Questionnaire Assistance Center programs was caused by the lower
workload that resulted in salary, travel, and other cost savings. According
to the bureau, the 886,000 actual addresses processed were 10 percent less
than the 980,000 addresses planned for the program. The bureau believed this
occurred because it had a better address list than originally anticipated so
people did not need to rely on the Be Counted forms available at walk- in
centers, such as community centers, churches, libraries, post offices, and
other public facilities. Also, many of the Be Counted forms received were
not used as
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 39 GAO- 02- 30 Census Budget and Controls
households were already counted as a part of the regular mail out and mail
back process. 1
5. A negative variance of $53 million occurred for project 6336 for coverage
improvement follow- up that resulted in higher salary, travel, and other
costs. According to the bureau, the variance was because of the
unanticipated need to verify 1.5 million new addresses as vacant and to
identify about 68, 000 households to be recounted by enumerators for one
area because the accuracy of the enumeration was in question.
6. A positive variance of $31 million occurred for project 6337 for group
quarters enumeration in places like prisons, nursing homes, and school
dormitories. According to the bureau, the variance was because of a two-
thirds lower workload of 172,000 actual units rather than the 519,000 units
planned, which resulted in salary, travel, and other cost savings. The
bureau believes this occurred because some of the addresses it planned for
group quarters enumeration were actually businesses, commercial
establishments, duplicates, or nonexistent.
7. A positive variance of $8 million occurred for project 6338 for list
enumeration in areas where residences do not receive mail delivery, such as
rural areas where mail is sent to post office boxes. According to the
bureau, the variance occurred because of a 25- percent lower workload of
372,000 actual units rather than the 500,000 units planned, which resulted
in salary, travel, and other cost savings. The bureau believes this occurred
because of inaccurate address lists that determined planned amounts.
8. The negative variance of $87 million for project 6339 for nonresponse
follow- up enumeration was caused by higher costs than planned for
enumerator salary and benefit costs and a higher workload for unanticipated
recounts. According to bureau data, enumerators were paid almost $1 an hour
more than the average $11.77 an hour planned in order to recruit a
sufficient number of quality temporary workers in a tight labor market. In
addition, almost 3,300 more FTE enumerators were hired than planned. This
occurred because of the bureau?s frontloaded staffing strategy that
anticipated a 150- percent turnover of
1 For further information, see 2000 CENSUS: Actions Taken to Improve the Be
Counted and Questionnaire Assistance Center Programs (GAO/ GGD- 00- 47,
February 25, 2000).
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 40 GAO- 02- 30 Census Budget and Controls
enumerators coupled with a higher workload for unexpected household visits
to recount almost 800,000 incomplete, lost, or inaccurate questionnaires for
over 600,000 cases in which returned questionnaires did not indicate the
number of persons living in the household (preparation costs are item #3),
122,000 questionnaires that were lost between completion by local census
offices and processing by the data capture centers (assignment costs are
item #2), and
68,000 questionnaires that were recounted because the accuracy of the
enumeration was in question. (Identification costs are item #5.)
9. The positive variance of $7 million for project 6341 for remote Alaska
enumeration was because, according to the bureau, salary and other costs
were erroneously charged to project 6516 for enumerating special
populations. (See #19.)
10. A positive variance of $32 million occurred in project 6342 for service
based enumeration in places like soup kitchens, homeless shelters, and areas
frequented by persons with no fixed addresses. According to the bureau, the
variance was caused by an 80- percent lower workload of 14,000 actual sites
verses the 69,000 sites planned, which resulted in salary, travel, and other
cost savings. The bureau believes that the majority of the planned sites did
not exist and were added to address lists because of inaccurate national and
local data. Also, bureau officials stated that some costs of advance visits
were erroneously charged to project 6516 for enumerating special
populations. (See #19.)
11. The positive variance of $95 million for project 6447 for data
collection A (intercity support staff in 102 local census offices) was
caused by lower support workloads than planned, and the higher than expected
mail response rate was a contributing factor. According to the bureau, this
resulted in cost efficiencies in logistical support salaries of 3,578 FTEs
compared to the 6,416 FTEs planned, for savings of 44 percent.
12. The positive variance of $55 million for project 6448 for data
collection B (suburb support staff in 51 local census offices) was caused by
lower support workloads than planned, and the higher than expected mail
response rate was a contributing factor. According to the bureau, this
resulted in cost efficiencies in logistical support salaries of 1,692 FTEs
compared to the 3,221 FTEs planned, for savings of 47 percent.
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 41 GAO- 02- 30 Census Budget and Controls
13. The positive variance of $134 million for project 6449 for data
collection C (small town support staff in 316 local census offices) was
caused by lower support workloads than planned, and the higher than expected
mail response rate was a contributing factor. According to the bureau, this
resulted in cost efficiencies in logistical support salaries of 10, 723 FTEs
compared to 16,480 FTEs planned, for savings of 35 percent.
14. The positive variance of $14 million for project 6450 for data
collection D (rural support staff in 42 local census offices) was caused by
lower support workloads than planned, and the higher than expected mail
response rate was a contributing factor. According to the bureau, this
resulted in cost efficiencies in logistical support salaries of 1,633 FTEs
compared to the 2,532 FTEs planned for savings of 35 percent.
15. According to the bureau, the negative variance of $7 million for project
6455 for kit preparation was caused by higher than planned staff overtime
and priority shipping costs to ensure delivery of materials and supplies to
the 520 temporary local census offices to begin enumeration.
16. The positive variance of $11 million for project 6470 for regional
direction and control was caused by lower support staff workloads than
planned in 12 regional census offices, and the higher than expected mail
response rate was a contributing factor. According to the bureau, this
resulted in cost efficiencies in logistical support salaries of 1,161 FTEs
compared to the 1,518 FTEs planned, for savings of 24 percent.
17. The positive variance of $39 million for project 6480 for ACE collection
activity was caused by a lower than planned workload of cases requiring
personal visits. According to the bureau, this resulted in lower data
collection costs for staff salaries and benefits of $33 million, lower
equipment costs of $4 million, and lower office rental costs of $2 million.
The purpose of ACE was to estimate the population for purposes such as
redistricting by sampling households from an address list developed
independently of the address list used to enumerate the census. The results
of ACE (formerly Integrated Coverage Management) were to have been
statistically combined with the results of enumeration to form a single,
integrated set of population counts.
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 42 GAO- 02- 30 Census Budget and Controls
18. According to the bureau, the positive variance of $36 million for
project 6510 for regional and local census office support was caused by
lower support workloads, which resulted in lower office space and equipment
costs than planned. The mail response rate was a contributing factor to the
lower support workloads.
19. According to the bureau, the negative variance of $18 million for
project 6516 for enumerating special populations was caused by charging
salary and other costs erroneously charged from Remote Alaska (see #9) and
some costs of advance visits for service- based enumeration (see #10).
20. According to the bureau, the positive variance of $31 million for
project 6540 for telecommunications was the result of renegotiating a 90-
percent reduction in FTS 2000 long distance phone costs from a planned 10
cents a minute to an actual 1 cent a minute.
21. According to the bureau, the positive variance of $6 million for project
6910 for automated acquisitions was primarily the result of lower computer
equipment costs and lower headquarters telephone support costs than planned.
22. According to the bureau, the positive variance of $14 million for
project 6912 for telephone questionnaire assistance was caused by lower
contractor costs in running the program since the number of inbound calls of
6 million was 45 percent lower than the 11 million calls planned.
23. The negative variance of $5 million for project 6406 for address list
capture was caused by the higher than planned workload for support staff
updating enumerator maps and the address database. According to the bureau,
planned workload was 2.4 million map sheets while the actual workload was
over 150 percent higher at 6.1 million map sheets because the number of new
and corrected locations was higher than anticipated.
24. The positive variance of $7 million for project 6408 non- ID processing
was caused by the lower than planned workload for support staff to match and
code questionnaires for the Be Counted and Telephone Assistance programs.
According to the bureau, planned workload was 2.5 million addresses and
actual workload was 52 percent lower at 1.2 million addresses because more
information was already contained in mailed questionnaires than anticipated.
Appendix II: Explanations for Fiscal Year 2000 Project Variances of $5
Million or More
Page 43 GAO- 02- 30 Census Budget and Controls
25. According to the bureau, the negative variance of $9 million for project
6918 for the DCS 2000 contract was caused by higher contractor costs than
planned to scan census questionnaires in two passes. The first pass scanned
six basic questions on both the short and long forms, and the second scanned
the balance of long form responses. The bureau refers to this as the two-
pass approach to data capture.
26. The positive variance of $22 million for project 6922 for NPC data
capture operations was caused by a lower workload than planned for forms to
process and higher productivity for data entry. According to the bureau, 5
million fewer mail back, enumerator, and group quarters forms were
processed, and data entry productivity of 6,500 keystrokes per hour was
higher than the 5,200 keystrokes per hour planned.
27. The positive variance of $55 million for undelivered order deobligation
is discussed in the body of this report. The six contracts concerned can be
identified by framework but could not be identified to the project level as
contracts may involve multiple projects.
Appendix III: Review of Other Selected Areas Page 44 GAO- 02- 30 Census
Budget and Controls
As agreed with our requesters, we also reviewed financial system information
and financial policies and interviewed officials on other selected financial
areas at the U. S. Census Bureau, but did not audit this information. These
selected areas were bureau personnel and benefits expenditures, fund balance
with Treasury, property and equipment, and government small purchase and
travel credit cards. No significant weaknesses or areas for improvement were
noted during our work in these areas, except for the two areas noted in the
body of this report related to personnel expenditures and property and
equipment capitalization thresholds.
For the bureau?s personnel and benefit expenditures, we noted the following.
This area was the largest fiscal year 2000 expenditure consisting of
$2,475 million, or 58 percent, of total expenditures of $4,259 million for
periodic census and programs, including decennial census.
Policies and procedures existed to provide guidance and internal controls.
A contractor tested the Pre- Appointment Management System (PAMS) and
Automated Decennial Administrative Management System (ADAMS) temporary
employee payroll system with no material exceptions noted.
In March 2000, the Commerce IG conducted an evaluation of PAMS/ ADAMS and
found areas where software practices needed improvement but concluded that
the systems should provide adequate support for the 2000 decennial census. 1
As discussed in appendix II, coding errors caused some salary amounts to
be erroneously charged to other projects.
The bureau?s independent auditor review of internal controls and
substantive tests noted no significant issues with personnel and benefits
for fiscal year 2000.
For the bureau?s fund balance with Treasury, we noted the following.
The bureau?s balance sheet showed $1.1 billion as of September 30, 2000.
Policies and procedures existed to provide guidance and internal controls.
One central disbursing function at the bureau?s headquarters in Suitland,
Maryland controls payments to vendors and employees.
1 Final Inspection Report OSE- 11684, March 2000. Appendix III: Review of
Other Selected Areas
Review of Personnel and Benefits Expenditures
Review of Fund Balance With Treasury
Appendix III: Review of Other Selected Areas Page 45 GAO- 02- 30 Census
Budget and Controls
A contractor performs monthly reconciliation of fund balances, and
differences are investigated promptly by bureau financial accounting staff.
The bureau?s independent auditor review of internal controls and
substantive tests noted no significant issues with fund balance with
Treasury for fiscal year 2000.
For the bureau?s property and equipment, we noted the following.
The bureau?s balance sheet showed $121 million at an acquisition cost of
$25,000 and over as of September 30, 2000. As discussed in the body of this
report, this amount represented only 43 percent of total bureau gross
accountable property. After accumulated depreciation, net property and
equipment was valued at $47 million.
Policies and procedures existed to provide guidance and internal controls.
The bureau can provide detailed lists of its accountable property,
including capitalized, noncapitalized, and sensitive property.
The bureau conducted physical wall- to- wall inventories of all its
accountable property during fiscal year 2000 that were observed by the
independent auditors and the Commerce IG?s staff.
A contractor performs a monthly reconciliation of the equipment included
in the subsidiary property record system, the Accountable Property
Management System (APMS), to the bureau?s general ledger function contained
in CAMS.
In March 2000, the Commerce IG conducted a review of accountable property
at the 12 regional data census centers and found areas where internal
controls could be improved in the recording of property in APMS, the
observation of annual physical inventories, and the documentation of
transfers of property. 2
The bureau?s independent auditor review of internal controls and
substantive tests noted no significant issues with property and equipment
for fiscal year 2000.
For the bureau?s government credit card program for small purchase cards and
employee travel cards, we noted the following.
The bureau uses Citibank Visa credit cards for expenses for official
government travel and for small purchases, such as supplies and services.
2 Final Audit Report ESD- 11781- 0- 0001, March 2000. Review of Property
and Equipment Review of Government Credit Cards
Appendix III: Review of Other Selected Areas Page 46 GAO- 02- 30 Census
Budget and Controls
As of June 12, 2001, the bureau had 3,950 travel credit cards outstanding.
As of June 22, 2001, the bureau had 316 purchase cards outstanding.
The bureau has policies and procedures regarding issuance and use of
credit cards to provide guidance and internal controls and appears to be
following them.
Small purchase cards were issued to 79 temporary employees and were
subject to the same policies and procedures regarding issuance, use, and
separation as for permanent employees.
The bureau had a policy not to issue government travel cards to temporary
employees.
Small purchase cards have 30- day spending limits ranging from $5,000 to
$200,000, and travel cards have a $5,000 credit limit, but increases can be
obtained as needed.
The bureau has a program to monitor credit card use and delinquent
payments; however, we did not assess the adequacy of this program.
The bureau pays all small purchase card bills monthly so there are no
delinquent accounts.
Bureau employees must pay their travel card bills promptly and are
reported to the bureau if over 60 days delinquent. As of June 15, 2001,
Citibank reported only about $13, 400 in travel card bills over 60 days
delinquent, including one account for about $4,000.
In March 2000, the Commerce IG conducted a review of small purchase credit
cards and concluded that the bankcard program was well managed. 3
3 Final Audit Report ESD- 11781- 0- 0001, March 2000.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 47 GAO- 02- 30 Census Budget and Controls
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 48 GAO- 02- 30 Census Budget and Controls
See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 49 GAO- 02- 30 Census Budget and Controls
See comment 2.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 50 GAO- 02- 30 Census Budget and Controls
See comment 2. See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 51 GAO- 02- 30 Census Budget and Controls
See comment 4. See comment 1.
See comment 3. See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 52 GAO- 02- 30 Census Budget and Controls
See comment 1. See comment 6.
See comment 5. See comment 4.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 53 GAO- 02- 30 Census Budget and Controls
See comment 7. See comment 1.
See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 54 GAO- 02- 30 Census Budget and Controls
See comment 1. See comment 1.
See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 55 GAO- 02- 30 Census Budget and Controls
See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 56 GAO- 02- 30 Census Budget and Controls
See comment 6.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 57 GAO- 02- 30 Census Budget and Controls
See comment 1.
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 58 GAO- 02- 30 Census Budget and Controls
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 59 GAO- 02- 30 Census Budget and Controls
The following are GAO?s comments on the letter dated December 7, 2001, from
the Department of Commerce, U. S. Census Bureau.
1. See the ?Agency Comments and Our Evaluation? section of this report. 2.
Our report clearly lays out the source and status of the budget
variances we identified. We note that the bureau?s restatement of our
findings still concludes with the same dollar amounts we reported.
3. We have modified footnote 10 to add that the appropriation for Periodic
Censuses and Programs established a 3- day notification period for
reprogramming funds provided by the appropriation.
4. The bureau?s increased reliance on private contractors was stated
factually, and the scope of our work did not include determining whether the
use of contractors was appropriate for the involved activities. The human
capital issue described in the body of this report reflects a concern that
the bureau did not have a sufficient number of experienced accountants
familiar with the financial statement process and able to effectively
monitor year- end reconciliations or provide needed accounting support on a
day- to- day basis. While not specifically disclosed as part of an
independent auditor?s report on internal control, the assessment of the
bureau?s internal control environment as high risk by its independent
auditor was supported by the auditor?s working papers, which were within the
scope of our work as stated in appendix I, ?Objectives, Scope, and
Methodology.?
5. We have modified the report to indicate that the FMFIA weakness reported
by the bureau seriously affected the bureau?s ability to conform with
generally accepted accounting principles.
6. The bureau?s response presented new information on system testing that
was not mentioned throughout our discussions with key bureau officials, up
to and including our exit conference on June 15, 2001. However, in our
experience, system testing is usually done on downloaded offline systems
data so that online data needed for management are not altered, disrupted,
or lost. To delay posting $65 million of year- end adjustments for 7 months
due to systems testing would, in our view, seriously hamper financial
management activities. This is because, during this period, system personnel
would be using automated screen inquiries for individual contracts that
contain incorrect and misleading data and would have to refer to a GAO
Comments
Appendix IV: Comments From the Department of Commerce, U. S. Census Bureau
Page 60 GAO- 02- 30 Census Budget and Controls
manual tracking list of adjustments, a cumbersome and error- prone process.
7. Bureau officials told us, in the context of accounts payable and
undelivered order transactions, that about 18 million records accumulated
since the installation of CAMS on October 1, 1997. The bureau?s response
that 100 million transaction records have accumulated since CAMS? inception
provides further evidence that the bureau should develop archive capability
to store millions of completed transactions in order to reduce volume and
processing time and to highlight errors, duplicates, and larger balances.
Appendix V: GAO Contact and Staff Acknowledgments
Page 61 GAO- 02- 30 Census Budget and Controls
Roger R. Stoltz, (202) 512- 9408 Staff members who made key contributions to
this report were Cindy Barnes, Linda Brigham, Amy Chang, and Peggy Smith.
Appendix V: GAO Contact and Staff
Acknowledgments GAO Contact Acknowledgments
(192002)
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