U.S. Department of State Fiscal Year 2019 Agency Financial Report

4  F inancial and P roperty M anagement Management of its financial resources and property remains a challenge for the Department. One significant aspect of this challenge relates to overall internal control issues— namely, the Department’s ability to identify internal control weaknesses in the first place and its subsequent compliance with relevant standards. This issue affects management of both the Department’s financial resources and its property. In addition, we identify weaknesses in the Department’s collection, use, and analysis of financial information. As with oversight of contracts and grants, attention to this challenge is particularly important to ensure that the Department appropriately oversees and uses public resources. Internal Control Deficiencies Department operations in FY 2019 suffered from a variety of internal control deficiencies, and an independent audit identified certain matters that were considered “significant.” OIG notes that weaknesses in property and equipment were initially reported in the audit of the Department’s FY 2005 consolidated financial statements and reiterated in subsequent audits. In FY 2018, the Department’s internal control structure continued to exhibit several deficiencies that hampered the Department’s ability to account for real and personal property in a complete, accurate, and timely manner. The auditor concluded that the combination of property-related control deficiencies was a significant deficiency. 41 Internal control deficiencies were also identified during various OIG projects. For example, embassies in Gabon and Kenya failed to identify internal control deficiencies as a result of weak statement of assurance processes. 41 OIG, Independent Auditor’s Report on the U.S. Department of State 2018 and 2017 Financial Statements (AUD-FM-19-03, November 2018). 42 ISP-I-19-16, June 2019. 43 ISP-I-19-08, October 2018. 44 ISP-I-19-04, November 2018. 45 ISP-I-19-03, November 2018. 46 ISP-I-19-08, October 2018. 47 ISP-I-19-10, December 2018. Embassy Libreville did not prepare its 2018 Annual Chief of Mission Management Control Statement of Assurance in accordance with Department guidance, nor did it have an ongoing system of management controls. 42 At Embassy Nairobi, the embassy followed the format required by the Statement of Assurance process but did not use the checklists to identify vulnerabilities. 43 A lack of an annual acquisition plan for procurement was also a concern for several embassies. For example, in The Gambia, because the embassy did not have a plan for current and future contracting requirements, it had little knowledge of existing contracting requirements that were due to expire, ultimately resulting in several unauthorized commitments discovered by OIG. 44 At Embassy Dakar, Senegal, we found that the existence of an annual acquisition plan for procuring supplies and services could have prevented the embassy from spending hundreds of thousands of dollars on excess and ultimately unused equipment. 45 Several embassy inspections identified weaknesses in general property management controls involving ware- house access, inventory, spot checks, and related issues. At Nairobi, the embassy maintained more than $26 million in non-expendable inventory; of that amount, we found $14 million should be disposed of or replaced. For exam- ple, OIG found assets in the warehouse and residences that were due to be replaced in 1984 but were still in the inventory. 46 At Consulate General Kolkata in India, staff did not track facilities management expendable supplies in the Department’s electronic inventory system. Instead, staff maintained a separate paper log to document inventory and issuance of expendable supplies, increasing the risk of theft. Also, Consulate General Mumbai’s on-compound warehouse lacked adequate access control. 47 2019 A gency F inancial R eport U nited S tates D epartment of S tate | 119 INSPECTOR GENERAL’S STATEMENT ON THE DEPARTMENT’S MAJOR MANAGEMENT AND PERFORMANCE CHALLENGES | OTHER INFORMATION