Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance (continued)

include the creation and maintenance of related records that provide evidence of execution of these activities, as well as appropriate documentation. The Green Book states that transactions should be promptly recorded to maintain their relevance and value to management in controlling operations and making decisions. Without effective controls over monitoring open obligations for ongoing validity, AOC is at increased risk of inaccurately reporting its financial position, net costs, and budgetary resources.

Recommendation

We recommend that AOC strengthen internal controls over financial reporting and improve communication with project managers to ensure the accurate and timely recording of accounting events related to leasehold improvements.

Management’s Response

Management concurs with the finding and recommendation:

The internal controls for the Accounts Payable accrual will be strengthened so that the AOC can identify this issue in the future. The AOC will create a secondary process for the undelivered orders that will analyze undelivered orders that have passed their period of performance and are above a threshold set by the Accounting Officer. This review will require accounting personnel to coordinate with contracting officers and their technical representatives to determine the amount of work complete and the fiscal year end.

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