GAO Hearing Question #2 The following is the recommendation of the Study of Bus Management and operations prepared by Cresap, McCormick and Paget, Inc. The Office of Audit Should Report Directly to the General Manager The Office of Audit is responsible for performing internal auditing of WMATA's operations, in addition to its major role of auditing WMATA contractors for the construction program. The internal audit function entails a review of various financial activities. As a result, the Office of Audit serves as a "check and balance" through its involvement in analyzing WMATA's processing procedures and methods, as well as assessing the accuracy of the financial records. However, to ensure the integrity of the internal audit function, it is necessary that the Office of Audit does not report organizationally to any offices that it audits. Under the present structure, in which the Office of Audit reports to the Office of the Controller, a potential conflict exists, since the Controller's Office is an area in which a significant amount of internal auditing should be routinely performed. Accordingly, to guarantee full independence, the Office of Audit should report directly to the General Manager; in addition to ensuring internal effectiveness, this change will not, in any way, inhibit the Office's external auditing duties. GAO Hearing Question #2 The following is the staff response to the Cresap, McCormick & Paget recommendation contained in their management report. The Office of Audit should report directly to the General Manager (111-15) In other comments, WMATA has opposed the recommendation that calls for the positions and functions of Comptroller and Treasurer to be combined. The primary basis for opposing this recommendation are the Compact provisions which prohibit the consolidation of the Office of Comptroller with any other office, and the principle of separation of those functions and activities dealing with the collection and handling of funds exercised by the Treasurer from the accounting and audit responsibilities of the Comptroller. While it is presumed that provision of the Compact will be complied with and the Comptroller office remain intact and independent rendering moot the proposal to move the audit function and have it report directly to the General Manager, it is nevertheless desirable to set out the reasons why the audit function should remain as a part of the Comptroller's responsibility. Among the Comptroller functions is a principal responsibility of "watchdog." The Comptroller exercises a substantial degree of independence in carrying out responsibilities dealing with accounting, the auditing of funds, both internally and those of contractors, and in the process of analyzing program effectiveness. In providing for an independent Comptroller, and in requiring that position not be combined with any other, the Compact placed in one of the officer positions of the Authority the broad responsibility for assuring efficiency and integrity in fund accounting and responsibility both within the Authority and outside with those with whom the Authority enters into contract arrangements. Following this concept, the Board of Directors and the General Manager should expect to hold responsible a major officer of the Authority for assuring a thorough, effective, independent audit of all financial activities and involvement of WMATA. It is indeed questionable whether the audit function's directly reporting to the General Manager might weaken instead of strengthen the process. Under current operating arrangements, the Board and the General Manager hold the Comptroller responsible for an effective audit activity. It was realized, however, in 1969 shortly after construction of the rapid rail system began that to enhance completely the integrity of the audit operation, it would be necessary to permit the Director of the Office of Audit to report independently to the General Manager or to the Board of Directors in those instances and on those occasions where his judgment indicated this to be desirable. It is also provided, further to assure integrity, that the Director of Audit submit copies of his reports to the Treasurer and to the General Manager for their information. The organization of the internal audit operation and the method by which the Director of Audit reports was noted and agreed with by Ernst & Ernst in its audit report of WMATA dated April 30, 1969. In the light of the above reasoning, it is believed that the organizational location of the audit function in the Office of the Comptroller best serves the General Manager, the Board of Directors and the constituent jurisdictions of the Authority. November 24, 1975 Request Question #3 Submission #1 GAO Hearing Submit for the record the Ernst & Ernst management letter See the attached enclosure ERNST & ERNST 1225 CONNECTICUT AVE., N. W. WASHINGTON, D. C. 20036 April 30, 1969 Mr. Jackson Graham General Manager Washington Metropolitan Area Transit Authority 950 South L'Enfant Plaza Washington, D. C. Dear Mr. Graham: Our examination of the financial statements of the Washington Metropolitan Area Transit Authority for the year ended June 30, 1968 included a review of the system of internal control and the accounting procedures of the Authority. This letter presents our comments and recommendations for strengthening controls and procedures already in effect. Systems and Procedures The Washington Metropolitan Area Transit Authority Compact, Title III, Article III, "Officers," states that The treasurer shall be the custodian of the funds of In keeping with the Compact, the Office of Secretary-Treasurer has been the custodian of the Authority's funds, has maintained cash receipts and cash disbursements records, has prepared bank reconciliations and has made payments only upon receipt of signed warrants. The Office of Comptroller prepares all warrants, based on appropriate documentation, which includes signed purchase requisitions, signed receiving reports, approved invoices and/or statements from contracting offices, all as applicable. The Comptroller has been given final authority to sign warrants up to $100,000, and his office prepares checks for all signed warrants. These checks and duplicate copies of the warrants then are forwarded to the Treasurer who examines the warrant copies and signs the checks. The Comptroller's office also has maintained cash receipts and cash disbursements records. Periodically these records are compared to assure that they agree. The Comptroller': office obtains a copy of the monthly bank reconciliation and checks it in detail. There are several areas pertaining to the foregoing about which we would like to comment: (1) The Compact does not define "warrants duly and (2) If it is deemed sufficient to have only the (3) The Comptroller's office and the Treasurer's |