ADDITIONAL ACTIONS NEEDED TO ESTABLISH EFFECTIVE INTERNAL.

(From GAO Reports)

GAO-12-369

U.S. Merchant Marine Academy: Additional Actions Needed to Establish Effective Internal Control

July 6, 2012

The Honorable Patty Murray Chairman The Honorable Susan M. Collins Ranking Member Subcommittee on Transportation, Housing and Urban Development, and Related Agencies Committee on Appropriations United States Senate

The Honorable Tom Latham Chairman The Honorable John W. Olver Ranking Member Subcommittee on Transportation, Housing and Urban Development, and Related Agencies Committee on Appropriations House of Representatives

The U.S. Merchant Marine Academy (Academy), one of five United States service academies, was established in 1938 to provide 4- year undergraduate educational programs for men and women (midshipmen) to become shipboard officers and leaders in the maritime transportation field. A graduate from the Academy receives a Bachelor of Science degree and a U.S. Coast Guard license as deck or engineering officer and a commission in the U.S. Naval Reserve or another uniformed service. The Academy is a component of, and receives federal funding and overall policy direction through, the Department of Transportation` s (DOT) Maritime Administration (MARAD). For fiscal year 2011, DOT allocated $80 million to the Academy for its operations, capital improvements, and facilities maintenance. Most of the Academy`s 44 principal facilities were constructed during or shortly after World War II.

In August 2009, we issued a report[Footnote 1] that identified numerous deficiencies in the Academy`s internal control activities and weaknesses in the Academy`s overall internal control environment [Footnote 2] that resulted in numerous instances of improper and questionable sources and uses of funds by the Academy and its affiliated organizations. Our 2009 report included 47 recommendations to address the deficiencies we identified. You requested that we update the status of the Academy`s efforts to address our recommendations from our 2009 report and that we review the Academy`s oversight of its Capital Improvement Program (CIP).[Footnote 3] This report provides the results of our assessment of (1) the extent to which the Academy has taken actions to address our prior recommendations and (2) the Academy`s CIP oversight.

To assess the extent to which actions have been taken to address our prior recommendations, we (1) evaluated the Academy`s and MARAD`s corrective actions for each recommendation and supporting documentation as of September 30, 2011, and- where relevant- reviewed documentation supporting selected transactions to assess the Academy`s implementation of revised internal control procedures; (2) interviewed Academy, MARAD, and DOT officials responsible for the development and implementation of the corrective actions; and (3) performed walk- throughs of the Academy`s processes as revised in response to our recommendations.

To assess the Academy`s oversight of its CIP, we (1) interviewed cognizant agency officials responsible for oversight of the Academy`s implementation of the program, (2) obtained and reviewed related policies and procedures and strategic planning documents, and (3) toured the Academy grounds to observe the current physical condition of buildings and infrastructure. In addition, we interviewed MARAD human resources personnel regarding Academy staff resources used to oversee and manage CIP projects.

During our review, the Academy and MARAD continued to address internal control weaknesses that were the focus of our prior recommendations. For this report, we evaluated corrective actions taken through September 30, 2011, that the Academy, MARAD, and DOT made us aware of as of February 15, 2012. We will evaluate information that we receive about additional actions taken as part of our standard, ongoing recommendation follow-up procedures.

We conducted this performance audit from February 2011 to June 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, …