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In Brief: Weaknesses in the Smithsonian Tropical Research Institute’s Financial Management Require Prompt Attention, No.A-13-01, Issued October 29, 2013

Why We Did This Audit

The Smithsonian Tropical Research Institute (STRI) is the only Smithsonian organization based outside of the United States. Its geographically remote location, and the unique demands of operating in another country, present challenges for the Smithsonian to oversee and manage STRI’s operations.

Our audit objective was to evaluate high risk areas of STRI’s financial operations, including cash operations, accounts receivable transactions, and procurement activities.

Background

Located in the Republic of Panama (Panama), STRI is a research center dedicated to understanding biological diversity and its relevance to human welfare. It has marine laboratories on both coasts of Panama, giving access to two different ocean environments.

What We Found

We found that STRI has not performed bank account reconciliations or posted cash transactions to the Smithsonian’s official accounting records (general ledger) timely. STRI’s bank account reconciliations were not complete, and there was a lack of segregation of duties over the payroll operations.

We also found that STRI’s accounts receivable does not reconcile to the general ledger. STRI had approximately $50,000 of accounts receivable balances that were more than 90 days delinquent as of fiscal year-end 2012. Moreover, STRI did not have a written policy that outlined procedures to collect the delinquent balances.

During our review of procurement activities, we found that STRI management did not ensure that the Office of Facilities Engineering and Operations (OFEO) participated in the design stage of a construction project. This caused OFEO to disapprove the use of a science lab for safety reasons. We also found that STRI management had not assigned a custodian to control purchased assets.

Lastly, we found that STRI has filled two key directorates with outside consultants, which increases the risk of loss of continuity of business operations and management stability.

What We Recommended

We recommended that STRI develop and implement written policies and procedures over bank account reconciliations, as well as accounts receivable and collections activities.

We also recommended that STRI coordinate with OFEO on construction and improvement projects; assign responsibility for the control and maintenance of accurate inventory records; and develop a succession plan for key directorates currently being filled by outside consultants.

Management concurred with our findings and recommendations and has planned corrective actions to address the recommendations. We will continue to monitor management’s progress towards completion of these recommendations.




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