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In Brief: The Center for Folklife and Cultural Heritage Needs to Improve Its Financial Management Operations, No. A-11-09
Issued September 28, 2012

Why We Did This Audit

We conducted this audit to assess whether the accounting information systems (1) reconcile to the Smithsonian’s Enterprise Resource Planning system, (2) provide management an accurate view of Center for Folklife and Cultural Heritage’s (CFCH) business activities, and (3) can be improved to increase efficiencies.


CFCH is a research and educational unit of the Smithsonian Institution dedicated to promoting the understanding and continuity of diverse, contemporary grassroots cultures in the United States and around the world. CFCH’s primary activities are the Smithsonian Folklife Festival (Festival) and Smithsonian Folkways Recordings (Folkways). The Festival is an annual event held outdoors on the National Mall. Folkways has a collection of over 43,000 recordings that are available for purchase. To manage these activities, CFCH utilizes various accounting information systems for its operations.

What We Found

We found that the Center for Folklife and Cultural Heritage (CFCH) needs to increase oversight of the accounting information system that Smithsonian Folkways Recordings (Folkways) uses to capture sales, inventory, accounts receivable data, and other financial information. We also determined that CFCH needs to improve management of the Festival Marketplace point of sale system, which is used to manage Festival Marketplace operations. In addition, we found that CFCH needs to improve segregation of duties and cross-train staff to perform key financial tasks.

CFCH’s ability to make sound business decisions is impaired because the inventory and accounts receivable records are inaccurate. In addition, because information from these subsidiary ledgers is transferred to the Enterprise Resource Planning (ERP) system, the Smithsonian’s official accounting records, specifically inventory and accounts receivable, are also inaccurate.

What We Recommended

We made eight recommendations intended to ensure that Folkways’ accounting records reconcile to ERP and to provide management an accurate view of its profitability.

We made four recommendations directed at improving internal controls over Festival Marketplace activities.

Lastly, we made five recommendations to improve management over financial activities, as well as to strengthen CFCH’s user access controls over systems that accept payment cards.

Management concurred with our findings and recommendations and has proposed or taken corrective actions that will address the recommendations. Based on corrective actions taken by management, we closed five recommendations as of the date of this report.

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