As a result, our 2009 report included a  total of 47 recommendations for corrective action. on the Academy identified numerous internal control  Of the 47 recommendations, we made 1 overarching recommendation  concerning actions needed for the Academy to establish effective overall  internal control. Specifically, we recommended that the Secretary of  Transportation direct the Administrator of MARAD, in coordination with  the Superintendent of the Academy, to establish a comprehensive, risk- based internal control system to address the core causes of the control  deficiencies identified in our 2009 report, including delineating the roles  and responsibilities of management and employees to establish and  maintain a positive and supporting attitude toward internal control and  conscientious management, and the responsibility of managers to monitor  control activities. Actions Taken to Address Prior Recommendations

Our review of the Academy’s and MARAD’s efforts to address the issues  reported in our 2009 report found that the Academy and MARAD had not  yet established a comprehensive, risk-based system of internal control at  the Academy. Despite these completed actions, until Academy and MARAD officials  take additional actions to fully address our recommendation in this area,  their ability to ensure that Academy and MARAD management’s  objectives are carried out, including proactively identifying and correcting  control deficiencies in a timely fashion, will continue to be impaired. Actions Taken to Address Many of Our Prior Recommendations Related to Specific Control Activities

As of September 30, 2011, Academy and MARAD officials had taken  sufficient actions to address 32 of our 46 prior recommendations intended  to address specific deficiencies in the Academy’s control activities. However, because GMATS NAFI  operations have not yet been terminated or reestablished, our two  recommendations in this area remain open. Financial reporting. Further Enhancements to Capital Improvement Program Oversight Are Needed

Although the Academy and MARAD have taken steps to improve  oversight of the Academy’s CIP, the Academy does not have a current  comprehensive plan for capital improvements to provide the basis for  oversight of CIP planning and implementation. The Academy also established and filled a new position for an Assistant  Superintendent for Capital Improvements and Facilities Maintenance in  2010, designating the new position’s responsibilities to include oversight  of the Academy’s Departments of Capital Improvements and Facilities  Maintenance and the Office of Safety and Environmental Protection. For example, the  implementation plan did not present a long-range phased investment plan  and detailed cost estimates. Further, the Academy has  not yet aligned its capital improvement priorities with the organization’s  strategic objectives, a critical factor in providing effective oversight. However, it is too soon to  determine the extent to which the new CIP addresses the three specific  elements that our recommendation provided as minimum attributes for a  comprehensive capital improvement plan: an inventory of long-range  capital improvements that align with the Academy’s strategic objectives,  reliable cost estimates specific to each capital improvement, and a  phased investment approach for prioritizing capital improvement needs. Merchant Marine Academy (Academy) and Maritime  Administration (MARAD); and  laws and regulations governing Academy operations. We  evaluated corrective actions taken through September 30, 2011.
Why GAO Did This Study

The Academy, a component of the Department of Transportations (DOT) MARAD, was established in 1938 and built during World War II to provide undergraduate education programs for midshipmen to become shipboard officers and leaders in the maritime transportation field. DOT allocated $80 million to the Academy for fiscal year 2011 for its operations, CIP, and facilities maintenance.
In August 2009, GAO issued a report that identified numerous internal control deficiencies and made 47 recommendations for corrective action. This report provides the results of GAOs assessment of (1) the extent to which the Academy has taken actions to address the prior recommendations and (2) the Academys CIP oversight. To address these objectives, GAO evaluated corrective actions and supporting documentation; interviewed Academy, MARAD, and DOT officials; and performed walk-throughs of several processes revised in response to GAOs prior recommendations.

What GAO Found

The U.S. Merchant Marine Academy (Academy) has made progress in improving its internal control since GAOs August 2009 report, but has not yet fully addressed one key recommendation related to fundamental weaknesses in its overall internal control system. GAO found that while the Academy had appointed an Internal Control Officer responsible for coordinating reviews of internal controls, it had not yet established a comprehensive risk-based internal control system to ensure effective and efficient operations, reliable financial reporting, and compliance with laws and regulations, including a monitoring system to help ensure that control deficiencies are proactively identified and promptly corrected. Maritime Administration (MARAD) officials stated that their strategy had been to focus on the deficiencies that could be readily resolved. As of September 30, 2011, Academy and MARAD officials had addressed 32 of the other 46 prior recommendations regarding control activity deficiencies.
Importantly, for many of the specific control-related recommendations that remained open, the Academy and MARAD had not yet identified the cause of the related internal control deficiencies, a critical step for designing effective controls.
GAO also found that the Academy and MARAD have taken steps to improve Capital Improvement Program (CIP) oversight. For example, the Academy filled a new Assistant Superintendent position responsible for oversight of the Academys capital improvements and facilities maintenance. However, the Academy did not yet have an up-to-date, comprehensive plan for capital improvements to provide a basis for oversight. Specifically, the Academy did not have a capital improvement plan that identified long-term capital improvement needs aligned with the Academys strategic objectives, reliable cost estimates for planned improvements, and a phased implementation approach for prioritizing capital improvement needs. Such plan elements are consistent with Office of Management and Budget guidance and GAO-identified leading practices.

What GAO Recommends

In addition to reiterating the need to fully implement the remaining open recommendations, GAO is making one new recommendation directed at updating the Academys capital improvement plan to include reliable cost estimates and phased investment priorities aligned with the Academys strategic objectives in accordance with leading practices. In commenting on a draft of this report, DOT stated that it had recently established a comprehensive plan to manage CIP, and plans to keep GAO apprised as it completes actions addressing other GAO open recommendations.