oversight

Report 2013-001-FIN - Audit of the Equal Employment Opportunity Commission's Fiscal Year 2013 Financial Statements

Published by the Equal Employment Opportunity Commission, Office of Inspector General on 2013-12-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                          Independent Auditors’ Report

Inspector General
U.S. Equal Employment Opportunity Commission

We have audited the accompanying consolidated balance sheets of the U.S. Equal Employment
Opportunity Commission (EEOC), as of September 30, 2013 and 2012, and the related consolidated
statements of net cost and changes in net position, and combined statements of budgetary resources, for
the fiscal years then ended. These financial statements are the responsibility of EEOC management. Our
responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of
America, the standards applicable to financial audit contained in Government Auditing Standards, issued
by the Comptroller General of the United States, and OMB Bulletin No. 14-02, Audit Requirements for
Federal Financial Statements.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.

In our audit of the EEOC for fiscal years 2013 and 2012, we found

   •   the financial statements are presented fairly, in all material respects, in conformity with U.S.
       generally accepted accounting principles,
   •   no material weaknesses in internal control over financial reporting (including safeguarding of
       assets) and compliance with laws and regulations, and
   •   no reportable noncompliance with laws and regulations we tested.

The following sections discuss in more detail (1) these conclusions, (2) our conclusions on
Management’s Discussion and Analysis and other supplementary information, and (3) our and
management’s responsibilities.

Opinion on the Financial Statements
In our opinion, the financial statements including the accompanying notes, present fairly, in all material
respects, the financial position of EEOC as of September 30, 2013 and 2012, and its net cost of
operations, changes in net position, and budgetary resources for the fiscal years then ended, in
conformity with accounting principles generally accepted in the United States of America.




                        Harper, Rains, Knight & Company, P.A. • Certified Public Accountants • Consultants
                 One Hundred Concourse • 1052 Highland Colony Parkway, Suite 100 • Ridgeland, Mississippi 39157
                             Telephone 601.605.0722 • Facsimile 601.605.0733 • www.hrkcpa.com
Inspector General
U.S. Equal Employment Opportunity Commission - Continued


Consistency of Other Information
Management’s Discussion and Analysis (MD&A) is not a required part of the financial statements but is
supplementary information required by the Federal Accounting Standards Advisory Board and OMB
Circular A-136, Financial Reporting Requirements. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the MD&A. However, we did not audit the information and accordingly, we express no
opinion on it.

Internal Control Over Financial Reporting
In planning and performing our audit, we considered EEOC’s internal control over financial reporting
and compliance. We did this in order to determine our audit procedures for the purpose of expressing
our opinion on the financial statements and not to provide an opinion on internal control. We limited our
internal control testing to those controls necessary to achieve the objectives described in OMB Bulletin
No. 14-02. We did not test all internal controls relevant to the operating objectives as broadly defined by
the Federal Managers' Financial Integrity Act of 1982. Providing an opinion on internal control was not
the objective of our audit. Accordingly, we do not express an opinion on EEOC’s internal control over
financial reporting and compliance or on management’s assertion on internal control included in
Managements’ Discussion and Analysis. However, for the controls we tested, we found no material
weaknesses in internal control over financial reporting (including safeguarding of assets) and
compliance.

A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal
control that is less severe than a material weakness, yet important enough to merit attention by those
charged with governance. We consider the deficiency described in Exhibit I to be a significant
deficiency.

Our internal control work would not necessarily disclose all deficiencies in internal control that might be
material weaknesses or other significant deficiencies.

We noted certain additional matters that we will report to management of EEOC in a separate letter.

Compliance with Applicable Laws and Regulations
The management of EEOC is responsible for complying with laws and regulations applicable to EEOC.
As part of obtaining reasonable assurance about whether EEOC’s financial statements are free of
material misstatement, we performed tests of its compliance with selected provisions of laws and
regulations including laws governing the use of budgetary authority and government-wide policies
identified in OMB Bulletin No. 14-02, non-compliance with which could have a direct and material
effect on the determination of consolidated and combined financial statements. Our tests disclosed no
instances of noncompliance with laws and regulations which would be reportable under auditing
standards generally accepted in the United States of America or OMB audit guidance.
Inspector General
U.S. Equal Employment Opportunity Commission - Continued
We limited our tests of compliance to the provisions of laws and regulations referred to in the preceding
paragraph. Providing an opinion on compliance with those provisions was not an objective of our audit.
Accordingly, we do not express such an opinion.

Management’s Responsibility for the Financial Statements
EEOC’s management is responsible for (1) preparing the financial statements in conformity with
accounting principles generally accepted in the United States of America, (2) establishing, maintaining,
and assessing internal control to provide reasonable assurance that the broad control objectives of the
Federal Managers’ Financial Integrity Act are met, and (3) complying with applicable laws and
regulations.

Auditors’ Responsibility
We are responsible for obtaining reasonable assurance about whether the financial statements are
presented fairly, in all material respects, in conformity with accounting principles generally accepted in
the United States of America. We are also responsible for (1) obtaining a sufficient understanding of
internal control over financial reporting and compliance to plan the audit, (2) testing compliance with
selected provisions of laws and regulations that have a direct and material effect on the financial
statements and laws for which OMB audit guidance requires testing, and (3) performing limited
procedures with respect to certain other information appearing in the Annual Financial Statement. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America; the Comptroller General of the United States; and OMB Bulletin No. 14-02. Those standards
and OMB Bulletin No. 14-02 require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of EEOC’s internal control over financial reporting. Accordingly, we express no such
opinion.

In order to fulfill these responsibilities, we

    •   examined, on a test basis, evidence supporting the amounts and disclosures in the financial
        statements;
    •   assessed the accounting principles used and significant estimates made by management;
    •   evaluated the overall presentation of the financial statements;
    •   obtained an understanding of the entity and its operations, including its internal control related to
        financial reporting (including safeguarding assets), and compliance with laws and regulations
        (including execution of transactions in accordance with budget authority);
    •   tested relevant internal controls over financial reporting, and compliance, and evaluated the
        design and operating effectiveness of internal control;
    •   considered the design of the process for evaluating and reporting on internal control and financial
        management systems under the Federal Managers’ Financial Integrity Act; and
    •   tested compliance with selected provisions of laws and regulations that have a direct and material
        effect on the financial statements and those required by OMB Bulletin No. 14-02.

We believe that our audit provides a reasonable basis for our opinion.
Inspector General
U.S. Equal Employment Opportunity Commission - Continued
We did not evaluate all internal controls relevant to operating objectives as broadly defined by the
Federal Managers’ Financial Integrity Act, such as those controls relevant to preparing statistical
reports and ensuring efficient operations. We limited our internal control testing to controls over
financial reporting and compliance. Because of inherent limitations in internal control, misstatements
due to error or fraud, losses, or noncompliance may nevertheless occur and not be detected. We also
caution that projecting our evaluation to future periods is subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with controls may
deteriorate. In addition, we caution that our internal control testing may not be sufficient for other
purposes.

We did not test compliance with all laws and regulations applicable to EEOC. We limited our tests of
compliance to selected provisions of laws and regulations that have a direct and material effect on the
financial statements and those required by OMB audit guidance that we deemed applicable to the
EEOC’s financial statements for the fiscal year ended September 30, 2013. We caution that
noncompliance may occur and not be detected by these tests and that such testing may not be sufficient
for other purposes.

Our audit was conducted for the purpose of forming an opinion on the financial statements of EEOC
taken as a whole. The other accompanying information included in this performance and accountability
report is presented for purposes of additional analysis and is not a required part of the financial
statements. Such information has not been subjected to the auditing procedures applied in the audit of
the financial statements and, accordingly, we express no opinion on them.

EEOC’s written responses to the findings identified in our audit and presented in Exhibit I were not
subjected to the auditing procedures applied in the audit of the EEOC’s consolidated financial
statements and, accordingly, we express no opinion on them.

This report is intended solely for the information and use of the management of the U.S. Equal
Employment Opportunity Commission, the U.S. Office of Management and Budget, the U.S.
Government Accountability Office, and the U.S. Congress and is not intended to be and should not be
used by anyone other than these specified parties.




December 12, 2013
Significant Deficiencies
Exhibit I

1. Lack of Sufficient Controls over Supporting Documentation for Personnel Expenses

   The U.S. Equal Employment Opportunity Commission (EEOC) does not properly maintain
   supporting documentation for personnel expenses recorded in the general ledger. EEOC maintains
   personnel files for all employees to ensure that wages and elections for withholdings and benefits are
   consistent with the employee’s intent. These files have minimum standards for accuracy, relevancy,
   necessity, timeliness, and completeness.

   In FY 2013, we tested a sample of 76 employees’ personnel expenses and supporting documentation
   maintained by EEOC in the employees’ personnel files (eOPF) for the period of October 1, 2012
   through March 31, 2013. Based on our testing, we identified the following exceptions:
   •   Six (6) employees do not have a FEHB enrollment form (SF-2809, SF-2810 or transcript) in
       eOPF.
   •   Twenty (20) employees’ enrollment code per most recent FEHB enrollment form (SF-2809, SF-
       2810 or transcript) in eOPF does not agree to enrollment code on LES for pay period sampled.
   •   Five (5) employees’ elected coverage per most recent FEGLI election form (SF-2817, FE 2004
       or RI 76-27) in eOPF does not agree to election code per SF-50 effective during pay period
       sampled.
   •   Seven (7) employees do not have a TSP election form (TSP-1 or transcript) in eOPF.
   •   Fifteen (15) employees’ elected contribution (percentage/dollar amount) per most recent TSP
       election form (TSP-1 or transcript) in eOPF does not agree to contribution on LES for pay period
       sampled.

   These exceptions were caused by insufficient controls in place at EEOC to ensure proper and timely
   documentation is maintained in the eOPF. We identified similar exceptions in our audit from FY
   2010, FY 2011 and FY 2012.

   EEOC’s failure to properly record and maintain official personnel records increases the risk for
   improper calculations of liabilities on the Balance Sheets and improper calculations of program costs
   on the Statements of Net Cost.

   The Government Accountability Office’s (GAO) GAO Standards for Internal Control in the Federal
   Government (Green Book) states: “Internal control and all transactions and other significant events
   need to be clearly documented, and the documentation should be readily available for examination.
   The documentation should appear in management directives, administrative policies, or operating
   manuals and may be in paper or electronic form. All documentation and records should be properly
   managed and maintained.”

   To address this issue, we recommend that EEOC update its controls over the maintenance of its
   official personnel files. Additionally, management should perform a thorough review of its
   employees’ personnel files to ensure that documentation is current and complete.
Significant Deficiencies
Exhibit I
   Management’s Response: As mentioned in last year’s report, the majority of these issues occurred
   prior to our new agreement with DOI/IBC and OPM/Employee Express; whereas changes are
   transmitted automatically to the e-OPF. As for those issues that continue to require hard copy
   submissions, we will plan to correct this going forward by fully utilizing our new WTTS/EODS
   systems (automated on-boarding system), our Standard Operation Procedures dates August 6, 2012,
   which require internal audit and quality assurance reviews. This process requires the review of
   weekly reports from OPM and performing random samplings of e-OPFs each quarter with a report
   submitted to the Operations Services Director. We will also continue to use our volunteer veterans to
   perform some of these functions with the responsibility of monitoring the process and performing
   the audit going to the e-OPF Systems Administrator.

   Auditors’ Response: FY 2014 audit procedures will determine whether the corrective actions have
   been implemented and are operating effectively.