oversight

Report 2016-001-AOIG - FY 2016 Financial Statement Independent Auditor Report

Published by the Equal Employment Opportunity Commission, Office of Inspector General on 2016-11-15.

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

                                    Independent Auditors' Report



Inspector General
U.S. Equal Employment Opportunity Commission

Report on the Financial Statements

We have audited the accompanying consolidated balance sheets of the Equal Employment Opportunity
Commission (EEOC), as of September 30, 2016 and 2015, 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 and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States; and Office of Management and Budget (OMB)
Bulletin No. 15-02, Audit Requirements for Federal Financial Statements. Those standards and OMB
Bulletin No. 15-02 require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors' judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
Inspector General
U.S. Equal Employment Opportunity Commission – Continued

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.

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, 2016 and 2015, 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.

Other Matters
Required Supplementary Information

Generally accepted accounting principles in the United States of America require that the information in
the Management's Discussion and Analysis, and Required Supplementary Information sections be
presented to supplement the basic financial statements. Such information, although not a part of the
basic financial statements, is required by the Federal Accounting Standards Advisory Board who
considers it to be an essential part of financial reporting for placing the basic financial statements in an
appropriate operational, economic, or historical context. We have applied certain limited procedures to
the required supplementary information in accordance with auditing standards generally accepted in the
United States of America, which consisted of inquiries of management about the methods of preparing
the information and comparing the information for consistency with management's responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the information because
the limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the basic financial statements as a
whole. The information in the Message from the Chief Financial Officer (CFO) is presented for
purposes of additional analysis and is not a required part of the basic financial statements. Such
information has not been subjected to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements as of and for the year ended September
30, 2016, we considered EEOC's internal control over financial reporting (internal control) to determine
the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion
on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of
EEOC's internal control. Accordingly, we do not express an opinion on the effectiveness of EEOC's
internal control. We did not test all internal controls relevant to operating objectives as broadly defined
by the Federal Managers’ Financial Integrity Act of 1982.
Inspector General
U.S. Equal Employment Opportunity Commission – Continued

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.
We noted certain additional matters that we will report to management of EEOC in a separate letter.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether EEOC's financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on
the determination of financial statement amounts. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests of compliance disclosed no instances of noncompliance or other matters that are
required to be reported herein under Government Auditing Standards or OMB Bulletin No. 15-02.
EEOC's Responses to Findings
EEOC's response to the finding identified in our audit are described in Exhibit I. EEOC's response was
not subjected to the auditing procedures applied in the audit of the consolidated financial statements and,
accordingly, we express no opinion on the responses.
Purpose of the Other Reporting Required by Government Auditing Standards
The purpose of the communication described in the Other Reporting Required by Government Auditing
Standards section is solely to describe the scope of our testing of internal control and compliance and
the result of that testing, and not to provide an opinion on the effectiveness of EEOC's internal control or
compliance. This report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the entity's internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.




November 15, 2016
Significant Deficiency
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 2016, we tested a sample of 45 employees' personnel expenses and supporting documentation
   maintained by EEOC in the employees' personnel files (eOPF) for the period of October 1, 2015
   through July 31, 2016. Based on our testing, we identified the following exceptions:

   FEHB:

        •   One (1) employees' FEHB withholding amount per the OPM FEHB Premium Rates chart
            (using the enrollment per the SF-2809) does not agree to the employee FEHB withholding
            amount per the ELS.
        •   One (1) employees' FEHB contribution amount per the OPM FEHB Premium Rates chart
            (using the enrollment per the SF-2809) does not agree to the employer FEHB contribution
            amount per the FPPS.

   TSP:

        •   Five (5) employees' elected TSP employee withholdings per eOPF (TSP-1) and the ELS do
            not agree.
        •   Five (5) employees' calculated TSP employee withholding amount based on the bi-weekly
            elected TSP percentage or fixed amount per TSP-1 does not agree with the actual TSP
            employee amount withheld per ELS.
        •   Five (5) employees' calculated TSP employer contribution amount (automatic and
            matching) based on the bi-weekly elected TSP percentage or fixed amount per TSP-1 does
            not agree with the actual TSP employer contribution amount recorder per FPPS.

   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 audits of FY 2010,
   FY 2011, FY 2012, FY 2013, FY 2014, and FY 2015.

   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
Significant Deficiency
Exhibit I
   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.

   Management's Response: The Office of Chief Human Capital Office (OCHCO) accepts the
   recommendation. However, while this has been a repeated finding, OCHCO has improved
   tremendously over previous years. As of this report, we were cited for 5 issues as opposed to the 32
   plus issues in previous years. This was due to lack of resources and performance issues. We are
   recruiting for a Branch Chief, GS-14 who will oversee the data input. We will have three HR
   Assistants, all of which will be responsible for benefits processing instead of one. We have contract
   scanners who are currently reviewing all documents for scanning. This along with our temporary
   Payroll Administrator, who is very knowledgeable in this area, we should receive a clean audit next
   year. With the arrival of the new Chief Human Capital Officer, we will discuss with her the
   possibility of adding this to our Business Operations and Strategic Planning Division’s audit
   responsibilities.

   Auditors' Response: FY 2017 audit procedures will determine whether the corrective actions have
   been implemented and are operating effectively.