UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20-115 November 10 , 2010 Office of the (nspel'to r General CHRON COpy RepOltNo.4A-CF-00-10-0IS MEMORANDUM FOR JOHN BERRY , I J Director $;~~\ FROM: PATRlCK E. McFARLAND /Pp t ~ Inspector General rtJ~ SUBJECT: Audit of the Office of Personnel Management's Fiscal Year 2010 Consolidated Financial Statements This memorandum transmits KPMG LLP 's (KPMG) report on its financial statement audit of the Office of Personnel Management's (OPM) Fiscal Year 20 10 Consolidated Financial Statements and the results ofthe Office of the Inspector General's (OIG) oversight of the audit and review of that report. OPM's consolidated financial statements include the Retirement Program, Health Benefits Program, Life Insurance Program, Revolving Fund Programs (RF) and Salaries & Expenses funds (S&E). Audit Reports on Financial Statem ents, Internal Controls and Compliance with Laws and Regulations The Chief Financial Officers (CFO) Act of 1990 (P.L. 101 -576) requires OPM's Inspector General or an independent external auditor, as determined by the Inspector General, to audit the agency' s financial statements in accordance with Goverrunent Auditing Standards (GAS) issued by the Comptroller General of the United States. We contracted with the independent certified public accounting firm KPMG LLP to audit OPM's consolidated financial statements as of September 30, 2010 and for the fiscal year then ended. The contract requires that the audit be performed in accordance with generally accepted government aUditing standards and the Office of Management and Budget (OMB) Bulletin No. 07-04, Audit Requirementsfor Federal Financial Statements, as amended. KPMG's audit report for Fiscal Year 2010 includes: (1 ) opinions on the consolidated financial statements and the individual statements for the three benefit programs, (2) a Www.opm . gov www.usaJobs.gov Honorable John Berry 2 report on internal controls, and (3) a report on compliance with laws and regulations. In its audit of OPM, KPMG found: • The consolidated financial statements were fairly presented, in all material respects, in confom1ity with U.S. generally accepted accounting principles. • KPMG's report identified one material weakness in the intemal controls: :» Information systems general control environment (OPM and the Progran1s) A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements wi ll not be prevented, or detected and corrected on a timely basis. • KPMG's repOlt identified one significant deficiency: :» Financial management and reporting processes of the Chief Financial Officer (CFO). (RF Program and S&E Fund) A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged wi Ih governance. OIG Evaluation of KPMG 's Audit Performance In connection with the audit contract, we reviewed KPMG's report and related documentation and made inquiries of its representatives regarding the audit. To fulfill our audit responsibilities under the CFO Act for ensuring the quality of the audit work performed, we conducted a review ofKPMG' s audit ofOPM's Fiscal Year 20 10 Consolidated Financial Statements in accordance with GAS. Specifically, we: • reviewed KPMG' s approach and planning of the audit; • evaluated the qualifications and independence of its auditors; • monitored the progress of the audit at key points; • examined its working papers related to plmming the audit and assessing internal contro ls over the financial reporting process; • reviewed KPMG's audit reports to ensure compliance with Govemment Auditing Standards; • coordinated issuance of the audit report; and • performed other procedures we deemed necessary. Our review, as differentiated from an audit in accordance with generally accepted government auditing standards, was not intended to enable us to express, and we do not Honorable John Berry 3 express, opinions on OPM's financial statements or internal controls or on whether OPM' s financial management systems substantially complied with the Federal Financial Management Improvement Act of 1996 or conclusions on compliance with laws and regulations. KPMG is responsible for the attached auditor's report dated November 9, 20 I 0, and the conclusions expressed in the report. However, our review disclosed no instances where KPMG did not comply, in all material respects, with the generally accepted GAS. In accordance with the OMB Circular A-50 and Public Law 103-355, all audit findings must be resolved within six months of the date of this report. In order to ensure audit findings are resolved within the required six-month period, we are asking that the CFO respond directly to the OIG within 90 days of the date of this report advising us whether they agree or disagree with tl1e audit findings and recommendations. As stated in OMB Circular A-50, where agreement is indicated, the CFO should describe plam1ed corrective action. If the CFO disagrees with any of the audit findings and recommendations, they need to explain the reason for the disagreement and provide any additional documentation that would support their opinion. In closing, we would like to congratulate OPM's financial management staff for once again issuing the consolidated financial statements by the November 15 due date. Their professionalism, courtesy, and cooperation allowed us to overcome the many challenges encountered during OPM's preparation, KPMG's audit, and the OIG' s oversight of the financial statement audit this year. If you have any questions about KPMG's audit or our oversight, please contact me or have a member of your staff contact Michael R. Esser, Assistant Inspector General for Audits, at 606-2143. cc: Stephen Agostini Chief Financial Officer
Audit of the Office of Personnel Management's Fiscal Year 2010 Consolidated Financial Statements
Published by the Office of Personnel Management, Office of Inspector General on 2010-11-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)