oversight

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)

                           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




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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