oversight

Audit of the Office of Personnel Management's Fiscal Year 2011 Consolidated Financial Statements

Published by the Office of Personnel Management, Office of Inspector General on 2011-11-14.

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

                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                 Washington, DC 20415



  Office of the
Inspector General                            November 14, 2011

                                                                         Report No, 4A-CF-00-ll-050



            MEMORANDUM FOR           ~?r:o~ERRY	                         7   L>:   J f;fl/~
            FROM:	                   PATRICKE.McFARLAND
                                     Inspector General
                                                                     a~
                                                                    )0tt1
                                                                                                .
            SUBJECT:	                Audit of the Office of Personnel Management's Fiscal Year
                                     2011 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 2011 Consolidated
            Financial Statements and the results of the Office of the Inspector General's (OlG)
            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 Statements, 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 Government Auditing
            Standards (GAS) issued by the Comptroller General of the United States. We contracted
            with the independent certified public accounting finn KPMG LLP to audit OPM's
            consolidated financial statements as of September 30, 2011 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.

            KPf'vlG's audit report for Fiscal Year 2011 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
John Berry	                                                                                    )




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 conformity with U.S. generally accepted accounting principles.


   •	 KPMG's report identified one material weakness in the internal controls:

                "	 Information systems control environment (OPM and the Programs)

        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 will not be prevented, or detected and conected
        on a timely basis.

   •	 KPMG's report identified one significant deficiency:

                ,	   Controls over Financial Management and Reporting Processes of OPM
                     Operational Activities and Related Data

        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 with 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 of KPMG' s audit of OPM' s Fiscal Year 2011 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 planning the audit and assessing internal
      controls over the financial reporting process;
   •	 reviewed KPMG's audit reports to ensure compliance with Government 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
express, opinions on OPM's financial statements or internal controls or on whether OPlVl's
John BelTY                                                                                 3


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 8,
2011, 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. The OMB Circular also
requires that agency management officials provide a timely response to the final audit
report indicating whether they agree or disagree with the audit findings and
recommendations. When management is in agreement, the response should include
planned corrective actions and target dates for achieving them. If management disagrees,
the response must include the basis in fact, law or regulation for the disagreement.

To help ensure that the timeliness requirement for resolution is achieved, we ask that the
CFO coordinate with the OPM audit follow-up office, Internal Oversight and Compliance
(lOC), to provide their initial responses to us within 30 days, as outlined in OMS Circular
A-50. IOC should be copied on all final report responses. Subsequent resolution activity
for all audit findings should also be coordinated with IOC. The CFO should provide
periodic reports through IOC to us, no less frequently than each March and September,
detailing the status of corrective actions, including documentation to support this activity,
until all findings have been resolved.

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 _

cc:	 Dennis Coleman
     Acting Chief Financial Officer


    Deputy Chief Financial Officer