oversight

Audit of the Office of Personnel Management's Fiscal Year 2014 Closing Package Financial Statements

Published by the Office of Personnel Management, Office of Inspector General on 2014-11-17.

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

                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                 WashingLon, DC 20415 


  Office of the
Inspector General                             November 17, 2014

                                                                          Report No. 4A-CF-00-14-040


             MEMORANDUM FOR KATHERfNE ARCHULETA
                                      Director                                                          ~
             FROM: 	                  PATRICKE.McFARLAND                  /]?~ L~~
                                      Inspector General               P"""
             SUBJECT: 	               Audit of the Office of Personnel Management's Fiscal Year
                                      2014 Closing Package Financial Statements


             This memorandum transmits KPMG LLP's (KPMG) report on the Office of Personnel
             Management's (OPM) Fiscal Year 2014 Closing Package Financial Statements and the
             results of the Office of the Inspector General's (OIG) oversight of the audit and review of
             that report. OPM's Closing Package Financial Statement Reports include the Balance
             Sheet as of September 30,2014 and 2013, and the related Closing Package Financial
             Statement Reports, Statement of Net Cost and Statement of Changes in Net Position for
             the years then ended, and the related Financial Report (FR) Notes Reports (except for the
             information in the FR Notes Reports entitled "Threshold" and FR Notes Report No.
             11 G); the accompanying Additional Note Nos. 28 and 29; the accompanying Trading
             Partner S ummary Note Report - Balance Sheet as of September 30, 2014 and 20 13; and
             the related Trading Partner Summary Note Reports- Statement ofNet Cost and
             Statement of Changes in Net Position for the years then ended (hereinafter referred to as
             the " closing package financial statements"). These closing package financial statements
             directly link the entities' audited consolidated department-level financial statements to
             the Financial Report of the Government (the government-wide financial statements).

             We contracted with the independent certified public accounting firm KPMG to audit
             OPM 's closing package fmancial statements as of September 30,2014 and 2013. The
             contract requires that the audit be done in accordance with generally accepted government
             auditing standards (GAGAS) and the Office of Management and Budget Bulletin No.
             14-02, Audit Requirements/or Federal Financial Statements.

             KPMG reported that OPM's closing package financial statements are presented fairly, in
             a11 material respects. KPMG noted no matters involving the internal control over the
             financial process for the closing package financial statements that are considered a
             material weakness or significant deficiency. KPMG disclosed no instances of




        www.opm .gov 	                                                                         www.usajobs.gov
Honorable Katherine Archuleta                                                               2


noncompliance or other matters that are required to be reported. The objectives of
KPMG 's audits of the closing package financial statements did not include expressing an
opinion on internal controls or compliance with laws and regulations, and KPMG,
accordingly, does not express such opinions.

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 Chief Financial Officers Act for ensuring the quality of the audit
work performed, we conducted a review ofKPMG's audit ofOPM's Fiscal Year 2014 and
2013 closing package financial statements in accordance with Government Auditing
Standards (GAS). Specifically, we:

   • 	 provided oversight, technical advice, and liaison to KPMG auditors;

    • 	 ensured that audits and audit reports were completed timely and in accordance 

        with the requirements of GAGAS, OMB Bulletin 14-02, and other applicable 

        professional auditing standards; 


    • 	 documented oversight activities and monitored audit status;

    • 	 reviewed responses to audit reports and reported significant disagreements to the
        audit follow-up official per OMB Circular No. A-50, Audit Follow-up;

    • 	 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 closing package financial statements. KPMG is responsible
for the attached auditor's report dated November 14, 2014, 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.       ·

If you have any questions about K.PMG's audit or our oversight, please contact me, at
606-1200, or you may have a member of your staff contact Michael R. Esser, Assistant
Inspector General for Audits, at -    ·

Attachment

cc: Dennis D. Coleman
    Chief Financial Officer
                                KPMG LLP
                                Suite 12000
                                1801 K Street, NIN
                                Washington. DC 20006



                                          Independent Auditor s' Report


Director and Inspector General
U.S. Office of Personnel Management:

Report on tbe Closing Packa ge Fina ncial Statements

We have audited the accompanying Closing Package Financial Statement Report of the United States (U.S.)
Office of Personnel Management (OPM), which comprise the Closing Package Financial Statement Report
- Balance Sheet as of September 30, 2014 and 2013, and the related Closing Package Financial Statement
Reports - Statement ofNet Cost and Statement of Changes in Net Position for the years then ended, and the
related Financial Report (FR) Notes Reports (except for the information in the FR Notes Reports entitled
" Threshold " and FR Notes Report No. 11 G); the accompanying Additional Note Nos. 28 and 29; the
accompanying Trading Partner Summary Note Report - Balance Sheet as of September 30, 2014 and 20 13;
and the related Trading Partner Summary Note Reports- Statement ofNet Cost and Statement of Changes
in Net Position for the years then ended (hereinafter referred to as the "closing package financial
statements'').

M anagement's R espons ibility for the Closing Package Financial S tatements

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

A uditors ' Responsibility

Our responsibility is to express an opinion on these closing package financial s tatements based on our audits.
We conducted our audits in accordance with auditing s tandards 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. 14-02, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin
No. 14-02, require that we plan and perform the audits to obtain reasonable assurance about whether the
closing package financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
closing package financial statements. The procedures selected depend on the auditors' judgment, including
the assessment ofthe risks ofmaterial misstatement ofthe closing package financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the closing package financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the
effectiveness ofthe 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 closing package
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

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 Opin ion on the Closing Package Financial S tatem en ts

 In our opinion, the closing package financial statements referred to above present fairly, in all material
 respects, the financial position ofthe U.S. Office of Personnel Management as of September 30, 2014 and
 2013, and its net costs and changes in net position for the years then ended in accordance with U.S. generally
 accepted accounting principles.

 Emphasis ofM atter

We draw attention to Additional Note No. 28 to the closing package financial statements, which describes
the accompanying closing package financial statements were prepared to comply with the requirements of
the U.S. Department of the Treasury's Treasury Financial Manual (TFM) Volume I, Part 2, Chapter 4700
(TFM Chapter 4700) for the purpose of providing financial information to the U.S. Department of the
Treasury and the U.S. Government Accountability Office (GAO) to use in preparing and auditing the
Financial Report ofthe U.S. Governm ent, and are not intended to be a complete presentation of the OPM's
consolidated balance sheets as of September 30, 2014 and 201 3, and the related consolidated statements of
net cost and changes in net position, and combined statements of budgetary resources for the years then
ended (hereinafter referred to as the "general-purpose financial statements"). Our opinion is not modified
with respect to this matter.

We also draw attention to Additional Note No. 29 to the closing package financial statements, which describe
the change in presentation to the consolidated statements ofchanges in net position as ofSeptember 30, 20 14
and 2013 as prepared to comply with the requirements ofthe U.S. Department ofthe Treasury's TFM Chapter
4700. Our opinion is not modified with respect to this matter.

 Other Matters

 Opinion on the General-Purpose Financial Statements

We have audited, in accordance with auditing standards generally accepted in the United States ofAmerica;
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. 14­
02, the general-purpose financial statements of the U.S. Office of Personnel Management as of and for the
years ended September 30, 2014 and 2013, and our report thereon, dated November 7, 2014, expressed an
unmodified opinion on those financial statements.

 Required Supplementary Information

  U.S. generally accepted accounting principles require that the information in Other Data Report Nos. l , 8, 9,
  14, 17, and 18, except for the information included in the Other Data Info Section C- Tax Gap of Other
  Data Report No. 1, Other Text Data of Other Data Report No. l ; Text Data Line No.2 in FR Notes Report
· No. 25, and Text Data Line No. 3 in FR Notes Report No. 26, be presented to supplement the basic closing
  package financial statements. Such information, although not a part of the basic closing package 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 closing package financial statements in an
  appropriate operational, economic, or historical context. We have applied certain limited procedures to the
  required supplementary infonnation 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 infonnation for consistency with management 's responses to our inquiries,
  the closing package financia l statements, and other knowledge we obtained during our audits of the closing
  package 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.
Management has omitted the Management's Discussion and Analysis and the Schedule of Budgetary
Resources by Major Budgetary Account that U.S. generally accepted accounting principles require to be
presented to supplement the closing package financial statements. Such missing information, although not a
part ofthe c losing package 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 closing package financial
statements in an appropriate operational, economic, or historical context. Our opinion on the closing package
financial statements is not affected by this mjssing information.

Other Information

Our audits were conducted for the purpose offorming an opinion on the closing package financial statements
as a whole. The information included in FR Notes Report No. JI G; the information included in the Other
Data Report Nos. 15 and 16; the information included in the Other Data Info Section C- Tax Gap of Other
Data Report No. 1; the information included in the Other Text Data of Other Data Report No. I; the
information entitled "Threshold" in FR Notes Report Nos. 9, lOB, 11, and 15; the information in the Closing
Package Line Reclassification Summary Report- Balance Sheet; and the information in the Closing Package
Line Reclassifi cation Summary Reports - Statement of Net Cost and Statement of Changes in Net Position
are presented for purposes ofadditional analysis in accordance with TFM Chapter 4700 and are not a required
part of the closing package financial statements. Such information has not been subjected to the auditing
procedures applied in the audits of the closi ng package financial statements, and accordingly, we do not
express an opinion or provide any assurance on it.

Restriction on Use ofthe R ep ort on the Closing Package Financial Statements

This report is intended solely for the information and use ofthe management ofthe U.S. Office of Personnel
Management, OPM' s Office ofthe Inspector General, U.S. Department ofthe Treasury, OMB, and GAO in
connection with the preparation and audit ofthe Financial Report ofthe US. Government and is not intended
to be and should not be used by anyone other than these specified parties.

Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards and OMB Bulletin No. 14-02, we have also issued a
combined auditors' report dated November 7, 2014 which presents our opiruon on the OPM's general­
purpose financial statemen ts; our consideration of OPM's internal control over financial reporting; and the
results of our tests of its compliance with certain provisions of laws, regulations, and contracts, and other
matters that are required to be reported under Government Auditing Standards. Those reports are an integral
part of an audit performed in accordance with Government Auditing Standards and OMB Bulletin No. 14­
02, in considering the OPM's internal control and compliance, and should be read in co njunction with this
report in considering the results of our audits of the clos ing package financial statements. Our audit of the
general-purpose financial statements of OPM as of and for the year ended September 30, 2014 disclosed the
following significant deficiency: Information Systems General Control Environment.

Internal Control Over Financial R eporting Specific to the Closing Package Financial S tatem ents
In planning and performing our audit ofthe closi ng package financial statements, we also considered OPM's
internal control over fmancial reporting (internal control) to determine the audit procedures that are
appropriate in the c ircumstances for the purpose of expressing our opinion on the closing package financial
statements, but not for the purpose of expressing an opinion on the effectiveness of OPM's inte rnal control
over finan cial reporting. Accordingly, we do not express an opinion on the effectiveness of OPM 's internal
control.

A deficiency in internal control exists when the design or operation ofa 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.

Our consideration ofinternal control for the closing package fmancial statements was for the limited purpose
described in the fi!St paragraph of this section and was not designed to identify all deficiencies in internal
control that might be material weaknesses or significant deficiencies. Given these limitations, during our
aud it we did not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified .

Compliance and Other Matters Specific to the Closing Package Financial Statements
As part of obtaining reasonable assurance about whether OPM's closing package financial statements are
free from material misstatement, we also performed tests of its compliance with certain provisions ofTFM
Chapter 4700 . However, providing an opinion on compliance with those provisions was not an objective of
our audit of the closing package financial statements, and accordingly, we do not express such an opinion.
The resu lts of our tests of compliance with TFM Chapter 4700 disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards or OMB Bulletin
No. 14-02.

Purpose ofthe 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 OPM's internal control or
compliance. Accordingly, this communication is not suitable for any other purpose.



November 14,2014