UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the Inspector General November 16, 2015 Report No. 4A-CF-00-15-028 MEMORANDUM FOR BETH F. COBERT Acting Director FROM: PATRICK E. McFARLAND Inspector General SUBJECT: Audit of the Office of Personnel Management’s Fiscal Year 2015 Closing Package Financial Statements This memorandum transmits KPMG LLP’s (KPMG) report on the Office of Personnel Management’s (OPM) Fiscal Year 2015 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, 2015 and 2014, 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. 11G); the accompanying Additional Note Nos. 30 and 31; the accompanying Trading Partner Summary Note Report – Balance Sheet as of September 30, 2015 and 2014; and the related Trading Partner Summary Note Reports – Statement of Net 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 financial statements as of September 30, 2015 and 2014. 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. 15-02, Audit Requirements for Federal Financial Statements. KPMG reported that OPM’s closing package financial statements are presented fairly, in all 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 Beth F. Cobert 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 of KPMG’s audit of OPM’s Fiscal Year 2015 and 2014 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 15-02, 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 13, 2015, 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 KPMG’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 . Honorable Beth F. Cobert 3 Attachment cc: Dennis D. Coleman Chief Financial Officer Deputy Chief Financial Officer Janet L. Barnes Director, Internal Oversight and Compliance KPMG LLP Suite 12000 1801 K Street, NW Washington, DC 20006 Independent Auditors’ Report Director and Inspector General U.S. Office of Personnel Management: Report on the Closing Package Financial 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, 2015 and 2014, 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. 11G); the accompanying Additional Notes No. 30 and 31; the accompanying Trading Partner Summary Note Report – Balance Sheets as of September 30, 2015 and 2014; and the related Trading Partner Summary Note Reports – Statement of Net Cost and Statement of Changes in Net Position for the years then ended (hereinafter referred to as the “closing package financial statements”). Management’s Responsibility for the Closing Package Financial Statements 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. Auditors’ Responsibility Our responsibility is to express an opinion on these closing package 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 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 of the risks of material misstatement of the 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 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 closing package financial statements. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the Closing Package Financial Statements In our opinion, the closing package financial statements referred to above present fairly, in all material respects, the financial position of the U.S. Office of Personnel Management as of September 30, 2015 and 2014, and its net costs and changes in net position for the years then ended in accordance with U.S. generally accepted accounting principles. Emphasis of Matter We draw attention to Additional Note No. 30 to the closing package financial statements, which describes that the accompanying closing package financial statements were prepared to comply with 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 of the U.S. Government, and are not intended to be a complete presentation of the OPM’s consolidated balance sheets as of September 30, 2015 and 2014, 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. Other Matters Opinion on the General-Purpose Financial Statements We have audited, 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 OMB Bulletin No. 15-02, the general-purpose financial statements of the U.S. Office of Personnel Management as of and for the years ended September 30, 2015 and 2014, and our report thereon, dated November 12, 2015, 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. 1, 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. 1, 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 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 closing package financial statements, and other knowledge we obtained during our audits of the basic closing package financial statements. Although our opinion on the basic closing package financial statements is not affected, Other Data Report Nos. 9, 17, and 18 contain material departures from the prescribed guidelines because the information included in these Other Data Reports is limited to OPM’s information that will be used for the Financial Report of the U.S. Government and does not include all of the information required for OPM’s component level 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 Combining Schedule of Budgetary Resources by Major Budgetary Account that U.S. generally accepted accounting principles require to be presented to supplement the basic closing package financial statements. Such missing 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. Our opinion on the basic closing package financial statements is not affected by this missing information. Other Information Our audits were conducted for the purpose of forming an opinion on the closing package financial statements as a whole. The information included in FR Notes No. 11G; 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. 1; the information entitled “Threshold” in FR Notes Report Nos. 6, 11, and 15; the information in the Closing Package Line Reclassification Summary Report – Balance Sheet; and the information in the Closing Package Line Reclassification Summary Reports – Statement of Net Cost and Statement of Changes in Net Position are presented for purposes of additional 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 closing package financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Restriction on Use of the Report on the Closing Package Financial Statements This report is intended solely for the information and use of the management of OPM, OPM’s Office of the Inspector General, U.S. Department of the Treasury, OMB, and GAO in connection with the preparation and audit of the Financial Report of the U.S. 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. 15-02, we have also issued a combined auditors’ report dated November 12, 2015 which presents our opinion on the OPM’s general- purpose financial statements; 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. That report should be read in conjunction with this report in considering the results of our audits of the closing package financial statements. Our audit of the general-purpose financial statements of OPM as of and for the year ended September 30, 2015 disclosed the following material weakness, significant deficiency, and compliance and other matters: Material Weakness Information Systems General Control Environment Significant Deficiency Entity Level Controls over Financial Management Compliance and Other Matters Non-compliance with the Federal Financial Management Improvement Act of 1996 (FFMIA) – Federal financial management systems requirements Internal Control Over Financial Reporting Specific to the Closing Package Financial Statements In planning and performing our audit of the closing package financial statements, we also considered OPM’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 closing package financial statements, but not for the purpose of expressing an opinion on the effectiveness of OPM’s internal control over financial 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 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. Our consideration of internal control for the closing package financial statements was for the limited purpose described in the first 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 audit 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 of TFM Chapter 4700, noncompliance with which could have a direct and material effect on the determination of the closing package financial statement amounts. 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 results 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. 15-02. 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 OPM’s internal control or compliance. Accordingly, this communication is not suitable for any other purpose. Washington, DC November 13, 2015
Audit of the Office of Personnel Management's Fiscal Year 2015 Closing Package Financial Statements
Published by the Office of Personnel Management, Office of Inspector General on 2015-11-16.
Below is a raw (and likely hideous) rendition of the original report. (PDF)