oversight

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)

                           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