UNITED STATES OFFICE OF PERSONNEL MANAGEMENT Washington, DC 20415 Office of the November 14, 2016 Inspector General Report No. 4A-CF-00-16-030 MEMORANDUM FOR BETH F. COBERT Acting Director FROM: NORBERT E. VINT Deputy Inspector General SUBJECT: Audit of the Office of Personnel Management’s Fiscal Year 2016 Consolidated Financial Statements This memorandum transmits Grant Thornton LLP’s (Grant Thornton) report on its financial statement audit of the Office of Personnel Management’s (OPM) Fiscal Year 2016 Consolidated 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 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 firm Grant Thornton to audit OPM’s consolidated financial statements as of September 30, 2016 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. 15-02, Audit Requirements for Federal Financial Statements. Grant Thornton’s audit report for Fiscal Year 2016 includes opinions on the consolidated financial statements and the individual statements for the three benefit programs. In addition, Grant Thornton separately reported on internal controls and on compliance with laws and regulations. In its audit of OPM, Grant Thornton found: www.opm.gov www.usajobs.gov The Honorable Beth F. Cobert 2 The consolidated financial statements were fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Grant Thornton’s internal control report identified one material weakness in the internal controls: Information Systems Control Environment 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 Agency’s financial statements will not be prevented, or detected and corrected, on a timely basis. Grant Thornton’s internal control report identified one significant deficiency: Monitoring Internal Controls 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. Grant Thornton’s report identified instances of non-compliance with the Federal Financial Management Improvement Act of 1996 (FFMIA), as described in the material weakness, in which OPM’s financial management systems did not substantially comply with the Federal financial management systems requirements. The results of Grant Thornton’s test of FFMIA disclosed no instances in which OPM’s financial management systems did not substantially comply with applicable Federal accounting standards and the United States Government Standard General Ledger at the transaction level. OIG Evaluation of Grant Thornton’s Audit Performance In connection with the audit contract, we reviewed Grant Thornton’s reports 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 Grant Thornton’s audit of OPM’s Fiscal Year 2016 Consolidated Financial Statements in accordance with GAS. Specifically, we: provided oversight, technical advice, and liaison to Grant Thornton auditors; ensured that audits and audit reports were completed timely and in accordance with the requirements of Generally Accepted Government Auditing Standards (GAGAS), OMB Bulletin 15-02, and other applicable professional auditing standards; documented oversight activities and monitored audit status; The Honorable Beth F. Cobert 3 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 GAGAS, 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 OPM’s financial management systems substantially complied with the Federal Financial Management Improvement Act of 1996 or conclusions on compliance with laws and regulations. Grant Thornton is responsible for the attached auditor’s and internal control reports dated November 10, 2016, and the conclusions expressed in the reports. However, our review disclosed no instances where Grant Thornton 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 (IOC), to provide their initial responses to us within 60 days from the date of this memorandum. 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 thank OPM’s financial management staff for their professionalism during Grant Thornton’s audit and our oversight of the financial statement audit this year. If you have any questions about Grant Thornton’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 . cc: Dennis D. Coleman Chief Financial Officer Daniel K. Marella Deputy Chief Financial Officer The Honorable Beth F. Cobert 4 David DeVries Chief Information Officer Janet L. Barnes Director, Internal Oversight and Compliance Grant Thornton LLP 1000 Wilson Boulevard., 14th Floor Arlington, VA 22209 T 703.847.7500 F 703.848.9580 www.GrantThornton.com REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Beth F. Cobert, Acting Director United States Office of Personnel Management Norbert E. Vint, Deputy Inspector General United States Office of Personnel Management Report on the financial statements We have audited the accompanying financial statements of the United States Office of Personnel Management (OPM)(the “Agency”), which comprise the consolidated and consolidating balance sheetsas of September 30, 2016, and the related consolidated and consolidating statements of net costs and changes in net position, and combined and combining statements of budgetary resources for the year then ended, and the related notes to the consolidated financial statements (the financial statements). Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of thefinancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on thesefinancial statements based on our audit. We conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd 2 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Agency’spreparation and fair presentation of the 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 Agency’sinternal 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the financial statements In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of OPMas of September30, 2016, and the results of its net costs, changes in net position and budgetary resources for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other matters The financial statements of OPM as of and for the year ended September 30, 2015 were audited by other auditors. Those auditors expressed an unmodified opinion on those 2015 financial statements in their report dated November 12, 2015. Required supplementary information Accounting principles generally accepted in the United States of America require that the information in Management’s Discussion and Analysis (Section 1) and the combining schedule of budgetary resources by major budgetary accountbe presented to supplement the basic financial statements. Such information, although not a required part of the basic financial statements, is required by the FederalAccounting Standards Advisory Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. This required supplementary information is the responsibility of management. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America and OMB Bulletin 15-02. These limited procedures 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 financial statements, and other knowledge we obtained during our audit of the basic 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. Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd 3 Other information The Other Information (Section 3) is presented for purposes of additional analysis and isnot a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other reporting required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report, dated November 10, 2016, on our consideration of the Agency’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, and contracts and other matters. The purpose of thosereports is to describe the scope of our testing of internal control over financial reporting and complianceand the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standardsin considering the Agency’s internal control over financial reporting and compliance. Alexandria, VA November 10, 2016 Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd
Audit of the Office of Personnel Management's Fiscal Year 2016 Consolidated Financial Statements
Published by the Office of Personnel Management, Office of Inspector General on 2016-11-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)