oversight

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)

                          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
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                                                                               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