Management Report:

Improvements Needed in CFPB's Internal Controls and Accounting Procedures

GAO-16-522R: Published: Jun 13, 2016. Publicly Released: Jun 13, 2016.

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What GAO Found

During its audit of the Consumer Financial Protection Bureau’s (CFPB) fiscal years 2015 and 2014 financial statements, GAO identified deficiencies in CFPB’s internal control over accounting for property, equipment, and software that collectively constituted a significant deficiency in CFPB’s internal control over financial reporting. Specifically, GAO found that CFPB did not effectively design or implement controls to (1) reasonably assure accurate and timely classification and recording of software costs and (2) maintain ongoing accuracy and completeness of property and equipment inventory records. In addition, GAO identified deficiencies that it did not consider to be material weaknesses or significant deficiencies, either individually or collectively, but nonetheless warrant CFPB management’s attention. These control deficiencies are related to reviewing and approving financial statements.

GAO found that CFPB had completed corrective actions on two of the four recommendations from GAO’s prior management report that remained open at the beginning of GAO’s fiscal year 2015 audit. As a result, CFPB currently has seven financial audit-related GAO recommendations to address: the previous two open recommendations and the five recommendations GAO is making in this report.

Why GAO Did This Study

GAO’s November 16, 2015, report containing its audit opinion on CFPB’s fiscal years 2015 and 2014 financial statements identified one significant deficiency in CFPB’s internal control over financial reporting related to its recorded property, equipment, and software amount.

The purpose of this report is to (1) present additional information regarding the significant deficiency GAO identified in its November 2015 financial audit report, along with related recommendations; (2) communicate other less significant deficiencies identified but not reported during GAO’s fiscal year 2015 audit; and (3) provide the status of GAO’s prior recommendations reported in its May 2, 2014, management report to CFPB.

What GAO Recommends

GAO is making five recommendations to CFPB to address the significant deficiency related to CFPB’s year-end recorded property, equipment, and software amount and other less significant deficiencies related to reviewing and approving financial statements that were identified by GAO during the fiscal year 2015 CFPB audit. CFPB stated that it agreed with the recommendations GAO made in the report and has implemented or is in the process of implementing actions to address the issues GAO identified. GAO will evaluate CFPB’s actions for addressing the deficiencies identified in the report as part of GAO’s fiscal year 2016 audit.

For more information, contact J. Lawrence Malenich at (202) 512-3406 or malenichj@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: CFPB stated that it agreed with the recommendations we made in our report and has implemented or is in the process of implementing actions to address the issues we identified. CFPB cited a number of such actions, including more frequent reconciliations between the asset inventories and financial records, interim testing of asset inventories, additional training to employees on conducting inventories and maintaining inventory records, working with program offices and vendors to enhance the financial reporting and proper classification of software, and reviewing current procedures for further enhancements to ensure proper review of the financial statements. In addition, CFPB stated that it is dedicated to upholding its fiscal responsibilities and ensuring that proper management oversight and controls are implemented to minimize risk. We will evaluate CFPB's actions for addressing the deficiencies identified in this report as part of our fiscal year 2016 audit.

    Recommendation: To provide reasonable assurance that the property, equipment, and software transactions are properly tracked and capitalized or expensed as appropriate, the Director of CFPB should direct the program offices to require vendors to provide detailed invoices with costs broken out by project.

    Agency Affected: Consumer Financial Protection Bureau

  2. Status: Open

    Comments: CFPB stated that it agreed with the recommendations we made in our report and has implemented or is in the process of implementing actions to address the issues we identified. CFPB cited a number of such actions, including more frequent reconciliations between the asset inventories and financial records, interim testing of asset inventories, additional training to employees on conducting inventories and maintaining inventory records, working with program offices and vendors to enhance the financial reporting and proper classification of software, and reviewing current procedures for further enhancements to ensure proper review of the financial statements. In addition, CFPB stated that it is dedicated to upholding its fiscal responsibilities and ensuring that proper management oversight and controls are implemented to minimize risk. We will evaluate CFPB's actions for addressing the deficiencies identified in this report as part of our fiscal year 2016 audit.

    Recommendation: To provide reasonable assurance that the property, equipment, and software transactions are properly tracked and capitalized or expensed as appropriate, the Director of CFPB should direct the Chief Financial Officer to update OCFO's financial records to include costs by project.

    Agency Affected: Consumer Financial Protection Bureau

  3. Status: Open

    Comments: CFPB stated that it agreed with the recommendations we made in our report and has implemented or is in the process of implementing actions to address the issues we identified. CFPB cited a number of such actions, including more frequent reconciliations between the asset inventories and financial records, interim testing of asset inventories, additional training to employees on conducting inventories and maintaining inventory records, working with program offices and vendors to enhance the financial reporting and proper classification of software, and reviewing current procedures for further enhancements to ensure proper review of the financial statements. In addition, CFPB stated that it is dedicated to upholding its fiscal responsibilities and ensuring that proper management oversight and controls are implemented to minimize risk. We will evaluate CFPB's actions for addressing the deficiencies identified in this report as part of our fiscal year 2016 audit.

    Recommendation: The Director of CFPB should direct the Office of Technology and Innovation's Chief Information Officer to develop and document training materials that are consistent with CFPB's policies and procedures and provide training to employees, on a recurring basis, on how to conduct inventory of electronic equipment and how to update and maintain accurate inventory records.

    Agency Affected: Consumer Financial Protection Bureau

  4. Status: Open

    Comments: CFPB stated that it agreed with the recommendations we made in our report and has implemented or is in the process of implementing actions to address the issues we identified. CFPB cited a number of such actions, including more frequent reconciliations between the asset inventories and financial records, interim testing of asset inventories, additional training to employees on conducting inventories and maintaining inventory records, working with program offices and vendors to enhance the financial reporting and proper classification of software, and reviewing current procedures for further enhancements to ensure proper review of the financial statements. In addition, CFPB stated that it is dedicated to upholding its fiscal responsibilities and ensuring that proper management oversight and controls are implemented to minimize risk. We will evaluate CFPB's actions for addressing the deficiencies identified in this report as part of our fiscal year 2016 audit.

    Recommendation: The Director of CFPB should direct the Chief Financial Officer and Chief Information Officer to develop and implement procedures that require coordination between the OCFO and the Office of Technology and Innovation to provide reasonable assurance that the records maintained by both divisions are accurate, consistent, complete, and comparable for inventory and accounting purposes.

    Agency Affected: Consumer Financial Protection Bureau

  5. Status: Open

    Comments: CFPB stated that it agreed with the recommendations we made in our report and has implemented or is in the process of implementing actions to address the issues we identified. CFPB cited a number of such actions, including more frequent reconciliations between the asset inventories and financial records, interim testing of asset inventories, additional training to employees on conducting inventories and maintaining inventory records, working with program offices and vendors to enhance the financial reporting and proper classification of software, and reviewing current procedures for further enhancements to ensure proper review of the financial statements. In addition, CFPB stated that it is dedicated to upholding its fiscal responsibilities and ensuring that proper management oversight and controls are implemented to minimize risk. We will evaluate CFPB's actions for addressing the deficiencies identified in this report as part of our fiscal year 2016 audit.

    Recommendation: The Director of CFPB should direct the Chief Financial Officer to design and implement effective procedures over the preparation of CFPB financial statements and note disclosures, including procedures such as completing the FAM 2010 and 2020 checklists at fiscal year-end, to provide reasonable assurance that the financial statements as of fiscal year-end are prepared in accordance with GAAP and note disclosures are adequate.

    Agency Affected: Consumer Financial Protection Bureau

 

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