Management Report:

Improvements Needed in CFPB's Internal Controls and Accounting Procedures

GAO-14-455R: Published: May 2, 2014. Publicly Released: May 2, 2014.

Additional Materials:

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J. Lawrence Malenich
(202) 512-3406
malenichj@gao.gov

 

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What GAO Found

GAO’s audit of the Consumer Financial Protection Bureau’s (CFPB) fiscal years 2013 and 2012 financial statements identified two significant deficiencies in CFPB’s internal control over financial reporting as of September 30, 2013. Specifically, GAO found that CFPB did not effectively design or implement

  • internal control over its year-end accrual process to ensure accounts payable amounts recorded were complete and accurate and
  • controls to ensure accurate and complete recording of its property and equipment transactions.

These deficiencies increase the risk that CFPB may not detect and correct errors in time to prevent misstatement of the financial statements. GAO is making four new recommendations that are intended to improve management’s oversight and controls in these areas and reduce the risk of misstatements in CFPB’s accounts and financial statements.

Why GAO Did This Study

GAO’s December 16, 2013, report containing its audit opinion on the CFPB’s fiscal years 2013 and 2012 financial statements identified two significant deficiencies in CFPB’s internal control over financial reporting related to its year-end accounts payable accruals and recorded property and equipment amounts.

The purpose of this report is to present additional information regarding the significant deficiencies GAO identified in its December 2013 report on the results of the CFPB financial audit along with related new recommendations. 

What GAO Recommends

GAO is making four new recommendations to CFPB to address the two significant deficiencies identified by GAO during the fiscal year 2013 CFPB audit related to its year-end accounts payable accruals and recorded property and equipment amounts. These recommendations are intended to improve CFPB’s oversight and controls in these areas as well as to bring CFPB into conformance with its own policies, Standards for Internal Control in the Federal Government, federal accounting standards, or a combination thereof. 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.

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

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: During fiscal year 2015, CFPB (1) finalized, disseminated, and implemented detailed guidance to CORs and invoice approvers; and (2) provided training to its CORs to assist them in identifying accruals. These actions by CFPB sufficiently addressed the deficiencies in accounts payable accruals such that we no longer consider the remaining control deficiencies in this area, individually or collectively, to represent a material weakness or a significant deficiency as of September 30, 2015. Therefore, we consider these recommendations closed.

    Recommendation: The Consumer Financial Protection Bureau (CFPB) should direct the Chief Financial Officer to develop detailed guidance and provide training for contracting officer representatives (COR) to further assist them in identifying and estimating accruals, including examples of expenses that should and should not be accrued at the end of an accounting period and how to calculate amounts to be accrued.

    Agency Affected: Consumer Financial Protection Bureau

  2. Status: Open

    Comments: In commenting on the draft report, CFPB concurred with the recommendation and cited action in process to improve coordination among various offices regarding capitalized assets. We found that although CFPB took actions to attempt to address this recommendation, our fiscal year 2015 audit continued to identify deficiencies in this area.

    Recommendation: The CFPB should direct the Chief Financial Officer to design and implement control procedures that require coordination between the Office of Procurement and other program offices at the time of capitalization to ensure that property and equipment costs, including costs associated with internal-use software, are properly capitalized or expensed as appropriate.

    Agency Affected: Consumer Financial Protection Bureau

  3. Status: Open

    Comments: In commenting on the draft report, CFPB concurred with the recommendation and cited action in process to enhance the review and oversight of the capitalization process. We found that although CFPB took actions to attempt to address this recommendation, our fiscal year 2015 audit continued to identify deficiencies in this area.

    Recommendation: The CFPB should direct the Chief Financial Officer to strengthen the design and implementation of control procedures to require, as part of the Office of the Chief Financial Officer's quarterly review procedures, review of underlying supporting documents, including tracking schedules, invoices, and obligating documents, to ensure that property and equipment transactions are properly identified and capitalized or expensed as appropriate.

    Agency Affected: Consumer Financial Protection Bureau

  4. Status: Closed - Implemented

    Comments: During fiscal year 2015, CFPB designed and implemented a control activity that strengthened the review of the accounts payable estimates. These actions by CFPB sufficiently addressed the deficiencies in accounts payable accruals such that we no longer consider the remaining control deficiencies in this area, individually or collectively, to represent a material weakness or a significant deficiency as of September 30, 2015. Therefore, we consider these recommendations closed.

    Recommendation: The CFPB should direct the Chief Financial Officer to strengthen the design and implementation of control procedures regarding the review of the accounts payable estimates to include variance analysis of calculations and comprehensive review of obligating documents, invoices, and the CORs' accrual calculations.

    Agency Affected: Consumer Financial Protection Bureau

 

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