Management Report: Improvements Needed in CFPB's Internal Controls and Accounting Procedures
Highlights
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Consumer Financial Protection Bureau | 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. |
During our fiscal year 2021 audit, we found that CFPB implemented the corrective actions to address this recommendation. CFPB determined its initial proposed corrective action for standard contract language was potentially difficult to implement and administratively burdensome to the vendors. CFPB's Office of Technology and Innovation (T&I) and Office of Chief Financial Officer (OCFO) implemented an alternate procedure to obtain the same or similar information to mitigate the risk of improper classification of costs. Specifically, CFPB established one T&I person of contact to (1) collect periodic status reports on costs for identified internal use software projects, and (2) communicate those costs to the OCFO on a monthly basis. CFPB's T&I also developed a standard operating procedure detailing this process. Based on our review of the new standard operating procedure, we have determined this recommendation is closed.
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| Consumer Financial Protection Bureau | 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. |
During fiscal year 2017, CFPB updated its Standard Operating Procedures to require project names to be added to the Fixed Asset schedule to facilitate the reconciliation of the costs associated with each project to the internal-use software tracker and supporting documents from the program office and vendor. We confirmed that these actions were properly implemented. Therefore, we consider this recommendation closed.
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| Consumer Financial Protection Bureau | 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. |
During our fiscal year 2018 audit, we found that CFPB implemented corrective actions for this recommendation to develop and document training materials that are consistent with CFPB's polices 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.
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| Consumer Financial Protection Bureau | 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. |
During our fiscal year 2018 audit, we found that CFPB implemented the corrective actions to address this recommendation. Specifically, we obtained and reviewed CFPB's: (1) Updated Asset Management Policy; (2) dissemination of the policy; (3) training materials on how to conduct inventory, and update and maintain inventory records; and (4) related corrective action plan and completion form. Based upon our review of these documents, we determined that BCFP appropriately developed and implemented procedures designed to help ensure that inventory records maintained by the Office of the Chief Financial Officer and Office of Technology and Innovation are accurate, consistent, complete and comparable for inventory and accounting purposes.
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| Consumer Financial Protection Bureau | 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. |
During fiscal year 2017, CFPB updated procedures on its Financial Statement Review/Approval Checklist requiring the reviewer to ensure that financial accounting and reporting are consistent with FASAB standards by using OMB Circular A-136 and the applicable checklists as guidance, specifically as it relates to significant changes in financial transactions, policies, or procedures. In fiscal years 2016 and 2017, CFPB completed the applicable checklists at fiscal year-end. Furthermore, our review of CFPB's financial statements and note disclosures as of September 30, 2017 did not find any non-compliance with GAAP. Therefore, we consider this recommendation closed.
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