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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

November 2011: 

Financial Audit: 

Bureau of Consumer Financial Protection's Fiscal Year 2011 Financial 
Statements: 

GAO-12-186: 

GAO Highlights: 

Highlights of GAO-12-186, a report to congressional committees. 

Why GAO Did This Study: 

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act, referred to as the Consumer Financial Protection Act of 2010, 
created the Bureau of Consumer Financial Protection (CFPB). The act 
charged it with the responsibility of regulating the offering and 
provision of consumer financial products or services under the federal 
consumer financial laws. The act also requires CFPB to annually 
prepare financial statements, and further requires GAO to audit these 
statements. The Full-Year Continuing Appropriations Act, 2011 also 
requires that GAO audit CFPB’s financial statements. 

Pursuant to the above-referenced requirements in these two acts, GAO 
audited CFPB’s fiscal year 2011 financial statements to determine 
whether (1) the financial statements were fairly presented, and (2) 
CFPB management maintained effective internal control over financial 
reporting. GAO also tested CFPB’s compliance with selected laws and 
regulations. 

What GAO Found: 

In GAO’s opinion, CFPB’s fiscal year 2011 financial statements are 
fairly presented in all material respects. GAO also concluded that 
CFPB had effective internal control over financial reporting as of 
September 30, 2011. GAO found no reportable instances of noncompliance 
with the laws and regulations it tested. 

On July 21, 2010, the Consumer Financial Protection Act established 
CFPB as an independent bureau within the Federal Reserve System to be 
headed by a Director. Since the date of enactment, CFPB has been 
forming its structure and commencing operations. To assist in this 
process, the Department of the Treasury provided administrative 
support services to CFPB during this first year. Effective July 21, 
2011, CFPB assumed responsibility for certain consumer financial 
protection functions formerly the responsibilities of the Board of 
Governors of the Federal Reserve System, the Comptroller of the 
Currency, the Director of the Office of Thrift Supervision, the 
Federal Deposit Insurance Corporation, the Federal Trade Commission, 
the National Credit Union Administration, and the Secretary of the 
Department of Housing and Urban Development. 

In July 2011, the President of the United States submitted a 
nomination to the United States Senate for the CFPB’s first Director. 
This nomination is currently pending before the Senate. Until the 
Director is confirmed, the Secretary of the Treasury has the power to 
perform some, but not all, of the functions of the CFPB. The Secretary 
of the Treasury appointed a Special Advisor to the Secretary to lead 
the CFPB’s day-to-day operations. 

While CFPB began operations in 2010, fiscal year 2011 was its first 
full year of operations and the first year for which it prepared 
financial statements. Consequently, CFPB’s fiscal year 2011 financial 
statements do not present comparative information for the prior year. 
GAO noted deficiencies involving CFPB’s internal controls that were 
less significant than a material weakness or significant deficiency 
and will be reporting separately to CFPB management on these matters. 

What GAO Recommends: 

GAO is not making any recommendations in this report. In commenting on 
a draft of this report, CFPB stated that it was pleased with the 
results of the audit, and that it would continue to work to enhance 
its internal controls and ensure the reliability of its financial 
reporting. 

View [hyperlink, http://www.gao.gov/products/GAO-12-186]. For more 
information, contact Steven J. Sebastian at (202) 512-3406 or 
sebastians@gao.gov. 

[End of section] 

Contents: 

Letter: 

Auditor's Report: 

Opinion on Financial Statements: 

Opinion on Internal Control: 

Compliance with Laws and Regulations: 

Consistency of Other Information: 

Objectives, Scope, and Methodology: 

Agency Comments and Our Evaluation: 

Management's Discussion and Analysis: 

Financial Statements: 

Appendix I: Management's Report on Internal Control over Financial 
Reporting: 

Appendix II: Comments from the Bureau of Consumer Financial Protection: 

Abbreviations: 

CFPB: Bureau of Consumer Financial Protection: 

FMFIA: Federal Managers' Financial Integrity Act of 1982: 

OMB: Office of Management and Budget: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

November 15, 2011: 

The Honorable Timothy Johnson:
Chairman:
The Honorable Richard Shelby:
Ranking Member:
Committee on Banking, Housing, and Urban Affairs:
United States Senate: 

The Honorable Spencer Bachus:
Chairman:
The Honorable Barney Frank:
Ranking Member:
Committee on Financial Services:
United States House of Representatives: 

This report presents the results of our audit of the financial 
statements of the Bureau of Consumer Financial Protection (CFPB) as 
of, and for the fiscal year ending, September 30, 2011--the first full 
year of CFPB's operation. These financial statements are the 
responsibility of CFPB. This report contains our (1) unqualified 
opinion on CFPB's financial statements, (2) opinion that CFPB's 
internal control over financial reporting was effective as of 
September 30, 2011, and (3) conclusion that our tests of CFPB's 
compliance with selected laws and regulations disclosed no instances 
of reportable noncompliance during fiscal year 2011. 

CFPB was established in Title X of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act, commonly referred to as the Consumer 
Financial Protection Act of 2010.[Footnote 1] The act established the 
CFPB as the federal entity charged with the responsibility of 
regulating the offering and provision of consumer financial products 
or services under the federal consumer financial laws. The act 
requires CFPB to annually prepare financial statements and further 
requires GAO to audit the financial statements. The Full-Year 
Continuing Appropriations Act, 2011 also requires that GAO audit 
CFPB's financial statements. We conducted this audit in accordance 
with U.S. generally accepted government auditing standards. The 
accomplishment of this first-ever audit of CFPB's financial statements 
was made possible by the tremendous dedication of time and effort from 
CFPB management and staff. 

CFPB was created as an independent bureau within the Federal Reserve 
System to be headed by a Director. As a newly established entity, CFPB 
spent the majority of fiscal year 2011 forming its structure and 
commencing operations. To assist in this process, the Department of 
the Treasury provided administrative support services to CFPB during 
this first year. The services related to, among others, financial 
management, human resource management, information technology, and 
general support operations. Effective July 21, 2011, CFPB assumed 
responsibility for certain consumer financial protection functions 
that were formerly the responsibilities of the Board of Governors of 
the Federal Reserve System, the Comptroller of the Currency, the 
Director of the Office of Thrift Supervision, the Federal Deposit 
Insurance Corporation, the Federal Trade Commission, the National 
Credit Union Administration, and the Secretary of the Department of 
Housing and Urban Development.[Footnote 2] 

In July 2011, the President of the United States submitted a 
nomination to the United States Senate for CFPB's first Director. This 
nomination is currently pending before the Senate. Until a Director is 
confirmed, the Secretary of the Treasury has the power to perform 
some, but not all, of the functions of the CFPB. The Secretary of the 
Treasury appointed a Special Advisor to the Secretary to lead CFPB's 
day-to-day operations. 

We are sending copies of this report to the Chairmen and Ranking 
Members of the Senate Committee on Appropriations and the House 
Committee on Appropriations, the Director of the Office of Management 
and Budget, and other interested parties. In addition, this report 
will be available at no charge on GAO's website at [hyperlink, 
http://www.gao.gov]. 

If you have any questions concerning this report, please contact me at 
(202) 512-3406 or sebastians@gao.gov. Contact points for our Offices 
of: 

Congressional Relations and Public Affairs may be found on the last 
page of this report. 

Signed by: 

Steven J. Sebastian: 
Director: Financial Management and Assurance: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

To the Secretary of the Treasury: 

In accordance with the Dodd-Frank Wall Street Reform and Consumer 
Protection Act and the Full-Year Continuing Appropriations Act, 2011, 
we are responsible for conducting audits of the financial statements 
of the Bureau of Consumer Financial Protection (CFPB). In our audit of 
CFPB's fiscal year 2011 financial statements, we found: 

* the financial statements are presented fairly, in all material 
respects, in conformity with U.S. generally accepted accounting 
principles; 

* CFPB maintained, in all material respects, effective internal 
control over financial reporting as of September 30, 2011; and: 

* no reportable noncompliance with laws and regulations we tested. 

The following sections discuss in more detail (1) these conclusions; 
(2) our conclusions on CFPB's Management's Discussion and Analysis; 
(3) our audit objectives, scope, and methodology; and (4) agency 
comments and our evaluation. 

Opinion on Financial Statements: 

CFPB's financial statements, including the accompanying notes, present 
fairly, in all material respects, in conformity with U.S. generally 
accepted accounting principles, its assets, liabilities, and net 
position as of September 30, 2011; and its net costs, changes in net 
position, and budgetary resources for the fiscal year then ended. 

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer 
Protection Act created CFPB as an independent bureau within the 
Federal Reserve System. For the remainder of fiscal year 2010 and for 
fiscal year 2011, the Department of the Treasury provided 
administrative and operational support services to CFPB in an effort 
to assist with establishing the new entity. As discussed in note 1B of 
the financial statements, fiscal year 2011 was the first full year of 
CFPB's operations and therefore, the first year for which CFPB 
prepared financial statements. Consequently, the financial statements 
do not present comparative information for the prior year. However, 
CFPB's fiscal year 2010 financial activity is discussed in note 11 of 
the financial statements. 

Opinion on Internal Control: 

CFPB maintained, in all material respects, effective internal control 
over financial reporting as of September 30, 2011, which provided 
reasonable assurance that misstatements, losses, or noncompliance 
material in relation to the financial statements would be prevented or 
detected and corrected on a timely basis. Our opinion is based on 
criteria established under 31 U.S.C. § 3512 (c), (d), commonly known 
as the Federal Managers' Financial Integrity Act of 1982 (FMFIA). 

During our audit of CFPB's fiscal year 2011 financial statements, we 
identified deficiencies in CFPB's system of internal control that do 
not individually or collectively represent a material weakness or 
significant deficiency.[Footnote 3] Nonetheless, these deficiencies 
warrant CFPB management's attention. These deficiencies related to 
CFPB's documented accounting policies and procedures, process of 
assessing internal controls, and information security management 
program. We have communicated these matters to CFPB management and, 
where appropriate, will report on them separately along with 
recommendations for corrective actions. 

Compliance with Laws and Regulations: 

Our tests of CFPB's compliance with selected provisions of laws and 
regulations for fiscal year 2011 disclosed no instances of 
noncompliance that would be reportable under U.S. generally accepted 
government auditing standards. The objective of our audit was not to 
provide an opinion on overall compliance with laws and regulations. 
Accordingly, we do not express such an opinion. 

Consistency of Other Information: 

CFPB's Management's Discussion and Analysis contains information that 
is not directly related to the financial statements. We did not audit 
and we do not express an opinion on this information. However, where 
appropriate, we compared this information for consistency with the 
financial statements and discussed the methods of measurement and 
presentation with CFPB officials. On the basis of this limited work, 
we found no material inconsistencies with the financial statements, 
with U.S. generally accepted accounting principles, or with applicable 
guidance in OMB Circular No. A-136, Financial Reporting Requirements. 

Objectives, Scope, and Methodology: 

CFPB management is responsible for (1) preparing the financial 
statements in conformity with U.S. generally accepted accounting 
principles, (2) establishing and maintaining effective internal 
control over financial reporting and evaluating its effectiveness, and 
(3) complying with applicable laws and regulations. CFPB management 
evaluated the effectiveness of CFPB's internal control over financial 
reporting as of September 30, 2011, based on the criteria established 
under FMFIA. CFPB management's assertion based on its evaluation is 
included in appendix I. 

We are responsible for planning and performing the audit to obtain 
reasonable assurance and provide our opinion about whether (1) CFPB's 
financial statements are presented fairly, in all material respects, 
in conformity with U.S. generally accepted accounting principles; and 
(2) CFPB management maintained, in all material respects, effective 
internal control over financial reporting as of September 30, 2011. We 
are also responsible for (1) testing compliance with selected 
provisions of laws and regulations that have a direct and material 
effect on the financial statements, and (2) performing limited 
procedures with respect to certain other information accompanying the 
financial statements. 

In order to fulfill these responsibilities, we: 

* examined, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements; 

* assessed the accounting principles used and significant estimates 
made by management; 

* evaluated the overall presentation of the financial statements; 

* obtained an understanding of the entity and its operations, 
including its internal control over financial reporting; 

* considered CFPB's process for evaluating and reporting on internal 
control over financial reporting that CFPB is required to perform by 
FMFIA and the Consumer Financial Protection Act; 

* assessed the risk that a material misstatement exists in the 
financial statements and the risk that a material weakness exists in 
internal control over financial reporting; 

* evaluated the design and operating effectiveness of internal control 
over financial reporting based on the assessed risk; 

* tested relevant internal control over financial reporting; 

* tested compliance with selected provisions of the following laws and 
their related regulations: 31 U.S.C. § 3902 - Interest penalties under 
the Prompt Payment Act; 31 U.S.C. § 3904 - Limitations on Discount 
Payments Under the Prompt Payment Act; 5 U.S.C. § 8334 (a)(1), (2) - 
Civil Service Retirement Act; 5 U.S.C. §§ 8422, 8423, 8432 - Federal 
Employees' Retirement System Act of 1986; Social Security Act of 1935, 
as amended; 5 U.S.C. §§ 8905-8909 - Federal Employees Health Benefits 
Act of 1959, as amended; and Title X of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act; and: 

* performed such other procedures as we considered necessary in the 
circumstances. 

An entity's internal control over financial reporting is a process 
affected by those charged with governance, management, and other 
personnel, the objectives of which are to provide reasonable assurance 
that (1) transactions are properly recorded, processed, and summarized 
to permit the preparation of financial statements in conformity with 
U.S. generally accepted accounting principles, and assets are 
safeguarded against loss from unauthorized acquisition, use, or 
disposition; and (2) transactions are executed in accordance with the 
laws governing the use of budget authority and other laws and 
regulations that could have a direct and material effect on the 
financial statements. 

We did not evaluate all internal controls relevant to operating 
objectives as broadly established under FMFIA, such as those controls 
relevant to preparing statistical reports and ensuring efficient 
operations. We limited our internal control testing to testing 
internal control over financial reporting. Our internal control 
testing was for the purpose of expressing an opinion on the 
effectiveness of internal control over financial reporting and may not 
be sufficient for other purposes. Consequently, our audit may not 
identify all deficiencies in internal control over financial reporting 
that are less severe than a material weakness. Because of inherent 
limitations, internal control may not prevent or detect and correct 
misstatements due to error or fraud, losses, or noncompliance. We also 
caution that projecting any evaluation of effectiveness to future 
periods is subject to the risk that controls may become inadequate 
because of changes in conditions, or that the degree of compliance 
with the policies or procedures may deteriorate. 

We did not test compliance with all laws and regulations applicable to 
CFPB. We limited our tests of compliance to selected provisions of 
laws and regulations that have a direct and material effect on the 
financial statements for the fiscal year ended September 30, 2011. We 
caution that noncompliance may occur and not be detected by these 
tests and that such testing may not be sufficient for other purposes. 

We performed our audit in accordance with U.S. generally accepted 
government auditing standards. We believe our audit provides a 
reasonable basis for our opinions and other conclusions. 

Agency Comments and Our Evaluation: 

In commenting on a draft of this report, the Special Advisor to the 
Secretary of the Treasury for CFPB stated that the agency was pleased 
that the audit found that the CFPB financial statements were presented 
fairly, that it maintained effective internal control over financial 
reporting, and that there were no instances of reportable 
noncompliance with laws and regulations. CFPB also stated that it will 
continue to work to enhance its internal controls and ensure the 
reliability of its financial reporting, its operating performance, and 
public confidence in its work. 

The complete text of CFPB's response is reprinted in appendix II. 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

[End of section] 

November 9, 2011: 

[End of section] 

Management's Discussion and Analysis: 

Message from the Special Advisor to the Secretary of the Treasury for 
the Consumer Financial Protection Bureau: 

[Photograph of Raj Date] 

The Consumer Financial Protection Bureau (CFPB) was launched on July 
21, 2011 with a focused goal: To make the markets for consumer 
financial products work for consumers, responsible providers, and the 
economy as a whole. We want to make sure that the price and risks of 
financial products are clear so that consumers can decide what 
products are best for them. And we want to make sure that there are 
sensible rules of the road and a level playing field so that providers 
can innovate and compete fairly. 

The CFPB was created on July 21, 2010 by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act Before the Dodd-Frank Act, 
responsibility for administering and enforcing the various federal 
consumer financial laws was scattered across seven different federal 
agencies. For each of those seven agencies, consumer protection was 
only one of its responsibilities. The result was that no single agency 
was truly on the hook for protecting the average, everyday user of 
financial products and services. There was no true accountability, and 
consumers got left behind The Dodd-Frank Act changed this by creating 
in the CFPB a single point of accountability for consumer financial 
protection. And we have been given, for the first time at the Federal 
level, supervisory authority over independent nonbank companies in 
addition to depositories. That means, for example, that when it comes 
to the mortgage market, we will be able to ensure that brokers, 
originators, and servicers play by the same rules regardless of their 
charter. It doesn't matter if you're a thrift, bank, finance company, 
ILC, or investment bank. If you want to be in the business of consumer 
finance, then you've got to play by the same rules as everybody else. 

We recognize that the CFPB has a tough job. But fortunately, we have 
lots of tools in our toolkit — research, supervision, rulemaking, 
enforcement, and consumer education. Having the full range of tools 
means that we don't have to force a square policy peg into a round 
hole. We will strive to use each of these tools in the smartest way 
possible, matching problems to solutions. 

Ultimately, our efforts will benefit the entire economy. We will help 
give families the confidence they need to borrow for a home or a 
child's education. We will help give our nation's financial 
institutions the confidence they need to innovate and compete. If we 
succeed in our mission, everybody wins. 

As required by the Dodd-Frank Act, the CFPB prepared financial 
statements for fiscal year 2011. The Government Accountability Office 
(GAO) rendered an unqualified -- or "clean" -- audit opinion on the
CFPB's financial statements. GAO noted no material weaknesses or 
significant deficiencies m CFPB's internal controls and cited no 
instances of noncompliance with laws and regulations. 

I am proud of the CFPB's first Financial Report. It describes the 
fiscal year 2011 efforts to establish the CFPB, and the results we 
have achieved to date. I am even more proud to be a part of the CFPB 
team, whose dedicated public service is making the promise of our 
mission a reality. 

Signed by: 

Raj Date: 

Special Advisor to the Secretary of the Treasury for the Consumer 
Financial Protection Bureau: 

[End of letter] 

CFPB Financial Report - Fiscal Year 2011: 

Mission: 

The Consumer Financial Protection Bureau is a 21st century agency that 
helps consumer financial markets work by making rules more effective, 
by consistently and fairly enforcing those rules, and by empowering 
consumers to take more control over their economic lives. 

We will achieve our mission through: 

* data-driven analysis; 

* innovative use of technology; 

* valuing the best people and great teamwork. 

I. Introduction: 

Beginning in 2007, the United States faced the most severe financial 
crisis since the Great Depression. Millions of Americans saw their 
home values drop, their savings shrink, their jobs eliminated, and 
their small businesses lose financing. Credit dried up, and countless 
consumer loans — many improperly made to begin with — went into 
default. 

Many Americans took on loans that they did not fully understand and 
could not afford. Although some borrowers knowingly took on too much 
debt, many Americans who behaved responsibly were also lured into 
unaffordable loans by misleading promises of low payments. Honest 
lenders that resisted the pressure to sell complicated products had to 
compete with their less responsible competitors. 

Even those who avoided the temptations of excessively risky credit 
were caught in its web. Those who never took out an unaffordable 
mortgage nonetheless saw the values of their homes plummet when 
neighbors lost homes in foreclosure. Those who used credit cards and 
home equity lines of credit judiciously saw across-the-board increases 
in interest rates on credit cards and contraction of outstanding lines 
of credit. Those who had saved regularly watched their retirement 
funds lose significant value. Cities and states cut back on services 
to make up for their own revenue losses. The cost of irresponsible 
lending has been and continues to be borne by tens of millions of 
American families. 

In June 2009, President Obama proposed to address failures of consumer 
protection by establishing a new financial agency to focus directly on 
consumer protection. This new agency would heighten government 
accountability by consolidating in one place responsibilities that had 
been scattered across government. The agency would also have 
responsibility for supervising providers of consumer financial 
products and services that had not had regular federal oversight and 
for enforcing the consumer protection laws with respect to such 
providers. This agency would protect families from unfair, deceptive, 
and abusive financial practices. The President urged Congress to give 
the CFPB the same accountability and independence that the other 
banking agencies have and sufficient funding so it could ensure that 
financial companies would comply with consumer laws. 

In July 2010, Congress passed and President Obama signed the Dodd-
Frank Wall Street Reform and Consumer Protection Act. The law — often 
referred to as the Dodd-Frank Act — created the Bureau of Consumer 
Financial Protection (also known as the "Consumer Financial Protection 
Bureau" or the "CFPB"). Part of the purpose of creating the CFPB was 
to increase accountability in government by consolidating consumer 
financial protection authorities that had existed across seven 
different federal agencies into one. Instead of important consumer 
protection powers being scattered across the federal government, now a 
single entity would have the oversight authority to make sure consumer 
financial markets work for all consumers. 

II. Establishment of the Consumer Financial Protection Bureau: 

One of the key elements of the Dodd-Frank Act was the creation of a 
new financial regulatory agency, the CFPB, which centralizes consumer 
protection authorities and increases accountability for the 
supervision and enforcement of laws governing consumer financial 
products and services. Specifically, the agency is tasked with 
protecting consumers from unfair, deceptive, and abusive financial 
practices by making the markets for consumer financial products and 
services work for American families. 

The Dodd-Frank Act created the CFPB as an independent bureau within 
the Federal Reserve System. The CFPB is an Executive agency as defined 
in section 105 of Title 5, United States Code. Title X of the Dodd-
Frank Act established the following goals for the CFPB: 

* Ensure that consumers have timely and understandable information to 
make responsible decisions about financial transactions, 

* Protect consumers from unfair, deceptive, or abusive acts or 
practices, and from discrimination, 

* Reduce outdated, unnecessary, or overly burdensome regulations, 

* Promote fair competition by enforcing the federal consumer financial 
laws consistently, and, 

* Encourage markets for consumer financial products and services that 
operate transparently and efficiently to facilitate access and 
innovation. 

Under the Dodd-Frank Act, the Secretary of the Treasury is responsible 
for exercising the CFPB authorities until a Director of the Bureau is 
in place. On July 18, 2011 President Obama sent to the Senate a 
nomination for a Director of the CFPB. Until confirmed by the Senate, 
the day-to-day operations of the CFPB are being managed by the Special 
Advisor to the Secretary of the Treasury for the CFPB. 

III. CFPB Stand-Up Actions and Status: 

Vision: 

A consumer financial marketplace: 

Where customers can see prices and risks up front and where they can 
easily make product comparisons; in which no one can build a business 
model around unfair, deceptive, or abusive practices; that works for 
American consumers, responsible providers and the economy as a whole. 

CFPB leadership recognize that they have a unique and vital 
opportunity to create an organization with an innovative 
infrastructure, and accordingly, articulated a mission and vision and 
began establishing the infrastructure, tools and processes to attract, 
hire, develop and retain the human capital needed to build an agency 
responsible for protecting consumers of financial products and 
services. The tools needed by the CFPB to begin hiring, compensating, 
and managing employees using the CFPB's own statutory authorities 
under the Dodd-Frank Act were put in place and became operational in 
February 2011. 

The CFPB has currently filled 25 of its key leadership positions with 
highly talented and experienced staff from the private, nonprofit, and 
public sectors. In addition, the CFPB has made considerable progress 
in recruiting, hiring, and orienting the workforce. 

The CFPB's recruitment efforts have focused on filling vacancies 
throughout the country in support of its headquarters operations in 
Washington, D.C., and its regional satellite offices in Chicago, New 
York City, and San Francisco. 

In addition, to ensure the successful stand-up of the Bureau, CFPB 
staff conducted reviews of "best practices" and "lessons learned" from 
the merger and stand-up of other federal agencies. The team also 
solicited input on stand-up needs and issues from other government 
agencies, private corporations, and the public. As a result of this 
process, staff used the following principles to guide the development 
and implementation of the CFPB's organization and human capital 
strategies: 

* Focus on the CFPB's core principles and priorities (see below) to 
guide the organizational design and stand-up, 

* Establish clear implementation goals and timelines that build 
momentum and demonstrate progress, 

* Establish and implement a communication strategy to create shared 
expectations and report progress, and, 

* Build a "learning organization" that provides for the continuing 
development and advancement of the Bureau. 

The CFPB has also implemented an initial workforce design strategy 
that identifies the human capital assets necessary to accomplish the 
CFPB's mission in line with the CFPB's vision and core organizational 
principles and priorities. This strategy has served to guide 
recruiting efforts to date and continues to serve as the CFPB's long-
range workforce vision. 

The CFPB's Core Organizational Principles And Priorities: 

* Engage the American public.  

* Ensure that federal consumer financial laws are administered 
consistently, efficiently, and effectively. 

* Help create a level playing field for community banks and credit 
unions to compete with large banks and non-depository financial 
companies. 

* Make the CFPB a data-driven agency by ensuring research and market 
analysis are at the roe of all of its work. 

* Advance financial education opportunities for all Americans. 

* Continue an open and candid dialogue with Members of Congress. 

* Strengthen accountability within the CFPB. 

Organization: 

One of the Bureau's top priorities has been to build an organization 
for success using a design that will provide the infrastructure the 
Bureau needs to meet its responsibilities. Late last calendar year, 
the CFPB began providing its draft organization chart to Members of 
Congress and the media. In early February 2011, the Bureau posted the 
chart to its newly launched website. In developing the CFPB's 
organizational structure, the Bureau has asked for comments and 
critiques from stakeholders across the spectrum. The CFPB organization 
chart as of September 30, 2011 is displayed below: 

[Figure: Organization chart] 

Top level: Director: 
* Office of the Director: 

Second level, reporting to the Director: 
  
Chief Operating Officer: Associate Director; 
* Consumer Response; 
* Operations & Facilities; 
* Procurement; 
* CTO; 
* CIO; 
* CFO; 
* Human Capital; 
* Inclusion; 
* FOIA, Privacy & Records. 

Consumer Education & Engagement: Associate Director; 
* Financial Education; 
* Consumer Engagement; 
* Older Americans; 
* Servicemembers; 
* Students; 
* Financial Empowerment. 

Research, Market & Regulations: Associate Director; 
* Research; 
* Regulations; 
* Mortgage Markets; 
* Installment & Liquidity Lending Markets; 
* Deposits, Collections & Credit Information Markets. 

Supervision, Enforcement, Fair Lending & Equal Opportunity: Associate 
Director; 
* Fair Lending & Equal Opportunity; 
* Large Bank Supervision; 
* Non-bank Supervision; 
* Enforcement. 

General Counsel: Associate Director; 
* Principal Deputy GC; 
* Deputy GC (2); 
* ALJ Staff Director. 

External Affairs: Associate Director; 
* Media Relations; 
* Small Business, Community Banks & Credit Unions; 
* Intergovernmental Affairs; 
* Ombudsman; 
* Consumer Advisory Boards; 
* Community Affairs. 

[End of figure] 

The Bureau currently includes six primary divisions: 

* Consumer Education and Engagement; 
* Supervision, Enforcement, Fair Lending and Equal Opportunity; 
* Research, Markets, and Regulations; 
* Office of General Counsel; 
* External Affairs; 
* Office of Chief Operating Officer. 

A description of the functions and responsibilities of the each of the 
Divisions follows. 

Consumer Education and Engagement: 

Provides, through a variety of initiatives and methods, information to 
consumers that will allow them to make decisions that are best for 
them. Consumer education is a central mission to the Bureau. The 
Bureau is developing targeted outreach to groups that face particular 
challenges, as required by the Dodd-Frank Act. 

It includes the following offices: 

Community Affairs — conducts outreach to consumer groups, civil rights 
groups, community organizations, and other organizations focused on 
traditionally underserved consumers and communities. 

Consumer Engagement — creates engaging experiences for the American 
public to enable them to live better financial lives and for people 
interacting with the Bureau by developing platforms for participatory 
government. 

Financial Education — serves as a resource for consumers who are 
looking to better understand how to make decisions in the financial 
services marketplace and provides access to tools and information that 
can help consumers make financial choices. 

Older Americans — helps prevent financial abuse of seniors, promotes 
consumer education and consumer protection efforts, and develops 
initiatives to ensure appropriate tools are available to guide 
financial decision making for Americans 65 and over. 

Servicemember Affairs — works in partnership with the Department of 
Defense to (1) help ensure that military families receive the 
financial education they need to make the best financial decisions for 
them; (2) monitor complaints from military families, and responses to 
those complaints; and (3) coordinate the efforts of federal and state 
agencies to improve consumer financial protection measures for 
military families. 

Students — assesses and develops policy and educational solutions to 
address and prevent consumer financial protection issues of students. 

Supervision Enforcement, Fair Lending and Equal Opportunity
Ensures compliance with federal consumer financial laws by supervising 
market participants and bringing enforcement actions when appropriate. 

It includes the following offices: 

Bank Supervision — conducts examinations of the largest and most 
complex banks, thrifts, and credit unions in the country, as well as 
other depository institutions under the Bureau's jurisdiction. These 
efforts are closely coordinated with the Nonbank Supervision office.
Enforcement—initiates investigations and enforcement actions, where 
appropriate, to ensure that providers of consumer financial products 
and services are complying with the law and that such providers are 
held accountable when they fail to do so. 

Fair Lending and Equal Opportunity — provides oversight and 
enforcement of fair lending laws to make certain that credit decisions 
are not based on race or any other prohibited factor. The office also 
engages in fair lending outreach and education. 

Nonbank Supervision - conducts examinations of different types of 
nonbank consumer financial services companies, including nonbank 
affiliates of large depository institutions. 

Research, Markets and Regulations: 

Responsible for understanding consumer financial markets and consumer 
behavior and for evaluating whether there is a need for regulation and 
the costs and benefits of potential or existing regulations. Before 
the CFPB acts, it will seek to be fully informed. The offices within 
this division are staffed with professionals selected for their strong 
analytical skills and subject matter expertise. 

It includes the following offices: 

Research — conducts research and rigorous policy evaluations and 
publishes findings on a variety of topics to support the CFPB's 
evidence-based policymaking and to develop a deeper understanding of 
consumer financial markets and household finances. 

Market teams — provide real-time market intelligence, guidance, and 
analysis of their respective consumer markets. The market teams are 
Cards Markets, Mortgage Markets, Installment & Liquidity Lending 
Markets, and Deposits, Collections & Credit Information Markets. 

Regulations — works to ensure that rulemaking is conducted in an 
informed, fair, and efficient manner in accordance with the law. 

Office of General Counsel: 

Responsible for the CFPB's compliance with all applicable laws and 
provides advice to the Director and CFPB's divisions. 

External Affairs: 

Responsible for ensuring that the CFPB maintains robust dialogue with 
various stakeholders who have an interest in its work in order to 
promote understanding, transparency, and accountability. 

It includes the following offices: 

Community Banks and Credit Unions - conducts outreach to smaller 
credit providers, especially community banks and credit unions. 

Consumer Advisory Board - advises and consults with the Bureau in the 
exercise of its functions and provides information on emerging 
practices in the consumer financial products or services industry, 
including regional trends and concerns. 

Intergovernmental Affairs - conducts outreach to municipal, state, and 
other government entities with coinciding concerns or initiatives. 

Legislative Affairs - serves a liaison function with the Members of 
Congress and congressional staff, providing timely information on the 
Bureau's activities and responding to inquiries and concerns. 

Media Relations - serves a liaison function with the media. 

Ombudsman - focuses on problem resolution between the CFPB and 
regulated entities or other third parties. 

Office of Chief Operating Officer: 

Builds and sustains the CFPB's operational infrastructure to support 
the entire organization and includes the Offices of the Chief 
Financial Officer; Chief Information Officer; Chief Technology 
Officer; and Chief Human Capital Officer; Minority and Women Inclusion 
Office; Operations and Facilities; Procurement; and FOIA, Privacy and 
Records. This division also includes Consumer Response, which receives 
complaints and helps consumers find answers for questions about 
consumer financial products and services. 

On-Board Status: 

One of the key areas of focus in building the CFPB has been to 
identify the best qualified people to meet its immediate staffing 
needs. The CFPB has made significant strides by transferring[Footnote 
1] or hiring approximately 663 highly qualified personnel by September 
30, 2011. This progress has been accomplished by taking many 
concurrent steps in the areas of policy development, recruitment 
activities, development of metrics, and on-boarding these many new 
employees, all within very compressed time frames. 

Provided below is a chart that displays the dramatic quarterly growth 
of on-board positions filled for the CFPB during fiscal year 2011.   

Figure: CFPB Positions Filled: 

[Refer to PDF for image: line graph] 

FY 2001 Quarter: 1; 
CFPB Positions Filled: 58. 

FY 2001 Quarter: 2; 
CFPB Positions Filled: 128. 

FY 2001 Quarter: 3; 
CFPB Positions Filled: 214. 

FY 2001 Quarter: 4; 
CFPB Positions Filled: 663. 

[End of figure] 

Provided below is a percentage breakout of CFPB total on-board staff 
by division as of September 30, 2011. As displayed in the chart, the 
CFPB's initial efforts to staff the bureau has placed a high priority 
on the Supervision, Enforcement, Fair Lending and Equal Opportunity 
functions — 51.9% of total on-board staff—receiving the highest 
attention in filling CFPB regulatory and compliance expertise 
positions.  

Figure: CFPB By Division: 

[Refer to PDF for image: vertical bar graph] 

COO[A]: 26.5%; 
Consumer Education & Engagement: 3.2%; 
External Affairs: 2.3%; 
General Counsel: 4.8%; 
RMR: 10.3%; 
Office of the Director: 1.1%; 
Supervision, Fair Lending, Enforcement & E.O.: 51.9%. 

[A] The Office of the Chief Operating Officer (COO) displayed as 26.5% 
is composed of 12.5% for the Consumer Response Center and 14% for all 
other COO functions. 

[End of figure] 

Design and Implement Payroll and Human Resources Systems: 

The Dodd-Frank Act did not give the CFPB direct-hire authority, and 
the CFPB was required to implement its own payroll and hiring system 
in order to begin hiring regulatory and compliance expertise — either 
from competitive hires or from transfer agencies. The CFPB launched a 
series of discussions and negotiations with the Federal Reserve System 
and with federal providers of payroll and human resource (HR) systems. 
The CFPB ultimately decided to implement an independent payroll and 
FIR automated system separate from the systems used by the Federal 
Reserve. 

Under the Dodd-Frank Act, the CFPB must establish a compensation 
program that provides compensation and benefits that, at a minimum, 
are comparable to the compensation and benefits being provided by the 
Board of Governors for the corresponding class of employees. All such 
compensation and benefits must be based on the terms and conditions 
set forth in the Federal Reserve Act Accordingly, the CFPB undertook a 
complete compensation and classification analysis and developed a 
market-based classification and compensation system that supports its 
strategy of building a highly skilled, flexible, high-performing 
workforce and that attracts both individuals from outside of 
government as well as employees from the agencies transferring 
functions to the CFPB. 

Additionally, the CFPB developed its own benefits program and 
implemented it on July 17, 2011. Pursuant to the Dodd-Frank Act, the 
CFPB has collaborated with the six transferring agencies[Footnote 2] 
to establish procedures and systems that allow for employees 
transferring into the CFPB to retain appropriate benefits provided to 
them by their prior agency for a one-year period and to reimburse 
those agencies as required by the Dodd-Frank Act. The six agencies are 
the Department of Housing and Urban Development, Office of Thrift 
Supervision, Office of the Comptroller of the Currency, National 
Credit Union Administration, Federal Deposit Insurance Corporation, 
and the Federal Reserve Board of Governors and Federal Reserve System 
Banks. 

IV. CFPB Actions, Performance and Results: 

The Dodd-Frank Act under section 1062 required the transfer date of 
the consumer financial protection functions from the seven prudential 
Federal agencies[Footnote 3] to occur no later than July 21, 2011 
unless Congress was notified. The Senior Advisor to the Secretary of 
the Treasury and CFPB management established as the primary 
performance goal for fiscal year 2011 the establishment and stand-up 
of the CFPB by the transfer date of July 21, 2011.[Footnote 4] 

On July 21, 2011 the CFPB achieved its goal and began its work to 
carry out its responsibilities and authorities to enforce the laws on 
credit cards, mortgages, student loans, prepaid cards, and other kinds 
of financial products and services. Some of the CFPB actions starting 
that day include: 

* The CFPB sent introductory letters to the CEOs of the depository 
institutions — generally large banks and their affiliates — that are 
subject to CFPB supervision. These letters, which outline the agency's 
approach to supervision and examination, marked the beginning of 
CFPB's regular communications with the institutions it supervises. In 
addition, CFPB's Enforcement team was ready to begin enforcing federal 
consumer financial laws, when necessary. 

* The CFPB's Consumer Response Center began accepting credit card 
complaints on its newly redesigned website, and through a toll-free 
number. CFPB also began referring distressed homeowners to housing 
counselors via the Homeowner's mortgage assistance hotline. 

The CFPB began publishing regulations and interim rules, examples of 
which include: a list of the regulations of the transferor agencies 
that will be enforceable by the CFPB; interim rules to create records 
and information procedures to implement the Privacy Act and the 
Freedom of Information Act, and to establish a process by which 
parties may seek testimony or records from the CFPB for use in 
litigation; and an interim rule concerning the CFPB's conduct of 
investigations of potential violations of any provision of federal 
consumer financial law. 

In addition, CFPB began work on many initiatives prior to July 21, 
2011, including: 

* Know Before You Owe — In May, the CFPB launched the Know Before You 
Owe project, an effort to combine two federally required mortgage 
disclosures into a single, simpler form that makes the costs and risks 
of the loan clear and allows consumers to comparison shop for the best 
offer. The CFPB began testing two alternate prototype forms that are 
designed to be given to consumers who have just applied for a mortgage 
loan. This testing — which is nearing completion and involves one-on-
one interviews with consumers, lenders, and brokers which — will 
precede and inform the CFPB's formal rulemaking process. The CFPB also 
has posted the prototypes on its website with an interactive tool to 
gather public input about the designs. 

* Transparency in Credit Cards — Credit cards are the most commonly 
used form of consumer credit. Almost two out of three families now 
have at least one credit card, and almost half of all families with 
credit cards carry a balance. hi February 2011, the CFPB held a 
conference on the first anniversary of when many provisions of the 
Credit Card Accountability Responsibility and Disclosure Act—the CARD 
Act—took effect. The CFPB's conference brought together industry 
representatives, consumer groups, academics, government experts, and 
others for a review of data on how the CARD Act, coupled with the 
recession and its aftermath, have affected supply, demand, and pricing 
within the credit card marketplace. The CFPB undertook a voluntary 
survey of the nine largest card issuers, representing approximately 90 
percent of the market, and other studies also were conducted in 
connection with the conference. 

The CARD Act has pushed in the right direction. It has brought about 
significant reforms in both the pricing practices of card issuers and 
the information provided to consumers. Even so, there are a lot of 
moving parts in a credit card price, and there is still room for 
improvement in the transparency of this market. The CFPB's next 
challenge will be to further clarify price and risk and make it easier 
for consumers to make direct product comparisons. 

As part of the CFPB's commitment to transparency, the raw data from a 
consumer survey conducted by the CFPB in connection with the 
conference were made public on its website at: www.consumerfinance.gov. 

* Report on Using Remittance History for Credit Scores and Remittance 
Exchange Rates — Each year, consumers in the United States send tens 
of billions of dollars to family members, friends, businesses, and 
others abroad through remittance transfers — electronic transfers from
U.S. senders to recipients in foreign countries. The CFPB issued a 
report on July 20, 2011 mandated by the Dodd-Frank Act, which analyzes 
two subjects related to remittance transfers: the transparency and 
disclosure to consumers of exchange rates used in remittance 
transfers, and the potential for using remittance histories to enhance 
the credit scores of consumers. 

The report finds that implementation of some of the Dodd-Frank Act's 
new requirements related to remittance transfers — including mandatory 
disclosures of the exchange rate used — could shed light on any need 
for additional exchange rate transparency measures. The CFPB also 
recommends to policy makers and other stakeholders that any additional 
transparency measures be evaluated and considered together with the 
range of mechanisms for increasing the competitiveness of the 
remittance transfer market, or promoting other consumer protection 
goals. The report further discusses the potential for remittance 
histories to inform credit scores, and describes planned CFPB research 
regarding the relationship between remittance histories and credit 
scores. 

* Report on Credit Scores — CFPB issued a mandated report on July 19, 
2011 examining the differences between credit scores sold to consumers 
and scores used by lenders to make credit decisions. 

The Dodd-Frank Act required the CFPB to study the differences between 
credit scores consumers purchase and those creditors use to make 
credit decisions. The CFPB's report covers the process of developing 
credit scoring models, why different scoring models may produce 
different scores for the same consumer, how different scoring models 
are used by creditors in the marketplace, what credit scores are 
available to consumers for purchase, and ways that differences between 
the scores provided to creditors and those provided to consumers may 
disadvantage consumers. A consumer unaware of the variety of credit 
scores available in the market place may purchase a score believing it 
to be his or her only credit score, when in fact there is no such 
single score. 

The report discusses the general lack of information about credit 
scoring. One survey shows that many consumers do not know that a 
credit score represents the risk of not repaying a loan.
Furthermore, many consumers do not know that credit scores they buy 
may not use the same credit scoring models that are most widely used 
by lenders. 

As a follow-up to the report, the CFPB will obtain and analyze data 
that shed further light on differences in scores and the significance 
of related concerns. To help educate consumers, the CFPB also posted 
advice on its website about how to obtain and maintain a good credit 
score: http://www.consumerfinance.gov. 

* Larger Participants and Nonbank Supervision — The Dodd-Frank Act 
gives the CFPB the job of supervising large banks, as well as some 
other types of financial companies, for compliance with federal 
consumer financial protection laws. While banks, thrifts, and credit 
unions have been subject to examinations by various federal regulators 
in the past, other types of companies providing consumer financial 
products and services have not. One of the goals of the new law is to 
better protect consumers by expanding this type of supervision to 
nonbank companies. The examination of nonbank companies will be a 
crucial piece of the CFPB's work. For the first time, many of these 
nonbank financial companies will be subject to federal oversight. 

Under the Act, the CFPB's nonbank supervision program will be able to 
look at companies of all sizes in the mortgage, payday lending, and 
private student lending markets. But for all other markets—like 
consumer installment loans, money transmitting, and debt collection—
the CFPB generally can supervise only larger participants. 

The CFPB requested input on June 29, 2011 on how to define a "larger 
participant" through the rulemaking process. In order to collect 
input, CFPB published a Notice and Request for Comment (Notice). 
Public comments on the questions listed in the Notice will help the 
CFPB formulate a rule that helps the CFPB make the best use of its 
resources to protect American consumers. 

Engaging the Public: 

One of the CFPB's top priorities is to communicate substantively and 
frequently across a wide range of industry and consumer group sectors. 
The CFPB aims to actively engage all stakeholders that could 
potentially be affected by the agency, with the understanding that 
there is much insight to be gained from varied perspectives that 
represent many distinct points of view. 

The CFPB has traveled across the country to listen to and learn from 
the hopes, fears, and concerns of industry and consumer groups. As a 
result, the CFPB has collected ample information about how its work 
will affect various stakeholders, and suggestions from stakeholders 
have informed preparations in setting up the agency.  

* Community Banks and Credit Unions — CFPB set a goal to reach out to 
small independent banks in all 50 states before July 21, 2011. By 
April 2011, the CFPB had reached its goal of speaking to bankers from 
every state. Further, CFPB officials delivered speeches at the 
Independent Community Bankers of America National Convention, the 
Credit Union National Association Governmental Affairs Conference, and 
at the National Association of Federal Credit Unions Congressional 
Caucus. A CFPB team has been dedicated to outreach to small financial 
service providers. 

* Trade Associations and Bank Executives — CFPB has frequently met 
with banking executives and trade associations that represent both 
depository and non-depository institutions. The CFPB has spoken 
directly to many of the major trade organizations representing firms 
likely to be affected by its work and delivered speeches to the 
Financial Services Roundtable and at the U.S. Chamber of Commerce 
Fifth Annual Capital Market Summit. 

* Servicemembers and Military Families — In January 2011, the CFPB 
made a key hire to establish its Office of Servicemember Affairs. The 
newly hired Assistant Director, Office of Servicemembers Affairs (OSA) 
understands — from personal experience as a military spouse and work 
at the Better Business Bureau Military Line — that men and women in 
the U.S. armed forces encounter unique financial is sues. 

In January, the Assistant Director, OSA visited Joint Base San 
Antonio, Texas to speak with servicemembers and financial counselors 
about the unique financial circumstances and challenges that exist in 
military communities. In April, the Assistant Director traveled to 
Joint Base Myer-Henderson Hall in Virginia to meet with servicemembers 
and their families. 

The Assistant Director has visited many other military bases as well, 
talking about the financial challenges facing American men and women 
in uniform. The Assistant Director was the first CFPB staffer to 
testify before Congress when she appeared before the House Committee 
on Veterans Affairs and has also testified before a subcommittee of 
the Senate Committee on Homeland Security and Governmental Affairs, 
and has submitted testimony for the record to the Subcommittee on 
Federal Financial Management, Government Information, Federal Services 
and International Security U.S. Senate Committee on Homeland Security. 

* Consumer Response — The Dodd-Frank Act directs the CFPB to 
facilitate the collection and monitoring of and response to, consumer 
complaints regarding certain financial products and services. These 
complaints and consumers' inquiries will help the CFPB identify areas 
of concern and help CFPB in its supervision and other responsibilities. 

The CFPB is implementing the consumer response function gradually 
through a phased roll-out of functionality. The CFPB aims to build an 
efficient and effective consumer response system that is useful to 
American consumers, minimizes burden on financial institutions, and 
leverages the best of technology. A phased roll-out will enable proper 
consideration of the needs of consumers, the requirements of financial 
institutions, and the relevant operational constraints. In the initial 
phase, the CFPB will focus on taking complaints for credit cards, with 
other products to follow. 

Anticipating that many distressed homeowners would contact the CFPB 
soon after the launch of the Consumer Response function, the CFPB 
designed a process to connect these homeowners with a housing 
counselor via the Homeowner's HOPETM Hotline, a housing counseling 
hotline available through the Department of the Treasury. 

The CFPB is coordinating its approach with other regulators to prevent 
any gaps for consumers during this transition of responsibilities3. As 
the CFPB rolls out its full functionality, it plans to route or refer 
incoming complaints for other products to the prudential regulators or 
other appropriate agencies. 

The CFPB is investing in a 21st-century IT infrastructure to ensure 
that its consumer response function is accessible, easy to use, and 
secure. To ensure broad access, the CFPB will provide a variety of 
contact channels, including the Internet, mail, fax, and a toll-free 
telephone number with English and Spanish language capabilities. For 
consumers, the CFPB is creating an integrated web and phone system to 
file and track complaints. The CFPB's website and call center will 
also provide answers to frequently asked questions regarding financial 
products. For credit card complaints, the CFPB is creating a web-based 
system that allows card issuers to log on, view, and respond to 
complaints online. Eventually, this system is expected to be used by 
providers of other financial products. 

The CFPB has engaged and will continue to engage a broad range of 
stakeholders — including community banks, consumer advocates, industry 
groups, and others — to gather input on the complaint handling 
process. The CFPB has presented its complaint intake process and 
complaint handling system to the largest credit card issuers. The CFPB 
will be holding ongoing discussions with them regarding improvements 
to the system. 

V. Enterprise Risk Management: 

Fiscal Year 2011: 
CFPB Statement Of Management Assurances: 
November 9, 2011: 

The management of the Consumer Financial Protection Bureau (CFPB) is 
responsible for establishing and maintaining effective internal 
control and financial management systems that meet the objectives of 
the Federal Managers' Financial Integrity Act of 1982 (FMFIA). 
Continuous monitoring and periodic evaluations provide the basis for 
the annual assessment and report on management's controls, as required 
by FMFIA. CFPB is leveraging the established OMB Circular A-123 and 
the FMFIA assessment methodologies to assist in assessing the 
applicable entity-wide controls, documenting the applicable processes, 
and identifying and testing the key controls. Based on the results of 
these ongoing evaluations, CFPB can provide reasonable assurance that 
internal control over the effectiveness and efficiency of operations 
and compliance with applicable laws and regulations meet the 
objectives of FMFIA and no material weaknesses were found in the 
design or operation of the internal controls as of September 30, 2011. 

As required by the Dodd-Frank Act, the CFPB is required to provide a 
management assertion as to the effectiveness of CFPB's internal 
control Over financial reporting. CFPB management is responsible for 
establishing and maintaining effective internal control over financial 
reporting. CFPB conducted its assessment of the effectiveness of 
internal control over financial reporting based on the criteria 
established under 31 U.S.C. Sec. 3512(c). Based on the results of this 
evaluation, the CFPB can provide reasonable assurance that its 
internal control over financial reporting as of September 30, 2011 was 
operating effectively and no material weaknesses were found in the 
design or operation of the internal control over financial reporting. 

As required by the Dodd-Frank Act, the CFPB is required to maintain 
financial management systems that comply substantially with Federal 
financial management systems requirements and applicable Federal 
accounting standards. The CFPB utilizes financial management systems 
that substantially comply with the requirements for Federal financial 
management systems and applicable Federal accounting standards. 

Signed by: 

Raj Date: 
Special Advisor to the Secretary of the Treasury for the Consumer 
Financial Protection Bureau: 

[End of letter] 

Federal Manage& Financial Integrity Act: 

The CFPB was established as an independent bureau in the Federal 
Reserve System under the Dodd-Frank Act Section 1011 (a). As an 
independent, non-appropriated bureau, CFPB recognizes the importance of
Federal laws associated with implementing effective enterprise risk 
management, including the Federal Managers' Financial Integrity Act. 
This includes ensuring that CFPB operations and programs are effective 
and efficient and that internal controls are sufficient to minimize 
exposure to waste and mismanagement. 

In fiscal year 2011, CFPB performed an evaluation of its risks and 
systems of internal controls and employed an independent accounting 
firm to assist CFPB management in its evaluations. The results of 
those evaluations helped to support the CFPB's reasonable assurance of 
effective internal control. 

The CFPB is committed to ensuring it has an effective risk management 
program in fiscal year 2012 and will take actions to implement all 
identified recommendations and concerns, and increase resources 
assigned to an office within the Office of the Chief Financial 
Officer - the Office of Audit and Internal Controls. 

Federal Financial Management Systems Requirements: 

Section1017 (a) (4) (C) of the Dodd-Frank Act requires the CFPB to 
implement and maintain financial management systems that substantially 
comply with Federal financial management systems requirements and 
applicable Federal accounting standards. As discussed below in the 
section on Financial Management System Strategy, the CFPB has entered 
into an agreement with the Department of the Treasury's Bureau of Public
Debt (BPD) for the cross-servicing of CFPB's core financial management 
system needs. As such, BPD has provided assurances to CFPB that its 
system is in compliance with the Federal Financial Management 
Improvement Act (FFMIA) whereby the system is substantially compliant 
with: 

* Federal financial management system requirements, 

* Applicable federal accounting standards, and, 

* The United States Standard General Ledger at the transaction level. 

BPD has reported that its system substantially complies with the three 
requirements of FFMIA and recently completed a Statement on Standards 
for Attestation Engagement (SSAE) No. 16, Reporting on Controls at a
Service Organization. The independent auditors opined in the SSAE-16 
report that in short, BPD's controls were suitably designed to provide 
reasonable assurance that control objectives would be achieved if 
customer agencies applied the complementary customer agency controls.
CFPB evaluated its internal controls over the processing of 
transactions between the CFPB and BPD. CFPB determined it has adequate 
complementary controls in place. 

Financial Statement Audit and Report on Internal Control over 
Financial Reporting: 

Sections 1017 (a) (4) (B) and (D) of the Dodd-Frank Act require the 
CFPB to prepare and submit to GAO annual financial statements and an 
assertion of the effectiveness of the internal controls over financial
reporting. Section 1017 (a) (5) (A) and (B) of the Dodd-Frank Act also 
require GAO to audit those financial statements and assertions and 
report their results to the bureau, Congress and the President. The 
CFPB prepared financial statements for the first full year of 
operation, fiscal year 2011. 

GAO issued an unqualified audit opinion on CFPB's fiscal year 2011 
financial statements GAO noted no material weaknesses or significant 
deficiencies in CFPB's internal controls and cited no instances of 
noncompliance with laws and regulations. 

Financial Management Systems Strategy: 

CFPB recognized early on that as a new bureau it needed to leverage 
existing financial management resources, systems and information 
technology platforms when identifiable and available. Initially, all of
CFPB's financial management transactions were processed through the 
Department of the Treasury's Departmental Offices. In fiscal year 
2011, CFPB entered into a contract with the Department of the
Treasury's Bureau of Public Debt (BPD) for the cross-servicing of a 
core financial management system that uses a commercial off-the-shelf 
core financial management system designed and configured to meet 
generally accepted accounting principles for Federal entities. In 
addition to the core financial management system, BPD provides 
additional services to CFPB, such as transactional processing, 
financial reporting, human resource services, procurement services, 
and travel services. 

Further, CFPB established an IT Investment Review Board (IRB) as an 
executive advisory body providing the business and technology 
leadership to ensure all technology investment aligns with the CFPB 
mission and goals. The members of the IRB work with the CIO and the 
Technology Implementation Group to make informed recommendations and 
assist the CIO in making the proper investment decisions to ensure that
CFPB's IT assets are managed as strategic business resources that 
support the mission of the bureau. 

Federal Information Security Management Act: 

The Federal Information Security Management Act (FISMA) requires 
Federal agencies to develop, document, and implement an agency-wide 
program to provide security for the information and information 
systems that support the operations and assets of the agency. As 
discussed above, the CFPB has leveraged existing information 
technology and platforms by deploying a cloud-based infrastructure and 
entering into various cross-servicing agreements with the Department 
of the Treasury, Departmental Offices and BPD, and the Department of 
Agriculture, National Finance Center. As part of the independent 
performance audit of the operations and budget of the CFPB, which is 
discussed below, the auditors also reported that the CFPB has complied 
with key elements of the E-Government Act of 2002, including FISMA. 

Improper Payments Elimination and Recovery Act: 

The Improper Payments Elimination and Recovery Act of 2011 require 
agencies to review their programs and activities annually to identify 
those susceptible to significant improper payments. During fiscal year 
2011, the Office of Audit and Internal Control conducted such a review 
over four areas of payments — Purchase Card, Contract Payments and/or 
Invoices, Travel Card, and Claims and/or Vouchers. The CFPB's risk 
assessment process did not identify any programs susceptible to 
significant improper payments. 

Independent Performance Audit of the Operations and Budget of the CFPB: 

The Dodd-Frank Act, amended by the Full-Year Continuing Appropriations 
Act, 2011 (12 USC 5496a), mandated that CFPB obtain an annual 
independent audit of the operations and budget of the Bureau. CFPB 
contracted for a fiscal year 2011 independent performance audit of the 
CFPB budget and several operating areas that were instrumental in 
implementing the Dodd-Frank Wall Street Reform and Consumer Financial
Protection Act of 2010 and standing up the CFPB: Human Capital and 
Organizational Development, Consumer Response, Information Technology, 
and Communications and Transparency. 

To evaluate CFPB's operations and performance in these five areas, the 
auditor's evaluation criteria were (1) compliance with legal 
requirements, (2) achievement of organizational goals, and (3) 
alignment with performance standards, best practices, and/or 
benchmarks. In its October 15 report, the auditors reported that CFPB 
has made significant progress towards achieving legal compliance, 
attaining organizational goals, and meeting performance standards. 

Limitations of the Financial Statements: 

The principal financial statements contained in this report have been 
prepared to present the financial position and results of operations 
of the Consumer Financial Protection Bureau pursuant to the 
requirements of the Dodd-Frank Act Section 1017 (a) (4) (B). While the 
statements have been prepared from the books and records of the 
Consumer Financial Protection Bureau, in accordance with generally 
accepted accounting principles for the Federal government, and follows 
the general presentation guidance provided by OMB, the statements are 
in addition to the financial reports used to monitor and control 
budgetary resources, which are prepared using the same books and 
records. 

The statements should be read with the realization that they are for a 
component of the United States Government, a sovereign entity. 

VI. Financial Analysis: 

How the CFPB is Funded: 

Under the Dodd-Frank Act, the CFPB is funded principally by transfers 
from the Board of Governors of the Federal Reserve System up to a 
limit set forth in the statute. The CFPB requests transfers from the 
Board of Governors in amounts that are reasonably necessary to carry 
out its mission, which funding is capped at a pre-set percentage of 
the total 2009 operating expenses of the Federal Reserve System, 
subject to an annual adjustment. Specifically, the CFPB fund transfers 
are capped as follows: 

* In fiscal year 2011 to 10 percent of these Federal Reserve System 
expenses (or approximately $498 million), 

* In fiscal year 2012 to 11 percent of these expenses (or 
approximately $547.8 million), 

* In fiscal year 2013 to 12 percent of these expenses (or 
approximately $597.6 million), and, 

* In fiscal year 2014 and beyond, the cap remains at 12 percent but 
will be adjusted for inflation. 

The Dodd-Frank Act requires the CFPB to maintain an account with the 
Federal Reserve — "Bureau of Consumer Financial Protection Fund" 
(Bureau Fund). Funds requested from the Board of Governors are 
transferred into the Bureau Fund. Bureau funds determined not to be 
needed to meet the current needs of the CFPB are invested in Treasury 
securities on the open market. Earnings from the investments are also 
deposited into this fund. During fiscal year 2011, five transfers 
totaling $161.8 million were received from the Board of Governors. 
[Footnote 5] 

The Dodd-Frank Act explicitly provides that Bureau funds obtained by 
or transferred to the CFPB are not Government funds or appropriated 
funds. 

The CFPB also collects filing fees from developers as part of the 
process regarding Interstate Land Settlements (ILS). The ILS program 
protects consumers from fraud and abuse in the sale or lease of land. In
1968, Congress enacted the Interstate Land Sales Full Disclosure Act, 
which is patterned after the Securities Law of 1933 and requires land 
developers to register subdivisions of 100 or more non-exempt lots and 
to provide each purchaser with a disclosure document called a Property 
Report The Property Report contains relevant information about the 
subdivision and must be delivered to each purchaser before the signing 
of the contract or agreement. On July 21, 2010, this program was 
transferred to the CFPB from the Department of Housing and Urban 
Development pursuant the Dodd-Frank Act. While CFPB continues to study 
the legal effects of the legislation with respect to the transfer of 
these functions under the Land Sales Act, and the collection of fees, 
the fees are currently being deposited into an account maintained by 
Treasury. The fees collected may be retained and are available until 
expended for the purpose of covering all or part of the costs that the 
Bureau incurs for ILS program operations.  

Pursuant to the Dodd-Frank Act, the CFPB is also authorized to collect 
civil penalties against any person in any judicial or administrative 
action under Federal consumer financial laws. The Act also requires 
the CFPB to maintain a separate fund, known as the Consumer Financial 
Civil Penalty Fund (Civil Penalty Fund). Collections of civil 
penalties will be deposited into the Civil Penalty Fund, which is in 
the process of being established. CFPB did not collect any civil 
penalties during fiscal year 2011.  

What the CFPB has Funded:  

During fiscal year 2011, the CFPB was still growing, therefore, the 
majority of its obligations related to resources essential to standing 
up the CFPB, such as personnel, information technology, mission-
specific and human capital support, and other general start-up 
activities. The CFPB incurred $123.3 million in obligations — $68.7
million in Contracts & Support Services, $48.4 million in Salary & 
Benefits, and $6.2 million in All Other — as displayed in the chart to 
below: 

Some of the larger funded items for the CFPB start-up activities 
included in the $68.7 million for Contracts and Support Services 
include: 

* $18.6 million to the Department of the Treasury for various services 
such as, information and technology and human resource systems support 
and detailees, 

* $6 million to the Bureau of the Public Debt for cross-servicing of 
various human resource and financial management services, such as core 
financial accounting, transaction processing, travel and payroll, and 
assistance in developing salary and, 
 
* $4.4 million to a contractor for human resource policies benefits 
packages consistent with the requirements of the Dodd-Frank Act, and,  

* $4.3 million to a contractor for the development and maintenance of 
a Consumer Complaint System.  

Figure: FY 2011 Obligations Incurred: 

[Refer to PDF for image: pie-chart] 

Contracts & Support Services: $68.7 million; 
Salary & Benefits: $48.4 million; 
All Other: $6.2 million. 

[End of figure] 

Net Costs of the CFPB's Operations: 

The Statement of Net Cost presents the CFPB gross and net cost for its
three strategic missions: Consumer Education & Engagement; Research, 
Markets & Regulation; and Education & Engagement Supervision, 
Enforcement, Fair Lending & Equal Opportunity. Total  CFPB net costs 
for fiscal year 2011 in these three programmatic categories are $85.3 
million — $47 million for Supervision & Enforcement, Fair Lending and 
Equal Opportunity, $22.8 million for Consumer Education and 
Engagement, and $15.5 million for Research, Markets & Regulation — as 
displayed in the chart below. The majority of costs were incurred in 
Supervision and Equal Enforcement, Fair Lending and Equal Opportunity 
including the start-up costs of the program and the majority of CFPB's 
personnel costs — 51.9% of all hires by year-end. 

Figure: FY 2011 Program Costs: 

[Refer to PDF for image: pie-chart] 

Consumer Education & Engagement: $22.8 million; 
Research, Markets & Regulation: $15.5 million; 
Supervision, Enforcement, Fair Lending & Equal Opportunity: $47.0 
million. 

[End of figure] 

 
VII. Possible Future Risks and Uncertainties:  

Potential Funding Concerns and Potential Impact to Independence 
The Dodd-Frank Act followed a long-established precedent in providing 
the CFPB with funding outside of the Congressional appropriations 
process. Congress has consistently provided for independent funding for 
bank supervisors to allow for long-term planning and the execution of 
complex initiatives and to ensure that banks are examined regularly 
and thoroughly for both safety and soundness and compliance with the 
law.  

The CFPB has been tasked with supervising more entities than all other 
federal bank supervisors combined, including supervising the largest, 
most complex banks. Effective supervision that levels the playing field 
between bank and non-bank institutions will require dedicated and 
predictable resources, and independent examiners. Moreover, consumer 
compliance examinations for depository institutions with less than $10 
billion in assets will continue to be conducted by prudential 
regulators and thus funded independently. Thus, consumer compliance 
examinations of community banks and large bank and non-bank 
institutions will all be funded independently.  

Although Congress provided the CFPB with a source of funding outside 
the appropriations process, the CFPB is nonetheless the only bank 
supervisor with a statutory cap on its primary source of Ending. If the 
Director were to determine that the non-appropriated funds to which it 
is entitled under the Act are insufficient to carry out its 
responsibilities, the Act provides the potential for CFPB to also 
obtain appropriated funds, up to a capped amount, in fiscal years 2011-
2014. In accordance with the Act and appropriations law requirements, 
further action would be required on the part of the Director and 
Congress in order for CFPB to obtain such appropriated funds.  

Management's Discussion and Analysis Footnotes: 
   
[1] The Dodd-Frank Act under Section 1064 provides for the transfer of 
certain employees Governors of the Federal Reserve System, Federal 
Deposit Insurance Corporation, National Credit Union Administration, 
Office of the Comptroller of the Currency, Office of Thrift 
Supervision, and the Department of Housing and Urban Development.  

[2] Under the Dodd-Frank Act, the functions and responsibilities for 
consumer financial protection laws were transferred to the CFPB from 
seven Federal agencies; however, the Federal Trade Commission was not 
required to transfer any employees to CFPB per Section 1061 (b) (A). 

[3] Under the Dodd-Frank Act, authorities for consumer financial 
protection were transferred from the Board of Governors of the Federal 
Reserve System, Comptroller of the Currency, Office of Thrift 
Supervision, Federal Deposit Insurance Corporation, Federal Trade 
Commission, National Credit Union Administration, and the Department 
of Housing and Urban Development. 

[4] The CFPB is preparing a strategic plan to help guide its future-
years activities beginning in fiscal year 2012. 

[5] In fiscal year 2010, one transfer for $18.4 million was received 
from the Board of Governors. 

[End of Management's Discussion and Analysis section] 

Financial Statements: 

Message from the Chief Financial Officer: 

During fiscal year 2011, the Office of the Chief Financial Officer 
played a major role in the growth and development of the Consumer 
Financial Protection Bureau (CFPB). The CFPB was established by the 
Dodd-Frank Act when it was enacted on July 21, 2010. Much of the work 
to establish CFPB as a new bureau occurred during fiscal year 2011. 
During this time, the agency grew from 58 employees in the first 
quarter to 663 employees at fiscal year-end. The rapid growth in 
employees and the associated offices required a significant level of 
effort to establish the necessary support structure of the agency. 
Some of the CFPB activities the Office of the Chief Financial Officer 
supported in fiscal year 2011 include: 

* Entered into Inter-agency Agreements with other federal agencies to 
obtain services in the areas of financial management, human resource, 
procurement, travel, and payroll; 

* Designed and developed CFPB's budget and internal control functions; 

* Developed CFPB's operating plans; 

* Prepared five fund request transfers from the Federal Reserve System 
totaling $161.8 million; and; 

* Coordinated benefits payments for transferees. 

As a new stand-up bureau, we recognize that much work remains to be 
done in fiscal year 2012. We will continue to work towards 
strengthening the Office of the Chief Financial Officer and continue 
to ensure we have sound fiscal policies and a strong internal control 
environment in place. 

I am pleased to present the CFPB's first set of financial statements 
as an integral part of the fiscal year 2011 Financial Report. For 
fiscal year 2011, the Government Accountability Office rendered an 
unqualified audit opinion on CFPB's financial statements and noted no 
material weaknesses or significant deficiencies in CFPB's internal 
controls and cited no instances of non-compliance with laws and 
regulations. 

Signed by: 

Stephen Agostini: 
Chief Financial Officer: 
Consumer Financial Protection Bureau: 

Signed by: 

Freddy Velez: 
Acting Deputy, Chief Financial Officer: 
Consumer Financial Protection Bureau: 

[End of letter] 

Consumer Financial Protection Bureau Balance Sheet: 
As of September 30, 2011 (In Dollars): 

Assets:  

Intragovernmental: 

Fund Balance with Treasury (Note 2): $18,673,308; 
Investments (Note 3): $80,298,806; 
Total Intragovernmental: $98,972,114. 

Cash, and Other Monetary Assets (Note 4): $332,021; 
Accounts Receivable: $7,068; 
Property, Equipment, and Software, Net (Note 5): $1,770,214; 
Advances and Prepayments (note 6): $14,689,107; 
Total Assets: $115,770,524. 

Liabilities:  

Intragovernmental: 
 
Accounts Payable: $3,288,536; 
Other (Note 7): $1,151,377; 
Total Intragovernmental: $4,439,913; 
Accounts Payable: $5,728,159; 
Other (Note 7): $9,129,788; 
Total Liabilities: $19,297,860. 

Net Position:  

Cumulative Results of Operations - Earmarked Funds: $96,472,664; 
Total Net Position: $96,472,664; 
Total Liabilities and Net Position: $115,770,524. 

[End of table] 

Consumer Financial Protection Bureau: 
Statement Of Net Cost: 
For the Fiscal Year Ended September 30, 2011 (In Dollars):  

Program Costs:  

Consumer Education and Engagement (Including Response Center):  

Gross Costs: $22,831,038
Less: Earned Revenue: [Empty]; 
Net Consumer Education and Engagement (Including Response Center): 
$22,831,938. 

Research, Markets, and Regulations: 
Gross Costs: $15,485,938
Less: Earned Revenue: [Empty]; 
Net Research, Markets, and Regulations: $47,011,018. 

Supervision, Enforcement, Fair Lending and Equal Opportunity: 
Gross Costs: $47,011,018; 
Less: Earned Revenue: [Empty]; 
Net Supervision, Enforcement, Fair Lending and Equal Opportunity: 
$47,011,018. 

Total Gross Program Costs: $85,328,594; 
Less: Total Earned Revenues: [Empty]; 
Net Cost of Operations (Note 10)$85,328,594. 

[End of table] 

Consumer Financial Protection Bureau: 
Statement Of Changes In Net Position: 
For the Fiscal Year Ended September 30, 2011 (In Dollars): 

Cumulative Results of Operations:  

Beginning Balances (Note 11): $18,256,655. 

Budgetary Financing Sources: 
Nonexchange Revenue: $161,847,142
Other: $3,709. 

Other Financing Sources (Non-Exchange): 
Imputed Financing Sources: $1,693,752; 
Total Financing Sources: $163,544,603; 
Net Cost of Operations: ($85,328,594); 
Net Change: $78,216,009; 
Cumulative Results of Operations: $96,472,664. 
 
Net Position - Earmarked Funds: $96,472,664. 

Consumer Financial Protection Bureau: 
Statement Of Budgetary Resources: 
For the Fiscal Year Ended September 30, 2011 (In Dollars): 

Budgetary Resources: 
Unobligated Balance Brought Forward, October 1 (Note 11): $9,200,000; 
Funds Available for Obligation: $161,849,662; 
Total Budget Resources: $171,049,662. 

Status of Budgetary Resources: 
Obligations Incurred (Note 12) Direct: $123,329,760; 
Unobligated Balance, Exempt From Apportionment: $47,719,902; 
Total Status of Budgetary Resources: $171,049,662. 

Change in Obligated Balance: 
Obligated Balance, Net, Unpaid Obligations, Brought Forward, October 1 
(Note 11): $9,200,000;  
Total Unpaid Obligated Balance, Net: $9,200,000. 

Obligations Incurred Net: $123,329,760; 
Gross Outlays: ($80,946,716); 
Obligated Balance, Net, End of Period, Unpaid Obligations: $51,583,044
Total Unpaid Obligated Balance, Net, End of Period: $51,583,044. 

Net Outlays: 
Gross Outlays: $80,946,716; 
Net Outlays: $80,946,716. 

[End of table] 

The accompanying notes are an integral part of these financial 
statements.  

NOTE 1. Summary Of Significant Accounting Policies: 

A. Reporting Entity: 

The Bureau of Consumer Financial Protection, known as the Consumer 
Financial Protection Bureau (CFPB), was established under the Dodd-
Frank Wall Street Reform and Consumer Protection Act P.L.111-203
(Dodd-Frank Act) on July 21, 2010. CFPB was established as an 
independent bureau within the Federal Reserve System. The Bureau is an 
Executive agency as defined in section 105 of Title 5, United States 
Code. 

The Dodd-Frank Act authorizes the CFPB to exercise its authorities to 
ensure that with respect to consumer financial products and services: 

a. Consumers are provided with timely and understandable information 
to make responsible decisions about financial transactions; 

b. Consumers are protected from unfair, deceptive, or abusive acts and 
practices and from discrimination; 

c. Outdated, unnecessary, or unduly burdensome regulations are 
regularly identified and addressed in order to reduce unwarranted 
regulatory burdens; 

d. Federal consumer financial law is enforced consistently in order to 
promote fair competition; and; 

e. Markets for consumer financial products and services operate 
transparently and efficiently to facilitate access and innovation. 

Under the Dodd-Frank Act, on the designated transfer date, July 21, 
2011, certain authorities and functions of several agencies relating 
to Federal consumer financial law were transferred to the CFPB in 
order to accomplish the above objectives. These authorities were 
transferred from the Board of Governors of the Federal Reserve System 
(Board of Governors), Comptroller of the Currency (OCC, Office of Thrift
Supervision (OTS), Federal Deposit Insurance Corporation (FDIC), 
Federal Trade Commission (FTC), National Credit Union Administration 
(NCUA), and the Department of Housing and Urban Development (HUD). In 
addition to these transferred authorities, the Dodd-Frank Act provided 
the CFPB with certain newly established federal consumer financial 
regulatory authorities. 

To accomplish its mission, the CFPB is organized into six primary 
divisions/offices: 

1. Consumer Education and Engagement: 

Provides, through a variety of initiatives and methods, information to 
consumers that will allow them to make decisions that are best for 
them. Consumer education is a central mission to the Bureau. The 
Bureau is developing targeted outreach to groups that face particular 
challenges, as required by the Dodd-Frank Act. 

2. Supervision, Enforcement, Fair Lending and Equal Opportunity: 

Ensures compliance with federal consumer financial laws by supervising 
market participants and bringing enforcement actions when appropriate. 

3. Research, Markets, and Regulations: 

Responsible for understanding consumer financial markets and consumer 
behavior, for evaluating whether there is a need for regulation, and 
for determining the costs and benefits of potential or existing 
regulations. Before the Bureau acts, it will seek to be fully 
informed. The offices within this division are staffed with 
professionals selected for their strong analytic skills and subject 
matter expertise. 

4. Office of General Counsel: 

Responsible for the Bureau's compliance with all applicable laws and 
provides advice to the Director and the Bureau's divisions. 

5. External Affairs: 

Ensures that the Bureau maintains robust dialogue with various 
stakeholders that have an interest in its work in order to promote 
understanding, transparency, and accountability. 

6. Office of Chief Operating Officer: 

Builds and sustains the CFPB's operational infrastructure to support 
the entire organization. 

The CFPB workforce is spread across the country with its headquarters 
in Washington, D.C. and regional satellite offices in Chicago, New 
York City, and San Francisco. The headquarters is temporarily spread 
across several locations within Washington, D.C., utilizing space 
rented through interagency agreements with the Department of the 
Treasury (Treasury). CFPB will eventually consolidate its headquarters 
into one building in Washington, D.C. The workforce in CFPB's regional 
offices is predominantly mobile and therefore minimal office and 
conference room space is used in the regions. 

Additional information on the organizational structure and 
responsibilities of CFPB is available on CFPB's web site at 
http://www.consumerfinance.gov/. 

Under the Dodd-Frank Act, the Secretary of the Treasury is responsible 
for establishing the CFPB and exercising certain of its authorities 
until a Director of the CFPB is in place. On July 18, 2011 President
Obama sent to the Senate a nomination for a Director of CFPB. The CFPB 
is still without a Director and continues to operate under the 
authority of the Secretary of the Treasury. The Bureau's day-to-day 
operations are managed by the Special Advisor to the Secretary of the 
Treasury for the Consumer Financial Protection Bureau. 

B. Basis of Presentation: 

CFPB's principal statements were prepared from its official financial 
records and general ledger in conformity with accounting principles 
generally accepted in the United States and follows the general 
presentation guidance established by OMB Circular A-136, Financial - 
Reporting Requirements, as revised. The financial statements are a 
requirement of the Dodd-Frank Act. The financial statements are in 
addition to the financial reports prepared by CFPB, pursuant to OMB 
directives, which are used to monitor and control budgetary resources. 
The financial statements have been prepared to report the financial 
position, net cost of operations, changes in net position, and the 
status and availability of budgetary resources of CFPB. The financial 
statements and associated notes are presented on a single year basis. 
This is the first full year of operation for the CFPB and therefore 
comparative statements are not presented. 

The net cost of operations is presented by the three primary 
objectives of the Bureau — educate, enforce, and study — and is 
consistent with CFPB's organizational structure. 

C. Basis of Accounting: 

Transactions are recorded on both an accrual accounting basis and a 
budgetary basis. Under the accrual basis of accounting, revenues are 
recognized when earned, and expenses are recognized when a liability 
is incurred, without regard to receipt or payment of cash. Budgetary 
accounting facilitates compliance with legal requirements and controls 
over the use of federal funds. CFPB conforms to accounting principles 
generally accepted in the United States for federal entities as 
prescribed by the standards set forth by the Federal Accounting 
Standards Advisory Board (FASAB). FASAB is recognized by the American 
Institute of Certified Public Accountants as the body designated to 
establish generally accepted accounting principles for federal 
government entities. Certain assets, liabilities, earned revenues, and 
costs have been classified as intragovernmental throughout the 
financial statements and notes. Intragovernmental assets and 
liabilities are those due from or to other federal entities. 
Intragovernmental earned revenues are collections or accruals due from 
other federal entities. Intragovernmental costs are payments or 
accruals due to other federal entities. 

CFPB has rights and ownership of all assets reported in these 
financial statements. CFPB does not possess any non-entity assets. 

D. Funding Sources: 

Funding needed for carrying out the mission of CFPB is obtained 
primarily through transfers from the Board of Governors, interest 
earned on investments, and penalties and fees collected. The Dodd-
Frank Act requires the CFPB to maintain an account with the Federal 
Reserve — "Bureau of Consumer Financial Protection Fund" (Bureau 
Fund). The Director of CFPB, or designee, requests transfers from the 
Board of Governors in amounts necessary to carry out the authorities 
and operations of the Bureau. The Board of Governors transfers the 
funds into the Bureau Fund, which is maintained at the Federal Reserve 
Bank of New York (FRBNY). Bureau funds determined not needed to meet 
the current needs of the Bureau are invested in Treasury securities on 
the open market. Earnings from the investments are also deposited into 
this fund. Going forward, CFPB anticipates requesting funds on a 
quarterly basis. The funds maintained by the FRBNY are reported in the 
financial statements and related notes and represent budget authority 
for CFPB. 

The CFPB funding requests for the Bureau Fund are capped as follows: 

The amount that shall be transferred to the Bureau in each fiscal year 
shall not exceed a fixed percentage of the total operating expenses of 
the Federal Reserve System, subject to an annual inflation adjustment, 
as reported in the Annual Report, 2009, of the Board of Governors, 
equal to: 

1. 10 percent of such expenses in fiscal year 2011, 

2. 11 percent of such expenses in fiscal year 2012, 

3. 12 percent of such expenses in fiscal year 2013, and in each year 
thereafter. 

The Dodd-Frank Act explicitly provides that Bureau funds obtained by 
or transferred to CFPB are not Government funds or appropriated funds. 

If the Director were to determine that the non-appropriated funds to 
which it is entitled under the Act are insufficient to carry out its 
responsibilities, the Act provides the potential for CFPB to also 
obtain appropriated funds, up to a capped amount, in fiscal years 2011-
2014. In accordance with the Act and appropriations law requirements, 
further action would be required on the part of the Director and 
Congress in order for CFPB to obtain such appropriated funds. 

The CFPB also collects filing fees from developers as part of the 
process regarding Interstate Land Settlements (ILS). The Interstate 
Land Settlements program protects consumers from fraud and abuse in 
the sale or lease of land. In 1968 Congress enacted the Interstate 
Land Sales Full Disclosure Act, which is patterned after the 
Securities Law of 1933 and requires land developers to register 
subdivisions of 100 or more non-exempt lots and to provide each 
purchaser with a disclosure document called a Property Report. The 
Property Report contains relevant information about the subdivision 
and must be delivered to each purchaser before the signing of the 
contract or agreement. On July 21, 2011, this program was transferred 
to the CFPB from HUD pursuant the Dodd-Frank Act. While CFPB continues 
to study the legal effects of the legislation with respect to the 
transfer of these functions under the Land Sales Act, and the 
collection of fees, the fees are currently being deposited into an 
account maintained by Treasury. The fees collected may be retained and 
are available until expended for the purpose of covering all or part 
of the costs that the Bureau incurs for ILS program operations. 

Pursuant to the Dodd-Frank Act, the CFPB is also authorized to collect 
civil penalties against any person in any judicial or administrative 
action under Federal consumer financial laws. The Act also requires 
the CFPB to maintain a separate fund, known as the Consumer Financial 
Civil Penalty Fund (Civil Penalty Fund). 

Collections of civil penalties will be deposited into the Civil 
Penalty Fund, which will be maintained by the FRBNY. The Civil Penalty 
Fund is in the process of being established. CFPB did not collect any 
civil penalties for fiscal year 2011. 

CFPB also recognizes imputed financing sources. An imputed financing 
source is recognized by the receiving entity for costs that are paid 
by other entities. CFPB recognized imputed costs and financing sources 
in fiscal year 2011 as prescribed by accounting standards. CFPB 
recognizes as an imputed financing source the amount of pension 
expenses for OCC and the Office of Personnel Management (OPM) and post-
retirement benefit expenses for OPM for current employees accrued on 
CFPB's behalf. 

E. Use of Estimates: 

The Bureau has made certain estimates and assumptions relating to the 
reporting of assets, liabilities, revenues, expenses, and the 
disclosure of contingent liabilities to prepare these financial 
statements. Actual results could differ from these estimates. 
Significant transactions subject to estimates include costs regarding 
benefit plans for CFPB employees that are administered by the OPM, 
OCC, FDIC, and the Federal Reserve System and cost allocations among 
the programs on the Statement of Net Cost. 

F. Earmarked Funds: 

FASAB's Statement of Federal Financial Accounting Standards (SFFAS) 
No. 27 Identifying and Reporting Earmarked Funds established certain 
disclosure requirements for funds defined as "earmarked." SFFAS No. 27 
states that "earmarked funds are financed by specifically identified 
revenues, often supplemented by other financing sources, which remain 
available over time. These specifically identified revenues and other 
financing sources are required by statute to be used for designated 
activities, benefits or purposes and must be accounted for separately 
from the Government's general revenues." The standard also presents 
three required criteria for an earmarked fund. Based on the standard's 
criteria, CFPB is an earmarked fund due to its primary funding sources 
being transfers from the Board of Governors, interest on investments, 
and fees from the ILS program. 

G. Fund Balance with Treasury: 

The U.S. Treasury holds funds in the Treasury General Account for CFPB 
which are available to pay agency liabilities and finance authorized 
purchase obligations. Treasury processes cash receipts and 
disbursements on CFPB's behalf, such as fees collected from the 1LS 
program. As discussed in Note 1.D. above, CFPB also maintains an 
account with the FRBNY known as the Bureau Fund. During the year, 
increases to the Bureau Fund are generally comprised of fund transfers 
from the Board of Governors and investment interest. These funds are 
available for transfer to CFPB's Fund balance with Treasury. CFPB's
Fund Balance with Treasury is maintained in a special fund. A special 
fund is established where the law requires collections to be earmarked 
from a specified source to finance a particular program, and the law 
neither authorizes the fund to conduct a cycle of business-type 
operations (making it a revolving fund) nor designates it as a trust 
fund. 

H. Investments: 

CFPB has the authority to invest the funds in the Bureau Fund account 
that are not required to meet the current needs of the Bureau. CFPB 
invests solely in U.S. Treasury securities purchased at a discount on 
the open market, which are normally held to maturity and carried at 
cost. CFPB selects investments with maturities suitable to its needs, 
currently three month Treasury bills. Investments are adjusted for 
discounts. In accordance with generally accepted accounting 
principles, the CFPB records the value of its investments in
U.S. Treasury securities at cost and amortizes the discount on a 
straight-line basis over the term of the respective issues. Interest 
is credited to the Bureau Fund. 

I. Accounts Receivable: 

Accounts receivable consists of amounts owed to CFPB by the public. An 
allowance for uncollectible accounts receivable from the public is 
established when either (1) management determines that collection s 
unlikely to occur after a review of outstanding accounts and the 
failure of all collection efforts, or (2) an account for which no 
allowance has been established is submitted to Treasury for 
collection, which takes place when it becomes 180 days delinquent. 

J. Property, Equipment, and Software, Net: 

Property, Equipment, and Software is recorded at historical cost. It 
consists of tangible assets and software. Under CFPB's property 
management policy equipment acquisitions of $50 thousand or more are 
capitalized and depreciated using the straight-line method over the 
estimated useful life of the asset. Similarly, internal use software, 
software purchased or developed to facilitate the operation of an 
entity's programs, is capitalized for software of $750 thousand or 
more and depreciated using the straight-line method over the estimated 
useful life of the asset. Additionally, for bulk purchases of similar 
items, which individually do not meet the test to capitalize, the 
acquisition is capitalized and depreciated if the depreciated basis of 
the bulk purchase is $250 thousand or more. Applicable standard 
governmental guidelines regulate the disposal and convertibility of 
agency property and equipment. The useful life classifications for 
capitalized assets are as follows: 

Table: 

PP&E Category: Laptop/Desktop Computers 3 
Useful Lives (years): 

PP&E Category: Internal Use Software; 
Useful Lives (years): 5. 

PP&E Category: Mainframe Computer System; 
Useful Lives (years): 7. 

PP&E Category: Servers; 
Useful Lives (years): 7. 

PP&E Category: Telecommunications Equipment; 
Useful Lives (years): 7. 

PP&E Category: Furniture; 
Useful Lives (years): 8. 

PP&E Category: Other Equipment; 
Useful Lives (years): 10. 

[End of table] 

A leasehold improvement's useful life is equal to the remaining lease 
term or the estimated useful life of the improvement, whichever is 
shorter. CFPB has no real property holdings or stewardship or heritage 
assets. Other property items, normal repairs and maintenance are 
charged to expense as incurred. 

K. Advances and Prepaid Charges: 

Advances and prepayments may occur as a result of reimbursable 
agreements, subscriptions, payments to contractors and employees, and 
payments to entities administering benefit programs for CFPB employees.
Payments made in advance of the receipt of goods and services are 
recorded as advances or prepaid charges at the time of prepayment and 
recognized as expenses when the related goods and services are 
received. 

L. Liabilities: 

Liabilities represent the amount of monies likely to be paid by CFPB 
as a result of transactions or events that have already occurred. 
Liabilities may be intragovernmental (claims against the CFPB by other 
Federal agencies) or with the public (claims against CFPB by an entity 
or person that is not a Federal agency). However, no liability can be 
paid if there is no funding. Liabilities for which funds are not 
available, therefore, are classified as not covered by budgetary 
resources. There is no certainty that the funding will be received.
Additionally, the Government, acting in its sovereign capacity, can 
abrogate liabilities. Liabilities not covered by budgetary resources 
on the Balance Sheet are equivalent to amounts reported as components 
not requiring or generating resources on the Reconciliation of Net 
Cost to Budget. 

M. Annual, Sick, and Other Leave: 

Annual leave and credit hours earned by the Bureau's employees, but 
not yet used, are reported as accrued liabilities. The accrued balance 
is adjusted annually to current pay rates. The accrued leave, for 
which funding is not available, is recorded as an unfunded liability. 
Sick and other leave are expensed as taken. 

N. Employee Benefits: 

CFPB employees are enrolled in various benefit programs — medical, 
vision, dental, long-term disability, and life insurance. Employees 
also have options regarding which benefit programs to enroll. 

Benefits for employees transferred pursuant to the Dodd-Frank Act: 

The Dodd-Frank Act provided employees transferred from other agencies 
(Board of Governors, Federal Reserve Banks, OCC, OTS, FDIC, NCUA, and 
HUD) with the ability to continue participation in some of the 
transferring agencies' non-Title 5 benefit programs for a defined 
amount of time (one year from the CFPB transfer date of July 21, 
2011). Title 5 of the U.S. Code outlines benefit programs for the 
majority of the Federal workforce, in which the programs are typically 
administered by OPM. The transferring agencies continue to administer 
the non-Title 5 benefit programs for those transferred employees. Upon 
conclusion of the defined period of time, the employees may enroll in 
non-Title 5 benefit programs sponsored by CFPB. For those employees 
participating in the transferring agencies' programs, CFPB reimburses 
the transferring agencies for the employer's contribution to the 
programs. CFPB may also reimburse the transferring agencies for 
administrative costs pursuant to memoranda of understanding with the 
transferring agencies. These costs are reflected as expenses in CFPB's 
financial statements. 

Benefits for employees not transpired pursuant to the Dodd-Frank Act: 

Employees not transferred to the Bureau pursuant to the Dodd-Frank Act 
are enrolled in benefit programs administered by OPM and also have the 
option to enroll in non-Title 5 benefit programs sponsored by CFPB in 
addition to, or in lieu of, OPM programs. For those employees 
participating in OPM's benefit programs, CFPB records the employer's 
contribution to those programs. OPM records the liability and pays for 
these programs on behalf of all of the Federal agencies participating 
in the programs. For those employees participating in CFPB's non-Title 
5 benefit programs, CFPB directly contracts with vendors to provide 
those services. The Bureau recognizes the employer's contributions for 
these benefits as the benefits are earned. All of these costs are 
reflected as expenses in CFPB's financial statements. 

0. Pension Costs and Other Retirement Benefits: 

CFPB employees are enrolled in several retirement and pension programs 
and post-employment benefits in accordance with the authorities in the 
Dodd-Frank Act. 

Employees transferred from the Federal Reserve, OCC, OTS, FDIC, and 
HUD: 

The Dodd-Frank Act allowed employees transferred from OCC, OTS, FDIC, 
and HUD, under the terms of the Act, to continue participating in the 
pension or retirement plans in which they were enrolled at their 
transferring agency or to affirmatively elect, from January 21, 2012 
to January 20, 2013, to join the Federal Reserve System Retirement 
Plan and the Federal Reserve System Thrift Plan. Many transferee 
employees from these agencies are in the traditional Title 5 
retirement plans (Federal Employee Retirement System (FERS), Civil 
Service Retirement System (CSRS), or CSRS Offset); however, a few 
transferees from OTS are in a non-Title 5 plan (i.e., Pentegra Defined 
Benefit Plan). Transferees from the Federal Reserve are allowed to 
remain in the Federal Reserve System retirement program or to 
affirmatively elect into the appropriate Title 5 retirement plan 
during that same timeframe. For those employees electing to enroll in 
an alternative retirement plan, the enrollment will become effective 
in January 2013. 

CFPB does not report on its financial statements information 
pertaining to the retirement plans covering its employees. Reporting 
amounts such as plan assets, accumulated plan benefits, and related 
unfunded liabilities, if any, is the responsibility of the Federal 
Reserve System, OCC, or OPM as the administrator of their respective 
plans. In all cases, CFPB pays any employer contributions required by 
the plans. Refer to the chart below for information on which agency 
administers each of the retirement plans for CFPB employees. 

OCC, OTS, and FDIC also offered other agency-only savings plans to 
employees. Any transferees who participated in such plans are allowed 
to continue their participation as long as they remain enrolled in 
their current retirement plans. In such cases, CFPB pays any employer 
contributions. Employees who elect to enroll in the Federal Reserve 
retirement plan will not be allowed to continue their participation in 
either the Title 5 Thrift Savings Plan or OCC, OTS, and FDIC agency 
savings plans. 

CFPB may also reimburse the transferring agencies for administrative 
costs pursuant to memoranda of understanding with the transferring 
agencies. These costs are reflected as expenses in CFPB's financial 
statements. 

All other employees of CFPB: 

Employees hired with prior Title 5 Federal Retirement System coverage 
who are not transferees under the Dodd Frank Act are enrolled in the 
appropriate retirement programs administered by OPM — CSRS, CSRS 
Offset, or FERS. These employees also have the option, within one year 
of appointment, to enroll in the Federal Reserve System retirement 
plans. CFPB will begin providing employees the opportunity to enroll 
in the Federal Reserve retirement system plans beginning in November 
2011. For those employees electing to enroll in the Federal Reserve 
System retirement plans, the enrollment will become effective at the 
beginning of the pay period following receipt of their written 
election decision. Employees that were hired from the private sector, 
with no previous coverage under a Title 5 retirement plan, are 
automatically enrolled in the Federal Reserve System's retirement 
plans. CFPB pays the employer's contribution into those plans. 

Table: Pension' Retirement Plans for CFPB Employees: 

Name: Federal Reserve System Retirement Plan;  
Administering Agency: Federal Reserve System. 

Name: Federal Reserve System Thrift Plan; 
Administering Agency: Federal Reserve System. 

Name: Pension Enhancement Plan for Officers of the Board of Governors 
of the Federal Reserve System[A]; 
Administering Agency: Federal Reserve System. 

Name: Retirement Plan for Employees of the Federal Reserve System 
Benefits Equalization Plan[A]; 
Administering Agency: Federal Reserve System. 

Name: Retirement Plan for Employees of the Federal Reserve System 
Benefits Equalization Plan for Section 415 Excess Benefits[A]; 
Administering Agency: Federal Reserve System. 

Name: Thrift Plan for Employees of the Federal Reserve System Benefits 
Equalization Plan[A]; 
Administering Agency: Federal Reserve System. 

Name: Civil Service Retirement System (CSRS); 
Administering Agency: OPM. 

Name: CSRS Offset; 
Administering Agency: OPM. 

Name: Federal Employees' Retirement System (FERS);  
Administering Agency: OPM. 

Name: Thrift Savings Plan; 
Administering Agency: Federal Retirement Thrift Investment Board. 

Name: FDIC Savings Plan; 
Administering Agency: FDIC. 

Name: OCC 401(k); 
Administering Agency: OCC. 

Name: OTS 401(k); 
Administering Agency: OCC. 

Name: OTS Deferred Compensation Plan; 
Administering Agency: OCC. 

Name: Pentegra Defined Benefit Plan (OTS); 
Administering Agency: OCC (administration is through Pentegra). 

[A] This retirement program does not have any CFPB participants for 
fiscal year 2011.  

[End of table] 

The Bureau does not have a separate pension or retirement plan 
distinct from the plans described above. CFPB expenses its 
contributions to the retirement plans of covered employees as the 
expenses are incurred. CFPB reported imputed (unfunded) costs with 
respect to retirement plans (OPM and OCC administered), health 
benefits and life insurance (OPM administered) pursuant to guidance 
received from OPM and OCC. These costs are paid by OPM and OCC and not 
by CFPB. Disclosure is intended to provide information regarding the 
full cost of CFPB's program in conformity with generally accepted 
accounting principles.  

The Bureau recognizes the employer's contributions for the retirement 
plans administered by the Federal Reserve. The Bureau however is 
responsible for transferring the employer's and employee's 
contributions to the Federal Reserve. The FRBNY records the full costs 
and liability and pays for the retirement plans on behalf of the 
Federal Reserve System and CFPB.  

P. Commitments and Contingencies:  

A commitment is a preliminary action that will ultimately result in an 
obligation to the U.S. government if carried through, such as purchase 
requisitions or unsigned contracts.  

A contingency is an existing condition, situation, or set of 
circumstances involving uncertainty as to possible gain or loss to an 
entity that will ultimately be resolved when one or more future 
confirming events occur or fail to occur. The future confirming event 
or events are more likely than not to occur, with the exception of 
pending or threatened litigation and unasserted claims. For pending or 
threatened litigation and unasserted claims, the future confirming 
event or events are likely to occur. In accordance with Statement of 
Federal Financial Accounting Standards No. 5, Accounting for 
Liabilities of the Federal Government, contingent future outflows or 
other sacrifices of resources as a result of past transactions or 
events may be recognized, may be disclosed, or may not be reported at 
all, depending on the circumstances. Contingencies should be 
recognized as a liability when a past transaction or event has 
occurred, a future outflow or other sacrifice of resources is 
probable, and the related future outflow or sacrifice of resources is 
measurable. A contingent liability should be disclosed if any of the 
conditions for liability recognition are not met and there is a 
reasonable possibility that a loss or an additional loss may have been 
incurred. Disclosure should include the nature of the
contingency and an estimate of the possible liability, an estimate of 
the range of the possible liability, or a statement that such an 
estimate cannot be made. 

Note 2. Fund Balance With Treasury: 

Fund Balance with Treasury account balances as of September 30, 2011, 
were as follows (In Dollars): 

Fund Balance:
Special Fund: $18,673,308; 
Total: $18,673,308. 

Status of Fund Balance with Treasury: 
Unobligated Balance, Available: $47,719,902
Unobligated Balance, Unavailable: [Empty]; 
Obligated Balance Not Yet Disbursed: $51,583,044; 
Investments (at Cost) (See Note 3): ($80,297,617); 
Cash Held in the Bureau Fund at the Federal Reserve: ($332,021); 
See Note 4; 

Total: $18,673,308. 

[End of table] 

Unobligated Balance Available represents the amount of budget 
authority that can be used to enter into new obligations. This amount, 
or a portion thereof, may be administratively dedicated for specific 
purposes that have not yet been obligated. The Obligated Balance Not 
Yet Disbursed represents amounts designated for payment of goods and 
services ordered but not received or goods and services received but 
for which payment has not yet been made. 

Note 3. Investments: 

As discussed further in Note 4, the Board of Governors at the 
discretion of the CFPB can invest the portion of the Bureau Fund that 
is not, in the judgment of the Bureau, required to meet the current 
needs of the Bureau. When directed by CFPB, the FRBNY will utilize the 
funds available to purchase investments on the open market CFPB only 
invests in three month U.S. Treasury bills. The market value is 
determined by the secondary U.S. Treasury market and represents the 
value an individual investor is willing to pay for these securities, 
as of September 30, 2011. 

Investments as of September 30, 2011 consist of the following (In 
Dollars):  

Intragovernmental Securities: Marketable: 
Cost: $80,297,617; 
Amortization Method: Straight Line; 
Amortized Premium) Discount: $1,189
Investments Net: $80,298,806; 
Market Value Disclosure: $80,297,603. 

Intragovernmental Securities: Total: 
Cost: $80,297,617; 
Amortized Premium) Discount: $1,189
Investments Net: $80,298,806; 
Market Value Disclosure: $80,297,603. 

[End of table] 

Note 4. Cash And Other Monetary Assets: 

CFPB has both cash and investments held outside of Treasury. When 
transfers are made from the Board of Governors to CFPB, the funds are 
deposited into an account held within the FRBNY referred to as the 
Bureau Fund. The account has a required minimum balance of $250,000 
and any funds in excess of this minimum are invested in Treasury 
securities in increments of $100,000 by the FRBNY utilizing an 
automatic investment process. CFPB requests cash disbursement from the 
Bureau Fund to the CFPB's Fund Balance with Treasury based on 
projections of future expenditures. 

Funds obtained by, transferred to, or credited to the Bureau Fund are 
immediately available to CFPB and under the control of the Director, 
and shall remain available until expended, to pay for the expenses of 
the Bureau in carrying out its duties and responsibilities. Funds 
obtained by or transferred to the Bureau Fund shall not be considered 
to be Government funds or appropriated monies. These funds are not 
subject to apportionment for purposes of chapter 15 Title 31, United 
States Code, or under any other authority. 

Account balance as of September 30, 2011 (In Dollars): 

Cash: Cash Held in the Bureau Fund at the Federal Reserve: $332,021; 
Total Cash and Other Monetary Assets: $332,021. 

[End of table] 

Note 5. Property, Equipment and Software, Net: 

Schedule of Property, Equipment, and Software as of September 30, 2011 
(In Dollars): 

Major Class: Equipment; 
Acquisition Cost: $997,719; 
Accumulated Amortization/Depreciation: $108,490; 
Net Book Value: $889,229. 

Major Class: Internal Use Software; 
Acquisition Cost: $978,872; 
Accumulated Amortization/Depreciation: $97,887; 
Net Book Value: $880,985. 

Major Class: Total; 
Acquisition Cost: $1,976,591; 
Accumulated Amortization/Depreciation: $206,377; 
Net Book Value: $1,770,214. 

[End of table] 

Note 6. Advances And Prepayments:  

Advances and Prepayment balance as of September 30, 2011 were as 
follows (In Dollars): 

With the Public: Advances and Prepayments: $14,689,107; 
Total Public Advances and Prepayments: $14,689,107. 

[End of table] 

The prepayment primarily represents a payment of $14.4 million to the 
Federal Reserve System for Federal Reserve System retirement plans to 
cover the time in service for employees transferred to under Section 
1064 of the Dodd-Frank Act who were previously covered by an OPM or 
OTS retirement plan. Pursuant to Section 1064 of the Dodd-Frank Act, 
employees transferred to CFPB may enroll Federal Reserve System 
Retirement Plan and Federal Reserve System Thrift Plan. If the 
transferred employee chooses to enroll in these plans, CFPB has to 
transfer to the Federal Reserve System Retirement Plan an amount 
determined by the Board of Governors in consultation with CFPB to 
reimburse the Federal Reserve System Retirement Plan for the costs of 
providing the transferred employees' benefits under this plan. The 
$14.4 million payment was based on a projection of CFPB employees 
likely to enroll in the Federal Reserve System Retirement Plan. A 
memorandum of understanding between the Board of Governors and the 
Bureau established that the Board of Governors would provide the 
Bureau a final cost estimate for this payment by September 30, 2014. 
This prepayment represents the amount agreed to by the Board of 
Governors and Bureau to fund the Federal Reserve Trust until the final 
cost estimate is complete. The amount is calculated using actuarial 
assumptions. Other prepayments include subscriptions and other 
miscellaneous items.  

Note 7. Other Liabilities: 

Other liabilities as of September 30, 2011 consist of the following
(In Dollars): 

Intragovernmental Liabilities: 

Payroll Taxes Payable: $257,336; 
Benefits Payable: $894,041; 
Total Intragovernmental Liabilities: $1,151,377. 

With the Public: 
Employee Withholdings: $14,536; 
Employer Benefits Contributions: $817,293; 
Accrued Funded Payroll: $4,315,674; 
Unfunded Leave: $3,982,285; 
Total Public Liabilities: $9,129,788. 

All other liabilities are considered current liabilities. 

[End of table] 

Note 8. Liabilities Not Covered By Budgetary Resources: 

Liabilities not covered by budgetary resources as of September 30, 
2011 consists of unfunded leave of $3,982,285. 

Note 9. Commitments And Contingencies: 

As described in Note 6, CFPB is responsible for reimbursing the 
Federal Reserve Retirement Plan for certain costs related to 
employees, transferred to CFPB under Section 1064 of the Dodd Frank 
Act, that enroll in the Plan. As described in note 1.0. employees will 
be given the opportunity to elect to enroll into the Plan from
January 21, 2012 to January 20, 2013, therefore the number of 
employees that will elect to enroll in the Plan is not known as of 
September 30, 2011. Consequently, a contingent liability and related 
expense are not recognized as of September 30, 2011, because the 
amount to be reimbursed is not measurable. 

Note 10. Intragovernmental Costs And Exchange Revenue:  

Intragovernmental costs and intragovernmental exchange revenue 
represent goods and services provided between two reporting entities 
within the Federal government, and are in contrast to those with non-
federal entities (the public). Such costs and revenue are summarized 
as follows:  

By Program (In Dollars): 

Consumer Education and Engagement (Including Response Center):  
Intragovernmental Costs: $9,947,744; 
Public Costs: $12,883,894; 
Total Program Costs: $22,831,638; 
Net Consumer Education and Engagement Cost: $22,831,638. 

Research, Markets, and Regulations: 
Intragovernmental Costs: $6,747,223; 
Public Costs: $8,738,715; 
Total Program Costs: $15,485,938; 
Net Research, Markets, and Regulations Costs: $15,485,938. 

Supervision, Enforcement, Fair Lending and Equal Opportunity:  
Intragovernmental Costs: $20,482,699; 
Public Costs: $26,528,319; 
Total Program Costs: $47,011,018; 
Net Supervision, Enforcement, Fair Lending and Equal Opportunity Cost: 
$47,011,018. 

Total Intragovernmental Costs: $37,177,666; 
Total Public Costs: $48,150,928; 
Total Program Costs: $85,328,594; 
Less: Total Public Earned Revenue: [Empty]; 
Total Program Net Cost: $88,328,591. 

[End of table] 

Note 11. Beginning Balances: 

CFPB was established on July 21, 2010 and had minimal activity in 
fiscal year 2010, which related primarily to an initial fund transfer 
received from the Federal Reserve Bank. 

All amounts are for the period ended September 30, 2010 (In Dollars): 

Funds Received from Federal Reserve: $18,400,000; 
Operating Costs: ($143,345); 
Cumulative Results of Operations: $18,256,655; 
Funds Available for Obligation: $18,400,000; 
Obligations Incurred: ($9,200,000); 
Unobligated Balance: $9,200,000. 

[End of table] 

Note 12. Apportionment Categories Of Obligations Incurred: 

All obligations incurred are characterized as Category C, Exempt from 
Apportionment (i.e. not apportioned), on the Statement of Budgetary 
Resources. Obligations incurred and reported in the Statement of 
Budgetary Resources in fiscal year 2011 consisted of the following (In 
Dollars): 

Direct Obligations, Category C: $123,329,760; 
Total Obligations Incurred: $123,329,760. 

[End of table] 

Note 13. Undelivered Orders At The End Of The Period: 

Statement of Federal Financial Accounting Standards No. 7, Accounting 
for Revenue and Other Financing Sources and Concepts for Reconciling 
Budgetary and Financial Accounting, states that the amount of 
budgetary resources obligated for undelivered orders at the end of the 
period should be disclosed. CFPB's Undelivered Orders represent 
obligated amounts designated for payment of goods and services ordered 
but not received. 

Undelivered Orders as of September 30, 2011 were $36,267,469. 

Note 14. Reconciliation Of Net Cost To Budget: 

CFPB has reconciled its budgetary obligations and non-budgetary 
resources available to its net cost of operations for the year ended 
September 30, 2011 (In dollars): 

Resources Used to Finance Activities: 

Budgetary Resources Obligated, Obligations Incurred: $123,329,760; 
Less: Spending Authority From Offsetting Collections and Recoveries: 
[Empty]; 
Less: Offsetting Receipts: [Empty]; 
Net Obligations: $123,329,760; 
Other Resources: Imputed Financing From Costs Absorbed By Others: 
$1,693,752; 
Total Resources Used to Finance Activities: $125,023,512. 

Resources Used to Finance Items Not Part of the Net Cost of 
Operations:  

Change In Budgetary Resources Obligated For Goods, Services and 
Benefits Ordered But Not Yet Provided: ($41,899,921); 
Resources That Finance the Acquisition of Assets: ($1,976,591); 
Total Resources Used to Finance Items Not Part of Net Cost of 
Operations: ($43,876,512); 
Total Resources Used to Finance the Net Cost of Operations: 
$81,147,000. 

Components of the Net Cost of Operations That Will Not Require or 
Generate Resources in the Current Period:  

Components Requiring or Generating Resources in Future Periods 
Increase In Annual Leave Liability: $3,982,285; 
Components Not Requiring or Generating Resources: 
Depreciation and Amortization: $206,377; 
Other: ($7,068); 
Total Components of Net Cost of Operations That Will Not Require or 
Generate Resources In The Current Period: $4,181,594; 
Net Cost of Operations: $85,328,594. 

[End of table] 

Note 15. President's Budget:  

Statement of Federal Financial Accounting Standards No. 7, Accounting 
for Revenue and Other Financing Sources and Concepts for Reconciling 
Budgetary and Financial Accounting, requires explanations of material 
differences between amounts reported in the Statement of Budgetary 
Resources and the actual balances published in the Budget of the 
United States Government (President's Budget). However, the 
President's Budget that will include fiscal year 2011 actual budgetary 
execution information has not yet been published. Therefore the 
reconciliation of fiscal year 2011 balances will be reported next year 
since CFPB is a first-year entity.  

[End of section] 

Appendix I: Management's Report on Internal Control over Financial 
Reporting: 

Consumer Financial Protection Bureau: 
1801 L Street, NW: 
Washington, DC 20036: 

November 9, 2011: 

Comptroller General of the United States: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Dodaro, 

As required by § 1017 of the Dodd-Frank Act, 12 U.S.C. § 
5497(a)(4)(D), the Consumer Financial Protection Bureau (CFPB) 
provides this management assertion regarding the effectiveness of 
internal controls that apply to financial reporting by the CFPB using 
the standards established in section 3512(c) of Title 31, United 
States Code (commonly known as the Federal Managers' Financial 
Integrity Act). 

The CFPB internal controls over financial reporting are processes 
implemented by those charged with governance, by management, and by 
other personnel. The objectives of the internal control are to provide 
reasonable assurance that transactions are 1) properly recorded, 
processed, and summarized to permit the preparation of financial 
statements in accordance with U.S. generally accepted accounting 
principles, and assets are safeguarded against loss from unauthorized 
acquisition, use, or disposition and 2) executed in accordance with 
laws governing the use of budget authority and other laws that could 
have a direct and material effect on the financial statements. 

CFPB management is responsible for establishing and maintaining 
effective internal controls over financial reporting. The CFPB 
conducted its assessment of the effectiveness of these internal 
controls based on the criteria required by the Dodd-Frank Act. Based 
on this evaluation, the CFPB can provide reasonable assurance that its 
internal controls over financial reporting as of September 30, 2011 
were operating effectively and that no material weaknesses were found 
in the design or operation of these internal controls. 

Signed by: 

Raj Date: 
Special Advisor to the Secretary of the Treasury for the Consumer 
Financial Protection Bureau: 

Signed by: 

Stephen Agostini: 
Chief Financial Officer: 
Consumer Financial Protection Bureau: 

Signed by: 

Freddy Velez: 
Actin Deputy Chief Financial Officer: 
Consumer Financial Protection Bureau: 

[End of section] 

Appendix II: Comments from the Bureau of Consumer Financial Protection: 

Consumer Financial Protection Bureau: 
1801 L Street, NW: 
Washington, DC 20036: 

November 9, 2011: 

Mr. Steven J. Sebastian: 
Director, Financial Management and Assurance: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Sebastian, 

I appreciate the opportunity to respond to the Government 
Accountability Office's (GAO) draft audit report titled, Financial 
Audit: Bureau of Consumer Financial Protection:c Fiscal Year 2011 
Financial Statements (GA0-12-186), and want to thank you and your 
staff for your dedicated efforts and for working with us to meet the 
audit requirements in the short time available. 

We are pleased that, in this first full fiscal year, GAO's auditors 
rendered an "unqualified" or "clean" audit opinion, which means they 
found that the CFPB financial statements are presented fairly, in all 
material respects, and in conformity with U.S. generally accepted 
accounting principles; that CFPB maintained, in all material respects, 
effective internal control over financial reporting; and that there 
were no instances of reportable noncompliance with laws and 
regulations tested by GAO. 

This first year was challenging for the CFPB, and I am proud of how we 
have met that challenge. Our primary goal was the establishment and 
standing-up of CFPB operations one year after enactment of the
Dodd-Frank Act. It took considerable effort to achieve this goal — 
from developing an organization structure, to hiring personnel, to 
establishing required support structures. Obtaining an unqualified 
audit opinion in CFPB's first full fiscal year is a true testament to 
the efforts of the CFPB management and staff. 

In fiscal year 2012, the CFPB will continue to work to enhance our 
internal controls and ensure the reliability of CFPB's financial 
reporting, operating performance, and public confidence in the 
Bureau's work. The CFPB looks forward to working with GAO in future 
audits and truly appreciates GAO's work over the past fiscal year. 

If you have any questions relating to this response, please contact 
Freddy Velez, Acting Deputy Chief Financial Officer. 

Signed by: 

Raj Date: 
Special Advisor to the Secretary of the Treasury for the Consumer 
Financial Protection Bureau: 

[End of section] 

Footnotes: 

[1] Pub. L. No. 111-203, Title X, 124 Stat. 1955, signed into law on 
July 21, 2010. 

[2] See section 1061 of the Dodd-Frank Act, codified at 12 U.S.C. § 
5581. Also, Title III of the Dodd-Frank Act provided for the 
abolishment of the Office of Thrift Supervision and the transfer of 
its other functions to the Office of the Comptroller of the Currency, 
the Board of Governors of the Federal Reserve System, and the Federal 
Deposit Insurance Corporation. 

[3] A material weakness is a deficiency, or a combination of 
deficiencies, in internal control such that there is reasonable 
possibility that a material misstatement of the entity's financial 
statements will not be prevented or detected and corrected on a timely 
basis. A significant deficiency is a deficiency, or 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. A deficiency in internal control exists when the 
design or operation of a control does not allow management or 
employees, in the normal course of performing their assigned 
functions, to prevent or detect and correct misstatements on a timely 
basis. 

[End of section] 

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