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GAO-18-334R 1 (2018-04-05)

handle is hein.gao/gaobacphl0001 and id is 1 raw text is: cAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 April 5, 2018 Mr. David Caperton Special Counsel, Legal Division Board of Governors of the Federal Reserve System Management Report: Areas for Improvement in the Federal Reserve Banks' Information System Controls Dear Mr. Caperton: In connection with our audit of the consolidated financial statements of the U.S. government,1 we audited and reported on the Schedules of Federal Debt Managed by the Bureau of the Fiscal Service (Fiscal Service) for the fiscal years ended September 30, 2017, and 2016.2 As part of these audits, we performed a review of information system controls over key financial systems maintained and operated by the Federal Reserve Banks (FRB) on behalf of the Department of the Treasury (Treasury) that are relevant to the Schedule of Federal Debt. As we reported in connection with our audits of the Schedules of Federal Debt for the fiscal years ended September 30, 2017, and 2016, although certain internal controls could be improved, Fiscal Service maintained, in all material respects, effective internal control over financial reporting relevant to the Schedule of Federal Debt as of September 30, 2017, based on criteria established under 31 U.S.C. § 3512(c), (d), commonly known as the Federal Managers' Financial Integrity Act. Those controls provided reasonable assurance that misstatements material in relation to the Schedule of Federal Debt would be prevented, or detected and corrected, on a timely basis. However, we identified a significant deficiency in Fiscal Service's internal control over financial reporting, which although not a material weakness, is important enough to merit the attention of those charged with governance of Fiscal Service.3 Specifically, during our fiscal year 2017 audit, we identified new deficiencies in information system controls that along with unresolved control deficiencies from prior audits collectively represent a significant deficiency in Fiscal Service's internal control over financial reporting. We plan to issue a separate report to the Commissioner of the Bureau of the Fiscal 131 U.S.C. § 331 (e)(2). Because the Bureau of the Fiscal Service is a bureau within the Department of the Treasury, federal debt and related activity and balances that it manages are also significant to the consolidated financial statements of the Department of the Treasury (see 31 U.S.C. § 3515(b)). 2GAO, Financial Audit. Bureau of the Fiscal Service's Fiscal Years 2017 and 2016 Schedules of Federal Debt, GAO- 18=134 (Washington, D.C.: Nov. 9, 2017). 3A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a 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 a combination of deficiencies, in internal control over financial reporting 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. GAO-18-334R Information System Controls at FRBs Page I11

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