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GAO-19-304R 1 (2019-03-26)

handle is hein.gao/gaobadvrw0001 and id is 1 raw text is: cAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 March 26, 2019 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 Department of the Treasury's (Treasury) Bureau of the Fiscal Service (Fiscal Service) for the fiscal years ended September 30, 2018 and 2017.2 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) 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, 2018 and 2017, although 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, 2018, 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 to the Schedule of Federal Debt would be prevented, or detected and corrected, on a timely basis. However, during our fiscal year 2018 audit, we continued to identify deficiencies in Fiscal Service's information system controls that, along with unresolved control deficiencies from prior audits, collectively represent a significant deficiency in internal control over financial reporting.3 Although the deficiencies are not a material weakness, they warrant the attention of those charged with governance of Fiscal Service.4 We plan to issue a separate report to the Commissioner of the Bureau of the Fiscal Service on the results of our review of information 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 2018 and 2017 Schedules of Federal Debt, GAO- 19-113 (Washington, D.C.: Nov. 8, 2018). 3A 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. 4A 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. GAO-1 9-304R Information System Controls at FRBs Page 1

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