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GAO-14-416R 1 (2014-05-12)

handle is hein.gao/gaobaahwx0001 and id is 1 raw text is: G A U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 May 12, 2014 The Honorable Mary Jo White Chair U.S. Securities and Exchange Commission Management Report: Improvements Needed in SEC's Internal Controls and Accounting Procedures Dear Ms. White: On December 16, 2013, we issued our report containing our opinion on the U.S. Securities and Exchange Commission's (SEC) and its Investor Protection Fund's (IPF)1 fiscal years 2013 and 2012 financial statements.2 Our December 2013 report also included (1) our evaluation of SEC's compliance with selected provisions of applicable laws, regulations, contracts, and grant agreements during fiscal year 2013 and (2) our opinion on the effectiveness of SEC's internal control over financial reporting as of September 30, 2013, including a significant deficiency in SEC's internal control over financial reporting resulting from continuing and new deficiencies in SEC's internal control over information security.3 In April 2014, we issued a separate report on the information security issues identified during our fiscal year 2013 audit, including the new issues that collectively contributed to the significant deficiency, along with associated recommendations for corrective actions.4 The purpose of this report is to (1) communicate other less significant deficiencies we identified in SEC's internal controls during our fiscal year 2013 audit, along with our related 1IPF was established in 2010 to fund the activities of SEC's whistleblower award program and the SEC Office of Inspector General suggestion program for SEC employees. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 922, 124 Stat. 1376, 1841 (2010) (classified at 15 U.S.C. § 78u-6). IPF is a separate fund reported on in SEC's and IPF's financial statements that is presented as a segment of SEC financial activity. Accordingly, IPF's financial transactions are also included in SEC's financial statements. However, the significant deficiency discussed in our audit report (GAO-1 4-21 3R) pertains to SEC's information security but not that of IPF because of the nature of IPF's financial transactions during fiscal year 2013. 2GAO, Financial Audit. Securities and Exchange Commission's Financial Statements for Fiscal Years 2013 and 2012, GAO-14-213R (Washington, D.C.: Dec. 16,2013). 3A significant deficiency is a deficiency, or a 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 material weakness is a deficiency, or combination of deficiencies, in internal control 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 control deficiency 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. 4GAO, Information Security. SEC Needs to Improve Controls over Financial Systems and Data, GAO-1 4=419 (Washington, D.C. Apr. 17, 2014). GAO-14-416R SEC Management Report Page 1

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