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GAO-13-274R 1 (2013-04-04)

handle is hein.gao/gaobachbi0001 and id is 1 raw text is: A GAO Accountablty *Integrity * Reliability United States Government Accountability Office Washington, DC 20548 April 4, 2013 The Honorable Elisse B. Walter Chairman U.S. Securities and Exchange Commission Subject: Management Report: Improvements Needed in SEC's Internal Controls and Accounting Procedures Dear Ms. Walter: On November 15, 2012, 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 2012 and 2011 financial statements.2 Our November 2012 report also included (1) our opinion on the effectiveness of SEC's internal control over financial reporting as of September 30, 2012, and our evaluation of SEC's compliance with selected provisions of laws and regulations during fiscal year 2012,3 and (2) the two significant deficiencies4 we identified in SEC's internal control over financial reporting on its budgetary resources and property and equipment. The purpose of this report is to (1) present additional information regarding the significant deficiencies we identified in our November 2012 report on the results of our SEC financial audit,5 along with related new recommendations; (2) communicate other less significant 1IPF was established in 2010 to fund the activities of SEC's whistleblower award program and the SEC Office of Inspector General's suggestion program for SEC employees. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 922(a), 124 Stat. 1376, 1844 (2010) (codified at 15 U.S.C. § 78u-6(g)(2)). IPF is a separate fund within SEC and its financial statements present a segment of SEC financial activity. Accordingly, IPF's financial transactions are also included in SEC's financial statements. However, the significant deficiencies discussed in our audit report (GAO-1 3-122R) pertain to SEC's financial reporting but not that of IPF because of the nature of IPF's financial transactions during fiscal year 2012. 2GAO, Financial Audit. Securities and Exchange Commission Fiscal Years 2012 and 2011 Financial Statements, GAO-13=122R (Washington, D.C.: Nov. 15, 2012). 3GAO-1 3-122R. 4A 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. In contrast, 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. 5See enc. I for the list of open recommendations relating to continuing control deficiencies that contributed to the significant deficiencies over financial reporting discussed in our audit opinion report, GAO-1 3-122R. GAO-13-274R SEC Management Report Page 1

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