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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

November 12, 2010

MEMORANDUM

TO: Jacqueline Berrien
Chair
FROM: Milton A. Mayo, Jr.
Acting Inspector General
signature_milton_mayo
SUBJECT: Audit of the Equal Employment Opportunity Commissionís Fiscal Year 2010 Financial Statements (OIG Report No. 2010-03-FIN)


The Office of Inspector General (OIG) contracted with the independent certified public accounting firm of Harper, Rains, Knight and Company, P.A (HRK) to audit the financial statements of the U.S. Equal Employment Opportunity Commission (EEOC) for fiscal year 2010. The contract required that the audit be done in accordance with U.S. generally accepted government auditing standards; Office of Management and Budgetís Bulletin 07-04, Audit Requirements for Federal Financial Statements, and the Government Accountability Office/Presidentís Council on Integrity and Efficiencyís Financial Audit Manual.

HRK issued an unqualified opinion on EEOCís FY 2010 financial statements. In its Report on Internal Control, HRK noted two areas involving internal control and its operation that were considered to be significant deficiencies. These included time and attendance controls and controls over revenue and receivables. In its Report on Compliance with Applicable Laws and Regulations, HRK noted no instances of non compliance with certain laws and regulations applicable to the agency.

In connection with the contract, OIG reviewed HRKís report and related documentation and inquired of its representatives. Our review, as differentiated from an audit in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, opinions on EEOCís financial statements or conclusions about the effectiveness of internal controls or on whether EEOCís financial management systems substantially complied with FFMIA; or conclusions on compliance with laws and regulations. HRK is responsible for the attached auditorís report dated November 10, 2010 and the conclusions expressed in the report. However, OIGís review disclosed no instances where HRK did not comply, in all material respects, with generally accepted government auditing standards.

EEOC management was given the opportunity to review the draft report and to provide comments. Management comments are included with the report as an attachment.

cc: Claudia Withers
Jeffrey A. Smith
Raj Mohan
Nicholas Inzeo
John Schmelzer
Mary McIver
Lisa Williams
Kimberly Hancher
Peggy Mastroianni
Justine Lisser
Todd Cox


Harper, Rains, Knight and Company (Logo)

Report of Independent Auditors

 

Inspector General
Equal Employment Opportunity Commission

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of the U.S. Equal Employment Opportunity Commission (EEOC), as of September 30, 2010, and the related consolidated statements of net cost and changes in net position, and combined statement of budgetary resources, for the year then ended. These financial statements are the responsibility of EEOC management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of EEOC as of September 30, 2009 were audited by other auditors whose report, dated November 13, 2009, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and OMB Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as amended. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of EEOC as of September 30, 2010, and its net cost of operations, changes in net position, and budgetary resources for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Report on Internal Control over Financial Reporting

In planning and performing our audit, we considered EEOCís internal control over financial reporting and compliance. We did this in order to determine our audit procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on internal control. We limited our internal control testing to those controls necessary to achieve the objectives described in OMB Bulletin No. 07-04, as amended. We did not test all internal controls relevant to the operating objectives as broadly defined by the Federal Managers' Financial Integrity Act of 1982. Providing an opinion on internal control was not the objective of our audit. Accordingly, we do not express an opinion on EEOCís internal control over financial reporting and compliance or on managementís assertion on internal control included in Managementsí Discussion and Analysis. However, our work identified the need to improve certain internal controls, as defined above, they are described in Exhibit 1. These deficiencies in internal control, although not considered material weaknesses, represent significant deficiencies in the design or operation of internal control, which adversely affect the entityís ability to meet their internal control objectives or meet OMB criteria for reporting matters under FMFIA.

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 misstatements on a timely basis. Our consideration of the internal control over financial reporting would not necessarily disclose all deficiencies that might be a significant deficiency. A significant deficiency is a deficiency in internal control, or a combination of deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected. Our consideration of the internal control over financial reporting would not necessarily disclose all significant deficiencies that might be a material weakness. A material weakness is a significant deficiency, or combination of significant deficiencies, that result in a more than remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Because of inherent limitations in internal controls, misstatements, losses, or non-compliance may nevertheless occur and not be detected.

Report on Compliance with Applicable Laws and Regulations

The management of EEOC is responsible for complying with laws and regulations applicable to EEOC. As part of obtaining reasonable assurance about whether EEOCís financial statements are free of material misstatement, we performed tests of its compliance with selected provisions of laws and regulations including laws governing the use of budgetary authority and government-wide policies identified in OMB Bulletin No. 07-04, as amended, non-compliance with which could have a direct and material effect on the determination of consolidated and combined financial statements. Our tests disclosed no instances of noncompliance with laws and regulations which would be reportable under U.S. generally accepted government auditing standards or OMB audit guidance.

We limited our tests of compliance to the provisions of laws and regulations referred to in the preceding paragraph. Providing an opinion on compliance with those provisions was not an objective of our audit. Accordingly, we do not express such an opinion.

Other Information

Managementís Discussion and Analysis (MD&A) is not a required part of the financial statements but is supplementary information required by the Federal Accounting Standards Advisory Board and OMB Circular A-136, Financial Reporting Requirements. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the MD&A. However, we did not audit the information and accordingly, we express no opinion on it.

Our audits were conducted for the purpose of forming an opinion on the financial statements of EEOC taken as a whole. The other accompanying information included in this performance and accountability report is presented for purposes of additional analysis and is not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them.

This report is intended solely for the information and use of the management of the Equal Employment Opportunity Commission, the U.S. Office of Management and Budget, the U.S. Government Accountability Office, and the U.S. Congress and is not intended to be and should not be used by anyone other than these specified parties.

hrk_signature

November 10, 2010

Harper, Rains, Knight & Company, P.A. ē Certified Public Accountants âÄ¢ Consultants
One Hundred Concourse ē 1052 Highland Colony Parkway, Suite 100 ē Ridgeland, Mississippi 39157
Telephone 601.605.0722 ē Facsimile 601.605.0733 ē www.hrkcpa.com


Exhibit 1

Significant Deficiencies

1. Lack of Adequate Controls over Time and Attendance

In fiscal years (FY) 2008 and 2009, a significant deficiency relating to the lack of adequate controls over time and attendance was reported.

The following recommendations were made to management:

  • The EEOC Office of Human Resources (OHR) should review and refine controls in place over time and attendance reporting to ensure all employees report accurate and complete information to time keepers.

  • OHR should implement a policy requiring timesheets with incorrect or incomplete information to be returned to employees for correction before certifying time and attendance information in EEOCís online timekeeping system.

In response to the prior year finding, OHR indicated the updated Time Attendance Guidance included policy and procedures to address the deficiencies and that follow-up with timekeepers and certifiers was performed. In addition, OHRís response indicated EEOC had purchased a web based time and attendance system with a planned implementation of January 2011.

During FY 2010, EEOC continued to experience difficulties in providing support for recorded time and attendance, including providing time and attendance support that was incomplete, for the incorrect pay period and not properly approved.

We noted the following during our testing:

  • 3 instances in which no information was provided for the employee
  • 7 instances in which the Bi-weekly Labor Hours Distribution Worksheets provided were for the wrong pay period
  • 5 instances in which Bi-weekly Labor Hours Distribution Worksheets did not indicate pay period end date
  • 20 instances in which the SF-71 Request for Leave forms were not properly approved.

Based on the knowledge OHR is implementing a new system in FY2011, we make the following recommendations:

  • Integrate and document the existence of controls in the web based time and attendance system, set for implementation in January 2011, which address and mitigate the time and attendance deficiencies identified in the current year and two previous years.
  • Establish a policy and procedure to perform internal audits of the EEOC time and attendance system for proper implementation and application of all EEOC policies and procedures over the recording and maintaining of time and attendance.

Managementís Response: Management concurs with the finding and recommendation. See appendix B for managementís detailed response.

2. Lack of Adequate Controls over Revenue and Receivables

In fiscal years (FY) 2008 and 2009, a significant deficiency relating to the lack of adequate controls over revolving fund (RF) revenue and receivables was reported.

It was recommended to management that the Revolving Fund Division (RFD) ensure documentation is maintained to support all transactions recorded in the general ledger.

During fiscal year (FY) 2010, EEOC continued to experience difficulties providing complete and timely documentation supporting RF transactions recorded in the general ledger.

We noted the following during our testing:

  • 4 instances in which the project code on the invoice does not match the document number recorded in Momentum.
  • 24 instances in which the invoices provided do not provide complete support for the recorded transaction in Momentum.

Per interviews with RFD personnel, we were informed that due to systems limitations with the contracted systems to record on-line registrations and payment and the core accounting system, additional manual processes were required to be performed by RFD personnel on a daily basis in order to maintain accurate accounting records over the RF revenue and accounts receivable activity.

Recognizing the manual nature of certain RF revenue and accounts receivable activities, we make the following recommendations:

  • RFD and CFO management should work with the third party contractors of EEOCís on-line registration and payment and core accounting systems to identify potential solutions to systems limitations regarding the recording of RF revenue and accounts receivable transactions.
  • RFD management should continue working with the third party contractor of EEOCís on-line registration and payment system to ensure accurate and complete documentation is maintained and readily available to support all RF transactions recorded in the general ledger.
  • RFD management should document all manual procedures performed to maintain proper RF revenue and accounts receivable balances.
  • RFD management should maintain complete documentation and justifications for all manual RF transactions entered in Momentum by RFD personnel.

Managementís Response: Management generally concurs with the finding and recommendation. See appendix B for managementís detailed responses. While the OCFO concurs with the overall finding, they take exception to their inclusion, as well as the inclusion of the core accounting system, Momentum, in the recommendation and request "the recommendation in the first bullet needs to drop the reference to CFO management and core accounting system limitations."

Auditor Response: Ultimately the OCFO is responsible for all transactions recorded in Momentum and therefore their inclusion in the recommendation is considered necessary to resolve the finding.


Appendix A

Status of Managementís Actions on Prior Year Recommendations

Recommendation Status as of
11-10-2010

OHR should review and refine controls in place over time-and-attendance reporting to ensure that all employees report accurate and complete information to timekeepers. Additionally, OHR should implement a policy requiring return of timesheets with incorrect or incomplete information to employees for correction before certification of time-and-attendance information in EEOCís online timekeeping system.

Unresolved:

Repeat Condition

The CFO, along with the Director of the RFD, should review accrual procedures in place and refine these procedures to ensure that all revenue not earned at yearend is properly classified as deferred in the financial statements.

Resolved

The CFO should work with the Director of RFD to ensure that documentation is maintained to support all transactions recorded in the general ledger.

Unresolved:

Repeat Condition

The CFO should coordinate with the Director of RFD to ensure that timely, complete, and accurate reconciliations are performed between the general ledger and the subsidiary ledger and the differences identified are researched and resolved.

Resolved