Equal Employment Opportunity Commission
Independent Auditor’s Report on Internal Control
We audited the Balance Sheets of the U.S. Equal Employment Opportunity Commission (EEOC) as of September 30, 2007, and 2006, and the related Statements of Net Cost, Changes in Net Position, and Budgetary Resources for the years then ended. We have issued our report thereon dated November 2, 2007. We conducted our audits in accordance with auditing standards generally accepted in the United States of America; standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal Financial Statements.
In planning and performing our audits, we considered EEOC’s internal control over financial reporting as a basis for designing audit procedures for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of EEOC’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of EEOC’s internal control over financial reporting.
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. A significant deficiency is a control deficiency, or combination of control 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 by the entity’s internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control.
Our consideration of internal control over financial reporting was for the limited purpose described above and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. We did, however, note two matters involving internal control and its operation that we considered to be significant deficiencies.
EEOC employees did not follow the agency’s policy regarding correct recording of work hours and proper allocation of hours among functions during Fiscal Year (FY) 2007. In addition, timekeepers and certifiers did not perform thorough reviews of information entered into EEOC’s timekeeping system to ensure that it accurately reflected work performed by employees.
Per EEOC policy, each employee is required to complete a Cost Accounting Bi-weekly Timesheet each pay period. The employee is required to record time worked and allocate time among activity codes representing EEOC program areas. In addition, certifiers are expected to review and approve the assignment of hours to activity codes.
Failure to properly record hours worked and activity codes on the Bi-weekly Timesheet along with entering incorrect data into EEOC’s accounting system could lead to improper calculation of accrued annual leave liability as presented on the Balance Sheet as well as incorrect program cost allocation on the Statement of Net Cost.
Recommendation: We recommend that the EEOC Office of Human Resources (OHR) review and refine controls in place over time-and-attendance reporting to ensure that all employees report accurate and complete information to timekeepers. Additionally, we recommend that OHR implement a policy requiring return of timesheets with incorrect or incomplete information to employees for correction before certification of time-and-attendance information in EEOC’s online timekeeping system.
Management Response: EEOC management’s response follows:
Towards the end of FY 2007, a revised Administrative Manual for Time and Attendance was produced and placed on EEOC’s internal website for use by all timekeepers and certifiers. The manual dictates what timekeepers and certifiers’ roles are, what should be reviewed on the timecards and how to proceed with incorrect or incomplete information. OHR also continues to send our FPPS Users notes of importance and those issues that need periodic reminders. An automated time and attendance system such as QuickTime, which we understand is in the FY 2009 budget, will virtually eliminate inaccurate reporting of information by both the employee and timekeeper.
Auditor Comment: EEOC’s proposed action if implemented will adequately address this recommendation.
Anti-Deficiency Act Violation
EEOC violated the Anti-Deficiency Act by obligating funds within the Revolving Fund before those funds were apportioned by OMB during Fiscal Year (FY) 2007.
According to 31 USC, Section 1517, Subsection (a):
An officer or employee of the United States Government.. may not make or authorize an expenditure or obligation exceeding – (1) an apportionment; or (2) the amount permitted by regulations prescribed under section 1514(a) of this title.
EEOC operated under a year-long continuing resolution during FY 2007. OMB issued OMB Bulletin 06-04 providing an automatic apportionment for all funds covered under the continuing resolution. The Revolving Fund does not receive appropriated funds and was not covered by the continuing resolution. As a result, EEOC was required to submit a Standard Form-132 to OMB requesting that funds for the year be apportioned for the Revolving Fund. EEOC personnel misunderstood Bulletin 06-04 and assumed that it apportioned funds in the Revolving Fund. EEOC obligated $189,498 within the Revolving Fund before funds were apportioned for FY 2007, thus violating the Anti-Deficiency Act.
Recommendation: We recommend that the EEOC Chief Financial Officer review and update policies and procedures in place over the apportionment of funds to ensure that all funds are apportioned before obligations are incurred, as required by law.
Management Response: EEOC management concurred with this recommendation. When notified by OMB that a violation may have occurred, EEOC personnel immediately submitted an apportionment request to OMB to have the Revolving Fund apportioned. In addition, EEOC management prepared and submitted to the President a letter detailing the Anti-Deficiency Act violation as required by 31 USC, Section 1517, Subsection (b).
Auditor Comment: EEOC has adequately addressed this finding and recommendation.
With respect to internal control related to significant performance measures included in Management’s Discussion and Analysis, we obtained an understanding of the design of internal control relating to existence and completeness assertions, as required by OMB Bulletin 07-04. Our procedures were not designed to provide assurance on internal control over reported performance measures, and, accordingly, we do not express such an opinion.
We noted certain matters involving internal control and its operation that we will report to EEOC management in a separate letter.
This report is intended solely for the information and use of EEOC management, others within EEOC, OMB, and Congress. It is not intended to be and should not be used by anyone other than these specified parties.
Cotton & Company LLP
Colette Y. Wilson, CPA
November 2, 2007