Federal Reserve Banks:

Areas for Improvement in Information Systems Controls

GAO-11-447R: Published: Mar 31, 2011. Publicly Released: Mar 31, 2011.

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In connection with fulfilling our requirement to audit the financial statements of the U.S. government, we audited and reported on the Schedules of Federal Debt Managed by the Bureau of the Public Debt (BPD) for the fiscal years ended September 30, 2010 and 2009. As part of these audits, we performed a review of information systems controls over key financial systems maintained and operated by the Federal Reserve Banks (FRB) on behalf of the Department of the Treasury's (Treasury) BPD relevant to the Schedule of Federal Debt. As we reported in connection with our audit of the Schedules of Federal Debt for the fiscal years ended September 30, 2010 and 2009, we concluded that BPD maintained, in all material respects, effective internal control over financial reporting relevant to the Schedule of Federal Debt as of September 30, 2010, that provided reasonable assurance that misstatements, losses, or noncompliance material in relation to the Schedule of Federal Debt would be prevented, or detected and corrected on a timely basis. However, we identified information systems deficiencies affecting internal control over financial reporting, which, while we do not consider them to be collectively either a material weakness or significant deficiency, nevertheless warrant FRB management's attention and action. This report presents a control deficiency we identified during our fiscal year 2010 testing of information systems controls over key financial systems maintained and operated by the FRBs relevant to BPD's Schedule of Federal Debt. This report also includes the results of our follow-up on the status of FRB's corrective actions to address information systems control-related recommendations contained in our prior years' reports and open as of September 30, 2009. In a separately issued Limited Official Use Only report, we communicated detailed information regarding our findings to FRB management.

Our fiscal year 2010 audit procedures identified one new general information systems control deficiency related to access controls. We made one recommendation to address this control deficiency. The new information systems control deficiency we identified did not represent a significant risk to the key financial systems maintained and operated by the FRBs on behalf of BPD. The potential effect of such a control deficiency on financial reporting relevant to the Schedule of Federal Debt was mitigated by FRB's physical security measures and a program of monitoring user and system activity, and BPD's compensating management and reconciliation controls designed to detect potential misstatements in the Schedule of Federal Debt. In addition, during our fiscal year 2010 follow-up on the status of FRB's corrective actions to address eight open recommendations related to general information systems control deficiencies identified in our prior years' audits, we determined that as of September 30, 2010, corrective action on six of the eight recommendations was completed, while corrective action was in progress on the two remaining open recommendations related to security management and access controls. The Director of Reserve Bank Operations and Payments Systems on behalf of the Board of Governors of the Federal Reserve System provided comments on the detailed findings and recommendations in the separately issued Limited Official Use Only report. In those comments, the Director of Reserve Bank Operations and Payment Systems stated that the agency takes control deficiencies, and actions to address them, seriously. The Director further commented that the new deficiency has already been addressed, and that the remainder have corrective actions planned or in progress. We recommend that the Director of Reserve Bank Operations and Payment Systems direct the appropriate FRB officials to implement the new detailed recommendation presented in the separately issued Limited Official Use Only report.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendation for Executive Action

    Recommendation: The Director of Reserve Bank Operations and Payment Systems should direct the appropriate FRB officials to implement the new detailed recommendation presented in the separately issued Limited Official Use Only report.

    Agency Affected: Federal Reserve System: Board of Governors: Division of Reserve Bank Operations and Payment Systems

    Status: Open

    Comments: In connection with our audits of the fiscal years 2011 and 2012 Schedules of Federal Debt, we reviewed the status of actions taken to address the open information systems control recommendations at the Federal Reserve Banks (FRB) identified during our prior years' audits. FRB management informed us that it was in the process of taking corrective actions to address the recommendation made to the FRBs in connection with the audit of the fiscal year 2010 Schedule of Federal Debt. We will follow up on this matter during our audit of the fiscal year 2013 Schedule of Federal Debt to determine if the FRBs have completed actions needed to close this recommendation as implemented.

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