Federal Reports

Report on the Railroad Retirement Board's Financial Statements

For the second year in a row, an independent audit of CNCS’s National Service Trust Fund Fiscal Year 2018 financial statements resulted in a disclaimer of opinion, the worst possible outcome for a financial statement audit. CNCS did not cure the three material weaknesses and one significant deficiency identified in the FY 2017 audit. This year, the auditors reported another new material weakness. In layman’s terms, the financial statements were unauditable and likely subject to pervasive material errors. CNCS’s financial transaction recording, processing and reporting are not sufficiently reliable to produce reliable financial statements. Key audit findings were:•Disclaimer of Opinion: CNCS was unable to provide adequate evidential matter to support a significant number of transactions and account balances due to inadequate processes and controls to support transactions and estimates, and incomplete records to support accounting for transactions in accordance with generally accepted accounting principles. We were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. •Four material weaknesses and one significant deficiency in CNCS’s internal control over financial reporting. These issues included: ◦Material Weaknesses:◾Internal Controls Program: The system of internal controls failed to identify numerous and pervasive material weaknesses that the auditors found in financial reporting and in specific material line items on the financial statements; ◾Financial System and Reporting: CNCS’s financial reporting was hindered by limitations in its financial system and the timing and difficulties arising from a system upgrade, accounting staff turnover, and inadequate internal controls; ◾Trust Fund Unpaid Obligations: CNCS significantly overstated its Trust obligation balance and obligated substantially more than is necessary to pay its anticipated liabilities; and ◾Trust Service Award Liability: The model used to establish the liability included calculation errors and lacked quality controls, which impair significantly the accuracy of the reported liability; ◦Significant Deficiency:◾Information Technology Security Controls: There were new and continued control weaknesses in the information security program that need to be addressed in configuration management, access control and security management.We made 45 recommendations to CNCS. The recommendations include immediate corrective actions to address pervasive material weaknesses and significant deficiency. CNCS responds that it “does not entirely concur” with the findings and recommendations, but does not specify its disagreements or the basis for them. CNCS provides various reasons aned explanations for the difficulties that it encountered, but the auditors have not audited and cannot validate these explanations.The independent accounting firm of CliftonLarsonAllen LLP, performed the audit of the CNCS’s National Service Trust Fund FY 2018 financial statements, under contract with CNCS-OIG.

As required by law, the Department of Transportation (DOT) Office of Inspector General reports annually on DOT's most significant challenges to meeting its mission. We considered several criteria in identifying ten DOT’s top management challenges for fiscal year 2019, including their impact on safety, documented vulnerabilities, large dollar implications, and the ability of the Department to effect change.

This report details the KPMG LLP auditors' report of the U.S. Department of the Interior's financial statements for fiscal years 2018 and 2017. In its audit of the Department, KPMG reported:• The financial statements were fairly presented, in all material respects, in accordance with U.S. generally accepted accounting principles• No material weaknesses in internal control over financial reporting, but did identify one significant deficiency:o Lack of Sufficient Controls over General Property, Plant, and Equipment• No instances in which the Department's financial management systems did not substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996 and• No reportable noncompliance with provisions of laws tested or other matters.

This report details the KPMG LLP auditors' report of the U.S. Department of the Interior's closing package financial statements for fiscal year 2018. In its audit of the Department, KPMG reported:• The closing package financial statements were fairly presented, in all material respects, in accordance with U.S. generally accepted accounting principles and• No material weaknesses in internal control over financial reporting or noncompliance with laws and other matters.