Federal Reports

On January 21, 2026, we issued the financial statements audit report (Report 26-03) performed by the independent certified public accounting firm KPMG LLP. The auditors issued a disclaimer of opinion on the consolidated balance sheet as of September 30, 2025. During that audit, KPMG identified and reported on four material weaknesses and one significant deficiency.

When conducting an audit of an agency’s financial statements, auditors may identify certain other matters involving internal controls that do not rise to the level of a material weakness or significant deficiency and are not required to be reported in the independent auditors’ report. Instead, those matters are communicated in a management letter.

This memorandum has been prepared to transmit a management letter prepared by KPMG, dated February 20, 2026, to report internal control issues identified during the 2025 financial statement audit, that were not included in the final financial statement audit report. The attached management letter entitled Controls Related to the Reporting of Outstanding Guaranty Loans details the following issues identified by KPMG:

• Management did not properly categorize the 1 month reporting lag of the guaranty loan balances as a non-generally accepted accounting principles policy.
• Management did not perform a timely review of the non-generally accepted accounting principles policy related to the untimely reporting of the guaranty loan balances and determine its impact on the financial statements and related notes.

The auditors made two recommendations based on these findings that management agreed to implement to improve internal controls. We consider the recommendations issued in this letter as open audit recommendations. In accordance with our audit follow-up process, we will monitor management’s implementation of the corrective actions.

Background

The U.S. Postal Service has 50 authorized officer positions, including the postmaster general, deputy postmaster general, and vice presidents. The Postal Service had 48 active officers, including acting officers, as of September 30, 2025. Officers filed 1,011 expense reimbursement requests totaling $1,405,278. In addition, as of the end of fiscal year (FY) 2025, the Postal Service had 13 executive directors who filed 195 reimbursement requests totaling $314,570. Further, the Postal Service hired specially assigned, limited-term contract employees who were not officers, but management elected for their reimbursement requests to receive the same level of review as officers. During FY 2025, the contract employees filed 81 reimbursement requests, totaling $120,075.

What We Did

Our objective was to determine whether Postal Service officers and executive directors complied with policies and procedures regarding travel and representation expense reimbursements. We reviewed a sample of 60 reimbursement requests for officers, including limited-term contract employees, totaling $75,136, and 20 executive directors’ reimbursement requests totaling $28,362 from FY 2025.

What We Found

For the travel and representation expense reimbursements we reviewed, Postal Service officers and executive directors generally followed applicable Postal Service travel policies and included proper support for reimbursement requests. However, we did identify instances of noncompliance where applicable travel policies were not followed and reimbursement requests were not supported, as required. In some cases, the non-compliance related to undocumented policy exceptions. In addition, we noted limited-term contract employees’ reimbursement requests were not always identified for additional review by the Travel and Relocation team.

Fiscal Year 2025 Independent Evaluation of the SEC's Implementation of the Federal Information Security Modernization Act of 2014, Report No. 589

Our Objective(s)To perform a quality control review (QCR) of KPMG LLP's management letter related to the audit of the DOT's consolidated financial statements as of and for the fiscal year ended September 30, 2025. We reviewed KPMG's management letter, dated January 29, 2026, and related documentation.
About This ReportWe contracted with the independent public accounting firm KPMG LLP to audit DOT's consolidated financial statements. KPMG also issued a management letter discussing internal control matters that KPMG was not required to include in its audit report.
What We FoundThe independent auditor, KPMG, found eight internal control matters in DOT's management of operations:

Weakness exists within the Federal Highway Administration grant management system change management process,
Weaknesses exist within the user access application change management process,
Weaknesses in password requirements for the user access application database,
Weaknesses in new user provisioning process for grant management system operating system,
Weaknesses in the frequency of the Office of the Chief Information Officer administrator access semi-annual review,
Weaknesses within the Federal Transit Administration (FTA) general user base review and privileged access review,
Weaknesses in Federal Aid grant accrual assumptions, and
Weaknesses in FTA's review of grant accrual calculations.

Our QCR disclosed no instances in which KPMG did not comply, in all material respects, with U.S. generally accepted Government auditing standards.
RecommendationsWe agree with KPMG's 10 recommendations to help strengthen DOT's information system and business controls.

Our Objective(s)To perform a quality control review (QCR) of KPMG LLP's management letter related to the audit of the Federal Aviation Administration's (FAA) financial statements for fiscal year 2025. We reviewed KPMG's management letter, dated January 28, 2026, and related documentation.
About This ReportWe contracted with the independent public accounting firm KPMG to audit FAA's financial statements. KPMG also issued a management letter discussing internal control matters that KPMG was not required to include in its audit report.
What We FoundThe independent auditor, KPMG, found four internal control matters in FAA's management of operations:

Weaknesses in documenting review of FAA procurement system users during non-routine provisioning,
Weaknesses in the recording of right-to-use leases,
Weaknesses in ESC's review of manual journal entries,
Untimely review of year-end journal vouchers.

Our QCR disclosed no instances in which KPMG did not comply, in all material respects, with U.S. generally accepted Government auditing standards.
RecommendationsWe agree with KPMG's four recommendations to help strengthen FAA's information technology and service organization system and business processes.