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OIG-18-031 Financial Management: Audit of the Bureau

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OIG-18-031 Financial Management: Audit of the Bureau Audit Report OIG-18-031 FINANCIAL MANAGEMENT Audit of the Bureau of Engraving and Printing’s Fiscal Years 2017 and 2016 Financial Statements December 19, 2017 Office of Inspector General Department of the Treasury This Page Intentionally Left Blank DEPARTMENT OF THE TREASURY WASHINGTON, D.C. 20220 OFFICE OF December 19, 2017 INSPECTOR GENERAL MEMORANDUM FOR LEONARD R. OLIJAR, DIRECTOR BUREAU OF ENGRAVING AND PRINTING FROM: James Hodge /s/ Director, Financial Audit SUBJECT: Audit of the Bureau of Engraving and Printing’s Fiscal Years 2017 and 2016 Financial Statements I am pleased to transmit the attached subject report. Under a contract monitored by our office, KPMG LLP (KPMG), an independent certified public accounting firm, audited the financial statements of the Bureau of Engraving and Printing (BEP) as of September 30, 2017 and 2016, and for the years then ended, and provided an opinion on the financial statements, an opinion on management’s assertion that BEP maintained effective internal control over financial reporting, and a report on compliance with laws, regulations, and contracts tested. The contract required that the audit be performed in accordance with U.S. generally accepted government auditing standards, Office of Management and Budget Bulletin No. 17-03, Audit Requirements for Federal Financial Statements, and the Government Accountability Office/President’s Council on Integrity and Efficiency, Financial Audit Manual. In its audit of BEP, KPMG found • the financial statements were fairly presented, in all material respects, in accordance with U.S. generally accepted accounting principles; • management’s assertion that BEP maintained effective internal control over financial reporting as of September 30, 2017, was fairly stated in all material respects; and • no instances of reportable noncompliance with laws, regulations, and contracts tested. In connection with the contract, we reviewed KPMG’s reports and related documentation and inquired of its representatives. Our review, as differentiated from an audit performed 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 BEP’s financial statements or management’s assertion on the effectiveness of internal control over financial reporting, or a conclusion on Page 2 compliance with laws and regulations. KPMG is responsible for the attached auditors’ reports dated December 18, 2017, and the conclusions expressed in the report. However, our review disclosed no instances where KPMG did not comply, in all material respects, with U.S. generally accepted government auditing standards. Should you have any questions, please contact me at (202) 927-0009, or a member of your staff may contact Shiela Michel, Manager, Financial Audit, at (202) 927-5407. Attachment THE DEPARTMENT OF THE TREASURY BUREAU OF ENGRAVING AND PRINTING Financial Statements Years ended September 30, 2017 and 2016 (With Independent Auditors’ Reports Thereon) THE DEPARTMENT OF THE TREASURY BUREAU OF ENGRAVING AND PRINTING FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2017 AND 2016 TABLE OF CONTENTS INDEPENDENT AUDITORS’ REPORT ................................................................................................................. 1 FINANCIAL STATEMENTS ................................................................................................................................... 3 Balance Sheets ....................................................................................................................................................... 3 Statements of Operations and Cumulative Results of Operations ......................................................................... 4 Statements of Cash Flows ...................................................................................................................................... 5 Notes to the Financial Statements .......................................................................................................................... 6 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ................................................................ 16 INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ................................................................ 17 INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE AND OTHER MATTERS ................................................................................................................................ 19 KPMG LLP Suite 12000 1801 K Street, NW Washington, DC 20006 Independent Auditors’ Report The Inspector General, Department of the Treasury and The Director of the Bureau of Engraving and Printing, Department of the Treasury: Report on the Financial Statements We have audited the accompanying financial statements of the Bureau of Engraving and Printing (the Bureau), which comprise the balance sheets as of September 30, 2017 and 2016, and the related statements of operations and cumulative results of operations, and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, in accordance with the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, and in accordance with Office of Management and Budget (OMB) Bulletin No. 17-03, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin No. 17-03 require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the Financial Statements In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Bureau as of September 30, 2017 and 2016, and the results of its operations, and cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. KPMG LLP is a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Other Reporting Required by Government Auditing Standards Report on Internal Control over Financial Reporting We also have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States, the Bureau’s internal control over financial reporting as of September 30, 2017, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 18, 2017 expressed an unqualified opinion. Report on Compliance and Other Matters In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2017 on our tests of the Bureau’s compliance with certain provisions of laws, regulations, and contracts, and other matters. The purpose of this report is to describe the scope of our testing of compliance and the result of that testing, and not to provide an opinion on compliance. This report and the report on internal control over financial reporting are an integral part of an audit performed in accordance with Government Auditing Standards in considering the Bureau’s internal control over financial reporting and compliance. Washington, DC December 18, 2017 2 THE DEPARTMENT OF THE TREASURY BUREAU OF ENGRAVING AND PRINTING Balance Sheets As of September 30, 2017 and 2016 (In Thousands) 2017 2016 ASSETS Current assets Cash (Note 3) $ 221,228 $ 203,998 Accounts receivable (Note 10) 39,162 51,247 Inventories, net (Note 4) 202,977 179,611 Prepaid expenses 618 670 Total current assets 463,985 435,526 Property and equipment,
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