UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of Inspector General
The Office of Inspector General has audited the Federal Trade Commission's (the Commission) Balance Sheets as of September 30, 1999 and 1998, and the related Statements of Net Cost, Statements of Changes in Net Position, Statements of Budgetary Resources, Statements of Financing, and Statements of Custodial Activity for the years then ended, and has considered internal control over financial reporting and the FTC's compliance with laws and regulations.
Opinion on Financial Statements
In our opinion, the financial statements referred to above, including the notes thereto, present fairly, in all material respects, the Commission's assets, liabilities and net position as of September 30, 1999 and 1998, and the net costs and changes in net position, its budgetary resources, financing and custodial activities for the years then ended, in conformity with generally accepted accounting principles for federal government entities.
Other Accompanying Information
Our audit was conducted for the purpose of forming an opinion on the FY 1999 and 1998 principal financial statements of the Commission taken as a whole. The information discussed below is presented for purposes of additional analysis and is not a required part of the principal financial statements.
The information in the Required Supplementary Information section has been subjected to the auditing procedures applied in the audit of the Commission's principal financial statements and, in our opinion, is fairly stated in all material respects in relation to the principal financial statements taken as a whole.
The information in the Management Overview of the Commission's annual financial statements has not been subjected to the auditing procedures applied in the audits of the financial statements and, accordingly, we express no opinion on it. This information is, however, addressed in our assessment of internal control discussed below.
Opinion on Internal Control
We considered the Commission's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Consequently, we do not provide an opinion on internal controls.
With respect to internal control relating to performance measures included in the Management Overview of the Commission, we obtained an understanding of the design of internal controls relating to the existence and completeness assertions, as required by OMB Bulletin 98-08. Our procedures were not designed to provide assurance on internal control over reported performance measures, and accordingly, we do not provide an opinion on such controls. However, we noted certain deficiencies in internal control over reported performance measures that, in our judgment, could adversely affect the agency's ability, in selected performance measures, to present relevant performance information.
Our findings and management's comments on the internal control over performance measures findings and recommendations, including corrective actions taken or planned, are included in a separate audit report. (Review of Systems Used to Collect Data for Annual Performance Measures Under the Government Performance and Results Act; AR 00-44).
In summary, our review of nine of the agency's thirteen performance measures as contained in the Commission's FY 2001 Budget Request found that the methodology to be used for accumulation of selected performance data was not sufficiently defined to allow for the reporting of measures in an accurate and consistent manner. Our concerns were discussed with representatives of each of the principle bureaus and efforts are now underway to better define precisely what data elements are to comprise each performance measure. The OIG believes that the best way to attack this weakness is for the GPRA task force to define the rationale behind each of the thirteen performance measures; i.e., clearly articulate how consumers/businesses are better off when the FTC meets or exceeds its performance targets.
Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be reportable conditions. Under standards issued by the American Institute of Certified Public Accountants, reportable conditions are matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgement, could adversely affect the Commission's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Material weaknesses are reportable conditions in which the design or operation of one or more of the specific internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited or material to a performance measure or aggregation of related performance measures, may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the internal control and its operation that we considered to be material weaknesses as defined above.
We noted certain other matters involving the internal control over financial reporting that we have reported to the Commission's management in a separate letter (management letter 00-045A).
Compliance with Laws and Regulations
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the Commission's compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts and certain other laws and regulations specified in OMB Bulletin 98-08, including the requirements referred to in the Federal Financial Management Improvement Act (FFMIA) of 1996. However, the objective of our audit of these financial statements, including our tests of compliance with selected provisions of applicable laws and regulations, was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion.
Material instances of noncompliance are failures to follow requirements, or violations of prohibitions contained in statutes and regulations, that cause us to conclude that the aggregation of the misstatements resulting from those failures or violations is material to the statement of financial position referred to above or that sensitivity warrants disclosure thereof.
The results of our tests of compliance disclosed no instances of noncompliance with laws and regulations that are required to be reported under Government Auditing Standards or OMB Bulletin 98-08 "Audit Requirements for Federal Financial Statements."
Under FFMIA, we are required to report whether the agency's financial management systems substantially comply with the Federal financial management systems requirements, Federal accounting standards, and the United States Government Standard General Ledger at the transaction level. To meet this requirement, we performed tests of compliance using the implementation guidance for FFMIA included in Appendix D of OMB Bulletin 98-08.
The results of our tests disclosed no instances in which the agency's financial management systems did not substantially comply with the three requirements discussed in the preceding paragraph.
With respect to items not tested, nothing came to our attention to cause us to believe the Commission had not complied, in all respects, with those provisions. In addition, we noted certain nonmaterial instances of noncompliance that we have reported to the management.
Responsibilities and Methodology
Management has the responsibility for:
- preparing the financial statements in conformity with generally accepted accounting principles for federal government entities described in Note 1 to the financial statements;
- establishing and maintaining an effective internal control over financial reporting; and
- complying with applicable laws and regulations.
Our responsibility is to express an opinion on these financial statements based on our audit. Generally accepted auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misrepresentation and presented fairly in accordance with the basis of accounting described in Note 1 to the financial statements. We performed tests of controls in order to determine our auditing procedures for the purpose of expressing our opinion on these financial statements and not to provide an opinion on the internal control over financial reporting. We are also responsible for testing compliance with selected provisions of applicable laws and regulations that may materially affect the financial statements.
In order to fulfill these responsibilities, we
- obtained an understanding of the design of relevant internal controls and determined whether they had been placed in operation;
- assessed control risk;
- examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements;
- assessed the accounting principles used and significant estimates made by management;
- evaluated the overall presentation of the financial statements;
- tested compliance with selected provisions of the laws and regulations that may materially affect the financial statements; and
- performed other procedures that we considered necessary in the circumstances.
Our audit was conducted in accordance with generally accepted auditing standards; Government Auditing Standards, as issued by the Comptroller General of the United States; and OMB Bulletin 98-08, "Audit Requirements for Federal Financial Statements." We believe that our audit provides a reasonable basis for our opinion.
While this report is intended for the information of the Commission, it is also a matter of public record, and its distribution is, therefore, not restricted.
February 11, 2000
Federal Trade Commission