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In addition to the material weaknesses discussed in appendices II and III, we found two significant deficiencies in internal control as described below. Also, the significant deficiency in fiscal year 2009 regarding verification procedures for data input for the Troubled Asset Relief Program equity investment and direct loan valuations is no longer considered to be a significant deficiency as of September 30, 2010.
Internal control deficiencies were identified at certain federal entities accounting for the majority of the reported balances for loans receivable and loan-guarantee liabilities. The deficiencies, for the most part, involved credit subsidy estimation and related financial reporting processes. The issues and the complexities associated with estimating the costs of lending and other loan-related financing activities significantly increase the risk that misstatements in agency and governmentwide financial statements could occur and go undetected. Further, these control deficiencies can adversely affect the federal government’s ability to support annual budget requests for these programs, make future budgetary decisions, manage program costs, and measure the performance of lending activities. A previously reported control deficiency relating to mortgage-backed securities was resolved in fiscal year 2010.
Deficiencies were identified in certain controls over spreadsheets used by the Department of Health and Human Services (HHS) to prepare its Statement of Social Insurance, including the lack of robust controls over spreadsheet changes and inputs that may result in output that varies from management’s intentions. HHS, which administers the Medicare programs, contributes the majority of the amounts reported on the consolidated Statement of Social Insurance. Such control deficiencies could result in misstatements to the consolidated Statement of Social Insurance.
(198620)
