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Quality Control Review of the Department of Transportation’s Audited Consolidated Financial Statements for Fiscal Years 2016 and 2015

Required by the CFO Act
Project ID: 
QC2017013

This report presents the results of our quality control review (QCR) of the Department of Transportation’s (DOT) audited consolidated financial statements for fiscal years 2016 and 2015. KPMG LLP, under contract to the Office of the Inspector General, issued a clean (unmodified) audit opinion on DOT’s consolidated financial statements. KPMG LLP reported two material weaknesses and two significant deficiencies in internal control over financial reporting. KPMG LLP also reported two instances of reportable noncompliance with the laws and regulations tested. Our QCR disclosed no instances in which KPMG LLP did not comply, in all material respects, with auditing standards.

Recommendations

Open

Closed

Closed on 06.08.2018
No. 1 to FTA

KPMG recommends that the Chief Information Officers of DOT and FTA develop policies, procedures and controls to address the provisioning of IT access, vulnerability management, system audit log review and change management control deficiencies identified in the FTA financial IT systems.

Closed on 06.08.2018
No. 2 to FTA

KPMG recommends that the Chief Information Officers of DOT and FTA monitor progress to ensure that procedures and controls are appropriately designed, implemented, and maintained.

Closed on 06.08.2018
No. 3 to FTA

KPMG recommends that the Chief Information Officers of DOT and FTA establish procedures and controls, at the appropriate level of precision, for unusual or infrequent events (e.g. system implementations) by establishing an IT steering committee that is composed of management from all relevant stakeholder functional areas, including the IT office, program office, and financial reporting office to ensure that system implementation meets the needs of all users and that policies, procedures, and system controls are appropriately redesigned, as necessary, to respond to the process changes resulting from the system implementation.

Closed on 06.08.2018
No. 4 to FTA

KPMG recommends that the Chief Information Officer of FTA execute a Service Level Agreement with all external service providers that defines the level of service expected from the service provider and appropriately identifies and delineates the roles and responsibilities of the service provider and the end user entity.

Closed on 06.08.2018
No. 5 to FTA

KPMG recommends that the Chief Information Officer of FTA d esign and implement policies and procedures to formally request, obtain, and review the external service provider's SSAE No. 16 report, and evaluate any deficiencies and end user considerations noted in the report.

Closed on 06.08.2018
No. 6 to FTA

KPMG recommends that the Chief Information Officer of FTA document the required procedures for assessing the impact of identified deficiencies, noted in the external service provider's SSAE No. 16 report, which may impact FTA, to ensure appropriate end user controls are in place to mitigate those noted deficiencies.

Closed on 06.08.2018
No. 7 to FTA

KPMG recommends that FTA enhance the grant accrual retrospective review policies, procedures, and controls to ensure that the retrospective review is performed at the appropriate level of precision, using relevant and reliable data inputs (complete and accurate FFR data);

Closed on 06.08.2018
No. 8 to FTA

KPMG recommends that FTA establish procedures and controls over the completeness and accuracy of the data inputs used in the grant accrual calculation.

Closed on 06.08.2018
No. 9 to FTA

KPMG recommends that FTA enhance the methodology and consider creating a user checklist of each of the program elements and appropriation codes that should be selected as inputs.

Closed on 06.08.2018
No. 10 to FTA

KPMG recommends that FTA establish policies and procedures for handling deviations from the standard methodology, including maintaining the evidence to support the deviation.

Closed on 06.08.2018
No. 11 to FTA

KPMG recommends that FTA establish a review control, with the appropriate level of precision, over the grant accrual calculation.

Closed on 06.08.2018
No. 12 to FTA

KPMG recommends that FTA perform an analysis and calculate an independent grant accrual for abnormalities in grantee spending patterns, in particular when a grantee is placed on suspension or restricted drawdowns as the billing cycle days for such grantees are not indicative of the true accrual period for that expenditure category.

Closed on 12.14.2018
No. 13 to FHWA

KPMG recommends that FHWA establish a review control, with the appropriate level of precision, over the cash flow projections to ensure that the inputs to the Subsidy Calculator are relevant and reliable.

No. 14 to FHWA

KPMG recommends that FHWA review the overall cash flow model functionality and implementation to ensure that all assumptions are properly applied, documented, and supported in the execution of the cash flow projections.

No. 15 to FHWA

KPMG recommends that FHWA consider automating the calculations that are performed manually to reduce the risk of misapplication of assumptions due to human error.

Closed on 03.02.2017
No. 16 to FRA

KPMG recommends that DOT follow established policies and procedures designed to prevent Anti-Deficiency Act violation.

Closed on 03.02.2017
No. 17 to FRA

KPMG recommend that DOT increase training and communications with personnel responsible for performing the established policies and procedures.

Closed on 06.08.2018
No. 18 to FTA

KPMG recommended that DOT improve its general information technology controls at FTA, as noted above (under Section A - Lack of Sufficient General Information Technology Controls at FTA), to ensure that DOT's financial management systems comply with the requirements of the FFMIA.