Independent Auditor’s Report
Chairman and Inspector General of the
United States Commodity Futures Trading Commission
We have audited the accompanying balance sheet of Commodity Futures Trading Commission (CFTC) as of September 30, 2009, and the related statements of net cost, changes in net position, budgetary resources, and custodial activity for the year then ended. The financial statements of CFTC as of September 30, 2008 were audited by other auditors whose report dated November 12, 2008, expressed an unqualified opinion on those financial statements. In our audits of CFTC for fiscal years 2009, we found:
The following sections discuss in more detail (1) these conclusions, (2) our conclusions on Management’s Discussion and Analysis (MD&A) and other supplementary information, and (3) our objectives, scope and methodology.
In our opinion, the financial statements including the accompanying notes present fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America, CFTC’s assets, liabilities and net position as of September 30, 2009, and its net costs; changes in net position; budgetary resources and custodial activity for the year then ended.
In planning and performing our audit, we considered CFTC’s internal control over financial reporting as a basis for designing our auditing procedures and to comply with the Office of Management and Budget (OMB) audit guidance for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on internal control and compliance or on management’s assertion on internal control included in MD&A. Accordingly, we do not express an opinion on the effectiveness of the entity’s internal control over financial reporting or on management’s assertion on internal control included in the MD&A.
Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses.
A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily disclose all deficiencies in the internal control that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses or significant deficiencies, as defined above.
We noted other nonreportable matters involving internal control and its operation that we will communicate in a separate management letter to CFTC management.
Under the Federal Financial Management Improvement Act of 1996 (FFMIA), we are required to report whether the financial management systems used by CFTC substantially comply with the Federal financial management systems requirements, applicable Federal accounting standards, and the United States Standard General Ledger (SGL) at the transaction level. To meet this requirement, we performed tests of compliance with FFMIA Section 803(a) requirements.
The objective of our audit was not to provide an opinion on compliance with FFMIA. Accordingly, we do not express such an opinion. The results of our work disclosed no instances in which CFTC’s financial management systems did not substantially comply with Federal financial management systems requirements, Federal accounting standards, or the SGL at the transaction level.
Our tests of CFTC’s compliance with selected provisions of laws and regulations for fiscal 2009 disclosed no instances of noncompliance that would be reportable under United States Government Auditing Standards or OMB audit guidance. However, the objective of our audit was not to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not express such an opinion.
The MD&A is not a required part of the financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
The introductory information, performance information and other accompanying information listed in the table of contents are presented for additional analysis and are not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them.
Management is responsible for (1) preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, (2) establishing, maintaining, and assessing internal control to provide reasonable assurance that the broad control objectives of the Federal Managers’ Financial Integrity Act (FMFIA) are met, and (3) ensuring that CFTC’s financial management systems substantially comply with FFMIA requirements, and (4) complying with other applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether the financial statements are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States. We are also responsible for: (1) obtaining a sufficient understanding of internal control over financial reporting and compliance to plan the audit, (2) testing whether CFTC’s financial management systems substantially comply with the three FFMIA requirements, (3) testing compliance with selected provisions of laws and regulations that have a direct and material effect on the financial statements and laws for which OMB audit guidance requires testing, and (4) performing limited procedures with respect to certain other information appearing in the Performance and Accountability Report.
In order to fulfill these responsibilities, we (1) examined on a test basis, evidence supporting the amounts and disclosures in the financial statements, (2) assessed the accounting principles used and significant estimates made by management, (3) evaluated the overall presentation of the financial statements, (4) obtained an understanding of CFTC and its operations, including its internal control related to financial reporting (including safeguarding of assets), and compliance with laws and regulations (including execution of transactions in accordance with budget authority), (5) tested relevant internal controls over financial reporting, and compliance, and evaluated the design and operating effectiveness of internal control, (6) considered the design of the process for evaluating and reporting on internal control and financial management systems under FMFIA, (7) tested whether CFTC’s financial management systems substantially complied with the three FFMIA requirements, and (8) tested compliance with selected provisions of certain laws and regulations.
We did not evaluate all internal controls relevant to operating objectives as broadly defined by the FMFIA, such as those controls relevant to preparing statistical reports and ensuring efficient operations. We limited our internal control testing to controls over financial reporting and compliance. Because of inherent limitations in internal control, misstatements due to error or fraud, losses, or noncompliance may nevertheless occur and not be detected. We also caution that projecting our evaluation to future periods is subject to risk that controls may become inadequate because of changes in conditions or that the degree of compliance with controls may deteriorate. In addition, we caution that our internal control testing may not be sufficient for other purposes.
We did not test compliance with all laws and regulations applicable to CFTC. We limited our tests of compliance to selected provisions of laws and regulations that have a direct and material effect on the financial statements and those required by OMB audit guidance that we deemed applicable to CFTC’s financial statements for the fiscal year ended September 30, 2009. We caution that noncompliance with laws and regulations may occur and not be detected by these tests and that such testing may not be sufficient for other purposes.
We performed our audit in accordance with auditing standards generally accepted in the United States; the standards applicable to the financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB guidance.
This report is intended solely for the information and use of CFTC’s management, CFTC’s Office of Inspector General, OMB, the Government Accountability Office, and the U.S. Congress, and is not intended to be, and should not be, used by anyone other than these specified parties.
November 13, 2009
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