U.S.	Securities	and	Exchange	Commission	

Management	Report	to	Accompany	

the	Office	of	Inspector	General	

Semiannual	Report	to	Congress	

for	the	period	April	1,	2017	through	September	30,	2017	

November	2017
     

          

               

             

           

	 	 	 	

	 	

                   

	 	

       

	 	

U.S.	SECURITIES	AND	EXCHANGE	COMMISSION

Management Report to Accompany the

Office of Inspector General Semiannual Report to Congress

April 1, 2017 – September 30, 2017

Section	5(b)	of the	Inspector	General	Act of	1978,	as	amended,	requires	the	Commission	to	transmit

to	the	appropriate	committees	or	subcommittees	of	the	U.S.	Congress	a	Management	Report,	

containing	certain	statistical	tables	and	any	comments	deemed	appropriate,	to	accompany	the	Office

of	Inspector	General’s	(OIG’s)	Semiannual	Report.		This	Management	Report	presents	the	required	

information	for	the	reporting	period	of	April	1,	2017	through	September	30,	2017.	

I. Overview of SEC Audit Follow‐up Activities

The	SEC	is	committed	to	timely	completion	of	corrective	actions	on audit recommendations.	 At the	

commencement	of this	semiannual reporting	period,	there	were	35	open	recommendations.		During	

the period,	management	successfully	closed	17	recommendations	and	five	reports with	OIG’s

concurrence.		Corrective	actions	were	completed	on	76 percent	of	the	recommendations	in	less	than	

one	year.		At	period‐end,	final	action	was	pending	on	five	reports;	all	were	less	than	a	year	old.

II. Reports More than One Year Old with Pending Corrective Action

Section	5(b)(4)	of	the	Inspector	General	Act,	as	amended,	requires	the	SEC	Management	

Report	to	include	a statement with	respect	to audit	reports	where	management decisions	were	

made	more	than	a	year	ago	but	final	action has	not	been	taken.		At	period‐end,	there	were	no	open	

reports	more	than	one	year	old.	

III. Reports with Monetary Savings

Sections	5(b)(2)	and	(3)	of	the	Inspector	General	Act	require	the	SEC	Management	 Report	to	

include	statistical	tables	summarizing	the	progress	that	the	agency	has	made	in	responding	to	audit,	

inspection,	and	evaluation	reports	containing	“disallowed	costs” and	“recommendations	that	funds

be	put to	better	use.”

Disallowed Costs.	 Whenever	OIG	questions	whether	costs	incurred	by	the	agency	are necessary,	

supported	by	adequate	documentation,	or	in	accordance	with	law,	regulation,	or	 contracts	

governing	the use of	funds,	SEC	management	will	review the	facts	and	determine	 whether	such	

costs	should	be	officially	disallowed.	If	the SEC	agrees	that	such	costs	should	not	 be	charged	to	the	

government,	the	agency	will then	take	appropriate	action,	such	as	commencing	 collection	efforts	to

recover	the	disallowed	costs.	

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Table 1. Status of Final Action on Audit, Inspection and Evaluation Reports

with Disallowed Costs

(as of September 30, 2017)

Audit, Inspection and Evaluation Reports Number of

Reports

Dollar Value of

Disallowed Costs

(in thousands)

A. For which final action had not been taken by the beginning of the reporting period 1 $177

B. On which management decisions were made during the reporting period 0 $0

C. For which final action was taken during the reporting period 1 $177

(i) Dollar value of disallowed costs that were recovered through collection, offsets,

property in lieu of cash, or otherwise 1 $177

(ii) Dollar value of disallowed costs that were written off by management 0 $0

D. For which no final action has been taken by the end of the period 0 $0

On	June	22,	2016,	the	OIG	issued	a	report entitled	“Management of	the	SEC’s	Protective	Security	

Force	Contract	Needs	Improvement”	(Report No.	536).			The	OIG	did	not	identify	any concerns	with	

the	performance	of	the	SEC’s	protective	security	force.		However,	OIG	found	the	difference	in	

contractually	required	versus	actual	training	hours	resulted	in	questioned	costs	of about	$177,000.			

In	response,	the	SEC	modified	the	security	force contract	to	clarify	the	contractor’s	obligation	to	

reimburse	the SEC	if	actual	training	hours	fall	below	the	contractually	required	level. During	the	

reporting	period,	the	SEC	verified	that	the	contractor	complied	with	contractual	requirements	

regarding	training	hours;	as	such,	no	reimbursement	to	the	agency	was	necessary.	

Funds Put to Better Use.		Whenever	OIG	recommends	specific	dollar	amounts	that	it	 believes	can be	

saved	by	improving	the	efficiency	of	agency	operations,	SEC	management will review	the	facts	and	

determine	whether	to	implement	such	recommendations.	 “Funds	put	to	better	use”	refers	to	the	

specific	dollar	value	of	cost	savings	that	the	SEC	has	agreed	can	and should	be	implemented	through	

appropriate	corrective	action.	

Table 2. Status of Final Action on Audit, Inspection and Evaluation Reports

with Funds Put to Better Use

(as of September 30, 2017)

Audit, Inspection and Evaluation Reports Number

Dollar Value of

Funds Put to

Better Use

(in thousands)

A. For which final action had not been taken by the beginning of the reporting period 1 $216

B. On which management decisions were made during the reporting period 0 $0

C. For which final action was taken during the reporting period 0 $0

(i) Dollar value of recommendations that were actually completed $0

(ii) Dollar value of recommendations that management has subsequently concluded

should not or could not be implemented or completed $0

D. For which no final action has been taken by the end of the reporting period 1 $216

On	March	31,	2016,	the	OIG	issued	a	report	on	the	SEC’s	Student	Loan	Repayment	Program (Report	

No.	534).		The	audit	identified	about $216,000	in	student	loan	benefits	owed	to	the	SEC	by	17	former	

employees.		While	final	action	remains	underway,	as	of	September	30,	2017,	the	SEC	had recovered	

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$94,890	and	waived	$18,208	due	to financial	hardship.		Payment plan	balances	totaled	$18,171 and	

the	balance	of	claims	referred	to Treasury	for	collection	totaled	$84,736.

Status of Other OIG Reports Citing Questioned Costs or Funds that Could be Put to Better Use. At	the

end	of	the	reporting	period,	the	Office	of	Inspector	General	issued	a	report	on	the	SEC’s	management	

of	its	data	centers	(“Audit	of	the	SEC’s	Management	of Its	Data	Center”	(Report	#543,	dated	

9/29/2017)).	 The	OIG	identified	$375,205	as	questioned	costs,	$2,778,882	as	unsupported	costs	due	

to insufficient documentation,	and	$2,698,584	in	funds	that	could	be	put to	better	use	over	the	life	of

the contracts	for	the data centers.		At	this writing,	SEC management is	preparing a	management

decision	on	these	monetary	findings.		In	addition,	the	SEC	is	also	taking corrective	action	including:		

supplementing	the	data center	contract	file	to	improve	documented	support for contract	price	

changes;	undertaking	a	review	of	invoices to	validate	payments	made; and undertaking	a review	of	

regulations	with	a focus	on	contracting	officer	and	contracting	officer	representative	roles	and	

responsibilities	in	order	to improve	key	areas	of	managing	agency	contracts.

SEMIANNUAL MANAGEMENT REPORT TO CONGRESS 3