U.S. Securities and Exchange Commission

Management Report to Accompany 

the Office of Inspector General 

Semiannual Report to Congress

for the period April 1, 2019 through September 30, 2019

November 2019
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U.S. SECURITIES AND EXCHANGE COMMISSION

Management Report to Accompany the 

Office of Inspector General Semiannual Report to Congress

April 1, 2019 – September 30, 2019

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, 2019through September30, 2019.

I. Overview of SEC Audit Follow-up Activities

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

the commencement of this semiannual reporting period, there were 57openrecommendationsand 

9 reports. During the period, management successfully closed 31recommendations and four

reports with OIG’s concurrence. Management completed corrective actions on 55percent of these

closedrecommendations in less than one year. At period-end, final action was pending on8reports. 

II. 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 useof 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 commencingcollection efforts to 

recover the disallowed costs.

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

with Disallowed Costs

(Reporting Period April 1, 2019 through September 30, 2019)

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 0 $0

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 disallowed costs that were recovered through collection, offsets, 

property in lieu of cash, or otherwise $0

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

D. For which no final action has been taken by the end of the period 0 $0
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While there were no disallowed costs identified during this reporting period, there were questioned

costs of $42,801 and unsupported costs of $2,977,379identified in the OIG Report 554: The SEC Can 

Better Manage Administrative Aspects of the ISS Contract. The term “questionedcost” means a cost 

that is questionedbecause of (A) an alleged violation of a provision of a law, regulation, contract, 

grant, cooperative agreement, or other agreement or document governing the expenditure of funds; 

(B) a finding that, at the time of the audit, such cost is not supported by adequate documentation; or 

(C) a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable.

The term “unsupported cost” means a cost that is questioned because the OIG found that, at the time 

of the audit, such cost is not supported by adequate documentation. In this instance, the auditors 

identified the questionedcosts because four contractor employees did not meet ISS contract 

minimum labor category requirements. The auditors identified the unsupported costs because SEC 

lacked evidence of agency pre-approval for labor hours outside the normal hours of performance 

charged to the ISS contract or because available documents did not clearly support the employee’s 

qualifications for the charged labor category. 

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

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 implementedthrough 

appropriate corrective action.

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

with Funds Put to Better Use

(Reporting Period April 1, 2019 through September 30, 2019)

Audit, Inspection and Evaluation Reports Number of 

Reports

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 0 $0

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 0 $0

III. 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 on which management decisions have 

been made but final action has not been taken, other than audit reports on which a management 

decision was made within the preceding year. Table 3 presents the requiredinformation.
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Table 3. Audits and Other Reports More than One Year Old 

(Reporting Period April 1, 2019 through September 30, 2019)

Report No./Title Report Date Funds Put to 

Better Use 

Disallowed 

Costs Status of Final Action

Report 546: Audit of 

SEC's Compliance with 

the Federal 

Information Security 

Modernization Act for 

Fiscal Year 2017 

3/30/2018 $0 $0 Eight of the report’s 20 recommendations have 

been closed with OIG’s concurrence. As of 

November 13, 2019 the SEC has completed 

corrective actions on 3 other recommendations 

and is waiting for the OIG’s concurrence on 

closure. The SEC continues to implement the 

remaining recommendations. The SEC anticipates 

the remaining recommendations to be completed 

before the end of the next semiannual reporting 

period.

Report 547: Audit of 

the SEC's Internal 

Controls for Retaining 

External Experts and 

Foreign Counsel for the 

Division of 

Enforcement

6/15/2018 $0 $0 Six of the report’s 7 recommendations have been 

closed with OIG’s concurrence. The SEC continues 

to address the 1 remaining recommendation and 

will share appropriate documentation of actions 

taken with OIG for concurrence on closure. Due to 

the complexities and number of stakeholders 

involved, anticipated completion is now summer 

2020.

Report 549: The SEC 

Made Progress But 

Work Remains To 

Address Human 

Capital Management 

Challenges and Align 

With the Human 

Capital Framework

9/11/2018 $0 $0 Seven of the report’s 9 recommendations have 

been closed with OIG’s concurrence. The SEC 

continues to actively work on the remaining two 

recommendations. Due to the need to conduct an 

adequate assessment, the anticipated completion 

is spring 2021.

Report 550: Evaluation 

of the EDGAR System’s 

Governance and 

Incident Handling 

Processes (NONPUBLIC 

REPORT)

9/21/2018 $0 $0 Twelve of the report’s 14 recommendations have 

been closed with OIG’s concurrence. The SEC 

continues to implement the remaining two 

recommendations, with anticipated completion 

before the end of the next semiannual reporting 

period.