U.S.	Securities	and	Exchange	Commission	

Management	Report	to	Accompany	

the	Office	of	Inspector	General	

Semiannual	Report	to	Congress	

for	the	period	October	1,	2017	through	March	31,	2018	

May	2018
SEMIANNUAL MANAGEMENT REPORT TO CONGRESS 1

U.S.	SECURITIES	AND	EXCHANGE	COMMISSION

Management Report to Accompany the  

Office of Inspector General Semiannual Report to Congress

October 1, 2017 – March 31, 2018

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	October	1,	2017	through	March	31,	2018.	

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	43	open	recommendations.		During	

the	period,	management	successfully	closed	25	recommendations	and	one	report	with	OIG’s	

concurrence.		Corrective	actions	were	completed	on	100	percent	of	the	recommendations	in	less	than	

one	year.		At	period‐end,	final	action	was	pending	on	six	reports.		

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	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.	

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

with Disallowed Costs

(as of March 31, 2018)

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   1 $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 $0

(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
SEMIANNUAL MANAGEMENT REPORT TO CONGRESS 2

On	September	29,	2017,	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	Centers”	(Report	No.	543)).		The	OIG	

identified	$375,205	as	questioned	costs	and	$2,778,882	as	unsupported	costs	due	to	insufficient	

documentation.		Management	supplemented	the	data	center	contract	file	to	improve	documented	

support	for	contract	price	changes.		Management	also	reviewed	invoices	to	validate	payments	made.		

Based	on	the	results	of	the	review,	and	in	consultation	with	the	Office	of	General	Counsel,	

management	determined	that	expenditures	were	justified	to	monitor,	troubleshoot	and	remediate	

certain	issues	and,	therefore,	there	was	not	a	sufficiently	strong	legal	basis	to	seek	recovery	of	the	

funds.		

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 March 31, 2018)

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 1 $2,699

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

(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 $2,535

D. For which no final action has been taken by the end of the reporting period 1 $380

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	March	31,	2018,	the	SEC	had	recovered	

$103,376	and	waived	$16,9651	due	to	financial	hardship.	Payment	plan	balances	totaled	$31,881	

and	the	balance	of	claims	referred	to	Treasury	for	collection	totaled	$63,784.			

On	September	29,	2017,	the	OIG	issued	a	report	on	the	SEC’s	management	of	its	data	centers	(“Audit	

of	the	SEC’s	Management	of	Its	Data	Centers”	(Report	No.	543)).	The	OIG	identified	$2,698,584	in	

funds	that	could	be	put	to	better	use	with	respect	to	the	cost	of	kilowatt‐per‐hour	rate	increase	and	

cost	of	monthly	rental	of	power	distribution	units	at	the	data	center.		In	response	to	this	finding,	

management	determined	that	the	costs	resulting	from	the	kilowatt‐per‐hour	pricing	changes	for	the	

data	center	were	fair	and	reasonable	in	accordance	with	Federal	Acquisition	Regulation	Subpart	15.4	

and	no	further	action	is	required.		With	respect	to	the	power	distribution	units,	management	

reviewed	the	risk	of	renting	the	equipment	through	the	remaining	life	of	the	contract	versus	

government	ownership	and	agreed	that	purchasing	the	equipment	would	result	in	$164,004	in	funds	

that	could	be	put	to	better	use.	Management	is	in	the	process	of	procuring	the	equipment.			

																																																													

1 The amount waived has been revised from $18,208 to $16,965 due to a collection made by the Department of Treasury 

before a certain waiver was granted. 
SEMIANNUAL MANAGEMENT REPORT TO CONGRESS 3

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	required	information.	

Table 3. Audits and Other Reports More than One Year Old

(Reporting Period October 1, 2017 through March 31, 2018)

Report No./Title Report Date Status of Final Action

539, Audit of SEC’s

Compliance with the

Federal Information

Security

Management Act for

Fiscal Year 2016

(Nonpublic Report)

3/7/2017 18 of 21 recommendations have been closed with OIG’s concurrence. The three

remaining recommendations relate to cybersecurity training, skills, and incident

management policies. While the SEC’s Office of Information Technology has taken

actions in each of these areas, additional work was ongoing as of March 30, 2018.  OIT

anticipates completing corrective action on these three recommendations no later

than September 2018.