Federal Election Commission 

Agency Financial Report 

Fiscal Year 2015 
 

Federal Election Commission 

Agency Financial Report 

Fiscal Year 2015 

Federal Election Commission 

999 E St. NW 

Washington, D.C. 20463 

(202) 694-1000 

1-(800) 424-9530 

www.fec.gov 

Released November 16, 2015 
Table	of	Contents

Message from the Chairman i 

How to Use This Report iii 

SECTION I – Management’s Discussion and Analysis 1 

Section I.A: Mission and Organizational Structure 1 

Mission Statement 2 

Organizational Structure 2 

Section I.B: Performance Goals, Objectives and Results 6 

Strategic Goal 6 

Strategic Objectives 6 

Section I.C: Analysis of FEC Financial Statements and Stewardship Information 14

Section I.D: Analysis of FEC’s Systems, Controls and Legal Compliance 17

Section I.E: Limitations of the Financial Statements 21

SECTION II – Auditor’s Report and Financial Statements 22

Message from the Chief Financial Officer 22

OIG Transmittal Letter 24 

Independent Auditor’s Report 27

Financial Statements 51 

Notes to the Financial Statements 56

SECTION III – Other Information 75

Inspector General’s Statement on FEC Management and Performance Challenges 76

Management’s Response to Challenges Identified By the Inspector General 82

Improper Payments Information Act Reporting Details 89

APPENDIX – List of Acronyms 90
 

 

 

 

 

Message from the Chairman 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

OFFICE OF THE CHAIR 

November 13, 2015 

I am pleased to present the Federal Election Commission's (FEC) Agency Financial Report 

(AFR) for Fiscal Year (FY) 2015. The AFR reflects the agency's program performance and 

financial activities over the past year and demonstrates our continued commitment to 

administering the Federal Election Campaign Act of 1971, as amended (the Act). 

The FEC protects the integrity of the Federal campaign finance process by providing the public 

with accurate and accessible information about how candidates raise and spend funds to support 

their campaigns. By providing the public with transparency regarding campaign financing, and 

ensuring that the campaign finance law is fairly and effectively enforced and administered, the 

Commission provides the public with crucial information by which to evaluate candidates for 

Federal office. To support this mission, the FEC must provide the public with unsurpassed access 

to campaign finance information as well as ensuring that timely advice and support is provided 

so that candidates, committees, and the public can fully understand and comply with the 

requirements of campaign finance law. 

The Commission took a number of steps during FY 2015 to ensure that it would be fully 

successful in its mission to make campaign finance disclosure information quickly available and 

easily accessible to the public. The FEC must ensure that it provides the public with timely, 

reliable, useful and accessible campaign finance data to meet the public’s right to access 

campaign finance information. During FY 2015, the FEC received 76,790 documents filed 

disclosing more than 28.4 million transactions. In an effort to decrease data processing time, 

increase the accuracy of data and reduce the overall costs of capturing campaign finance data 

from paper forms, the FEC has continued to develop an automated data capture process to 

convert paper-filed reports into structured, machine-readable data. 

During FY 2015, the Commission also continued its efforts on an extensive redesign of the FEC 

website in order to improve the delivery of campaign finance data and information to the public. 

The Commission, in partnership with 18F, a digital services delivery team within the General 

Services Administration, has been taking steps towards creating a new website design that is 

user-driven and meets the needs of the FEC's diverse audience. On October 29, 2015, the 

Commission launched the beta version of the new FEC website featuring an agile, navigable, userbased online platform to deliver campaign finance information. The new design and infrastructure 

is a big step forward in providing data in a usable, intuitive format to political 

i
 

 

 

 

professionals, citizens, journalists and researchers. The Commission will continue to actively 

engage the public in this effort to provide easy, intuitive and comprehensive campaign finance 

data and information. 

With respect to the agency's FY 2015 annual financial statements, the Commission received an 

unmodified opinion from its independent auditors. This unmodified opinion reflects 

the continued commitment by the Commissioners and FEC staff to ensure that the FEC's 

financial statements present fairly the agency's fiscal position. 

The performance data described in the FEC's FY 2015 AFR were compiled and evaluated using 

appropriate techniques for achieving the desired level of credibility for the verification and 

validation of performance data relative to its intended use. 

The efforts described in this report reflect the work and dedication of the agency's staff. The 

Commission looks forward to building on its achievements in FY 2015 in order to fulfill the 

mission of the agency in the most efficient manner possible. 

On behalf of the Commission, 

Ann M. Ravel, Chair 

ii
How to Use This Report 

This Agency Financial Report presents financial information, as well as relevant performance 

information, on the Federal Election Commission’s operations. The report was prepared pursuant 

to the Accountability of Tax Dollars Act of 2002 and Office of Management and Budget (OMB) 

Circular A-136, revised, Financial Reporting Requirements, and covers activities from October 

1, 2014 through September 30, 2015. 

The FEC places a high importance on keeping the public informed of its activities. To learn more 

about the FEC and what the agency does to serve the American public, visit the FEC’s website at 

http://www.fec.gov. To access this report, click on “About the FEC” and then “Plans, 

Performance and Budget.” 

The FY 2015 Agency Financial Report is organized into three primary sections: 

Section I – Management’s Discussion and Analysis (MD&A) provides an overview of the FEC. 

It describes our mission, organizational structure and regulatory responsibilities. It also includes 

relevant performance information related to the FEC’s strategic goals and objectives to provide a 

forward-looking discussion of future challenges. 

Section II – Financial Information, including the Independent Auditor’s Report, detailing the 

FEC’s financial performance by 1) highlighting the agency’s financial position and audit results 

and 2) describing the FEC’s compliance with key legal and regulatory requirements. 

Section III – Other Information includes our Inspector General’s (IG) assessment of the FEC’s 

management challenges and the FEC’s response. 

iii
 

                                                            

SECTION I – Management’s Discussion and Analysis 

Section I.A: Mission and Organizational Structure 

The FEC is an independent regulatory agency responsible for administering, enforcing, 

defending and interpreting the Federal Election Campaign Act of 1971, as amended (FECA or 

the Act).1

 Congress created the FEC to administer, enforce and formulate policy with respect 

to the FECA. The Act reflects Congress’s efforts to ensure that voters are fully informed of the 

sources of financial support for Federal candidates, political party committees, other political 

committees and other political actors. Public confidence in the political process depends not 

only on laws and regulations to ensure transparency, but also on the knowledge that those who 

disregard the campaign finance law will face consequences. 

Under the Act, all Federal political committees, including the committees of Presidential, 

Senate and House candidates, must file reports of receipts and disbursements. The FEC makes 

disclosure reports, and the data contained in them, available to the public through the 

Commission’s Internet-based public disclosure system on the Commission’s website, as well 

as in a public records office at the Commission's Washington, D.C. headquarters. The FEC 

also has exclusive responsibility for civil enforcement of the Act, and has litigating authority 

independent of the Department of Justice in U.S. district court and the courts of appeals. 

Additionally, the Commission promulgates regulations implementing the Act and issues 

advisory opinions responding to inquiries regarding interpretation and application of the Act 

and the Commission’s regulations. 

Additionally, the Commission is responsible for administering the Federal public funding 

programs for Presidential campaigns. This responsibility includes certifying and auditing all 

participating candidates and committees and enforcing the public funding laws. 

The FEC has chosen to produce an Agency Financial Report and Annual Performance Report 

(APR) pursuant to the Government Performance and Results Act of 1993, as amended. The 

FEC will include its FY 2015 Annual Performance Report with its Congressional Budget 

Justification and will post it on the FEC website at 

http://www.fec.gov/pages/budget/budget.shtml in February 2016. 

1

   The Commission’s primary responsibilities pertain to the Federal Election Campaign Act of 1971, Public Law 

92-225, 86 Stat. 3 (1972) as amended (codified at 52 U.S.C. §§ 30101-30145) (formerly at 2 U.S.C. §§ 431-55) 

(the Act or the FECA). The Commission’s responsibilities for the Federal public funding programs are 

contained in the Presidential Election Campaign Fund Act, Public Law 92-178, 85 Stat. 562 (1971) (codified 

at 26 U.S.C. §§ 9001-13) and the Presidential Primary Matching Payment Account Act, Public Law 93-

443, 88 Stat. 1297 (1974) (codified at 26 U.S.C. §§ 9031-42). 

1
Mission Statement 

The FEC’s mission is to protect the integrity of the Federal campaign finance process by 

providing transparency and fairly enforcing and administering Federal campaign finance laws.

 Organizational Structure 

To accomplish its legislative mandate, the FEC is directed by six Commissioners, who are 

appointed by the President with the advice and consent of the Senate. By law, no more than 

three Commissioners can be members of the same political party. Each member serves a sixyear term, and two seats are subject to appointment every two years. The Chairmanship of the 

Commission rotates among the members, with no member serving as Chair more than once 

during his or her term. The Commissioners are responsible for administering and enforcing 

the FECA and meet regularly to formulate policy and to vote on significant legal and 

administrative matters. The Act requires the affirmative vote of four members of the 

Commission to approve official actions, thus requiring bipartisan decision-making. The FEC 

has its headquarters in Washington, D.C. and does not have any regional offices. 

Figure 1: FEC Organizational Chart 

As noted in Figure 1, the offices of the Staff Director, General Counsel, Chief Information 

Officer and Chief Financial Officer support the agency in accomplishing its mission. The 

Office of the Inspector General, established within the FEC in 1989 under the 1988 

amendments to the Inspector General Act, is independent and reports both to the 

Commissioners and to Congress. The specific roles and responsibilities of each office are 

2
described in greater detail below. 

・ Office of the Staff Director (OSD) 

The Office of the Staff Director consists of four offices: 1) Management and Administration; 

2) Compliance; 3) Communications; and 4) Equal Employment Opportunity. The Office of 

Management and Administration is responsible for the FEC’s strategic planning and 

performance and works with the Commission to ensure the agency’s mission is met 

efficiently. In addition, this office houses the Commission Secretary, the Office of Human 

Resources (OHR) and the Administrative Services Division (ASD). The primary 

responsibilities of the Office of Compliance are review of campaign finance reports, audits, 

administrative fines and alternative dispute resolution. The Office of Communications 

includes divisions charged with making campaign finance reports available to the public, 

encouraging voluntary compliance with the Act through educational outreach and training and 

ensuring effective communication with Congress, executive branch agencies, the media and 

researchers and the general public. The Equal Employment Opportunity Office administers 

and ensures compliance with applicable laws, regulations, policies and guidance that prohibit 

discrimination in the Federal workplace based on race, color, national origin, religion, age, 

disability, sex, pregnancy, genetic information or retaliation. The EEO Officer reports to the 

Staff Director on administrative issues, but has direct reporting authority on all EEO matters. 

See 29 CFR 1614.102(b). 

・ Office of General Counsel (OGC) 

The Office of General Counsel consists of five organizational units: (1) the Deputy General 

Counsel—Administration; (2) the Deputy General Counsel—Law Division; (3) the Policy 

Division; (4) the Enforcement Division; and (5) the Litigation Division. The Deputy General 

Counsel—Administration directly supervises the Administrative Law Team, the Office of 

Complaints Examination and Legal Administration, the Law Library and all OGC 

administrative functions. The Deputy General Counsel—Law has the primary responsibility 

for assisting the General Counsel in all of the substantive aspects of the General Counsel’s 

duties and shares in the management of all phases of OGC programs, as well as directly 

supervises the Compliance Advice Team and the agency’s ethics program. The Policy 

Division drafts for Commission consideration advisory opinions and regulations interpreting 

the Federal campaign finance law. The Enforcement Division recommends to the Commission 

appropriate action to take with respect to administrative complaints and apparent violations of 

the Act. Where authorized, the Enforcement Division investigates alleged violations and 

negotiates conciliation agreements, which may include civil penalties and other remedies. If 

an enforcement matter does not resolve through conciliation during the administrative 

process, the Commission may authorize suit in district court, at which point the matter is 

transferred to the Litigation Division. The Litigation Division represents the Commission 

before the Federal district courts and courts of appeals in all civil litigation involving the 

campaign finance statutes. This Division assists the Department of Justice’s Office of the 

3
 

Solicitor General when the Commission’s FECA cases are before the Supreme Court. 

・ Office of the Chief Information Officer (OCIO) 

The Office of the Chief Information Officer (OCIO) consists of four units: (1) Enterprise 

Architecture; (2) Operational Support; (3) Data Administration; and (4) IT Security. The 

OCIO provides secure, stable and robust technology solutions for Commission staff and the 

public. OCIO both develops and maintains the systems that serve as the public's primary 

source of information about campaign finance data and law and ensures agency employees 

have a technology infrastructure that allows them to perform their day-to-day responsibilities 

administering and enforcing campaign finance laws. OCIO also develops and supports 

analytic reporting tools that help staff perform their disclosure and compliance duties.

・ Office of the Chief Financial Officer (OCFO) 

The Office of the Chief Financial Officer is responsible for complying with all financial 

management laws and standards, and all aspects of budget formulation, budget execution and 

procurement. 

Sources of Funds 

On an annual basis, the FEC receives a single appropriation for Salaries and Expenses. In FY 

2015, the FEC’s authorized funding level included an appropriation of $67,500,000. 

The FEC also has the authority to collect fees from attendees of agency-sponsored educational 

conferences. The Commission may use those fees to defray the costs of conducting those 

conferences. In an effort to keep the fees as low as possible, the agency has not fully exercised 

that authority. Rather, the Commission sets its registration fees at a level that covers only the 

costs incurred by the agency’s conference-management contractor, including meeting room 

rental and conference meals and compensation. All other conference-related expenses, such as 

materials and staff travel, are paid using appropriated funds. Registration fees for FY 2015 

were $110,875. 

4
   

Figure 2 shows the agency’s appropriations and obligations from FY 2011 to 2015. 

66.4

67.5

65.1

67.3

60

61

62

63

64

65

66

67

68

2011 2012 2013 2014 2015

Appropriation

Obligation

Figure 2: Summary of Funding (in millions of dollars) 

Personnel vs. Non-Personnel Costs 

Figure 3 represents the Commission’s FY 2015 obligations by personnel and non-personnel 

costs. Personnel costs, which are primarily composed of salaries and employee benefits, 

accounted for 68 percent of the FEC’s costs. The remaining 32 percent of the Commission’s 

costs was spent on non-personnel items, such as infrastructure and support, software and 

hardware, office rent, building security and other related costs. 

68.4%

SALARIES and

BENEFITS

OCIO

INITIATIVES

16.1%

FACILITIES 8.9% OTHER 6.6%

Figure 3: Fiscal Year 2015 by Major Category 

5
Section I.B: Performance Goals, Objectives and Results 

This section provides a summary of the results of the FEC’s key performance objectives, 

which are discussed in greater detail in the FEC’s FY 2015 APR. This report will be part of 

the FEC’s FY 2017 Congressional Budget Justification, which will be available at 

http://www.fec.gov/pages/budget/budget.shtml in February 2016. 

Strategic Goal 

The strategic goal of the Federal Election Commission is to fairly, efficiently and effectively 

administer and enforce the Federal Election Campaign Act, promote compliance and engage 

and inform the public about campaign finance data and rules, while maintaining a workforce 

that delivers results. 

Strategic Objectives 

The Act reflects a belief that democracy works best when voters can make informed decisions 

in the political process—decisions based in part on knowing the sources of financial support 

for Federal candidates, political party committees, other political committees and other 

political actors. As a result, the FEC’s first strategic objective is to inform the public about 

how Federal campaigns and committees are financed. Public confidence in the political 

process also depends on the knowledge that participants in Federal elections follow clear and 

well-defined rules and face real consequences for non-compliance. Thus, the FEC’s second 

strategic objective focuses on the Commission’s efforts to promote voluntary compliance 

through educational outreach and to enforce campaign finance laws effectively and fairly. The 

third strategic objective is to interpret the FECA and related statutes, providing timely 

guidance to the public regarding the requirements of the law. The Commission also 

understands that organizational performance is driven by employee performance and that the 

agency cannot successfully achieve its mission without a high-performing workforce that 

understands expectations and delivers results. The FEC’s fourth strategic objective is to foster 

a culture of high performance in order to ensure that the agency delivers its mission efficiently 

and effectively. 

Objective 1: Engage and Inform the Public about Campaign Finance Data 

The FEC provides the public with campaign finance disclosure information necessary to make 

educated, informed decisions in the political process based on data concerning the sources and 

amounts of funds used to finance Federal elections. In order to ensure that this data is quickly 

available and fully accessible to the public, the agency is committed to ensuring that 

information is easy to view, sort and download from the FEC website and that FEC staff have 

the tools and knowledge to help the public find and understand the campaign finance 

information relevant to their questions and needs. 

The FEC’s e-filing system acts as the point of entry for submission of electronically filed 

campaign finance reports, providing faster access to reports and streamlining operations. 

6
Specifically, the system provides for public disclosure of electronically filed reports, via the 

FEC website, within minutes of being filed. When a committee files a financial disclosure 

report on paper, the Commission ensures that a copy is available for public inspection within 

48 hours of receipt, both electronically on the website and at the FEC’s offices in Washington, 

D.C.2 The eFiling platform is a crucial component of the Commission’s campaign finance 

disclosure system. During the 2013-2014 election cycle, over 8,000 committees and other 

filers used the eFiling platform to file campaign finance disclosure reports. 

                                                            

 

The FEC is committed to providing timely and transparent campaign finance disclosure to the 

public and delivering data in accessible and easy-to-use formats. The FEC has launched an 

initiative to develop an automated data capture process to convert paper-filed reports into 

structured, machine-readable data. Automating this labor-intensive process will decrease data 

processing time, increase the accuracy of data and reduce the overall costs of capturing data 

from paper forms. 

The Commission is also currently redesigning its website, in part, to increase the public’s 

access to and understanding of the agency’s extensive data offerings. In partnership with 18F, 

a newly formed data services delivery team within the General Services Administration 

(GSA), the FEC is developing a user centered online platform to deliver campaign finance 

information to its diverse base of users. Once complete, the redesigned FEC website will 

better meet the needs of an audience that spans from individual citizens seeking information 

about the candidates on the ballot in their state to journalists and researchers who specialize in 

campaign finance issues, to filers and other political participants seeking legal guidance and 

compliance information. The FEC provides the public with a wealth of complex information, 

including current and historical campaign finance data, detailed information regarding the 

requirements of the campaign finance law and legal resources, such as advisory opinions 

issued by the Commission and information on closed enforcement matters. This multiyear 

effort will ensure that the FEC provides full and meaningful campaign finance data and 

information in a manner that meets the public’s increasing expectations for data customization 

and ease of use. 

The FEC’s first new offerings as a result of its website redesign project are a publicly 

available application programming interface (API) to increase public access to campaign 

finance data and an online tool to help filers and the general public better understand filing 

requirements and deadlines. The new API and online tool, created in collaboration with 18F, 

supplement the campaign finance data offerings developed and maintained by FEC staff. The 

Commission continues to provide detailed and comprehensive campaign finance data through 

the Candidate and Committee Viewer and the Data Catalog. During Presidential election 

2 The Commission’s mandatory electronic filing (“e-filing”) rules require any committee that receives contributions 

or makes expenditures in excess of $50,000 in a calendar year, or that has reason to expect to do so, to submit its 

reports electronically. Under the Act, these mandatory e-filing provisions apply to any political committee or other 

person required to file reports, statements or designations with the FEC, except for Senate candidate committees 

(and certain other persons who support Senate candidates only). 

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years, users can access through the Presidential Map the amount of funds raised on a state-bystate basis, contributions, cash-on-hand and the distribution of contributions by amount with a 

simple click at www.fec.gov. Users can also access lists of contributors by name, city and 

amounts of contributions within the first three digits of any zip code. Contribution and 

disbursement data are updated within one day of the FEC’s receipt of electronically filed 

disclosure reports. The Candidate and Committee Viewer, the House and Senate Map and the 

Data Catalog are updated nightly with all data that have been entered into the Commission's 

database. Generally, summary financial data are available the day following receipt of the 

report. Transactions—detailed information about receipts and disbursements—are processed 

on a rolling basis and added to the Commission's database nightly. The agency also provides a 

Compliance Map to assist members of the public in their efforts to comply with campaign 

finance law. The Compliance Map lists all reporting dates and other significant information 

tied to each state’s election calendar, such as the time periods when special requirements for 

electioneering communications and Federal election activity apply. Like the interactive 

Disclosure Map of contribution information, the Compliance Map provides quick access to 

information on a state-by-state basis in an easy-to-use format. 

The level of availability and accessibility of campaign finance data serves as a measurement 

of success in improving the public’s access to information about how campaign funds are 

raised and spent. 

Performance Goal 1-1: Improve the public’s access to information about how campaign 

funds are raised and spent. 

Key Indicator: Enhanced availability of campaign finance data as measured by 

increased capabilities to retrieve and analyze data. 

FY 2010 

Actual 

FY 2011 

Actual 

FY 2012 

Actual 

FY 2013 

Actual 

FY 2014 

Actual 

FY 2015 

Target 

FY 2015 

Actual 

FY 2016 

Target 

FY 2017 

Target 

N/A N/A N/A N/A 75% 75% 86% 75% 75% 

Objective 2: Promote Compliance with the FECA and Related Statutes 

Helping the public understand its obligations under the Act is an essential component of 

voluntary compliance. The FEC places a significant emphasis on encouraging compliance 

through its Information Division, Reports Analysis Division (RAD), Press Office and Office 

of Congressional, Legislative and Intergovernmental Affairs. The FEC measures its progress 

in meeting this Objective through two performance measures: one that measures the agency’s 

efforts to encourage voluntary compliance through educational outreach and information and 

another that measures the FEC’s efforts to seek adherence to FECA requirements through fair, 

effective and timely enforcement and compliance programs. Progress against these measures 

is detailed in the charts below. 

8
Encourage voluntary compliance with FECA requirements through educational outreach 

and information. 

The FEC’s education and outreach programs provide information necessary for compliance 

with the campaign finance law and give the public the context necessary to interpret the 

campaign finance data filers disclose. The FEC maintains a toll-free line and public email 

accounts to respond to inquiries regarding campaign finance data disclosed to the public and 

questions about how to comply with the campaign finance law and its reporting requirements. 

The FEC also operates Press and Congressional Affairs offices. 

One way the Commission encourages voluntary compliance is by hosting conferences across 

the country, where Commissioners and staff explain how the Act applies to candidates, parties 

and political action committees. These conferences address recent changes in the law and 

focus on fundraising, methods of candidate support and reporting regulations. 

The FEC also devotes considerable resources to ensuring that staff can provide distance 

learning opportunities to the public. The Commission’s website is one of the most important 

sources of instantly accessible information about the Act, Commission regulations and 

Commission proceedings. In addition to viewing campaign finance data, anyone with Internet 

access can use the website to track Commission rulemakings, search advisory opinions, audits 

and closed enforcement matters, view campaign finance data and find reporting dates. The 

Commission places a high emphasis on providing educational materials about the campaign 

finance law and its requirements. Toward this end, the FEC has moved its focus away from 

the printing and manual distribution of its educational materials and instead looked for ways 

to leverage available technologies to create and disseminate dynamic and up-to-date 

educational materials through the website. While the Commission continues to make available 

printed copies of its educational brochures and publications, transitioning to primarily webbased media has allowed the agency to reduce significantly its printing and mailing costs and 

use of resources while at the same time encouraging new and expanded ways of 

communicating with the public via the website. 

As part of this broad effort to improve its Internet communications and better serve the 

educational needs of the public, the Commission maintains an E-Learning section on its 

Educational Outreach web page and its own YouTube channel, which can be found at 

http://www.youtube.com/FECTube. The E-Learning page offers instructional videos and 

tutorials, as well as interactive presentations that enable users to obtain guidance tailored to 

their specific activities. The curriculum currently includes a variety of presentations about the 

Commission and the campaign finance law. 

The agency’s educational outreach program has been significantly enhanced with the addition 

of an online training service that enables political committees and other groups to schedule 

live, interactive online training sessions with FEC staff. This on-demand service allows the 

FEC to provide tailored, distance learning presentations and training to the public in a manner 

that will significantly increase the availability of FEC staff to serve the public. The service 

9
 

also offers an efficient and effective way for alternative dispute resolution and other 

enforcement respondents to satisfy the terms of their agreements with the agency. The FEC 

has historically measured the success of its educational outreach programs based on 

satisfaction surveys of conference attendees. Beginning in FY 2014, the agency initiated a 

program to measure user satisfaction across all aspects of its outreach program. 

Performance Goal 2-1: Encourage voluntary compliance with FECA requirements through 

educational outreach and information. 

Key Indicator: Percent of educational outreach programs (webinars, seminars, 

publications and E-Learning presentations) and events that achieve targeted 

satisfaction rating on user surveys. 

FY 2010 

Actual 

FY 2011 

Actual 

FY 2012 

Actual 

FY 2013 

Actual 

FY 2014 

Actual 

FY 2015 

Target 

FY 2015 

Actual 

FY 2016 

Target 

FY 2016 

Target 

N/A N/A N/A N/A Develop

methods for 

surveying 

user 

satisfaction 

with 

webinars, 

publications 

and ELearning 

presentations. 

4.0 or 

higher on 

a 5.0 

scale 

4.34 4.0 or 

higher on 

a 5.0 

scale 

4.0 or 

higher 

on a 5.0 

scale 

Seek adherence to FECA requirements through fair, effective and timely enforcement and 

compliance programs. 

The FEC has set strategies for ensuring that its enforcement and compliance programs are 

fair, effective and timely. The Commission’s statutory obligation is to administer, interpret 

and enforce the Federal Election Campaign Act, which serves the compelling governmental 

interest in deterring corruption and the appearance of corruption in financing elections. In 

doing so, the Commission remains mindful of the First Amendment’s guarantees of freedom 

of speech and association, and the practical implication of its actions on the political process. 

The FEC has exclusive jurisdiction over civil enforcement of Federal campaign finance laws. 

It consults with the U.S. Department of Justice, as appropriate, on matters involving both civil 

and criminal enforcement of the Act. Commission enforcement actions, which are handled 

primarily by the Office of General Counsel (OGC), originate from a number of sources, 

including external complaints, referrals from other government agencies and matters 

generated by information ascertained by the Commission in the normal course of carrying out 

its supervisory responsibilities. Enforcement matters are handled by OGC pursuant to the 

requirements of the FECA. If the Commission cannot settle or conciliate a matter involving an 

alleged violation of the Act, the Commission may initiate civil litigation by filing and 

prosecuting a civil action in Federal district court to address the alleged violation. Closed 

enforcement matters are available online through the Commission’s Enforcement Query 

System at http://eqs.fec.gov/eqs/searcheqs. 

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To augment OGC’s traditional enforcement role, the Office of Compliance manages several 

programs that seek to remedy alleged violations of the Act and encourage voluntary 

compliance. These programs include: 1) the Alternative Dispute Resolution Program, 2) the 

Administrative Fine Program and 3) the Audit Program. The Commission’s Alternative 

Dispute Resolution Program is designed to resolve matters more swiftly by encouraging the 

settlement of less-complex enforcement matters with a streamlined process that focuses on 

remedial measures for candidates and political committees, such as training, internal audits 

and hiring compliance staff. Violations involving the late submission of, or failure to file, 

disclosure reports are subject to the Administrative Fine Program. This Program is 

administered by RAD and the Office of Administrative Review (OAR), which assess 

monetary penalties and handle challenges to the penalty assessments. The Audit Program 

conducts “for cause” audits under the FECA in those cases where political committees have 

failed to meet the threshold requirements for demonstrating substantial compliance with the 

Act, and conducts mandatory audits under the public funding statutes. Threshold requirements 

approved by the Commission and used by RAD and the Audit Division are public, subject to 

limited redactions. 

Performance Goal 2-2: Seek adherence to FECA requirements through fair, effective and 

timely enforcement and compliance programs. 

Key Indicator: Of the enforcement matters resolved during the fiscal year, the 

percentage that was resolved within 15 months of the date of receipt. 

FY 2010 

Actual 

FY 2011 

Actual 

FY 2012 

Actual 

FY 2013 

Actual 

FY 2014 

Actual 

FY 2015 

Target 

FY 2015 

Actual 

FY 2016 

Target 

FY 2017 

Target 

75% 89% 70% 72% 28% 75% 48% 75% 75%

Objective 3: Interpret the FECA and Related Statutes 

The Commission responds to questions from the public about how the Act applies to specific 

situations by issuing advisory opinions (AO). In addition, Commission initiatives, 

Congressional action, judicial decisions, petitions for rulemaking or other changes in 

campaign finance law may necessitate that the Commission update or adopt new regulations. 

Consequently, the FEC undertakes rulemakings either to write new Commission regulations 

or revise existing regulations. The FEC has set as a performance goal to provide timely legal 

guidance to the public. 

Regulations 

The Policy Division of OGC drafts various rulemaking documents, including Notices of 

Proposed Rulemaking (NPRMs), for Commission consideration. NPRMs provide an 

opportunity for the public to review proposed regulations, submit written comments to the 

Commission and, when appropriate, testify at public hearings at the FEC. The Commission 

considers the comments and testimony and deliberates publicly regarding the adoption of the 

11
final regulations and the corresponding Explanations and Justifications, which provide the 

rationale and basis for the new or revised regulations. 

Advisory Opinions 

Advisory opinions (AO) are official Commission responses to questions regarding the 

application of Federal campaign finance law to specific factual situations. The Act requires the 

Commission to respond to AO requests within 60 days. For AO requests from candidates in 

the two months leading up to an election, the Act requires the Commission to respond within 

20 days. On its own initiative, the Commission also makes available an expedited process for 

handling certain time-sensitive requests that are not otherwise entitled to expedited processing 

under the Act. The Commission strives to issue these advisory opinions in 30 days. 

Defending Challenges to the Act 

The Commission represents itself in most litigation before the Federal district courts and 

courts of appeals and before the Supreme Court with respect to cases involving publicly 

financed Presidential candidates. It also has primary responsibility for defending the Act and 

Commission regulations against court challenges. In addition, the FECA authorizes the 

Commission to institute civil actions to enforce the FECA. 

12
                                                            

 

 

Performance Goal 3-1: Provide timely legal guidance to the public. 

Key Indicator: Percent of legal guidance provided within statutory and courtordered deadlines. 

FY 2010 

Actual 

FY 2011 

Actual 

FY 2012 

Actual 

FY 2013 

Actual 

FY 2014 

Actual 

FY 2015 

Target 

FY 2015 

Actual 

FY 2016 

Target 

FY 2017 

Target 

N/A N/A N/A N/A 100%3 100% 100%4 100% 100% 

Objective 4: Foster a Culture of High Performance 

One of the management objectives from the FEC’s Strategic Plan, FY 2014-2019, Foster a 

Culture of High Performance, cuts across the organization and reflects the agency’s strategic 

priorities for improving the efficiency and effectiveness of its workforce and management 

processes. The Commission understands that the success of its programs depends upon the 

skills and commitment of its staff. A focus for the Commission is to ensure that staff training 

needs are assessed and met at every level of the agency and that agency leaders receive 

training necessary to help manage and maintain a fully engage and productive workforce. 

The FEC is also participating in and contributing to the government-wide Records 

Management initiative. In compliance with the Federal Records Act, the FEC is updating its 

records management program. The updated program will increase efficiency and improve 

performance by eliminating paper and using electronic recordkeeping to the fullest extent 

possible. 

Performance Goal 4-1: Foster a workforce that delivers results. 

Key Indicator: Commission-required quarterly updates meet targeted performance 

goals. 

FY 2010 

Actual 

FY 2011 

Actual 

FY 2012 

Actual 

FY 2013 

Actual 

FY 2014 

Actual 

FY 2015 

Target 

FY 2015 

Actual 

FY 2016 

Target 

FY 2017 

Target 

N/A N/A N/A N/A 73% 60% 80% 65% 65% 

3 The Commission obtained extensions to consider ten advisory opinion requests in FY 2014; four of those 

extensions were attributable to the Federal government shutdown during October 2013. The Commission did not 

have any rulemakings during FY 2014 with statutory or court-ordered deadlines. 4 The Commission obtained extensions to consider two advisory opinion requests in FY 2015. The Commission did 

not have any rulemakings during FY 2015 with statutory or court-ordered deadlines. 

13
 

 

 

 

Section I.C: Analysis of FEC Financial Statements and Stewardship 

Information 

The FEC’s FY 2015 financial statements and notes are presented in the required format in 

accordance with OMB Circular A-136, as revised, Financial Reporting Requirements. The 

FEC’s current-year financial statements and notes are presented in a comparative format in 

Section II of this report. 

The following table summarizes the significant changes in the FEC’s financial position during 

FY 2015: 

Net Financial 

Condition FY 2015 FY 2014 Increase (Decrease) 

% 

Change 

Assets $ 17,056,461.67 $ 16,181,802.18 $ 874,659.49 5.41% 

Liabilities $ 5,924,714.17 $ 6,062,608.82 $ (137,894.65) -2.27% 

Net Position $ 11,131,747.50 $ 10,119,193.36 $ 1,012,554.14 10.01% 

Net Cost $ 68,213,708.70 $ 65,789,981.48 $ 2,423,727.22 3.68% 

Budgetary Resources $ 71,084,848.49 $ 69,492,381.82 $ 1,592,466.67 2.29% 

Custodial Revenue $ 778,018.51 $ 549,586.76 $ 228,431.75 41.56% 

The following is a brief description of the nature of each required financial statement and its 

relevance. The effects of some significant balances or conditions on the FEC’s operations are 

explained. 

Balance Sheet 

The Balance Sheet presents the total amounts available for use by the FEC (assets) against the 

amounts owed (liabilities) and amounts that comprise the difference (Net Position). As a small 

independent agency, all of the FEC’s assets consist of Fund Balance with Treasury (FBWT), 

Property and Equipment (P&E) and Accounts Receivable. Fund Balance with Treasury (e.g., 

cash) is available through the Department of Treasury accounts, from which the FEC is 

authorized to make expenditures (i.e., obligations) and payments. FBWT increased by 

approximately $774 thousand, or 6.38 percent, from the prior year. 

Accounts Receivable primarily represent amounts due from the public for fines and penalties 

assessed by the FEC and referred to Treasury for collection, as deemed appropriate. In 

compliance with the Debt Collection Improvement Act of 1996 (DCIA), the OCFO takes into 

consideration the most appropriate approach to debt management. These amounts are not 

available for FEC operations and are sent to the U.S. Treasury as miscellaneous receipts. Net 

accounts receivable increased by approximately $518 from FY 2014. 

Property and equipment consists of software, general-purpose equipment used by the agency 

14
and software development. In FY 2015, the FEC continued to evaluate existing systems and 

retired outdated software systems, and initiated a series of upgrades to existing systems to 

support regulated reporting requirements. Net property and equipment increased by $97 

thousand from FY 2014 to $4 million. Total liabilities decreased by approximately two 

percent. 

Statement of Net Cost 

The Statement of Net Cost presents the annual cost of operating the FEC program. Gross costs 

are used to arrive at the total net cost of operations. The FEC’s total gross costs in 

administering the FECA did not experience significant fluctuation from FY 2014, as there was 

a 3.6 percent change from FY 2014 to FY 2015. This is supported by the agency’s having 

experienced only a slight fluctuation – about three percent – in net appropriations from the 

prior year. 

Statement of Changes in Net Position 

The Statement of Changes in Net Position presents in greater detail the net position section of 

the Balance Sheet, including Cumulative Results of Operations and Unexpended 

Appropriations. This statement identifies the activity that caused the net position to change 

during the reporting period. Total Net Position increased by 10 percent, or approximately 

$1.01 million. 

Statement of Budgetary Resources 

The Statement of Budgetary Resources provides information on the source and status of 

budgetary resources made available to the FEC during the reporting period. It presents the 

relationship between budget authority and budget outlays, as well as the reconciliation of 

obligations to total outlays. Total Budgetary Resources and Status of Budgetary Resources 

increased by approximately $1.59 million, or 2.29 percent, from FY 2014. This included a 

2.47 percent increase in obligations incurred. 

Statement of Custodial Activity 

The Statement of Custodial Activity (SCA) represents an accounting of revenue and funds 

collected by the FEC that are owed to the U.S. Treasury’s general fund. These monies are not 

available for the FEC’s use. Collection and revenue activity primarily result from enforcement 

actions that come before the Commission during the fiscal year. Revenue and collections on 

the SCA consist of collections on new assessments, prior year(s) receivables and 

Miscellaneous Receipts. In FY 2015, the total custodial revenue and collections increased by 

approximately $228 thousand, or 41.56 percent, from FY 2014. 

15
                                                            

           

     

The chart below displays the assessment history for the past 20 years5 . 

$1.96

$6.71

$0.73

FY 1995 FY 2015

FIGURE 4 ‐ FINES ASSESSED, BY FISCAL YEAR

(in Millions of Dollars)

Figure 4: Fines Assessed, by Fiscal Year (in millions of dollars) 

16

5 

   One MUR resolved during 2006 yielded the largest civil penalty in agency history, which was $3.8 million paid by 

Federal Home Loan Mortgage Corporation (Freddie Mac) for prohibited corporate activity. This 2006 penalty is the 

primary reason for the largest Fines Assessed (approximately $6.71 million) in Figure 4. 
Section I.D: Analysis of FEC’s Systems, Controls and Legal Compliance 

I.D.i – FEC Integrated Internal Control Framework and Legal Compliance 

The Commission is subject to numerous legislative and regulatory requirements that promote 

and support effective internal controls. The FEC complies with the following laws and 

regulations: 

Annual Appropriation Law – establishes the FEC’s budget authority; 

Inspector General Act of 1978, as amended; 

Federal Managers’ Financial Integrity Act of 1982; 

Government Performance and Results Act of 1993, as amended; 

Federal Financial Management Improvement Act of 1996; 

Clinger-Cohen Act of 1996; 

Debt Collection Improvement Act of 1996, as amended; and 

Chief Financial Officers Act, as amended by the Accountability of Tax Dollars Act of 2002. 

The proper stewardship of Federal resources is a fundamental responsibility of the FEC. 

These laws help the FEC improve the management of its programs and financial operations, 

and assure that programs are managed in compliance with applicable law. 

I.D.ii – Management Assurances 

The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) is implemented by OMB 

Circular A-123, revised, Management’s Responsibility for Internal Control, with applicable 

appendices. The FEC management is responsible for establishing and maintaining effective 

internal control and financial management systems that meet the objectives of the FMFIA and 

for performing a self-assessment under the guidance of its Directive 53, Implementation of 

OMB Circular A-123, Internal Control Review. Directive 53 outlines the process and 

describes roles and responsibilities for conducting risk assessments and internal control 

reviews. 

Section 2 of the FMFIA requires Federal agencies to report, on the basis of annual 

assessments, any material weaknesses that have been identified in connection with their 

internal and administrative controls. The reviews that took place during FY 2015 provide 

unqualified assurance that FEC systems and management controls comply with the 

requirements of the FMFIA. 

Section 4 of the FMFIA requires that agencies annually provide assurance on programmatic 

internal controls and financial management systems, and effectiveness of internal control over 

17
financial reporting. The FEC evaluated its financial management systems in accordance with 

the FMFIA, OMB Circular A-123, as applicable, and reviewed the Statements on Standards 

for Attestation Engagements, Reporting on Controls at a Service Organization (SSAE 16) 

reports received from its shared service providers. The results of management reviews 

provided an unmodified opinion that the FEC’s financial systems controls generally conform 

to the required principles and standards as per Section 4 of the FMFIA. 

Prompt Payment Act 

The Prompt Payment Act (PPA) requires Federal agencies to make timely vendor payments 

and to pay interest penalties when payments are late. The FEC’s on-time payment rate for FY 

2015 was nearly 100 percent, with less than 0.2 percent of all invoices paid after the date 

required by the PPA. 

Improper Payments 

The Improper Payments Information Act of 2002 (IPIA), the Improper Payments Elimination 

and Recovery Act of 2010 (IPERA), Improper Payments Elimination and Recovery 

Improvement Act of 2012 (IPERIA) and OMB guidance require agencies to identify those 

programs that are susceptible to significant erroneous payments, and determine an annual 

estimated amount of erroneous payments made in their operations. The FEC reviewed all of 

its programs and activities to identify those susceptible to significant erroneous payments. 

Approximately 68 percent of the FEC’s obligations pertain to salaries and benefits, which 

represents a low risk for improper payments, based on established internal controls. The FEC 

also reviewed all of its FY 2015 non-personnel procurements, charge card, and payroll costs 

to verify their accuracy and completeness. Accordingly, the FEC is unaware of any improper 

payments. The FEC continues to monitor its payment and internal control process to ensure 

that the risk of improper payments remains low. 

18
 

 

 

 

 

 

Annual Assurance Statement on Internal Control 

THE FEDERAL ELECTION COMMISSION 

Washington, DC 20463 

Annual Assurance Statement on Internal Control 

The Federal Election Commission (FEC) is responsible for establishing and maintaining 

effective internal control and financial management systems that meet the objectives of the 

Federal Managers' Financial Integrity Act of 1982 (FMFIA), as implemented by OMB Circular 

A-123, revised, Management 's Responsibility for Internal Control. Internal control is an 

integral component of management to provide reasonable assurance that (1) programs operate 

effectively and efficiently, (2) financial reports are reliable, and (3) programs comply with 

applicable laws and regulations. The FEC conducted its evaluation of internal control in 

accordance with OMB Circular A -123. Based on the results of the Fiscal Year 2015 internal 

control review, the FEC reports no material weakness under the FMFIA and is able to provide an 

unqualified statement of assurance that the internal controls and financial management systems 

meet the objectives of FMFIA. 

Ann M. Ravel 

Chair 

19
I.D.iii – Management’s Response to the Inspector General’s Management and 

Performance Challenges 

The Inspector General’s report in Section III identifies three areas specific to management and 

performance challenges: 1) Information Technology Project Planning and Management, 2) 

Governance Framework and 3) Human Capital Management / Human Resources Operations. 

The agency continues its efforts to adhere to Directive 50, addressing project management 

requirements and creating corrective action plans (CAP) and creating project plans for 

specific CAP items. The FEC also continues to make significant progress in its human capital 

management and operations. The FEC’s full response to the Inspector General’s assessment 

of its performance in these areas appears in Section III. 

20
 

Section I.E: Limitations of the Financial Statements 

The principal financial statements have been prepared to report the financial position and 

results of operations of the FEC pursuant to the requirements of 31 U.S.C. §3515(b). While 

the statements have been prepared from the books and records of the FEC in accordance with 

United States generally accepted accounting principles (GAAP) for Federal entities and the 

formats prescribed by the OMB, the statements are in addition to the financial reports used to 

monitor and control budgetary resources which are prepared from the same books and 

records. 

The statements should be read with the realization that they are for a component of the U.S. 

Government, a sovereign entity. 

21
SECTION II – Auditor’s Report and Financial Statements 

Message from the Chief Financial Officer 

November 13, 2015 

I am pleased to present the Commission’s financial statements for Fiscal Year (FY) 2015. The 

financial statements are an integral part of the Agency Financial Report. The Commission 

received an unmodified (clean) opinion on its financial statements from the independent 

auditors. This marks the seventh consecutive year with no material weaknesses identified. 

This is the fourth consecutive year with no significant deficiencies reported for the Office of 

the Chief Financial Officer (OCFO). I applaud the good work of OCFO staff who strived 

diligently throughout the fiscal year to achieve these results, maintaining a commitment to 

excellence. 

The agency continues to improve its information technology (IT) security controls. Although 

the auditors identified IT security controls as a significant deficiency for FY 2015, the agency 

is making progress in this area. The agency understands the importance of IT security and is 

committed to the timely implementation of the FY 2015 Financial Statement Audit Corrective 

Action Plan (CAP). Over the past year, the FEC has taken significant actions to improve the 

agency’s IT infrastructure generally and our IT security posture specifically. The agency has 

a robust plan and leadership support to continue IT enhancements in future years. The Agency 

has approved implementation of NIST standards based on the study completed in the fiscal 

year. The Agency will implement a trusted internet connection by the end of the calendar 

year. 

During FY 2015, General Service Administration’s (GSA) 18F and the FEC have worked to 

develop the IT infrastructure necessary to support a 21st century digital services model. The 

FEC’s vast store of campaign finance data is arguably our most valuable and most durable 

asset. The agency holds 40 years’ worth of detailed information on campaign finance 

transactions collected over time and via an array of media, including letters, paper forms and 

electronically filed documents. This year, we have taken the first steps toward moving this 

data and the systems that support it into a secure, scalable cloud environment. With a cloudhosted system, we enjoy effectively limitless capacity but only pay for the capacity we use. 

Transitioning to a cloud environment allows us to continue to grow our database in the future, 

providing an agile, searchable system able to meet the public’s peak demand for services. 

For FY 2015, as mandated by the Office of Management and Budget’s Memorandum M-13-

08, Improving Financial Systems Through Shared Services, to consolidate shared services 

across government for financial management, the OCFO transitioned from GSA shared 

services to U.S. Department of Agriculture (USDA) shared services. USDA has agreed to 

acquire GSA’s Financial Management Line of Business operations including the current 

Momentum financial system and the support staff, making the transition as seamless as 

possible. This approach to comply was least disruptive to our current operations and the best 

solution for the agency. 

22
   

The FEC continues to seek opportunities to modernize and upgrade business systems to 

improve operational efficiency. We are confident that FEC employees’ commitment to the 

agency’s mission will provide an opportunity to build on the prior year’s financial 

management successes. The OCFO looks forward to another successful year. 

Sincerely, 

Judy Berning 

Acting Chief Financial Officer 

23
 

OIG Transmittal Letter 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

Office of Inspector General 

MEMORANDUM 

TO: The Commission 

FROM: Inspector General 

SUBJECT: Audit of the Federal Election Commission’s Fiscal Year 2015 Financial 

 Statements 

DATE: November 16, 2015 

Pursuant to the Chief Financial Officers Act of 1990, as amended, this letter transmits the 

Independent Auditor’s Report issued by Leon Snead & Company (LSC), P.C. for the fiscal 

year ending September 30, 2015. The audit was performed under a contract with, and 

monitored by, the Office of Inspector General (OIG), in accordance with auditing standards 

generally accepted in the United States of America; the standards applicable to financial 

audits contained in Government Auditing Standards, issued by the Comptroller General of 

the United States; and applicable provisions of Office of Management and Budget (OMB) 

Bulletin No. 14-02, Audit Requirements for Federal Financial Statements. 

Opinion on the Financial Statements 

LSC audited the balance sheet of the Federal Election Commission (FEC) as of 

September 30, 2015, and the related statements of net cost, changes in net position, budgetary 

resources, and custodial activity (the financial statements) for the year then ended. The 

objective of the audit was to express an opinion on the fair presentation of those financial 

statements. In connection with the audit, LSC also considered the FEC’s internal control 

over financial reporting and tested the FEC’s compliance with certain provisions of 

applicable laws and regulations that could have a direct and material effect on its financial 

statements. The financial statements of the FEC as of September 30, 

2014, were also audited by LSC whose report dated November 14, 2014, expressed an 

unmodified opinion on those statements. 

In LSC’s opinion, the financial statements present fairly, in all material respects, the financial 

position, net cost, changes in net position, budgetary resources, and custodial activity of the 

FEC as of, and for the year ending September 30, 2015, in conformity with accounting 

principles generally accepted in the United States of America. 

24
 

Report on Internal Control 

In planning and performing the audit of the financial statements of the FEC, LSC considered the 

FEC’s internal control over financial reporting (internal control) as a basis for designing 

auditing procedures for the purpose of expressing their opinion on the financial statements, but 

not for the purpose of expressing an opinion on the effectiveness of the FEC’s internal control. 

Accordingly, LSC did not express an opinion on the effectiveness of the FEC’s internal control. 

Because of inherent limitations in internal controls, including the possibility of management 

override of controls, misstatements, losses, or noncompliance may nevertheless occur and not be 

detected. According to the American Institute of Certified Public Accountants: 

 A deficiency in internal control 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 and correct, misstatements on a timely basis. 

 A significant deficiency is a deficiency, or a combination of deficiencies, in 

internal control that is less severe than a material weakness yet important enough to 

merit attention by those charged with governance. 

 A material weakness is a deficiency, or a combination of deficiencies, in internal 

control, such that there is a reasonable possibility that a material misstatement of the 

entity’s financial statements will not be prevented, or detected and corrected, on a 

timely basis. 

LSC’s consideration of internal control was for the limited purpose described in the first 

paragraph in this section and would not necessarily identify all deficiencies in internal control 

that might be significant deficiencies or material weaknesses. LSC did not identify any 

deficiencies in internal control that LSC would consider to be material weaknesses, as defined 

above. However, LSC did identify a significant deficiency in internal controls related to 

Information Technology security. 

Report on Compliance with Laws and Regulations 

FEC management is responsible for complying with laws and regulations applicable to the 

agency. To obtain reasonable assurance about whether FEC’s financial statements are free of 

material misstatements, LSC performed tests of compliance with certain provisions of laws 

and regulations, noncompliance which could have a direct and material effect on the 

determination of financial statement amounts, and certain other laws and regulations 

specified in OMB Bulletin No. 14-02, Audit Requirements for Federal Financial Statements. 

LSC did not test compliance with all laws and regulations applicable to FEC. 

The results of LSC’s tests of compliance with laws and regulations described in the audit report 

disclosed one instance of noncompliance with The Homeland Security Presidential Directive 

23, and National Security Presidential Directive 54, Cyber Security and 

Monitoring, establishing the Comprehensive National Cyber Security Initiative, and relating 

25
 

 

   

to Initiative No. 1, Manage the Federal Enterprise Network as a Single Enterprise with a 

Trusted Internet Connection. Additional details can be found on page 12 of the audit report. 

Audit Follow-up 

The independent auditor’s report contains recommendations to address deficiencies found by the 

auditors. Management was provided a draft copy of the audit report for comment and generally 

concurred with some of the findings and recommendations. In accordance with OMB Circular 

No. A-50, Audit Follow-up, revised, the FEC is to prepare a 

corrective action plan that will set forth the specific action planned to implement the agreed 

upon recommendations and the schedule for implementation. The Commission has 

designated the Chief Financial Officer to be the audit follow-up official for the financial 

statement audit. 

OIG Evaluation of Leon Snead & Company’s Audit Performance 

We reviewed LSC’s report and related documentation and made necessary inquiries of its 

representatives. Our review was not intended to enable the OIG to express, and we do 

not express an opinion on the FEC’s financial statements; nor do we provide conclusions about 

the effectiveness of internal control or conclusions on FEC’s compliance with laws and 

regulations. However, the OIG review disclosed no instances where LSC did not comply, in all 

material respects, with Government Auditing Standards. 

We appreciate the courtesies and cooperation extended to LSC and the OIG staff during the audit. 

If you should have any questions concerning this report, please contact my office on (202) 694-

1015. 

Lynne A. McFarland 

Inspector General 

Attachment 

cc: Judy Berning, Acting Chief Financial Officer 

Alec Palmer, Staff Director/Chief Information Officer 

Daniel Petalas, Acting General Counsel 

26
 

Independent Auditor’s Report 

The following pages are intended to show the Independent Auditor’s Report 

27
Federal Election Commission 

Audit of Financial Statements 

As of and for the Years Ended 

September 30, 2015 and 2014 

Submitted By 

Leon Snead & Company, P.C. 

Certified Public Accountants & Management Consultants 
TABLE OF CONTENTS 

Page 

Independent Auditor’s Report ..............................................................................................1 

Report on Internal Control...................................................................................................4 

Report on Compliance .......................................................................................................12 

Attachment 1, Status of Prior Year Recommendations .....................................................14 

Attachment 2, Agency Response to Report .......................................................................16 

i 
LEON SNEAD Certified Public Accountants 

& COMPANY, P.C. & Management Consultants 

416 Hungerford Drive, Suite 400 

Rockville, Maryland 20850 

301-738-8190 

Fax: 301-738-8210 

leonsnead.companypc@erols.com 

Independent Auditor’s Report 

THE COMMISSION, FEDERAL ELECTION COMMISSION 

INSPECTOR GENERAL, FEDERAL ELECTION COMMISSION 

We have audited the accompanying financial statements of Federal Election Commission 

(FEC), which comprise the balance sheet as of September 30, 2015 and 2014, and the related 

statements of net cost, changes in net position, budgetary resources, and custodial activity for 

the years then ended. The objective of our audit was to express an opinion on the fair 

presentation of those financial statements. In connection with our audit, we also considered the 

FEC’s internal control over financial reporting, and tested the FEC’s compliance with certain 

provisions of applicable laws, regulations, and certain provisions of contracts. 

SUMMARY 

As stated in our opinion on the financial statements, we found that the FEC’s financial 

statements as of and for the years ended September 30, 2015 and 2014, are presented fairly, in 

all material respects, in conformity with accounting principles generally accepted in the United 

States of America. 

Our consideration of internal control would not necessarily disclose all deficiencies in internal 

control over financial reporting that might be material weaknesses under standards issued by 

the American Institute of Certified Public Accountants. Our testing of internal control 

identified no material weakness in internal controls over financial reporting. However, we 

identified a significant deficiency related to the Information Technology (IT) security program 

established by the FEC that continues to exist. 

FEC officials responded to the draft report, and concurred with eight of the eleven 

recommendations. For the remaining three recommendations, relating to project planning and 

implementation of recommendations in a contractor’s report dealing with an IT security 

intrusion, we have not reached agreement. In addition, while the FEC concurs with many of 

the IT findings identified in the audit report, FEC officials do not agree that these issues result 

in a significant deficiency for financial statement purposes. We disagree with the agency’s 

comments, and have on several occasions provided authoritative guidance to FEC officials that 

support our professional opinion and illustrates that we have met audit standards in reporting 

this significant deficiency. 
 

During this fiscal year (FY), the Commission voted to adopt the National Institute of Standards 

and Technology (NIST), Risk Management Framework (RMF), NIST IT security control “best 

practices,” and approved funding to begin to implement this critical internal control process. 

We believe that the actions the Commission has agreed to take, when fully implemented, will 

significantly reduce the risks to the agency’s information and information systems. In addition, 

the agency completed corrective actions on several other recommendations from our prior 

financial statement audit reports. 

Our tests of compliance with certain provisions of laws, regulations, and significant provisions 

of contracts, disclosed one instance of noncompliance that is required to be reported under 

Government Auditing Standards and the Office of Management and Budget (OMB) audit 

bulletin. This issue deals with noncompliance with The Homeland Security Presidential 

Directive 23 and National Security Presidential Directive 54, Cyber Security and Monitoring, 

establishing the Comprehensive National Cybersecurity Initiative, and relating to Initiative No. 

1, Manage the Federal Enterprise Network as a Single Enterprise with a Trusted Internet 

Connection (TIC). FEC has taken actions to meet TIC requirements, and we have been 

advised that the agency should be in full compliance with this security policy in the near future. 

The following sections discuss in more detail our opinion on the FEC’s financial statements, 

our consideration of the FEC’s internal control over financial reporting, our tests of the FEC’s 

compliance with certain provisions of applicable laws and regulations, and management’s and 

our responsibilities. 

REPORT ON THE FINANCIAL STATEMENTS 

We have audited the accompanying financial statements of FEC, which comprise the balance 

sheets as of September 30, 2015 and 2014, and the related statements of net cost, statements of 

changes in net position, statements of budgetary resources, and custodial activity for the years 

then ended, and the related notes to the financial statements. 

Management’s Responsibility for the Financial Statements 

Management is responsible for the preparation and fair presentation of these financial 

statements in accordance with accounting principles generally accepted in the United States of 

America. Such responsibility includes the design, implementation, and maintenance of internal 

control relevant to the preparation and fair presentation of financial statements that are free 

from material misstatement, whether due to error or fraud. 

Auditor’s Responsibility 

Our responsibility is to express an opinion on the financial statements based on our audit. We 

conducted our audit in accordance with auditing standards generally accepted in the United 

States of America; standards applicable to financial statement audits contained in Government 

Auditing Standards (GAS), issued by the Comptroller General of the United States; and OMB 

Bulletin 15-02, Audit Requirements for Federal Financial Statements (the OMB audit bulletin). 

Those standards and the OMB audit bulletin require that we plan and perform the audit to 

Leon Snead & Company, P.C. 2 
 

obtain reasonable assurance about whether the financial statements are free from material 

misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and 

disclosures in the financial statements. The procedures selected depend on the auditor’s 

professional judgment, including the assessment of the risks of material misstatement of the 

financial statements, whether due to fraud or error. In making those risk assessments in a 

Federal agency, the auditor considers internal control relevant to the entity’s preparation and 

fair presentation of the financial statements in order to design audit procedures that are 

appropriate in the circumstances, but not for the purpose of expressing opinions on the 

effectiveness of the FEC’s internal control or its compliance with laws, regulations, and 

significant provisions of contracts. An audit also includes evaluating the appropriateness of 

accounting policies used, and the reasonableness of significant accounting estimates made by 

management, as well as evaluating the overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 

basis for our audit opinion. 

Opinion 

In our opinion, the financial statements referred to above present fairly, in all material respects, 

the financial position of FEC as of September 30, 2015 and 2014, and the related net cost, 

changes in net position, budgetary resources, and custodial activity for the years then ended in 

accordance with accounting principles generally accepted in the United States of America. 

OTHER MATTERS 

Required Supplementary Information 

Accounting principles generally accepted in the United States require that Management’s 

Discussion and Analysis (MDA) be presented to supplement the basic financial statements. 

Such information, although not a part of the basic financial statements, is required by the 

Federal Accounting Standards Advisory Board (FASAB) who considers it to be an essential 

part of financial reporting for placing the basic financial statements in an appropriate 

operational, economic, or historical context. We have applied certain limited procedures to the 

required supplementary information in accordance with auditing standards generally accepted 

in the United States of America, which consisted of inquiries of management about the 

methods of preparing the information and comparing the information for consistency with 

management’s responses to our inquiries, the basic financial statements, and other knowledge 

we obtained during our audit of the basic financial statements. We do not express an opinion 

or provide any assurance on the information because the limited procedures do not provide us 

with sufficient evidence to express an opinion or provide any assurance. 

Other Information 

Our audit was conducted for the purpose of forming an opinion on the basic financial 

statements taken as a whole. The performance measures and other accompanying information 

Leon Snead & Company, P.C. 3 
 

are presented for the purposes of additional analysis and are not required parts of the basic 

financial statements. Such information has not been subjected to the auditing procedures 

applied in the audit of the basic financial statements, and accordingly, we do not express an 

opinion or provide any assurance on it. 

OTHER AUDITOR REPORTING REQUIREMENTS 

Report on Internal Control 

In planning and performing our audit of the financial statements of FEC, as of and for the years 

ended, September 30, 2015 and 2014, in accordance with auditing standards generally accepted 

in the United States of America, we considered the FEC’s internal control over financial 

reporting (internal control) as a basis for designing audit procedures that are appropriate in the 

circumstances for the purpose of expressing our opinion on the financial statements, but not for 

the purpose of expressing an opinion on the effectiveness of the FEC’s internal control. 

Accordingly, we do not express an opinion on the effectiveness of the FEC’s internal control. 

Our consideration of internal control was for the limited purpose described in the preceding 

paragraph and was not designed to identify all deficiencies in internal control that might be 

material weaknesses or significant deficiencies. Therefore, material weaknesses or significant 

deficiencies may exist that were not identified. However, given these limitations, during our 

audit, we did not identify any deficiencies in internal control that we consider to be a material 

weakness. As discussed below, we identified a deficiency in internal control that we consider 

to be a significant deficiency. 

Because of inherent limitations in internal controls, including the possibility of management 

override of controls, misstatements, losses, or noncompliance may nevertheless occur and not 

be detected. A deficiency in internal control 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 and correct, misstatements on a timely basis. A material 

weakness is a deficiency or a combination of deficiencies, in internal control, such that there is 

a reasonable possibility that a material misstatement of the entity’s financial statements will not 

be prevented, or detected and corrected, on a timely basis. A significant deficiency is a 

deficiency, or a combination of deficiencies, in internal control that is less severe than a 

material weakness, yet important enough to merit attention by those charged with governance. 

Findings and Recommendations 

Notable Agency Progress 

The Commission voted during July 2015 to adopt NIST’s RMF and “best practice” IT security 

controls, and to provide funding to implement these critical control processes. These actions 

represent a significant step in eliminating the vulnerabilities identified in our, and the Office of 

the Inspector General (OIG) audit reports. FEC officials estimated that full implementation 

would not be completed until approximately one year after a contract is awarded to assist the 

agency in implementation, or approximately the end of calendar year 2016. 

Leon Snead & Company, P.C. 4 
 

 

 

FY 2015 Recommendation Status 

As required by GAS, we conducted follow-up testing to determine whether FEC had 

implemented corrective actions to address the findings and recommendations in the FY 2014 

financial statement audit. The following information discusses the findings that still impact the 

agency’s internal control processes. 

a. Planning, Oversight and Monitoring of FEC’s Corrective Action Plan (CAP) 

FEC has made progress in addressing problems reported in prior years’ audits. Of the 18 

prior year’s recommendations, seven have been closed, and our audit tests showed that the 

agency has corrective actions planned or ongoing on the remaining open recommendations. 

However, we continue to believe that effective project management is required to 

effectively and timely implement agreed upon corrective actions. Without appropriate 

project management and a project plan that includes: key tasks, assignments, timeframes, 

resource information, and other necessary information; the timely and effective 

implementation of agency IT projects are delayed, or not effectively implemented. 

We worked with FEC officials during our FY 2015 audit, and provided to them guidance 

related to project planning and management requirements that we obtained from other 

federal agencies. In addition, we were notified that FEC officials added some information 

to the CAP relating to tasks and completion dates. However, our audit found that the 

agency has not issued guidance to address the deficiencies we identified in project 

planning, and the additional information provided in the CAP does not fully address the 

audit recommendation. 

As noted previously, the Commission plans to obtain contractor assistance to implement 

NIST’s best practice IT security program. The adoption of these best practice requirements 

will be a complex and long term project that crosses all aspects of FEC’s IT operations, 

as well as other related agency operations. It is critical that a comprehensive project 

management plan be developed and monitored to ensure that this project is completed in a 

timely and effective manner. 

Recommendations: 

1. Develop an Office of Chief Information Officer (OCIO) policy that requires all project 

managers to develop a detailed project plan for all OCIO projects that require multiple 

resources and/or has a timeframe of completion beyond 60 days. 

Agency’s Response 

FEC summarized the actions it has taken to attempt to address this recommendation, 

and adds “... We also created a draft project plan guide to provide direction in creating 

project plans for the OCIO. We held monthly meetings to update statuses of the CAP. 

The OCIO concurs to develop a project plan in areas that affect every division in the 

Agency. This will require a centralized Project Management Office (PMO) that would 

report to an Agency senior level leader and coordinate projects of a certain size and 

dollar value....” 

Leon Snead & Company, P.C. 5 
 

 

 

Auditor’s Comments 

We have worked with FEC officials during the audit to assist in addressing this audit 

recommendation, and concur that the agency has taken certain actions. However, we 

are unable to agree that the proposed action to hire a Project Management Official 

appropriately addresses the audit recommendation. In our prior audits, we reported that 

inadequate project planning and management were key reasons for the significant 

delays in implementing agreed upon corrective actions for IT projects. Although the 

impact a project has on other FEC divisions is a significant element that should be 

included in an IT project plan, OCIO should have a project plan for all IT projects 

meeting the specified criteria in our recommendation, whether OCIO specific or 

involving other agency divisions. The OIG agrees with this conclusion, and has shown 

Information Technology Project Planning and Management, as a management 

challenge for FY 2015. 

2. Develop an OCIO policy that details the necessary information required for the 

development of a project plan such as: 

a. identification of key tasks and/or steps; 

b. personnel responsible for completing the task and/or step; 

c. the timeframe for beginning and completing the task and/or step; 

d. any associated cost; 

e. resources required; and 

f. maintain documentation, as part of the project plan, to support the 

accomplishment of key plan tasks, issues that impacted the project, and the 

completion of the overall project. 

Agency’s Response 

FEC officials advised that “The OCIO does concur to provide a project outline that 

covers parent tasks, resources assigned costs and start and end dates for the parent 

tasks. Documentation will be kept on issues that impacted the timely completion of the 

project. This will be applied to any project having a capital budget impact over 200K.” 

Auditor’s Comments 

We do not believe that project planning should only be done for projects that require 

capital expenditures. We are uncertain how the agency would determine the costs of 

projects that may not require the purchase of a capital item since the agency does not 

have a cost accounting system that could provide project costs (or estimated costs). In 

addition, some projects because of their critical nature and/or complexity would need a 

project plan, but may not have a capital budget of over $200,000. 

b. Assessment and Accreditation of the General Support System (GSS) 

The FEC has not completed a full assessment and accreditation of its GSS, or updated 

applicable policy documents as we recommended in prior financial statement audit reports. 

In our FY 2014, we reported that: 

Leon Snead & Company, P.C. 6 
 

“FEC needs to perform an assessment of its general support system to identify 

vulnerabilities that could allow further network intrusions and data breaches. In addition, 

FEC has not followed FEC policy 58-2.4, Certification and Accreditation Policy, which 

establishes controls over the process of obtaining independent assurance that FEC major 

applications and general support system (GSS) are capable of enforcing the security 

policies that govern their operations.” 

Recommendations: 

3. Promptly perform, after implementation of NIST best practice IT controls, an 

assessment and accreditation of the GSS. (Revised) 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation. The OIG is 

aware and has acknowledged OCIO’s continuous work in this area. The OCIO is 

currently in the process of acquiring the service of a contractor to have the NIST 

Management Framework implemented (including SP 800-53r4) in the Agency... and a 

project plan will be created by the contractor once the contract is awarded.” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation, we have no 

additional comments. 

4. Strengthen FEC Policy 58-2.4 so that it provides additional guidance on what decision 

points determine when a new assessment and accreditation is required; and the specific 

documentation requirements that need to be maintained in order for the agency to track 

changes so it can make informed decisions on when major changes drive the need for a 

new assessment and/or updated accreditation. 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation. All OCIO 

security policies will be reviewed during the implementation of the NIST Risk 

Management Framework and modified as needed.” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation, we have no 

additional comments. 

c. Recertification of Users’ Access Authorities 

FEC has not yet established a process that will provide supervisors with the necessary 

information to recertify user access authorities for their staff. We first reported that FEC 

needed to develop a process to periodically review users’ access authorities in 2009. 

While FEC officials agreed after our first report that such a control process was needed 

(and required by its own policies), limited progress has been made to implement this 

control process. This problem continues even though FEC policies contained in IT policy 

58-2.2, Account Management Policy, and the general support system’s (GSS) security plan 

Leon Snead & Company, P.C. 7 
 

 

state that all user account access rights and privileges will be periodically reviewed and 

validated each six months. 

Recommendations: 

5. Complete the project relating to review of user access authorities, and ensure necessary 

budgetary and personnel resources are provided to complete this project in a timely 

manner. 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation. As we have 

briefed OIG, we are currently evaluating tools that can meet the needs of the Agency. 

OCIO expects this project to be a multi-year phase approach. The tools we are 

evaluating are in the range of $200K. Pending approval of the Commission we will 

acquire and implement the appropriate tools.” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation and are seeking 

funding to acquire needed software, we have no additional comments. 

6. Reissue FEC Policy 58-2.2 to require annual recertification of users’ access authorities 

by supervisory personnel who would have knowledge of the users’ requirements for 

accessing FEC information and information systems. Ensure that the policy contains 

sufficient operational details to enable an effective review and update process. 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation. The OCIO 

has informed OIG that we are currently evaluating tools in order to implement the 

recommendations as OCIO has reported in the Corrective Action Plan. Once a tool 

is acquired, OCIO will provide OIG the necessary project outline for this 

recommendation. Because of dependencies on other module, the attestation module 

(user-recertification module) will be the last module to be implemented; therefore 4th 

quarter of FY 2017 is estimated here.” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation and are seeking 

funding to acquire needed software, we have no additional comments. 

d. Continuity of Operations Plan (COOP) 

We noted that FEC conducted a voluntary COOP testing exercise on September 23-24, 

2015, to test the feasibility of using Surface tablets and the telework option as a viable 

method for the continuation of FEC operations in the event of a disruption to normal 

business. However, the COOP testing was only voluntary for COOP essential personnel, 

and all key COOP essential personnel had not been provided a Surface tablet at the time of 

this testing. Therefore, FEC has not yet fully and effectively tested and exercised the 

Continuity of Operations Plan (COOP) – a critical element in the development of a 

comprehensive and effective plan. As discussed in Federal Continuity Directive (FCD) 

Leon Snead & Company, P.C. 8 
 

 

 

 

No. 1,1 until the COOP plan is tested and exercised, any deficiencies in the plan cannot be 

determined, and the agency remains at risk of not being able to carry out the mission of the 

agency in the event of a disruption to normal business operations. 

While the FEC currently has a draft Continuity of Operations Plan (COOP) a full test must 

be completed in order to validate the FEC’s plan. We were advised by FEC officials that a 

full report of the voluntary test results is expected to be available in November 2015. 

Recommendation: 

7. Ensure that sufficient resources are assigned to the task of testing the COOP, a critical 

IT control process, in order to reduce risk to the FEC, and complete all required tests in 

a timely manner. Ensure that appropriate documentation is retained as required by 

FCD No. 1 to support that FEC has met all applicable federal requirements. 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation. A test of the 

updated COOP was performed September 23-24, 2015....A full report of the test results 

is available and appropriate modifications will be made to the COOP, and if additional 

testing is required, a project outline will be provided.” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation and are assessing 

the test results, we have no additional comments. 

e. USGCB Configuration Requirements 

We have reported in prior audits that the FEC needed to adopt the United States 

Government Configuration Baseline (USGCB). As discussed in OMB guidance, the 

implementation of these standards is critical to strengthening an agency’s overall 

configuration management control process. Our 2015 tests showed that FEC had initiated 

corrective actions to implement automated logging of changes, implemented a strengthened 

configuration review board, and began to implement USGCB configuration security 

settings within FEC. However, management noted that this project has been delayed, and it 

is now estimated to be completed during 2017, “because it is impossible to implement 

(these standards) on old hardware.” Until these standards are implemented, critical risks 

remain and could impact the agency’s information and information systems. 

1

 Federal Continuity Directive No.1, Federal Executive Branch National Continuity Program, Appendix K, Test, 

Training and Exercise, require that COOP documents must be validated through tests, training, and exercises 

(TT&E), and that all agencies must plan, conduct, and document periodic TT&Es to prepare for all-hazards 

continuity emergencies and disasters, identify deficiencies, and demonstrate the viability of their continuity plans 

and programs. Deficiencies, actions to correct them, and a timeline for remedy must be documented in an 

organization’s CAP (corrective action plan). FEC Policy No. 58.2.9 provides that plans should not be considered 

valid until tested for practicality, executability, errors and/or omissions. The initial validation test should consist 

of a simulation or tactical test. Once validated, plans should be tested annually, or when substantive changes 

occur to the system, to the system environment, or to the plan itself. Test results should be maintained in a journal 

format and retained for analysis. Validated change recommendations resulting from testing activities should be 

incorporated into plans immediately. 

Leon Snead & Company, P.C. 9 
 

 

Recommendation: 

8. Implement USGCB baseline configuration standards for all workstations and require 

documentation by the CIO to approve and accept the risk of any deviation from these 

standards. 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation. For all the 

new hardware installed thus far we are 100% compliant...Because it is not possible to 

implement the plan on older hardware, (t)herefore, based on budget availability, the 

remaining machines will be compliant during FY 2016-2017....” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation, we have no 

additional comments. 

f. Vulnerability Scanning and Timely Remediation of Vulnerabilities to Agency’s 

Network 

Vulnerability scanning for patch levels; scanning for functions, ports, protocols, and 

services that should not be accessible to users or devices; and scanning for improperly 

configured or incorrectly operating information flow control mechanisms is one of the most 

important control processes in an agency’s IT security program. Without an effective 

scanning process, and timely remediation of identified vulnerabilities, the agency’s 

information and information systems will remain at high risk. 

Our FY 2015 audit continued to find problems in this area as follows: 

 Controls needed strengthening to ensure that vulnerabilities/weaknesses identified 

through the vulnerability scanning tests are completed within 60 days of 

identification, or document an analysis and acceptance of risks for longer term 

remediation. 

 Scanning of FEC’s networks and devices were completed on a test basis, but later 

stopped. We were advised by FEC officials that until a decision was made as to 

whether to adopt NIST best practices IT security controls, scanning the network 

and devices served no useful purpose. In addition, the USGCB configuration 

management project needed to be completed prior to scanning network resources, 

according to FEC officials. However, the project is now scheduled to be completed 

during 2017, which further delays this control process for approximately two years. 

Recommendation: 

9. Immediately implement a comprehensive vulnerability scanning and remediation 

program. Strengthen controls to ensure that vulnerabilities/weaknesses identified 

through the vulnerability scanning are completed within 60 days of identification, or 

document an analysis and acceptance of risks for longer term remediation. (Revised) 

Leon Snead & Company, P.C. 10 
 

 

 

Agency’s Response 

FEC officials advised that the OCIO concurs with this recommendation, and has 

awarded a contract to support agency scanning and remediation efforts. 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation, we have no 

additional comments. 

g. Mandiant Report Recommendations Remain Open 

In May 2012, the FEC was a victim of a network intrusion by an Advanced Persistent 

Threat (APT).2

 The agency hired a contractor to analyze this serious intrusion on FEC’s IT 

systems, and to provide recommended solutions to eliminating any threat discovered by the 

contractor. The contractor completed the analysis, and provided a report to FEC on 

October 5, 2012. The contractor made a significant number of recommendations, including 

that FEC should complete the actions by the end of October 2012. 

However, our FY 2015 audit tests showed that, while the agency had taken action on 

several of the recommendations, other recommendations have remained open, almost three 

years after the report was provided to FEC officials. 

Recommendation: 

10. Complete the implementation of the contractor’s open recommendations contained in 

the October 2012 Threat Assessment Program report, or provide a formal signed 

document accepting the risk of the remaining outstanding recommendations that FEC 

will not implement. Provide sufficient budgetary and personnel resources to this 

project to ensure that actions are properly accomplished. (Revised) 

Agency’s Response 

FEC officials advised that the OCIO disagrees with the recommendation, and stated 

that the OCIO has implemented all the primary recommendations from the Mandiant 

report. FEC officials add that “The supplemental recommendations will fall under 

larger projects OCIO is currently working on and/or plans to implement in FY 2016. 

For example, as part of the USGCB project admin access from client machines will be 

removed as OCIO refreshes its client machines; OCIO also made a recommendation to 

eliminate xmail that would address this finding. The Commission instead decided to 

implement multi-factor authentication for “webmail” as the Agency moves from Lotus 

Notes to Office 365 early next year.” 

2

According to NIST SP 800-39, an adversary that possesses sophisticated levels of expertise and significant resources which 

allow it to create opportunities to achieve its objectives by using multiple attack vectors (e.g., cyber, physical, and deception). 

These objectives typically include establishing and extending footholds within the information technology infrastructure of the 

targeted organizations for purposes of obtaining information, undermining or impeding critical aspects of a mission, program, 

or organization; or positioning itself to carry out these objectives in the future. The advanced persistent threat: (i) pursues its 

objectives repeatedly over an extended period of time; (ii) adapts to defenders’ efforts to resist it; and (iii) is determined to 

maintain the level of interaction needed to execute its objectives. The contractor also identified two additional systems that 

were infected, but were not shown as APT type threats. 

Leon Snead & Company, P.C. 11 
 

 

 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation via other planned 

projects, we will review the agency’s detailed plans for resolving the remaining 

recommendations during the FY 2016 audit. Thus, we have no additional comments. 

A summary of the status of prior year recommendations is included as Attachment 1. 

REPORT ON COMPLIANCE 

As part of obtaining reasonable assurance about whether the agency’s financial statements are 

free of material misstatement, we performed tests of its compliance with certain provisions of 

laws, regulations, and significant provisions of contracts, noncompliance with which could 

have a direct and material effect on the determination of financial statement amounts, and 

certain other laws and regulations. We limited our tests of compliance to these provisions and 

we did not test compliance with all laws and regulations applicable to the FEC. Providing an 

opinion on compliance with certain provisions of laws, regulations, and significant contract 

provisions was not an objective of our audit and, accordingly, we do not express such an 

opinion. 

In connection with our audit, we noted one instance described below of noncompliance that is 

required to be reported according to Government Auditing Standards and the OMB audit 

bulletin guidelines. No other matters came to our attention that caused us to believe that FEC 

failed to comply with applicable laws, regulations, or significant provisions of laws, 

regulations, and contracts that have a material effect on the financial statements insofar as they 

relate to accounting matters. Our audit was not directed primarily toward obtaining knowledge 

of such noncompliance. Accordingly, had we performed additional procedures, other matters 

may have come to our attention regarding the FEC’s noncompliance with applicable laws, 

regulations, or significant provisions of laws, regulations, and contracts insofar as they relate to 

accounting matters. 

Noncompliance with Comprehensive National Cyber Security Initiative (Repeat Finding) 

We first reported that the FEC was noncompliant with The Homeland Security Presidential 

Directive 23, and National Security Presidential Directive 54, Cyber Security and Monitoring, 

in our FY 2012 audit report. Trusted Internet Connection (TIC) was introduced in OMB 

Memorandum M-08-05, Implementation of Trusted Internet Connections, dated November 20, 

2007. The initiative was described in the memorandum as an effort to develop “a common 

[network] solution for the federal government” that would reduce the number of external 

Internet connections for the entire government. The memorandum stated that “each agency 

will be required to develop a comprehensive POA&M (Plan of Action and Milestones)” to 

implement TIC, but it neither defined “agency” nor referred to any legal authority supporting 

the initiative. 

FEC’s Office of General Counsel (OGC) analyzed this document and initially determined that 

the FEC was exempt from implementing TIC. However, at our request, OGC reassessed this 

determination, and in an August 2012 memorandum to the Staff Director, the OGC stated that 

Leon Snead & Company, P.C. 12 
 

 

“...we conclude that FEC must comply with all requirements of...TIC.” Based upon this 

OGC opinion, FEC officials agreed in 2012 to implement TIC. 

Our 2015 audit tests found that the agency has just contracted with a vendor to implement TIC 

requirements. FEC officials advised that TIC would be fully implemented in the near future. 

Recommendation: 

11. Develop a time-phased corrective action plan to address the prompt implementation 

of Homeland Security Presidential Directive 23, and National Security Presidential 

Directive 54, Cyber Security and Monitoring. 

Agency’s Response 

FEC officials advised that “The OCIO concurs with this recommendation...The contracting 

officer awarded a contract for the TIC service at the end of September. We are currently in 

the planning phase with the winning vendor. The estimated completion date is the second 

quarter of FY 2016....” 

Auditor’s Comments 

Since FEC officials have agreed to implement this recommendation, we have no additional 

comments. 

Restricted Use Relating to Reports on Internal Control and Compliance 

The purpose of the communication included in the sections identified as “Report on Internal 

Control” and “Report on Compliance” is solely to describe the scope of our testing of internal 

control over financial reporting and compliance, and to describe any material weaknesses, 

significant deficiencies, or instances of noncompliance we noted as a result of that testing. Our 

objective was not to provide an opinion on the design or effectiveness of the FEC’s internal 

control over financial reporting or its compliance with laws, regulations, or provisions of 

contracts. The two sections of the report referred to above are integral parts of an audit 

performed in accordance with Government Auditing Standards in considering the FEC’s 

internal control over financial reporting and compliance. Accordingly, those sections of the 

report are not suitable for any other purpose. 

AGENCY’S RESPONSE 

The FEC’s November 9, 2015 response to the audit report, which has been summarized in the 

body of this report, is included in its entirety as Attachment 2. The FEC’s response was not 

subjected to the auditing procedures applied in the audit of the financial statements and, 

accordingly, we express no opinion on it. 

Rockville, Maryland 

November 16, 2015 

Leon Snead & Company, P.C. 13 
 

 

Attachment 1 

Status of Prior Year Recommendations 

Rec. No. Recommendation Recommendation 

Status 

1. 

Formally adopt as a model for FEC, the NIST IT security controls 

established in FIPS 199, FIPS 200, SP 800-53, and other applicable 

guidance that provides best practice IT security control requirements. 

Closed 

2. 

Revise FEC policies and procedures to require a documented, fact-based, 

risk assessment prior to declining adoption of any government-wide IT 

security best practice, or IT security requirement. Require the Chief 

Information Officer (CIO) to approve, and accept the risk of any 

deviation from government-wide IT security best practices that are 

applicable to the FEC business operations. Retain documentation of 

these decisions. 

Closed 

3. 

Complete the implementation of the open contractor’s recommendations 

contained in the October 2012 Threat Assessment Program report. 

Provide sufficient budgetary and personnel resources to this project to 

ensure that actions are properly accomplished. 

Open 

4. 

Revise all pertinent FEC policies and procedures to ensure that they 

address proper prevention and detection controls, and provide a current 

and authoritative control structure for addressing Advance Persistent 

Threat (APT), and other types of intrusions. 

Closed 

5. 

Complete the project relating to review of user access authorities, and 

ensure necessary budgetary and personnel resources are provided to 

complete this project. 

Open 

6. 

Reissue FEC Policy 58-2.2 to require annual recertification of users’ 

access authorities by supervisory personnel who would have knowledge 

of the users’ requirements for accessing FEC information and 

information systems. Ensure that the policy contains sufficient 

operational details to enable an effective review and update process. 

Open 

7. 

Revise FEC policies and operating procedures to require the minimum 

best practices controls contained in the United States Government 

Configuration Baseline (USGCB). 

Closed 

8. 

Implement USGCB baseline configuration standards for all workstations 

and require documentation by the CIO to approve and accept the risk of 

any deviation. 

Open 

9. 

Undertake a comprehensive review of user accounts that have been 

granted non-expiring passwords. Require detailed information from 

account owners on the need for non-expiring accounts, including the 

development of other alternatives, before reauthorizing the accounts’ 

access. Develop FEC policies and operating procedures to implement this 

recommendation. 

Closed 

10. 

Whenever possible, require accounts with non-expiring passwords to be 

changed at least annually. Establish substantially more robust password 

requirements for accounts granted non-expiring passwords. Develop FEC 

policies and operating procedures to implement this recommendation. 

Closed 

11. 

Immediately terminate those accounts with non-expiring passwords that 

have not accessed their accounts within the last 12 months. Develop FEC 

policies and operating procedures to implement this recommendation to 

include a data retention policy for historical data. 

Closed 

Leon Snead & Company, P.C. 14 
 

Attachment 1 

12. 

Strengthen controls to ensure that vulnerabilities/weaknesses identified 

through the vulnerability scanning tests are completed within 60 days of 

identification, or document an analysis and acceptance of risks for longer 

term remediation. 

Open 

13. Perform within this fiscal year a new assessment and accreditation of the 

GSS using NIST SP 800-53 as the review criteria. Open 

14. 

Strengthen FEC Policy 58-2.4 so that it provides additional guidance on 

what decision points determine when a new assessment and accreditation 

is required; and the specific documentation requirements that need to be 

maintained in order for the agency to track changes so it can make 

informed decisions on when major changes drive the need for a new 

assessment and/or updated accreditation. 

Open 

15. 

Ensure that sufficient resources are assigned to the task of testing the 

COOP, a critical IT control process, in order to reduce risk to the FEC, 

and complete all required tests in a timely manner. Ensure that 

appropriate documentation is retained as required by FCD No. 1 to 

support that FEC has met all applicable federal requirements. 

Open 

16. 

Develop a detailed Plan of Action and Milestone (POA&M) to ensure 

that required COOP testing and exercises are completed as soon as 

possible. 

Open 

17. 

Issue a FEC policy that requires project managers to prepare project 

plans that address FEC Directive 50 requirements for projects that are 

implemented to address audit recommendations. Require that the project 

plan includes information, such as: identification of key tasks and/or 

steps; personnel responsible for completing the task and/or step; the 

timeframe for beginning and completing the task and/or step; resources 

required; and that documentation be maintained, as part of the project 

plan, to support the accomplishment of key plan tasks, issues that 

impacted the project, and the completion of the overall project. 

Open 

18. 

Develop a time-phased corrective action plan to address the prompt 

implementation of Homeland Security Presidential Directive 23, and 

National Security Presidential Directive 54, Cyber Security and 

Monitoring. 

Open 

Leon Snead & Company, P.C. 15 
 

 

Attachment 2 

Agency Response to Report3 

While the FEC concurs with many of the IT findings identified in the audit report, we do 

not agree that these issues result in a significant deficiency for financial statement 

purposes. All IT findings are solely related to the FEC’s general support system (GSS) 

rather than the financial system of record, which is outsourced. The likelihood of a 

material misstatement occurring due to the weakness in the FEC GSS environment is 

extremely low. The current levels of IT controls do not impact the fair presentation of 

the Agency’s financial statements such that it would rise to the level of a significant 

deficiency in the scope of the financial statement audit. 

In FY 2015, the Agency has taken steps to adopt the National Institute of Standards and 

Technology (NIST), Risk Management Framework (RMF), NIST IT security control 

“best practices,” and approved funding to begin to implement this critical internal control 

process. In addition, the Agency completed corrective actions on several other 

recommendations from our prior financial statement audit reports. Furthermore, the 

Agency has taken actions to meet TIC requirements, and should be in full compliance 

with this security policy in the near future. 

1. Develop an Office of Chief Information Officer (OCIO) policy that requires all 

project managers to develop a detailed project plan for all OCIO projects that 

require multiple resources and/or has a timeframe of completion beyond 60 days. 

Agency’s Response 

In the FY 2014 financial statement audit report, the auditors recommended that 

FEC issue a policy that requires project managers to prepare project plans that 

addresses Directive 50 requirements. These additional items consisted of 

identifying information such as: identification of key tasks and/or steps; personnel 

responsible for completing the task and/or step; the time frame for beginning and 

completing the task and/or step; resources required; and that documentation be 

maintained, as part of the project plan, to support the accomplishment of key plan 

tasks, issues that impacted the project, and the completion of the overall project. 

Directive 50 requires that for all audit follow up, management officials are 

responsible for receiving and analyzing audit reports, providing timely responses, 

and taking corrective action for all audit follow-up. It further outlines the need to 

develop a written corrective action plan (CAP) to present to the Commission after 

receiving the audit report, conduct regular meetings with the Inspector General to 

follow-up on outstanding findings, respond in a timely manner to all audit reports, 

and produce semi-annual reports that are submitted to Agency head. 

In FY 2015, the OCIO continued its efforts to enhance the CAP to adhere to 

Directive 50 and the auditor’s recommendation. We focused on creating project 

3

 The acting Chief Financial Officer provided the agency response via email, and the response is attached in 

its entirety. 

Leon Snead & Company, P.C. 16 
 

Attachment 2 

plans for some CAP items. We enhanced the CAP to include updates, key tasks, 

accomplishments, key personnel and timelines. Additionally, we created a 

separate document to serve as project plan for specific CAP items. We also 

created a draft project plan guide to provide direction in creating project plans for 

the OCIO. We held monthly meetings to update statuses of the CAP. 

The OCIO concurs to develop a project plan in areas that affect every division in 

the Agency. This will require a centralized Project Management Office (PMO) 

that would report to an Agency senior level leader and coordinate projects of a 

certain size and dollar value. Because Project Management Book of Knowledge 

(PMBOK) is a massive bureaucratic framework that may not fit in this small 

Agency, this change will require the Commission to support staffing a PMO and 

whether new project methodologies are feasible, such as implemented by the 

Digital Services Innovation Team at GSA. 

2. Develop a OCIO policy that details the necessary information required for the 

development of a project plan such as: 

a. identification of key tasks and/or steps; 

b. personnel responsible for completing the task and/or step; 

c. the timeframe for beginning and completing the task and/or step; 

d. any associated cost; 

e. resources required; and 

f. maintain documentation, as part of the project plan, to support the 

accomplishment of key plan tasks, issues that impacted the project, and 

the completion of the overall project. 

Agency’s Response 

The OCIO does concur to provide a project outline that covers parent tasks, 

resources assigned costs and start and end dates for the parent tasks. 

Documentation will be kept on issues that impacted the timely completion of the 

project. This will be applied to any project having a capital budget impact over 

200K. 

3. Promptly perform, after implementation of NIST best practice IT controls, an 

assessment and accreditation of the GSS. (Revised) 

Agency’s Response 

The OCIO concurs with this recommendation. The OIG is aware and has 

acknowledged OCIO’s continuous work in this area. The OCIO is currently in 

the process of acquiring the service of a contractor to have the NIST Management 

Framework implemented (including SP 800-53r4) in the Agency. The OCIO 

already provided OIG with a copy of the SOW for their review. As previously 

stated above, a project plan will be created by the contractor once the contract is 

awarded. 

Leon Snead & Company, P.C. 17 
 

Attachment 2 

4. Strengthen FEC Policy 58-2.4 so that it provides additional guidance on what 

decision points determine when a new assessment and accreditation is required; 

and the specific documentation requirements that need to be maintained in order 

for the agency to track changes so it can make informed decisions on when major 

changes drive the need for a new assessment and/or updated accreditation. 

Agency’s Response 

The OCIO concurs with this recommendation. All OCIO security policies will be 

reviewed during the implementation of the NIST Risk Management Framework 

and modified as needed. 

The OIG is aware and has acknowledged OCIO’s continuous work in this area. 

The OCIO is currently in the process of acquiring the service of a contractor to 

have the NIST Management Framework implemented (including SP 800-53r4) in 

the Agency. The OCIO already provided OIG with a copy of the SOW for their 

review. As previously stated above, a project plan will be created by the 

contractor once the contract is awarded. 

5. Complete the project relating to review of user access authorities, and ensure 

necessary budgetary and personnel resources are provided to complete this project 

in a timely manner. 

Agency’s Response 

The OCIO concurs with this recommendation. As we have briefed OIG, we are 

currently evaluating tools that can meet the needs of the Agency. OCIO expects 

this project to be a multi-year phase approach. The tools we are evaluating are in 

the range of $200K. Pending approval of the Commission we will acquire and 

implement the appropriate tools. 

6. Reissue FEC Policy 58-2.2 to require annual recertification of users’ access 

authorities by supervisory personnel who would have knowledge of the users’ 

requirements for accessing FEC information and information systems. Ensure 

that the policy contains sufficient operational details to enable an effective review 

and update process. 

Agency’s Response 

The OCIO concurs with this recommendation. The OCIO has informed OIG that 

we are currently evaluating tools in order to implement the recommendations as 

OCIO has reported in the Corrective Action Plan. Once a tool is acquired, OCIO 

will provide OIG the necessary project outline for this recommendation. Because 

of dependencies on other module, the attestation module (user-recertification 

module) will be the last module to be implemented; therefore 4th quarter of FY 

2017 is estimated here. 

Leon Snead & Company, P.C. 18 
 

 

 

Attachment 2 

7. Ensure that sufficient resources are assigned to the task of testing the COOP, a 

critical IT control process, in order to reduce risk to the FEC, and complete all 

required tests in a timely manner. Ensure that appropriate documentation is 

retained as required by FCD No. 1 to support that FEC has met all applicable 

federal requirements. 

Agency’s Response 

The OCIO concurs with this recommendation. A test of the updated COOP was 

performed September 23-24, 2015. The test simulated a local unavailability of the 

primary work site, with all designated COOP personnel working from their 

alternate work site. A full report of the test results is available and appropriate 

modifications will be made to the COOP, and if additional testing is required, a 

project outline will be provided. 

8. Implement USGCB baseline configuration standards for all workstations and 

require documentation by the CIO to approve and accept the risk of any deviation 

from these standards. 

Agency’s Response 

The OCIO concurs with this recommendation. For all the new hardware installed 

thus far we are 100% compliant. Currently, we have 90 compliant machines. 

Because it is not possible to implement the plan on older hardware, the OCIO 

implementation plan is linked to the desktop hardware refresh cycle. Therefore, 

based on budget availability, the remaining machines will be compliant during FY 

2016-2017 during new hardware implementation. 

The OCIO has provided OIG with the project plan of what we have accomplished 

thus far as an example, of which the IG’s office has accepted. 

9. Immediately implement a comprehensive vulnerability scanning and remediation 

program. Strengthen controls to ensure that vulnerabilities/weaknesses identified 

through the vulnerability scanning are completed within 60 days of identification, 

or document an analysis and acceptance of risks for longer term remediation. 

(Revised) 

Agency’s Response 

The OCIO concurs with this recommendation. The procurement officer awarded a 

contract to support the scanning and remediation efforts. This effort will help with 

documentation and acceptance of risks for longer term remediation. OIG is aware 

of the SOW for this service. It is important to note that when the scanning tool 

was configured we ran our first set of scans in April of this year. 

10. Complete the implementation of the contractor’s open recommendations 

contained in the October 2012 Threat Assessment Program report, or provide a 

Leon Snead & Company, P.C. 19 
 

 

 

Attachment 2 

formal signed document accepting the risk of the remaining outstanding 

recommendations that FEC will not implement. Provide sufficient budgetary and 

personnel resources to this project to ensure that actions are properly 

accomplished. (Revised) 

Agency’s Response 

The OCIO disagrees with the recommendation for this activity. The OCIO has 

implemented all the primary recommendations from the Mandiant report. The 

supplemental recommendations will fall under larger projects OCIO is currently 

working on and/or plans to implement in FY 2016. For example, as part of the 

USGCB project admin access from client machines will be removed as OCIO 

refreshes its client machines; OCIO also made a recommendation to eliminate 

xmail that would address this finding. The Commission instead decided to 

implement multi-factor authentication for “webmail” as the Agency moves from 

Lotus Notes to Office 365 early next year. 

11. Develop a time-phased corrective action plan to address the prompt 

implementation of Homeland Security Presidential Directive 23, and National 

Security Presidential Directive 54, Cyber Security and Monitoring. 

Agency’s Response 

The OCIO concurs with this recommendation. The OCIO personnel reviewed the 

MTIPs vendors’ proposals on the 17th through the 21st of September. The 

contracting officer awarded a contract for the TIC service at the end of 

September. We are currently in the planning phase with the winning vendor. The 

estimated completion date is the second quarter of FY 2016. A project schedule 

will be available to the IG in the next 3 weeks. 

The FEC concurs with many of the IT findings identified in the audit report. However, 

none of the findings were related to financial reporting. Therefore, we do not agree that 

these issues result in a significant deficiency for financial statement purposes. The levels 

of IT controls do not impact the fair presentation of the Agency’s financial statements for 

it to be considered a significant deficiency in the scope of the financial statement audit. 

Leon Snead & Company, P.C. 20 
End of Independent Auditor’s Report 

50
 

 

 

 

 

Financial Statements 

BALANCE SHEET 

As of September 30, 2015 and 2014 (in dollars) 

 Assets (Note 2) 2015 2014

Intragovernmental: 

 Fund balance with Treasury (Note 3) $ 12,900,515.87 $ 12,126,546.56

Accounts receivable, net (Note 4) 3,020.38 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 With the public:

 Total Intragovernmental 12,903,536.25 12,126,546.56

Accounts receivable, net (Note 4) 152,502.74 151,984.94 

 General property and equipment, net (Note 5) 4,000,422.68 3,903,270.68

Total Assets $ 17,056,461.67 $ 16,181,802.18

 Liabilities (Note 6) 

Intragovernmental: 

 Accounts payable $ 131,193.00 $ 154,253.21 

 Employer contributions and payroll taxes payable 281,298.85 229,281.24 

 Deferred rent 174,119.60 261,179.40 

 Custodial liability (Note 11) 152,502.74 151,984.94 

Other 

 

3,500.00 3,500.00

 Total intragovernmental 742,614.19 800,198.79 

Accounts payable 1,611,211.26 1,765,917.13

 Accrued payroll and benefits 1,132,598.04 951,213.61 

Unfunded leave 2,438,290.68 2,545,279.29

 Total Liabilities 

 Commitments and contingencies (Note 7) 

5,924,714.17 6,062,608.82

Net Position 

 Unexpended appropriations 9,743,735.10 9,022,381.37

 Cumulative results of operations 1,388,012.40 1,096,811.99

 Total Net Position 11,131,747.50 10,119,193.36

Total Liabilities and Net Position $ 17,056,461.67 $ 16,181,802.18 

The accompanying notes are an integral part of these statements. 

51
 

 

 

 

STATEMENT OF NET COST 

For The Years Ended September 30, 2015 and 2014 (in dollars) 

 

 

 

 

The accompanying notes are an integral part of these statements. 

Program Costs: 2015 2014 

Administering and Enforcing the FECA

 Gross costs 

 

 $ 68,218,355.00 

52

$ 65,819,345.25 

Less: Earned revenues (4,646.30) (29,363.77)

 Net program costs 68,213,708.70 65,789,981.48 

Net Cost of Operations (Note 9) $ 68,213,708.70 $ 65,789,981.48 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

STATEMENT OF CHANGES IN NET POSITION 

For The Years Ended September 30, 2015 and 2014 (in dollars) 

Cumulative Results of Operations 

 Beginning balance $ 

2015 

1,096,811.99 $ 

2014 

 675,854.33 

Budgetary Financing Sources

 Appropriations used 66,034,470.94 63,452,546.28 

Other Financing Resources (non-exchange) 

 Imputed financing 

 Total financing sources 

Net cost of operations 

Net change 

2,470,438.17 

 68,504,909.11 

(68,213,708.70)

 291,200.41 

2,758,392.86 

66,210,939.14 

 (65,789,981.48)

 420,957.66 

 Cumulative Results of Operations $ 1,388,012.40 $ 1,096,811.99 

Unexpended Appropriations 

 Beginning balance $ 9,022,381.37 $ 7,503,431.00 

Budgetary Financing Sources

 Appropriations received 

 Other adjustments 

 Appropriations used 

Total Budgetary Financing Sources 

 Total Unexpended Appropriations 

 67,500,000.00 

(744,175.33)

(66,034,470.94)

 721,353.73 

9,743,735.10 

65,791,000.00 

 (819,503.35)

 (63,452,546.28)

 1,518,950.37 

9,022,381.37 

Net Position $ 11,131,747.50 $ 10,119,193.36 

The accompanying notes are an integral part of these statements. 

53
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

STATEMENT OF BUDGETARY RESOURCES 

For The Years Ended September 30, 2015 and 2014 (in dollars) 

 2015 2014 

Budgetary Resources (Note 10) 

Unobligated balance brought forward, October 1 $ 3,711,398.49 $ 3,833,814.77 

Recoveries of prior year unpaid obligations 594,417.33 644,004.95 

Other changes in unobligated balance (744,175.33) (819,503.35) 

Unobligated balance from prior year budget authority, net 3,561,640.49 3,658,316.37 

Appropriations 67,500,000.00 65,791,000.00 

Spending authority from offsetting collections 23,208.00 43,065.45 

Total Budgetary Resources $ 71,084,848.49 $ 69,492,381.82 

Status of Budgetary Resources 

Obligations incurred $ 67,405,381.33 $ 65,780,983.33 

Apportioned 269,661.55 109,801.40 

Unapportioned 3,409,805.61 3,601,597.09 

Total unobligated balance, end of year 3,679,467.16 3,711,398.49 

Total Budgetary Resources $ 71,084,848.49 $ 69,492,381.82 

Change in Obligated Balance 

Unpaid obligations, brought forward, October 1 $ 8,415,148.07 $ 6,528,773.62 

Obligations incurred 67,405,381.33 65,780,983.33 

Outlays (gross) (65,983,481.28) (63,250,603.93) 

Recoveries of prior year unpaid obligations (594,417.33) (644,004.95)

Unpaid obligations, end of year 9,242,630.79 8,415,148.07

Change in uncollected payments, Federal sources (21,582.08) -

Uncollected payments, Federal sources, end of year (21,582.08) -

Obligated balance, start of year 8,415,148.07 6,528,773.62 

Obligated balance, end of year $ 9,221,048.71 $ 8,415,148.07 

Budget Authority and Outlays, Net 

Budget authority, gross $ 67,523,208.00 $ 65,834,065.45

Actual offsetting collections (1,625.92) (43,065.45)

Change in uncollected payments, Federal sources (21,582.08) -

Budget authority, net 67,500,000.00 65,791,000.00 

Outlays, gross 65,983,481.28 63,250,603.93 

Actual offsetting collections (1,625.92) (43,065.45)

Outlays, net $ 65,981,855.36 $ 63,207,538.48 

The accompanying notes are an integral part of these statements. 

54
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

STATEMENT OF CUSTODIAL ACTIVITY 

For The Years Ended September 30, 2015 and 2014 (in dollars) 

 2015 2014 

Revenue Activity 

Sources of cash collections 

Civil penalties 

 

 

 $ 476,211.53 $ 363,769.30 

 Administrative fines 204,302.23 94,170.67 

Miscellaneous receipts 96,986.95 631.82 

Total Cash Collections 777,500.71 458,571.79 

 Accrual adjustments 517.80 91,014.97

Total Custodial Revenue (Note 11) $ 778,018.51 $ 549,586.76 

 

55

Disposition of Collections 

Transferred to Treasury $ 777,500.71 $ 458,571.79 

 Amount yet to be transferred 517.80 91,014.97

 Total Disposition of Collections $ 778,018.51 $ 549,586.76

Net Custodial Activity $ - $ -

The accompanying notes are an integral part of these statements. 
Notes to the Financial Statements 

Note 1 – Summary of Significant Accounting Policies 

Reporting Entity 

The Federal Election Commission (FEC or Commission) was created in 1975 as an independent 

regulatory agency with exclusive responsibility for administering, enforcing, defending and 

interpreting the Federal Election Campaign Act of 1971 (FECA), 2 U.S.C. 431 et seq., as 

amended (“the Act”). The Commission is also responsible for administering the public funding 

programs (26 U.S.C. §§ 9001- 9039) for Presidential campaigns, which include certification and 

audits of all participating candidates and committees, and enforcement of public funding 

legislation. 

The financial activity presented relates to the execution of the FEC’s Congressionally approved 

budget. Consistent with Federal Accounting Standards Advisory Board’s (FASAB) Statement of 

Federal Financial Accounting Concept No. 2, “Entity and Display,” the Presidential Election 

Campaign Fund is not a reporting entity of the FEC. Financial activity of the fund is budgeted, 

apportioned, recorded, reported and paid by the U.S. Department of Treasury (Treasury). The 

accounts of the Presidential Election Campaign Fund are therefore not included in the FEC’s 

financial statements. 

Basis of Accounting and Presentation 

As required by the Accountability of Tax Dollars Act of 2002, the accompanying financial 

statements present the financial position, net cost of operations, changes in net position, 

budgetary resources and custodial activity of the FEC. While these financial statements have 

been prepared from the books and records of the FEC in accordance with U.S. generally 

accepted accounting principles (GAAP) for the Federal Government and in accordance with the 

form and content for entity financial statements specified by the Office of Management and 

Budget (OMB) in Circular A-136, as revised, Financial Reporting Requirements, as well as the 

accounting policies of the FEC, the statements may differ from other financial reports submitted 

pursuant to OMB directives for the purpose of monitoring and controlling the use of the FEC’s 

budgetary resources. 

These financial statements reflect both accrual and budgetary accounting transactions. Under the 

accrual method of accounting, revenues are recognized when earned and expenses are 

recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary 

accounting is designed to recognize the obligation of funds according to legal requirements. 

Budgetary accounting is essential for compliance with legal constraints and controls over the use 

of federal funds. 

Throughout these financial statements, assets, liabilities, revenues and costs have been classified 

according to the type of entity with which the transactions are associated. Intragovernmental 

assets and liabilities are those resulting from transactions with other federal entities. 

Intragovernmental earned revenues are collections or accruals of revenue from other federal 

entities and intragovernmental costs are payments or accruals to other federal entities. These 

statements should be read with the understanding that they are for a component of the Federal 

Government, a sovereign entity. 

56
Assets 

Assets that an entity is authorized to use in its operations are termed entity assets, whereas assets 

that are held by an entity and are not available for the entity’s use are termed non-entity assets. 

Most of the FEC’s assets are entity assets and are available for use in carrying out the mission of 

the FEC as appropriated by Congress. The FEC also has non-entity assets which primarily 

consist of receivables from fines and penalties. These custodial collections are not available to 

the FEC to use in its operations and must be transferred to Treasury. 

Fund Balance with Treasury 

The FEC does not maintain cash in commercial bank accounts. Treasury processes cash receipts 

and disbursements. Fund Balance with Treasury consists of appropriated funds and custodial 

collections. With the exception of the custodial collections, these funds are available to pay 

current liabilities and finance authorized purchase commitments. Custodial collections, which are 

not available to finance FEC activities, are classified as non-entity assets. 

Accounts Receivable 

The FEC’s Accounts Receivable mainly represents amounts due from the public for fines and 

penalties assessed by the FEC and referred to Treasury for collection. The FEC establishes an 

allowance for the estimated loss on accounts receivable from the public that are deemed 

uncollectible accounts. This allowance is included in Accounts Receivable, net on the balance 

sheet. The allowance is a percentage of the overall receivable balance, based on the collection 

rate of past balances. 

General Property and Equipment 

General Property and Equipment (P&E) is reported at acquisition cost, and consists of items that 

are used by the FEC to support its mission. Depreciation or amortization on these assets is 

calculated using the straight-line method with zero salvage value. Depreciation or amortization 

of an asset begins the day it is placed in service. Maintenance, repairs and minor renovations are 

expensed as incurred. Expenditures that materially increase the value, capacity or useful life of 

existing assets are capitalized. Refer to Note 5 General Property and Equipment, Net for 

additional details. 

Liabilities 

Liabilities represent amounts that are likely to be paid by the FEC as the result of transactions or 

events that have already occurred; however, no liabilities are paid by the FEC without an 

appropriation. Intragovernmental liabilities arise from transactions with other federal entities. 

Liabilities classified as not covered by budgetary resources are liabilities for which 

appropriations have not been enacted (e.g., annual leave benefits and actuarial liability under the 

Federal Employees Compensation Act), or those resulting from the agency’s custodial activities. 

The FEC has an intragovernmental liability to Treasury for fines, penalties and miscellaneous 

receipts which are due from the public but have not yet transferred. These funds may not be used 

to fund FEC operations. 

57
Accounts Payable 

Accounts Payable consists of liabilities to other entities or persons for amounts owed for goods 

and services received that have not yet been paid at the end of the fiscal year. Accounts Payable 

also consists of disbursements in-transit, which are payables that have been recorded by the FEC 

and are pending payment by Treasury. In addition to accounts payables recorded through normal 

business activities, unbilled payables are estimated based on historical data. 

Accrued Payroll and Employer Contribution 

Accrued payroll and benefits represent salaries, wages and benefits earned by employees, but not 

yet disbursed as of the statement date. Accrued payroll and Thrift Savings Plan contributions are 

not classified as intragovernmental. Employer contributions and payroll taxes payable are 

classified as intragovernmental. 

Annual, Sick and Other Leave 

Annual leave is recorded as a liability when it is earned by FEC employees; the liability is 

reduced as leave is taken. On a quarterly basis, the balance in the accrued leave account is 

adjusted to reflect the current leave balances and pay rates. Accrued annual leave is paid from 

future funding sources and is reflected as a liability not covered by budgetary resources. Sick 

leave and other types of non-vested leave are expensed as taken. 

Federal Employee Benefits 

A liability is recorded for estimated and actual future payments to be made for workers’ 

compensation pursuant to the Federal Employees Compensation Act. The liability consists of the 

net present value of estimated future payments calculated by the Department of Labor (DOL) 

and the actual unreimbursed cost paid by DOL for compensation paid to recipients under the 

Federal Employee’s Compensation Act. The future workers' compensation estimate is generated 

by DOL through an application of actuarial procedures developed to estimate the liability for the 

Federal Employee’s Compensation Act, which includes the expected liability for death, 

disability, medical and miscellaneous costs for approved compensation cases. The liability is 

calculated using historical benefit payment patterns related to a specific incurred period to 

estimate the total payments related to that period. These projected annual benefits payments are 

discounted to present value. 

Employee Retirement Plans 

Each fiscal year, the Office of Personnel Management (OPM) estimates the Federal Government 

service cost for all covered employees. This estimate represents an annuity dollar amount which, 

if accumulated and invested each year of an employee’s career, would provide sufficient funding 

to pay for that employee’s future benefits. As the Federal Government’s estimated service cost 

exceeds the amount of contributions made by employer agencies and covered employees, this 

plan is not fully funded by the FEC and its employees. As of September 30, 2015, the FEC 

recognized approximately $2,470,000 as an imputed cost and related financing source, for the 

difference between the estimated service cost and the contributions made by the FEC and its 

employees. This represents a 10 percent decrease when compared to the $2,758,000 of imputed 

cost and related financing source recognized in Fiscal Year 2014. 

58
FEC employees participate in either the Civil Service Retirement System (CSRS) or the Federal 

Employees Retirement System (FERS), which became effective on January 1, 1987. For 

employees participating in CSRS, the FEC withheld 7 percent of base pay earnings and provided 

a matching contribution equal to the sum of the withholding. For employees covered by FERS, 

the FEC withheld .8 percent of base pay earnings and provided the agency contribution. The 

majority of FEC employees hired after December 31, 1983, are automatically covered by FERS. 

Effective January 1, 2013, the Middle Class Tax Relief and Job Creation Act of 2012 created a 

new FERS retirement category, Revised Annuity Employees (RAE) for new federal employees 

hired in calendar year (CY) 2013 or thereafter. In FY 2015, the FERS-RAE employee 

contribution rate was 3.1 percent. 

Effective January 1, 2014, the Bipartisan Budget Act of 2013 introduced a new FERS retirement 

category, Further Revised Annuity Employees (FRAE) for new federal employees hired in CY 

2014 and thereafter. In FY 2015, the FERS-FRAE employee contribution rate was 4.4 percent. 

FERS contributions made by employer agencies and covered employees are comparable to the 

Federal Government’s estimated service costs. For FERS covered employees, the FEC made 

contributions of 13.2 percent of basic pay for FY 2015. For both FERS-RAE and FERS-FRAE 

covered employees, the FEC made contributions of 11.1 percent of basic pay for FY 2015. 

Employees participating in FERS are covered under the Federal Insurance Contribution Act 

(FICA), for which the FEC contributed 6.2 percent to the Social Security Administration in FY 

2015. Effective in FY 2012 FERS and CSRS – Offset employees were granted a 2 percent 

decrease in Social Security for tax year (CY) 2012 under the Temporary Payroll Tax Cut 

Continuation Act of 2011; and H.R. 3630, the Middle Class Tax Relief and Job Creation Act of 

2012. During FY 2013, employees contributed 4.2 percent to Social Security through December 

31, 2012. Effective January 1, 2013 the employee contribution rate is 6.2 percent. 

Thrift Savings Plan 

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for employees 

covered by either CSRS or FERS. The TSP is administered by the Federal Retirement Thrift 

Investment Board on behalf of federal agencies. For employees belonging to FERS, the FEC 

automatically contributes 1 percent of base pay to their account and matches contributions up to 

an additional 4 percent. For employees belonging to CSRS, there is no governmental matching 

contribution. 

The FEC does not report on its financial statements CSRS and FERS assets, accumulated plan 

benefits or unfunded liabilities, if any, which may be applicable to FEC employees. Reporting 

such amounts is the responsibility of the Office of Personnel Management. The portion of the 

current and estimated future outlays for CSRS and FERS not paid by the FEC is in accordance 

with Statement of Federal Financial Accounting Standards (SFFAS) No. 5, Accounting for 

Liabilities of the Federal Government, and is included in the FEC's financial statements as an 

imputed financing source. 

59
Commitments and Contingencies 

A contingency is an existing condition, situation or set of circumstances involving uncertainty as 

to possible gain or loss. The uncertainty will ultimately be resolved when one or more future 

events occur or fail to occur. SFFAS No. 5 as amended by SFFAS No. 12, contains the criteria 

for recognition and disclosure of contingent liabilities. A contingency is recognized when a past 

event or exchange transaction has occurred, a future outflow or other sacrifice of resources is 

probable and the future outflow or sacrifice of resources is measurable. A contingency is 

disclosed where any of the conditions for liability recognition are not met and the chance of the 

future confirming event or events occurring is more than remote but less than probable. 

According to OMB Circular A-136, as revised, in addition to the contingent liabilities required 

by SFFAS No. 5, the following commitments should be disclosed: 1) an estimate of obligations 

related to cancelled appropriations for which the reporting entity has a contractual commitment 

for payment; and 2) amounts for contractual arrangements which may require future financial 

obligations. The FEC does not have commitments related to cancelled appropriations or amounts 

for contractual arrangements that would require future financial obligations. 

Revenues and Other Financing Sources 

Annual Appropriation 

The FEC received all of its funding through an annual appropriation as provided by Congress. 

Additionally, the FEC received funding through reimbursement for services provided to other 

Federal agencies. Services performed for other Federal agencies under reimbursable agreements 

are financed through the account providing the service and reimbursements are recognized as 

revenue when earned. 

Imputed Financing Sources 

In accordance with OMB Circular A-136, as revised, all expenses should be reported by agencies 

whether or not these expenses would be paid by the agency that incurs the expense. The amounts 

for certain expenses of the FEC, which will be paid by other federal agencies, are recorded in the 

Statement of Net Cost (SNC). A corresponding amount is recognized in the “Statement of 

Changes in Net Position” as an “Imputed Financing Source.” These imputed financing sources 

primarily represent unfunded pension costs of FEC employees, as described above. 

Statement of Net Cost 

Net cost of operations is the total of the FEC’s expenditures. The presentation of the statement is 

based on the FEC’s strategic plan, which presents one program that is based on the FEC’s 

mission and strategic goal. The program that reflects this strategic goal is to administer and 

enforce the Federal Election Campaign Act efficiently and effectively. 

Net Position 

Net position is the residual difference between asset and liabilities and consists of unexpended 

appropriations and cumulative results of operations. Unexpended appropriations include the 

portion of the FEC’s appropriations represented by undelivered orders and unobligated balances. 

Unobligated balances associated with appropriations that expire at the end of the fiscal year 

60
 

remain available for obligation adjustments, but not for new obligations, until that account is 

cancelled, five years after the appropriations expire. Cumulative results of operations represent 

the excess of financing sources over expenses since inception. 

Statement of Custodial Activity 

The Statement of Custodial Activity summarizes collections transferred or transferable to 

Treasury for miscellaneous receipts, fines and penalties assessed by the FEC. These amounts are 

not available for FEC operations, and accordingly, are reported as custodial revenue. 

Use of Estimates 

The preparation of the accompanying financial statements in accordance with GAAP requires 

management to make certain estimates and assumptions that directly affect the reported amounts 

of assets, liabilities, revenues and expenses. Actual results could differ from these estimates. 

61
 

 

 

 

 

 

   

Note 2 – Non-Entity Assets 

Non–entity assets, which primarily represent amounts due to the FEC for fines and penalties on 

those that violated the requirements of the Federal Election Campaign Act, consisted of the 

following as of September 30, 2015 and September 30, 2014: 

2015 2014 

With the Public 

Accounts Receivable - Custodial 152,502.74 151,984.94 

Total non-entity assets 152,502.74 151,984.94 

Total entity assets 16,903,958.93 16,029,817.24 

Total Assets $17,056,461.67 $16,181,802.18 

62
 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Note 3 – Fund Balance with Treasury 

Fund Balance with Treasury consisted of the following as of September 30, 2015 and September 

30, 2014: 

2015 2014 

Fund Balances 

Appropriated Funds $12,900,515.87 $12,126,546.56 

Total $12,900,515.87 $12,126,546.56 

2015 2014 

Status of Fund Balance with Treasury 

Unobligated Balance 

Available $ 269,661.55 $ 109,801.40 

Unavailable 3,409,805.61 3,601,597.09 

Obligated Balance not yet Disbursed 9,221,048.71 8,415,148.07 

Total $12,900,515.87 $12,126,546.56 

Available unobligated balances represent amounts that are apportioned for obligation in the 

current fiscal year. Unavailable unobligated balances represent amounts that are not apportioned 

for obligation during the current fiscal year and expired appropriations that are no longer 

available to incur new obligations. Obligated balances not yet disbursed include amounts 

designated for payment of goods and services ordered but not received, or goods and services 

received but for which payment has not yet been made. 

63
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Note 4 – Accounts Receivables, Net 

All accounts receivable are with the public and consisted of the following as of September 30, 

2015 and September 30, 2014: 

2015 

Gross Accounts 

Receivable Allowance Net Accounts Receivable 

Intragovernmental 

 Intragovernmental $ 3,020.38 $ - $ 3,020.38 

Total Intragovernmental $ 3,020.38 $ - $ 3,020.38 

With the Public 

Fines and Penalties 293,766.75 141,264.01 152,502.74 

Total Non-Entity 293,766.75 141,264.01 152,502.74 

Total $ 296,787.13 $ 141,264.01 $ 155,523.12 

2014 

Gross Accounts

Receivable Allowance Net Accounts 

Receivable 

Intragovernmental 

Intragovernmental $ - $ - $ -

Total Intragovernmental $ - $ - $ -

With the Public 

Fines and Penalties 311,801.35 159,816.41 151,984.94 

Total Non-Entity 

Total $ 311,801.35 

311,801.35 159,816.41

$ 159,816.41 $ 151,984.94 

151,984.94 

Non-Entity receivables consist of civil penalties and administrative fines assessed by the FEC 

through its enforcement processes or conciliation agreements reached with parties. The FEC has 

three offices that administer the penalties: the Office of General Counsel; the Office of 

Administrative Review; and the Office of Alternative Dispute Resolution. Each office has a 

distinct role in the enforcement and collection process. The allowance is based on the historical 

rate of collection and an overall assessment of the debtor’s willingness and ability to pay. 

Delinquent debts are referred to Treasury in accordance with the Debt Collection Improvement 

Act of 1996. The terms of the agreement between the FEC and the parties establish the 

conditions for collection. 

64
Note 5 – General Property and Equipment, Net 

General Property and Equipment (P&E) is reported at acquisition cost. The capitalization 

threshold is established at $25,000 and a useful life of two or more years. For bulk purchases, 

items are capitalized when the individual useful lives are at least two years and have an 

aggregate value of $250,000 or more. Acquisitions of P&E that do not meet the capitalization 

criteria are recorded as operating expenses. 

General P&E consists of items that are used by the FEC to support its mission. Depreciation or 

amortization on these assets is calculated using the straight-line method with no salvage value. 

Depreciation or amortization begins the day the asset is placed in service. Maintenance, repairs 

and minor renovations are expensed as incurred. Expenditures that materially increase values, 

change capacities or extend useful lives are capitalized. 

Effective FY 2009, the estimated useful life of assets such as office furniture, office equipment, 

telecommunications equipment and audio/visual equipment is five years and the estimated useful 

life of information technology equipment is three years. 

The office building in which the FEC operates is leased through the General Services 

Administration under an occupancy agreement, which manages the lease agreement between the 

Federal Government and the commercial leasing entity. The FEC is billed by GSA for the leased 

space based upon estimated lease payments made by GSA plus an administrative fee. The cost of 

the office building is not capitalized. The costs of any leasehold improvements, which are 

managed through GSA, are financed with FEC appropriated funds. Construction costs of 

$25,000 or more are accumulated as construction in progress until completion and then are 

transferred and capitalized as a leasehold improvement. Leasehold improvements are amortized 

over the lesser of five years or the remaining life of the lease term. 

The internal use software development and acquisition costs capitalization threshold changed as 

a result of a new policy that was implemented in FY 2011. Internal use software development 

and acquisition costs of $250,000 are capitalized as software in development until the 

development stage is completed and the software is tested and accepted. At acceptance, costs of 

software in development are reclassified as internal use software costs and amortized using the 

straight-line method over an estimated useful life of three years. Purchased commercial software 

that does not meet the capitalization criteria is expensed. In addition, enhancements which do not 

add significant new capability or functionality are also expensed. 

The general components of capitalized property and equipment, net of accumulated depreciation 

or amortization, consisted of the following as of September 30, 2015 and September, 2014, 

respectively: 

65
                          

        

        

  

 

 

 

  

     

     

     

     

     

                          

        

        

        

   

 

 

 

   

     

     

     

     

     

                       

   

2015 

Asset Class Service Life 

(years) 

Acquisition 

Value 

Accumulated 

Depreciation/ 

Amortization 

Net Book 

Value 

Software 

Computers and 

peripherals 

Furniture 

Software-in-Development 

Total 

3 

3 

5 

 n/a 

$ 9,806,591.06 

$ 2,762,918.95 

$ 852,753.70 

$ 1,231,663.45

 $14,653,927.16

$ 7,217,898.60

$ 2,582,852.18 

$ 852,753.70 

-

 $10,653,504.48

 $ 2,588,692.46 

$ 180,066.77 

$ -

$ 1,231,663.45 

 $ 4,000,422.68 

2014 

Asset Class Service Life 

(years) 

 Acquisition 

Value 

Accumulated 

Depreciation/ 

Amortization

 Net Book 

Value 

Software 

Computers and 

peripherals 

Furniture 

Software-in-Development 

Total 

3 

3 

5 

 n/a 

$ 6,396,224.94 

$ 2,762,918.95 

$ 852,753.70 

$ 3,401,601.56 

 $13,413,499.15 

$ 6,240,682.83 

$ 2,416,791.94 

$ 852,753.70 

$ -

$ 9,510,228.47

$ 155,542.11 

$ 346,127.01 

$ -

 $ 3,401,601.56 

 $ 3,903,270.68 

66
 

 

Note 6 – Liabilities Not Covered by Budgetary Resources 

Liabilities Not Covered by Budgetary Resources consisted of the following as of September 30, 

2015 and September 30, 2014: 

Liabilities Not Covered by Budgetary Resources 2015 2014 

Intragovernmental

 Custodial Fines and Civil Penalties $ 152,502.74 $ 151,984.94 

 Deferred Rent 174,119.60 261,179.40 

Total Intragovernmental 326,622.34 413,164.34 

Unfunded Annual Leave 2,438,290.68 2,545,279.29 

Total Liabilities Not Covered by Budgetary 2,764,913.02 2,958,443.63 

Total Liabilities Covered by Budgetary Resources 3,159,801.15 3,104,165.19 

Total Liabilities $ 5,924,714.17 $ 6,062,608.82 

Beginning FY 2008, the FEC entered into a new lease agreement for its office building that 

provided a rent abatement of $870,598, which covers the equivalent of two months of rent. 

Consistent with generally accepted accounting principles, the FEC has recorded rent abatement 

as deferred rent, which is amortized over the life of the ten-year lease. 

67
Note 7 – Commitments and Contingencies 

As of September 30, 2015, the FEC had a lawsuit requesting attorneys’ fees and was unable to 

reasonably estimate the amount of the loss due to the lawsuit. 

As of September 30, 2014, in the opinion of FEC management and legal counsel, the FEC was 

not a party to any legal actions which were likely to result in a material liability. Accordingly, no 

provision for loss was included in the financial statements. 

 

68
 

 

 

 

   

Note 8 – Leases 

The FEC did not have any capital leases as of September 30, 2015 and September 30, 2014. The 

FEC has a commitment under an operating lease for its office space. Future payments due under 

the lease through September 30, 2017 are as follows: 

 Future Operating Lease Payments 

2015 

Fiscal Year Lease Payment 

2016 6,058,864.32 

2017 6,130,121.81 

Total $ 12,188,986.13 

69
 

 

 

 

 

 

 

 

 

        

 

 

Note 9 – Statement of Net Cost 

The FEC’s costs are consolidated into one program, “Administering and Enforcing the FECA,” 

and consisted of the following as of September 30, 2015 and September 30, 2014, respectively: 

2015 2014 

Intragovernmental: 

Intragovernmental gross costs $ 18,895,980.23 $ 18,700,489.97 

Less: Intragovernmental earned revenue (4,646.30) (29,363.77) 

Intragovernmental net costs 18,891,333.93 18,671,126.20 

Public: 

Gross costs with the public 49,322,374.77 47,118,855.28 

Net costs with the public 49,322,374.77 47,118,855.28 

Net cost of operations $ 68,213,708.70 $ 65,789,981.48 

Costs incurred for goods and services provided by other Federal entities are reported in the full 

costs of the FEC’s program and are indentified as “intragovernmental.” The “intragovernmental 

earned revenue” is primarily attributed to the Deputy Inspector General servicing a Federal 

agency on a reimbursable basis pursuant to the Inspector General Act. All other costs are 

identified as “with the public.” 

70
 

 

 

Note 10 – Statement of Budgetary Resources 

The Statement of Budgetary Resources (SBR) compares budgetary resources with the status of 

those resources. For the year ended September 30, 2015, budgetary resources were 

$71,084,848.49 and net outlays were $65,981,855.36. For the year ended September 30, 2014, 

budgetary resources were $69,492,381.82 and net outlays were $63,207,538.48. 

Apportionment Categories of Obligations Incurred 

The FEC receives apportionments of its resources from OMB. Apportionments are for resources 

that can be obligated without restriction, other than to be in compliance with legislation for 

which the resources were made available. 

For the years ended September 30, 2015 and September 30, 2014, direct obligations incurred 

amounted to $67,400,735.03 and $65,751,619.56, respectively. For the years ended September 

30, 2015 and September 30, 2014, reimbursable obligations incurred amounted to $4,646.30 and 

$29,363.77, respectively. 

Comparison to the Budget of the United States Government 

SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for 

Reconciling Budgetary and Financial Accounting, requires an explanation of material 

differences between budgetary resources available, the status of those resources and outlays as 

presented in the Statement of Budgetary Resources to the related actual balances published in the 

Budget of the United States Government (Budget). The Budget that will include FY 2015 actual 

budgetary execution information is scheduled for publication in February 2016, which will be 

available through OMB’s website at http://www.whitehouse.gov/omb. Accordingly, information 

required for such disclosure is not available at the time of publication of these financial 

statements. 

Balances reported in the FY 2014 SBR and the related President’s Budget reflected the 

following: 

FY 2014 Budgetary 

Resources 

Obligations 

Incurred 

Distributed 

Offsetting 

Receipts 

Net Outlays 

Statement of Budgetary Resources $69,492,381.82 $65,780,983.33 - $63,207,538.48 

Budget of the U.S. Government $66,000,000.00 $66,000,000.00 - $63,000,000.00 

Difference $ 3,492,381.82 $ (219,016.67) $ - $ 207,538.48 

The difference between the Statement of Budgetary Resources and the Budget of the United 

States Government for budgetary resources is primarily due to expired unobligated balances. The 

differences for obligations incurred and net outlays are due to rounding. 

71
 

 

 

 

 

   

Note 11 – Custodial Revenues and Liability 

The FEC uses the accrual basis of accounting for the collections of fines, penalties and 

miscellaneous receipts. The FEC’s ability to collect fines and penalties is based on the 

responsible parties’ willingness and ability to pay: 

Custodial Revenue 2015 2014 

Fines, Penalties, and Other Miscellaneous Revenue $ 778,018.51 $ 549,586.76 

Custodial Liability 

Receivable for Fines and Penalties $ 293,766.75 $ 311,801.35 

Less: Allowance for Doubtful Accounts (141,264.01) (159,816.41) 

Total Custodial Liability $ 152,502.74 $ 151,984.94 

The Custodial Liability account represents the amount of custodial revenue pending transfer to 

Treasury. Accrual adjustments reflected on the Statement of Custodial Activity represent the 

difference between the FEC's opening and closing accounts receivable balances. Accounts 

receivable are the funds owed to the FEC (as a custodian) and ultimately to Treasury. The 

accrual adjustment for civil penalties is composed of a net decrease of approximately $13,000 for 

FY 2015 and a net increase of approximately $80,000 for FY 2014, respectively. The accrual 

adjustment for administrative fines is composed of a net increase of approximately $14,000 in 

FY 2015 and a net increase of approximately $11,000 in FY 2014, respectively. 

72
Note 12 – Undelivered Orders at the End of the Period 

Undelivered orders as of September 30, 2015 and September 30, 2014 totaled $6,082.829.64 and 

$5,310,982.88, respectively. 

 

73
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 13 – Reconciliation of Net Cost of Operations to Budget 

The objective of this information is to provide an explanation of the differences between budgetary and 

financial (proprietary) accounting. This is accomplished by means of a reconciliation of budgetary 

obligations and non-budgetary resources available to the reporting entity with its net cost of operations. 

2015 2014 

Resources used to finance activities 

Budgetary resources obligated 

Obligations incurred $ 67,405,381.33 $ 65,780,983.33

 Less: Recoveries and offsetting collections (617,625.33) (687,070.40) 

Net obligations 66,787,756.00 65,093,912.93 

Other resources 

Imputed financing from costs absorbed by others 2,470,438.17 2,758,392.86 

Total resources used to finance activities 69,258,194.17 67,852,305.79 

Resources used to finance items not part of the net cost of 

operations 

Change in budgetary resources obligated for goods, services, and 

benefits ordered but not yet provided 753,285.06 1,641,366.65 

Resources that fund expenses recognized in prior periods 87,059.80 87,059.80 

Resources that finance the acquisition of assets that do not affect net 

cost of operations 1,240,428.01 1,177,316.37 

Total resources used to finance items not part of the net cost of 

operations 2,080,772.87 2,905,742.82 

Total resources used to finance the net cost of operations 67,177,421.30 64,946,562.97 

Components of the net cost of operations that will not require or 

generate resources in the current period 

Components requiring or generating resources in future periods

 Increase in annual leave liability (106,988.61) (36,913.64)

 Other - (452.47) 

Total (106,988.61) (37,366.11) 

Components not requiring or generating resources

 Depreciation and amortization 1,143,276.01 880,784.62 

Total 1,143,276.01 880,784.62 

Total components of the net cost of operations that will not require 

or generate resources in the current period 1,036,287.40 843,418.51 

Net cost of operations $ 68,213,708.70 $ 65,789,981.48 

74
 

SECTION III – Other Information 

75
     

 

 

Inspector General’s Statement on FEC Management and Performance 

Challenges 

FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

Office of Inspector General 

MEMORANDUM 

TO: The Commission 

FROM: Inspector General 

SUBJECT: Inspector General Statement on the Federal Election Commission’s 

Management and Performance Challenges 

DATE: October 16, 2015 

Each year, the Inspector General (IG) is required to provide a summary and assessment 

of the most serious management and performance challenges facing the Federal Election 

Commission (FEC). The requirement is contained in the Reports Consolidation Act of 

2000 (Public Law 106-531), an amendment to the Chief Financial Officers (CFO) Act of 

1990. The attached document responds to the requirement and provides the annual 

statement on Commission challenges to be included in the Federal Election Commission 

Financial Audit Report (FAR) Fiscal Year (FY) 2015. 

The Office of Inspector General (OIG) has identified three management and performance 

challenges for inclusion in the FEC’s FY 2015 FAR: 

 Information Technology Project Planning and Management 

 Governance Framework 

Human Capital Management / Human Resources Operations 

This year’s management challenges statement contains a significant difference from those 

previous. For the past 11 years, the OIG has identified information technology (IT) 

security as a challenge. Due to the agency’s legal exemption from the Federal 

Information Systems Management Act, agency management had not formally adopted or 

implemented the applicable National Institute of Standards and Technology (NIST) IT 

security standards for the federal government. However, during the agency’s FY 2014 

financial statement audit, management agreed with the OIG’s recommendation to 

formally adopt NIST as its risk management framework. In addition, management has 

recently taken the following steps to comply with the NIST standards: 

76
 performed a system inventory gap analysis; 

 performed a cost feasibility study to implement NIST; and 

 developed a statement of work to procure contractor assistance to implement the 

NIST IT security. 

                                                            

   

Due to these management actions and a recent commitment to establish more robust IT 

security standards, the OIG has removed Information Technology Security as a 

management challenge. The OIG will continue to monitor and assess management’s 

progress in implementing NIST IT security standards to ensure adequate implementation. 

However, the FEC’s Office of Chief Information Officer (OCIO) (formerly Information 

Technology Division, or ITD) continues to struggle with implementing IT projects 

efficiently and effectively, and in a timely manner due to a lack of adequate planning and 

management oversight. Currently the FEC’s Chief Information Officer (CIO) is also the 

agency’s full-time Staff Director, who has oversight of the FEC (except the Office of 

General Counsel, Office of Chief Financial Officer, and Office of Inspector General). In 

a Government Accountability Office (GAO) report,1

 GAO states: 

“We stressed that asking the CIO to shoulder a heavy load of responsibilities 

would make it extremely difficult, if not impossible for that individual to devote 

full attention to IRM [Information Risk Management] issues.” 

The OIG believes the FEC’s current leadership structure in having one person as both the 

full-time CIO and full-time Staff Director hinders the effectiveness and efficiency of 

agency business and the improvement of FEC programs. For several years, the OIG has 

reported on IT projects that have yet to be completed or properly implemented. Some of 

these projects include developing a Continuity of Operations Plan (COOP) and 

verification of user access authorities, both of which date back to FY 2004 as findings in 

the agency’s annual financial statement audit. In the FY 2014 audit report, the OIG 

recommended requiring OCIO project managers to prepare project plans to ensure 

adequate planning and completion of IT projects. The OIG is aware of seven on-going 

projects2

 that currently do not have proper planning documents to manage the project. 

In light of the reported agency IT system hacks in 2013 and more recent data breaches 

encountered by other government entities (Office of Personnel Management, State 

Department), it is imperative that the FEC has efficient and effective project planning and 

management processes to complete IT projects, such as the recent implementation of 

NIST standards, and other critical IT projects that ensure the security of FEC data. 

Therefore, the OIG has elevated IT project planning and management as a management 

challenge for FY 2015. 

The IG’s annual assessment of management and performance challenges is based on 

information derived from a combination of several sources, including OIG audit and 

inspection work, Commission reports, government-wide risks factors, and a general 

1

 GAO-11-634 

2

 Number of IT projects is limited to the specific IT projects related to the annual financial statement audit 

and does not include other IT projects not reviewed in the audit. 

77
knowledge of the Commission’s programs and activities. The management and 

performance challenges are detailed in the attached report. The Reports Consolidation 

Act of 2000 permits agency comment on the IG’s statements. Agency comments, if 

applicable, are due November 16, 2015. 

Lynne A. McFarland 

Inspector General 

Attachment 

cc: Alec Palmer, Staff Director and Chief Information Officer 

Judy Berning, Acting Chief Financial Officer 

Daniel Petalas, Acting General Counsel 

Edward Holder, Acting Deputy Staff Director for Management and 

 Administration 

Derrick Allen, Director, Office of Human Resources 

   

78
                                                            

FEDERAL ELECTION COMMISSION (FEC) 

 MANAGEMENT AND PERFORMANCE CHALLENGES 

FY 2015 

I. Information Technology Project Planning and Management 

Management Challenge: 

Management consistently lacks the proper planning documentation and oversight 

of IT projects that are critical to the fulfillment of the agency’s mission and are 

required to ensure the security and reliability of agency data. 

Applicable Government Requirements/Best Practices Not In Place: 

 Project Management Body of Knowledge Guidelines; 

 OMB Memorandums: 

 M-10-25 Reforming the Federal Government’s Efforts to Manage 

Information Technology Projects;3 

 M-12-27 Information Technology Baseline Management Policy. 

Critical Agency Impacts:4 

A. FEC is not in full compliance with the following: 

 Federal Continuity Directive 1, Federal Executive Branch 

National Continuity Program; 

 OMB Memorandum M-08-22 Guidance on the Federal Desktop 

Core Configuration. 

B. Project funding wasted or exceeding original planned budget5 

 User Access Review Project; 

 COOP Project. 

C. Continuous delays: 

 COOP project outstanding since FY 2004; 

 User Access Authorities project outstanding since FY 2004; 

 Assessment and Accreditation project6 outstanding since FY 

2008. 

D. Weak Internal Controls: 

 Inability to certify that mission essential functions of the agency have 

the ability to operate in the event of a local disaster; 

 Unable to verify if unauthorized disclosure of Personally Identifiable 

Information or confidential information has occurred. 

3 Updated by M-10-31, Immediate Review of Information Technology Projects. 4

 This section only includes information from those IT projects audited or reviewed by the OIG and that 

have been determined by the OIG to be most critical to the agency. 5 User Access Review Project: The OCIO purchased applications software in 2009 and 2011 to implement 

this project, but both projects were terminated as management determined they did not meet the FEC’s 

business need., The FEC will soon be starting this project for yet a third time, with a scheduled completion 

date of April 2017, and purchasing new software tools. COOP Project: From FY 2008 to 2010, the FEC 

spent $277,506 on contractors to develop plans for each division that were never updated and are now 

obsolete. 

6

 Periodic evaluations of the agency’s systems to ensure the security of the information systems, in addition 

to documenting management’s approval that the systems are operable for a specific period of time based 

on the results of the evaluation. 

79
                                                            

II. Governance Framework 

Management Challenge: 

FEC lacks adequate structure and continued stability in key senior leadership 

positions that are accountable for the mission and objectives of the agency. 

Applicable Government Requirements/Best Practices Not In Place: 

 52 U.S.C. section 30106(f);7 

 Clinger-Cohen Act of 1996.8 

Critical Agency Impacts: 

A. Agency vacancies – The FEC has several senior leader positions that have 

been vacant for a year or more.9 

 General Counsel - position vacant since July 2013;10 

 Chief Financial Officer - position vacant since October 2012;11 

 Deputy Staff Director for Management and Administration - position 

vacant since August 2014;12 

 Failure to fill senior leader positions creates resource gaps. Critical 

management positions filled with acting FTEs due to vacant senior 

leader positions, including: 

 Director of Accounting; 

 Deputy Chief Information Officer of Operations. 

B. Dual office holding – The CIO also serves as the Staff Director. 

 Failure to establish singular oversight of the OCIO significantly 

contributes to the following issues: 

 Delays in IT project implementation due to lack of adequate 

oversight; 

 Failure to timely implement recommendations to improve FEC 

business processes and programs from OIG audits/inspection in 

accordance with OMB Circular A-50 and Commission Directive 50; 

 Failure to timely implement recommendations from external 

contractors procured by ITD to improve FEC business processes. 

13

7

 Statutory requirement mandating a General Counsel at the FEC. 8

 As the FEC is exempt from the act, the government-wide standard should be used as best practice as the 

FEC’s CIO is responsible for all IT functions as identified in the act. 

9

 There are several vacant senior and management positions not included on this list that are filled by staff 

in an acting capacity. 

10 The FEC recently assigned the Associate General Counsel for Enforcement as Acting General Counsel in 

August 2015. 

11 The FEC assigned the Director of Accounting as Acting CFO in October 2012. 12 The FEC assigned the Deputy CIO of Operations as Acting Deputy Staff Director in August 2014. 13 Mandiant’s October 2012 Threat Assessment Report ($54,000); Solution Technology Systems Inc. 

Comprehensive review of FEC’s PII ($340,433.28) in FY 2008; IonIdea’s COOP development contract 

($277,506) in FY 2008. 

80
III. Human Capital Management / Human Resources Operations 

                                                            

Management Challenge: 

The Office of Human Resources (OHR) lacks leadership stability and adequate 

resources to achieve its mission critical program goals and objectives. 

Applicable Government Requirements/Best Practices Not In Place: 

 Office of Personnel Management (OPM) Guidance, including Human Capital 

Assessment and Accountability Framework; 

 5 CFR 410, 5 CFR 412, and 5 CFR 430;14 

 OPM’s 2014 Report on FEC’s HR Management Evaluation 

Recommendations. 

Critical Agency Impacts: 

A. Consistent turnover in the Director of OHR Position – The FEC has had 

four different OHR Directors since FY 2010. The current Director of OHR 

was hired in September 2015 and the previous Director was only in the 

position for approximately one year. 

 Lack of stability and continuity in leadership roles leads to resource 

gaps, lack of direction, and low moral which has a direct impact on 

productivity and efficiency; 

 Marginal progress in implementing standard operating procedures to 

improve customer service levels; 

 Critical personnel policies and procedures have not been updated, 

created, and/or approved; 

 Lack of accountability to comply with OMB Circular A-50 and 

Commission Directive 50 to timely implement recommendations to 

improve FEC business processes and programs from OIG audits and 

inspections, as well as external audits. 

 OPM 2014 Report of FEC’s HR Management Evaluation 

Recommendations have not been implemented (e.g. Training 

and Development Plans, Leadership Succession Plan). 

 

B. Lack of resources to improve customer service levels– Lack of resources 

impact OHR’s ability to implement effective internal control improvements. 

 Three vacant positions – one position has been vacant for over three 

years, and one position has been vacant for over one year; 

 The Remedy System implemented to automate and improve the 

tracking and timely response to employee inquiries is not conducive to 

the needs of the human resources operations. 

14 As an excepted service agency, the FEC is exempt from certain parts of Title 5. However, governmentwide standards should be used as best practices even if the agency is exempt from those sections. 

81
Management’s Response to Challenges Identified By the Inspector General 

Response to the OIG’s Statement on the Federal Election Commission's Management and 

Performance Challenges – Nov. 10, 2015 

I. Information Technology Project Planning and Management 

Management Challenge: 

Management consistently lacks the proper planning documentation and oversight of IT 

projects that are critical to the fulfillment of the Agency’s mission and are required to ensure 

the security and reliability of Agency data. 

Applicable Government Requirements/Best Practices Not in Place: 

 Project Management Body of Knowledge Guidelines: 

 OMB Memorandums: 

 M-10-25 Reforming the Federal Government’s Efforts to Manage Information 

Technology Projects; 

 M-12-27 Information Technology Baseline Management Policy. 

Management Response: 

In FY 2014 financial statement audit, the auditors recommended that FEC issue a 

policy that requires project managers to prepare project plans that addresses 

Directive 50 requirements. These additional items consisted of identifying 

information such as: identification of key tasks and/or steps; personnel responsible 

for completing the task and/or step; the time frame for beginning and completing the 

task and/or step; resources required; and that documentation be maintained, as part 

of the project plan, to support the accomplishment of key plan tasks, issues that 

impacted the project, and the completion of the overall project. 

Directive 50 requires that for all audit follow up, management officials are 

responsible for receiving and analyzing audit reports, providing timely responses, 

and taking corrective action for all audit follow-up. It further outlines the need to 

develop a written corrective action plan (CAP) to present to the Commission after 

receiving the audit report, conduct regular meetings with the Inspector General to 

follow-up on outstanding findings, respond in a timely manner to all audit reports, 

and produce semi-annual reports that are submitted to Agency head. 

In FY 2015, the OCIO continued its efforts to enhance the CAP to adhere to 

Directive 50 and the auditor’s recommendation. We focused on creating project 

plans for some CAP items. We enhanced the CAP to include updates, key tasks, 

accomplishments, key personnel and timelines. Additionally, we created a separate 

document to serve as project plan for specific CAP items. We also created a draft 

project plan guide to provide direction in creating project plans for the OCIO. We 

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held monthly meetings to update statuses of the CAP. 

OCIO concurs to develop project planning in areas that affect every division in the 

Agency. This will require a centralized Project Management Office (PMO) that 

would report to an Agency senior level leader and coordinate projects of a certain 

size and dollar value. Because Project Management Book of Knowledge is a massive 

bureaucratic framework that may not fit in this small Agency, this change will 

require the Commission to support staffing a PMO and whether new project 

methodologies are feasible, such as implemented by the Digital Services Innovation 

Team at GSA. 

Critical Agency Impacts: 

A. FEC is not in full compliance with the following: 

 Federal Continuity Directive 1, Federal Executive Branch National Continuity 

Program; 

 OMB Memorandum M-08-22 Guidance on the Federal Desktop Core 

Configuration. 

Management Response: 

 For all the new hardware installed, we are 100% compliant. Currently, we have 90 

compliant machines. Because it is not possible to implement the plan on older 

hardware, the OCIO implementation plan is linked to the desktop hardware 

refresh cycle. Therefore, based on budget availability the remaining machines will 

be compliant during FY 2016-2017 during new hardware implementation. 

OCIO has provided OIG with the project plan of what we have accomplished thus 

far as an example, of which the IG’s office has accepted. 

B. Project funding wasted or exceeding original planned budget: 

 User Access Review Project; 

 COOP Project. 

Management Response: 

 Because much of the technology we currently have in place can no longer 

supports the strategic vision of the Agency regarding its IT security program, FEC 

is evaluating tools that can meet the strategic need of the Agency. OCIO expects 

this project to be a multi-year and multi-phase approach. The tools we are 

evaluating are in the range of $200K for an Agency our size. Pending approval of 

the Commission, we will acquire and implement the appropriate tools that will 

meet the FEC’s need for the next several years. OIG is aware of the changes in IT 

security that necessitate this new evaluation. 

 During July and August, OCIO updated the COOP plan to ensure the document 

reflects the current operational details FEC would need to operate in the event of a 

local disaster. A copy of the plan was provided to the IG office in August FY15 

for their information. 

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We disagree with the assessment that the Agency wasted funds on the COOP 

project. The framework for the COOP plan provided by the Contractor in FY 

2010 is the foundation for the current plan that was updated in August. In FY 

2015, we replaced the original equipment, which had become obsolete, with new 

Surface tablets that are compatible with new security technology and 

infrastructure. 

In September 2015, we tested the updated COOP. This test was a simulation of a 

local unavailability of the primary work site, with all designated COOP personnel 

working from their alternative work site. A full report of the test results will be 

available in November 2015. In addition, depending on the results of the test, 

appropriate modifications will be made to the COOP and if additional testing is 

required, a project outline will be provided. 

C. Continuous delays: 

 COOP project outstanding since FY 2004; 

 User Access Authorities project outstanding since FY 2004; 

 Assessment and Accreditation project outstanding since FY 2008. 

Management Response: 

 During July and August, OCIO updated the COOP plan to ensure the document 

reflects the current operational details FEC would need to operate in the event of a 

local disaster. A copy of the plan was provided to the IG office in August FY15 

for their information. 

 The access re-certification projects were terminated because they no longer 

support the current operating environment of the FEC, and they no longer meet 

the strategic need of the FEC. OCIO will continue to end projects that no longer 

make sense for the FEC and start new projects that help the FEC continue 

advancement in the 21st century. 

 OIG is aware and has acknowledged OCIO’s continuous work in this area. OCIO 

is currently in the process of acquiring the service of a contractor to have the 

NIST Management Framework implemented (including SP 800-53r4) in the 

Agency. OCIO already provided OIG with a copy of the SOW for their review. 

As previously stated above, a project plan will be created by the contractor once 

the contract is awarded. 

D. Weak Internal Controls: 

 Inability to certify that mission essential functions of the Agency have the ability 

to operate in the event of a local disaster; 

 Unable to verify if unauthorized disclosure of Personally Identifiable information 

or confidential information has occurred. 

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Management Response: 

 During July and August, OCIO updated the COOP plan to ensure the document 

reflect the current operational details FEC would need to operate in the event of a 

local disaster. A copy of the plan was provided to the IG office in August FY15 

for their information. 

In September 2015, we tested the updated COOP. This test was a simulation of a 

local unavailability of the primary work site, with all designated COOP personnel 

working from the alternate work site. A full report of the test results will be 

available in November 2015. In addition, depending on the results of the test 

appropriate modifications will be made to the COOP and if additional testing is 

required a project outline will be provided. 

 The FEC is continually taking steps to improve its security posture by increasing 

its security capabilities. FEC is currently a member of agencies participating in 

the DHS Continuous Diagnostic and Mitigation (CDM) program. This program 

allows small, medium, and large agencies the ability to fill-in gaps in agency 

capabilities. The FEC is in Group 2F, which has an estimated date of award the 

2nd quarter of FY16. Once the award is made the GSA/DHS, FEC may be able to 

leverage this program to get the necessary tools to verify if unauthorized 

disclosure of Personally Identifiable information or confidential information has 

occurred. 

II. Governance Framework 

Management Challenge: 

FEC lacks adequate structure and continued stability in key senior leadership positions that 

are accountable for the mission and objectives of the Agency. 

Applicable Government Requirements/Best Practices Not In Place: 

 52 U.S.C. section 30106(f); 

 Clinger-Cohen Act of 1996. 

Critical Agency Impacts: 

A. Agency vacancies – The FEC has several senior leader positions that have been 

vacant for a year or more. 

 General Counsel - position vacant since July 2013; 

 Chief Financial Officer - position vacant since October 2012; 

 Deputy Staff Director for Management and Administration - position vacant since 

August 2014; 

 Failure to fill senior leader positions creates resource gaps. Critical management 

positions filled with acting FTEs due to vacant senior leader positions, including: 

 Director of Accounting; 

 Deputy Chief Information Officer of Operations 

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Management Response: 

 Management understands the importance of filling these key, vacant positions. It 

remains a challenge, however, to permanently fill these high-level positions. It 

should be noted that in the interim, the responsibilities of these positions are being 

fulfill by qualified, capable, hardworking individuals. Management is assisting 

the Commission in its recruitment, screening, and selection process. 

B. Dual office holding – The CIO also serves as the Staff Director. 

 Failure to establish singular oversight of the OCIO significantly contributes to the 

following issues: 

 Delays in IT project implementation due to lack of adequate oversight; 

 Failure to timely implement recommendations to improve FEC business 

processes and programs from OIG audits/inspection in accordance with 

OMB Circular A-50 and Commission Directive 50; 

 Failure to timely implement recommendations from external contractors 

procured by ITD to improve FEC business processes. 

Management Response: 

 Although management is appreciative of OIG’s recommendations, management is 

committed to prudent management, the strategic distribution of resources, and 

minimal acceptance of risk. 

 The proper emphasis and attention has been afforded to all areas of management. 

Accountability is essential to ensuring progress in completing OIG’s 

recommendations where management and OIG agree, and will continue to take 

action to ensure such progress. Management has appropriately responded to the 

applicable recommendations across functional areas within the Agency and will 

continue to do so. 

 In 2011, the Commission approved, that the Staff Director and Chief Information 

Officer (CIO) positions would be filled by one FEC employee. IT is a critical part 

of the Agency’s mission in disclosing campaign, finance information to the public 

and an area of concern regarding IT security and the current employee who 

fulfills both the Staff Director and CIO positions is fulfilling his obligations as 

directed by the Commission. Significantly, the auditors’ assessment does not 

identify any specific delays in IT project completion related to the CIO also 

serving as the Staff Director. Generally speaking, any perceived delays in IT 

project implementation can be related to delays in funding, staffing, inadequate 

cross functional support and antiquated IT contracting rules (which are currently 

under review by the Administration). The auditors do not identify, and 

management is not aware of, any case where the fact that the CIO also serves as 

the Staff Director has led to project delays. Indeed, this year, under the leadership 

of the current CIO, OCIO has accomplished more in both the strategic and tactical 

arenas than any other year, especially in the area of security. 

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 OCIO has implemented all the primary recommendations from the Mandiant 

report. The supplemental recommendations will fall under larger projects OCIO is 

currently working on and/or plan to implement in FY16. For example, as part of 

the USGCB project, admin access from client machines will be removed as OCIO 

refreshes its client machines. OCIO also made a recommendation to eliminate 

xmail that would address this finding. The Commission instead decided to 

implement multi-factor authentication for “webmail” as the Agency moves from 

Lotus Notes to Office365 early next year. 

Additionally, in order to improve the business process, an external contractor 

provided a PII inventory to FEC and actions were taken based on this inventory, 

as appropriate. 

 As OIG acknowledged, management agreed with the recommendation to formally 

adopt NIST as its risk management framework and OCIO has taken steps to 

comply with the appropriate NIST standards for this Agency. These 

improvements and the OIG’s recommendation to implement a Trusted Internet 

Connection (TIC) have been made under the current OCIO leadership. 

 FEC followed the framework for the COOP plan provided by the Contractor in 

FY 2010. Since then, the equipment has become obsolete. In FY 2015, we 

replaced the original equipment, which had become obsolete, with new Surface 

tablets that are compatible with new security technology and infrastructure. 

III.Human Capital Management / Human Resources Operations 

Management Challenge: 

The Office of Human Resources (OHR) lacks leadership stability and adequate resources to 

achieve its mission critical program goals and objectives. 

Applicable Government Requirements/Best Practices Not In Place: 

 Office of Personnel Management (OPM) Guidance, including Human Capital 

Assessment and Accountability Framework; 

 5 CFR 410, 5 CFR 412, and 5 CFR 430; 

 OPM’s 2014 Report on FEC’s HR Management Evaluation Recommendations 

Critical Agency Impacts: 

A. Consistent turnover in the Director of OHR Position – The FEC has had four different 

OHR Directors since FY 2010. The current Director of OHR was hired in September 

2015 and the previous Director was only in the position for approximately one year. 

 Lack of stability and continuity in leadership roles leads to resource gaps, lack of 

direction, and low moral which has a direct impact on productivity and efficiency; 

 Marginal progress in implementing standard operating procedures to improve 

customer service levels; 

 Critical personnel policies and procedures have not been updated, created, and/or 

approved; 

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 Lack of accountability to comply with OMB Circular A-50 and Commission 

Directive 50 to timely implement recommendations to improve FEC business 

processes and programs from OIG audits and inspections, as well as external 

audits. 

 OPM 2014 Report of FEC’s HR Management Evaluation 

Recommendations have not been implemented (e.g. Training and 

Development Plans, Leadership Succession Plan). 

B. Lack of resources to improve customer service levels– Lack of resources impact 

OHR’s ability to implement effective internal control improvements. 

 Three vacant positions – one position has been vacant for over three years, and 

one position has been vacant for over one year; 

 The Remedy System implemented to automate and improve the tracking and 

timely response to employee inquiries is not conducive to the needs of the human 

resources operations. 

Management Response: 

 The FEC hired a new Director of Human Resources in the final month of the 

fiscal year. As he assesses the office's current policies and practices, his top 

priorities are improved Customer Service, Human Capital Management, and 

updating Policies and Procedures. He is working to hire additional resources to 

address these priorities and improve overall HR performance. 

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Improper Payments Information Act Reporting Details 

The Improper Payments Information Act of 2002, as amended by the Improper Payments 

Elimination and Recovery Act of 2010, and Improper Payments Elimination and Recovery 

Improvement Act of 2012 requires agencies to review all programs and activities they administer 

and identify those which may be susceptible to significant erroneous payments. In FY 2015, the 

FEC performed a systematic review of its program and related activities to identify processes 

which may be susceptible to significant erroneous payments. Significant erroneous payments are 

defined as annual erroneous payments in the program exceeding both $10 million and 1.5 

percent or $100 million of total annual program payments. The risk assessment included the 

consideration of risk factors that are likely to contribute to significant improper payments. The 

risk assessment was performed for the FEC’s only program area which is to administer and 

enforce the Federal Election Campaign Act. 

Risk Assessment 

In FY 2015, the FEC considered risk factors as outlined in OMB Memorandum M-15-02, 

Appendix C to Circular No. A-123, Requirements for Effective Estimation and Remediation of 

Improper Payments which may significantly increase the risk of improper payments and 

determined that none are applicable to FEC’s operations. Based on the systematic review 

performed, the FEC concluded that none of its program activities are susceptible to significant 

improper payments at or above the threshold levels set by OMB. 

Recapture of Improper Payments Reporting 

The FEC has determined that the risk of improper payments is low; therefore, implementing a 

payment recapture audit program is not applicable to the agency. 

IPIA (as amended by IPERA) Reporting Details Agency Response 

Risk Assessment Reviewed as noted above. 

Statistical Sampling Not Applicable.* 

Corrective Actions Not Applicable.* 

Improper Payment Reporting Not Applicable.* 

Recapture of Improper Payments Reporting Not Applicable.* 

Accountability Not Applicable.* 

Agency information systems and other infrastructure Not Applicable.* 

Barriers Not Applicable.* 

*The FEC does not have programs or activities that are susceptible to significant 

improper payments. 

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APPENDIX – List of Acronyms 

AFR Agency Financial Report 

AO Advisory Opinion 

APR Annual Performance Report 

ASD Administrative Services Division 

CFR Code of Federal Regulations 

CSRS Civil Service Retirement System 

CY Calendar Year 

DCIA Debt Collection Improvement Act of 1996 

DOL Department of Labor 

EEO Equal Employment Opportunity 

FASAB Federal Accounting Standards Advisory Board 

FBWT Fund Balance With Treasury 

FEC Federal Election Commission 

FECA Federal Election Campaign Act 

FERS Federal Employees' Retirement System 

FMFIA Federal Managers' Financial Integrity Act 

FRAE Further Revised Annuity Employees 

FY Fiscal Year 

GAAP Generally Accepted Accounting Principles 

GSA General Services Administration 

IG Inspector General 

IPERA Improper Payments Elimination and Recovery Act 

IPERIA Improper Payments Elimination and Recovery Improvement Act 

IPIA Improper Payments Information Act 

MD&A Management's Discussion and Analysis 

NPRM Notices of Proposed Rulemaking 

NTEU National Treasury Employee Union 

OAR Office of Administrative Review 

OCFO Office of the Chief Financial Officer 

OCIO Office of the Chief Information Officer 

OGC Office of General Counsel 

OHR Office of Human Resources 

OMB Office of Management and Budget 

OPM Office of Personnel Management 

OSD Office of the Staff Director 

P&E Property and Equipment 

PPA Prompt Payment Act 

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RAD Reports Analysis Division 

RAE Revised Annuity Employees 

SBR Statement of Budgetary Resources 

SCA Statement of Custodial Activity 

SFFAS Statement of Federal Financial Accounting Standards 

SNC Statement of Net Cost 

SSAE Statements on Standards for Attestation Engagements 

TSP Thrift Savings Plan 

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