FEDERAL ELECTION COMMISSION 

OFFICE OF INSPECTOR GENERAL 

FINAL REPORT 

INSPECTION OF THE COMMISSION’S

COMPLIANCE WITH THE FEDERAL MANAGERS’

FINANCIAL INTEGRITY ACT OF 1982

JUNE 2001

ASSIGNMENT NO. 01-03
TABLE OF CONTENTS

________________________________________________________________________ 

Introduction, Objectives and Background...........................................................................1

Scope and Methodology .............................................................................................. 3

Inspection Results......... ..................................................................................................4

Conclusions................................................................................................. 10
INTRODUCTION AND OBJECTIVES

The Office of the Inspector General completed an inspection of the Federal Election 

Commission’s (FEC or Commission) compliance with the Federal Managers’ Financial 

Integrity Act of 1982 (the Act or FMFIA). The FMFIA requires Federal managers to 

establish a continuous process for evaluating, improving, and reporting on the internal 

controls and accounting systems for which they are responsible. We conducted our 

inspection to primarily assess the Commission’s program for meeting the requirements of 

the Act. Specifically, our objectives were to: 

(1) Evaluate the Commission's compliance with the provisions of 

the Federal Managers' Integrity Act of 1982, General Accounting Office 

(GAO) standards, Office of Management and Budget (OMB) policies, and 

Commission directives; 

(2) Determine whether the Commission adequately implemented 

agency policies and procedures to assess as well as strengthen the internal 

control environment; 

(3) Determine whether the Commission's Annual FMFIA report for 

Fiscal Year 2000 to the President and Congress accurately represented the 

adequacy of the review process within the Commission; and 

(4) Follow up on issues addressed during the 1991 review of 

the Commission’s FMFIA program. 

BACKGROUND

The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) 

The FMFIA was enacted in response to continuing disclosures of waste, loss, unauthorized 

use, and misappropriation of funds or assets associated with weak internal controls and 

accounting systems. It establishes requirements with regard to management accountability 

and controls. This law encompasses program, operational, and administrative areas as 

well as accounting and financial management. The Act further states that agency heads 

must submit an annual statement of assurance to the President and Congress on the 

adequacy of internal controls and actions taken to correct identified weaknesses. Each 

annual statement prepared must also include a report on whether the agency's accounting 

system conforms to the principles, standards, and other related FMFIA requirements. 

Under the provisions of the Act, OMB, and GAO are required to issue evaluation 

guidelines for agencies, such as the FEC, of their systems of internal accounting and 

administrative control to determine such systems’ compliance. 

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As a result, OMB issued implementing guidance Circular A-123 Revised, Management 

Accountability Control dated June 21, 1995. It provides detailed guidance to Federal 

managers on improving the accountability and effectiveness of Federal programs and 

operations by establishing, assessing, correcting, and reporting on management controls. 

The A-123 Circular defines management controls as the organization’s policies and 

procedures used to reasonably ensure that: (1) programs achieve their intended results; (2) 

resources are used consistent with agency mission; (3) laws and regulations are followed; 

(4) programs and resources are protected from waste, fraud, and mismanagement; and (5) 

reliable and timely information is used for decision making. As Federal managers develop 

and implement strategies for reengineering agencies’ programs and operations, they should 

design management structures that help ensure accountability for results, and include 

appropriate, cost-effective controls. 

Additional FMFIA policy was issued in OMB Circular A-127 Revised, Financial 

Management Accountability and Control, dated July 23, 1993, to govern agencies’ 

financial management systems. In its policy section, the A–127 states that “financial 

management systems must be in place to process and record financial events effectively 

and efficiently, and to provide complete, timely, reliable and consistent information for 

decision makers and the public. In support of these objectives, each agency must establish 

and maintain a single integrated financial management system that complies with, among 

other requirements, internal control standards as defined in A–123 and successor 

documents.” 

Furthermore, GAO published the Standards of Internal Control in the Federal 

Government, dated November 1999. These standards provide the overall framework for 

establishing and maintaining internal control. The standards also identify and address 

major performance and management challenges as well as areas at greatest risk of fraud, 

waste, abuse, and mismanagement. Internal control is an integral component of an 

organization's management and helps government program managers achieve desired 

results through effective stewardship of public resources. 

The Commission 

At the Commission, the FMFIA program requirements were implemented through 

Commission Directive 53 Revised,: Implementation of A-123: Internal Control Review, 

dated September 17, 1993 and Commission Directive 57 Implementation of A-127: 

Financial Management System Section of Federal Managers’ Financial Integrity Act 

(FMFIA), dated September 17, 1993. The Commission’s FMFIA assessment program 

relies upon the results of the informal vulnerability assessments conducted by the 

program/office heads of their respective program functions. 

Commission Directive 53 instructs all FEC components to develop and maintain effective 

systems of management control over their program operations and administrative 

functions. Specifically, it assigns roles and responsibilities to managers within the FEC for 

completing the A-123 assessment review. For example, the Director of Planning and 

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Management was assigned the responsibility of submitting the annual assurance statement 

required by statute on the status of the Agency’s system of management control by 

December 15th of each year. 

Commission Directive 57 states that the FEC shall develop and maintain effective systems 

of financial management to assure management control over Commission program 

operations and administrative functions. This directive established the following OMB 

required actions into Commission policy: (1) establish financial management system and 

issue operating policies; (2) inventory and evaluate agency systems; and (3) develop an 

agency financial management system plan. The annual statement to the President must 

include an assurance that the Agency’s financial management systems complies with 

government wide standards and requirements as set forth in A-127. 

SCOPE AND METHODOLOGY

We reviewed the applicable laws, implementing guidance, Commission Directives, as 

well as, our audit report entitled Audit Of the Federal Election Commission’s Federal 

Managers’ Financial Integrity Act Program (OIG 91-02). To accomplish the inspection 

objectives, we also reviewed results of financial system evaluations performed by the 

Accounting manager, current (FY 2000) and prior years (FY 1995, 1998 & 1999) 

assurance statements and the available documentation. Our inspection included 

discussions with the FMFIA program manager and other Commission managers with 

FMFIA assessment responsibilities. 

Due to the limited scope of this inspection, actual testing of internal controls techniques 

were not considered. Therefore, we will not address the adequacy of internal control 

measures within FEC components on an individual basis. Rather, we will address the 

FEC’s program for evaluating and reporting on internal controls. 

We conducted our inspection from March through May 2001, in accordance with the 

Quality Standards for Inspections issued by the President’s Council on Integrity and 

Efficiency (PCIE). 

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INSPECTION RESULTS

Compliance with Statutory Requirements 

To evaluate the Commission’s compliance with the applicable laws and policies issued 

under the authority of the Act, we compared the statutory FMFIA requirements to 

Commission Directives. We determined that the Commission policies adequately 

addressed most of the requirements established by OMB and GAO. However, Commission 

policy does not include the OMB’s requirement to develop a five-year Financial 

Management System Plan in accordance with the CFO Financial Management Five-Year 

Plan Guidance. As a result, the Commission does not have a five-year Financial 

Management System Plan. 

Commission Directive No. 57 states the following “Agency must develop a financial 

management system plan based on the annual assessment performed by the Accounting 

Officer and emphasize compliance with GAO standards. If there are no reported nonconformances and/or material weaknesses to be corrected, the Plan shall consist of an 

assessment of the cost of maintaining the Financial Management System at the Commission. 

If any non-conformances or material weaknesses are reported, the Plan shall consist of a 

document describing the actions to be undertaken to remedy the weakness as reported.” 

Commission policy omits the requirement to prepare plans based on the CFO Financial 

Management Five-Year Plan Guidance. 

The FEC must prepare an annual financial management plan in accordance with guidance 

issued annually by OMB. The OMB A-127 Circular also states that agencies not covered 

by the Chief Financial Officers (CFO) Act shall prepare plans, but are not required to 

submit the plans to OMB. 

The OIG suggested that a five-year Financial Management System Plans be developed to 

satisfy OMB’s requirement. Also, Commission Directive No. 57 should be revised to 

include the requirement to develop and maintain a five-year Financial Management System 

Plan in accordance with the CFO Financial Management Five-Year Plan Guidance. 

We discussed this finding with the program manager. He believed that it would be 

redundant to produce a five-year financial system plan when the information is contained 

in the five-year IT Strategic Plan. He also stated that the FEC is not covered by the CFO 

Act, and therefore, not required to comply with guidance regarding the CFO agencies. 

However, he would review the OMB guidance regarding the five-year plan as time 

permits to determine applicability to the FEC. 

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The OIG believes that OMB policy clearly states that agencies not covered by the CFO Act 

are to develop five year plans, even though they are not required to submit them. The 

Commission’s IT Strategic Plan does not incorporate the strategies and tactical initiatives 

included in CFO Financial Management five-year Plan guidance. 

Implementation of Commission Polices 

Based on the results of inspection work completed, we determined that the Commission did

not adequately implement agency policies and procedures to assess, and strengthen the

internal control environment. We noted several examples of noncompliance with

Commission policy. Specifically, during discussions with six managers and through the

examination of the available documentation we identified the following:

LACK OF TRAINING

We found that managers lacked the required FMFIA training. Commission Directive #53

states that it is the responsibility of the Deputy Staff Director to provide and/or authorize

orientation and FMFIA training for FEC Managers. However, none of the managers/office

heads interviewed had received any management control training.

Managers and employees are to maintain a level of competence that allows them to

accomplish their assigned duties as well as understand the importance of developing and

implementing good management controls. Therefore, the OIG stressed the importance of

training and suggested that management provide FMFIA training to office heads/managers

with FMFIA reporting responsibilities for management control of their respective

operating functions.

In the opinion of the FMFIA program manager, all managers have been at the FEC for

several years and are well acquainted with their responsibilities under A-123. He agreed

to conduct a refresher A-123 training course for managers.

The OIG believes that up-to-date knowledge and skill is critical for both organizational

performance and individual employee success. Training and development are the keys to

adding skills and competencies that will improve program results. The Commission’s

management should be dedicated to maintaining an environment of continuous learning.

Conducting a refresher A-123 training course for managers will improve the FMFIA

assessment process and strengthen the Commission overall internal control structure.

LACK OF DOCUMENTATION

Commission policy states that management control systems and other significant events are

to be clearly documented, and that the documentation is to be readily available for

examination. It also requires documentation of assessments to be maintained for a period

of at least two years to provide a permanent record of the methods used, the personnel

involved and their roles, key factors considered and the conclusions reached. However,

we discovered that the managers interviewed had not prepared any written documentation

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of their system of internal controls or self- assessments of their respective

programs/divisions.

As stated in Commission policy, this information would be useful in evaluating the review

process and performing subsequent assessments and reviews. Therefore, the OIG

suggested that management ensure that Commission policy is fully implemented to satisfy

documentation requirements.

During our discussions with the FMFIA program manager, he agreed to ensure that

Commission managers prepare documentation of their systems of internal controls and self

-assessments. He also stated that he would track the progress of the FMFIA assessment

process and require managers to submit documentation in a timely manner.

LACK OF A MANAGMENT CONTROL PROGRAM/PLAN

Managers are required to develop a management control program/plan in accordance with

the GAO standards and FEC internal guidance. Although Commission policy requires a

control plan, none of the six managers interviewed could provide a copy of such a plan to

the OIG.

The FMFIA program manager reemphasized the importance of having such a management

control program/plan in the annual FMFIA assessment advisory memorandum sent to each

manager/office head. It stated that “managers should review their management control

more thoroughly, and should be able to produce a management control plan if requested by

the IG or any other reviewing office....” The memorandum also provided suggestions on

how to develop a detailed management control plan outline of documents, reports, manuals,

guidelines, procedures, techniques which may be used to manage programs.

The OIG met with the program manager and suggested that management ensure that

Commission policy is fully implemented to satisfy management control plan requirements.

Management agreed to direct managers to prepare outlines of their A-123 controls

processes. Additionally, management will circulate an outline of management control

procedures as a model for office heads/managers to follow in the development of

management controls for their programs.

NO MONITORING SYSTEM

We found that the Commission does not have a system (manual or automated) in place to

monitor the FMFIA assessment process. Department mangers/office heads are required to

prepare an assurance statement based on the results of their vulnerability assessments. As a

result of no monitoring system, several managers neglected to conduct vulnerability

assessments and did not submit their FY 2000 annual assurance statement to the FMFIA

program manager .

Commission Directive 53 requires the development and implementation of a monitoring 

system to assure that vulnerability assessments and management control reviews are 

adequate and performed in a timely fashion. It should monitor the progress and timely 

completion of: (1) internally performed vulnerability assessments and management control 

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reviews; (2) corrective actions; (3) required reports; and (4) the preparation of the annual 

statement. Agency policy assigned primary responsibility to Planning and Management for 

establishing an adequate system for monitoring within the Budgeting and Management 

Information System (MIS). 

Therefore, OIG suggested that Planning and Management develop and implement a system 

to monitor the timely completion of vulnerability assessments, management control reviews 

and the timely submission of assurance statements reviews. The assurance statements are a 

vital part of the FEC’s FMFIA assessment process because they provide the basis for the 

Annual Assurance Report to the President and Congress. 

In management’s response to us, they agreed to develop a system to monitor the FMFIA 

program to ensure that A-123 statements are submitted in a timely fashion. 

The Commission's FY 2000 Annual FMFIA Report 

Based on inspection results, the OIG could not attest to the accuracy of the Commission's 

FY 2000 FMFIA report to the President and Congress due to the inadequate FMFIA 

review process. Our inspection determined that the Commission FMFIA review process is 

deficient because the agency neglected to implement the established FMFIA review 

procedures. As stated above, the Commission’s FMFIA review process lacked 

documentation, management control plans and the required assurance statements. 

Additionally, managers had not received the required training nor did the Commission have 

a monitoring system in place to track the progression of the annual assessment process. 

Therefore, OIG believes that the Commission’s FY 2000 FMFIA review process was 

insufficient. OIG suggested that management ensure that the Commission established A-123 

policies are fully implemented. 

The FMFIA program manager agreed to ensure that A-123 statements are received in a 

timely manner and will direct managers to prepare outlines of their A-123 controls 

processes. He stated that the FEC has adequate management and financial management 

controls, and the agency is not subject to serious and unnecessary vulnerability to potential 

waste, fraud, abuse and misuse of funds. 

Our inspection objectives did not include actual testing of internal controls techniques, 

therefore, we did not address the adequacy of the internal control measures within the FEC. 

Additionally, we can not affirm as to whether or not the agency is subject to serious and 

unnecessary vulnerability to potential waste, fraud, and abuse due to the insufficiencies 

found in the agency’s FMFIA review process. 

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Prior FMFIA Audit Recommendation Not Implemented 

As part of our review, we followed up on the Commission’s actions taken in response to 

the most recent FMFIA compliance review (Audit No. 91-02) conducted by the OIG in 

1990. We found that one audit recommendation had not been fully implemented. 

During the 1990 audit, we reported that managers’ position descriptions and performance 

standards lacked management control responsibilities. In our report entitled “Audit of the 

Federal Election Commission‘s Federal Managers’ Financial Integrity Act Program”, 

we recommended that the Staff Director ensure that position descriptions and performance 

standards are revised for all managers to encompass internal control responsibilities and 

evaluation criteria. Management agreed and stated that “All managers should have a 

performance element addressing their obligations to guard against waste, fraud and abuse. 

The Personnel Office shall ensure that management controls are an integral part of each 

manager’s job description and performance standards.” 

As part of our FY 2000 compliance inspection, we reviewed 25 managerial position 

descriptions and found that only 3 of the descriptions contain the required internal control 

element. Our 1990 FMFIA Compliance Audit recommendation was never implemented. 

A basic requirement of internal controls for any federal agency or business/entity is to 

ensure that each employee fully understands his/her duties, responsibilities and limits of 

authority. Furthermore, Commission Directive 53 states that the Personnel Office shall 

ensure that the position descriptions of each office head includes a statement about the 

management control responsibilities and will provide the staff assistance necessary for the 

development and implementation of a corresponding performance standard. However, 

position descriptions of Commission officials and managers responsible for evaluating 

management controls lacked internal control responsibilities. 

The OIG finds it disturbing to discover that this recommendation was never fully 

implemented even though management agreed to the recommendation and presented us with 

a statement that was to be included in every manager’s position description. The 

recommendation was closed based on management’s assurances and the receipt of the 

statement. 

As stated in Commission policy, managers are responsible for the prompt resolution and 

completion of corrective actions within the established time frame. In this case, 

management neglected to implement corrective actions that should have been taken over 10 

years ago. The OIG believes that this practice is unacceptable. 

We met with the Personnel Office to discuss the inaccurate position descriptions. We 

found that the Personnel Office recently experienced a 100% turnover in staff. However, 

the Director stated that his office is in the process of rewriting position descriptions and 

plans to incorporate the required internal control element. 

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Other Issues 

While assessing the adequacy of the Commission FMFIA program, the OIG, noted that the 

Annual Assurance Letter to the President was submitted after the due date for the past two 

years. The FMFIA requires that Federal agencies submit a report annually by December 

31st. We discussed this issue with management and they agreed that submission of the 

annual letter had been delayed. 

Management stated in their response to us that the delay was due to the Chairman and/or 

other Commissioners requests for additional Presidential Election Fund statistical 

information to include in the letter. Although this shortfall in funding is not due to 

inadequate management controls by the FEC, each year management uses the annual letter 

as a device to warn about potential funding shortfalls in a key component of the 

Presidential elections. Furthermore, management stated that the Commission will strive to 

meet the December 31 deadline, however, the priority will continue to be placed on the 

accuracy and sufficiency of the information provided. 

Additionally, we identified that during the 1998 assessment process, a Management 

Control Review (MCR) was requested by the Acting Director of Personnel based on the 

results of the vulnerability assessment. According to Commission policy, a summary and 

analysis of the completed assessment which finds the need for subsequent action is 

required to be documented and transmitted to the Staff Director. However, no 

documentation was prepared. 

According to the program manager, a request for funds to complete the proposed MCR of 

the Personnel Office was included the 1999 budget submission, however, no funds were 

granted due to staff resource constraints. In the absence of funds, the requested MCR was 

never conducted. The OIG pointed out that we could have conducted the MCR, but our 

office was never contacted or considered in this matter. Also, we suggested and 

management agreed that requests for MCRs be clearly documented. 

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CONCLUSIONS

Due to the Commissions inadequate review process, the OIG could not attest to the 

accuracy of the Commission's FY 2000 FMFIA report to the President and Congress. The 

OIG found that the FEC did not adequately implement agency policies and procedures 

relating to the annual FMFIA assessment. Several examples of noncompliance with 

Commission policy were identified and conveyed to management during our inspection. 

Additionally, we discovered that the Commission failed to fully implement an agreed upon 

recommendation made during the 1991 review of the Commission’s FMFIA program. The 

OIG believes implementation of the established procedures will proactively improve as 

well as strengthen the internal control environment at the FEC. 

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