Office of the 

Inspector General 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5110 

Facsimile: (202) 418-5522 

MEMORANDUM 

TO: Gary Gensler, Chairman 

FROM: A. Roy Lavik, Inspector General 

DATE: October 25,2012 

SUBJECT: Customer Protection Fund Financial Statement Audit Report 

This memorandum transmits the Commodity Futures Trading Commission's Office of the 

Inspector General's (OIG) report on the financial statement for the CFTC's Customer Protection 

Fund. The OIG contracted with an independent public accounting finn Williams, Adley & 

Company-DC, LLP to conduct this audit. My office concurs with Williams Adley's unqualified 

("clean") audit opinion stated in the attached audit report. 

Should you have any questions regarding this report, please do not hesitate to contact me. We 

appreciate the courtesy and cooperation that you and your staff extended to my staff and 

contractors during this audit. 

Attachment 
Independent Auditors’ Report

Chairman and Inspector General of the

U.S. Commodity Futures Trading Commission:

We have audited the accompanying Balance Sheet of the Commodity Futures Trading Commission 

Customer Protection Fund (CPF) as of September 30, 2012, and the related Statements of Net Cost, 

Changes in Net Position and Budgetary Resources for the year then ended (hereinafter referred to as 

financial statements). These financial statements are the responsibility of CPF management. Our 

responsibility is to express an opinion on these financial statements based on our audit. The financial 

statements of CPF as of September 30, 2011 were audited by other auditors who issued an unqualified 

opinion dated October 24, 2011.

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

of America and standards applicable to financial statement audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States, and the Office of Management and 

Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as amended. 

Those standards require that we plan and perform the audit to obtain reasonable assurance that the 

financial statements are free of material misstatement. An audit includes consideration of internal 

control over financial reporting as a basis for designing audit procedures that are appropriate in the 

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the CPF’s 

internal control over financial reporting. Accordingly, we express no such opinion. An audit also 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial 

statements. An audit also includes assessing the accounting principles used and significant estimates 

made by management, as well as evaluating the overall financial statement presentation. We believe 

that our audit provides a reasonable basis for our opinion.

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

position of the Customer Protection Fund as of September 30, 2012 and 2011, and its net cost, changes 

in net position and budgetary resources for the fiscal years then ended, in conformity with accounting 

principles generally accepted in the United States of America.

The information in the Fund’s Annual Report to Congress and the supplementary schedule of Cash Flow 

Analysis are not a required part of the financial statements, but are supplementary information required 

by the Dodd-Frank Wall Street Reform and Consumer Protection Act. We have applied certain limited 

procedures, which consisted principally of inquiries of management regarding the methods of 

measurement and presentation of this information. However, we did not audit this information and, 

accordingly, we express no opinion on it.

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

as a whole.

In accordance with Government Auditing Standards, we have also issued our reports dated October 24,

2012, on our consideration of the CPF’s internal control over financial reporting and our tests of its

compliance with certain provisions of laws, regulations, and other matters. The purpose of those 
reports is to describe the scope of our testing of internal control over financial reporting and compliance 

and the results of that testing, and not to provide an opinion on the internal control over financial 

reporting nor on compliance. Those reports are an integral part of an audit performed in accordance 

with Government Auditing Standards and should be read in conjunction with this report in assessing the 

results of our audits.
Independent Auditors’ Report on Compliance and Other Matters

Chairman and Inspector General of the 

U.S. Commodity Futures Trading Commission:

We have audited the Principal Statements (hereinafter referred to as the “financial statements”) of the 

Commodity Futures Trading Commission Customer Protection Fund (CPF) as of and for the year ended 

September 30, 2012, and have issued our report thereon dated October 24, 2012. We conducted our 

audit in accordance with auditing standards generally accepted in the United States of America; 

standards applicable to financial audits contained in Government Auditing Standards, issued by the 

Comptroller General of the United States: and Office of Management and Budget (OMB) audit guidance.

The management of the CPF is responsible for complying with laws and regulations that are applicable 

to the CPF. As part of obtaining reasonable assurance about whether the CPF’s financial statements are 

free of material misstatement, we performed tests of the CPF’s compliance with certain provisions of 

laws and regulations including but not limited to Dodd-Frank, Accountability for Tax Dollars Act, Federal 

Managers’ Financial Integrity Act, and Anti-Deficiency Act noncompliance with which could have a 

direct and material effect on the determination of the financial statements amounts, and certain 

provisions of other laws and regulations specified in the Office of Management and Budget (OMB)

Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as amended. We limited our 

tests of compliance to the provisions described in the preceding sentence, and we did not test 

compliance with all laws and regulations applicable to the CPF. However, providing an opinion on 

compliance with those provisions was not an objective of our audit, and accordingly, we do not express 

such an opinion.

The results of our tests of compliance described in the preceding paragraph of this report disclosed no 

instances of noncompliance or other matters that are required to be reported under Government 

Auditing Standards and OMB Bulletin No. 07-04.

The report is intended solely for the information and use of the management of the CPF, OMB, the U.S. 

Government Accountability Office, and the U.S. Congress and is not intended to be and should not be 

used by anyone other than these specified parties. 

WILLIAMS, ADLEY & COMPANY-DC, LLP

Certified Public Accountants / Management Consultants

1030 15th Street, NW, Suite 350 West • Washington, DC 20005 • (202) 371-1397 • Fax: (202) 371-9161

www.williamsadley.com
Independent Auditors’ Report on Internal Control over Financial Reporting

Chairman and Inspector General of the 

U.S. Commodity Futures Trading Commission

We have audited the Principal Statements (hereinafter referred to as the “financial statements”) of the 

Commodity Futures Trading Commission Customer Protection Fund (CPF) as of and for the year ended 

September 30, 2012, and have issued our report thereon dated October 24, 2012.

CPF management is responsible for establishing and maintaining effective internal control. In planning 

and performing our audits, we considered the CPF’s internal control over financial reporting by 

obtaining an understanding of the CPF’s internal control, determining whether internal controls had 

been placed in operation, assessing control risk, and performing tests of controls as a basis for designing 

our audit procedures for the purpose of expressing our opinion on the financial statements but not to 

express an opinion on the effectiveness of the CPF’s internal control over financial reporting. 

Accordingly we do not express an opinion on the effectiveness of the CPF’s internal control over 

financial reporting. We limited our internal control testing to those controls necessary to achieve the 

objectives described in the Office of Management and Budget (OMB) Bulletin No. 07-04, Audit 

Requirements for Federal Financial Statements, as amended. We did not test all internal controls 

relevant to operating objectives broadly defined by the Federal Managers’ Financial Integrity Act of 

1982 such as those controls relevant to ensuring efficient operations.

Our consideration of internal control over financial reporting was for the limited purpose described in 

the preceding paragraph and would not necessarily identify all deficiencies in the internal control over 

financial reporting that might be significant deficiencies or material weaknesses. 

A control deficiency 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 

misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of 

control deficiencies that adversely affects the CPF’s ability to initiate, authorize, record, process, or 

report financial data reliably in accordance with accounting principles generally accepted in the United 

States of America such that there is more than a remote likelihood that a misstatement of the CPF’s

principal financial statements that is more than inconsequential will not be prevented or detected by 

the CPF’s internal control. A material weakness is a significant deficiency, or combination of significant 

deficiencies, that results in more than a remote likelihood that a material misstatement of the financial 

statements will not be prevented or detected.

In our fiscal year 2012 audit, we did not identify any deficiencies in internal control over financial 

reporting that we consider to be material weaknesses, as defined above.

WILLIAMS, ADLEY & COMPANY-DC, LLP

Certified Public Accountants / Management Consultants

1030 15th Street, NW, Suite 350 West • Washington, DC 20005 • (202) 371-1397 • Fax: (202) 371-9161

www.williamsadley.com
This report is intended solely for the information and use of management of the Customer Protection 

Fund, OMB, U.S. Government Accountability Office, and the U.S. Congress and is not intended to be and 

should not be used by anyone other than these specified parties.
 

FINANCIAL STATEMENTS FOR THE 

CUSTOMER PROTECTION FUND 

REPORT TO CONGRESS
 

As of September 30, 2012 
 

 

2 

U.S. Commodity Futures Trading Commission 

Customer Protection Fund Report to Congress: Financial Statements 

Table of Contents 

Financial Statements ....................................................................................................................... 3

Notes to the Financial Statements ................................................................................................... 7 

Supplementary Schedule: 

 Cash Flow Analysis...................................................... ........................11

 the Period from July 21, 2010 to September 30, 2011
1 

2 

6 

 

 

32. 

 

 

 

 

Commodity Futures Trading Commission 

Balance Sheets 

As of September 30, 2012 and 2011 

Customer Protection Fund 

Assets 

Intragovernmental: 

Fund Balance With Treasury (Note 2) 

Investments (Note 3) 

Total Intragovernmental 

Total Assets 

2012 

$ 22,904,529 

77,135,901 

100,040,430 

$ 100,040,430 

$ 

$ 

2011 

23,755,000 

-

23,755,000 

23,755,000 

Liabilities 

Liabilities With the Public 

Accrued Funded Payroll 

Total Liabilities 

$ 43,681 

$ 43,681 

$ 

$ 

-

-

Net Position 

Cumulative Results of Operations - Earmarked 

Total Net Position 

Total Liabilities and Net Position 

$ 99,996,749 

99,996,749 

$ 100,040,430 

$ 

$ 

23,755,000 

23,755,000 

23,755,000 

The accompanying notes are an integral part of these financial statements. 

3 
 

 

 

 

 

 

Commodity Futures Trading Commission 

Statements of Net Cost 

For the Years Ended September 30, 2012 and 2011 

Customer Protection Fund 

Net Costs (Note 5) 2012 2011 

Gross Costs 

Less: Earned Revenue 

Total Net Cost of Operations 

$ 479,789 

(12,918) 

$ 466,871 

$ 

$ 

-

-

-

The accompanying notes are an integral part of these financial statements. 

4 
 

 

 

 

 

 

 

 

Commodity Futures Trading Commission 

Statements of Changes in Net Position 

For the Years Ended September 30, 2012 and 2011 

Customer Protection Fund 

2012 2011 

Cumulative Results of Operations 

Beginning Balances, October 1 

Budgetary Financing Sources 

Other Financing Sources: 

Transfers-In/Out Without Reimbursement (+/-) 

Net Cost of Operations 

$ 23,755,000 

76,708,620 

(466,871) 

$ -

23,755,000 

-

Net Change 76,241,749 23,755,000 

Total Cumulative Results of Operations as of Reporting Date $ 99,996,749 $ 23,755,000 

Net Position, September 30, 2012 $ 99,996,749 $ 23,755,000 

The accompanying notes are an integral part of these financial statements. 

5 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Futures Trading Commission 

Customer Protection Fund 

Statements of Budgetary Resources 

For the Years Ended September 30, 2012 and 2011 

2012 2011 

BUDGETARY RESOURCES 

Unobligated Balance, October 1 

Spending Authority from Offsetting Collections 

Total Budgetary Resources 

STATUS OF BUDGETARY RESOURCES 

$ 23,755,000 

76,721,538 

$ 100,476,538 

$ 

$ 

-

23,755,000 

23,755,000 

Obligations incurred 

Apportioned

Unapportioned 

Total Unobligated Balance, September 30 

Total Status of Budgetary Resources 

CHANGE IN OBLIGATED BALANCES 

$ 479,789 

 12,558,748 

87,438,001 

99,996,749 

$ 100,476,538 

$ 

$ 

-

-

23,755,000 

23,755,000 

23,755,000 

Obligations Incurred 

Outlays (gross) 

Unpaid Obligations, end of y ear (gross) 

Net Obligated Balance, September 30 

NET BUDGET AUTHORITY AND OUTLAYS 

479,789 

(436,108) 

43,681 

$ 43,681 $ 

-

-

-

-

Budget Authority, Gross 

Actual offsetting collections 

Outlays (gross) 

Actual offsetting Collections 

NET OUTLAYS 

$ 76,721,538 

(76,721,538) 

436,108 

(76,721,538) 

$ (76,285,430) 

$ 

$ 

23,755,000 

(23,755,000) 

-

(23,755,000) 

(23,755,000) 

The accompanying notes are an integral part of these financial statements. 

6 
 

 

 

Notes to the Financial Statements
 

For the Years Ended September 30, 2012 and 2011 

Note 1. Summary of Significant Accounting Policies 

A. Reporting Fund 

The Commodity Futures Trading Commission (CFTC or the Commission) is an independent agency of the 

executive branch of the Federal Government. Its mission is to “protect market users and the public from 

fraud, manipulation, and abusive practices related to the sale of commodity futures and options, and to 

foster open, competitive, and financially sound commodity futures and options markets.” 

On July 21, 2010, the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the Dodd-Frank 

Act, or the Act) was signed into law, significantly expanding the powers and responsibilities of the CFTC. 

According to Section 748 of the Act, there is established in the Treasury of the United States a revolving 

fund known as the “Commodity Futures Trading Commission Customer Protection Fund” (the Fund). 

The Fund shall be available to the Commission, without further appropriation or fiscal year limitation, for 

a) the payment of awards to whistleblowers; and b) the funding of customer education initiatives designed 

to help customers protect themselves against fraud or other violations of this Act or the rules and 

regulations thereunder. 

The Act requires CFTC to transmit to the Committee on Agriculture, Nutrition and Forestry of the Senate, 

and the Committee on Agriculture of the House of Representatives a report which includes a complete set 

of audited financial statements and supplementary information, including balance sheet, income 

statement, and cash flow analysis, no later than October 30, of each year. 

B. Basis of Presentation 

The financial statements have been prepared to report the financial position and results of operations for 

the Fund, as required by the Dodd-Frank Act. These statements have been prepared from the Fund’s 

books and records, which are a component of the Commission’s books and records, in conformity with 

U.S. generally accepted accounting principles (GAAP), as prescribed for the federal government by the 

Federal Accounting Standards Advisory Board (FASAB) and in accordance with the form and content 

requirements contained in Office of Management and Budget (OMB) Circular No. A-136, “Financial 

Reporting Requirements,” as amended. 

The Fund was established in July 2010 and funded by transfers from CFTC’s Civil Monetary Penalties, 

Fines and Administrative Fees receipt account. These transfers do not meet the criteria of reportable 

revenue as defined by the Statement of Federal Financial Accounting Standards (SFFAS) Number 7, 

“Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting.” 

The financial statements report on the Fund’s financial position, changes in net position, net cost and 

budgetary resources. The books and records of the Fund served as the source of information for preparing 

the financial statements in the prescribed formats. All Fund financial statements and reports used to 

monitor and control financial resources are prepared from the same books and records. The statements 

should be read with the understanding that they relate to a fund controlled by CFTC, a component of the 

U.S. Government, a sovereign entity. 

The Balance Sheet presents the financial position of the Fund. The Statement of Net Cost presents the 

Fund’s operating results. The Statement of Changes in Net Position displays the changes in the Fund’s net 

position, and the Statement of Budgetary Resources shows the spending authority of the fund derived 

from the deposits eligible from civil monetary collections. 

C. Fund Balance with Treasury 

Fund Balance with Treasury is the aggregate amount of the Fund’s balance with the U.S. Treasury. The 

balance in the Fund is available to pay current liabilities and finance authorized operations. 

7 
 

 

 

The Fund does not maintain bank accounts of its own, has no disbursing authority, and does not maintain 

cash held outside of Treasury. Treasury makes disbursements for the Fund. 

D. Investments in U.S. Government Securities 

The CFTC has authority to invest amounts in the Customer Protection Fund in market based U.S Treasury 

securities. The interest earned on the investments is a component of the Fund and is available to be used 

for expenses of the Fund. Additional details regarding Customer Protection Fund investments are 

provided in Note 3. Investments, Net. 

Market-based Treasury securities are debt securities that the U.S. Treasury issues to Federal entities 

without statutorily determined interest rates. Although the securities are not marketable, the terms 

(prices and interest rates) mirror the terms of marketable Treasury securities. 

E. Liabilities 

The Fund’s liabilities consist of actual and estimated amounts that are likely to be paid as a result of 

transactions covered by the Whistleblower Incentives and Protection regulation, and will be paid from 

available balances remaining in the Fund. In addition, the salaries and operating expenses of the 

Whistleblower’s Office and Consumer Outreach Office were funded through the Fund. As of September 

30, 2012, liabilities consisted of salaries payable of $43,681. No liabilities existed as of September 30, 

2011. The Fund’s liabilities are considered current liabilities. 

F. Earmarked Funds 

The Fund contains earmarked funds which can only be used to operate a whistleblower program and 

support customer education initiatives. See Note 1.A. for a description of the purpose of the Fund and its 

authority to use the revenues and other financing sources. Deposits into the Fund are credited from 

monetary sanctions collected by the Commission in any covered judicial or administrative action that are 

not otherwise distributed to victims of a violation of the Dodd-Frank Act or the rules and regulations 

underlying such action, unless the balance of the Fund at the time the monetary judgment is collected, 

exceeds $100 million. No new legislation was enacted as of September 30, 2012 that significantly 

changed the purpose of the earmarked fund or redirected a material portion of the accumulated balance. 

G. Revenues and Other Financing Sources 

The CFTC Customer Protection Fund is funded through monetary sanctions resulting from judicial or 

administrative action brought by the Commission under the Commodity Exchange Act. All collections are 

deposited into a receipt account. Eligible collections are transferred into the Fund from the CFTC’s Civil 

Monetary Penalties, Fines and Administrative Fees receipt account. 

Congress enacted the Dodd-Frank Act that provides the CFTC with the authority to establish the Fund. 

The Fund is available to the Commission, without further appropriation or fiscal year limitation. These 

funds are considered financing sources under U.S. Treasury Department guidelines. Per the Act, no 

sanction collected by the Commission can be deposited into the Fund if the Fund’s balance exceeds $100 

million. The CFTC may request the Secretary of the Treasury to invest Fund amounts in Treasury 

obligations. Eligible collections were deposited into this new Fund during fiscal years 2012 and 2011. 

H. Intra- and Inter-Agency Relationships 

The CFTC is an independent federal agency. The Commodity Futures Trading Commission Customer 

Protection Fund is a fund within the CFTC, and these financial statements present a segment of the CFTC 

financial activity. The financial events of the Fund are consolidated into the CFTC annual financial 

statements. 

I. Use of Management Estimates 

No management estimates were used to prepare these financial statements. 

8 
 

 

 

 

 

 

 

 

 

J. Limitations of the Financial Statements 

The principal financial statements included in this report have been prepared to report the financial 

position and results of operations of the Fund, pursuant to the requirements of Section 748 of the DoddFrank Consumer Protection Act. While the statements have been prepared from the books and records of 

the CFTC in accordance with GAAP for federal entities, the statements are in addition to the reports used 

to monitor and control the financial activity of the CFTC, which are prepared from the same books and 

records. The statements should be read with the understanding that they are for the Customer Protection 

Fund, a single fund within the CFTC. 

Note 2. Fund Balance with Treasury 

The Fund Balance with Treasury by type of fund and Status of Fund Balance with Treasury as of 

September 30, 2012 and 2011 consists of the following: 

2012 2011 

Revolving Funds $ 22,904,529 $ 23,755,000 

TOTAL FUND BALANCE WITH TREASURY $ 22,904,529 $ 23,755,000 

Revolving Funds 

Unobligated Fund Balance 

Available $ 12,558,748 $ -

Unavailable 10,302,100 23,755,000 

Obligated Balance Not Yet Disbursed 43,681 -

Total Revolving Funds 22,904,529 23,755,000 

TOTAL FUND BALANCE WITH TREASURY $ 22,904,529 $ 23,755,000 

A. Reconciliation to Treasury 

There are no differences between the fund balance reflected in the CPF Balance Sheet and the balance in 

the Treasury Account. 

B. Fund Balance with Treasury 

Fund Balance with Treasury consists of collections of fines and penalties not owed to harmed investors. 

Obligation of these funds is controlled by apportionments made by OMB. Until such funds are 

apportioned by OMB, they are unavailable to be obligated. 

9 
 

Note 3. Investments, Net 

On June 1, 2012, the CFTC began investing funds in overnight non-marketable market-based Treasury 

bills. Treasury overnight certificates of indebtedness are issued with a stated rate of interest to be applied 

to their par amount, mature on the business day immediately following their issue date, are redeemed at 

their par amount at maturity, and have interest payable at maturity. Non-marketable market-based 

Treasury securities are issued by the Bureau of Public Debt to Federal agencies. They are not traded on 

any securities exchange but mirror the prices of similar Treasury securities trading in the Government 

securities market. As of September 30, 2012, the net investments were $77,135,901. 

Note 4. Contingencies 

Unasserted claims are actions or potential actions the Commission is aware of in which future events may 

result in claims against the fund. 

As mentioned in Note 1.A. Reporting Fund, the Commodity Futures Trading Commission Customer 

Protection Fund will be used to pay awards to whistleblowers if they voluntarily provide original 

information to the CFTC that leads to the successful enforcement by the CFTC of a covered judicial or 

administrative action in which monetary sanctions exceeding $1 million are imposed. Whistleblowers are 

entitled to appeal any decisions by Commission in regards to claims made against the fund. 

In accordance with Federal Accounting Standards, CFTC records contingent liabilities for any unasserted 

claim in which payment has been deemed probable and for which the amount of potential liability can be 

estimated. The Commission also discloses all claims for which payment is reasonably possible. 

There were no unasserted claims that deemed reasonably probably and measurable, or reasonably 

possible, as of September 30, 2012 or 2011, respectively. 

Note 5. Intragovernmental Costs 

The Statement of Net Cost presents the Customer Protection Fund’s results of operations for the activities 

to run the Whistleblower’s Office and Consumer Outreach Office. 

Intragovernmental costs arise from the purchases of goods and services from other components of the 

Federal Government (including other CFTC funds). In contrast, public costs are those which arise from 

the purchase of goods and services from non-Federal entities. The Whistleblower’s Office and Consumer 

Outreach Office incurred $458 thousand in net intragovernmental costs and $9 thousand in net costs with 

the public in FY 2012. 

10 
 

 

   

 

   

 

   

 

Supplementary Schedule 

Commodity Futures Trading Commission
 

Customer Protection Fund
 

Cash Flow Analysis
 

For thePeriod from October 1, 2011 to September 30,2012
 

Cash as of October 1, 2011 $ 23,755,000 

Cash flows from (used) inoperating activities 

Paid Expenses for WhistleBlower Office and Consumer Outreach Office $ (436,108) 

Interestearned from investing in US Treasuries 12,918 

Net cash flowsfromoperating activities $ (423,190) 

Cash flows used in investing activities 

Investments in US Treasuries $ (77,135,901) 

Net cashflows from investing activities $ (77,135,901) 

Cash flows from financing activities 

Transfers in from Civil Monetary Sanctions $ 76,708,620 

Net cashflows from financing activities $ 76,708,620 

Net increase/(decrease) in cash and cash equivalents $ (850,471) 

Cash as of September 30, 2012 $ 22,904,529 

11