Information Security: SEC Needs to Improve Controls over Financial Systems and Data
Published: 2014-04-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: SEC is responsible for enforcing securities laws, issuing rules and regulations that protect investors, and helping to ensure that securities markets are fair and honest. In carrying out its mission, the commission relies extensively on computerized systems that collect and process financial and sensitive information. Accordingly, it is essential that SEC have effective information security controls in place to protect this information from misuse, fraudulent use, improper disclosure, manipulation, or destruction.
As part of its audit of SEC's fiscal years 2013 and 2012 financial statements, GAO assessed the commission's information security controls. The objective was to determine the effectiveness of information security controls for protecting the confidentiality, integrity, and availability of SEC's key financial systems and information. To do this, GAO assessed security controls in key areas by reviewing SEC documents, testing selected systems, and interviewing relevant officials.
section_title: What GAO Found
paragraphs: Although the Securities and Exchange Commission (SEC) had implemented and made progress in strengthening information security controls, weaknesses limited their effectiveness in protecting the confidentiality, integrity, and availability of a key financial system. For this system's network, servers, applications, and databases, weaknesses in several controls were found, as the following examples illustrate:
Access controls: SEC did not consistently protect its system boundary from possible intrusions; identify and authenticate users; authorize access to resources; encrypt sensitive data; audit and monitor actions taken on the commission's networks, systems, and databases; and restrict physical access to sensitive assets.
Configuration and patch management: SEC did not securely configure the system at its new data center according to its configuration baseline requirements. In addition, it did not consistently apply software patches intended to fix vulnerabilities to servers and databases in a timely manner.
Segregation of duties: SEC did not adequately segregate its development and production computing environments. For example, development user accounts were active on the system's production servers.
Contingency and disaster recovery planning: Although SEC had developed contingency and disaster recovery plans, it did not ensure redundancy of a critical server.
The information security weaknesses existed, in part, because SEC did not effectively oversee and manage the implementation of information security controls during the migration of this key financial system to a new location. Specifically, during the migration, SEC did not (1) consistently oversee the information security-related work performed by the contractor and (2) effectively manage risk.
Until SEC mitigates control deficiencies and strengthens the implementation of its security program, its financial information and systems may be exposed to unauthorized disclosure, modification, use, and disruption. These weaknesses, considered collectively, contributed to GAO's determination that SEC had a significant deficiency in internal control over financial reporting for fiscal year 2013.
section_title: What GAO Recommends
paragraphs: GAO is recommending that SEC take two actions to (1) more effectively oversee contractors performing security-related tasks and (2) improve risk management. In a separate report for limited distribution, GAO is recommending that SEC take 49 specific actions to address weaknesses in security controls. In commenting on a draft of this report, SEC generally agreed with GAO's recommendations and described steps it is taking to address them.

section_title: Letter
paragraphs: As you are aware, the U.S. Securities and Exchange Commission (SEC)  is responsible for enforcing securities laws, issuing rules and regulations  that provide protection for investors, and helping to ensure that the  securities markets are fair and honest. To support its demanding financial  and mission-related responsibilities, the commission relies extensively on  computerized systems. In order to protect financial and sensitive  information—including personnel and regulatory information maintained  by SEC—from inadvertent or deliberate misuse, fraudulent use, improper  disclosure or manipulation, or destruction, it is essential that SEC have  effective information security controls in place.
On December 16, 2013, we issued our report on the audit of the SEC’s  fiscal years 2013 and 2012 financial statements. identified, among other things, information security control weaknesses  that, considered collectively, represent a significant deficiencyinternal control over financial reporting.
GAO, Financial Audit: Securities and Exchange Commission’s Financial Statements for  Fiscal Years 2013 and 2012, GAO-14-213R (Washington, D.C.: Dec. 16. 2013).
This report presents more detailed information and our recommendations  related to the specific information security control weaknesses that we  identified during our audit. Our objective was to determine the  effectiveness of information security controls for protecting the  confidentiality, integrity, and availability of SEC’s key financial systems  and information. To do this, we examined the commission’s information  security policies, plans, and procedures; tested controls over key financial  applications; interviewed key agency officials; and reviewed our prior  reports to identify previously reported weaknesses and assessed the  effectiveness of corrective actions taken.
We performed our work in accordance with U.S. generally accepted  government auditing standards. We believe that our audit provided a  reasonable basis for our conclusions in this report. See appendix I for  more details on our objective, scope, and methodology.
subsections: section_title: Background
paragraphs: Information security is a critical consideration for any organization that  depends on information systems and computer networks to carry out its  mission or business and is especially important for government agencies,  where maintaining the public’s trust is essential. While the dramatic  expansion in computer interconnectivity and the rapid increase in the use  of the Internet have enabled agencies such as SEC to better accomplish  their missions and provide information to the public, agencies’ reliance on  this technology also exposes federal networks and systems to various  threats. This can include threats originating from foreign nation states,  domestic criminals, hackers, and disgruntled employees. Concerns about  these threats are well founded because of the dramatic increase in  reports of security incidents, the ease of obtaining and using hacking  tools, and advances in the sophistication and effectiveness of attack  technology, among other reasons. Without proper safeguards, systems  are vulnerable to individuals and groups with malicious intent who can  intrude and use their access to obtain or manipulate sensitive information,  commit fraud, disrupt operations, or launch attacks against other  computer systems and networks.
We and federal inspectors general have reported on persistent  information security weaknesses that place federal agencies at risk of  disruption, fraud, or inappropriate disclosure of sensitive information.  Accordingly, since 1997, we have designated information security as a  government-wide high-risk area, and we continued to do so in the most  recent update to our high-risk list.
The Federal Information Security Management Act (FISMA) of 2002 is  intended to provide a comprehensive framework for ensuring the  effectiveness of information security controls over information resources  that support federal operations and assets. to develop, document, and implement an agency-wide security program  to provide security for the information and systems that support the  operations and assets of the agency, including information and  information systems provided or managed by another agency, contractor,  or other source. Additionally, FISMA assigns responsibility to the National  Institute of Standards and Technology (NIST) to provide standards and  guidelines to agencies on information security. NIST has issued related  standards and guidelines, including Recommended Security Controls for  Federal Information Systems and Organizations, NIST Special  Publication (NIST SP) 800-53, and Contingency Planning Guide for  Federal Information Systems, NIST SP 800-34.
subsections: section_title: SEC Relies on Information Technology to Support Operations and Financial Reporting
paragraphs: FISMA was enacted as Title III, E-Government Act of 2002, Pub L. No 107-347, 116 Stat.  2946 (2002).
The Electronic Data Gathering, Analysis, and Retrieval (EDGAR)  system performs the automated collection, validation, indexing,  acceptance, and forwarding of submissions by companies and others  that are required to file certain information with SEC. Its purpose is to  accelerate the receipt, acceptance, dissemination, and analysis of  time-sensitive corporate information filed with the commission.
EDGAR/Fee Momentum, a subsystem of EDGAR, maintains  accounting information pertaining to fees received from registrants.
End User Computing Spreadsheets and/or User Developed  Applications are used by SEC to prepare, analyze, summarize, and  report on its financial data.
The Financial Reporting and Analysis Tool facilitates the compilation  of monthly, quarterly, and year-end financial reports. This tool also  helps perform data reconciliation and analysis of the principal financial  statements.
The ImageNow application is a workflow tool that tracks, reviews, and  approves documents related to disgorgements, penalties, and court  registry.
The general support system provides (1) business application  services to internal and external customers and (2) security services  necessary to support these applications.
Under FISMA, the SEC Chair has responsibility for, among other things,  (1) providing information security protections commensurate with the risk  and magnitude of harm resulting from unauthorized access, use,  disclosure, disruption, modification, or destruction of the agency’s  information systems and information; (2) ensuring that senior agency  officials provide information security for the information and information  systems that support the operations and assets under their control; and  (3) delegating to the agency chief information officer (CIO) the authority to  ensure compliance with the requirements imposed on the agency. FISMA  further requires the CIO to designate a senior agency information security  officer who will carry out the CIO’s information security responsibilities.
section_title: Information Security Weaknesses Placed SEC Financial Data at Risk
paragraphs: Although SEC had implemented and made progress in strengthening  information security controls, weaknesses limited their effectiveness in  protecting the confidentiality, integrity, and availability of a key financial  system. SEC did not consistently control access to this financial system’s  network, servers, applications, and databases; manage its configuration;  segregate duties; and plan for contingencies and disasters. These  weaknesses existed, in part, because SEC did not effectively oversee  and manage the migration of the key financial system to a new location.  Consequently, SEC’s financial information and systems were exposed to  increased risk of unauthorized access, disclosure, modification, and  disruption.
subsections: section_title: SEC Did Not Consistently Control Access to a Key Financial System
paragraphs: A basic management objective for any organization is to protect the  resources that support its critical operations and assets from  unauthorized access. Organizations accomplish this by designing and  implementing controls that are intended to prevent, limit, and detect  unauthorized access to computer resources (e.g., data, programs,  equipment, and facilities), thereby protecting them from unauthorized  disclosure, modification, and loss. Specific access controls include border  protection, identification and authentication of users, authorization  restrictions, cryptography, audit and monitoring procedures, incident  response procedures, and physical security. Without adequate access  controls, unauthorized individuals, including intruders and former  employees, can surreptitiously read and copy sensitive data and make  undetected changes or deletions for malicious purposes or for personal  gain. In addition, authorized users could intentionally or unintentionally  modify or delete data or execute changes that are outside of their  authority.
Although SEC had issued policies and implemented controls based on  those policies, it did not consistently protect its network boundary from  possible intrusions; identify and authenticate users; authorize access to  resources; ensure that sensitive data are encrypted; audit and monitor  actions taken on the commission’s systems and network; and restrict  physical access to sensitive assets.
subsections: section_title: Although Control Mechanisms Were Put in Place, SEC Did Not Adequately Protect the Boundaries of a Key Financial System
paragraphs: Boundary protection controls logical connectivity into and out of networks  and controls connectivity to and from network-connected devices.  Implementing multiple layers of security to protect an information  system’s internal and external boundaries provides defense in depth. By  using a defense-in-depth strategy, entities can reduce the risk of a  successful cyber attack. For example, multiple firewalls could be  deployed to prevent both outsiders and trusted insiders from gaining  unauthorized access to systems. At the system level, any connections to  the Internet, or to other external and internal networks or information  systems, should occur through controlled interfaces (for example, proxies,  gateways, routers and switches, firewalls, and concentrators). At the host  or device level, logical boundaries can be controlled through inbound and  outbound filtering provided by access control lists and personal firewalls.
SEC deployed multiple firewalls that were intended to prevent  unauthorized access to its systems; however, it did not securely configure  access control lists on firewalls inside a key financial system’s  environment. For example, its network devices and firewall settings  inappropriately permitted users in the production environment to access  the system’s network management server. In addition, the system’s  production Internet firewalls were configured to allow systems in the  “demilitarized zone” to connect to each other. As a result of these  configurations, SEC introduced vulnerability to unnecessary and  potentially undetectable access at multiple points in the key financial  system’s network environment.
section_title: SEC Did Not Consistently Implement Controls for Identifying and Authenticating Users of a Key Financial System
paragraphs: Information systems need to be managed to effectively control user  accounts and identify and authenticate users. Users and devices should  be appropriately identified and authenticated through the implementation  of adequate logical access controls. Users can be authenticated using  mechanisms such as a password and user ID combination. SEC policy  requires strong password controls for authentication, such as passwords  that are at least 8 eight alphanumeric characters in length and that expire  after a predetermined period of time.
However, SEC did not consistently implement strong password controls  for identifying and authenticating users to certain servers, network  devices, and databases in the key financial system’s environment. For  example, password length on a network management device and a  server contained fewer characters than required. User account  passwords on another server were configured to never expire.  Additionally, two databases had a user password that had the same  name as the user account. As a result, SEC is at increased risk that  accounts could be compromised and used by unauthorized individuals to  access sensitive information.
section_title: SEC Did Not Always Sufficiently Restrict Access to a Key Financial System
paragraphs: Authorization encompasses access privileges granted to a user, program,  or process. It is used to allow or prevent actions by that user based on  predefined rules. Authorization includes the principles of legitimate use  and least privilege. Operating systems have some built-in authorization  features such as user rights and privileges, groups of users, and  permissions for files and folders. Network devices, such as routers, may  have access control lists that can be used to authorize users who can  access and perform certain actions on the device. Access rights and  privileges are used to implement security policies that determine what a  user can do after being allowed into the system. Maintaining access  rights, permissions, and privileges is one of the most important aspects of  administering system security.
However, SEC did not always employ the principle of least privilege when  authorizing access permissions to a key financial system. Specifically, it  did not appropriately restrict access to security-related parameters and  users’ rights and privileges for several network devices, databases, and  servers supporting key financial applications. As a result, users had  excessive levels of access that were not required to perform their jobs.  This could lead to data being inappropriately modified, either inadvertently  or deliberately.
section_title: SEC Did Not Effectively Protect Sensitive Data While in Transmission
paragraphs: Cryptographic controls can be used to help protect the integrity and  confidentiality of data and computer programs by rendering data  unintelligible to unauthorized users and/or protecting the integrity of  transmitted or stored data. Cryptography involves the use of  mathematical functions called algorithms and strings of seemingly  random bits called keys to (1) encrypt a message or file so that it is  unintelligible to those who do not have the secret key needed to decrypt  it, thus keeping the contents of the message or file confidential; (2)  provide an electronic signature that can be used to determine if any  changes have been made to the related file, thus ensuring the file’s  integrity; or (3) link a message or document to a specific individual’s or  group’s key, thus ensuring that the “signer” of the file can be identified.  NIST guidance states that the use of encryption by organizations can  reduce the probability of unauthorized disclosure of information. NIST  also recommends that organizations employ cryptographic mechanisms  to prevent unauthorized disclosure of information during transmission,  encrypt passwords while being stored and transmitted, and establish a  trusted communications path between users and security functions of  information systems.
However, SEC did not configure settings of the logging and database  servers supporting key financial applications to use encryption when  transmitting data. As a result, increased risk exists that transmitted data  can be intercepted, viewed, and modified.
section_title: SEC Did Not Adequately Maintain Audit Trails of Security-Relevant Events
paragraphs: Audit and monitoring involves the regular collection, review, and analysis  of auditable events for indications of inappropriate or unusual activity, and  the appropriate investigation and reporting of such activity. Automated  mechanisms may be used to integrate audit monitoring, analysis, and  reporting into an overall process for investigation of and response to  suspicious activities. Audit and monitoring controls can help security  professionals routinely assess computer security, perform investigations  during and after an attack, and even recognize an ongoing attack. Audit  and monitoring technologies include network and host-based intrusion  detection systems, audit logging, security event correlation tools, and  computer forensics. Network-based intrusion detection systems capture  or “sniff” and analyze network traffic in various parts of a network. FISMA  requires that each federal agency implement an information security  program that includes procedures for detecting, reporting, and responding  to security incidents.
However, SEC had not consistently configured certain servers supporting  a key financial system to maintain audit trails for all security-relevant  events. For example, several of these network devices did not perform  “failed access control lists access violation” logging. Also, while SEC had  initiated deployment of tools to monitor its network infrastructure, critical  systems’ local logs were not sent to a centralized syslog server that logs  security events. In addition, the syslog server was offline for more than 1  month. As a result, increased risk exists that SEC will be unable to  determine (1) if certain malicious incidents have occurred and (2) who or  what caused them.
section_title: SEC Generally Protected Access to Its Facilities but Did Not Sufficiently Control Physical Access to a Sensitive Computing Area
paragraphs: Physical security controls restrict physical access to computer resources  and protect them from intentional or unintentional loss or impairment.  Adequate physical security controls over computer facilities and  resources should be established that are commensurate with the risks of  physical damage or access. Physical security controls over the overall  facility and areas housing sensitive information technology components  include, among other things, policies and practices for granting and  discontinuing access authorizations; controlling badges, ID cards,  smartcards, and other entry devices; controlling entry during and after  normal business hours; and controlling the entry and removal of computer  resources (such as equipment and storage media) from the facility.  Physical controls also include environmental controls, such as smoke  detectors, fire alarms, extinguishers, and uninterruptible power supplies.
While SEC improved physical security controls after relocating its primary  data center to a secure location, SEC did not sufficiently control physical  access to a key financial system’s administrator area in headquarters. For  example, system administrators’ workstations were located in an open  area that was accessible by all personnel with access to the SEC  headquarters building. The insufficient physical access control over the  system administrators’ workstations reduces SEC’s ability to protect the  system from unauthorized access.
section_title: SEC Did Not Always Securely Configure or Install Patches on a Key Financial System
paragraphs: Configuration management involves the identification and management of  security features for all hardware, software, and firmware components of  an information system at a given point and systematically controls  changes to that configuration during the system’s life cycle. FISMA  requires each federal agency to have policies and procedures that ensure  compliance with minimally acceptable system configuration requirements.  Systems with secure configurations have less vulnerability and are better  able to thwart network attacks. Effective configuration management  provides reasonable assurance that systems are configured and  operating securely and as intended. In addition to periodically looking for  software vulnerabilities and fixing them, security software should be kept  current by establishing effective programs for patch management, virus  protection, and other emerging threats. Also, software releases should be  adequately controlled to prevent the use of noncurrent software.
Although it had configuration management related policies, plans and  procedures in place, SEC did not configure a key financial system at its  new data center according to SEC’s secure configuration baseline. For  example, the system’s server ran multiple insecure services. In addition,  while SEC had formed a patch vulnerability group to monitor  vulnerabilities and evaluate the results of vulnerability scan reports, it did  not routinely and consistently patch servers supporting key financial  applications in a timely manner. Moreover, SEC used outdated versions  of software and products that were no longer supported by their  respective vendors. Consequently, increased risk exists that the system  was exposed to vulnerabilities that could be exploited by attackers  seeking to gain unauthorized access.
section_title: Segregation of Duties Was Generally in Place, but Weaknesses Increase Risk
paragraphs: To reduce the risk of error or fraud, duties and responsibilities for  authorizing, processing, recording, and reviewing transactions should be  separated to ensure that one individual does not control all critical stages  of a process. Effective segregation of duties starts with effective entity- wide policies and procedures that are implemented at the system and  application levels. Often, segregation of incompatible duties is achieved  by dividing responsibilities among two or more organizational groups,  which diminishes the likelihood that errors and wrongful acts will go  undetected because the activities of one individual or group will serve as  a check on the activities of the other. Inadequate segregation of duties  increases the risk that erroneous or fraudulent transactions could be  processed, improper program changes implemented, and computer  resources damaged or destroyed. According to NIST SP 800-53, revision  3, to prevent collusive malevolent activity, organizations should separate  the duties of individuals as necessary and implement separation of duties  through assigned information system access authorizations.
During fiscal year 2013, SEC implemented segregation of duties controls  for key information technology processes. For example, SEC had  implemented segregation of duties for the administrative accounts tested.  In addition, based on our inquiries, SEC employees from the Office of  Information Technology Security, Office of Financial Management, and  system operations understood their duties and responsibilities.
However, production servers for the key financial system had active  development user accounts. As a result, increased risk exists that  unauthorized individuals from the development environment could pose a  threat to the system’s processes in the production environment.
section_title: SEC Did Not Fully Update or Test Contingency and Disaster Recovery Plans
paragraphs: Losing the capability to process, retrieve, and protect electronically  maintained information can significantly affect an agency’s ability to  accomplish its mission. If contingency and disaster recovery plans are  inadequate, even relatively minor interruptions can result in lost or  incorrectly processed data, which can cause financial losses, expensive  recovery efforts, and inaccurate or incomplete information. Given these  severe implications, it is important that an entity have in place (1) up-to- date procedures for protecting information resources and minimizing the  risk of unplanned interruptions, (2) a tested plan to recover critical  operations should interruptions occur, and (3) redundancy in critical  systems.
Although SEC had developed contingency and disaster recovery plans  and implemented controls for this planning, it did not (1) update its  contingency and disaster recovery plans to reflect its computing  environment, (2) test disaster recovery procedures to ascertain recovery  after the move to its newly built data center, and (3) ensure redundancy of  a critical server for the key financial system. Consequently, SEC had  limited assurance that financial information could be recovered and made  available to meet agency priorities and requirements in the event of a  failure at its primary data center.
section_title: SEC Did Not Effectively Oversee and Manage the Implementation of Information Security Controls during Migration of a Key Financial System
paragraphs: The information security weaknesses existed in the key financial system,  in part, because SEC did not effectively oversee and manage the  implementation of information security controls during the migration of the  system to a new production environment. Specifically, SEC did not  consistently provide adequate contractor oversight and implement an  effective risk management process during the migration to the new  production environment at its data center in June 2013.
subsections: section_title: SEC Did Not Consistently Provide Adequate Contractor Oversight
paragraphs: SEC relied on a contractor to migrate the key financial system to a new  production environment, which included the completion of critical security- related tasks. The Office of Federal Procurement Policy’s Guide to Best  Practices for Contract Administration states that a good contract  administration program is essential to improving contractor performance  under federal contracts. It also states that those entrusted with the duty to  ensure that the government gets all that it has bargained for must be  competent in the practices of contract administration. In addition, NIST  guidance states that the head of an agency should establish appropriate  accountability for information security and provide active support and  oversight of monitoring and improvement for the information security  program. Moreover, SEC policy states that the agency is to monitor  project development throughout the life cycle to ensure that security  controls are incorporated and security project milestones are met.
However, SEC did not adequately oversee the contractor’s efforts related  to the migration of the system from SEC’s operation center to its data  center in a different location. Specifically, SEC did not assign information  security personnel to monitor and evaluate the contractor’s performance  in completing required security tasks. In addition, while the project plan  included security-related tasks and milestones, SEC officials did not  review the system’s security and project migration plans to verify that  security-related roles, resources, and responsibilities were identified.  Further, SEC did not confirm that the contractor completed the security- related project tasks prior to the decision to go live, including (1)  implementing the baseline security configuration on the system’s servers,  (2) testing the security of its servers, (3) building a monitoring capability  inside its network environment, and (4) identifying and committing  resources to perform security configuration and testing after the server  build-out. SEC officials attributed this lack of rigorous oversight to their  reliance on the ability of the contractor to adequately complete the effort.  As a result, senior management officials were unaware that security- related project tasks had not been completed when the agency approved  the system to go live.
section_title: SEC Did Not Effectively Manage Risk Associated with the Migration of a Key Financial System
paragraphs: According to NIST SP 800-37,risks and, prior to placing information systems into operation, ensure that  (1) information system-related security risks are being adequately  addressed on an ongoing basis and (2) the authorizing official explicitly  understands and accepts the risk to organizational operations and assets.  In addition, the key financial system’s security plan states that SEC is to  monitor changes to the system and conduct security impact analyses to  determine the effects of the changes. Prior to change implementation,  and as part of the change approval process, the organization is to  analyze changes to the system for potential security impacts. After the  system is changed (including upgrades and modifications), the   agencies are to identify and mitigate  organization should check the security features to verify that the features  are still functioning properly.
To improve its information security risk management process, in February  2013 SEC established the Operational Risk Management Office to  proactively identify operational risks in all division offices. As part of the  agency’s risk management process, the heads of business lines are  responsible for identifying risks and controls. SEC also established a Risk  Committee with the purpose of formalizing the risk framing process and  creating an SEC-wide information security risk management strategy,  based on decisions and priorities set by the Risk Committee. The risk  decisions and risk priorities are to be used as guiding principles by  management officials in implementing daily and operational IT tasks.
However, SEC did not effectively manage risk associated with the  migration of a key financial system to a new location. Specifically, (1)  SEC’s Information Security Risk Committee did not identify and convey  risks related to the data center move (and to the system) to the agency’s  Operational Risk Management Program Office, which is responsible for  developing and overseeing SEC’s operational risk management and  internal control program and evaluating the results of internal control  reviews and information technology system reviews performed by the  internal control divisions and offices; (2) SEC did not perform a security  impact analysis after the system servers were rebuilt and major changes  were made to the systems; and (3) SEC did not act to mitigate security- related risks identified and communicated in the system’s weekly status  reports by the contractor prior to the go-live date. Consequently, SEC did  not have timely awareness of potential security vulnerabilities, which  resulted in pervasive control weaknesses in the system when the new  production environment went live.
section_title: SEC Made Limited Progress Remediating Previously Reported Information Security Control Weaknesses
paragraphs: SEC resolved two of the seven previously reported information system  control deficiencies in the areas of access controls and audit and   For example, SEC disabled inactive administrator accounts  monitoring.and enabled audit and monitoring capability on a server. However, five of  the seven previously reported weaknesses still exist. These five  remaining weaknesses encompassed SEC’s financial and general  support systems. For example, SEC did not always configure its remote  host and network infrastructure devices to require the use of strong  passwords; effectively enforce logical access controls, including controls  in the user separation process across its IT systems at the network levels;  and consistently apply patches or perform necessary system updates.
section_title: Conclusions
paragraphs: SEC continues to make progress in improving information security  controls over its key financial systems. However, information security  control weaknesses in a key financial system’s production environment  may jeopardize the confidentiality, integrity, and availability of information  residing in and processed by the system. These included deficiencies in  SEC’s controls over access control, configuration management,  segregation of duties, and contingency and disaster recovery planning. In  addition, SEC did not consistently provide adequate contractor oversight  and implement an effective risk management process during the  migration of an important financial system to its new location.  Cumulatively, these weaknesses decreased assurance regarding the  reliability of the data processed by the key financial system and increased  the risk that unauthorized individuals could gain access to critical  hardware or software and intentionally or inadvertently access, alter, or  delete sensitive data or computer programs. Consequently, the  combination of the continuing and new information security weaknesses  existing as of September 30, 2013, considered collectively, represented a  significant deficiency in SEC’s internal control over financial reporting.  Until SEC mitigates its control deficiencies and strengthens oversight of  contractors performing security-related tasks as part of its information  security program, it will continue to be at risk of ongoing deficiencies in  the security controls over its financial and support systems and the  information they contain.
section_title: Recommendations for Executive Action
paragraphs: As part of fully implementing a comprehensive information security  program, we recommend that the Chair direct the Chief Information  Officer to take the following two actions:  1.  Assign information security personnel to monitor and evaluate  contractor performance in implementing information security controls  in SEC’s information technology projects.  2.  Implement a risk management process to ensure that similar contract  oversight weakness are not widespread that includes (1) identifying  and conveying risks, (2) performing security impact analyses, and (3)  mitigating identified risks as appropriate.
In a separate report with limited distribution, we are also making 49  detailed recommendations consisting of actions to be taken to correct  specific information security weaknesses related to access control,  configuration management, segregation of duties, and contingency and  disaster recovery plans.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to SEC for its review and comment. In  its written comments (reproduced in app. II), SEC generally agreed with  our recommendations. SEC acknowledged that the appropriate level of  attention was not applied to contractor oversight during the migration of  the financial system and stated that contractual, procedural, and  corrective measures are taking place to prevent similar occurrences. In  addition, SEC agreed with the specific points we made about the risk  management process and stated that this process continues to be  improved.
This report contains recommendations to you. The head of a federal  agency is required by 31 U.S.C. § 720 to submit a written statement on  the actions taken on the recommendations by the head of the agency.  The statement must be submitted to the Senate Committee on Homeland  Security and Governmental Affairs and the House Committee on  Oversight and Government Reform not later than 60 days from the date  of this report. A written statement must also be sent to the House and  Senate Committees on Appropriations with your agency’s first request for  appropriations made more than 60 days after the date of this report.
We are also sending copies of this report to interested congressional  parties. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.
We acknowledge and appreciate the cooperation and assistance  provided by SEC management and staff during our audit. If you have any  questions about this report or need assistance in addressing these  issues, please contact Gregory C. Wilshusen at (202) 512-6244 or  wilshuseng@gao.gov or Nabajyoti Barkakati at (202) 512-4499 or   barkakatin@gao.gov. GAO staff who made significant contributions to this  report are listed in appendix III.
section_title: Appendix I: Objective, Scope, and Methodology
paragraphs: As part of our audit of the Securities and Exchange Commission’s (SEC)  fiscal years 2012 and 2013 financial statements, we assessed the  commission’s information security controls. The objective was to  determine the effectiveness of SEC’s information security controls for  ensuring the confidentiality, integrity, and availability of its key financial  systems and information. To do this, we identified and reviewed SEC  information systems control policies and procedures, conducted tests of  controls, and held interviews with key security representatives and  management officials concerning whether information security controls  were in place, adequately designed, and operating effectively.
We evaluated controls based on our Federal Information System Controls  Audit Manual (FISCAM), which contains guidance for reviewing  information system controls that affect the confidentiality, integrity, and  availability of computerized information; National Institute of Standards  and Technology standards and special publications; SEC’s plans,  policies, and standards; and the National Security Agency’s 60 Minute  Network Security Guide. We assessed the effectiveness of both general  and application controls by performing information system controls walkthroughs surrounding the observing technical controls implemented on selected systems; initiation, authorization, processing, recording, and reporting of  financial data (via interviews, inquiries, observations, and  inspections);  reviewing systems security assessment and authorization documents;  reviewing SEC policies and procedures;  testing specific controls; and  scanning and manually assessing SEC systems including general  support systems and financial applications.
We also evaluated the Statement on Standards for Attestation  Engagements report and performed testing on key information  technology controls on the following applications and systems: Delphi- Prism, FedInvest, and Federal Personnel and Payroll System/Quicktime.
We selected which systems to evaluate based on a consideration of  financial systems and service providers integral to SEC’s financial  statements.
The evaluation and testing of SEC information system controls, including  the evaluation of the status of SEC’s corrective actions during fiscal year  2013 to address open recommendations from our prior years’ reports,  was performed jointly with the independent firm of Williams, Adley, &  Company-DC, LLP. We agreed on the scope of the audit work, monitored  the firm’s progress, and reviewed the related audit documentation to  determine that the firm’s findings were adequately supported.
To determine the status of SEC’s actions to correct or mitigate previously  reported information security weaknesses, we identified and reviewed its  information security policies, procedures, practices, and guidance. We  reviewed prior GAO reports to identify previously reported weaknesses  and examined the commission’s corrective action plans to determine  which weaknesses it had reported were corrected. For those instances  where SEC reported that it had completed corrective actions, we  assessed the effectiveness of those actions by reviewing appropriate  documents, including SEC-documented corrective actions, and  interviewing the appropriate staffs, including system administrators.
To assess the reliability of the data we analyzed, such as information  system control settings, security assessment and authorization  documents, and security policies and procedures, we corroborated them  by interviewing SEC officials, programmatic personnel, and system  administrators to determine whether the data obtained were consistent  with system configurations in place at the time of our review. Based on  this assessment, we determined the data were reliable for the purposes  of this report.
We performed our work in accordance with U.S. generally accepted  government auditing standards. We believe that our audit provided a  reasonable basis for our conclusions in this report.
section_title: Appendix II: Comments from the Securities and Exchange Commission
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, GAO staff who made major  contributions to this report are Michael W. Gilmore and Duc Ngo  (Assistant Directors), Angela Bell, Lee McCracken, and Henry Sutanto.