The Consumer Financial Protection Bureau (CFPB), the 2007 brainchild of now-Senator Elizabeth Warren, was formed in 2010 as part of the Dodd-Frank Act. An annual audit by the Government Accountability Office (GAO) for the year ending September 30, 2014 found that the fledgling agency is continuing to struggle with internal controls to keep its own financial house in order. The GAO laid out the issues in a report released this week:
CFPB's internal control over financial reporting was not effective as of September 30, 2014, because of a material weakness in internal control over the reporting of accounts payable...
The material weakness is a result of serious control deficiencies that affected CFPB's determination and reporting of accounts payable. Specifically, GAO found that CFPB did not have effective procedures in place to determine and record an appropriate amount for goods and services received but not yet paid for as of September 30, 2014. Additionally, CFPB did not have effective review procedures to timely detect and correct inaccuracies in the accrual amounts.
The GAO says that the problem with accounts payable controls has actually deteriorated during the past year despite efforts to make improvement (see page 40 of report). Last year's audit found a "significant deficiency" in the same accounts payable process, a less severe finding than this year's "material weakness." The audit found that the CFPB was able to make "necessary and appropriate adjustments" to mitigate the weakness and prepare accurate reports, but warned that continued weakness "may adversely affect any decisions by CFPB's management that are based... on information that is inaccurate because of this weakness."
The audit also found that a "significant deficiency" in accounting for property and equipment first reported in the 2013 audit was not overcome in 2014. The director of the CFPB acknowledged this deficiency as well as the accounts payable material weakness and said that the agency is continuing to implement solutions to reverse the shortcomings.
Despite the opportunity for misstatement caused by weakness and deficiency, the GAO was able to give the CFPB financial statements an unmodified audit opinion, declaring that they are "presented fairly, in all material respects."