Bureau of the Public Debt
Areas for Improvement in Information Security Controls Gao ID: GAO-10-517R March 26, 2010In connection with fulfilling our requirement to audit the financial statements of the U.S. government, we audited and reported on the Schedules of Federal Debt Managed by the Bureau of the Public Debt (BPD) for the fiscal years ended September 30, 2009 and 2008. As part of these audits, we performed a review of the general and application information security controls over key BPD financial systems. As we reported in connection with our audit of the Schedules of Federal Debt for the fiscal years ended September 30, 2009 and 2008, we concluded that BPD maintained, in all material respects, effective internal control over financial reporting relevant to the Schedule of Federal Debt as of September 30, 2009, that provided reasonable assurance that misstatements, losses, or noncompliance material in relation to the Schedule of Federal Debt would be prevented or detected and corrected on a timely basis. However, we identified information security deficiencies affecting internal control over financial reporting, which, while we do not consider them to be collectively either a material weakness or significant deficiency, nevertheless warrant BPD management's attention and action. This report presents the control deficiencies we identified during our fiscal year 2009 testing of the general and application information security controls that support key BPD automated financial systems relevant to BPD's Schedule of Federal Debt. This report also includes the results of our follow-up on the status of BPD's corrective actions to address information security control-related recommendations contained in our prior years' audit reports and open as of September 30, 2008. In a separately issued Limited Official Use Only report, we communicated detailed information regarding our findings to BPD management. We also assessed the general and application information security controls over key financial systems that the Federal Reserve Banks (FRB) maintain and operate on behalf of BPD. We will issue a separate report to the Board of Governors of the Federal Reserve System on the results from that assessment.
Our fiscal year 2009 audit procedures identified seven new general information security control deficiencies related to access controls and configuration management. In the Limited Official Use Only report, we made eight recommendations to address these control deficiencies. None of the control deficiencies we identified represented significant risks to the BPD financial systems. The potential effect of such control deficiencies on financial reporting relevant to the Schedule of Federal Debt was mitigated by BPD's physical security measures and a program of monitoring user and system activity, as well as compensating management and reconciliation controls designed to detect potential misstatements in the Schedule of Federal Debt. In addition, during our fiscal year 2009 follow-up on the status of BPD's corrective actions to address eight open recommendations related to general information security control deficiencies identified in prior years' audits, we determined that as of September 30, 2009, corrective action on five of the eight recommendations was completed, while corrective action was in progress on the three remaining open recommendations, which related to access controls and configuration management. BPD provided comments on the detailed findings and recommendations in the separately issued Limited Official Use Only report. In those comments, the Commissioner of BPD stated that of the 10 findings open as of September 30, 2009, 3 have been completely resolved and corrective actions for the remaining 7 are planned or in progress. The Commissioner also stated that BPD intends to implement corrective actions for 5 of the 7 remaining findings by September 2010, and the other 2 by December 2011.
GAO-10-517R, Bureau of the Public Debt: Areas for Improvement in Information Security Controls
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GAO-10-517R:
United States Government Accountability Office:
Washington, DC 20548:
March 26, 2010:
The Honorable Van Zeck:
Commissioner:
Bureau of the Public Debt:
Subject: Bureau of the Public Debt: Areas for Improvement in
Information Security Controls:
Dear Mr. Zeck:
In connection with fulfilling our requirement to audit the financial
statements of the U.S. government,[Footnote 1] we audited and reported
on the Schedules of Federal Debt Managed by the Bureau of the Public
Debt (BPD) for the fiscal years ended September 30, 2009 and 2008.
[Footnote 2] As part of these audits, we performed a review of the
general and application information security controls over key BPD
financial systems.
As we reported in connection with our audit of the Schedules of
Federal Debt for the fiscal years ended September 30, 2009 and 2008,
we concluded that BPD maintained, in all material respects, effective
internal control over financial reporting relevant to the Schedule of
Federal Debt as of September 30, 2009, that provided reasonable
assurance that misstatements, losses, or noncompliance material in
relation to the Schedule of Federal Debt would be prevented or
detected and corrected on a timely basis. However, we identified
information security deficiencies affecting internal control over
financial reporting, which, while we do not consider them to be
collectively either a material weakness or significant deficiency,
nevertheless warrant BPD management's attention and action.[Footnote 3]
This report presents the control deficiencies we identified during our
fiscal year 2009 testing of the general and application information
security controls that support key BPD automated financial systems
relevant to BPD's Schedule of Federal Debt. This report also includes
the results of our follow-up on the status of BPD's corrective actions
to address information security control-related recommendations
contained in our prior years' audit reports and open as of September
30, 2008. In a separately issued Limited Official Use Only report, we
communicated detailed information regarding our findings to BPD
management. We also assessed the general and application information
security controls over key financial systems that the Federal Reserve
Banks (FRB) maintain and operate on behalf of BPD. We will issue a
separate report to the Board of Governors of the Federal Reserve
System on the results from that assessment.
Results in Brief:
Our fiscal year 2009 audit procedures identified seven new general
information security control deficiencies related to access controls
and configuration management. In the Limited Official Use Only report,
we made eight recommendations to address these control deficiencies.
None of the control deficiencies we identified represented significant
risks to the BPD financial systems. The potential effect of such
control deficiencies on financial reporting relevant to the Schedule
of Federal Debt was mitigated by BPD's physical security measures and
a program of monitoring user and system activity, as well as
compensating management and reconciliation controls designed to detect
potential misstatements in the Schedule of Federal Debt.
In addition, during our fiscal year 2009 follow-up on the status of
BPD's corrective actions to address eight open recommendations related
to general information security control deficiencies identified in
prior years' audits, we determined that as of September 30, 2009,
corrective action on five of the eight recommendations was completed,
while corrective action was in progress on the three remaining open
recommendations, which related to access controls and configuration
management.
BPD provided comments on the detailed findings and recommendations in
the separately issued Limited Official Use Only report. In those
comments, the Commissioner of BPD stated that of the 10 findings open
as of September 30, 2009, 3 have been completely resolved and
corrective actions for the remaining 7 are planned or in progress. The
Commissioner also stated that BPD intends to implement corrective
actions for 5 of the 7 remaining findings by September 2010, and the
other 2 by December 2011.
Background:
The Department of the Treasury (Treasury) is authorized by Congress to
borrow money backed by the faith and credit of the United States to
fund federal operations. Treasury is responsible for prescribing the
debt instruments and otherwise limiting and restricting the amount and
composition of the debt. BPD, an organizational entity within the
Fiscal Service of the Treasury, is responsible for issuing and
redeeming debt instruments, paying interest to investors, and
accounting for the resulting debt. In addition, BPD has been given the
responsibility for issuing Treasury securities to trust funds for
trust fund receipts not needed for current benefits and expenses.
As of September 30, 2009 and 2008, federal debt managed by BPD totaled
about $11.9 trillion and $10.0 trillion, respectively, primarily for
moneys borrowed to fund the government's operations. These balances
consisted of approximately (1) $7.6 trillion and $5.8 trillion of debt
held by the public as of September 30, 2009 and 2008, respectively,
and (2) $4.3 trillion and $4.2 trillion of intragovernmental debt
holdings as of September 30, 2009 and 2008, respectively. Total
interest expense on federal debt managed by BPD for fiscal years 2009
and 2008 was about $381 billion and $454 billion, respectively.
BPD relies on a number of interconnected financial systems and
electronic data to process and track the money that is borrowed and to
account for the securities it issues. Many of the FRBs provide fiscal
agent services on behalf of BPD, which primarily consist of issuing,
servicing, and redeeming Treasury securities held by the public and
handling the related transfers of funds. FRBs use a number of
financial systems to process debt-related transactions. Detailed data
initially processed at the FRBs are summarized and then forwarded
electronically to BPD's data center for matching, verification, and
posting to the general ledger.
Objectives, Scope, and Methodology:
Our objectives were to evaluate the general and application
information security controls over key financial management systems
maintained and operated by BPD relevant to the Schedule of Federal
Debt and to determine the status of corrective actions taken in
response to the recommendations in our prior years' reports for which
actions were not complete as of September 30, 2008. Our evaluation of
the general and application information security controls was
conducted using the Federal Information System Controls Audit Manual.
[Footnote 4]
To evaluate general and application information security controls, we
identified and reviewed BPD's information system general and
application information security control policies and procedures,
observed controls in operation, conducted tests of controls, and held
discussions with officials at the BPD data center to determine whether
controls were adequately designed, implemented, and operating
effectively.
The scope of our general information security controls work for fiscal
year 2009 as it relates to general information security controls
included following up on open recommendations from our prior years'
reports and testing all five general control areas (security
management, access controls, configuration management, segregation of
duties, and contingency planning) in the current year. In addition, we
performed security diagnostics and vulnerability assessment testing of
BPD's internal and external information system environment.
We performed application information security control reviews on six
key BPD applications to determine whether the applications were
designed to provide reasonable assurance that:
* all transactions that occurred were input into the system, accepted
for processing, processed once and only once by the system, and
properly included in output;
* transactions were properly recorded in the proper period, key data
elements input for transactions were accurate, data elements were
processed accurately by applications that produce reliable results,
and output was accurate;
* all recorded transactions actually occurred, related to the
organization, and were properly approved in accordance with
management's authorization, and output contained only valid data;
* application data and reports and other output were protected against
unauthorized access; and:
* application data and reports and other relevant business information
were readily available to users when needed.
We also reviewed the application information security control audit
documentation from the work performed by the Treasury Office of
Inspector General's contractor on another key BPD application.
Because the FRBs are integral to the operations of BPD, we assessed
the general information security controls over financial systems that
the FRBs maintain and operate relevant to the Schedule of Federal
Debt. We also evaluated application information security controls over
four key financial applications maintained and operated by the FRBs.
The evaluation and testing of certain information security controls,
including the follow-up on the status of BPD corrective actions to
address open recommendations from our prior years' reports, were
performed by the independent public accounting (IPA) firm of Cotton
and Company LLP. We agreed on the scope of the audit work, monitored
the IPA firm's progress, and reviewed the related audit documentation
to determine that the findings were adequately supported.
During the course of our work, we communicated our findings to BPD
management. We plan to follow up to determine the status of corrective
actions taken for matters open as of September 30, 2009, during our
audit of the fiscal year 2010 Schedule of Federal Debt.
We performed our work at the BPD data center from February 2009
through October 2009. Our work was performed in accordance with U.S.
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provided a reasonable basis for our findings and
conclusions based on our audit objectives.
As noted above, we obtained agency comments on the detailed findings
and recommendations in a draft of the separately issued Limited
Official Use Only report. BPD's comments are summarized in the Agency
Comments and Our Evaluation section of this report.
New Areas for Improvement in BPD's General Information Security
Controls:
General information security controls are the structure, policies, and
procedures that apply to an entity's overall computer operations.
General information security controls establish the environment in
which application systems and controls operate. They include security
management, access controls, configuration management, segregation of
duties, and contingency planning. An effective general information
security control environment (1) provides a framework and continuing
cycle of activity for managing risk, developing security policies,
assigning responsibilities, and monitoring the adequacy of the
entity's computer-related controls to ensure that an adequate security
management program is in place; (2) limits or detects access to
computer resources (data, programs, equipment, and facilities),
thereby protecting them against unauthorized modification, loss, and
disclosure; (3) prevents unauthorized changes to information system
resources (for example, software programs and hardware configurations)
and provides reasonable assurance that systems are configured and
operating securely and as intended; (4) includes policies, procedures,
and an organizational structure to manage who can control key aspects
of computer-related operations; and (5) protects critical and
sensitive data, and provides for critical operations to continue
without disruption or be promptly resumed when unexpected events occur.
Our fiscal year 2009 testing identified opportunities to strengthen
certain information security controls that support key BPD financial
systems relevant to BPD's Schedule of Federal Debt. Specifically, our
audit procedures identified seven new general information security
control deficiencies. This included five control deficiencies related
to logical access controls and two control deficiencies related to
configuration management.
Access controls are important because they limit or detect
inappropriate access to computer resources (data, equipment, and
facilities), thereby protecting them from unauthorized modification,
loss, and disclosure. Such controls include logical access controls
and physical access controls. The new access control deficiencies we
identified related to logical access controls. Logical access controls
require users to authenticate themselves through the use of secret
passwords or other identifiers, and limit the files and other
resources that authenticated users can access and the actions that
they can execute.
Configuration management is important because it 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. At each system sublevel (for example,
network, operating systems, and infrastructure applications),
configuration management controls ensure that only authorized changes
are made to such critical components. In addition, configuration
management controls ensure applications and changes to the
applications go through a formal, documented systems development
process that identifies all changes to the baseline configuration.
In a separately issued Limited Official Use Only report, we
communicated detailed information regarding our findings to BPD
management and made eight detailed recommendations.
In addition, during our fiscal year 2009 follow-up on the status of
BPD's corrective actions to address eight open recommendations related
to general information security control deficiencies identified in
prior years' audits, we determined that as of September 30, 2009,
corrective action on five of the eight recommendations was completed,
while corrective action was in progress on the three remaining open
recommendations, which related to access controls and configuration
management. Although BPD management has made progress in addressing
the remaining three general information security control deficiencies,
additional actions are still needed.
None of the control deficiencies we identified represented significant
risks to the BPD financial systems. The potential effect of such
control deficiencies on financial reporting relevant to the Schedule
of Federal Debt was mitigated by BPD's physical security measures and
a program of monitoring user and system activity, as well as
compensating management and reconciliation controls designed to detect
potential misstatements in the Schedule of Federal Debt. Nevertheless,
these deficiencies warrant management's attention and action to limit
the risk of unauthorized access, loss, or disclosure; modification of
sensitive data and programs; and disruption of critical operations.
Assessment of FRB Information Security Controls:
Because the FRBs are integral to the operations of BPD, we assessed
the general and application information security controls over key
financial systems maintained and operated by the FRBs on behalf of
BPD. We will issue a separate report to the Board of Governors of the
Federal Reserve System on the results from that assessment.
Conclusion:
BPD has made significant progress in addressing open information
security control recommendations from our prior years' audits, and
while actions are still needed in three control areas, it has
corrective actions underway or planned. Our fiscal year 2009 audit
also identified seven new general information security control
deficiencies related to access controls and configuration management.
Recommendations for Executive Action:
We recommend that the Commissioner of the Bureau of the Public Debt
direct the appropriate BPD officials to implement the eight new
detailed recommendations presented in the separately issued Limited
Official Use Only version of this report.
Agency Comments and Our Evaluation:
BPD provided comments on the detailed findings and recommendations in
the separately issued Limited Official Use Only report. In those
comments, the Commissioner of BPD stated that of the 10 findings open
as of September 30, 2009, 3 have been completely resolved and
corrective actions for the remaining 7 are planned or in progress. The
Commissioner also stated that BPD intends to implement corrective
actions for 5 of the 7 remaining findings by September 2010, and the
other 2 by December 2011. We plan to follow up to determine the status
of corrective actions taken for these matters during our audit of the
fiscal year 2010 Schedule of Federal Debt.
In the separately issued Limited Official Use Only report, we noted
that the head of a federal agency is required by 31 U.S.C. 720 to
submit a written statement on actions taken on our recommendations to
the Senate Committee on Homeland Security and Governmental Affairs and
to the House Committee on Oversight and Government Reform not later
than 60 days after the date of the Limited Official Use Only report. A
written statement must also be sent to the Senate and House Committees
on Appropriations with the agency's first request for appropriations
made more than 60 days after the date of that report. In the Limited
Official Use Only report, we also requested a copy of your responses.
We are sending copies of this report to interested congressional
committees, the Secretary of the Treasury, the Inspector General of
the Department of the Treasury, and the Director of the Office of
Management and Budget. In addition, this report is available at no
charge on the GAO Web site at [hyperlink, http://www.gao.gov].
If you have any questions regarding this report, please contact me at
(202) 512-3406, or engelg@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are Jeffrey L. Knott and Dawn B. Simpson, Assistant Directors;
Dean D. Carpenter; and Nicole N. Jarvis.
Sincerely yours,
Signed by:
Gary T. Engel:
Director:
Financial Management and Assurance:
[End of section]
Footnotes:
[1] 31 U.S.C. § 331(e).
[2] GAO, Financial Audit: Bureau of the Public Debt's Fiscal Years
2009 and 2008 Schedules of Federal Debt, [hyperlink,
http://www.gao.gov/products/GAO-10-88] (Washington, D.C.: Nov. 10,
2009).
[3] A significant deficiency is a deficiency, or combination of
deficiencies, in internal control that is less severe than a material
weakness, yet important enough to merit attention by those charged
with governance. A material weakness is a deficiency, or a combination
of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a
timely basis. A deficiency in internal control exists when the design
or operation of a control does not allow management or employees, in
the normal course of performing their assigned functions, to prevent,
or detect and correct misstatements on a timely basis.
[4] GAO, Federal Information System Controls Audit Manual, [hyperlink,
http://www.gao.gov/products/GAO-09-232G] (Washington, D.C.: February
2009).
[End of section]
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