Bureau of the Public Debt: Areas for Improvement in Information
Security Controls (16-MAR-06, GAO-06-522R).
In 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,
2005 and 2004. As part of these audits, we performed a review of
the general and application information security controls over
key BPD financial systems. This report presents the issues
identified during our fiscal year 2005 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 recommendations
that were contained in our prior years' audits and open as of
September 30, 2004. We also assessed the general and application
information security controls over key BPD 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 of such testing.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-522R
ACCNO: A49297
TITLE: Bureau of the Public Debt: Areas for Improvement in
Information Security Controls
DATE: 03/16/2006
SUBJECT: Access control
Audit reports
Computer security
Financial management systems
Financial statement audits
Information resources management
Information security
Information systems
Internal controls
Bureau of the Public Debt Schedule of
Federal Debt
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GAO-06-522R
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March 16, 2006
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,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, 2005 and 2004.2 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, 2005 and 2004, BPD
maintained, in all material respects, effective internal control relevant
to the Schedule of Federal Debt related to financial reporting and
compliance with applicable laws and regulations as of September 30, 2005,
that provided reasonable assurance that misstatements, losses, or
noncompliance material in relation to the Schedule of Federal Debt would
be prevented or detected on a timely basis. We found matters involving
information security controls that we do not consider to be reportable
conditions3 but that nevertheless warrant BPD management's attention and
action. BPD mitigates the potential effect of such issues with physical
security measures, a program of monitoring user and system activity, and
compensating management and reconciliation controls.
This report presents the results of our fiscal year 2005 testing of the
general and application information security controls that support key BPD
automated financial systems relevant to BPD's Schedule of Federal Debt and
the results of our follow-up on the status of BPD's corrective actions to
address recommendations that were contained in our prior years' audits and
open as of September 30, 2004. 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 BPD 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 of such testing.
131 U.S.C. S: 331(e).
2GAO, Financial Audit: Bureau of the Public Debt's Fiscal Years 2005 and
2004 Schedules of Federal Debt, GAO-06-169 (Washington, D.C.: Nov. 7,
2005).
3Reportable conditions are matters coming to our attention that, in our
judgment, should be communicated because they represent significant
deficiencies in the design or operation of internal control, which could
adversely affect the organization's ability to meet the objectives of
reliable financial reporting and compliance with applicable laws and
regulations.
Results in Brief
Our fiscal year 2005 audit procedures identified opportunities to
strengthen certain information security controls that support key BPD
automated financial systems relevant to BPD's Schedule of Federal Debt.
Specifically, our audit procedures identified 11 new general information
security control issues that relate to access controls and system
software. In the Limited Official Use Only report, we made nine
recommendations to address these issues.
Our follow-up on the status of BPD's corrective actions to address nine
open recommendations related to eight general and application information
security control issues identified in prior years' audits for which
actions were not complete as of September 30, 2004, identified the
following:
o As of September 30, 2005, corrective action on seven of the
nine recommendations had been completed.
o Corrective action was in progress as of September 30, 2005, on
the two remaining open recommendations, which relate to access
controls and application controls. We reaffirm our prior years'
recommendations related to these issues.
BPD provided comments on the detailed findings and recommendations in the
separately issued Limited Official Use Only report. In those comments, the
Commissioner of the Bureau of the Public Debt stated that of the 11
recommendations, which include 2 from prior years, 5 have been completely
resolved, and the remaining 6 are in progress. The Commissioner also
stated that BPD intends to fully implement the remaining recommendations
before the end of this fiscal year.
Background
The Department of the Treasury (Treasury) is authorized by Congress to
borrow money on the 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
Department 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, 2005 and 2004, federal debt managed by BPD totaled
about $7.9 trillion and $7.4 trillion, respectively, for moneys borrowed
to fund the government's operations. These balances consisted of
approximately (1) $4.6 trillion and $4.3 trillion of debt held by the
public as of September 30, 2005 and 2004, respectively; and (2) $3.3
trillion and $3.1 trillion of intragovernmental debt holdings as of
September 30, 2005 and 2004, respectively. Total interest expense on
federal debt managed by BPD for fiscal years 2005 and 2004 was about $355
billion and $322 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. The FRB uses a number of financial systems to process
debt-related transactions throughout the country.
Objectives, Scope, and Methodology
Our objectives were to evaluate and test 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, 2004. We use a risk-based, rotation approach
for testing general information security controls. Each general
information security control area is subjected to a full-scope review,
including testing, at least every 3 years. The general information
security control areas we review are defined in the Federal Information
System Controls Audit Manual.4 Areas considered to be of higher risk are
subject to more frequent review. Each key application is subjected every
year to a full-scope review.
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 in
place, adequately designed, and operating effectively.
The scope of our work for fiscal year 2005 as it relates to general
information security controls included following up on open
recommendations from our prior years' reports and reviewing entitywide
security program planning and management, access controls, and system
software controls. In addition, we performed certain testing of the BPD
distributed computing environment.
4GAO, Federal Information System Controls Audit Manual, GAO/AIMD-12.19.6
(Washington, D.C.: January 1999).
We performed full-scope application information security control reviews
of six key BPD applications to determine whether the applications are
designed to ensure that
o access privileges (1) establish individual accountability and
proper segregation of duties, (2) limit the processing privileges
of individuals, and (3) prevent and detect inappropriate or
unauthorized activities;
o data are authorized, converted to an automated form, and
entered into the application accurately, completely, and promptly;
o data are properly processed by the computer and files are
updated correctly;
o erroneous data are captured, reported, investigated, and
corrected; and
o files and reports generated by the application represent
transactions that actually occur and accurately reflect the
results of processing, and reports are controlled and distributed
only to authorized users.
We performed a limited application information security control review of
one key BPD application to expand our understanding of this new
application. The scope of our work as it relates to application
information security controls also included following up on open
recommendations from our prior year's report for which actions were not
complete as of September 30, 2004. 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 six key financial
applications maintained and operated by the FRBs.
The evaluation and testing of certain information security controls were
performed by the independent public accounting (IPA) firm of
PricewaterhouseCoopers LLP. We agreed on the scope of the audit work,
monitored the IPA firm's progress, and reviewed the related audit
documentation to ensure that the findings were adequately supported. In
addition, our information systems auditors performed supplemental testing
of general and application information security controls at BPD and
followed up on the status of BPD corrective actions to address certain
open recommendations in our fiscal year 2004 report.
During the course of our work, we communicated our findings to BPD
management, who informed us that BPD has taken or plans to take corrective
action to address the control issues identified. We plan to follow up on
these matters during our audit of the fiscal year 2006 Schedule of Federal
Debt.
We performed our work at the BPD data center from February 2005 through
October 2005. Our work was performed in accordance with U.S. generally
accepted government auditing standards. As noted earlier, 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.
Assessment of BPD's 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 an entitywide
security management program, access controls, system software controls,
application software development and change controls, segregation of
duties, and service continuity controls. An effective general information
security control environment helps (1) ensure that an adequate entitywide
security management program is in place; (2) protect data, files, and
programs from unauthorized access, modification, disclosure, and
destruction;
(3) limit and monitor access to programs and files that control computer
hardware and secure applications; (4) prevent the introduction of
unauthorized changes to systems and applications software; (5) prevent any
one individual from controlling key aspects of computer-related
operations; and (6) ensure the recovery of computer processing operations
in the event of a disaster or other unexpected interruption.
Our fiscal year 2005 testing identified opportunities to strengthen
certain information security controls that support key BPD automated
financial systems relevant to BPD's Schedule of Federal Debt.
Specifically, our audit procedures identified 11 new general information
security control issues. Ten new general information security control
issues relate to access controls and one new general information security
control issue relates to system software. The majority of the new issues
involves controls pertaining to the distributed computing environment.
Access controls are designed to limit or detect access to computer
programs, data, equipment, and facilities to protect these resources from
unauthorized modification, disclosure, loss, or impairment. Such controls
include logical access controls and physical access controls. Logical
access controls involve the use of computer hardware and software to
prevent or detect unauthorized access by requiring users to input unique
user identifications (ID), passwords, or other identifiers that are linked
to predetermined access privileges. Logical access controls restrict the
access of legitimate users to the specific systems, programs, and files
they need to conduct their work and prevent unauthorized users from
gaining access to computer resources. Physical access controls involve the
use of locks, guards, badges, alarms, and similar measures (used alone or
in combination) to prevent intentional or unintentional loss or impairment
to computer hardware and software and to the buildings and rooms where
they are housed.
System software coordinates and helps control the input, processing,
output, and data storage associated with all of the applications that run
on a system. System software includes operating system software, system
utilities, file maintenance software, security software, data
communications systems, and database management systems. Controls over
access to and modifications of system software are essential to protect
the overall integrity and reliability of information systems.
In a separately issued Limited Official Use Only report, we communicated
detailed information regarding our findings to BPD management and made
nine recommendations to address the access control and system software
issues.
Our follow-up on the status of BPD's corrective actions to address nine
open recommendations related to eight general and application information
security control issues identified in prior years' audits for which
actions were not complete as of September 30, 2004, found the following:
o As of September 30, 2005, corrective action on seven of the
nine recommendations had been completed.
o Corrective action was in progress as of September 30, 2005, on
the two remaining open recommendations, which relate to access
controls and application controls. We reaffirm our prior years'
recommendations related to these issues.
None of our findings pose significant risks to the BPD financial systems.
In forming our conclusions, we considered the mitigating effects of
physical security measures, a program of monitoring user and system
activity, and reconciliation controls that are designed to detect
potential irregularities or improprieties in financial data or
transactions. Nevertheless, these findings warrant management's attention
and action to limit the risk of unauthorized access, disclosure, loss, or
impairment; 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 of such testing.
Conclusion
BPD has made significant progress in addressing open recommendations from
our prior years' audits and is taking corrective action to address the two
remaining unresolved issues. We therefore reaffirm our two recommendations
related to these issues.
Our fiscal year 2005 audit identified 11 new general information security
control issues that relate to access controls and system software for
which we are making 9 recommendations. BPD informed us that it has taken
or plans to take corrective action to address all issues identified.
Recommendation for Executive Action
We recommend that the Commissioner of the Bureau of the Public Debt direct
the appropriate BPD officials to implement the nine new detailed
recommendations set forth 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
Limited Official Use Only version. In those comments, the Commissioner of
the Bureau of the Public Debt stated that of the 11 recommendations, which
include 2 from prior years, 5 have been completely resolved, and the
remaining 6 are in progress. The Commissioner also stated that BPD intends
to fully implement the remaining recommendations before the end of this
fiscal year. We plan to follow up on these matters during our audit of the
fiscal year 2006 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 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 House and Senate 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 the Chairmen and Ranking Minority
Members of the Senate Committee on Homeland Security and Governmental
Affairs; the Subcommittee on Federal Financial Management, Government
Information, and International Security, Senate Committee on Homeland
Security and Governmental Affairs; the Subcommittee on Transportation,
Treasury, the Judiciary, Housing and Urban Development, and Related
Agencies, Senate Committee on Appropriations; the House Committee on
Government Reform; the Subcommittee on Government Management, Finance, and
Accountability, House Committee on Government Reform; and the Subcommittee
on Transportation, Treasury, and Housing and Urban Development, The
Judiciary, District of Columbia, House Committee on Appropriations. We are
also sending copies of this report to the Secretary of the Department of
the Treasury, the Inspector General of the Department of the Treasury, and
the Director of the Office of Management and Budget. Copies will also be
made available to others upon request. In addition, the report will be
available at no charge on GAO's Web site at http://www.gao.gov .
If you have any questions regarding this report, please contact me at
(202) 512-3406 or [email protected]. Other key contributors to this
assignment were David B. Hayes and Dawn B. Simpson, Assistant Directors;
and Angela M. Bell, Bruce E. Cain, and Mickie E. Gray.
Sincerely yours,
Gary T. Engel
Director
Financial Management and Assurance
(198417)
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