Report on Internal Controls Related to the Pension Benefit Guaranty Corporation's Fiscal Year 2011 and 2010 Financial Statements Audit (AUD-2012-2 /FA-11-82-2), issued November 14, 2011

The Office of Inspector General contracted with Clifton Gunderson LLP, an independent certified public accounting firm, to audit the financial statements of the Single-Employer and Multiemployer Program Funds administered by the Pension Benefit Guaranty Corporation (PBGC) as of and for the years ended September 30, 2011 and 2010 (AUD-2012-1/FA-11-82-1, November 14, 2011). As part of that audit, Clifton Gunderson prepared this internal control report to provide more detailed discussions of the specifics underlying the three material weaknesses and the significant deficiency reported in the internal control section of the combined Independent Auditor's Report. PBGC's response to a draft of this internal control report indicated:

• Agreement with the vast majority of findings and 50 of the report's 55 recommendations.
• Disagreed with five recommendations addressing information technology control weaknesses relating to PBGC's contract service providers, including three recommendations dealing with a Security Operations Center located outside of the United States.
• For six additional recommendations addressing weaknesses in the Benefits Administration and Payment Department; PBGC management agreed with the recommendations and committed to addressing the issue through a corrective action plan. The management response to these recommendations did not provide sufficient detail for OIG to agree to the management decision.

We will work with the Corporation in the coming weeks to resolve these issues and reach an agreed-to management decision for each of the remaining eleven recommendations.