DHS OIG, OIG-16-27, Review of U.S. Customs and Border Protection's Fiscal Year 2015 Detailed Accounting Submission (2016)

Review of U.S. Customs and Border Protection's Fiscal Year 2015 Detailed Accounting Submission January 27, 2016 OIG-16-27 DHS OIG HIGHLIGHTS Review of U.S. Customs and Border Protection’s Fiscal Year 2015 Detailed Accounting Submission January 27, 2016 What We Found KPMG LLP, under contract with the Department of Homeland Security OIG, issued an Independent Accountants’ Report on U.S. Customs and Border Protection’s (CBP) Detailed Accounting Submission. CBP’s management prepared the Table of FY 2015 Drug Control Obligations and related disclosures to comply with the requirements of the ONDCP Circular, Accounting of Drug Control Funding and Performance Summary, dated January 18, 2013 (Circular). CBP management was unable to provide supporting documentation for the underlying assumptions used to calculate the total obligations reported in the Table for all Drug Resources by Budget Decision Unit and Function assumptions. As a result, KPMG was unable to complete their review procedures over those assumptions.

Except as noted above, nothing came to KPMG’s attention that caused them to believe that the FY 2015 Detailed Accounting Submission is not presented in conformity with the criteria set forth in the Circular. Why We Did This Review The Office of National Drug Control Policy’s (ONDCP) Circular, Accounting of Drug Control Funding and Performance Summary, requires National Drug Control Program agencies to submit to the ONDCP Director, not later than February 1 of each year, a detailed accounting of all funds expended for National Drug Control Program activities during the previous fiscal year. The Office of Inspector General (OIG) is required to conduct a review of the agency’s submission and provide a conclusion about the reliability of each assertion in the report. For Further Information: Contact our Office of Public Affairs at (202) 254-4100, or email us at [email protected] www.oig.dhs.gov OIG-16-27 OFFICE OF INSPECTOR GENERAL Department of Homeland Security Washington, DC 20528 / www.oig.dhs.gov MEMORANDUM FOR: Eugene H. Schied JAN 27 2016 FROM: Assistant Commissioner U.S. Customs and Border Protection Mark Bell )-1 J r;?e _ _Q_f Assistant Inspector General for Audits SUBJECT: Review of U.S. Customs and Border Protection's Fiscal Year 2015 Detailed Accounting Submission Attached for your information is our final report, Review of U.S. Customs and Border Protection's Fiscal Year 2015 Detailed Accounting Submission.

U.S. Customs and Border Protection's (CBP) management prepared the Table of FY 2015 Drug Control Obligations and related disclosures to comply with the requirements of the Office of National Drug Control Policy's Circular, Accounting of Drug Control Funding and Performance Summary, dated January 18, 2013. We contracted with the independent public accounting firm KPMG LLP (KPMG) to review CBP's Detailed Accounting Submission. KPMG is responsible for the attached Independent Accountants' Report, dated January 22, 2016, and the conclusions expressed in it. KPMG's report contains no recommendations.

Consistent with our responsibility under the Inspector General Act, we will provide copies of our report to congressional committees with oversight and appropriation responsibility over the Department of Homeland Security. We will post the report on our website for public dissemination. Please call me with any questions, or your staff may contact Maureen Duddy, Deputy Assistant Inspector General for Audits, at (202) 254-4100. Attachment www.oig.dhs.gov KPMG LLP Suite 12000 1801 K Street, NW Washington, DC 20006      ,QGHSHQGHQW$FFRXQWDQWV¶5HSRUW    $VVLVWDQW,QVSHFWRU*HQHUDOIRU$XGLWV 86'HSDUWPHQWRI+RPHODQG6HFXULW\   :HKDYHUHYLHZHGWKHDFFRPSDQ\LQJ'HWDLOHG$FFRXQWLQJ6XEPLVVLRQRIWKH86'HSDUWPHQWRI +RPHODQG6HFXULW\¶V '+6 &XVWRPVDQG%RUGHU3URWHFWLRQ &%3 IRUWKH\HDUHQGHG6HSWHPEHU &%3¶VPDQDJHPHQWLVUHVSRQVLEOHIRUWKH'HWDLOHG$FFRXQWLQJ6XEPLVVLRQ  2XUUHYLHZZDVFRQGXFWHGLQDFFRUGDQFHZLWKDWWHVWDWLRQVWDQGDUGVHVWDEOLVKHGE\WKH$PHULFDQ ,QVWLWXWHRI&HUWLILHG3XEOLF$FFRXQWDQWVDQGWKHVWDQGDUGVDSSOLFDEOHWRDWWHVWDWLRQHQJDJHPHQWV FRQWDLQHGLQGovernment Auditing StandardsLVVXHGE\WKH&RPSWUROOHU*HQHUDORIWKH8QLWHG 6WDWHV$UHYLHZLVVXEVWDQWLDOO\OHVVLQVFRSHWKDQDQH[DPLQDWLRQWKHREMHFWLYHRIZKLFKLVWKH H[SUHVVLRQRIDQRSLQLRQRQWKH3HUIRUPDQFH6XPPDU\5HSRUW$FFRUGLQJO\ZHGRQRWH[SUHVV VXFKDQRSLQLRQ  0DQDJHPHQWRI&%3SUHSDUHGWKH'HWDLOHG$FFRXQWLQJ6XEPLVVLRQWRFRPSO\ZLWKWKH UHTXLUHPHQWVRIWKH2IILFHRI1DWLRQDO'UXJ&RQWURO3ROLF\ 21'&3 &LUFXODUAccounting of Drug Control and Performance Summary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is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity. "  !  "  " "  
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 `&IHKGIM<&Q7GF`(9>>` Page2 1. Drug Methodology U.S. Customs and Border Protection (CBP) is a multi-mission agency that calculates obligations by budget decision unit and function, pursuant to an approved drug control funds calculation methodology. On the basis of past practice, six organizations within CBP. the Offices of Border Patrol (USBP), Field Operations (OFO), Information and Technology (OIT), Training and Development (OTO), Technology Innovation & Acquisition (OTIA), and Air and Marine (AMO), were provided with guidance on preparing submissions for FY 2015 annual reporting of drug control obligations.

USBP, OFO, OIT, OTO, OTIA, and AMO were asked to estimate what portions of their activities are related to drug enforcement. These estimates are based on the expert opinions of operational and programmatic staff from the six offices.

OTT.

OFO, USBP, and AMO attribute their resources to both intelligence and interdiction functions while OTIA and OTD attribute their resources solely to interdiction. The Drug Control Obligations table is based on actual obligations for each decision unit and organization named above. The obligation reports are generated by data reported in CBP's OHS-approved accounting system, Systems, Applications, and Products in Data Processing (SAP). SAP is a fully integrated Enterprise Resource Planning (ERP) system that CBP uses to record and report obligations.

Each organization uses SAP to report their actual annual obligations. All six organizations have specific missions and develop their own methodology for calculating their drug control activities and resources. Each organization multiplies its drug control percentages by its actual total obligations to calculate drug control obligations. U.S. BORDER PATROLCUSBP) USBP is responsible for controlling almost 6,000 miles of land borders between ports of entry with Canada and Mexico, and nearly 2, 100 miles of coastal waters surrounding the Florida Peninsula and Puerto Rico.

There were l 9,907 Border Patrol agents. at the close of FY 2015, assigned to the mission of detecting and apprehending illegal entrants between the ports-of-entry. These illegal entries include aliens, drug smugglers, potential terrorists, wanted criminals, and persons seeking to avoid inspection at the designated ports of entry due to their undocumented status. It has been determined that 15 percent of the total agent time nationwide is related to drug activities. This percentage was determined based on a review of the hours worked by agents, canine officers, and core personnel at various border check-points with narcotic-intensive activities.

Resources for USBP come from the S&E appropriation. Within the S&E appropriation. the resources for USBP come from the Border Security and Control between the Ports of Entry PPA. Of the 15 percent of total agent time related to drug activities, 3.5 percent of agents' efforts are related to intelligence and 96.5 percent are related to drug interdiction. These activities include staffing permanent border traffic checkpoints nationwide, including canine units trained in the detection of humans and certain illegal drugs that are concealed within cargo containers, truck trailers, passenger vehicles, and boats.

In addition, agents perfonn line watch functions in targeted border areas that are frequent entry points for the smuggling of drugs and people into the United States. OFFICE OF HELD OPERATIONS (OFO) OFO estimates that for FY 2015, there were 3,35i1 CBP officer (CBPO) full-time equivalents related to drug enforcement on enforcement teams. Anti-Terrorism Contraband Enforcement Teams (A-TCET) work closely with the Passenger Enforcement Rover Team (PERT) and Passenger Analytical Unit (PAU) teams to coordinate all enforcement activities. Although the primary mission of A-TCET teams is anti­ terrorism. they also focus on all types of contraband. including narcotics.

CBP estimates that 69 percent of the A-TCET is devoted to drug enforcement. The smuggling methodologies and their indicators are similar for both narcotics and anti-terrorism activities. OFO had 22.737 CBPOs in FY 2015, who, in addition to the interdiction of contraband and illegal drugs, enforce hundreds of laws and regulations of many other Federal government agencies. The other Federal agencies include, for example, the U.S. Fish and Wildlife Service, Bureau of Alcohol, Tobacco, Firearms, and Explosives, and Bureau of Export Administration, among many others.

CBP subject matter experts estimate that roughly 30 percent of these officers' time is devoted to drug-related activities. Tbe FY 2015 enacted budget also supports the funding for 2,000 additional CBPO's that were funded in the FY 2014 budget with two year funding. CBP uses a variety of Non-lntrusive Inspection (NII) systems and Radiation Detection Equipment (RDE) systems as part of its layered inspection strategy to achieve its primary mission of securing the Nation's borders and protecting America from the entry of dangerous people and goods while, at the same time. facilitating the flow of legitimate trade and travel across U.S. borders. It is estimated that 77 percent of the funding for Nll is associated with general contraband detection. which would include narcotics.

Multiple types of Nil systems and RDE are used to thoroughly and quickly inspect sea containers, rail cars, trucks, automobiles, pallets, and various packages and parcels for the presence of contraband without damaging the conveyance or its contents and without having to resort to more intrusive and time­ consuming manual inspections, such as unloading, drilling and dismantling. Significant numbers of NIT equipment are in use at 328 land border ports, airports, seaports, Border Patrol checkpoints, and international locations. NII technologies are viewed as force multipliers that enable CBP officers to examine or scan a larger portion of the stream of traffic while facilitating the flow of legitimate trade, cargo, and passengers. OFFICE OF INFORMATION AND TECHNOLOGY (OIT) OIT's budget supports the drug enforcement mission through the acquisition, support, and maintenance of technology, and mission critical targeting application systems.

Of OIT's spending, it is estimated that 10 percent each of Automated Targeting Systems (Passenger. Narcotics. and Anti-Terrorism) software application costs; TECS: and data center operations costs are in support of the drug mission. OFFICE OF TRAlNING AND DEVELOPMENT COTO) OTO calculates the portion of their budget attributable to drug control funding by issuing an annual data call for all projected National Training Plan (NTP) funded training courses to assess if courses contain any items related to drug enforcement material and activities. The curriculum of each course is reviewed and subject matter experts determine course hours delivered related to drug enforcement for this task.

If specific courses offered through the NTP contain drug enforcement related material, a specific percentage 1 Based upon a Field survey conducted in 2014. Page4 for that course is defined (hours related to drug enforcement training divided by the total number of course hours). Specific training programs identified include the canine training programs and basic, specialized, and advanced training for CBP officers and agents. OTD's day-to-day operational resources are attributed to drug enforcement activities at a rate of 20 percent.

OTO evaluated each office's mission statement and training development/delivery functions to determine the total weighted percentage of its drug enforcement activities.

OFFICE OF TECHNOLOGY INNOVATION & ACOUISITION - BORDER SECURITY FENCING.

INFRASTRUCTURE, AND TECHNOLOGY (OTJA) CBSFIT) Under OTIA, CBP is the lead agency within OHS for the development and deployment of border technology and tactical infrastructure to secure America's borders. This appropriation provides continued funding for the CBP Program Offices tasked with developing and installing technology and tactical infrastructure solutions, enabling a more effective and efficient method for controlling border security. TARS are fixed site, aerostat-based radar systems that provide air surveillance across the entire U.S.­ Mexico border. They are designed to detect compliant low-altitude aircraft and non-compliant low­ altitude aircraft attempting to smuggle narcotics or other contraband into the U.S. The TARS program bas assisted CBP with interdicting suspect aircraft for and is a critical component of CBP's bi-national narcotics and contraband interdiction operations with Mexico.

For this drug control estimate, BSFIT is using 98 percent of the Tethered Aerostat Radar System (TARS) program funding, IS percent of the funding from Development and Deployment, and 15 percent of remaining funding from Operations and Maintenance (minus TARS funding). This funding will be used on border technology and other technology systems that support drug control activities. OFFICE OF AIR & MARINE OPERATIONS AMO's core competencies are air and marine interdiction, air and marine law enforcement, and air domain security. In this capacity, AMO targets the conveyances that illegally transport narcotics, arms, and aliens across our borders and in the Source, Transit, and Arrival Zones. ln FY 2015, AMO P-3s flew 6,069.3 hours in drug control efforts which represent 81.6 percent of all AMO P-3 hours.

These hours were in support of Joint lnteragency Task Force-South (JIATF-S) in the Source and Transit Zones. AMO P-3's participated in the interdiction of 200,533 pounds of cocaine. This equates to 33 pounds of cocaine for every countemarcotic hour flown. CBP continues to deploy proven, effective surveillance technology tailored to the operational requirements along the highest trafficked areas of the southwest border.

During FY 2015, in support of the Joint Field Command and the South Texas Campaign Initiative, the Unmanned Aircraft Systems flew more than 5,502 hours in FY 20 IS contributing to the seizure of more than 74.273 pounds of narcotics with an estimated wholesale value of over $543 million. Since September 11, 200 I, AMO has steadily increased its support to counter-terrorism by developing a more cohesive and integrated response to national security needs, as well as placing more emphasis on illegal immigration. AMO is dedicating significant assets and personnel in support ofU.S./Mexico interdiction initiative, and in support of OB P's southwest border illegal alien intervention. Using tlight hours spent performing drug-related activities, AMO has determined that 84.3 percent of the budget resources that support AMO are considered to be drug-related.

Of the total flight hours flown by AMO, 19 percent were related to intelligence in FY 20 IS. Page 5 2. Methodology Modifications The drug control methodology for obligations used in FY 2015 remained the same as the methodology used in FY 2014 for the previously reported organizations. 3.

Material Weaknesses or Other Findings CBP contributed to the Departmental material weaknesses in the internal control area of IT Controls and System Functionality and to the Department significant deficiencies in the internal control areas of Budgetary Accounting, Entity-Level Controls (ELCs) and Custodial Revenue and Refunds and Drawback. We note the material weakness in IT and significant deficiencies in ELCs and Custodial Revenue and Refunds and Drawback are not relevant with respect to information contained in this report, as there is no information presented that is reliant upon information related to custodial revenues and refunds and drawback, or within the scope of the IT and ELCs testwork performed. In FY 2015, the Department remediated the Budgetary Accounting material weakness to a significant deficiency, as a result of OHS' progress in remediating control deficiencies identified across all components of the Department. The Budgetary Accounting significant deficiency assessed for OHS in FY 2015 was primarily driven by deficiencies in controls over quarterly validation of Undelivered Order balances identified across all components.

However, based upon the specific conditions cited in the report, we determined the aforementioned material weaknesses and significant deficiencies do not have a significant effect on the presentation of the FY 2015 drug-related obligations data, as none of the findings related to issues surrounding accuracy of obligations and expenditures. 4. Reprogrammings or Transfers During FY 2015, CBP had reports of transfers or reprogramming actions. However, these actions did not result in modification to the National Drug Control Program Budget.

5. Other Disclosures There are no other disclosures that CBP has determined are necessary to clarify any issues regarding the data reported under ONDCP Circular, Accounting of Drug Control Funding and Performance Summary. dated January 18, 2013.

B. Assertions I .

Obligations b y Budget Decision Unit Not Applicable - As a multi-mission agency, CBP is exempt from reporting under this section as noted in the ONDCP Circular, Accounting of Drug Control Funding and Performance Summary, Section 6(b)(I), dated January 18, 2013. 2. Drug Methodology CBP asserts that the methodology used to estimate drug enforcement related obligations is reasonable and accurate. The criteria associated with this assertion are as follows: a. Data The estimate of drug enforcement related obligations is based on the methodology described in section A. I above, and presents a fair and accurate picture of the CBP drug enforcement m1ss1on. _ _ Page6 b. Financial Systems Security Despite the IT general and application control weaknesses noted in section A.3, CBP's financial systems are capable of providing data that fairly represent, in all material respects, aggregate obligations.

The drug methodology described in section A. I above is used to estimate what portion of these obligations may reasonably be considered to be associated with drug enforcement related activities. 3. Application of Drug Methodology The methodology described in section A. I above was used to prepare the estimates contained in this report. 4.

Reprogrammings or Transfers Pursuant to 21 U.S.C. 1703 ( c) ( 4) (A), the ONDCP Circular on Budget Execution (revised January 18, 2013) prohibits agencies from submitting to Congress reprogramming or transfer requests that would result in a decrease or increase of $1 million or more in funding included in the National Drug Control Program budget without obtaining prior approval from the Director of National Drug Control Policy. During FY 2015, CBP had reports of transfers or reprogramming actions. However, these actions did not result in modification to the National Drug Control Program Budget. S. Fund Control Notices The Director of National Drug Control Policy did not issue a Fund Control Notice for CBP for FY 2015.

OFFICE OF INSPECTOR GENERAL

Department of Homeland Security Appendix A Report Distribution Department of Homeland Security Secretary Deputy Secretary Chief of Staff General Counsel Executive Secretary Director, GAO/OIG Liaison Office Assistant Secretary for Office of Policy Assistant Secretary for Office of Public Affairs Assistant Secretary for Office of Legislative Affairs U.S. Customs and Border Protection Commissioner Chief Financial Officer Audit Liaison Office of Management and Budget Chief, Homeland Security Branch DHS OIG Budget Examiner Congress Congressional Oversight and Appropriations Committees Office of National Drug Control Policy Associate Director for Management and Administration www.oig.dhs.gov OIG-16-27 ADDITIONAL INFORMATION AND COPIES To view this and any of our other reports, please visit our website at: www.oig.dhs.gov. For further information or questions, please contact Office of Inspector General Public Affairs at: [email protected]. Follow us on Twitter at: @dhsoig.

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