DHS OIG, OIG-07-19, Independent Auditors' Report On CBP's FY 2006 Consolidated Financial Statements, (2006)

DEPARTMENT OF HOMELAND SECURITY

Office of Inspector General Independent Auditors’ Report On CBP’s FY 2006 Consolidated Financial Statements (Excerpts from the CBP Performance and Accountability Report) OIG-07-19 December 2006 Office of Inspector General U.S. Department of Homeland Security Washington, DC 20528 November 15, 2006 Preface The Department of Homeland Security (DHS) Office of Inspector General (OIG) was established by the Homeland Security Act of 2002 (Public Law 107-296) by amendment to the Inspector General Act of 1978. This is one of a series of audit, inspection, and special reports published as part of our DHS oversight responsibilities to promote economy, effectiveness, and efficiency within the department. The attached report represents Financial Information excerpted from CBP’s Performance and Accountability Report (PAR) and the results of the CBP consolidated balance sheet as of and for the year ending September 30, 2006 and 2005, and the related consolidated statement of net cost, changes in net position, financing, and custodial activity, and the combined statement of budgetary resources (hereinafter referred to as “consolidated financial statements”) for the year ended September 30, 2006. We contracted with the independent public accounting firm KPMG LLP (KPMG) to perform the audit.

The contract required that KPMG perform its audit according to generally accepted government auditing standards and guidance from the Office of Management and Budget and the Government Accountability Office. KPMG issued an unqualified opinion on CBP’s consolidated financial statements for FY 2006. KPMG’s report identified two material weaknesses, two other reportable conditions, and instances of non-compliance with three laws and regulations. KPMG is responsible for the attached auditor’s report dated November 15, 2006, and the conclusions expressed in the report.

We do not express opinions on CBP’s consolidated financial statements or internal control or conclusions on compliance with laws and regulations. The recommendations herein have been discussed in draft with those responsible for implementation. It is our hope that this report will result in more effective, efficient, and economical operations. We express our appreciation to all of those who contributed to the preparation of this report.

Richard Inspector L. Skinner General U.S. DEPARTMENT OF HOMELAND SECURITY Excerpts from the CBP FY 2006 Performance and Accountability Report Financial Section Table of Contents Description ___Page Number Department of Homeland Security, Office of Inspector General Transmittal Letter………………………………………………….……………..1-2 Independent Auditors’ Report……………………………………………………….1-5 Appendix I – Material Weaknesses in Internal Control………………………….I.1-4 Appendix II – Other Reportable Conditions in Internal Control…….….…… II.1-10 Appendix III – Compliance and Other Matters………………………….………III.1-2 Appendix IV – Status of Prior Year Findings……………………………………IV.1-2 Management Response…………………………………………….……Unnumbered Financial Statements…………… ……………………………………………..…62-70 Notes to Financial Statements……………. …………………………………...71-103 Required Supplementary Information…………….…………………………..104-106 Other Accompanying Information (unaudited)……….……………………...107-112 Appendix Report Distribution Department of Homeland Security Secretary Deputy Secretary Executive Secretariat Chief of Staff Deputy Chief of Staff General Counsel Under Secretary, Management Chief Financial Officer Chief Information Officer Assistant Secretary for Public Affairs Assistant Secretary for Policy Assistant Secretary for Legislative and Intergovernmental Affairs Chief Security Officer Chief Privacy Officer Director, GAO/OIG Liaison Office Customs and Border Protection Commissioner, Customs and Border Protection Chief Financial Officer Chief Information Officer Office of Management and Budget Chief, Homeland Security Branch DHS OIG Program Examiner Congress Congressional Oversight and Appropriations Committees, as appropriate Additional Information and Copies To obtain additional copies of this report, call the Office of Inspector General (OIG) at (202) 254-4100, fax your request to (202) 254-4285, or visit the OIG web site at www.dhs.gov/oig. OIG Hotline To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal or noncriminal misconduct relative to department programs or operations, call the OIG Hotline at 1-800-323-8603; write to DHS Office of Inspector General/MAIL STOP 2600, Attention: Office of Investigations – Hotline, 245 Murray Drive, SW, Building 410, Washington, DC 20528; fax the complaint to (202) 254-4292; or email [email protected]. The OIG seeks to protect the identity of each writer and caller.