DHS OIG, OIG-06-25, Independent Review of The U.S. Immigration and Customs Enforcement Reporting of FY 2005, Drug Control Funds (2006)

DEPARTMENT OF HOMELAND SECURITY G

Office of Inspector General Letter Report: Independent Review of The U.S. Immigration and Customs Enforcement Reporting of FY 2005 Drug Control Funds Office of Audits OIG-06-25 1 March 2006 Office of Inspector General U.S. Department of Homeland Security Washington, DC 20528 March 20, 2006 MEMORANDUM FOR: Julie L. Myers Assistant U.S. Immigration and Customs Enforcement Secretary FROM: SUBJECT: Richard L. Skinner Inspector General Independent Review of the U.S. Immigration and Customs Enforcement Reporting of FY 2005 Drug Control Funds The Office of National Drug Control Policy (ONDCP) requires U.S. Immigration and Customs Enforcement (ICE) to submit an annual Detailed Accounting Submission (Submission), as authorized by 21 U.S.C. § 1704(d) and ONDCP Circular, Drug Control Accounting (Circular), April 18, 2003, to ONDCP. The Submission is included in this report as Appendix A, and the Circular is included as Appendix B. The Submission is the responsibility of ICE’s management. We have reviewed the reasonableness and accuracy of the drug methodology used to calculate obligations of prior year budgetary resources by function and by budget decision unit according to the criteria specified in Section 6(b) of the Circular; and whether the drug methodology disclosed in the Submission was the actual methodology used to generate the table required by Section 6(a) of the Circular. Drug methodology means the process by which ICE calculates its drug-related financial statistics according to ONDCP requirements.

Our review was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on the reasonableness and accuracy of the drug methodology used to calculate obligations of prior year budgetary resources by function and by budget decision unit according to the criteria specified in Section 6(b) of the Circular; and whether the drug methodology disclosed in the Submission was the actual methodology used to generate the table required by Section 6(a) of the Circular. Accordingly, we do not express such an opinion. 1 Our review disclosed that the Independent Auditors’ Report1 for the Department of Homeland Security’s (DHS) balance sheet as of September 30, 2005, identified several material weaknesses to which ICE directly contributed.

Those material weaknesses were identified in the areas of financial management oversight; financial reporting; undelivered orders, accounts payable, and disbursements; budgetary accounting; fund balance with Treasury; and intragovernmental and intradepartmental balances. Material weaknesses are reportable conditions in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements, in amounts that would be material in relation to the financial statements being audited, may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Reportable conditions are matters coming to the auditors’ attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in the auditors’ judgment, could adversely affect DHS’ ability to record, process, summarize, and report financial data consistent with the assertions by management in the financial statements. The material weaknesses cited in this paragraph deviate from the criteria that financial systems supporting the drug methodology should yield data that fairly present, in all material respects, aggregate obligations from which drug-related obligation estimates are derived.

We did not review, as required by the Circular, whether data presented are associated with obligations against a financial plan that, if revised during the fiscal year, properly reflects those changes, including ONDCP’s approval of reprogrammings or transfers affecting drug-related resources in excess of $5 million. Further, we did not review whether the data presented are associated with obligations against a financial plan that fully complied with all Fund Control Notices issued by the ONDCP Director under 21 U.S.C. § 1703(f) and Section 8 of the ONDCP Circular, Budget Execution. We did not review these matters because of incomplete criteria against which to evaluate the subject matter, in terms of measurability and applicability for multi-mission bureaus, of which ICE is one. We recommend that ICE, in conjunction with DHS, obtain formal guidance from ONDCP and legal counsel, as appropriate, on appropriate and suitable criteria to evaluate these matters for multi-mission bureaus.

Based on our review, except for the effects, if any, of the material weaknesses discussed in paragraph four of this report, nothing came to our attention that caused us to believe that the drug methodology used to calculate obligations of prior year budgetary resources by function and by budget decision unit is not reasonable and accurate, in all material respects, in conformity with criteria specified in the Circular, and that the drug methodology disclosed in the Submission was not the actual methodology used to generate the table required by the Circular, in all material respects. We provided a copy of this report in draft to ICE. ICE concurred with the findings. This report is intended solely for the information and use of ICE, DHS, ONDCP, and the U.S. Congress, and is not intended to be and should not be used by anyone other than these specified parties.

1 See DHS Office of Inspector General Report Number OIG-06-09, November 2005. KPMG LLP, an independent public accounting firm, performed the audit of DHS’ balance sheet as of September 30, 2005. 2 Should you have any questions concerning this review, please call me, or your staff may contact David M. Zavada, Assistant Inspector General for Audits, at (202) 254-4100. 3 DISTRIBUTION DHS Secretary Deputy Secretary Executive Secretary General Counsel Chief of Staff Under Secretary for Management Assistant Secretary for Public Affairs Assistant Secretary for Policy Assistant Secretary for Legislative Affairs Acting Chief Financial Officer Chief Security Officer DHS Audit Liaison ICE Assistant Secretary Chief Financial Officer ICE Audit Liaison Office of National Drug and Control Policy Associate Director for Planning and Budget Office of Management and Budget Chief, Homeland Security Branch DHS OIG Budget Examiner Congress Congressional Oversight and Appropriations Committees as appropriate 4 Appendix A 5 6 7 8 9 Appendix B 10 11 12 13 14 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 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 Department of Homeland Security, Washington, DC 20528, Attn: Office of Inspector General, Investigations Division – Hotline. The OIG seeks to protect the identity of each writer and caller.