Federal Bureau of Prisons Annual Financial Statement
Fiscal Year 2003

Report No. 04-24
June 2004
Office of the Inspector General

Commentary and Summary

This audit report contains the financial statements of the Federal Bureau of Prisons (BOP) for the fiscal years ended September 30, 2003 and September 30, 2002. Under the direction of the Office of the Inspector General (OIG), PricewaterhouseCoopers LLP (PwC) performed the audit, which resulted in an unqualified opinion on the FY 2003 financial statements. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and results of operations of the entity. The FY 2002 audit also resulted in an unqualified opinion (OIG Report No. 03 28).

PwC also issued reports on internal control and compliance with applicable laws and regulations. The Auditors' Report on Internal Control identified two reportable conditions, which were similar to the two issues reported in the FY 2002 audit. The first reportable condition related to the need for improvements in BOP's policies, procedures, and accounting for obligations. During interim testing, the auditors identified errors in the accounting for obligations and recording of accruals. In the second reportable condition the auditors noted that BOP's information security program management and controls needed improvement. PwC identified weaknesses in application software development and change control activity. The BOP made progress in correcting the prior year findings but additional controls need to be implemented to provide accurate financial information throughout the fiscal year and to secure the data in their financial systems. There were no compliance with laws and regulations issues reported.

The OIG reviewed PwC's report and related documentation and inquired of its representatives. Our review, as differentiated from an audit in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, an opinion on the Bureau of Prisons' financial statements, conclusions about the effectiveness of internal control, or conclusions on compliance with laws and regulations. PwC is responsible for the attached auditor's reports dated November 14, 2003 and the conclusions expressed in the reports. However, our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.