Drug Enforcement Administration Annual Financial Statement
Fiscal Year 1999

Report No. 00-22
September 2000
Office of the Inspector General

The Drug Enforcement Administration (DEA) is the lead Federal agency responsible for overall drug enforcement strategy and programs. Its mission is to enforce the controlled substance laws and regulations, disrupt the production and distribution of illegal drugs worldwide, and support non-enforcement programs aimed at reducing the availability of illicit substances. In FY 1999, the DEA had over 8,700 employees located in 56 countries and an annual budget of approximately $1.45 billion.

This audit report contains the Annual Financial Statement of the DEA for the fiscal year ended September 30, 1999. The audit was performed by KPMG LLP and resulted in an unqualified opinion. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and results of operating activity of the entity. For FY 1998, the DEA received an unqualified opinion on its balance sheet and a disclaimer of opinion on the other financial statements (Office of the Inspector General Report 99-25).

Although the DEA received an unqualified opinion, significant internal control weaknesses were reported that warrant management's attention. From FY 1998 to FY 1999, the overall number of material weaknesses increased from one to four. Previously identified issues in the reconciliation of the DEA's Fund Balance with Treasury remain. Additional material weaknesses were reported in accounting for property and equipment, the financial reporting process, and controls over information systems.

The auditors also noted six other reportable conditions. Weaknesses were identified in the DEA's controls over open obligations certifications, and processing and oversight of invoices. The auditors found the DEA did not record an operating inventory and concluded that improvements are still needed in plans for information system service continuity. The auditors also reported that the DEA does not have a reliable system in place for financial statement reporting purposes to accurately and completely report bulk drugs and funds held for evidence.

In its report on Compliance with Laws and Regulations, the auditors reported that the DEA's financial management systems did not substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996. The auditors specifically cited issues in the DEA's financial reporting process and internal controls over the entity-wide security program and system access as the causes for noncompliance.

Similar to the prior year, DEA's Annual Financial Statement consists of a balance sheet, statement of net cost, statement of changes in net position, statement of budgetary resources, and statement of financing. However, comparative financial statements were not required this year and are therefore not presented.