Drug Enforcement Administration
Annual Financial Statement
Fiscal Year 2001

Report No. 02-40
September 2002
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 fiscal year (FY) 2001, the DEA had approximately 8,700 employees located in 56 countries and a budget of approximately $1.47 billion.

This audit report contains the Annual Financial Statement of the DEA for the fiscal years ended September 30, 2001 and September 30, 2000. Under the direction of the Office of the Inspector General (OIG), the audit was performed by KPMG LLP and resulted in an unqualified opinion for FY 2001. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and the results of its operations. For FY 2000, the DEA also received an unqualified opinion on its financial statements (OIG Report No. 01-28).

Although the DEA received an unqualified opinion on its financial statements, significant weaknesses in internal controls remain. Four material weaknesses and one reportable condition were identified. All the material weaknesses are repeat issues previously cited in the FY 2000 audit. Problems continue to exist in the DEA's ability to reconcile its fund balance with Treasury and its financial reporting process, and improvements are still needed in controls over information systems and the status of obligated funds. 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 as a result of the material weaknesses in internal controls.

The OIG is particularly concerned about the material weakness in status of obligated funds. This year the condition was expanded to include an issue about the methodology used to develop the accounts payable balance at year-end. With the accelerated reporting deadlines imposed by the Department and the Office of Management and Budget, the DEA must improve this methodology and ensure personnel outside the finance office are involved in the process. The DEA must also consider the use of system generated data as an alternative to labor intensive manual processes.

Progress has been made in correcting some of the known weaknesses. The unreconciled difference in the DEA's Fund Balance with Treasury dropped by $31.4 million from the $54.1 difference reported in FY 2000. The DEA has also made significant progress in paying bills more timely, and thus also reduced the amount of prompt payment penalty interest incurred.