This audit report contains the Annual Financial Statement of the Drug Enforcement Administration (DEA) for the fiscal years (FY) ended September 30, 2007, and September 30, 2006. Under the direction of the Office of the Inspector General (OIG), KPMG LLP (KPMG) performed the DEA audit. The audit resulted in an unqualified opinion on the FY 2007 financial statements. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and the results of the entity’s operations in conformity with generally accepted accounting principles in the United States. For FY 2006, the DEA also received an unqualified opinion on its financial statements (OIG Report No. 07-11).

In their Independent Auditors’ Report on Internal Control, the auditors identified one significant deficiency for FY 2007. The auditors reported that improvements are needed in the DEA’s financial management systems’ general controls in the areas of configuration management, password management, and patch management. In their Report on Compliance and Other Matters, the auditors reported no issues, including no instances of noncompliance with the requirements of the Federal Financial Management Improvement Act (FFMIA) of 1996.

The OIG reviewed KPMG’s reports and related documentation and made necessary inquiries 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 DEA’s financial statements, conclusions about the effectiveness of internal control, conclusions on whether the DEA’s financial management systems substantially complied with FFMIA, or conclusions on compliance with laws and regulations. KPMG is responsible for the attached auditors’ reports dated October 25, 2007, and the conclusions expressed in the reports. However, our review disclosed no instances where KPMG did not comply, in all material respects, with generally accepted government auditing standards.