Our audit was performed in accordance with the performance audit standards specified in the General Accounting Office's, Government Auditing Standards, 1994 Revision (Yellow Book) and Standards for Consulting Services issued by the American Institute of Certified Public Accountants.

We were originally engaged to perform a performance audit of the expenditures billed by the INS to the EO for the fiscal years 1997 through 2000. The objective of the audit was to determine whether the amounts billed by the INS to the EO were in accordance with established criteria, mainly that costs were incurred for matters relating to OCDETF investigations. As a result of our preliminary findings, the EO requested, in January 2003, that we expand our work to include fiscal years 2001 and 2002. The scope of the work we had been engaged to perform as compared to the testing that we were able to complete with the documentation provided by the INS is shown in Exhibit No. 7 below.

As the table depicts, we were unable to perform testing relating to salaries and benefits in fiscal years 1997 and 1998. In accordance with INS's record retention policies, the monthly investigation time reports which we used to determine whether investigation time was charged to non-OCDETF related matters are not retained more than three years in accordance with INS policy as stated by INS officials. We were also not able to complete our testing on the fiscal year 2002 other direct costs because the INS had informed us that errors in calculating the amount of reimbursable costs were identified and the fiscal year 2002 billings were being revised. The INS was not able to provide us with documentation to support the revisions prior to the issuance of this draft report.

We segregated our work into two distinct phases, a survey phase where we gained an understanding of INS's participation in the OCDETF Program and where we developed our audit plan, and a verification phase where we executed the audit plan developed during the survey phase.

During the survey phase, we confirmed with the OIG, INS management, and the EO the objectives of the engagement, the availability of Department personnel and documents needed to perform our testing, and the internal controls designed to ensure costs incurred and billed by the INS to the EO were related to OCDETF investigations. During this phase we:

• Reviewed the General Accounting Office's Report No. GAO 01-78, Illegal Aliens - INS Participation in Antigang Task Forces in Los Angeles, and The Organized Crime Drug Enforcement Task Force Program Guidelines, dated November 1997,¹⁴ to assess the impact of these documents on our performance audit and to assist in the development of audit procedures.

• Interviewed management of the INS and EO at their respective Washington, D.C. offices, and we interviewed OCDETF regional coordinators to document the key controls and processes in place to identify, monitor, and accumulate costs associated with OCDETF investigations. We focused our inquiries on investigation time reporting, payroll timekeeping, coding of OCDETF costs, management review and approvals, and billing procedures.

• Performed a site-visit to a local INS district office to gain an understanding of the INS controls and processes at the district office level.

• Selected a non-representative sample of 78 OCDETF dedicated agents and selected one fiscal year quarter for each agent. We then requested each agent's monthly investigation time report for that quarter and determined whether the agent reported any non-OCDETF related investigation time.

• Attempted to select a sample of other direct costs billed to the EO to determine whether the cost was incurred for an OCDETF related investigation; however, the INS was not able to provide system-generated reports or other documentation that listed all of the obligations that supported the amounts billed to EO prior to completion of the survey phase.

• Held meetings with the OIG, INS officials, and the EO to discuss the results of our procedures performed during the survey phase and the effect on our planned approach during the verification phase of the audit.

• Provided a summary of the results of the procedures performed during the survey phase.

A key step in the survey phase was the development of an audit program that outlined the procedures we would perform in the verification phase to test whether costs incurred by the INS were for OCDETF investigations. The following procedures performed during the verification phase were discussed with the OIG, INS management, and the EO before any procedures were initiated:

• For each fiscal year, we selected the INS OCDETF dedicated agents that we identified during the survey phase as having reported non-OCDETF investigation time on monthly investigation time reports. Using a random number generator, we then selected an additional 30 INS OCDETF dedicated agents for total test populations of 43 to 51 agents out of a total population of 105 to 114 dedicated agents each fiscal year.

• For each agent selected, we obtained the agent's monthly investigation time reports for the entire fiscal year and determined whether the agent had reported any non-OCDETF related investigation time. We then calculated the percentage of non-OCDETF investigation time and the percentage of unsupported time for each monthly investigative time report that was not provided (see Appendix II).

• We obtained payroll reports from INS's Finance Center that listed the total full-time regular pay (sub-object classification code 1130)¹⁵ for all INS personnel who had been assigned to INS program code 1233, OCDETF Investigations. For each fiscal year, we compared the total amount reported as full-time regular pay in the payroll system reports to INS's FACS/FFMS Report for sub-object classification code 1130 and noted differences (FACS/FFMS Reports were used by the INS to support the invoices sent to the EO). However, we concluded these differences were immaterial and deemed the amounts reported in the payroll system to be reasonable for purposes of our testing.¹⁶

• For each INS agent selected for testing, we obtained the amount of full-time regular pay (sub-object classification code 1130) and multiplied this amount by the percentage of non-OCDETF investigation time and unsupported time (see Appendix III). We separated the INS agents selected with certainty from the INS agents we selected at random and calculated the percentage of non-OCDETF and unsupported costs for each of these two categories.

• Using the percentage of non-OCDETF costs for INS agents selected at random as calculated in Appendix III, we applied this percentage to the total full-time regular pay for all INS OCDETF dedicated agents except for the following amounts: (1) the full-time regular pay for exempt personnel such as OCDETF regional coordinators, (2) the full-time regular pay for INS agents selected with certainty, and (3) amounts estimated to be unsupported because monthly investigation time reports were not provided. This calculation provided the projected non-OCDETF full-time regular payroll costs for the portion of the population of INS OCDETF dedicated agents subject to random selection (see Appendix IV).

• The projected non-OCDETF full-time regular payroll costs calculated in the prior step was added to the non-OCDETF costs of INS OCDETF dedicated agents we selected with certainty. This combined total was divided by the total full-time regular payroll costs for both populations to arrive at a weighted average non-OCDETF cost rate for the entire population of dedicated agents' full-time regular pay (see Appendix IV).

• Except for fiscal year 2002, the weighted average non-OCDETF cost rate for the entire population of dedicated agents' full-time regular pay was applied against all of the salary and benefit amounts billed by the INS to the EO, less exempt and unsupported amounts, to arrive at a total projected non-OCDETF salary and benefit cost (see Appendix V).

For fiscal year 2002, the INS provided the EO with detailed billings of the salary and benefit costs for each agent; accordingly we modified our procedures slightly from those performed for fiscal years 1999 through 2001. Exhibit No. 8 depicts our calculation of fiscal year 2002 non-OCDETF related salary and benefit costs.

As shown above, fiscal year 2002 non-OCDETF costs were calculated on the total salary and related benefits for each agent, not on the full-time regular pay. As a result, we did not have to apply a weighted average non-OCDETF cost rate as was done in the fiscal years 1999 through 2001.

With respect to other direct costs, we selected a non-representative sample of amounts listed in certain sub-object classification codes obtained from INS FACS Reports that supported the billings to the EO in various quarters of fiscal years 1997 through 2001. The criteria used for judgmentally selecting an amount for testing was: (1) the amount of the sub-object classification code billed to the EO was material for that quarter, and/or (2) the sub-object classification was generic in nature and could represent costs for non-OCDETF related investigations (e.g., miscellaneous supplies, auto transportation, etc.).

We obtained system-generated schedules from the INS that identified all the obligations that comprised the sub-object classification codes we selected from INS's FACS Reports. Next we selected 70 individual obligations that were either large dollar amounts or potential duplicate obligations to perform our other direct cost testing. We then requested obligation documents and invoices or receiving reports from the INS that evidenced the goods and services were actually received by the INS, and that they were for an OCDETF related investigation or program purpose (see Appendix VI).

14. The Program Guidelines were subsequently revised in July 2002.
15. Sub-object classification code 1130, Full-Time Permanent Appointment - Regular pay for the prescribed administrative workweek of 40 hours (or alternate work schedule pay period of 80 hours), under permanent appointment. This factor was selected for testing because it is present for all employees in every pay period and generally represents the largest amount of the total costs incurred by the INS.
16. As previously discussed, all obligations and expenditures were recorded in FACS/FFMS at the transaction level, except for salary and related benefit costs. The transaction level salary and benefit cost detail was recorded in the payroll system, which produced summary level entries that were then recorded in FACS/FFMS.