Offices, Boards and Divisions Annual Financial Statement
Fiscal Year 2003

Report No. 04-27
July 2004
Office of the Inspector General

Commentary and Summary

This audit report contains the Annual Financial Statement for the Offices, Boards, and Divisions (OBDs) for the fiscal years ended September 30, 2003, and September 30, 2002. The OBDs are a reporting entity within the U.S. Department of Justice (DOJ). The OBDs consist of the U.S. Attorneys, U.S. Trustees, Office of Community Oriented Policing Services, Executive Office for Immigration Review, Legal Divisions, and general administration offices.

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 OBDs also received an unqualified opinion on the FY 2002 financial statements (OIG Audit Report 03-31).

The opinion in FY 2003, however, came at a tremendous cost and effort because many of the OBDs do not report complete or accurate accrual-based financial data throughout the year, but only at year-end as part of the financial statement process. In addition, there were difficulties with the OBDs preparing its financial statements timely and in accordance with generally accepted accounting principles. Furthermore, the lack of integration between the Financial Management Information System and some of the OBDs' information systems that support the financial statement preparation contributes to errors in the processing of some of the OBDs' transactions. As a consequence of these long-standing weaknesses, the OBDs' financial statements were not finalized until almost two months after the Department's requirement for final, audited financial statements.

To ensure accurate, timely financial information is continually available, there must be effective controls in place that are enforced and monitored throughout the year. This will require changes in the OBDs' financial management processes and the full participation of the OBDs' financial and program managers, including program, budget, and administrative offices. We are concerned that without these fundamental changes, the OBDs will not be able to meet the Department's accelerated reporting dates for FY 2004. In order for the OBDs to meet these accelerated dates, the OBDs will have to prepare the financial statements almost three months earlier than it did in FY 2003.

The auditors' Report on Internal Control identified one material weakness and one reportable condition in FY 2003. This is the same number as reported in FY 2002, although the reportable condition reported in FY 2002 was corrected and replaced with a new reportable condition in FY 2003 (both of these reportable conditions related to computer security). The material weakness was much more serious than in past years because of the financial control issues discussed in the previous two paragraphs. The reportable condition relates to security weaknesses with controls over the U.S. Trustees' Automated Case Management System. These weaknesses could compromise the security and reliability of financial or program data.

In the FY 2003 Report on Compliance with Laws and Regulations, the auditors concluded that the OBDs' financial management system did not substantially comply with applicable federal accounting standards as required by the Federal Financial Management Improvement Act. In addition, the auditors noted non-compliance with OMB Circular No. A-11, Preparation, Submission and Execution of the Budget, regarding the proper recording of obligations and unfilled customer orders.

The OIG reviewed PwC's report 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 OBDs' financial statements, conclusions about the effectiveness of internal control, or conclusions on compliance with laws and regulations. PwC is responsible for the attached auditors' report dated January 14, 2004, and the conclusions expressed in the report. However, our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.