United States Marshals Service Annual Financial Statement
Fiscal Year 2004

Audit Report No. 05-13
March 2005
Office of the Inspector General

This audit report contains the Annual Financial Statement of the United States Marshals Service (USMS) for the fiscal years (FY) ended September 30, 2004, and September 30, 2003. Under the direction of the Office of the Inspector General (OIG), Cotton & Company LLP (Cotton & Company) performed the USMS audit. The USMS received an unqualified opinion on its FY 2004 financial statements. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and results of the entity’s operations. The USMS also received an unqualified opinion on its FY 2003 financial statements (OIG Report No. 04 33). For FY 2004, the auditors reported four reportable conditions, two of which were material weaknesses. The auditors reported a material weakness in the segregation of duties in the financial systems environment. Specifically, inadequate segregation of duties was found within the USMS accounting system and with principal personnel in the Office of Finance. The auditors also reported a material weakness regarding improvements needed in the general and application control environments. Significant weaknesses were identified in the areas of segregation of duties, system software, access controls and service continuity. Furthermore, the auditors reported that the USMS needs to enhance its controls over the recording of property. The USMS’s controls over its construction work-in-process and property management lack sufficient oversight and quality assurance. In addition, the auditors determined that improvements were needed regarding the timeliness of financial reporting and reliability of the financial systems and statements. Although USMS made improvements to its financial reporting process, the auditors identified areas where additional improvements are still needed. In the Independent Auditor’s Report on Compliance, the auditors reported that the USMS’s financial management systems did not substantially comply with the requirements of the Federal Financial Management Improvement Act (FFMIA) of 1996. The auditors also reported non-compliance with regard to the Prompt Payment Act. The OIG reviewed Cotton & Company’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 USMS’s financial statements, conclusions about the effectiveness of internal control, conclusions on whether the USMS’s financial management systems substantially complied with FFMIA, or conclusions on compliance with laws and regulations. Cotton & Company is responsible for the attached auditor’s report dated October 22, 2004, and the conclusions expressed in the report. However, our review disclosed no instances where Cotton & Company did not comply, in all material respects, with generally accepted government auditing standards.