Report No. 99-05
Office of the Inspector General
COMMENTARY AND SUMMARY
The U.S. Department of Justice, under the direction of the Attorney General, is charged with protecting society against criminals and subversion; upholding the civil rights of all Americans; ensuring healthy competition of business in our free enterprise system; safeguarding the consumer; enforcing environmental, drug, immigration, and naturalization laws; and representing the American people in all legal matters involving the U.S. Government. The Department also plays a significant role in protecting citizens through its efforts for effective law enforcement, crime prevention, crime detection, and prosecution and rehabilitation of offenders. In FY 1998, the Department had over 121,300 employees and funding of over $20 billion.
This audit report contains the Annual Financial Statement of the Department of Justice for the fiscal year ended September 30, 1998. The audit was performed by PricewaterhouseCoopers LLP and resulted in a disclaimer of opinion on the FY 1998 consolidated balance sheet and the related consolidated statements of net costs and changes in net position, and the related combined statements of budgetary resources, financing, and custodial activity. Because of the following deficiencies, the auditors were unable to obtain sufficient evidence about certain account balances and disclosures:
- The Immigration and Naturalization Service (INS) has not established effective internal controls to ensure that accounting records and relevant documentation are maintained to support certain balances and related disclosures contained in INS' financial statements. The INS also lacks effective internal controls to ensure that transactions are accurately and completely recorded. The INS' reported total assets of $2.2 billion and total costs of $3.7 billion constitute 8.7 percent of the Department's combined total assets at
September 30, 1998, and 18.1 percent of combined total costs for the year then ended.
- Management of the Offices, Boards and Divisions (OBDs) was not able to demonstrate that advances made to state and local law enforcement agencies as part of the Community Oriented Policing Services Program were properly reported. OBDs' advances account balance represents $432.3 million (38.1%) of the Department's combined advances account balance.
- Because of weaknesses in the Assets Forfeiture Fund and Seized Asset Deposit Fund's (AFF/SADF) financial accounting and disclosure of seized and forfeited property, the auditors could not determine whether forfeited property and related deferred revenue of $127.8 million and the related seized and forfeited activity disclosed in the notes were fairly stated. These amounts represent substantially all of the Department's seized and forfeited property account balances.
- Because of weaknesses in the processing and recording of accounts payable and related unexpended appropriations at the U.S. Marshals Service (USMS) and the OBDs and accounts payable and unliquidated obligations at the AFF/SADF, the auditors could not determine whether accounts payable balances of $1.4 billion (48.5%) and related costs, unexpended appropriations of $3.2 billion (26.0%), and unliquidated obligations were fairly stated.
- The Federal Prison System (FPS) was not able to provide support for $100 million of transferred financing sources reflected in the statements of changes in net position and financing within the timeline established by the Department for preparing component financial statements. As a result, the FPS' auditors were not able to determine the effect of this transfer on these statements. The FPS' auditors reported that these amounts appeared to have been created during the resolution of previous audit findings with respect to unrecorded real property and related depreciation.
- Amounts reported in components' balance sheets as of September 30, 1997, enter into the determination of FY 1998 net costs, changes in net position, budgetary resources, and the reconciliation of net costs to budgetary resources. It was not practicable for auditors of the INS, Drug Enforcement Administration (DEA), Office of Justice Programs (OJP), USMS, AFF/SADF, and the OBDs to extend audit procedures during the audit of the components' FY 1998 financial statements to satisfy themselves as to opening balances. As a result, auditors were unable to apply sufficient audit procedures to determine whether amounts reported in the components' FY 1998 statements of net costs, changes in net position, budgetary resources, and financing were fairly stated.
The following table depicts the audit results for the Department consolidated audit as well as for the nine individual component audits for FY 1998. The Department has made progress towards an unqualified opinion, although improvements are still needed in certain areas.