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Semiannual Report to Congress

April 1, 2001 – September 30, 2001
Office of the Inspector General


THE AUDIT DIVISION

The Audit Division (Audit) audits Department organizations, programs, functions, computer technology and security systems, and financial statements. Audit also conducts or oversees external audits of expenditures made under Department contracts, grants, and other agreements. Audits are conducted in accordance with the Comptroller General’s Government Auditing Standards and related professional auditing standards. Audit produces a wide variety of products designed to provide timely notification to Department management of issues that need attention.

Audit works with Department management to develop recommendations for corrective actions that will resolve identified weaknesses. By doing so, Audit remains responsive to its customers and promotes more efficient and effective Department operations. During the course of regularly scheduled work, Audit also lends fiscal and programmatic expertise to Department components.

Audit has field offices in Atlanta, Chicago, Dallas, Denver, Philadelphia, San Francisco, and Washington, DC. The Financial Statement Audit Office and Computer Security and Information Technology Audit Office are also located in Washington, DC. Audit Headquarters consists of the immediate office of the AIG, the Office of Operations, the Office of Policy and Planning, and an Advanced Audit Techniques Group.

The field offices’ geographic coverage is indicated on the map below. The San Francisco office also covers Alaska, Hawaii, Guam, the Northern Mariana Islands, and American Samoa, and the Atlanta office also covers Puerto Rico and the U.S. Virgin Islands.

map of United States showing field offices’ geographic coverage: San Francisco, Denver, Dallas, Chicago, Atlanta, Washington D.C., Philadelphia

During this reporting period, Audit issued 240 audit reports containing more than $47 million in questioned costs and $15 million in funds to better use and made 382 recommendations for management improvement. Specifically, Audit issued 18 internal reports of programs funded at more than $115 million; 31 external reports of contracts, grants, and other agreements funded at more than $131 million; 97 audits of bankruptcy trustees with responsibility for funds of more than $239 million; and 94 Single Audit Act audits. Audit also issued six Management Improvement Memoranda, two Notifications of Irregularity, one Technical Assistance Memorandum, one Investigative Assistance memorandum, and ten Management Letter Transmittal Memoranda.

Significant Audit Products

The INS’s Automated I-94 System

According to the INS, “overstays” – nonimmigrants who do not leave the United States when their authorized stays expire – represent about 40 percent of the estimated 6 million or more illegal immigrants currently residing in the United States. The Department’s FY 1999 Annual Accountability Report, which listed the monitoring of overstays as a management challenge, stated that the collection of automated arrival and departure records would help ensure complete and reliable data on overstays..

In 1995, in response to congressional requirements, the INS began developing a system to automate the processing of airline passengers’ I-94 forms, the forms INS uses to collect arrival and departure data. We audited the design and implementation of the INS’s Automated I-94 System and found that the INS has not properly managed the project. As a result, despite having spent $31.2 million on the system from FY 1996 to FY 2000, the INS (1) does not have clear evidence that the system meets its intended goal, (2) has won the cooperation of only two airlines, (3) is operating the system at only four airports, and (4) must modify the system to achieve its intended uses.

INS estimates that an additional $57 million will be needed for FY 2001 through FY 2005 to complete the system. These projections include development, equipment, and operations and maintenance costs. As a result of our concerns and the amount of funding needed to complete the system, we made a series of recommendations to help ensure that the INS rigorously analyzes the costs, benefits, risks, and performance measures of the Automated I-94 System before proceeding with further expenditures or implementation.

In response to our audit, the INS said it plans to conduct a cost-benefit analysis prior to any additional expenditure on the Automated I-94 System. If the INS decides to proceed with the project, the INS said it will also complete the other corrective actions recommended in our report.

Computer Security Audits

During this reporting period, Audit completed a number of computer security audits. We provided management with details about the nature of any deficiencies uncovered in the audits and recommended appropriate corrective or remedial actions.

The above audit reports are not publicly available because disclosure could compromise data processed by the Department’s computer systems.

The Combined DNA Index System

CODIS is a national information repository maintained by the FBI that permits the storing, maintaining, tracking, and searching of DNA specimen information to facilitate the exchange of DNA information by forensic laboratories. CODIS consists of a hierar²hy of DNA indexes at the local, state, and national level. Two types of DNA profiles are maintained in CODIS: (1) forensic profiles, developed from crime scene evidence, and (2) convicted offender profiles, developed from samples submitted by persons convicted of specific crimes. The FBI established requirements for participating laboratories that specify the types of forensic profiles allowed in CODIS.

We conducted an audit of the FBI’s management of CODIS and the National Institute of Justice’s (NIJ) administration of Laboratory Improvement Program (LIP) grants. The purpose of the audit was to evaluate the extent to which the FBI implemented and monitored CODIS and to determine the extent of state and local participation in CODIS, especially for those laboratories receiving LIP grants. During the course of our audit, we (1) audited eight state and local laboratories to determine if they complied with the FBI’s quality assurance standards, (2) reviewed a sample of the DNA profiles those eight laboratories uploaded to CODIS to determine if they were complete, accurate, and allowable, (3) determined whether the NIJ awarded LIP grants to eligible grantees, and (4) determined whether grantees complied with the grant requirements listed in the DNA Identification Act of 1994 (the Act).

Our audit disclosed that the FBI has made significant progress in implementing the CODIS program nationwide. However, we noted that the FBI needs to improve its oversight of participating laboratories to ensure the laboratories comply with the quality assurance standards. Of the eight laboratories we audited, four laboratories did not fully comply with the FBI’s quality assurance standards. These laboratories agreed to initiate corrective action to resolve the findings from our audits. In addition, although CODIS-participating laboratories are required to undergo annual audits, we noted that the FBI did not have a process in place to ensure that laboratories institute appropriate corrective action for audit findings. FBI personnel stated that they were working to develop such a process and had initiated a pilot program to address this recommendation.

At six of the eight laboratories audited, we found 49 unallowable or incomplete forensic profiles in CODIS out of the 608 forensic profiles reviewed. Further, at two of the eight laboratories, we identified 6 incomplete or unallowable convicted offender profiles in CODIS out of the 700 convicted offender profiles we reviewed. Generally, the laboratories either removed the unallowable profiles from CODIS or corrected incomplete profiles when we notified them of the problem. To ensure that DNA profiles in CODIS are complete, accurate, and allowable, we recommended that the FBI (1) routinely verify the accuracy, completeness, and allowability of the DNA profiles uploaded to the national index system, and (2) require that laboratories advise DNA analysts of the requirements concerning allowable DNA profiles on an annual basis. The FBI agreed with both recommendations and is working to develop policies and procedures to routinely review CODIS DNA profiles and ensure DNA analysts are aware of the requirements concerning allowable profiles.

Our audit disclosed that the NIJ awarded LIP grants totaling $30.7 million to eligible grantees and that the grantees generally complied with the matching fund and indirect cost requirements. However, we noted that the NIJ did not ensure that all LIP grants met the requirements of the Act. Of the seven grants reviewed, one grantee received two grants totaling almost $1.38 million that did not call for the grantee to provide matching funds as required by the Act. The NIJ agreed that the grantee should have been required to provide matching funds. Subsequent to the audit, the NIJ provided documentation demonstrating that the grantee provided adequate matching funds for the project funded by the LIP grants.

CODIS Laboratory Audits

To date, Audit has conducted reviews of 12 laboratories that participate in the FBI’s CODIS. During this reporting period, we reviewed laboratories in Austin, Texas, and Frankfort, Kentucky. The laboratory audits were conducted to determine compliance with the FBI’s Quality Assurance Standards (QAS) and National DNA Index System (NDIS) requirements and to evaluate the accuracy and appropriateness of the data states and localities have submitted to the FBI. The QAS place specific requirements on laboratories, and the NDIS requirements establish the responsibilities and obligations for laboratories that participate in the program. DNA profiles that clearly match a victim of a crime or another known person other than the suspected perpetrator cannot be included in the FBI’s system. In addition, state legislation establishes the specific crimes for which the DNA profiles of convicted offenders must be obtained and may be submitted to the FBI.

We found, for example, the following exceptions for the Kentucky State Police Forensic Laboratory (Laboratory):

The Department’s Reliance on Private Contractors for Prison Services

The housing of federal prisoners and detainees is the responsibility of three Department components: the BOP, INS, and USMS. In addition to using their own facilities, all three components obtain space for prisoners through contracts with private contractors and intergovernmental agreements with state and local governments.

We conducted a review to determine the extent to which the Department relies on private contractors for prison and detention services and the status of contingency planning in the event a contractor is unable to carry out its contractual obligations. We ýound that about 18,000 federal prisoners and detainees are housed each day in facilities owned or operated by private contractors. Three contractors provide most of the private prison space to the Department. The largest of these providers has experienced severe financial difficulty, and that company’s independent auditor expressed concern about its continued operation. We also found that while the BOP, INS, and USMS have plans for dealing with short-term emergency situations at individual contract facilities, they lack overall contingency plans to address potential large scale disruption of private contractor facilities nationwide.

The Department’s reliance on a few large private prison contractors raises concerns about how the Department would respond to a long-term loss of multiple private contractor facilities across the country. We concluded that without coordinated contingency planning, the disruption of contract services could lead to a host of legal, health, financial, logistical, safety, and security issues for the Department.

Implementation of the Collection Litigation Automated Support System

The Department’s Office of Debt Collection Management (DCM) tracks all civil debts referred by other federal agencies to the Department for litigation and collection. As of September 30, 1999, the balance of civil debts owed totaled about $3.2 billion. In past years, Department components have used multiple automated systems to track and manage civil debts, and the Department has had a poor record of managing debts. In May 1998, the Department awarded a contract to provide an automated debt collection management system, the Collection Litigation Automated Support System (CLASS), to replace the civil debt collection systems within the USAOs and private attorneys’ offices an0, ultimately, within all Department components.

We audited the status of CLASS implementation. We found that as of October 1, 2000, DCM was at least 18 months behind schedule in implementing CLASS and had incurred more than $4.6 million in additional costs. DCM estimated monthly additional costs of more than $400,000 pending completion. Delays resulted from management indecision, changes in telecommunications requirements, and disagreements between DCM and the EOUSA about CLASS’s capabilities. After those disagreements had been unresolved for more than a year, and after we informally communicated our concerns to DCM officials, the Assistant Attorney General for Administration (AAGA) established a team of independent consultants to perform a study of the systems in use by the USAOs and private attorneys’ offices and to recommend the system that best meets the Department’s requirements. The team’s report, issued on January 19, 2001, recommended that CLASS be modified and used as the single debt collection system for the Department.

Our audit found that (1) the timeliness of entering debt-related data into CLASS by private attorneys’ offices could usually not be determined because most offices did not record when incoming documents were received, (2) many CLASS users were dissatisfied with CLASS’s method of generating documents and tracking cases, and (3) summary debt collection reports contained material discrepancies. For example, in FY 1998 and FY 1999, unaccounted for differences of $98.3 million and $219.8 million, respectively, existed between the dollar amounts reported as collected and the dollar amounts reported as deposited in the U.S. Treasury.

We recommended that the AAGA take actions to (1) implement the independent consultants’ recommendations to minimize further delays in implementing CLASS, (2) revise performance goals for implementing CLASS, (3) establish procedures to ensure data is entered timely into CLASS, (4) obtain certifications from the USAOs as to the accuracy of data before migrating the data to CLASS, and (5) obtain input from CLASS users about problems with CLASS and take actions to address those problems. The last three recommendations have been closed, and actions that will close the other two recommendations are being finalized.

INS Deferred Inspections at Airports

The INS is responsible for facilitating entry into the United States of citizens and legally admissible visitors and immigrants while preventing unlawful entry by those not entitled to admission. The more than 75 million individuals who annually seek entry into the United States through airports are required to undergo a primary inspection during which an INS inspector examines documents, performs immigration and customs database queries, and questions the traveler. When additional examination is required, individuals are sent to secondary inspection. We estimate that 1 million individuals are referred for secondary inspection annually. If an immediate decision regarding admissibility cannot be made at the secondary inspection, INS inspectors have the discretion to defer the inspection until a later date so that documentary evidence – such as an existing INS file – can be reviewed. In these cases, the individual is admitted (or “paroled”) into the country and must report to an INS district office at a later date to complete the inspection.

We reviewed the INS’s practices by examining a statistical sample of 725 deferred inspections cases. We found that nearly 11 percent (79 of 725) of the individuals paroled into the country under the deferred inspections process in this sample failed to appear at an INS office to complete their inspection. Of the one million individuals referred to secondary inspection during our 1-year review period, we estimate that more than 10,000 inspections were deferred. While deferred inspections represent a small percentage of total airport inspections, we found that the INS failed to track these inspections to completion or to penalize individuals who fail to appear.

We also determined that adequate procedures were not in place to ensure that individuals who fail to appear are either brought in to complete their inspections or are appropriately penalized for failing to appear. In many cases, the INS failed to initiate follow-up activity of any kind. Our analysis revealed that among those who failed to appear, INS inspectors had identified over 50 percent as either having criminal records or immigration violations at the time of entry. Subsequent OIG inquiries of criminal history databases revealed that nine individuals in our sample were either charged or convicted of crimes considered to be aggravated felonies after their deferral, making them possibly subject to deportation.

We also found that the INS’s controls were not adequate to determine the effectiveness of the deferred inspection process or the number of individuals deferred and the outcome of those inspections. We found that records maintained at airports and district offices were incomplete. Inspectors at all nine airports we visited destroyed deferral documentation after limited and varied retention periods. The paper-based tracking of deferred inspections failed to provide an adequate agencywide system of tracking deferrals. As a result, inspectors were unable to detect parole violators and other repeat offenders upon their reentry into the United States.

We recommended that the INS (1) implement an agencywide automated tracking system for deferred inspections, (2) establish or clarify policies and procedures concerning the granting, completing, and reporting of deferred inspections, and (3) conduct proper follow-up on all individuals who fail to appear for their deferred inspection, with special emphasis on the nine individuals identified in the report who were later either charged with or convicted of aggravated felonies.

IGA Audit of York County Prison

We completed an audit of the cost incurred by the York, Pennsylvania, County Prison, to house INS, USMS, and BOP detainees for the Department under Intergovernmental Service Agreements (IGA) between the agencies and York County. For the period January 1, 2000, through December 31, 2000, the INS paid York County $16 million to house an average of 729 detainees per day, the USMS paid $280,000 to house an average of 17 detainees per day, and the BOP paid $7,000 to house an average of 0.4 detainees per day. In total the INS, USMS, and BOP paid York County $16.3 million for housing detainees and an additional $872,000 for services such as out-of-prison medical care and translators.

Our audit was initiated in response to a newspaper article that indicated that the INS paid York County substantially more than its cost for housing INS detainees. The object of the audit was to establish audited jail day rates for each IGA based on allowable incurred costs and jail days used during the audit period and to determine whether York County was properly reimbursed. We determined that the Department overpaid York County $6 million for the review period, and we identified $6.4 million in future funds to better use.

IGA Audit of Wicomico County Department of Corrections

We completed an audit of the cost incurred by the Government of Wicomico County, Maryland, to house INS detainees for the Department in accordance with an IGA between the INS and Wicomico County. For the period July 1, 1999, through June 30, 2000, the INS paid Wicomico County $2.4 million to house an average of 132 detainees per day.

Similar to our review of the IGA with York County, our audit was initiated in response to a newspaper article that indicated that the INS paid Wicomico County more than the cost of housing INS detainees. The object of the audit was to establish an auditeý jail day rate for the IGA based on allowable incurred costs and jail days used during the audit period and to determine whether Wicomico County was properly reimbursed. Based on our audited jail day rate, we determined that the Department overpaid Wicomico County $347,000 for the review period, and we identified $297,000 in future funds to better use.

COPS Grant Audits

The Violent Crime Control and Law Enforcement Act of 1994 (Crime Act) authorized $8.8 billion for grants to add 100,000 police officers to the nation’s streets. During this reporting period, we performed 20 audits of COPS hiring and redeployment grants. Our audits identified more than $14 million in questioned costs and more than $1.4 million in funds to better use.

The following are examples of findings reported in our audits of COPS grants during this period:

State and Local Equitable Sharing Audits

The Department’s equitable sharing program exists to enhance cooperation among federal, state, and local law enforcement agencies by sharing federal forfeiture proceeds. State and local law enforcement agencies may receive equitable sharing revenues by participating directly with Department components in joint investigations leading to the seizure or forfeiture of property. The amount shared with the state and local law enforcement agencies is based on the degree of the agencies’ direct participation in the case.

During this reporting period, we audited the Miami, Florida, Police Department’s accountability and use of more than $2 million in cash and proceeds received through the equitable sharing program during a 27-month period. We found that the Police Department did not always comply with Department guidelines governing equitable sharing funds. The Police Department inappropriately transferred equitable sharing funds to four non-law enforcement entities and made an inappropriate charge against its equitable sharing account. As a result, we questioned $163,605 in equitable sharing funds.

Department Financial Statement Audits

The Chief Financial Officers Act of 1990 and the Government Management Reform Act of 1994 require financial statement audits of the Department. Audit oversees and issues the reports based on work performed by independent public accountants. During this reporting period, we issued ten FY 2000 Department component financial statement reports.

Each of these audits was performed in support of the FY 2000 consolidated Department audit, which was issued in the prior semiannual reporting period. The audit resulted in an unqualified opinion on the FY 2000 consolidated balance sheet and statement of custodial activity and a qualified opinion on the other financial statements.

Because the Department lacks automated systems to readily support financial statement preparation and ongoing accounting operations, many tasks had to be performed manually. One such task, the year-end count of INS applications needed to determine deferred revenue, involved substantial manual effort and caused delays in processing applications. Other problems resulted from the lack of integration between the Department’s automated accounting systems and subsystems. The Department’s finance staffs had to perform additional manual reconciliations of data because of system deficiencies. In addition, the Department incurred substantial costs and depended heavily on contractors to assist in the cleanup of accounting transactions and provide other accounting support. The Department’s ability to maintain or improve its audit results will require continuation of the efforts expended this year; any decrease in this effort could adversely effect the Department’s audit results. A comparison of the audit results for FY 2000 and FY 1999 follows.

Comparison of FY 2000 and FY 1999 Audit Results

 FY 2000 FY 1999
Reporting Entity Balance
Sheet 1
Other
Financial
Statements
Balance
Sheet
Other
Financial
Statements
Consolidated Department of Justice
Asset Forfeiture Fund and
    Seized Asset Deposit Fund
Bureau of Prisons
Drug Enforcement Administration
Federal Bureau of Investigation
Federal Prison Industries, Inc.
Immigration and Naturalization Service
Offices, Boards, and Divisions
Office of Justice Programs
U.S. Marshals Service
Working Capital Fund
U
U

U
U
U
Q
U
U
U
U
U
Q
U

U
U
U
Q
Q
U
U
U
U
Q
U

U
U
U
U
Q
U
U
U
U
Q
U

U
U
U
U
Q
U
U
U
U
D - Disclaimer of Opinion
Q - Qualified Opinion
U - Unqualified Opinion

1. For FY 2000, the consolidated statement of custodial activity also received an unqualified opinion.

Trustee Audits

Audit contributes significantly to the integrity of the bankruptcy program by conducting performance audits of trustees under a reimbursable agreement with the EOUST. During this reporting period, Audit issued 97 reports on the Chapter 7 bankruptcy practices of private trustees under Title 11, United States Code (Bankruptcy Code).

The Chapter 7 trustees are appointed to collect, liquidate, and distribute personal and business cases under Chapter 7 of the Bankruptcy Code. As a representative of the bankruptcy estate, the Chapter 7 trustee serves as a fiduciary, protecting the interests of all estate beneficiaries, including creditors and debtors.

We conduct performance audits on Chapter 7 trustees to provide U.S. Trustees with an assessment of the trustees’ compliance with bankruptcy laws, regulations, rules, and the requirements of the Handbook for Chapter 7 Trustees. Additionally, the audits assess the quality of the private trustees’ accounting for bankruptcy estate assets, cash management practices, bonding, internal controls, file maintenance, and other administrative practices.

Single Audit Act

The Single Audit Act of 1984, as amended, requires recipients of more than $300,000 in federal funds to arrange for audits of their activities. Federal agencies that award federal funds must review these audits to determine whether prompt and appropriate corrective action has been taken in response to audit findings.

During this reporting period, Audit reviewed and transmitted to OJP 94 reports encompassing 771 Department contracts, grants, and other agreements totaling more than $486 million. These audits report on financial activities, compliance with applicable laws, and the adequacy of recipients’ management controls over federal expenditures.

Audits in Progress

During the reporting period, Audit performed work on several significant projects that are not yet completed, including the following:

Accountability for Selected Law Enforcement Equipment

At the request of the Attorney General, the OIG initiated audits of the accountability for firearms and laptop computers throughout the Department. The Attorney General made the request after disclosures about missing weapons and laptop computers and theÍneed for improved accountability in the FBI and INS. Our objectives are to determine the adequacy of internal controls over this equipment and the reliability and accuracy of components’ property records.

Critical Infrastructure Protection

Presidential Decision Directive (PDD) 63 requires the Department and other government agencies to prepare plans for protecting their critical infrastructure, which includes systems essential to the minimum operations of the economy and government, such as telecommunications, banking and finance, energy, and transportation. The plans ordered by PDD 63 must include an inventory of the Department’s mission-essential assets, the vulnerability of each, and plans to remedy those vulnerabilities.

As part of an effort sponsored by the President’s Council on Integrity and Efficiency (PCIE), we are performing an audit of the Department’s planning and assessment activities for protecting its physical infrastructure. We will report on the Department’s ability to accomplish vital missions in the event of terrorist attacks or similar threats.

GISRA Audits

We continue to perform audits of the Department’s information security policies, procedures, standards, and guidelines. Audit plans to issue a series of individual audit reports on each of the nine systems tested at the EOUSA, BOP, DEA, JMD, and FBI, as well as consolidated reports on the collective systems. While we anticipate issuing these reports in the next reporting period, they will likely not be available publicly because of security concerns.

Maintenance and Disposal of Seized Assets

We are conducting an audit to assess whether seized assets are adequately secured, maintained, and accounted for and whether forfeited assets are disposed of in a cost-effective, timely manner.

Audit Follow-Up

OMB Circular A-50

OMB Circular A-50, Audit Follow-Up, requires audit reports to be resolved within six months of the audit report issuance date. Audit continuously monitors the status of open audit reports to track the audit resolution and closure process. As of September 30, 2001, the OIG had closed 167 audit reports and was monitoring the resolution process of 509 open audit reports.

Unresolved Audits

Audits Over Six Months Old Without Management Decisions or in Disagreement

As of September 30, 2001, the following audits had no management decisions:

Audit Statistics

Funds Recommended to be Put to Better Use

Audit Reports Number of
Audit Reports
Funds
Recommended
to be Put to
Better Use
No management decision made by beginning of period
Issued during period
Needing management decision during period

Management decisions made during period:

  • Amounts management agreed to put to better use 1
  • Amounts management disagreed to put to better use
No management decision at end of period
3
11
14



9
0

5
$3,502,249
$15,755,799
$19,258,048



$5,979,066
$0

$13,278,982
1. Includes instances where management has taken action to resolve the issue and/or
the matter is being closed because remedial action was taken.

Audits With Questioned Costs

Audit Reports Number of
Audit Reports
Total Questioned
Costs
(including
unsupported
costs)
Unsupported
Costs
No management decision made by beginning of period
Issued during period
Needing management decision during period

Management decisions made during period:

  • Amount of disallowed costs 2
  • Amount of costs not disallowed
No management decision at end of period
61
45
106



75
0

31
$21,950,941
$47,637,192
$69,588,133



$28,535,291
$0

$41,052,842
$7,770,992
$3,780,825
$11,551,817



$4,368,036
$0

$7,183,781
2. Includes instances where management has taken action to resolve the issue and/or the matter
is being closed because remedial action was taken.

Audits Involving Recommendations for Management Improvements

Audit Reports Number of Audit Reports Total Number of Management Improvements Recommended
No management decision made by beginning of period110244
Issued during period127382
Needing management decision during period237626
Management decisions made during period:
--Number management agreed to implement1
--Number management disagreed to implement
1512
0
451
0
No management decision at end of period89175
1. Includes instances where management has taken action to resolve the issue and/or the matter is being closed because remedial action was taken.

2. Includes three reports where management has agreed with some but not all of the reports' recommendations.