USDOJ/OIG - Semiannual Report to Congress, April 1, 1996- September 30, 1996

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The Audit Division

The Audit Division is responsible for independent reviews of Department of Justice organizations, programs, functions, computer security and information technology systems, and financial statement audits.

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Audit Division

Overview & Highlights

T he Audit Division is responsible for independent audits and related reviews of Department of Justice organizations, programs, functions, computer security and information technology systems, and financial statement audits. The Audit Division also conducts or reviews 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. The Audit Division produces a wide variety of audit products designed to provide timely notification to Department management of issues needing attention. The Division also assists the Investigations Division in complex fraud cases.

The Audit Division works closely with Department management in developing recommendations for corrective actions that will resolve weaknesses that its audits bring to light. By doing so, the Audit Division remains responsive to its customers and promotes more efficient and effective Department operations.

During this period, the Audit Division issued 13 internal audit reports covering almost $2 billion in Department programs; 20 external audit reports covering over $191 million in Department contracts, grants, and other agreements; 122 audits of bankruptcy trustees with responsibility for funds of over $289 million; and 130 Single Audit Act audits encompassing over $363 million. The Division issued five Management Information Memoranda, one Technical Assistance Memorandum, three Investigative Assistance Memoranda, and three Notifications of Irregularity.

Significant Audit Products

Status of INS' Financial Management Corrective Action Plan
as of June 30, 1996

Our prior audits of the Immigration and Naturalization Service (INS) financial statement for the fee accounts and Breached Bond Detention Fund resulted in disclaimers of opinion due to the poor condition of INS' accounting records. We found long-standing financial management deficiencies remain at INS.

In 1994, INS proposed that resources allocated for auditing financial statements be used for correcting existing financial management problems. We agreed to INS' proposal on the condition that it continue to prepare financial statements and that it establish a corrective action plan designed to improve overall financial management and eliminate weaknesses identified in previous audit reports.

During the period reviewed, October 1, 1995, through June 30, 1996, however, few new corrective actions were started or completed. Many corrective actions were delayed, including the implementation of the new financial management system. Of the 25 corrective actions that were identified as either "Not Started" or "In Process," 20 were currently behind schedule. To address these long-standing deficiencies, we recommended INS reevaluate and update its corrective action plan accordingly.

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Significant Audit Products

We also notified the Attorney General that the current state of INS' financial systems has repercussions outside the INS. For example:

  Our Fiscal Year (FY) 1995 financial statement audit of the Violent Crime Reduction Trust Fund resulted in a disclaimer of opinion for the entire Trust Fund because INS cannot produce auditable financial information. Further, the auditors' reports on internal controls attributed five of the ten material weaknesses and reportable conditions solely to INS.

  INS' inability to produce auditable financial information will negatively affect the Department's FY 1996 annual financial statement audit. This first Departmentwide financial statement audit will have a high profile in Congress and at the Office of Management and Budget. We doubt the Department's ability to receive an opinion on the financial statements as a whole because of material INS deficiencies.

Significant weaknesses in INS' systems must be corrected before an opinion can be expressed on the INS financial statements.

The Community Corrections Center Program in BOP

The Bureau of Prisons' (BOP) Community Corrections Center (CCC) Program provides Federal inmates with a transition back into the communities following release from Federal custody. The CCCs offer counseling, training, access to substance abuse programs, housing referrals, and other services. To qualify for placement, inmates must not pose a significant threat to the community and must contribute 25 percent of their income toward the cost of their CCC food and lodging. In this audit, we identified $14 million in funds that could be put to better use, and we recommended improving the use of available bed space.

During FY 1994, BOP had 250 CCC contracts providing bed space for about 20,000 inmates. BOP housed and paid for about 3,000 of these inmates who were the responsibility of the Administrative Office of the U.S. Courts (AOUSC). BOP's annual cost of serving all inmates in a CCC setting was $65.7 million including $14 million for serving AOUSC inmates.

We found CCCs to be a cost-effective, safe alternative to incarceration. BOP effectively negotiated, awarded, and monitored the CCC contracts. However, CCC operations can be improved by requiring AOUSC to reimburse BOP its $14 million annual cost of supervising AOUSC-referred cases.

We determined that BOP can better maximize the usage of CCC bed spaces. On average, 961 unfilled CCC bed spaces were available daily. Finally, BOP needs to standardize the amounts paid by inmates toward the cost of their CCC residence.

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Significant Audit Products

Intergovernmental Service Agreements for Detention Facilities

The U.S. Marshals Service (USMS) establishes agreements with local jails to obtain space for the detention of Federal prisoners. For FY 1996, USMS anticipated having almost 1,000 agreements nationwide at a cost of $295 million. At the request of USMS, we audited six agreements with local jails. These audits resulted in $9.8 million in questioned costs and over $1.3 million in funds that could be put to better use.

The audits identified unnecessary and unallowable charges to USMS that should be used to reduce the daily rate charged. We believe that substantial additional savings are available nationwide, and we plan additional audits to specifically identify such savings. We have worked with USMS staff regarding these audits and the program in general. The USMS is aggressively pursuing corrective actions and the recovery of unallowable costs.

Criminal Justice in Indian Country

The Department provides Native American tribes with criminal justice services such as law enforcement, prosecution, development and maintenance of effective tribal courts, and grant funding. Services are provided by the Office of Justice Programs (OJP), Office of Policy Development, Federal Bureau of Investigation (FBI), and U.S. Attorneys' Offices (USAOs). The Office of Tribal Justice seeks to enhance the Department's communication and coordination with tribal governments.

Department agencies have improved criminal justice services provided to Native American tribes. Our audit found that:

  The FBI established good communication and coordination with both tribal and Bureau of Indian Affairs law enforcement agencies. As a result, law enforcement agencies are working together to provide effective law enforcement in Indian country.

  The USAOs established good communication and working relationships with Native American tribes in their districts.

  The Tribal Courts Project effectively assisted in initiating, developing, and enhancing tribal courts.

  The OJP enhanced criminal justice grant funding services to Native American tribes through various programs and activities.

We also noted that Department agencies could improve criminal justice services by maintaining accurate crime statistics for Indian country, consolidating case management systems, and resolving tribal concerns regarding block and formula grants.

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Significant Audit Products

INS' Border Patrol Management of Aviation Operations

The Border Patrol's aviation program supports the enforcement operations of the Border Patrol. Aviation operations costs for FY 1995 were approximately $11.4 million, and the fleet comprised 86 aircraft with an estimated value of $6.6 million.

Our audit found the Border Patrol lacked an aviation maintenance program to ensure aircraft airworthiness and lacked a comprehensive aviation safety program. In addition, 20 percent of the pilots were not current with the biennial flight review, methods for accumulating and reporting the aviation program costs were inadequate, and a performance measurement system had not been developed.

Border Patrol officials agreed with our recommendations and reported correction of all the deficiencies except for the performance measurement system, which they are developing.

FDIC Reimbursement of Sale Proceeds to USMS

In conjunction with other audit work, we noted that monies from the sale of forfeited real estate had inadvertently been paid to the wrong parties by the closing agent. Both USMS and the Federal Deposit Insurance Corporation (FDIC) shared in the proceeds from forfeited property. We found that each received funds that should have been paid to the other. We determined that FDIC owed USMS a net amount of approximately $216,000. The FDIC agreed and issued a check for the full amount to USMS.

INS Forecasting for Fee Accounts

INS' forecasting of fee revenue, generated from services and benefits provided to the public, is critical for accurate budget and expenditure decisions. Total annual fee receipts ranged from $390 million in FY 1991 to $532 million in FY 1994. Our audit reviewed forecasts for User Fee, Examinations Fee, Legalization Fee, and Land Border Fee accounts.

We found that INS is improving its forecasting methods. INS staff were able to estimate annual User Fee revenue within approximately 10 percent of actual receipts from FY 1992 to FY 1994. INS recently developed a team approach involving budget, program, and statistical personnel to ensure accurate forecasting for the growing Examinations Fee account. This practice should be expanded to the other fee accounts. INS could improve its forecasting methodologies by validating and documenting each revenue forecasting method, making forecasts on an accrual basis rather than a cash accounting basis, and developing an appropriate forecasting method for the Land Border Fee account.

Office of Community Oriented Policing Services

We continued to work with the Office of Community Oriented Policing Services (COPS) in its implementation of the Violent Crime Control and Law Enforcement Act of 1994 and the hiring of 100,000 additional police officers nationwide. Funding for the program for FYs 1995 and 1996 totaled approximately $2.5 billion.

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Significant Audit Products

We developed and tested an expanded audit program to be used to conduct in-depth audits of recipients of COPS grants. This audit program is expected to be used to perform 20 to 30 audits of COPS grant recipients during FY 1997. Contingent upon funding for additional auditor positions from the Violent Crime Reduction Trust Fund, approximately 200 audits of recipients could be performed in FY 1998.

Grant Audits

During this reporting period, we audited approximately $14 million in expenditures made under 11 Department grants. We identified questioned costs totaling nearly $1 million.

  An audit of an OJP grant awarded by the Office of Juvenile Justice and Delinquency Prevention (OJJDP) questioned $376,773 (34 percent of the total audited) because costs were unsupported, unauthorized, or unallowable. We recommended that OJJDP remedy the questioned and unsupported costs.

  An audit of an OJP Bureau of Justice Assistance (BJA) grant questioned $124,868 because personnel costs were unsupported and unauthorized. We recommended that BJA take action necessary to remedy the costs questioned.

Management Assistance Activities

As part of our ongoing audit of USMS' property management, the Audit Division reviewed the accuracy of the property management accounting records. We found that the records were misstated by over $100 million and involved three areas: vehicles, equipment, and leasehold improvements. This matter was immediately brought to the attention of USMS and the Justice Management Division (JMD)—the entity responsible for maintaining USMS' accounting system. The USMS responded that it had established a task force to work with JMD to correct the problems identified.

Chief Financial Officers Act of 1990/ Government Management Reform Act of 1994

Financial statement audits are performed at the Department by independent public accountants, with oversight by the Audit Division. During this semiannual period, audits of the FY 1995 annual financial statements were issued for the Asset Forfeiture Program, the Bureau of Prisons Commissary Trust Fund, the Radiation Exposure Compensation Trust Fund, and the Working Capital Fund. Each entity received unqualified opinions on their respective principal financial statements.

In addition, we completed procurement actions to begin the audits of the
FY 1996 Consolidated Departmentwide Annual Financial Statement and of Department components.

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Significant Audit Products

INS Automation Initiatives

The Audit Division is increasing its efforts in monitoring INS' major automation initiatives project. The initiatives are to enhance INS' Automated Data Processing operations, which affect nearly all aspects of INS program operations. To help implement and monitor this critical, high risk effort, INS entered into its largest contract ever (approximately $300 million). Objectives of the contract, known as the Information Technology Partnership, were to obtain a contractor to perform as a full partner and provide technical and management expertise in support of development, implementation, and maintenance of the current initiatives and ongoing systems.

Representatives of the Audit Division are:

  proactively working with INS procurement officials to obtain the necessary audits of the contractor by the Defense Contract Audit Agency (DCAA);

  negotiating with INS to define the scope and types of future audits by DCAA and analyzing and commenting on the audits when received;

  participating in the quarterly briefings presented by INS management covering the automation initiative activities in general as well as the quarterly briefings that cover the activities of the INS information technology partner contractor; and

  assessing the automation initiative activities associated with each operation or activity in our regular internal audits of INS operations and activities.

Trustee Audits

The Audit Division has contributed significantly to the integrity of the bankruptcy system by performing financial audits of trustees under a reimbursable agreement with the Executive Office for U.S. Trustees (EOUST). During the reporting period, 122 trustee reports were issued.

For FY 1996, the EOUST redirected 52 percent of the funds previously reimbursed to the OIG for audits to support other bankruptcy initiatives. This reduction could substantially reduce oversight of a high risk area and increases the possibility that trustee fraud will go undetected.

Single Audit Act

The Single Audit Act and OMB Circulars A-128 and A-133 require recipients of Federal funds to arrange for audits of their activities. During this period, 130 reports were reviewed and transmitted by the Audit Division encompassing 606 Department contracts, grants, and other agreements totaling $363,143,953. These audits report on financial activities, compliance with applicable laws, and, in many cases, the adequacy of recipients' management controls over Federal expenditures. Reports on organizations over which the Department is cognizant or which

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Significant Audit Products

have a preponderance of Department funds are reviewed to ensure compliance with generally accepted Government auditing standards. In certain circumstances and upon Department request, the Audit Division performs audits of State and local governments, nonprofit organizations, and Department contracts and provides requested assistance to these entities.

Follow-up Activities

OMB Circular A-50, "Audit Follow-up," requires audit reports to be resolved within six months of the audit report issuance date. The status of open audit reports is continuously monitored to track the audit resolution and closure process. As of September 30, 1996, the OIG had closed 270 audit reports and was monitoring the resolution process of 113 open audit reports.

Achievements Resulting from Past Audits

In response to our audit of the USMS Intergovernmental Service Agreements (IGA) for Detention Facilities, issued in August 1996, USMS awarded a contract directly to a private correctional detention firm to house Federal prisoners in Mason, Tennessee. The USMS terminated the IGA with the Town of Mason because the IGA participant did not oversee or monitor the private firm's detention operation. The Town also had subrogated its rights and responsibilities under the IGA to the private firm shortly after the IGA was signed.

Audit Statistics

Enhanced Revenues
Audit Reports Number of
Enhanced Revenues
No management decision was made by beginning of period 0 $0
Issued during period 3 $290,160
Needing management decision during period 3 $290,160.00
Management decisions made during period:
-- Amounts management agreed with
3 $290,160.00
No management decision at end of period 0 $0

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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 1 $2,236,399
Issued during period 3 $15,327,970
Needing management decision during period 4 $2,236,399
Management decisions made during period: -- Amounts management agreed to put to better use 1 $2,236,399
No management decision at end of period 3 $15,327,970

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 11 $3,894,691 $1,271,300
Issued during period 30 $10,894,114 $1,482,938
Needing management decision during period 41 $14,788,805 $2,754,238
Management decisions made during period:-- Amounts management agreed to recover (disallowed) 19 $4,069,955 $1,308,347
No management decision at end of period 22 $10,728,850 $1,445,891

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Audit Statistics

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 period 26 94
Issued during period 59 201
Needing management decision during period 85 295
Management decisions made during period:-- Number management agreed to implement 45(1. 159
No management decision at end of period 41 136

(1.The number of reports is higher because in some cases management took multiple actions on a single report.