USDOJ/OIG - Semiannual Report to Congress, October 1, 1996 - March 31, 1997

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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

The Audit Division is responsible for independent audits and related reviews of Department of Justice (Department) organizations, programs, functions, automated data processing 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 products designed to provide timely notification to Department management of issues needing attention and 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 identified weaknesses. 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 12 internal reports covering almost $2.3 billion, 24 external reports covering about $138 million, 89 audits of bankruptcy trustees with responsibility for funds of over $156 million, and 176 Single Audit Act audits encompassing over $228 million. The Division issued nine Management Information Memoranda, one Technical Assistance Memorandum, and two Notifications of Irregularity.

Significant Audit Products

INS Replacement of Resident Alien Identity Cards

The Immigration and Naturalization Service (INS) issues identity cards to assist in providing and controlling immigration benefits and services that are provided to legal resident aliens. Historically, these cards have been highly susceptible to fraud and have been used to obtain public benefits and employment illegally. INS has two versions of identity cards in circulation, one that expires 10 years after issuance and the other with no expiration. In Fiscal Year (FY) 1995, about 10 million cards were in circulation, and about 700,000 applications for replacement cards were processed.

INS is developing a new, secure identity card. The new card should facilitate recognition of genuine cards, thus alleviating the confusion of inspectors and employers who must verify card validity. One card also will decrease the proliferation of fraudulent use that multiple cards encourage and increase the overall integrity of the identity card system. Once the card is developed, we believe INS should replace the 3 million cards with no expiration dates by the year 2001 and replace the 7 million cards with 10-year expiration dates by the year 2007.

Our audit found that streamlining the card replacement process could yield an estimated $45 million in funds that could be more effectively used, reduce the 6-month to 1-year waiting period to receive cards, improve the level of service, and eliminate the use of temporary stamps, which promote fraud through counterfeiting.

We recommended that INS perform a cost-benefit analysis of the new card production equipment requirements. Failure to conduct such an analysis could result in unnecessary equipment purchases that could cost over $7 million.


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Significant Audit Products

Intergovernmental Service Agreements for Detention Facilities

The U.S. Marshals Service (USMS) establishes intergovernmental service agreements (IGAs) with local jails to acquire space for federal prisoners. As reported in the last Semiannual Report to Congress, we have audited a number of IGAs and provided technical assistance to USMS. In FY 1997, USMS has almost 1,000 agreements nationwide at a cost of $418 million.

During this reporting period, we audited one agreement resulting in questioned costs of about $1.6 million. Our audit 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 also conducted training for USMS personnel on the review and auditing of the jail agreements and Audit Division, USMS, and Office of Management and Budget staff met to discuss alternative mechanisms for administering the agreements in order to streamline and simplify the process.

INS Workforce Analysis Model

INS invested approximately $1.35 million and five years of effort to refine and implement a computer modeling program called the Workforce Analysis Model (WAM). The purpose of WAM was to develop an objective means to allocate inspectors at ports of entry.

Our audit found that WAM could not accurately determine the optimum number of inspectors needed at ports of entry. The model only projected the number of inspectors needed above those scheduled and did not detect overstaffed work shifts or project a need for staff decreases. We also found that INS did not validate inspection processing times or WAM's output projections. Further, WAM output reports had to be changed to make them useful to INS' Headquarters and port directors.

We recommended that INS:

require WAM reprogramming to ensure it can determine the optimum number of inspectors needed at any port of entry;

validate port of entry-developed inspection processing times and WAM projections;

perform sensitivity analyses on WAM to determine the accuracy of input data needed for proper results; and

generate detailed and summary output reports that Headquarters and port directors can use in determining adequate staffing for the workload, preparing inspector shift schedules, and monitoring and controlling use of overtime.

INS agreed to implement our recommended corrective actions.


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Significant Audit Products

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. During this reporting period, we used a newly developed audit approach to perform audits of COPS hiring and redeployment grants. We initiated audits based on requests from COPS personnel and on allegations of misuse of grant funds. During FY 1997, we expect to perform 20 to 30 audits of COPS grant recipients.

These audits focus on (1) allowability of grant expenditures, (2) sources of matching funds, (3) implementation or enhancement of community policing activities, (4) efforts to fill vacant sworn officer positions, (5) plans to retain officer positions at grant completion, (6) grantee reporting, and (7) analysis of supplanting issues. Initial results indicate that some jurisdictions are not making a good-faith effort to fill locally funded sworn officer positions after receipt of a COPS grant. Additionally, we found that some jurisdictions may have difficulty retaining COPS-funded positions with local funds at the conclusion of the grants.

Based on our findings to date, we have identified about $3 million in questioned costs and about $600,000 in funds to be put to better use.

Department Use of Administratively Uncontrollable Overtime

We performed a congressionally mandated audit of Administratively Uncontrollable Overtime (AUO) in the Department. We focused on INS because it was responsible for almost all of the $57 million of AUO incurred by the Department during FY 1996. Our audit identified the following findings:

INS policies complied with established statutory, regulatory, and Department policies regarding AUO.

By statute, federal employees may receive AUO paid at rates no less than 10 percent and no more than 25 percent above the rate of basic pay. Of the INS employees receiving AUO who we sampled, about 83 percent were certified to receive 25 percent.

INS records did not substantiate that overtime worked was uncontrollable for 95 percent of the employees we sampled. Supervisors did not assess the actual duties of the employees to determine if the overtime worked was uncontrollable. As a further indication that the work performed was actually controllable, we found patterns of employees reporting the same amount of AUO every day.

Ten percent of INS' AUO recipients were in grades GS-13 and above and earned over 16 percent of all AUO funds at a cost of $9 million.

Our audit report questioned $1.5 million of the funds INS paid for AUO in FY 1996 and recommended that INS reconsider whether grades GS-13 and above should continue to receive AUO.


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Significant Audit Products

Computer Security at DEA

Computer security was reported by the Attorney General as a high risk area for six Department components, including the Drug Enforcement Administration (DEA). Our recent audit found computer security continues to be a high risk at DEA, as we identified in 1989 and the General Accounting Office also reported in 1992.

Our audit found that computer default settings and audit trails were not implemented effectively to protect DEA's sensitive computer resources and to detect unauthorized access; computer security management was inadequate; and computer security software was inadequately utilized to detect and investigate unauthorized access to DEA's sensitive data base applications.

We recommended that DEA strengthen its controls in system software, computer security management, and security software.

Fuel Purchases by BOP, FBI, and INS

The Federal Bureau of Investigation (FBI), Bureau of Prisons (BOP), and INS spent about $6 million in FY 1995 for purchases of bulk fuel for heating and power generation and fueling motor vehicles and equipment. The FBI spends an additional $7 million annually for retail purchases of gasoline primarily to fuel its fleet of 11,500 vehicles. We determined that cost savings are possible in each of the three components audited.

The FBI could save about $600,000 annually on retail fuel purchases and $29,000 annually on bulk fuel purchases by purchasing regular gasoline instead of mid-grade and premium gasoline.

BOP could save $50,000 annually on its current bulk fuel purchases by (1) avoiding paying unnecessary excise taxes, (2) purchasing bulk regular gasoline instead of mid-grade and premium gasoline, and (3) increasing bulk purchases using a Defense Fuel Supply Center contract. BOP could realize additional cost savings of about $220,000 over 30 years by installing additional bulk tanks at four field locations.

INS could save over $13,000 annually by discontinuing its bulk purchase of mid-grade and premium gasoline and replacing it with regular gasoline.

INS Contracting for Detention Space

INS is responsible for taking into custody and detaining aliens pending a determination of their deportability. INS has four sources for detention space: INS-owned Service Processing Centers, private vendors, facilities jointly operated by INS and BOP, and state and local jails. Our audit found that INS contracting practices for obtaining detention space were generally in accordance with federal guidelines.


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Significant Audit Products

Specific audit findings and recommendations include:

The method of reimbursement for the Seattle, Washington, detention facility was not based on the number of aliens in detention and would not be cost-effective if the facility was not adequately utilized. We recommended that INS take steps to assure maximum utilization of the Seattle detention facility and any other such facility contracted for on the basis of a flat daily rate.

The INS Western Regional Office overallocated by about $2 million FY 1995 detention obligations for aliens who did not meet User Fee Account guidelines. We recommended that INS allocate the cost of detention for the Western Region to the User Fee Account for only those excludable aliens who arrive on commercial aircraft and vessels.

INS did not accurately compile and report detention costs, and the costs in the INS cost detention report did not agree with INS' Financial Accounting and Control System. We recommended that INS establish procedures to ensure that detention costs reported in the INS detention cost report are accurate, complete, and consistent.

DEA's Third-Party Payment System

Third-party payments are an alternative payment method for cashsuch as a checkand an effective tool for reducing cash held by federal agencies. DEA uses a third-party payment system to make disbursements for imprest fund expenses, travel reimbursements, small purchases, and investigative expenses.

Our audit of DEA's management controls over the use of third-party payments identified weaknesses such as missing support documents and unauthorized expenses. We also noted differences in the daily and monthly bank reconciliations that were not identified and followed up in a timely manner during the DEA Headquarters reconciliations process. Furthermore, the field offices shared passwords, did not secure bank check stocks, could not locate voided checks, and manually voided checks that later appeared in the Financial Management Information System (FMIS) as issued or cleared.

The weaknesses we identified increase the risk of waste, unauthorized use, or theft not being detected in a timely manner. To reduce this risk, we recommended that DEA (1) reinforce requirements for support documents, authorized expenses, approvals, and voucher packages stamped "PAID," (2) streamline bank reconciliations by incorporating the monthly reconciliations into the daily reconciliations and eliminating the monthly reconciliations, (3) ensure that bank reconciliations identify all differences and are completed in a timely fashion, (4) ensure that each draft technician has and uses a unique user identification and password, (5) ensure that blank check stock is secured from unauthorized access, and (6) ensure voided checks are marked "VOID" and recorded in FMIS.

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Significant Audit Products

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

In compliance with the Chief Financial Officers Act of 1990 and the 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, the audit of the Consolidated Departmentwide Annual Financial Statement was started. This is the first time such an audit has been required of the Department; it was delayed while the Department reprogrammed funds for it.

Because the Department is decentralized and uses many automated financial systems, separate audits are being performed of the DEA; FBI; INS; Federal Prison System; Office of Justice Programs; USMS, along with remaining Department Offices, Boards, and Divisions; Asset Forfeiture Fund; and Working Capital Fund. These audits will be the basis for the opinion we express regarding the fairness of the Consolidated Department Financial Statement.

VCRTF Annual Financial Statement for FY 1995

Established by the Violent Crime Control and Law Enforcement Act of 1994, the Violent Crime Reduction Trust Fund (VCRTF) received $2.3 billion in FY 1995 to finance public safety and community policing programs and to supplement funding for (1) immigration enforcement, (2) expedited deportation of criminal aliens, (3) asylum reform, and (4) state and local law enforcement, corrections, and violence prevention programs.

Although INS is only one of several Department components receiving VCRTF resources, its share of these funds is material to the VCRTF as a whole. The audit resulted in a disclaimer of opinion on the principal financial statements because of the conditions identified by the auditors while at INS. Our auditors identified material weaknesses in INS' internal control structure for the fund balance with the Treasury reconciliation process, financial reporting, and the financial management control environment. At several other agencies receiving VCRTF resources, the auditors identified material weaknesses in the internal control structure for their grant management systems and accounts payable.

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, 89 trustee reports were issued.

For FYs 1996 and 1997, EOUST redirected 52 percent of the funds previously reimbursed to the Office of the Inspector General (OIG) for financial audits to support other bankruptcy initiatives. Commensurate with the funding reduction, audit scrutiny of panel and standing trustees also decreased. This reduction in the reimbursable agreement could substantially reduce oversight of this program designated by the Department as a material weakness and could increase the possibility that trustee fraud will go undetected.


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Significant Audit Products

Single Audit Act

The Single Audit Act and Office of Management and Budget (OMB) Circulars A-128 and A-133 require recipients of federal funds to arrange for audits of their activities. During this period, 176 reports were reviewed and transmitted by the Audit Division encompassing 816 Department contracts, grants, and other agreements totaling $228,383,936. 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 that have a preponderance of Department funds are reviewed to ensure compliance with the generally accepted Government Auditing Standards. In certain circumstances and upon request by Department components, the Audit Division performs audits of state and local governments, nonprofit organizations, and Department contracts and provides requested assistance to these entities.

Single Audit Act Audit Guide Supplement

The Audit Division is participating on an interagency task force, chaired by OMB, to revise the Compliance Supplement for Single Audit Act Audits (Supplement). Other task force members include General Accounting Office program managers and President's Council on Integrity and Efficiency representatives from federal agencies providing awards subject to the Single Audit Act.

The Supplement provides guidance to nonfederal auditors in conducting audits of federal awards in accordance with the Single Audit Act. The Audit Division recommended that the Supplement include provisions for determining if grantees are complying with the employer sanctions law to prevent illegal aliens from obtaining employment.

Follow-up Activities

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. The status of open audit reports is continuously monitored to track the audit resolution and closure process. As of March 31, 1997, the OIG had closed 286 audit reports and was monitoring the resolution process of 121 open audit reports. In addition, four audits remain unresolved over six months.

Unresolved Audits

The Community Corrections Center Program in BOP

In our May 1996 report, we recommended that BOP negotiate a reimbursable agreement with the Administrative Office of the U.S. Courts for the annual $14 million cost of supervision cases referred to BOP Community Corrections Centers. BOP does not agree with this recommendation, and it remains unresolved. The OIG is working with BOP to resolve this issue.


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Unresolved Audits

USMS Intergovernmental Service Agreements

As of March 31, 1997, three USMS IGA audits remained unresolved over six months. These audits are the USMS IGAs with the City of Mansfield, Texas; Plymouth County, Massachusetts; and Union County, New Jersey. These audits contained questioned costs of about $7.4 million and funds to be put to better use of about $819,000. We are working with USMS to resolve these audits.

Revised Management Decision

INS Select Enforcement Activities

In September 1995, we issued the INS Select Enforcement Activities Audit Report as resolved. In November 1996, the report was reclassified as unresolved because INS failed to provide the Audit Division with adequate documentation that the report's open recommendations were being implemented.

These recommendations addressed the following critical INS program activities: (1) identification of all deportable criminal aliens in the state prison systems in California, New York, Florida, Illinois, and Texas, (2) removal of fugitive criminal aliens under deportation proceedings, (3) effective enforcement of the employer sanctions fine structure, and (4) determination of the benefits of or alternatives to compliance inspections under the employer sanctions program. We continue to work with INS to resolve these issues.

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 3 $15,327,970
Issued during period 4 $53,512,005
Needing management decision during period 7 $68,839,975
Management decisions made during period:
Amounts management agreed to put to better use 2 $1,425,322
Amounts management disagreed to put to better use 10 $14,000,000
No management decision at end of period 4 $53,414,653

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Audit Statistics

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 22 $10,728,850 $1,445,891
Issued during period 22 $6,319,352 $1,826,888
Needing management decision during period 44 $17,048,202 $3,272,779
Management decisions made during period: --Amounts management agreed to recover (disallowed) 23 $4,918,586 $2,042,733
No management decision at end of period 21 $12,129,616 $1,230,046


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 41 136
Issued during period 55 247
Needing management decision during period 96 383
Management decisions made during period:
--Number management agreed to implement
571 236
No management decision at end of period 42 147

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