Drug Enforcement Administration Annual Financial Statement
Fiscal Year 1998

Report No. 99-25
September 1999
Office of the Inspector General


The Drug Enforcement Administration (DEA) is the lead Federal agency responsible for overall drug enforcement strategy and programs. Its mission is to enforce the controlled substance laws and regulations, disrupt the production and distribution of illegal drugs worldwide, and support non-enforcement programs aimed at reducing the availability of illicit substances. In FY 1998, the DEA had over 8,300 employees located in 53 countries and its annual budget increased slightly to $1.28 billion.

This audit report contains the Annual Financial Statement of the DEA for the fiscal year ended September 30, 1998. The audit was performed by KPMG LLP and resulted in an unqualified opinion on the balance sheet and a disclaimer of opinion on the other financial statements. The disclaimer on the other statements was issued because KPMG could not verify the FY 1998 beginning balances as a result of the disclaimer of opinion received on all DEA's FY 1997 financial statements (Office of the Inspector General Report No. 98-15).

During FY 1998, progress was made in correcting weaknesses identified in the prior year's audit. The overall number of reportable conditions decreased from 17 to 4, which includes a reduction in material weaknesses from 5 to 1. This decrease in reportable conditions reflects the agencywide commitment to improve financial reporting. A further commitment is still needed, particularly in the area of reconciling DEA's Fund Balance With Treasury.

The DEA noted as part of its overview that it has undertaken a four step strategy to ensure that all of its information technology systems and non-information technology systems are Year 2000 compliant. The DEA's goal was to be 100 percent Year 2000 compliant by March 31, 1999. The Office of the Inspector General is unable to provide any assurance as to whether DEA met this goal and all mission critical systems are compliant.

For FY 1998, new reporting formats as required by Office of Management and Budget Bulletin No. 97-01, Form and Content of Agency Financial Statements, were implemented. For FY 1997, DEA prepared a statement of financial position and statement of operations and changes in net position. For FY 1998, DEA prepared a balance sheet, statement of net cost, statement of changes in net position, statement of budgetary resources, and statement of financing. Accordingly, comparative financial statements are not presented or required this year.