Immigration and Naturalization Services
Annual Financial Statement
Fiscal Year 2000

Report No. 01-17
September 30, 2001
Office of the Inspector General

The Immigration and Naturalization Service (INS), a component of the United States Department of Justice, is responsible for the administration and enforcement of immigration laws. Its mission includes determining the admissibility of persons seeking entry into the United States, adjusting the status of legal non-citizens, and preventing the employment of individuals ineligible for admission. In FY 2000, the INS had approximately $4.6 billion in total budgetary resources, a 9 percent increase over the FY 1999 funding level of $4.2 billion.

This audit report contains the Annual Financial Statement of the INS for the fiscal year ended September 30, 2000. Under the direction of the Office of the Inspector General, the audit was performed by Urbach Kahn & Werlin LLP, Certified Public Accountants, and resulted in an unqualified opinion on the balance sheet and a qualified opinion on the statements of net cost, changes in net position, budgetary resources, and financing. The qualification resulted from the INS’s inability to substantiate the earned revenues offset portion of Immigration Program Costs because the INS did not have adequate records to support the number of pending applications at the beginning of the fiscal year. A qualified opinion means that the financial statements are presented fairly in all material respects, except for matters identified in the audit report. The INS received a qualified opinion on its FY 1999 financial statements (Office of the Inspector General Report Number 00-28).

During FY 2000, INS management expended tremendous efforts in planning and conducting a wall-to-wall physical inventory of pending applications. Although the count was a success, the effort was extremely costly, both in dollars and lost production. The INS manually counted approximately 2 million applications after several preliminary counts and a final September 30 count that shut down production at several sites for more than a week and caused delays in processing applications. Until an automated system for maintaining status of applications is in place, the INS will continue to face the challenge of annually conducting service-wide counts in order to achieve an unqualified opinion on its financial statements.

INS management has continued to make progress in correcting the number of material weaknesses previously reported, reducing it from four in FY 1999 to three this year. Although progress has been made, the INS still needs to make further improvement in certain areas including deferred revenue, financial management systems controls, general EDP controls, verification of intra-governmental transactions, documentation of accrual estimation, and controls over key performance measures. The auditors identified the first three items as material weaknesses and the other three as reportable conditions.

In the Report on Compliance with Laws and Regulations, the auditors reported that INS’s financial management systems did not comply with the requirements of the Federal Financial Management Improvement Act of 1996. Specifically, the auditors concluded that INS’s financial systems did not meet federal financial systems requirements and the U.S. Government Standard General Ledger requirements.

Similar to the prior year, INS’s Annual Financial Statement consists of a balance sheet, statement of net cost, statement of changes in net position, statement of budgetary resources, and statement of financing. However, comparative financial statements were not required this year and are therefore not presented.