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Immigration and Naturalization Service Annual Financial Statement
Fiscal Year 1998

Report No. 99-27
September 1999
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 1998, the INS had a direct budget authority of approximately $3.8 billion, a 15 percent increase over the FY 1997 funding level of $3.3 billion.

This audit report contains the Annual Financial Statement of the INS for the fiscal year ended September 30, 1998. The audit was performed by Urbach Kahn & Werlin PC, Certified Public Accountants, and resulted in a disclaimer of opinion. The auditors reported that the INS has not established effective internal controls to ensure accounting records and relevant documentation were maintained, and that transactions were accurately and completely recorded. The INS also received a disclaimer of opinion on its financial statements for FY 1997 (Office of the Inspector General Report Number 98-22).

During FY 1998, INS management began several initiatives to reduce its long-standing financial management weaknesses. These initiatives included restructuring its regional accounting operations to streamline financial management processes and reorganizing its headquarters accounting function to provide a focus on financial accounting and reporting. INS expects these initiatives to have long-term benefits which should improve the financial management processes at INS.

Progress was made in correcting material weaknesses reported in the FY 1997 audit report. The number of material weaknesses identified decreased from eight to five. Although progress has been made, a further commitment is still needed as material weaknesses continue to exist in significant areas including Fund Balance with Treasury, property and equipment, accounts payable, deferred revenue, and financial management systems controls.

The INS has noted as part of "Management's Overview" that all of its mission critical systems are Y2K compliant and all mission critical software applications have been corrected for Y2K. The OIG is unable to provide any assurance as to whether all mission critical systems will be compliant or that the INS is at minimal risk.

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, INS prepared a statement of financial position and statement of operations and changes in net position. For FY 1998, INS prepared a balance sheet, statement of net cost, statement of changes in net position, statement of budgetary resources, and statement of financing. Accordingly, comparative statements are not presented or required this year.