For the third straight year the Department of Homeland Security (DHS) has achieved a clean financial audit but an independent auditor also identified a number of deficiencies in internal control, the department’s Office of Inspector General (IG) said in a new report.
Homeland Security Secretary Jeh Johnson said in a statement on Tuesday that the clean audit opinion of DHS “is a remarkable achievement for the third largest department in the government,” adding that the teamwork that contributed to the audit result “reflects the Unity of Effort initiative that makes our department successful.”
The audit was performed by the public accounting firm KPMG LLP under contract to the DHS IG. Despite the clean opinion on all financial statements, the IG said that KPMG “issued an adverse opinion on DHS’ internal control over financial reporting because of material weaknesses in internal control.”
The material weaknesses are in the areas of financial reporting, information technology controls and financial system functionality, and property, plant and equipment. The audit also identified four other “significant deficiencies” in the areas of budgetary accounting, entity level controls, grants management, and custodial revenue and drawback.
KPMG said that DHS has taken corrective actions to fix the financial reporting weaknesses but said severe deficiencies remain at the Coast Guard, which “suffered from system functionality issues that were not sufficiently compensated for by manual internal controls.” Several other DHS components also continue to “experience challenges in financial reporting,” the auditor said.
In the area of IT controls and financial system functionality, Customs and Border Protection and the Federal Emergency Management Agency went from less severe deficiencies in 2014 to more severe deficiencies this year. Overall in DHS, the IT and financial system functionality weaknesses “represent an overall elevated IT risk to the Department,” KPMG said.
For the material weakness in property, plant and equipment, the Coast Guard continues to have issues here, although it has made a “significant accomplishment” in remediating activities related to enrolling property purchased before FY ’14 into the property subsidiary ledger, the report said.
The National Protection and Programs Directorate, which houses key cyber security services efforts used across the federal civilian government, also has deficiencies “affecting the identification and recording of PP&E for these programs” that the report said are “financial reporting in nature.”
The IG said that overall the department continued to improve its financial management in FY ’15. DHS concurred with the independent auditors’ conclusions and indicated that it will continue to make corrective actions in financial management and internal control, the IG said.