Senators Hail the Department of Homeland Security for Becoming Ready For Its First Full Financial Audit

Achievement means DHS is a major step closer to achieving a clean audit

WASHINGTON – Today, Sens. Tom Carper (D-Del.), Scott Brown (R-Mass.) and Ron Johnson (R-Wis.) hailed the Department of Homeland Security (DHS) for its achievement of becoming audit-ready this year, which means the agency will be able to conduct a financial audit for the first time since its establishment in 2002. In September o f 2011, Sens. Carper and Brown offered an amendment to the Homeland Security Authorization Act, the DHS Audit Requirement Target (DART) Act, which would require the DHS to obtain and pass full audits for its financial statements. The Senators also introduced a free-standing bill last year with the same language. The Department of Defense (DOD) remains the only federal agency that is unable to conduct an audit.

“An agency’s ability to keep track of its finances is a key ingredient for curbing waste and fraud,” said Sen. Carper. “With a lot of hard work and the attention of its leadership, the Department of Homeland Security now has accounting and financial statements in good enough order to conduct a full financial audit, a first for the Department. I am encouraged by the remarkable progress that the agency has made – accomplishing its goal to be audit-ready two years early. I hope the agency’s momentum continues as it moves to the next critical step of passing an audit. Furthermore, I hope the Department of Defense, which still has yet to achieve this same goal, follows the Department of Homeland Security’s examples and makes progress on getting its books together. As we work to trim budgets and reduce deficits, agencies across the federal government must improve their financial management practices to avoid squandering precious taxpayer resources and see where they can do more with less. We will also continue to urge the Department of Defense to follow suit.”

“I am encouraged that following legislative action, the Department of Homeland Security (DHS) has finally made itself accountable to the taxpayers by being able to conduct a full financial audit,” said Sen. Brown. “I will continue to ensure that all federal agencies’ financial statements are auditable so that we can pursue vigorous oversight to prevent waste and fraud of hard-earned taxpayer dollars.”

“Before coming to the Senate, I spent 31 years running a successful manufacturing company. I know the value of a complete audit of a company’s operations,” said Sen. Johnson. “That’s even more true when you’re talking about a federal agency that has never had a complete audit. I’m gratified that the Department of Homeland Security is now ‘audit ready,’ and I look forward to getting a better understanding of the department’s operations, so Congress can act to reduce waste and increase efficiency.”

The Government Accountability Office (GAO) has placed DHS financial management on its “high risk” list for waste, fraud, abuse, or mismanagement for the past nine years. Moreover, the DHS has never been able to conduct a department-wide audit despite the clear requirement to do so by the Chief Financial Officers Act of 1990.

Last month, Department of Homeland Deputy Chief Financial Officer Peggy Sherry sent a letter to Sen. Carper to inform him of the agency’s latest accomplishment. A copy of that letter follows:

February 16, 2012

The Honorable Tom Carper
United States Senate
Washington, DC 20510

Dear Senator Carper:

In November 2011, the Department of Homeland Security earned a qualified opinion on its FY 2011 Consolidated Balance Sheet and Statement of Custodial Activity. This milestone achievement allows the Department to pursue a full scope audit, as required by DHS Financial

Accountability Act of2004. In FY 2012, the Office of the Inspector General is expanding its audit to include the Statements of Budgetary Resources, Net Cost, and Changes in Net Position, bringing DHS closer to achieving compliance with the law, as well as improving transparency and accountability for the Department’s resources.

When the Department stood up in 2003, we inherited 30 significant deficiencies in internal controls over financial reporting. Eighteen of those deficiencies were so severe they were considered material weaknesses. We are committed to correcting these deficiencies, and

DHS continues to work collaboratively with Congress, the Government Accountability Office, the Office of Management and Budget, the DHS Inspector General, and our independent auditor to implement corrective actions to remediate remaining internal control weaknesses.

To date, DHS reduced the number of material weaknesses in internal controls from 18 to 5, and increased the Department’s auditable balance sheet balances to approximately 90 percent in FY 2011. These accomplishments ultimately earned the Department the qualified opinion on its FY 2011 Consolidated Balance Sheet and Statement of Custodial Activity, and allows us to take the next step towards obtaining an unqualified opinion on all financial statements.

I am also pleased to report that the Department is in compliance with the Improper

Payments Elimination and Recovery Act (IPERA). DHS has reduced estimated improper payments from 7.0% in FY 2008 to under 1.5% in FY 2011. We are developing additional measures-such as risk-based analytic tools and stronger internal controls-to further reduce the probability of future improper payments. Additionally, the Department has recovered nearly all, 94%, of high-dollar overpayments identified in the Secretary’s quarterly report to the DHS OIG, OMB, and the public.

I am extremely proud of the dedication and hard work of the DHS financial management community, without which DHS would not have been able to achieve the qualified opinion in FY 2011, and which made this expanded audit possible. We are committed to continuing to strengthen and mature financial management across the Department to ensure strong stewardship of the resources entrusted to us and to improving the systems and processes used for all aspects of financial management to demonstrate the highest level of accountability and transparency.

I appreciate your interest in this matter and look forward to working with you on future homeland security financial management issues.


Peggy Sherry
Deputy Chief Financial Officer