PROTECTING THE PUBLIC:

Treasury’s Counterterrorism Funding

Reports Were Inaccurate

OIG-01-081 July 26, 2001

Office of Inspector General

*******

The Department of the Treasury
Contents

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 1

Audit Report.................................................................................................................................. 2

Results in Brief.............................................................................................................................. 3

Background ................................................................................................................................... 4

Finding and Recommendations ................................................................................................. 6

Treasury Reports on Counterterrorism Funding Needed Improvement........................ 6

Recommendations ...............................................................................................................13

Appendices

Appendix 1: Objectives, Scope, and Methodology .......................................................16

Appendix 2: Finding Matrix ...............................................................................................17

Appendix 3: Management Response ..............................................................................18

OIG Comments to Management Response.............................................36

Appendix 4: Major Contributors to this Report...............................................................39

Appendix 5: Report Distribution.......................................................................................40

Abbreviations

Act National Defense Authorization Act of FY 1998

ATF Bureau of Alcohol, Tobacco and Firearms

BDR Budget Data Request

Customs U.S. Customs Service

FY Fiscal Year

GAO U.S. General Accounting Office

OIG Office of Inspector General

OMB Office of Management and Budget

PDD Presidential Decision Directive

Secret Service U.S. Secret Service

Treasury The Department of the Treasury
OIG Audit

Report

The Department of the Treasury

Office of Inspector General

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 2

July 26, 2001

James Sloan

Acting Under Secretary for Enforcement

Steven App

Acting Chief Financial Officer

Acts of domestic terrorism have resulted in deaths to American 

citizens, while terrorism overseas has taken an even heavier toll. The 

Administration has made the fight against terrorism a top national 

security priority and has sought more Federal resources to ensure the 

safety and security of the public and the Government from these 

devastating criminal acts. The Department of the Treasury (Treasury) 

plays an active role in counterterrorism activities.1 As such, Treasury 

is subject to reporting requirements under the National Defense 

Authorization Act of Fiscal Year (FY) 1998 (Act). This Act required the 

Office of Management and Budget (OMB) to provide an annual report 

to Congress describing counterterrorism-related programs, activities, 

priorities, and duplication of efforts government-wide. 

We completed an audit to evaluate the counterterrorism funding 

reports Treasury submitted to OMB. The Administration’s FY2001 

budget provided an estimated $9.3 billion for government-wide efforts 

to combat terrorism. OMB’s most recent report to Congress, in 

May 2000, showed that $440 million was requested in the FY2001 

President's Budget for Treasury’s counterterrorism activities. This was 

almost 5 percent of the total requested government-wide.

We performed our audit work from October 1999 through 

December 2000 at Treasury’s Departmental Offices, U.S. Customs 

Service (Customs), Bureau of Alcohol, Tobacco and Firearms (ATF), 

U.S. Secret Service (Secret Service), and OMB. See Appendix 1 for a 

 

1

In this report, we use the term ‘counterterrorism’ to mean all efforts to combat 

terrorism, including antiterrorism activities. 
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 3

more detailed description of the audit objectives, scope, and 

methodology.

Results in Brief

Treasury’s counterterrorism funding reports, as submitted to OMB, 

needed improvement. The submissions included inaccuracies that 

may have impacted the decisions Congress and others made while 

relying on the data. We identified several reasons Treasury’s reports 

were inaccurate, including: (1) program and budget personnel at both 

the Departmental and bureau levels did not work together to prepare 

the reports, (2) bureaus may not have used reliable methods for 

estimating counterterrorism funding, (3) oversight and review of the 

reports was not adequate, (4) guidance for report compilers was 

lacking, and (5) Treasury and bureau officials did not make the reports 

a high priority.

Accordingly, we recommend that Treasury Office of Enforcement and 

Office of Management officials place a higher priority on providing 

accurate information to OMB by: (1) ensuring budget and program 

personnel work together to prepare responses, (2) establishing reliable

methods for estimating counterterrorism funding, (3) defining oversight 

responsibilities, and (4) providing guidance and training to report 

compilers.

Treasury management agreed with the recommendations made in this 

report, as indicated in the Department’s consolidated response 

included as Appendix 3. When future OMB requests are received, 

Treasury will convene a meeting of interested parties to discuss the 

requests, resolve differing interpretations of issues, and lay the 

groundwork to ensure the data provided to OMB are as accurate and 

consistent as possible. Also, the Office of Enforcement will add to its 

Policies and Procedures Manual a discussion on the requests, 

including requirements for reporting, documentation, and oversight, as 

well as the meeting mentioned above. Enforcement will also send a 

memorandum to the bureaus explaining roles and responsibilities in 

the reporting process and expectations for documentation the bureaus 

should develop and maintain. All of these actions will be completed by 

September 30, 2001. 
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 4

ATF and Customs also provided comments to our draft report 

indicating disagreement with certain factual information and 

conclusions. In addition, we received comments from the Acting Under 

Secretary for Enforcement, who expressed concern that our draft 

report did not fully reflect improvements the Department had made in 

its reporting of counterterrorism funding. Finally, we received 

comments from the Departmental Budget Director containing a number 

of observations about the counterterrorism reporting process. We 

considered each response and, where appropriate, made changes to 

our report. However, these changes did not affect our overall 

conclusions. These other comments by the bureaus and Treasury 

officials, and our evaluation of the specific points raised, are also 

included in Appendix3.

Background

Over the last several years, funding to combat terrorism has steadily 

increased. The FY 2001 President's Budget provided $9.3 billion for 

government-wide efforts to combat terrorism, a 43 percent increase 

from 4 years ago. Treasury's funding for counterterrorism has also 

increased from $341 million in FY1998 to $440 million in the FY2001

President's Budget.

In a 1997 report to Congress, the U.S. General Accounting Office 

(GAO) found that the amount of Federal funds being spent on 

programs and activities to combat terrorism was unknown and difficult 

to determine for several reasons.2 These reasons included (1) a lack 

of a uniform definition of terrorism and (2) the inclusion of these 

expenditures within larger categories that did not readily allow 

separation. Federal agencies were not required to isolate or 

separately account for their terrorism-related programs and activities. 

The lack of allocation made it difficult to determine how much the 

Federal government budgeted and spent to combat terrorism. 

Following the GAO report, it became apparent that more effort was 

needed government-wide to review counterterrorism activities and 

funding data. To address these concerns, Congress amended the Act 

to require that OMB obtain national information on counterterrorism. 

 

2 COMBATING TERRORISM: Spending on Governmentwide Programs Requires 

Better Management and Coordination (GAO/NSIAD-98-39; December 1997). 
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 5

The Act required OMB to establish and use a reporting system for 

executive agencies on the budgeting and expenditure of funds for 

counterterrorism programs and activities. The President is required to 

submit an annual report to Congress containing the information OMB 

collects. The report is also to identify any priorities and duplication of 

efforts with respect to the programs and activities. To meet the 

requirements of the Act, OMB uses the Budget Data Request (BDR) 

process. 

OMB’s process for collecting counterterrorism data through a BDR was 

designed to review programs and make funding recommendations for 

high priority national security issues that cross agency lines. The 

crosscut ensures that recommendations are made in a 

government-wide context rather than agency by agency. Besides 

using the data for its own budget review, OMB also provides the data 

to interagency working groups, led by the National Security Council. 

The working groups use the data to: (1) identify gaps and duplications 

in the national effort, and (2) develop detailed programmatic initiatives 

to increase the Government’s effectiveness in countering 

unconventional threats. The working groups also prioritize the 

initiatives and make funding recommendations to affected agencies. 

Since Congress passed the Act, OMB has prepared three Annual 

Reports to Congress on Combating Terrorism. Each report describes 

terrorism-related programs and activities, priority areas, and 

duplication of efforts in implementing such programs. 

In addition to the Act, the President has issued directives to executive 

agencies on terrorism. Specifically, Presidential Decision Directives 

(PDD) 39, 62, and 63 address counterterrorism issues. These PDD 

requirements are summarized in Chart 1.
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 6

Chart 1: Presidential Decision Directives

PDD Number Requirements

PDD 39

(June 1995)

Established a central blueprint for counterterrorism. 

Directed the Secretary of Treasury to: (1) prevent 

unlawful traffic in firearms and explosives, 

(2) protect the President and other officials, and 

(3) enforce laws related to imports and exports. 

PDD 62

(May 1998)

Reinforced the mission of many U.S. agencies in 

defeating terrorism and created a new, more 

systematic approach to fighting terrorism. 

PDD 63

(May 1998)

Established an approach to ensure the U.S. has the 

ability to protect its critical infrastructure to preserve 

the Government’s ability to perform national security 

missions and ensure general public health and safety. 

Reducing violent crime and the threat of terrorism is one of Treasury’s 

strategic goals. Counterterrorism activities are inherent in many 

bureau activities. Approximately 75 percent of Treasury’s 

counterterrorism-related activities are conducted by the Secret Service, 

which provides physical security for the President, the Vice President, 

and other dignitaries. The Secret Service gathers intelligence, 

performs analyses, and conducts investigations involving threats 

against its protectees. The Secret Service also protects the national 

financial infrastructure through its financial crime and counterfeiting 

investigations. Other counterterrorism-related activities Treasury 

conducts include: (1) investigating explosives-related crimes (ATF); 

and (2) monitoring potential terrorist threats involving import of illegal 

and dangerous articles, including weapons of mass destruction, and 

the export of technology that could be misused by terrorists (Customs). 

Finding and Recommendations

Finding Treasury Reports on Counterterrorism Funding Needed 

Improvement

Treasury’s reports on counterterrorism funding, as submitted to OMB, 

were not accurate. Consequently, they did not help OMB meet the 

intent of the Act. Also, Treasury bureaus did not always follow OMB 

instructions when preparing the reports. As a result, Treasury’s 
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 7

inaccurate data may have impacted the decisions of Congress and 

other users of the OMB Annual Report who relied on the data for 

program planning and budgetary purposes. Many factors contributed 

to Treasury’s reporting problems, including: (1) program and budget 

personnel at both the Departmental and bureau levels did not work 

together to prepare the reports, (2) bureaus may not have used reliable 

methods for estimating counterterrorism funding, (3) oversight and 

review was not adequate, (4) Treasury officials did not provide 

guidance or training to report compilers, and (5) officials did not 

consider the counterterrorism BDR to be a priority.3

Treasury Reports Did Not Meet Intentions of the Act or Follow 

OMB Instructions

The Act intended that OMB would collect accurate data from all 

Federal agencies participating in counterterrorism activities to be used 

in programmatic and budgetary decision-making. To meet the intent of 

the law, all Federal agencies need to submit complete and accurate 

data through the BDR process. Treasury’s submissions to OMB, 

however, contained material errors. Our review of the existing BDR 

response files for counterterrorism funding and our inquiries with report 

compilers found the following discrepancies: 

• One report compiler combined spreadsheet subtotals with column 

aggregate totals which inflated the actual amount included in one 

report by $161.4 million. 

• One bureau over-reported its counterterrorism funding. In 1997, 

the bureau reported single amounts for both antiterrorism and 

counterterrorism because they could not distinguish amounts for 

the two. However, in 1998, the bureau appeared to double-count 

some numbers, once as counterterrorism and once again as 

antiterrorism. Although bureau officials stated they split the 

numbers evenly between the two categories, rather than

double-counting, our analysis of the reports does not support this. 

The bureau could not provide records to explain how the numbers 

were calculated. Furthermore, bureau staff told us the numbers 

may have been duplicated because the compiler did not see 

counterterrorism and antiterrorism as being mutually exclusive. 

Without supporting documentation, it is not possible to determine 

 

3

 See Appendix 2 for a matrix showing the weaknesses or discrepancies we identified 

at Departmental Offices and three Treasury law enforcement bureaus.
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 8

how the numbers were generated. It appears that the bureau 

over-reported funding by at least $33.5 million and possibly as 

much as $156.9 million. 

• One report contained two spreadsheet-input entry errors. The first 

error resulted in understating one bureau's funding by $20 million. 

The other error overstated another bureau's funding by 

$190 million. 

• One report compiler reclassified $4 million of research and 

development expenditures from a previous report and combined it 

with a different category in the current report because he could not 

provide the required description of the research and development 

activity. 

OMB provided specific instructions in its BDRs, with the intention of 

gathering comparable data from all Federal agencies. Treasury 

bureau officials, however, did not always follow OMB’s instructions 

when reporting counterterrorism funding. For example, employees at 

one bureau stated that OMB's definition of Weapons of Mass 

Destruction was not clear compared to a definition in the United States 

Code.4 If the program was limited to OMB’s definition, then the bureau 

had no resources dedicated to the program. However, if the United 

States Code definition was used, then the bureau would have funding 

for the program. Rather than following OMB’s definition, the bureau 

reported funding based on the Code definition. Furthermore, OMB 

specifically requested that each bureau provide a narrative explaining 

the methodology used to determine counterterrorism funding. In 1997 

and 1998, one bureau did not explain its methodology. Two other 

bureaus included an explanation in their 1997 reports, but did not 

include the narrative in the 1998 reports. In 1999, OMB revised its 

method of collecting data to use Microsoft Access databases to make 

reporting consistent. As a result, all bureaus were able to follow 

OMB’s instructions in 1999.

OMB officials also stated that methodologies for compiling the data 

changed each year. Accordingly, they expected each agency and 

bureau to reevaluate its methodology for identifying counterterrorism 

funding and reporting. However, at least one Treasury bureau did not 

revise its methodology, as needed. Instead, the bureau continued to 

use the data collected in prior years as baseline information for future 

 

4

 Title 18 United States Code 2332a "Use of Weapons of Mass Destruction."
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 9

reports. We found significant errors in the prior year data that were 

carried forward to later reports. Using outdated methodology could 

corrupt the data reported for future years and prevent it from being 

easily combined with other counterterrorism funding reports 

government-wide. 

Inaccuracies in Treasury Reports Impact Congress and Others

The decisions of Congress and other users of OMB's Annual Report to 

Congress on Combating Terrorism may have been impacted by relying 

on inaccurate data Treasury reported for program planning and 

budgetary purposes. If Treasury does not provide accurate information 

on both the ongoing counterterrorism programs and the amount of 

funding these programs receive, it could impact the decisions of the 

National Security Council working groups and, ultimately, the funding 

that Treasury receives for its programs. 

In March 1999, GAO officials testified before Congress that the 

executive branch had made progress toward improving the way it 

managed and coordinated the nation’s counterterrorism efforts since 

implementation of the OMB reporting process.5 They stated that 

OMB’s reports provided unprecedented and helpful insights into 

enacted funding and budget requests. GAO noted, however, that it 

had not fully evaluated the processes or methodologies associated 

with the OMB reports and, thus, could not comment on whether they 

accurately and fully captured the costs to combat terrorism. In this 

audit, we attempted to evaluate Treasury’s processes and 

methodologies for compiling and reporting data to OMB. However, 

bureau officials could not provide adequate supporting documentation 

used to compile the BDR responses, nor could they explain the 

amounts reported or the methodologies used. Officials explained that 

high staff vacancy rates, turnover in budget formulation personnel, and 

poor record documentation and filing complicated their retrieval of files 

supporting BDR responses. Because we could not obtain the needed 

supporting documentation or an understanding of the methodologies 

used to compile the data, we were also unable to fully evaluate the 

information Treasury provided to OMB. 

 

5 COMBATING TERRORISM: Observations on Federal Spending to Combat 

Terrorism (GAO/T-NSIAD/GGD-99-107; March 11, 1999).
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 10

Unless bureaus maintain adequate supporting documentation, as 

required by the United States Code, OMB, and the Treasury 

Department, Treasury officials will be unable to verify the validity of 

reported data and manage the BDR response process.6 

Consequently, Treasury senior officials are less likely to identify issues 

quickly and take timely corrective actions. Treasury needs to ensure 

that bureaus appropriately preserve all records as evidence of the 

decisions and activities of the Government. 

Given the mathematical errors we identified, we believe Treasury’s 

reports materially misstated the Department’s funding. For example, in 

the 1998 report to OMB, Treasury may have overstated its funding 

levels by up to 15 percent, based upon the estimated $488.3 million in 

errors that we identified, as shown in Chart 2.

Chart 2: Estimated Overstatements

In 1998 Report7

(in millions)

Total Reported $3,171.0

Estimated Overstatements $488.3

Percentage Overstated 15.4%

Many of these errors were carried forward to the 1999 report as well. 

Because of these misstatements, we believe that Treasury officials 

need to make a greater effort to ensure future counterterrorism funding 

reports are accurate and useful. 

Several Factors Prevented Accurate Reporting

We identified several reasons why Treasury reporting on 

counterterrorism funding was not accurate. Most importantly, the 

budget and program personnel within Treasury did not always work 

together to prepare the reports. At the Departmental level, the Offices 

of Enforcement and Management did not coordinate with each other to 

 

6

All Treasury bureaus are required to maintain adequate records by: (1) 44 United 

States Code Section 3101, Records Management by Federal Agencies; (2) OMB 

Circular A-130, Management of Federal Information Resources; and (3) Treasury 

Directive 80-05, Records and Information Management Program. 

7

Includes Customs, ATF, and Secret Service, for FYs 1997-2000 as reported in 

Treasury's 1998 report to OMB.
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 11

provide bureaus with instructions or guidance for responding to the 

BDRs or to review the bureaus’ responses. This type of coordination 

also did not occur at the bureau level. In one bureau, for instance, 

budget staff prepared reports with little or no input from program staff. 

At another bureau, special agents prepared the response without 

budget staff input or review. This could lead to (1) some 

counterterrorism programs or activities being inadvertently excluded

from the reports, if budget staff were not aware of them, or 

(2) improper reporting of budget amounts, if program personnel were 

not familiar with them. In fact, OMB instructed comptrollers to work 

closely with bureaus to collect data on activities to address this 

concern.

Even when budget and program staff work together, they need to 

carefully consider the data they use. In 1999, a budget staff member 

relied on funding information program staff provided to him, even 

though the estimates were created in1997. He did not verify the 

accuracy of the numbers or seek more up-to-date data. We 

determined that the numbers used were not always accurate. When 

working together, program personnel should ensure that all 

counterterrorism programs are included in the report and adequately 

explained, while budget staff should ensure that the funding reported is 

accurate and based on a sound methodology. 

Another factor that limited the accuracy of Treasury’s submissions was 

that the methods Treasury officials used to estimate counterterrorism 

funding may not have been reliable. OMB allowed agencies to 

pro-rate funding in their counterterrorism reports because they 

recognized that most agencies did not have programs and activities 

solely devoted to combating terrorism. At Treasury, the bureau 

officials needed to pro-rate funding because their accounting systems 

did not accumulate data on counterterrorism activities. However, 

bureau staff did not document and could not explain their 

methodologies for pro-rating funding. As a result, it was not possible 

for us to evaluate whether their estimates were reasonable. 

We also noted that there was not adequate oversight and review of the 

data Treasury reported to OMB. We identified several errors during 

our review that neither bureau nor Treasury officials had corrected. 

Although the Assistant Secretary for Management and Chief Financial 

Officer was required to clear all budget-related submissions before 
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 12

they were transmitted to OMB, we learned that staff in the Office of

Management did not substantiate bureau responses. An official from 

the Office of Management stated that his office did not have enough 

staff to review the bureaus’ supporting documentation. However, staff 

from one bureau stated that they expected Treasury Departmental 

officials to review the counterterrorism information. Because 

departmental officials did not take issue with the bureau’s responses, 

bureau staff were confident that their BDR responses were adequate. 

Another issue we identified was that bureau staff needed guidance and 

training from Treasury to prepare more accurate and consistent 

reports. Our review found several instances where report compilers 

needed a greater understanding of reporting definitions and acceptable 

compiling methodologies. For example:

• Some staff stated that they did not know how to accurately report 

their bureau’s activities because they were not sure if or how 

firearms trafficking fit within the OMB definition of counterterrorism.

• Compilation of data to respond to the BDRs may not have been 

consistent from year to year. At one bureau, a different analyst 

prepared each BDR response. The analysts who compiled prior 

years’ BDR responses generally were not available to explain their 

methodologies. Neither Treasury nor the bureaus provided written 

guidance to report analysts explaining compilation and reporting 

methods. Also, as previously discussed, bureaus did not always 

maintain complete and properly documented files for the BDR 

reporting process to help new analysts follow prior years’ 

processes.

If Treasury Enforcement and Management officials worked together to 

address these issues in internal guidance and training, then bureau 

personnel could more accurately respond to OMB’s requests for data, 

and OMB could be assured that the data it received from Treasury 

were consistent. 

Taken together, all of these issues lead us to believe that Treasury and 

some bureau officials did not consider the counterterrorism BDR to be 

a high priority. Some officials told us that responding to the 

counterterrorism BDR was not as high a priority as other work that they 

had to do. Because they did not place a priority on this action, they did 
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 13

not give it adequate attention to ensure the accuracy of the reported 

information. One Treasury official explained to us, however, that the 

counterterrorism BDR is, in fact, very important, because the data is 

used by the White House, Congress, and OMB to determine policy and 

program needs. 

Unless Treasury and bureau officials improve the reporting process, 

Treasury will likely continue to incorrectly report counterterrorism 

funding. Treasury Enforcement and Management officials need to 

review how BDR responses are compiled and calculated and improve 

internal controls to ensure accurate reporting. Taking these steps 

would help ensure that Congress and other decision-makers are 

provided accurate funding information on Treasury counterterrorism 

programs. 

Recommendations

Treasury Office of Enforcement and Office of Management officials 

should place a higher priority on providing complete and accurate 

information in response to OMB's requests for counterterrorism funding 

data. Specifically, the Under Secretary for Enforcement and the 

Assistant Secretary for Management and Chief Financial Officer 

should:

1. Ensure that budget and program personnel work together to 

prepare counterterrorism BDR responses.

Management Comments

Treasury concurred with this recommendation. When future BDRs 

are received, Treasury will convene a meeting of appropriate 

budget and program representatives from the enforcement 

bureaus, the Office of Enforcement, Departmental Budget, and 

Departmental Budget Execution. The purpose of the meeting will 

be to discuss the request, resolve differing interpretations of issues, 

and ensure the data provided to OMB is as accurate and consistent 

as possible. Additional meetings will be held as needed. These 

actions will be completed by the end of this fiscal year.
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 14

OIG Comment

We consider this recommendation to have a management decision 

with a projected final action date of September 30, 2001.

2. Establish reliable methods for estimating counterterrorism 

expenses. 

Management Comments

Treasury concurred with this recommendation and stated that the 

above referenced meeting(s) should address this recommendation 

as well.

OIG Comment

We consider this recommendation to have a management decision 

with a projected final action date of September 30, 2001.

3. Clearly define oversight and review responsibilities to ensure that 

staff preparing the reports follow OMB directions and report 

accurate information. 

Management Comments

Treasury concurred with this recommendation. To address it, the 

Office of Enforcement will assume the lead on the counterterrorism 

issue now and in the future, with the Office of Budget continuing to 

function as the interface with OMB. Office of Enforcement officials 

will also include an addition to its Policies and Procedures Manual, 

addressing the meeting, reporting, documentation, and oversight 

requirements for BDRs. They will do this by September 30, 2001. 

Prior to the end of September, Enforcement will also send a 

memorandum to the bureaus explaining roles and responsibilities in 

the BDR process and will include Enforcement’s expectations of 

methods/procedures documentation for the bureaus to develop and 

maintain.
Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 15

OIG Comment

We consider this recommendation to have a management decision 

with a projected final action date of September 30, 2001.

4. Provide guidance to ensure report compilers understand reporting 

definitions and acceptable compilation methodologies. 

Management Comments

Treasury concurred with this recommendation. A number of the 

actions planned for other recommendations should combine to 

address the concerns with guidance. Through documenting 

responsibilities and bringing all parties together under the 

leadership of the Office of Enforcement, Treasury expects future 

requests to be handled with a high degree of accuracy, 

consistency, and reliability. 

OIG Comment

We consider this recommendation to have a management decision 

with a projected final action date of September 30, 2001.

* * * * * *

We appreciate the cooperation we received from Treasury officials 

during this audit. If you wish to discuss this report, you may contact 

me at (202) 927-5400 or Ms. Roberta N. Rickey, Regional Inspector 

General for Audit (Chicago), at (312) 886-6300. Major contributors to 

this report are listed in Appendix4. 

Marla A. Freedman

Assistant Inspector General for Audit
Appendix 1

Objectives, Scope, and Methodology

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 16

The overall objective of this audit was to evaluate the counterterrorism 

funding reports Treasury submitted to OMB. Specific objectives were 

to determine whether: (1) Treasury bureaus followed OMB guidance to 

determine, compile, and report funding for counterterrorism; and 

(2) Departmental officials provided appropriate oversight over bureau 

activities to ensure coordination.

Although most Treasury bureaus reported counterterrorism funding, 

this review focused on ATF, Customs, and the Secret Service, 

because these bureaus reported the greatest percentage of 

counterterrorism funding.

Chart 3: Treasury Counterterrorism Funding8

Bureaus Percent

Secret Service 79

ATF 8

Customs 6

All Other Bureaus 7

Treasury Total 100

Our review generally covered each bureau's activities and funding to 

combat terrorism for FY1997 through FY1999 and estimates for 

FY 2000. 

We reviewed counterterrorism funding reports and supporting 

documentation, when available, at each of the three bureaus. We 

compared these reports to OMB's budget data requests. We also 

reviewed Treasury's consolidated reports submitted to OMB. We 

interviewed officials at OMB, Treasury, and the three bureaus 

regarding the BDR reporting process. We also interviewed Treasury 

Departmental officials to discuss their roles and responsibilities for 

overseeing counterterrorism activities and BDR reporting.

We conducted our audit between October 1999 and December 2000 in 

accordance with generally accepted government auditing standards. 

Identified weaknesses and discrepancies in the reporting process are 

noted accordingly.

 

8

 Supporting data obtained from OMB in December 1999. 
Appendix 2

Finding Matrix

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 17

Issue Departmental 

Offices

ATF Customs Secret

Service

Mathematical errors (in millions)

Subtotals included in column aggregate totals, 

overstated by $161.4 1998

Duplicated antiterrorism and counterterrorism 

funding, overstated by at least $33.5 and possibly 

as much as $156.9

1998-99

Spreadsheet-input entry error, overstated by 

$190.0 1998

Spreadsheet input entry error, understated by 

$20.0 1998-99

Reclassified unknown funding into another 

category, $4.0 1999

Did not follow BDR instructions

No or inadequate narrative explaining the source 

and methodology of reported funding 1997-98 1998 1998

No distinction made between antiterrorism and 

counterterrorism funding 1997-99

Lack of documentation 1997-99 1997-99 1999

Budget and program staff did not work

together 1997-99 1997-99 1997-99

Potentially unreliable methodology used 1997-99 1997-99

Lack of review/oversight 1997-99 1998-99 1997, 1999 1999

Guidance needed

Employees were confused with OMB's definitions

1997-99

Inconsistent data compilation from year to year

1997-99 1997-99

Lack of priority 

1997-99 1997-99
Appendix 3

Management Response

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Note: OIG 

Comments 

appear at the 

end of this 

Appendix.
Appendix 3

Management Response

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Appendix 3

Management Response

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Appendix 3

Management Response

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Comment 1.
Appendix 3

Management Response

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Appendix 3

Management Response

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Comment 2.
Appendix 3

Management Response

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Comment 3.
Appendix 3

Management Response

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Comment 4.

Comment 5.
Appendix 3

Management Response

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Appendix 3

Management Response

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Appendix 3

Management Response

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Appendix 3

Management Response

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Comment 6.

Comment 6.
Appendix 3

Management Response

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Comment 7.

Comment 8.
Appendix 3

Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 31

Comment 9.

Comment 10.
Appendix 3

Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 32

Comment 11.

Comment 12.

Comment 13.

Comment 11.
Appendix 3

Management Response

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Appendix 3

Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 34
Appendix 3

Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 35
Appendix 3

OIG Comments to Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 36

OIG Comments: 1. While ATF officials stated in their response that they did not doublecount funds in both the antiterrorism and counterterrorism 

categories, they were unable to provide documentation to support 

this. In fact, ATF staff told us that the numbers may have been 

duplicated because the compiler did not see counterterrorism and 

antiterrorism as being mutually exclusive. Also, our analysis of 

ATF’s reports does not support their contention. We were able to 

track a total of $33.5 million from the 1997 report forward to the 

1998 report, where it was reported twice, once in each category. 

Had ATF split the amount 50/50, ATF would have reported only 

$16.75 million in each category, rather than $33.5 million. Because 

ATF did not have adequate documentation supporting its 

counterterrorism funding reports, we were unable to track other 

numbers through the reports, but have no reason to believe they 

were split 50/50, rather than double-counted. We made some 

changes to our example to better clarify our concerns and to 

quantify the potential dollars involved.

2. We did not change this example, because while ATF’s explanation 

may be correct, the report compiler originally explained to us what 

he did and why he did it. He did not provide the explanation that 

ATF now offers and no documentation was provided to us to 

explain the reclassification.

3. We modified our report to reflect that ATF did not agree with OMB’s 

definition and that they used the United States Code definition 

instead.

4. While ATF’s response indicates that OMB’s guidance on firearms 

trafficking is clear and that they have followed that guidance, we did 

not make changes to our report. As stated in our example, ATF 

staff responsible for the BDR reports told us they were not sure if 

firearms trafficking was applicable to counterterrorism reporting. 

Furthermore, there were no records with which to verify how or if 

ATF included trafficking expenditures in its funding reports, so it 

was not possible for us to know if the ATF submissions were 

consistent with OMB’s guidance.

5. We modified our report to address ATF’s concerns by deleting this 

example.
Appendix 3

OIG Comments to Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 37

6. While Customs states that it does not concur on these issues, the 

response does indicate that future counterterrorism funding reports 

will address our reported concerns.

7. Although Customs response states that all BDR responses are 

thoroughly coordinated and vetted, we were not provided with any 

evidence of coordination or review/oversight activities. Thus, we 

did not modify our report.

8. We modified our report to remove references to Customs lack of 

priority with respect to BDR reports.

9. While we agree that we found errors primarily at one bureau, our 

audit objective was to evaluate Treasury’s processes and 

methodologies for compiling and reporting counterterrorism funding 

data to OMB. Accordingly, the scope of our audit was more limited 

than an audit designed to render an opinion on Treasury’s overall 

accounting of counterterrorism funds. Nevertheless, we concluded 

that as a result of the mathematical errors identified by our audit, 

Treasury’s reports to OMB materially misstated the Department’s 

funding of counterterrorism activities. As discussed in our finding, 

Treasury did not have adequate controls to identify and correct 

these errors before including the bureau’s information in its overall 

reports.

10. We modified our report to reflect that the bureaus followed OMB 

instructions in 1999.

11. In both of these cases, the Office of Enforcement states that 

guidance was adequate. While OMB’s instructions to Treasury, 

and in turn the bureaus, may have been clear, Departmental 

guidance to the bureaus for implementing the instructions was not 

adequate in some areas. These areas include program and 

budget coordination, establishment and documentation of 

methodologies, clarification of reporting definitions, and oversight 

and review responsibilities.

12. We did not change the report to indicate that progress has been 

made in having budget and program personnel work together to 

prepare counterterrorism BDR responses, because we have 

received no evidence of such progress.
Appendix 3

OIG Comments to Management Response

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 38

13. While we understand the Office of Enforcement’s point that OMB 

should take the lead in establishing methodology, we are not able 

to direct recommendations to OMB. However, we do encourage 

Treasury to consult with OMB when establishing departmental 

reporting methodologies as appropriate to ensure they meet 

OMB’s needs.
Appendix 4

Major Contributors to this Report

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 39

Chicago Regional Office

Roberta Rickey, Regional Inspector General for Audit

Janice Miller, Audit Manager

Lynn Richardson, Acting Audit Manager

Patrick Nadon, Auditor

Claire Schmidt, Auditor

Gary Wilk, Auditor
Appendix 5

Report Distribution

Counterterrorism Reporting Needs Improvement (OIG-01-081) Page 40

Department of the Treasury

Office of the Under Secretary of the Treasury for Enforcement

Office of the Assistant Secretary of the Treasury for

 Management and Chief Financial Officer

Office of Accounting and Internal Control

Office of Strategic Planning and Evaluations

Office of Budget

Bureau of Alcohol, Tobacco and Firearms

Director

Assistant Director, Office of Inspection

United States Secret Service

Director

Special Agent in Charge, Office of Inspection

United States Customs Service

Acting Commissioner

Director, Evaluations Oversight, Office of Planning

Office of Management and Budget

Budget Examiner