U.S. Citizenship and 

Immigration Services' 

Management Letter for DHS' 

FY 2014 Financial Statements 

Audit 

April 21, 2015 

OIG-15-72 
 

 

 

 

 

HIGHLIGHTS
 

U.S. Citizenship and Immigration

Services’ Management Letter for DHS’ FY 2014 

Financial Statements Audit
 

April 21, 2015 

Why We 

Did This 

The Federal 

Government has a 

fundamental 

responsibility to be an 

effective steward of 

taxpayers’ dollars. 

Sound financial 

practices and related 

management 

operations, reliable 

financial systems, and 

effective internal control 

are essential for 

reliable, timely financial 

information that 

supports management 

decision making needed 

to achieve the 

Department of 

Homeland Security’s 

(DHS) mission. 

For Further Information: 

Contact our Office of Public Affairs 

at (202) 254-4100, or email us at 

DHS-OIG.OfficePublicAffairs@oig.dhs.gov 

What We Found 

KPMG LLP reviewed the U.S. Citizenship and Immigration 

Services (USCIS) internal control over financial reporting. The 

management letter contains five observations related to 

internal control and other operational matters for 

management’s considerations. 

KPMG LLP noted deficiencies and the need for improvement in 

certain USCIS processes. These deficiencies did not meet the 

criteria to be reported in the Independent Auditors’ Report on 

DHS’ FY 2014 Financial Statements and Internal Control over 

Financial Reporting, dated November 14, 2014, included in 

DHS’ fiscal year 2014 Agency Financial Report. These 

observations are intended to improve internal control or result 

in other operating efficiencies. 

www.oig.dhs.gov OIG-15-72 
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Washington, DC 20528 / www.oig.dhs.gov

APR 21 2015

MEMORANDUM FOR: Joseph Moore

Chief Financial Officer

U.S. Citizenship and Immigration Services

FROM: Mark Bell

Assistant Inspector General for Audits

SUBJECT: U. S. Citizenship and Immigration Services' Management

Letter for DHS' FY 2014 Financial Statements Audit

Attached for your information is our final report, U.S. Citizenship and

Immigration Services' Management Letter for DHS' FY 2014 Financial Statements

Audit. This report contains observations related to internal control deficiencies

that were not required to be reported in the Independent Auditors' Report on

DHS' FY 2014 Financial Statements and Internal Control over Financial

Reporting. Internal control deficiencies which are considered significant

deficiencies were reported, as required, in the Independent Auditors' Report,

dated November 14, 2014, which was included in the Department of Homeland

Security (DHS) fiscal year (FY) 2014 Agency Financial Report. We do not require

management's response to the recommendations.

The independent public accounting firm KPMG LLP conducted the audit of

DHS' FY 2014 financial statements and is responsible for the attached

management letter and the conclusions expressed in it.

Consistent with our responsibility under the Inspector General Act, we will

provide copies of our report to appropriate congressional committees with

oversight and appropriation responsibility over the Department of Homeland

Security. We will post the report on our website for public dissemination.

Please call me with any questions, or your staff may contact Paul Wood, Acting

Deputy Assistant Inspector General for Audits, at (202) 254-4100.

Attachment

OFFICE OF INSPECTOR GENERAL

Department of Homeland Security
KPMG LLP

Suite 12000

1801 K Street, NW 

Washington, DC 20006

KPMG LLP is a Delaware limited liability partnership,

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.

December 8, 2014 

Office of Inspector General 

U.S. Department of Homeland Security, and 

Chief Financial Officer 

U.S. Department of Homeland Security, U.S. Citizenship and Immigration Services 

Washington, DC 

Ladies and Gentlemen: 

In planning and performing our audit of the consolidated financial statements of the U.S. Department 

of Homeland Security (DHS or Department), as of and for the year ended September 30, 2014, in 

accordance with auditing standards generally accepted in the United States of America; the standards 

applicable to financial audits contained in Government Auditing Standards issued by the Comptroller 

General of the United States; and Office of Management and Budget (OMB) Bulletin No. 14-02, Audit 

Requirements for Federal Financial Statements, we considered the Department’s internal control over 

financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the 

circumstances for the purpose of expressing our opinion on the consolidated financial statements. In 

conjunction with our audit of the consolidated financial statements, we also performed an audit of 

internal control over financial reporting in accordance with attestation standards established by the 

American Institute of Certified Public Accountants. 

The U.S. Citizenship and Immigration Services (USCIS) is a component of DHS. During our audit we 

noted certain matters involving internal control and other operational matters, related to USCIS, that 

are presented for your consideration. These comments and recommendations, all of which have been 

discussed with the appropriate members of management, are intended to improve internal control or 

result in other operating efficiencies. These matters are summarized in the Table of Financial 

Management Comments on the following pages. The disposition of each internal control deficiency 

identified during our FY 2014 audit – as either reported in our Independent Auditors’ Report, or herein 

as a financial management letter comment – is presented in Appendix A. Our findings related to 

information technology systems have been presented in a separate letter to the DHS Office of Inspector 

General, the USCIS Chief Information Officer and Chief Financial Officer. 

Our audit procedures are designed primarily to enable us to form an opinion on the financial statements 

and on the effectiveness of internal control over financial reporting, and therefore may not bring to 

light all weaknesses in policies or procedures that may exist. We aim, however, to use our knowledge 

of USCIS’s organization gained during our work to make comments and suggestions that we hope will 

be useful to you. 

We would be pleased to discuss these comments and recommendations with you at any time. 

The purpose of this letter is solely to describe comments and recommendations intended to improve 

internal control or result in other operating efficiencies. Accordingly, this letter is not suitable for any 

other purpose. 

Very truly yours, 
 

 

 

U.S. Citizenship and Immigration Services 

Table of Financial Management Comments 

September 30, 2014 

TABLE OF FINANCIAL MANAGEMENT COMMENTS (FMC) 

Comment Page 

Reference Subject 

FMC 14-01 Deficiencies in the Recording of Property, Plant, and Equipment 2 

FMC 14-02 Deficiencies in the Timely Recording of Obligations 2 

FMC 14-03 Deficiencies in the Approval of Apportionment Entries to Federal Financial 3 

Management System (FFMS) 

FMC 14-04 Inaccurate and Unsupported Data in the CLAIMS 3 CLAIMS 4 and MFAS Systems 3 

FMC 14-05 Deficiencies in the Public and Confidential Financial Disclosure Financial Reporting 5 

Process 

APPENDIX 

Appendix Subject Page 

A Crosswalk – Financial Management Comments to Active Notices of Finding and 6 

Recommendation (NFRs) 

1
 
U.S. Citizenship and Immigration Services
 

Financial Management Comments
 

September 30, 2014
 

FMC 14-01 – Deficiencies in the Recording of Property, Plant, and Equipment (Notice of 

Finding and Recommendation (NFR) No. U.S. Citizenship and Immigration Services 

(USCIS) 14-01) 

During the review of prior period adjustments, we identified the following: 

•	 The development of National Appointment Scheduling System Release 1.0.0.0 was not 

recorded timely and costs were not properly capitalized. 

•	 The disposal of Requirements Improvement Program Release 1.0 was not recorded 

timely and internal use software was overstated. 

•	 The acquisition and depreciation of equipment was not recorded timely. 

We performed testwork over internal use software additions as of June 30, 2014 and 

noted the following: 

•	 The deployment of Enterprise Service Bus – Lockbox Intake Service Release 2.0 was not 

recorded timely. 

•	 The deployment of Freedom of Information Processing System Release 7.1 was not 

recorded timely. 

Recommendations: 

We recommend that USCIS: 

•	 Continue with its newly established Release Planning Review approval process, as 

documented in the revised Office of Information Technology internal use software 

Standard Operating Procedure dated April 1, 2014. The newly established Release 

Planning Review approval process requires that internal use software reportable 

releases are identified prior to the onset of any software development efforts and 

therefore mitigates the re-occurrence of this condition. 

•	 Ensure personnel are aware of policies and procedures related to the receipt of 

assets, and change in the status of assets. This includes the deployment of software 

or the impairment or disposal of an asset, which must be reported, recorded, and 

documented at the time the asset was received or the status changed. Those 

personnel identified as having responsibility for this reporting must complete 

available property management training. 

FMC 14-02 – Deficiencies in the Timely Recording of Obligations (NFR No. USCIS 14-02) 

During testwork over 21 undelivered orders selected as of June 30, 2014, we noted that 

the obligation was signed on September 30, 2013, however the funds were not obligated 

within the general ledger until November 27, 2013. Additionally, the period of 

performance began and services were rendered prior to obligation in the general ledger 

on October 1, 2013. 

2
 
U.S. Citizenship and Immigration Services
 

Financial Management Comments
 

September 30, 2014
 

Recommendation: 

We noted that policies and procedures were established April 30, 2014, which address 

the condition of this finding. However, we recommend that the Financial Compliance 

and Systems Branch evaluate the design and effectiveness of the established procedures 

through the mission action plan process. 

FMC 14-03 – Deficiencies in the Approval of Apportionment Entries to Federal Financial 

Management System (NFR No. USCIS 14-04) 

Two apportionment transactions out of a sample of 43 were not reviewed and approved 

by a supervisor prior to recording the transaction in the Federal Financial Management 

System (FFMS). The transactions were posted to the general ledger on May 27, 2014; 

however, the physical print out of the Apportionment Transaction Screen was never 

reviewed and approved by a supervisor. As a result, $304.9 million was apportioned in 

the incorrect quarter, prior to being detected and corrected on the same day. 

 

Recommendations: 

We recommend that USCIS: 

•	 Ensure all employees with responsibility for entering apportionment transactions in 

the general ledger are aware of and implement the procedures outlined in the Budget 

Manual. 

•	 Supervisory Budget Analysts continue to monitor apportionments to ensure 

compensating controls are functioning effectively. 

FMC 14-04 – Inaccurate and Unsupported Data in the CLAIMS 3 CLAIMS 4 and MFAS 

Systems (NFR No. USCIS 14-04) 

We conducted testwork over the FY 2014 third quarter floor-to-list audit and noted the 

following: 

•	 One sample item was not included within the Citizenship and Immigration Services 

Centralized Oracle Repository deferred revenue universe, the system used to 

generate the deferred revenue population from the CLAIMS 3 system. The file was 

present in the CLAIMS 3 system mainframe, but was not properly extracted by 

Citizenship and Immigration Services Centralized Oracle Repository because it had 

a status of “0” or “unknown.” 

We conducted testwork over the FY 2014 third quarter list-to-floor audit and noted the 

following: 

•	 For two of the 680 samples, we reviewed the physical application and determined 

one application was adjudicated and another application was not adjudicated as of 

May 20, 2014. However, USCIS's sampling results included a different status as of 

May 20, 2014. 

3
 
U.S. Citizenship and Immigration Services
 

Financial Management Comments
 

September 30, 2014
 

•	 For 139 of the 680 samples, USCIS was unable to provide a physical application to 

support the applications’ status. We noted that it was USCIS’s policy to treat all 

unsupported samples as “not pending.” 

•	 For five of the 680 samples, the fee per the sample did not agree to the fee per the 

historic fee table, based on the form type and receipt date. USCIS was unable to 

provide support for these as the fee per the sample related to older applications. 

•	 For 94 of the 680 samples, the samples were listed as pending in the application 

tracking system but we determined that these samples were not pending based on 

review of the physical application. Of these samples, USCIS identified 94 of them to 

be not pending. This indicated that the information in the application tracking 

systems, CLAIMS 3, CLAIMS 4 and MFAS, was not reliable for financial reporting 

purposes and that there are deficiencies in the internal controls that govern the 

information in these systems, resulting in the need for the deferred revenue 

estimation methodology. 

•	 The deferred revenue quarterly sampling and verification process identified 

discrepancies in the status of applications where errors between the system query 

results and the hard copy application exist; however, all identified errors were not 

corrected within the systems. Although consideration of the faulty data was included 

in the monthly estimation of deferred revenue, the inclusion of faulty data presented 

an environment where the conditions in the NFR will be present in subsequent 

quarterly sampling and verification. 

We conducted test work over the FY 2014 4th quarter list-to-floor audit and noted the 

following: 

•	 For one of the 45 samples, the fee per the sample did not agree to the fee per the 

historic fee table. USCIS was unable to provide an explanation or support for the 

difference related to an older application. 

Recommendations: 

We recommend that USCIS: 

Related to sampling methodology: 

•	 Consult statisticians to verify the adequacy of the existing sample design and 

implement recommended changes for FY 2015, improving efficiency in both the 

sample selection and field verification process. Consider the following: 

o	 Analyzing year over year changes to assess if changes to sample design need to 

be made. Additionally, quarter over quarter assessments should be made to 

adjust sample sizes within the year if needed. 

o	 Demonstrating, on a quarterly basis, that the proposed sample design meets the 

Standard Operating Procedure (SOP) requirements of sub-sections 4.4.1.2a – c. 

4
 
U.S. Citizenship and Immigration Services 
 

Financial Management Comments 

September 30, 2014
 

o	 USCIS should document the precision it is targeting and factor in an expected 

error rate during their sample design to show that the sample design meets its 

precision targets at the associated confidence level. 

o	 If USCIS uses the same sample design and sample sizes year over year, 

implement a procedure to perform an analytical analysis to prove the assertions 

in their SOP. 

o	 Demonstrating the adequacy of the sample sizes based on current analysis, 

including determining whether an adjustment to the distribution of the sample by 

reallocating the total sample size to provide additional coverage over certain 

strata, which may help achieve an overall tighter precision estimate. 

o	 Reassessing the sample design in FY 2015 to ensure its targeted projections and 

precisions do not exceed an established internal materiality threshold. 

o	 Ensuring the standard deviation used in the projected calculation of precision 

reflects the entire sample. 

o	 Projecting the difference in audit amount (error) rather than the audit amount 

currently used, as the key test indicator for this area is the potential adjustment. 

	 Continue to increase the number and type of applications required to be processed 

through Electronic Immigration System (ELIS) and ensure the application will allow 

for the direct reporting of deferred revenue. The controls over the application status 

should eventually allow USCIS to retire their legacy tracking systems and replace 

their current estimation process. 

FMC 14-05 – Deficiencies in the Public and Confidential Financial Disclosure Financial 

Reporting Process (NFR No. USCIS 14-05) 

	 During testwork over Office of Government Ethics (OGE) Form 278 financial 

disclosure reports, we noted one of the 15 samples was not reviewed and certified by 

the Ethics Officer within 60 days of filing. 

	 During testwork over OGE Form 450 financial disclosure reports, we noted eight of 

the 25 samples were not reviewed and certified by the Ethics Officer within 60 days 

of filing. 

Recommendations: 

We recommend that USCIS: 

	 Ensure that necessary enhancements are made to their policies and procedures to 

ensure the timely notification to and submission by employees of OGE Forms 450 

and 278. 

	 Ensure all employees with responsibility for completing or reviewing the financial 

disclosure reports are aware of and implement the policies and procedures. 

5 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix A 

U.S. Citizenship and Immigration Services 

Crosswalk – Financial Management Comments to Active NFRs 

September 30, 2014 

Disposition1 

IAR FMC 

Component NFR 

No. Description MW SD NC No. 

USCIS 14-01 Deficiencies in the Recording of Property, Plant, and 

Equipment 14-01 

USCIS 14-02 Deficiencies in the Timely Recording of Obligations 14-02 

USCIS 14-03 Deficiencies in the Approval of Apportionment Entries 

to FFMS 14-03 

USCIS 14-04 Inaccurate and Unsupported Data in the CLAIMS 3 

CLAIMS 4 and MFAS Systems 14-04 

USCIS 14-05 Deficiencies in the Public and Confidential Financial 

Disclosure Financial Reporting Process 14-05 

1Disposition Legend: 

IAR Independent Auditors’ Report dated November 13, 2014 

FMC Financial Management Comment 

MW Contributed to a Material Weakness at the Department level when combined with the results of all other 

components 

SD	 Contributed to a Significant Deficiency at the Department level when combined with the results of all other 

components 

NC	 Contributed to Non-Compliance with laws, regulations, contracts, and grant agreements at the Department 

level when combined with the results of all other components 

NFR	 Notice of Finding and Recommendation 

Cross-reference to the applicable sections of the IAR: 

A Financial Reporting 

B Information Technology Controls and Financial Systems Functionality 

C Property, Plant, and Equipment 

D Budgetary Accounting 

E Entity-Level Controls 

F Grants Management 

G Custodial Revenue and Drawback 

H Federal Managers’ Financial Integrity Act of 1982 (FMFIA) 

I Single Audit Act Amendments of 1996 

J Antideficiency Act, as amended (ADA) 

K Federal Financial Management Improvement Act of 1996 (FFMIA) 

6
 
 

 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

General Counsel 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

U.S. Citizenship and Immigration Services 

Director 

Chief Financial Officer 

Audit Liaison 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees 

www.oig.dhs.gov OIG-15-72 
 

 

 

 

 

 

 

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