Department of Homeland Security
 

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U.S. Citizenship and Immigration Services’ 


Management Letter for FY 2013 DHS 


Financial Statements Audit
 

OIG-14-71 April 2014
 
 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

 Washington, DC 20528 / www.oig.dhs.gov

 APR 21 2014 

MEMORANDUM FOR: Joseph Moore 

Chief Financial Officer 

U.S. Citizenship and Immigration Services 

FROM: Anne L. Richards

Assistant Inspector General for Audits 

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

Letter for FY 2013 DHS Financial Statements Audit

 

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

Services’ Management Letter for FY 2013 DHS Financial Statements Audit. This report 

contains four comments and six recommendations related to internal control 

deficiencies that were not required to be reported in the Independent Auditors’ Report 

on DHS’ FY 2013 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 December 11, 2013, which was 

included in the Department of Homeland Security’s (DHS) fiscal year (FY) 2013 Agency 

Financial Report. We do not require management’s response to the recommendations. 

We contracted with the independent public accounting firm KPMG LLP (KPMG) to 

conduct the audit of the DHS’ FY 2013 financial statements and internal control over 

financial reporting. The contract required that KPMG perform its audit according to 

generally accepted government auditing standards and guidance from the Office of 

Management and Budget and the Government Accountability Office. KPMG is 

responsible for the attached management letter dated January 15, 2014, and the 

conclusions expressed in it. 

Please call me with any questions, or your staff may contact Mark Bell, Deputy Assistant 

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

Attachment 

 
 

 

 

KPMG LLP 

Suite 12000 

1801 K Street, NW 

Washington, DC 20006 

January 15, 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: 

We have audited the financial statements of the U.S. Department of Homeland Security (DHS or 

Department) for the year ended September 30, 2013 (referred to herein as the “fiscal year (FY) 2013 

financial statements”), and have issued our report thereon dated December 11, 2013. In planning and 

performing our audit of the financial statements of DHS, in accordance with auditing standards 

generally accepted in the United States of America and Government Auditing Standards, we 

considered internal control over financial reporting (internal control) as a basis for designing our 

auditing procedures for the purpose of expressing our opinion on the financial statements. In 

conjunction with our audit of the 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 2013 audit – as either reported in our Independent Auditors’ Report, or herein 

– 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, 

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative 

(“KPMG International”), a Swiss entity. 
TABLE OF FINANCIAL MANAGEMENT COMMENTS (FMC) 

Comment 

Reference Subject Page 

FMC 13-01 Deficiencies in the Public and Confidential Financial Disclosure Reporting Process 2 

FMC 13-02 Deficiencies in the Recording, Classification, and Useful Life of Internal Use Software 2 

FMC 13-03 Inadequate Preparation and Review of the Transaction by Elimination Pairs Report 3 

FMC 13-04 Insufficient Review of Journal Entries 3 

APPENDIX 

Appendix Subject Page 

A Crosswalk – Financial Management Comments to Active Notices of Finding and 4 

Recommendation (NFRs) 

U.S. Citizenship and Immigration Services 

Table of Financial Management Comments
 

September 30, 2013
 

1
 
U.S. Citizenship and Immigration Services 

Financial Management Comments
 

September 30, 2013
 

FMC 13-01 – Deficiencies in the Public and Confidential Financial Disclosure Reporting Process 

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

(USCIS) 13-01) 

During testwork over Office of Government Ethics (OGE) Form 450, we noted that USCIS did 

not obtain and review 247 of the 791 required OGE reports by the February 15, 2013 deadline. 

During testwork over OGE Form 278, we noted that one report was not reviewed and certified by 

the Ethics Officer within 60 days of filing. 

Recommendation: 

We recommend that USCIS make any necessary enhancements to systems and processes to 

ensure timely notification to and submission by employees of OGE Forms 450 and 278, and 

submitted forms are reviewed by the Ethics Office in a timely manner. 

FMC 13-02 – Deficiencies in the Recording, Classification, and Useful Life of Internal Use Software 

(NFR No. USCIS 13-02) 

USCIS was unable to provide a complete general ledger detail for internal use software (IUS) 

costs as of June 30, 2013, for substantive testing. 

We noted that the Financial Management Division (FMD) performed an analysis of the IUS 

balance as of July 31, 2013, and posted adjustments related to prior year activity, resulting in a 

net upward adjustment of $6.4 million and a net downward adjustment of $0.3 million. 

We performed testwork over additions to the IUS balance as of June 30, 2013 and noted the 

following errors: 

•	 USCIS did not reclassify $14.1 million from Software in Development (United States 

Standard General Ledger (USSGL) account 1832) to Internal Use Software (USSGL account 

1830) timely for one project. USCIS also did not update the useful life for that project in a 

timely manner. We noted that although management identified that the project’s useful life 

was changed, the useful life in the accounting records was not updated to reflect this change 

timely. 

•	 USCIS incorrectly reclassified capital costs of $722,000 from USSGL account 1830 to 

USSGL account 1832 for another project, resulting in a $182,000 understatement of 

amortization expense. 

We performed testwork over additions to the IUS balance as of September 30, 2013, and noted 

the following: 

•	 USCIS did not reclassify $352,000 from USSGL account 1832 to USSGL account 1830 

timely for one project. 

•	 USCIS did not reclassify $1.9 million from USSGL account 1832 to USSGL account 1830 

timely for another project, resulting in a $53,000 understatement of amortization expense. 

2
 
U.S. Citizenship and Immigration Services 

Financial Management Comments
 

September 30, 2013
 

We performed a reconciliation to determine completeness and noted the following:
 

Eight system releases were in-development that were not accounted for by FMD. The budgeted
 

amounts for these projects totaled $3 million. 


Recommendation: 

We recommend that USCIS develop and implement, within each office responsible for the 

management of software development projects operating procedures for: 

•	 Identifying and reporting of capitalizable software development projects prior to the initiation 

of software development. 

•	 Collecting costs for capitalizable software development projects and timely reporting that 

information. 

•	 Periodic reviews of the status of capitalizable software both in development and in operation, 

and the reporting of changes in status. 

FMC 13-03 – Inadequate Preparation and Review of the Transaction by Elimination Pairs Report 

(NFR No. USCIS 13-06) 

We noted that review of the September 2013 DHS Bureau Intra-Agency Transactions by 

Elimination Pairs Report was prepared using the August 2013 DHS Bureau Intra-Agency 

Transactions by Elimination Pairs Report. 

Recommendation: 

We recommend that USCIS ensure use of the most current information available when reviewing 

monthly and quarterly checklists. 

FMC 13-04 – Insufficient Review of Journal Entries (NFR No. USCIS 13-07) 

A manual journal entry for Imputed Costs related to the Office of Personnel Management PostEmployment Benefits was understated by $1,893,179. The understatement was caused by a 

miscalculation due to the omission of the Federal Employees Retirement System - Revised 

Annuity Employee normal cost from the pension expense calculation. 

USCIS proposed an on-top correcting entry for the amount of the error. 

Recommendation: 

We recommend that USCIS review and update procedures for verifying that calculations for 

manual journal entries are complete and accurate. 

3
 
Appendix A 

U.S. Citizenship and Immigration Services 

Crosswalk – Financial Management Comments to Active NFRs 

September 30, 2013 

Disposition1 

IAR FMC 

Component NFR 

No. Description MW SD NC No. 

USCIS 13-01 Deficiencies in the Public and Confidential Financial 

Disclosure Reporting Process 13-01 

USCIS 13-02 Deficiencies in the Recording, Classification, and Useful Life 

of Internal Use Software 13-02 

USCIS 13-03 Inaccurate Data in the CLAIMS 3, CLAIMS 4, and MFAS 

Systems J 

USCIS 13-04 Non-Compliance with the Federal Financial Management 

Improvement Act of 1996 J 

USCIS 13-05 Inadequate Monitoring of Software Licenses Note 1 

USCIS 13-06 Inadequate Preparation and Review of the Transaction by 

Elimination Pairs Report 13-03 

USCIS 13-07 Insufficient Review of Journal Entries 13-04 

1

Disposition Legend: 

IAR	 Independent Auditors’ Report dated December 11, 2013 

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 Liabilities 

G Grants Management 

H Custodial Revenue and Drawback 

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

J Federal Financial Management Improvement Act of 1996 (FFMIA) 

K Single Audit Act Amendments of 1996 

L Antideficiency Act, as amended (ADA) 

Note 1:	 This finding was identified by USCIS management and therefore not included in the management letter. 

4
 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix A 

Report Distribution 

Department of Homeland Security

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy 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 

Chief Privacy Officer 

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, as appropriate 

www.oig.dhs.gov OIG-14-71 
 

 

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