Department of Homeland Security
 

U.S. Citizenship and Immigration Services’ 


Management Letter for FY 2012 DHS Consolidated 


Financial Statements Audit 


OIG-13-57 April 2013
 
 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

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

 APR 3 2013 

MEMORANDUM FOR: Joseph Moore 

Chief Financial Officer 

U.S. Citizenship and Immigration Services 

FROM: rds

pector General for Audits 

Anne L. Richa

Assistant Ins

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

Letter for FY 2012 DHS Consolidated Financial Statements 

Audit

 

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

Services’ Management Letter for FY 2012 DHS Consolidated 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 2012 Financial 

Statements and Internal Control over Financial Reporting. Internal control deficiencies 

that are considered significant deficiencies were reported, as required, in the 

Independent Auditors’ Report, dated November 14, 2012, which was included in the 

fiscal year (FY) 2012 DHS Annual 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 2012 financial statements and is responsible for the attached management letter 

dated March 12, 2013, and conclusions expressed in it. We do not express opinions on 

DHS’ financial statements or internal control, nor do we provide conclusions on 

compliance with laws and regulations. 

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

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

Attachment 

 
 

Office of Inspector General 

U.S. Department of Homeland Security, and 

Chief Financial Officer, 

U.S. Department of Homeland Security United States Citizenship and Immigration Services 

Washington, DC 

Ladies and Gentlemen: 

We have audited the balance sheet of the U.S. Department of Homeland Security (DHS or Department) as 

of September 30, 2012 and the related statements of net cost, changes in net position and custodial activity, 

and combined statement of budgetary resources for the year then ended (referred to herein as the “fiscal 

year (FY) 2012 financial statements”). The objective of our audit was to express an opinion on the fair 

presentation of these financial statements. We were also engaged to examine the Department’s internal 

control over financial reporting of the FY 2012 financial statements, based on the criteria established in 

Office of Management and Budget (OMB), Circular No. A-123, Management’s Responsibility for Internal 

Control, Appendix A. 

Our Independent Auditors’ Report, issued on November 14, 2012, describes a limitation on the scope of 

our audit that prevented us from performing all procedures necessary to express an unqualified opinion on 

the DHS’ FY 2012 financial statements and internal control over financial reporting. In addition, the FY 

2012 DHS Secretary’s Assurance Statement states that the Department was able to provide qualified 

assurance that internal control over financial reporting was operating effectively at September 30, 2012. 

We have not considered internal control since the date of our Independent Auditors’ Report. 

In accordance with Government Auditing Standards, our Independent Auditors’ Report, referred to in the 

paragraph above, included internal control deficiencies identified during our audit, that individually, or in 

aggregate, represented a material weakness or a significant deficiency. 

The United States Citizenship and Immigration Services (USCIS) is a component of DHS. We noted 

certain matters, related to USCIS, that are summarized in the Table of Financial Management Comments 

on the following pages, involving internal control and other operational matters that are less severe than a 

material weakness or a significant deficiency, and consequently are reported separately to the Office of 

Inspector General (OIG) and USCIS management in this letter. 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. The disposition of each internal control deficiency 

identified during our FY 2012 audit – as either reported in our Independent Auditors’ Report, or herein – is 

presented in Appendix A. The status of internal control deficiencies identified during our FY 2011 audit is 

presented in Appendix B. Our findings related to information technology systems security have been 

presented in a separate letter to the OIG and the USCIS Chief Information Officer and Chief Financial 

Officer. 

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

intended for the information and use of the DHS’ and USCIS’s management, the DHS OIG, the U.S. OMB, 

the U.S. Congress, and the Government Accountability Office, and is not intended to be and should not be 

used by anyone other than these specified parties. 

Very truly yours, 

 

KPMG LLP 

Suite 12000 

1801 K Street, NW 

Washington, DC 20006 

March 12, 2013 

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 12-01 


FMC 12-02 


FMC 12-03 


FMC 12-04 


FMC 12-05 


Inadequate Policies and Procedures over the Review of Personnel Actions 

Insufficient Reconciliation between the Purchase Request Information System 

(PRISM) and Federal Financial Management System (FFMS) 

Potential Non-Compliance with Office of Government Ethics (OGE) Form 450 

Filing Requirements 

USCIS Contracting Officers Disregarded DHS Invoice Approval Requirements 

Insufficient Review of Journal Entries 

2 

2

3 

3 

3 

FMC 12-06 


FMC 12-07 


FMC 12-08 


FMC 12-09 


FMC 12-10 


Inaccurate Data in the Claims 3, Claims 4, and Marriage Fraud Amendment Systems 

Insufficient Review of Deposit Transactions 

Inadequate Monitoring of Fee Table Changes in Deferred Revenue Estimate Process 

Deficiencies in the Recording of Internal Use Software 

Deficiencies in the Timely Recording of Capital Equipment 

4 

4 

4 

5 

5 

APPENDIX
 

Appendix Subject Page 

A 

B 

Crosswalk – Financial Management Comments to Active Notices of Finding and 

Recommendation (NFRs)
 

Status of Prior Year NFRs 

7 


8 


 

 

United States Citizenship and Immigration Services 

Table of Financial Management Comments 

September 30, 2012 

1 

 

United States Citizenship and Immigration Services 

Financial Management Comments 

September 30, 2012 

FMC 12-01 – Inadequate Policies and Procedures over the Review of Personnel Actions (NFR No. 

USCIS 12-01) 

During the walkthrough over the processing of Standard Form (SF)-52 forms, KPMG noted that 

prior to May 1, 2012, the same individual could request and authorize the personnel actions. As 

such, KPMG determined that prior to May 1, 2012, United States Citizenship and Immigration 

Services (USCIS) did not have proper segregation of duties in place over the processing of SF52s. 

Recommendations: 

We recommend that USCIS: 

•	 Human Resources Operations Center (HROC) continues to monitor the status of Electronic 

System for Personnel (ESP) roles and responsibilities. The Systems Team should conduct a 

quarterly review with its customers (as already highlighted in the updated Standard Operating 

Procedures) to ensure accuracy of roles and thus comply with the requirement to separate 

roles within ESP. 

•	 The Quality Team within HROC should conduct periodic internal audits to ensure accuracy 

and completeness of the corrective action. 

FMC 12-02 – Insufficient Reconciliation Between the Purchase Request Information System 

(PRISM) and Federal Financial Management System (FFMS) (NFR No. USCIS 12-02) 

USCIS did not sufficiently address the risk that obligation data from PRISM is not recorded 

timely into FFMS for the period from October 1, 2011 – May 31, 2012. USCIS performed a 

reconciliation of data from USASpending.gov to FFMS during this period. However, we 

identified that this process causes USCIS to inadvertently rely on the transfer of information from 

Federal Procurement Data System – Next Generation to USASpending.gov. USCIS did not 

implement other procedures to assess the completeness and accuracy of the data transfer from 

Federal Procurement Data System – Next Generation to USASpending.gov. 

We noted that USCIS performed a review of open commitments, which partially mitigates the 

condition noted above. However, the review was not performed regularly (e.g., quarterly), and is 

not formally documented with management review and approval. As of June 30, 2012, USCIS 

had performed the open commitments review twice: once in February and once in May. 

We also noted that USCIS retroactively reconciled PRISM to FFMS for the period October 1, 

2011 – May 31, 2012 on June 5, 2012. 

Recommendation: 

We recommend that USCIS continue to perform a monthly reconciliation of PRISM to FFMS as 

was started in June 2012. 

2 

 

United States Citizenship and Immigration Services 

Financial Management Comments 

September 30, 2012 

FMC 12-03 – Potential Non-Compliance with Office of Government Ethics (OGE) Form 450 Filing 

Requirements (NFR No. USCIS 12-03) 

USCIS did not obtain and review all of the required OGE Form 450 Confidential Financial 

Disclosure Report forms from its employees by the February 15, 2012, deadline. This deadline is 

imposed by the OGE. 

Recommendation: 

We recommend that USCIS ensure that the OGE Form 450 policies and procedures are 

understood and implemented. 

FMC 12-04 – USCIS Contracting Officers Disregarded DHS Invoice Approval Requirements (NFR 

No. USCIS 12-04) 

During FY 2012, USCIS identified that contracting officers (COs) within the Contract 

Administration Division provided Contracting Specialists with pre-signed labels for use in 

approving invoices on cost-type contracts where CO approval is required. 

The pre-signed labels were typically used by Contracting Specialists when there was uncertainty 

as to whether an invoice for a cost-type contract would be approved in a timely manner (e.g., 

when the CO was out of the office). 

Recommendation: 

There are no recommendations as corrective action was taken during FY 2012. 

FMC 12-05 – Insufficient Review of Journal Entries (JEs) (NFR No. USCIS 12-05) 

KPMG selected 45 manual JEs for control and substantive testwork, and noted the following 

errors: 

•	 General Journal # 15099548: USCIS recorded the reclassification of balances within Treasury 

Account Fund Symbols (TAFS) 705106 using the incorrect percentages to allocate the funds 

between trading partners 16, 49 and 70. As a result of the error, trading partner balances 

totaling approximately $10 million were misstated within the following Standard General 

Ledger (SGL) accounts: 

- 2985, Liability for Non-Entity Assets Not Reported on the Statement of Custodial Activity; 

- 5993, Offset to Non-Entity Collections - Statement of Changes in Net Position; and 

- 5994, Offset to Non-Entity Accrued Collections - Statement of Changes in Net Position. 

KPMG noted that the overall SGL balances were correct, but that the individual trading partner 

balances within the SGL account were misstated. 

Recommendations: 

We recommend that USCIS: 

•	 Automate the calculation of the trading partner allocation to reduce the potential for using the 

incorrect allocation percentages. 

•	 Periodically check the allocation balance to ensure the recorded allocation by trading partner 

is consistent with the required allocation. 

3 

 

United States Citizenship and Immigration Services 

Financial Management Comments 

September 30, 2012 

FMC 12-06 – Inaccurate Data in the Claims 3 (C3), Claims 4 (C4), and Marriage Fraud 

Amendment Systems (MFAS) (NFR No. USCIS 12-06) 

KPMG conducted testwork over the FY 2012 third and fourth quarter list-to-floor audits and 

noted the following: 

•	 In the third quarter of the audit, 179 of the 680 samples, or 26.3%, were determined to be not 

pending by USCIS. In the fourth quarter of the audit, 207 of the 680 samples, or 30.4%, were 

determined to be not pending by USCIS. These error rates are indicative of a deficiency in 

internal control in the application adjudication process and exist on USCIS’s largest 

application tracking systems: C3, C4 and MFAS. 

•	 The deferred revenue quarterly sampling and verification process identifies discrepancies in 

the status of applications where errors between the system query results and the hard copy 

application exist; however, the faulty data was not corrected within the systems. 

Recommendation: 

We recommend that USCIS focus on the controls and reporting functions incorporated in 

Electronic Immigration System to ensure the new application tracking system will allow for the 

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

eventually allow USCIS to retire their legacy tracking systems and replace the current estimation 

process. 

FMC 12-07 – Insufficient Reivew of Deposit Transactions (NFR No. USCIS 12-07) 

During testwork over a sample of 45 deposits, we noted that for 5 transactions, the Burlington 

Finance Center recorded a portion of the deposit amount to the incorrect item type. In each 

instance, the amount of the entry was correct and the item types (incorrect and correct) were 

recorded within the correct TAFS. As such, no financial statement misstatement was identified as 

a result of the errors. 

Recommendation: 

We recommend that USCIS and Immigration and Customs Enforcement (ICE) evaluate the errors 

made and implement the controls that are deemed necessary for this process, possibly including 

an automation of this process where possible. 

FMC 12-08 – Inadequate Monitoring of Fee Table Changes in Deferred Revenue Estimate Process 

(NFR No. USCIS 12-08) 

 KPMG performed testwork over the third quarter list-to-floor samples and noted the following: 

•	 The original fee amount per the system did not agree to the historical fee table for 260 of the 

680 samples. Of the errors noted, 186 samples were C3 applications and 74 were MFAS 

applications. 

•	 The current fee table became effective on November 23, 2010. The C3 and MFAS systems 

were not properly coded to pull the new fee amounts for applications with receipt dates after 

November 23, 2010. 

 

4 

 

 

United States Citizenship and Immigration Services 

Financial Management Comments 

September 30, 2012 

Recommendation: 

There are no recommendations as USCIS remediated the deficiency in the current year, and we 

performed testwork over the remediation, noting no exceptions. 

FMC 12-09 – Deficiencies in the Recording of Internal Use Software (IUS) (NFR No. USCIS 12-09) 

As a result of USCIS’s review of Office of Transformation Coordination and Office of the Chief 

Information Officer costs, USCIS recorded the following corrective adjustments to the IUS 

balance: 

•	 USCIS recorded prior year adjustments to IUS of $30.1 million. 

•	 USCIS identified ten new IUS projects for which costs were previously recorded as expenses. 

Three of the ten projects were initiated in prior years. 

During testwork over the Office of Transportation Coordination projects as of June 30, 2012 and 

September 30, 2012, we noted that USCIS incorrectly capitalized Electronic Immigration System 

training and data conversion costs. 

During testwork over a sample of Office of the Chief Information Officer project costs as of 

September 30, 2012, we noted the following: 

•	 USCIS incorrectly capitalized Office of the Chief Information Officer training and 

maintenance costs. 

•	 USCIS was unable to provide supporting documentation for capitalized costs. 

Recommendation: 

We recommend that the USCIS Office of Chief Financial Officer (OCFO), Office of 

Transformation Coordination, Office of Information Technology (OIT), USCIS Contracting and 

other involved program offices continue to work together to develop and implement effective 

policies and procedures to ensure the accurate and timely identification and reporting of software 

developments cost. 

FMC 12-10 – Deficiencies in the Timely Recording of Capital Equipment (NFR No. USCIS 12-10) 

We reviewed the Property Plant and Equipment (PP&E) activity recorded to the general ledger 

(GL) during FY 2012 and noted that USCIS recorded prior period equipment costs as additions 

for 46 items in the current year. 

In addition, we selected a statistical sample of PP&E transactions related to asset additions and 

disposals, and noted the following: 

•	 USCIS disposed of equipment in the second quarter of FY 2011 but did not record the 

transaction in the GL until the second quarter of FY 2012. 

•	 USCIS was unable to provide supporting documentation for two capitalized equipment 

additions. 

5 

 

United States Citizenship and Immigration Services 

Financial Management Comments 

September 30, 2012 

Recommendations: 

We recommend that the USCIS: 

•	 The OCFO, Office of Administration, OIT, and USCIS Contracting continue to work together 

to develop and implement effective policies and procedures that ensure PP&E acquisitions 

are processed in a standardized method. 

•	 Roles and responsibilities for ordering, purchasing, delivery, receiving, and establishing 

accountability should be addressed. 

•	 Additionally, these procedures should ensure the responsible offices provide accurate 

documentation to the appropriate personnel for timely and accurate data entry into the asset 

management system and financial management system. 

6 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix A 

United States Citizenship and Immigration Services 

Crosswalk – Financial Management Comments to Active NFRs 

September 30, 2012 

Disposition1 

IAR FMC 

NFR No. Description MW SD NC No. 

12-01 Inadequate Policies and Procedures over the Review of Personnel 

Actions 12-01 

12-02 Insufficient Reconciliation between Purchase Request Information 

System (PRISM) and Federal Financial Management System (FFMS) 12-02 

12-03 Potential Non-Compliance with Office of Government Ethics (OGE)-450 

Filing Requirements 12-03 

12-04 USCIS Contracting Officers Disregarded DHS Invoice Approval 

Requirements 12-04 

12-05 Insufficient Review of Journal Entries (JEs) 12-05 

12-06 Inaccurate Data in the Claims 3 system, Claims 4 system, and Marriage 

Fraud Amendment System 12-06 

12-07 Insufficient Review of Deposit Transactions 12-07 

12-08 Inadequate Monitoring of Fee Table Changes in Deferred Revenue 

Estimate Process 12-08 

12-09 Deficiencies in the Recording of Internal Use Software (IUS) 12-09 

12-10 Deficiencies in the Timely Recording of Capital Equipment 12-10 

1

Disposition Legend: 

IAR Independent Auditors’ Report dated November 14, 2012 

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 System Functionality 

C Property, Plant, and Equipment 

D Environmental and Other Liabilities 

E Budgetary Accounting 

F Entity-Level Controls 

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) 

7 

 

 

 

 

 

Appendix B 

United States Citizenship and Immigration Services 

Status of Prior Year NFRs 

September 30, 2012 

Disposition1 

NFR No. Description Closed2 Repeat 

(2011 NFR No.) 

11-01 Lack of Controls over List-to-Floor Manual Processes X 

11-02 Deficiencies in the Timely Recording of Capital Property Plant and Equipment 

(PP&E) USCIS 12-10 

11-03 Lack of Policies and Procedures over Non-Itemized Invoices for PP&E X 

11-04 Inadequate and/or Inconsistent Supervisory Review of Personnel Actions USCIS 12-01 

11-05 Inadequate Supervisory Review of the Intra-Departmental Eliminations 

Reconciliation X 

11-06 Untimely Change in Accounting Policies and Practices X 

11-07 Inadequate Data in the Claims 3 system, Claims 4 system, and Marriage Fraud 

Amendment System USCIS 12-06 

11-08 Inadequate Documentation and Untimely Capitalization of Internal Use Software 

(IUS) USCIS 12-09 

1 KPMG was engaged to perform an audit over the DHS balance sheet as of September 30, 2012, and the related statements of net 

cost, changes in net position and custodial activity, and combined statement of budgetary resources for the year then ended. In 

addition, we were engaged to follow up on the status of all active NFRs that supported significant deficiencies reported in our FY 

2011 Independent Auditors’ Report. 

2

 The scope of our audit was limited to follow-up on NFRs that supported a material weakness or significant deficiency as 

reported in our Independent Auditors’ Report. All other NFRs, e.g., that described insignificant findings, and therefore presented 

to DHS management as observations for consideration, were considered closed. 

8 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix C 

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 

Acting 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-13-57
 
 

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