United States Citizenship 

and Immigration Services' 

Management Letter for 

DHS' Fiscal Year 2016 

Financial Statements 

Audit 

June 27, 2017 

OIG-17-84 
 

 

 

 

 

DHS OIG HIGHLIGHTS
 

United States Citizenship and Immigration 

Services’ Management Letter for DHS’ 

Fiscal Year 2016 Financial Statements Audit
 

June 27, 2017 

Why We Did 

This Report 

The Chief Financial Officers 

Act of 1990 (Public Law 101-

576) and the Department Of 

Homeland Security Financial 

Accountability Act (Public 

Law 108-330) require us to 

conduct an annual audit of 

the Department of Homeland 

Security’s (DHS) 

consolidated financial 

statements and internal 

control over financial 

reporting. 

During the fiscal year (FY) 

2016 audit of DHS’ 

consolidated financial 

statements and internal 

control over financial 

reporting, KPMG LLP noted 

certain matters involving the 

United States Citizenship 

and Immigration Service’s 

internal control and other 

operational matters. 

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, under contract with the DHS Office 

of Inspector General, audited the United States 

Citizenship and Immigration Services’ (USCIS) 

financial statements and internal control over 

financial reporting for FY 2016. The resulting 

management letter contains four observations 

related to internal controls and other 

operational matters which are presented in this 

report for management’s consideration. KPMG 

LLP noted internal control deficiencies in several 

processes including monitoring and recording 

employee completion of the annual ethics and 

integrity training; review and approval of H1-B 

and L fraud fee journal entries; recording of 

property, plant, and equipment; and inaccurate 

and unsupported data in some systems. These 

deficiencies are not considered significant and 

were not required to be reported in the 

Independent Auditors’ Report on DHS’ FY 2016 

Financial Statements and Internal Control over 

Financial Reporting, dated November 14, 2016, 

included in the DHS FY 2016 Agency Financial 

Report. 

www.oig.dhs.gov OIG-17-84 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

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

June 27, 2017 

MEMORANDUM FOR: Joseph Moore 

Chief Financial Officer 

United States Citizenship and Immigration Services 

FROM: John V. Kelly · 

'0==?~ · 

Deputy Inspector General 

SUBJECT: United States Citizenship and Immigration Services' 

Management Letterfor DHS' Fiscal Year 2016 Financial 

Statements Audit 

Attached for your information is our final report, United States Citizenship and 

Immigration Services' Management Letter for DHS' Fiscal Year 2016 Financial 

Statements Audit. This report contains four observations related to internal 

control deficiencies that were not required to be reported in our Independent 

Auditors' Report on DHS' FY 2016 Financial Statements and Internal Control 

over Financial Reporting, dated November 14, 2016, which was included in the 

Department of Homeland Security's (DHS) fiscal year (FY) 2016 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 2016 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 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 Maureen Duddy, 

Deputy Assistant Inspector General for Audits, at (617) 565-8723. 

Attachment 
 

 

 

KPMG LLP 

Suite 12000 

1801 K Street, NW 

Washington, DC 20006 

December 8, 2016 

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 planned and performed our audit of the consolidated financial statements (hereinafter referred to as the 

“financial statements”) of the U.S. Department of Homeland Security (DHS or Department), as of and for the 

year ended September 30, 2016, 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. 15-02, 

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 standards applicable to attestation engagements contained in Government 

Auditing Standards issued by the Comptroller General of the United States; and the internal control 

requirements included in OMB Bulletin No. 15-02. 

During our audits we noted certain matters involving the U.S. Citizenship and Immigration Services’ (USCIS) 

internal control and other operational matters 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 observations and 

recommendations are summarized in Exhibit I of this letter and are not considered significant deficiencies or 

material weaknesses in internal control over financial reporting. Significant deficiencies and material 

weaknesses in internal control over financial reporting have been previously communicated to the DHS Office 

of Inspector General (OIG) and management in our Independent Auditors’ Report, dated November 14, 2016, 

included in the fiscal year 2016 DHS Agency Financial Report. 

Deficiencies related to USCIS information technology (IT) controls will be presented in a separate letter to the 

DHS Office of Inspector General, USCIS Chief Information Officer, and USCIS 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 should be useful to you. 

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

KPMG LLP is a Delaware limited liability partnership and the U.S. member 

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 
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, 2016 

TABLE OF FINANCIAL MANAGEMENT COMMENTS (FMC) 

Comment 

Reference Subject Page 

FMC 16-01	 Deficiencies in Monitoring and Recording Employee Completion of 2 

the Annual Ethics and Integrity Training 

FMC 16-02	 Insufficiently Precise Review and Approval of H1-B and L Fraud 2 

Fee Journal Entries 

FMC 16-03	 Deficiencies in the Recording of Property, Plant, and Equipment 2 

FMC 16-04	 Inaccurate and Unsupported Data in the Adjudication Information 3 

Management Systems (CLAIMS 3 and CLAIMS 4) and the 

Marriage Fraud Amendment System 

APPENDIX 

Appendix Subject	 Page 

A Crosswalk – Financial Management Comments to Active NFRs	 4 

1 
 

 

 

 

 

 

 

U.S. Citizenship and Immigration Services 

Financial Management Comments and Recommendations 

September 30, 2016 

FMC 16-01 – Deficiencies in Monitoring and Recording Employee Completion of the Annual Ethics 

and Integrity Training (NFR No. USCIS 16-01) 

Controls were not operating effectively to ensure that all employees completed the required annual 

ethics training. In our sample of 45, USCIS employees required to complete the annual ethics and 

integrity training course, due on December 31, 2015, we found that USCIS was unable to provide 

documentation to support that two of the employees had completed the required annual training for 

calendar year 2015. Additionally, for one of those two employees, USCIS was unable to provide 

support that the employee completed the training due in the prior year as well. 

Recommendation: 

USCIS should: 

x Enhance its communications and compliance processes to ensure employees understand and 

comply with agency ethics and integrity training policies. 

x Engage Program Offices and Directorates to add necessary emphasis of timely completion of 

annual ethics and integrity training. 

FMC 16-02 – Insufficiently Precise Review and Approval of H1-B and L Fraud Fee Journal Entries 

(NFR No. USCIS 16-02) 

Controls were not operating effectively to ensure that journal entries recorded were accurate. In one of 

six monthly journal entries related to the transfer of H-1B and L Fraud fees selected for testwork, we 

identified a variance of $120 between what was recorded in the journal entry and the amount that was 

requested per the letter to Treasury. 

Recommendation: 

USCIS should emphasize policies and procedures relating to the review of journal entries in order to 

correct any identified errors prior to year-end reporting. 

FMC 16-03 – Deficiencies in the Recording of Property, Plant, and Equipment (NFR No. USCIS 16-03) 

Controls were not operating effectively to ensure that the monthly recorded costs were complete and 

accurate. Specifically, during our review of the property roll forward we identified the following: 

x	 One disposal which was not recorded timely. We noted that the asset was approved for disposal on 

June 30, 2015 per the decommissioning memo; however, the Accounting and Reporting Branch 

was not notified of the disposal until the first quarter of FY 2016. 

x	 The development for one project was not recorded timely and costs were not properly capitalized. 

Cost estimates were not provided for September 2015 even though costs were incurred. During FY 

2016, USCIS recorded a prior period adjustment to properly record the capitalization of costs 

related to the project in September 2015. 

Recommendation: 

We noted that USCIS implemented corrective actions during FY 2016 to mitigate the reoccurrence of 

the cited conditions. Therefore, no further action is needed. 

2 
 

U.S. Citizenship and Immigration Services 

Financial Management Comments and Recommendations 

September 30, 2016 

FMC 16-04 – Inaccurate and Unsupported Data in the Adjudication Information Management Systems 

(CLAIMS 3 and CLAIMS 4) and the Marriage Fraud Amendment System (NFR No. USCIS 16-05) 

We conducted testwork over the FY 2016 third quarter list to floor audit and identified the following: 

x For 100 of the 795 samples, USCIS was unable to provide a physical application to support the 

applications’ status. We note it is USCIS’s policy to treat all unsupported samples as “not pending.” 

As these applications were unsupported, we were unable to conclude whether the status 

determined by USCIS is appropriate. 

x For one of the 795 samples, the fee per the sample did not agree to the fee per the fee schedule, 

based on the form type and receipt date. USCIS was unable to provide support for the fee per the 

sample. 

x Forty two of the 795 samples were listed as pending in the application tracking system, however, 

we determined that these samples were not pending based on review of the physical application. 

Of these samples, USCIS also identified the 42 samples to be not pending. This indicates that the 

information in the application tracking systems [CLAIMS 3, CLAIMS 4, and the Marriage Fraud 

Amendment System] was not reliable for financial reporting purposes and that there were 

deficiencies in the internal controls that govern the information in these systems, resulting in the 

need for the deferred revenue estimation methodology. 

Recommendation: 

USCIS should: 

x	 Continue to ensure appropriate staff members are trained regarding the requirements of the 

quarterly review to ensure that the estimation process is complete and accurate. 

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

Electronic Immigration System and ensure the application allows 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. 

x	 Consider performing alternative procedures on the missing applications in order to reduce the 

number of unsupported samples. 

3 
Appendix A 

U.S. Citizenship and Immigration Services 

Crosswalk – Financial Management Comments to Active NFRs 

September 30, 2016 

Disposition1 

IAR FMC 

NFR No. Description MW SD NC No. 

16-01 Deficiencies in Monitoring and Recording Employee 

Completion of the Annual Ethics and Integrity Training 

16-01 

16-02 Insufficiently Precise Review and Approval of H1-B and L 

Fraud Fee Journal Entries 

16-02 

16-03 Deficiencies in the Recording of Property, Plant, and 

Equipment 

16-03 

16-04 Ineffective Monitoring of Aged Obligations B 

16-05 Inaccurate and Unsupported Data in the Adjudication 

Information Management Systems (CLAIMS 3 and CLAIMS 

4) and the Marriage Fraud Amendment System 

16-04 

1Disposition Legend: 

IAR	 Independent Auditors’ Report dated November 14, 2016 

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 Information Technology Controls and Financial System Functionality 

B Financial Reporting 

C Property, Plant, and Equipment 

D Entity-Level Controls 

E Grants Management 

F Custodial Revenue and Refunds and Drawback 

G Federal Managers’ Financial Integrity Act of 1982 

H Single Audit Act Amendments of 1996 

I Antideficiency Act, as amended 

J Federal Financial Management Improvement Act of 1996 

4 
 

OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Appendix B 

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 

Chief Financial Officer 

United States Citizenship and Immigration Services 

Director 

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-17-84 
 

 

 

 

 

 

 

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