Department of Homeland Security 

Office of Inspector General 

Independent Review of the U.S. Coast Guard's 


Reporting of FY 2009 Drug Control Performance 


Summary Report 


OIG-10-47 January 2010 
 

 

Office of Inspector General 

U.S. Department of Homeland Security

Washington, DC 20528 

January 27, 2010 

Preface 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was established by 

the Homeland Security Act of 2002 (Public Law 107-296) by amendment to the Inspector General 

Act of 1978. This is one of a series of audit, inspection, and special reports prepared as part of our 

oversight responsibilities to promote economy, efficiency, and effectiveness within the department. 

This report presents the results of the review of the Performance Summary Report of the U.S. Coast 

Guard for the fiscal year ended September 30, 2009, for the Office of National Drug Control Policy. 

We contracted with the independent public accounting firm KPMG LLP to perform the review. The 

U.S. Coast Guard prepared the Performance Summary Report and management assertions to comply 

with requirements of the Office of National Drug Control Policy Circular, Drug Control Accounting, 

dated May 1, 2007. KPMG LLP is responsible for the attached independent accountants’ report 

dated January 18, 2010, and the conclusions expressed in it. We do not express an opinion on the 

Performance Summary Report and management’s assertions. 

We trust this report will result in more effective, efficient, and economical operations. We express 

our appreciation to all of those who contributed to the preparation of this report. . 

Richard L. Skinner 


Inspector General 

 

KPMG LLP 

2001 M Street, NW 

Washington, DC 20036 

Independent Accountants’ Report 

Inspector General 

U.S. Department of Homeland Security 

We have reviewed the accompanying Performance Summary Report of the U.S. Department of Homeland 

Security’s (DHS) United States Coast Guard (USCG) for the year ended September 30, 2009. We have 

also reviewed the accompanying management’s assertions for the year ended September 30, 2009. USCG’s 

management is responsible for the Performance Summary Report and the assertions. 

Our review was conducted in accordance with attestation standards established by the American Institute 

of Certified Public Accountants, and applicable standards contained in Government Auditing Standards, 

issued by the Comptroller General of the United States. A review is substantially less in scope than an 

examination, the objective of which is the expression of an opinion on the Performance Summary Report 

and management’s assertions. Accordingly, we do not express such an opinion. 

Management of USCG prepared the Performance Summary Report and management’s assertions to 

comply with the requirements of the Office of National Drug Control Policy (ONDCP) Circular, Drug 

Control Accounting, dated May 1, 2007. 

Based on our review, nothing came to our attention that caused us to believe that (1) the Performance 

Summary Report for the year ended September 30, 2009 is not presented, in all material respects, in 

conformity with ONDCP’s Circular, Drug Control Accounting (May 1, 2007), or that (2) management’s 

assertions referred to above are not fairly stated, in all material respects, based on the criteria set forth in 

ONDCP’s Circular, Drug Control Accounting (May 1, 2007). 

This report is intended solely for the information and use of the management of DHS and USCG, the 

Inspector General, the ONDCP, and the U.S. Congress, and is not intended to be and should not be used by 

anyone other than these specified parties. 

January 18, 2010 

KPMG LLP, a U.S. limited liability partnership, is the U.S. 

member firm of KPMG International, a Swiss cooperative. 
Commandant 2100 Second Street, S.W.

United States Coast Guard Washington, DC 20593-0001

Staff Symbol: CG-5121

Phone: (202) 372-2585

Email:Patrick.m.hilbert@uscg.mil

7110

January 13,2010

Department ofHomeland Security

Director of Financial Management

Office ofthe Inspector General

Attn: Mr. John D. Shiffer, CPA

1120 Vermont Avenue, 10th Floor, NW

Washington, D.C. 20005

Dear Mr. Shiffer,

In accordance with the Office ofNational Drug Control Policy Circular: Annual Accounting of

Drug Control Funds dated May 1,2007, enclosed is the Coast Guard's updated FY 2009

Performance Summary Report, enclosure (1). My staff addressed your KPMG auditor's request

received on January 11, 2010 for additional information. Enclosures (2) through (4) provide

supporting documentation for data referenced in enclosures (1) and address your auditor's

inquiry. Enclosure (5) is the updated letter of assurance required by KPMG to be dated January

18,2010.

If you require further assistance on this information, please contact LCDR Patrick Hilbert,

202-372-2585.

Sincere:si

C?:~~LI:S Captain, U.S. Coast Guard

Chief, Office ofPerformance Management &

Assessment

Enclosure (1) FY 2009 Performance Summary Report

(2) KPMG auditor's comments with Coast Guard response

(3) FY 2009 Non-Commercial Maritime U.S. Bound Cocaine Flow

(4) Future Year Homeland Security Plan Coast Guard Drug Interdiction Snapshot

(5) Coast Guard "Letter ofAssurance" to KPMG

Copy: DHS Budget Office

CG-82
 

Enclosure (1) to letter dated January 13, 2010 

Drug Budget 


United States Coast Guard
 

Performance Summary Report 2009 


01/12/2010 Created by CG-512 

Page 1 of 6
 
Enclosure (1) to letter dated January 13, 2010 

I. PERFORMANCE INFORMATION 

Decision Unit 1: Primary Outcome Measure 

NOTE: Although the Coast Guard appropriation is apportioned along budget decision 

unit lines (i.e. Acquisitions, Construction, & Improvements (AC&I); Operating Expenses 

(OE); Research, Development, Test and Evaluation (RDT&E); and Reserve Training 

(RT)), the Coast Guard does not manage performance along decision unit lines. This is 

impractical due to the multi-mission performance of our assets, which transcends budget 

decision units. 

The Coast Guard’s drug interdiction performance is best summarized by the lead outcome 

measure of the program. This measure is the central focus of its Performance Summary 

Report. The Coast Guard Drug Interdiction Program has a suite of metrics that support the 

lead outcome measure. The lead outcome measure and its supporting metrics suite were 

validated during a 2007 Office of Management and Budget (OMB) Program Assessment 

Rating Tool (PART) Evaluation. In FY 2009, the Coast Guard transitioned the 

methodology by which it calculates its primary outcome measure as recommended by the 

2007 Independent Program Evaluation completed by the Center for Naval Analyses 

(CNA). The Coast Guard transitioned from the Interagency Assessment of Cocaine 

Movement (IACM) to the Consolidated Counterdrug Database (CCDB) as the authoritative 

source for estimating illicit drug flow through the transit zone. In part, the Coast Guard 

changed methodology to permit more timely performance evaluation. The CCDB is 

updated quarterly by interagency consensus compared to the IACM, which is published 

annually and not until nine months after the end of the fiscal year being evaluated. The 

change is consistent with ONDCP guidance and permits the Coast Guard to evaluate its 

performance on a quarterly basis. Historically, CCDB cocaine movement estimates are 

significantly higher than the IACM because it includes all confidence maritime flow 

(IACM does not count low confidence data), which translates to a lower perceived 

performance result for cocaine removal rate. 

Measure: Cocaine Removal Rate (Removal rate for cocaine from non-commercial vessels 

in maritime transit zone (CCDB)). 

Table 1: Cocaine Removal Rate 

FY 2005 

Actual 

FY 2006 

Actual 

FY 2007 

Actual 

FY 2008 

Actual 

FY 2009 

Actual 

FY 2009 

Target 

FY 2010 

Target 

15.2% 16.9% 16.6% 13.2% 15.0% 15.7% 18.5% 

(1) Describe the measure. In doing so, provide an explanation of how the measure (a) reflects the purpose of 

the program, (b) contributes to the National Drug Control Strategy, and (c) is used by management of the 

program. This description should include sufficient detail to permit non-experts to understand what is being 

measured and why it is relevant to the agency’s drug control activities.1 

1

 Requirements 1 through 4 in this section are drawn from the ONDCP Drug Accounting Circular. 

01/12/2010 Created by CG-512 

Page 2 of 6 
Enclosure (1) to letter dated January 13, 2010 

The goal of the Coast Guard’s Drug Interdiction program is to reduce the supply of illegal 

drugs by denying smugglers the use of air and maritime routes by projecting an effective 

law enforcement presence in and over the six million square mile transit zone of the 

Caribbean Sea, the Gulf of Mexico and the Eastern Pacific Ocean. The Coast Guard’s 

primary outcome measure, the Cocaine Removal Rate, indicates how effective the program 

is at disrupting the flow of cocaine traveling via non-commercial maritime means toward 

the United States. The more cocaine bound for the United States that the Coast Guard 

removes, the less supply of cocaine available within the United States. The cocaine 

removal rate is calculated by dividing the total amount of cocaine removed by the Coast 

Guard by the total non-commercial maritime movement of cocaine towards the United 

States, both of which are captured and validated in the CCDB. 

The 2007 National Drug Control Strategy set an interagency, transit zone removal rate 

goal for cocaine of 40% by 2014. With over 80% of the cocaine moving through the 

transit zone via non-commercial maritime means, the higher the Coast Guard’s cocaine 

removal rate, the less cocaine that needs to be removed by our domestic and international 

partner agencies to achieve that 40% goal. The Drug Interdiction program managers 

monitor the cocaine removal rate, watching for both changes in Coast Guard removals as 

well as increases or decreases in flow. Any changes are then diagnosed to determine the 

cause and to develop strategies to continue to increase the removal rate. Factors that can 

impact the removal rate include, but are not limited to, changing modes, tactics and routes 

by the drug trafficking organizations; increased or decreased patrol effort by the Coast 

Guard or its drug interdiction partner agencies/nations; the availability, quality and 

timeliness of tactical intelligence; new or upgraded diplomatic and legal tools; and the 

implementation of new capabilities (National Security Cutter and Maritime Patrol Aircraft 

(HC-144), for example). 

(2) Provide narrative that examines the FY 2009 actual performance results with the FY2009 target, as well 

as prior year actual results. If the performance target was not achieved for FY 2009, the agency should 

explain why this is the case. If the agency has concluded it is not possible to achieve the established target 

with available resources, the agency should include recommendations on revising or eliminating the target. 

In FY 2009, the Coast Guard removed 352,860 pounds (160.1 Metric Tons) of cocaine; the 

3rd highest year for cocaine removals in Coast Guard history. Relative to the total 

estimated movement of non-commercial cocaine destined to the United States in FY 2009 

captured in the CCDB, the Coast Guard removed 15.0% of this estimated flow. This 

removal rate was slightly below its target of 15.7%. In FY 2009, the Coast Guard 

temporarily took two of its twelve 378’ high endurance cutters (WHEC) out of service due 

to critical, unscheduled maintenance issues resulting in 356 lost major cutter days from 

these two cutters alone. The reduction in available high endurance cutters impacted Coast 

Guard’s surface interdiction and detection & monitoring support to Joint Interagency Task 

Force-South (JIATF-S). The Coast Guard only provided 2036 JIATF-S major cutter days 

in FY 2009, 519 cutter days short of its intended 2555 FY 2009 JIATF-S major cutter days 

support (approximately 20% gap). WHECs are historically the Coast Guard’s most 

effective surface asset for cocaine removals due to their greater endurance and more robust 

command and control suite compared to other Coast Guard surface platforms. Cutter 

endurance is a key contributor to countering the maritime cocaine threat in the remote, vast 

01/12/2010 Created by CG-512 

Page 3 of 6 
Enclosure (1) to letter dated January 13, 2010 

Eastern Pacific transit zone vector. The reduction in WHEC available cutter days reduced 

the opportunity for additional cocaine removals and may have contributed to the Coast 

Guard missing its FY 2009 Cocaine Removal Rate target. 

(3) The agency should describe the performance target for FY 2010 and how the agency plans to meet this 

target. If the target in FY 2009 was not achieved, this explanation should detail how the agency plans to 

overcome prior year challenges to meet targets in FY 2009. 

The Coast Guard’s target for FY 2010 is to remove 18.5% percent of the cocaine moving 

via non-commercial maritime means towards the United States. In FY 2010, the Coast 

Guard anticipates having all of its 378’ cutters back in service, a full operational year of 

United States Coast Guard Cutter BERTHOLF (the first National Security Cutter), and 

expanded Airborne Use of Force (AUF) capacity for both Coast Guard and U.S. Naval 

surface platforms to help counter the expanding go-fast threat in the littorals of Central 

America. Based on its baseline of performance, the expanded capabilities mentioned, and 

anticipated intelligence gains in FY 2010 to focus detection and monitoring efforts, the 

Coast Guard expects that it can achieve its FY 2010 target. 

(4) The agency should describe the procedures used to ensure performance data for this measure are accurate, 

complete, and unbiased in presentation and substance. The agency should also describe the methodology used 

to establish targets and actual results, as well as the data source(s) used to collect information. 

As stated previously, the Cocaine Removal Rate is calculated by dividing the total amount 

of cocaine removed by the Coast Guard by the non-commercial maritime movement of 

cocaine towards the United States. The data used to calculate the Coast Guard’s Cocaine 

Removal Rate is drawn from the interagency-validated CCDB. The amount of cocaine 

removed by the Coast Guard is the sum of all cocaine that is physically seized by Coast 

Guard personnel and all cocaine lost to the drug trafficking organizations due to the Coast 

Guard’s efforts. This latter amount is often an intelligence-based estimate of the quantity 

of cocaine onboard a given vessel that is burned, jettisoned, or scuttled in an attempt to 

destroy evidence when Coast Guard presence is detected. The estimated non-commercial 

maritime flow of cocaine towards the United States and actual cocaine removals are drawn 

from the CCDB. Data entered into the CCDB are approved through a quarterly, 

interagency vetting process. Although the cocaine removals are originally reported in 

pounds, the Coast Guard converts the removal to metric tons to compute the Cocaine 

Removal Rate. All data contained in the CCDB are deemed to be as accurate, complete 

and unbiased in presentation and substance as possible. 

At least annually, the Coast Guard’s Office of Law Enforcement and Office of 

Performance Management Assessment review all the assumptions that factor into the 

setting of its out-year targets, and makes adjustments as necessary. Revisions to the targets 

are reported to the Department of Homeland Security’s Future Year Homeland Security 

Program database. 

The Coast Guard Office of Law Enforcement last updated its out-year performance targets 

in August 2009. The key factors that drive the target setting process are the estimated outyear cocaine flow, the projected availability of Coast Guard resources (mainly major 

cutters, long range maritime patrol aircraft, Law Enforcement Detachment (LEDET) and 

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Enclosure (1) to letter dated January 13, 2010 

AUF), and any anticipated changes in Coast Guard capabilities, authorities, or partnerships 

that may impact cocaine removals. 

II. MANAGEMENT’S ASSERTIONS 

The Report should include a letter in which an accountable agency official makes the 

following assertions regarding the information presented above: 

(1) Performance reporting system is appropriate and applied – The agency has a 

system to capture performance information accurately and that system was properly 

applied to generate the performance data. 

The Coast Guard performance reporting system is appropriate and applied. It was 

reviewed in a 2007 Independent Program Evaluation by the Center for Naval Analyses and 

a 2007 OMB PART Evaluation. Both reviews verified the appropriateness and application 

of the performance reporting system, and the Coast Guard has made all significant changes 

recommended to ensure continued validity. 

(2) Explanations for not meeting performance targets are reasonable – The 

explanation(s) offered for failing to meet a performance target and for any 

recommendations concerning plans and schedules for meeting future targets or for 

revising or eliminating performance targets are reasonable. 

The Coast Guard was within the DHS allowable deviation from its target. The Coast 

Guard’s FY 2010 target was updated in August 2009 and satisfies OMB Circular A-11’s 

guidance for establishing targets. The FY 2010 target was lowered due to the WHEC 

cutter fleet availability and the lower projected baseline performance for FY 2009 based 

FY 2009 3rd quarter CCDB data that indicated lower than projected Coast Guard Cocaine 

removals. 

(3) Methodology to establish performance targets is reasonable and applied – The 

methodology described above to establish performance targets for the current year is 

reasonable given past performance and available resources. 

The Coast Guard methodology to establish performance targets is reasonable and applied. 

The Coast Guard uses a quantitative and qualitative process that reviews intelligence, 

logistics, strategic and operational policy, capability, emerging trends, past performance, 

and capacity variables impacting mission performance to establish performance targets. 

Targets generated by the program manager are reviewed independently by performance 

and budget oversight offices at Coast Guard Headquarters, as well as the DHS Office of 

Program Analysis and Evaluation, prior to entry into budget documents and the DHS 

Future Year Homeland Security Program database. 

(4) Adequate performance measures exist for all significant drug control activities 

The 2007 OMB PART of the Coast Guard Drug Interdiction Program and 2007 

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Page 5 of 6 
Enclosure (1) to letter dated January 13, 2010 

Independent Program Evaluation by the Center for Naval Analyses validated the adequacy 

of Coast Guard performance measures. 

- The agency has established one acceptable performance measure that covers all 

four budget decision units for which a significant amount of obligations ($1,000,000 or 50 

percent of the agency drug budget, whichever is less) were incurred in the previous fiscal 

year. 

Management should take the following criteria into account when making assertions: 

(a) Data – If workload, participant, or other quantitative information supports these 

 assertions, the sources of these data should be well documented. If these data are

 periodically collected, the data used in the report must be clearly identified and will

 be the most recently available. 

(b) Other Estimation Methods – If professional judgment or other estimation methods 

are used to make these assertions, the objectivity and strength of these estimation 

 methods must be thoroughly explained and documented. These estimation methods 

should be subjected to periodic review to confirm their continued validity. 

(c) Reporting Systems – Reporting systems supporting the assertions should be 


current, reliable, and an integral part of the agency’s budget and management 


processes. 


III. INSPECTOR GENERAL AUTHENTICATION 

Agency performance information and management’s assertions should be provided to the 

agency’s Inspector General (IG) for the purpose of expressing a conclusion about the 

reliability of each assertion made in the report. ONDCP anticipates that this engagement 

will be an attestation review, consistent with the Statements for Standards of Attestation 

Engagements, promulgated by the American Institute of Certified Public Accountants. 

01/12/2010 Created by CG-512 

Page 6 of 6 
 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff for Operations 

Chief of Staff for Policy 

Deputy Chiefs of Staff 

General Counsel 

Executive Secretariat 

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 

Under Secretary, Management 

Chief Financial Officer 

Deputy Chief Financial Officer 

Director Office of Financial Management 

Chief Information Officer 

Chief Security Officer 

Chief Privacy Officer 

Office of National Drug and Control Policy 

Associate Director for Planning and Budget 

United States Coast Guard 

Commandant 

Chief Financial Officer 

Chief Information Officer 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Program Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as appropriate 
ADDITIONAL INFORMATION AND COPIES 

To obtain additional copies of this report, please call the Office of Inspector General (OIG) at (202) 254-4100, 

fax your request to (202) 254-4305, or visit the OIG web site at www.dhs.gov/oig. 

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