Audit finds DHS weak in balance sheet reporting

The Homeland Security Department’s financial balance sheets showed eight cases of  noncompliance with laws and regulations, six material weaknesses and three other significant deficiencies as of Sept. 30, according to an audit released by DHS Inspector General Richard Skinner.

Accounting firm KPMG performed the audit for the fiscal 2007 and 2008 balance sheets, and DHS’ IG posted the report on its Web site Dec. 4.

The weaknesses cover a broad range including financial reporting, general financial and application controls, fund balances, capital assets and supplies, and budget accounting, the audit states.

“While the auditors noted improvement toward correction of internal control weaknesses, the department was unable to represent that its financial statements as of, and for the year ended, Sept. 30, 2008, were presented in conformity with U.S. generally accepted accounting principles,” the document states.

The Coast Guard, Transportation Security Administration and the Federal Emergency Management Agency were unable to provide evidence to support the data they presented on the balance sheets, the audit states.

The Coast Guard contributed to all six weaknesses even though it performed an in-depth root cause analysis that identified 17 areas for improvement.

For example, the audit identified 22 findings -- of which 21 were repeated from prior years -- related to general and application controls for the Coast Guard’s information technology programs.

The audit revealed control deficiencies in three general control areas that, when combined, present a risk of affecting financial data integrity, the audit states. The problems included weak password controls, excessive access to Coast Guard financial accounts and poor design in the controls over changes to the application.

David Norquist, DHS’ chief financial officer, agreed with the conclusions, according to the report.