Although the independent public accounting firm KPMG LLP (KPMG) issued an unmodified (clean) opinion on DHS’s consolidated financial statements, and noted that the financial statements present fairly, in all material respects, DHS’s financial position as of September 30, 2016, KPMG’s audit also “issued an adverse opinion on DHS’s internal control over financial reporting of its financial statements as of September 30, 2016.”
KPMG’s “report identifies six significant deficiencies in internal control; three of which are considered material weaknesses. The material weaknesses are in information technology controls and financial system functionality; financial reporting; and property, plant and equipment. The report also identifies instances of noncompliance with four laws and regulations.
DHS also identified the same material weaknesses in the Department of Homeland Security Secretary’s Assurance Statement.
The following are the three significant deficiencies in internal control considered to be material weaknesses, the three other significant deficiencies in internal control, and the four laws and regulations with which KPMG identified instances of DHS’ noncompliance:
- Significant deficiencies considered To be material weaknesses
- Information technology controls and financial system functionality
- Financial reporting
- Property, plant and equipment
Other significant deficiencies:
- Entity-level controls
- Grants management
- Custodial revenue and refunds and drawback
Laws and regulations with identified instances of noncompliance:
- Federal Managers’ Financial Integrity Act of 1982 (FMFIA)
- Single Audit Act Amendments of 1996
- Anti-deficiency Act (ADA)
- Federal Financial Management Improvement Act of 1996
KPMG said, “the department continued its commitment to identifying areas for improvement, developing and monitoring corrective actions, and establishing and maintaining effective internal controls over financial reporting this past fiscal year. Looking forward, the department must continue remediation efforts, and stay focused, in order to sustain its clean opinion on its financial statements and obtain an unqualified (clean) opinion on its internal control over financial reporting.”
In contrast to KPMG’s audit, Sen. Tom Carper (D-Del.), the top Democrat on the Senate Committee on Homeland Security and Governmental Affairs, DHS earned a clean financial audit for the fourth year in a row.
“The mission of the Department of Homeland Security is one of the most difficult and complex of any federal agency,” Carper said. “They do everything from securing our ports of entry, to defending our cyber networks, to keeping our cities and communities safe. It’s no small or easy task for any agency to produce a clean financial audit, let alone an agency as large and complex as DHS, but these impressive results for the fourth consecutive year show that it is possible. The key to success at any organization is strong leadership and it is obvious that, under Secretary Johnson’s leadership, what the department is doing to ensure accurate and complete financial accounting is working. I applaud the team at DHS for their ongoing commitment to protecting taxpayer dollars and encourage the agency to continue and build on this progress.”
In 2012, Carper joined Sens. Scott Brown (R-Mass.) and Ron Johnson (R- Wisc.) in seeing passage into law of the DHS Audit Requirement Target (DART) Act, which requires DHS to obtain and pass full audits for its financial statements.
Carper said, "By earning a clean bill of financial health from an independent auditor for the fourth year running, DHS continues to be in compliance with this law."