The mess at ICE

As the agencies hit their second anniversary within DHS, their separate procurement and accounting systems represent one big mess.
In an effort to consolidate the accounting among agencies, DHS gave extra responsibilities to the Bureau of Immigration and Customs Enforcement (ICE), which proved incapable of handling the workload, according to its critics.
Comment from ICE spokespeople was not available on this subject. However, both congressional appropriators and former Homeland Security Inspector General Clark Kent Ervin expressed deep concerns about the state of DHS’ accounting.
“[T]he department and ICE did not prepare a thorough, well-designed plan to guide the transition of accounting responsibilities within ICE,” Ervin wrote in his last report, titled Major Management Challenges Facing the Department of Homeland Security (www.dhs. gov/dhspublic/interweb/assetlibrary/OIG_05-06_Dec04.pdf). “ICE fell seriously behind in the performance of basic accounting functions, such as account reconciliations and analysis of abnormal balances. The pervasiveness of errors in ICE’s accounts will prevent the auditors from completing their work at ICE for the FY 2004 DHS financial statement audit.”
The precise extent of the accounting tangle became a bit clearer when ICE extended a contract to Savantage Financial Services, based in Rockville, Md., last December to provide its Federal Financial Management Services (FFMS) throughout 2005.
The contract extension is worth an estimated $10 million “due to ICE’s transformation to DHS and its requirement to support five other DHS organizational elements,” said the sole-source solicitation.
ICE accountants currently support most of the rest of DHS, including the rest of the Border and Transportation Security Directorate, the Science and Technology Directorate, the Information Analysis and Infrastructure Protection Directorate and DHS headquarters operations.
Problems discovered
Among the first to note problems with accounting at ICE was former Rep. Jim Turner (D-Texas), who served as the ranking member on the House Select Committee on Homeland Security before his retirement in December.
Turner criticized FFMS in a letter to Ervin dated June 14, 2004, noting that the Government Accountability Office (GAO) had questioned the reliability of its software in the past.
“Problems with [ICE] financial systems have crippled the ability of managers and staff to fulfill their responsibilities. It is puzzling to me that the department would choose to stay with a system that was so widely recognized as inherently flawed,” Turner wrote.
At that point, the Border and Transportation Security Directorate had enacted a hiring freeze due to budget constraints. An unexpected shortfall had left the directorate without the money necessary for new hires.
Congressional appropriators took note of the growing problem in their report accompanying the fiscal 2005 homeland security spending measure (PL 108-334) that emerged from the homeland security appropriations conference on Oct. 9, 2004.
The report noted that Congress understood that managers were “coping with major changes in the organizational environment, resources, and communication networks of new and radically expanding or changing agencies,” but legislators nonetheless expressed disappointment that ICE was incapable of producing data for its fiscal 2005 budget determinations.
The conferees told ICE to produce a report on how it would improve the functions of its financial management systems, its financial oversight and its reporting of financial irregularities. They also wanted to know how ICE planned to coordinate any reforms with the services it shares with Customs and Border Protection andU.S. Citizenship and Immigration Services, two other agencies born from the dissolution of the Immigration and Naturalization Service (INS).
Fiscal 2005 outlook bleak
The accounting firm KPMG LLP, based in New York City, conducted an independent audit of DHS fiscal 2004 financial statements, which was released by the DHS Office of the Inspector General on Dec. 8, 2004 (www.dhs.gov/dhspublic/interweb/assetlibrary/OIG_05-05_Dec04.pdf).
Richard Skinner, now the DHS acting inspector general, wrote in an introduction to the report that KMPG was unable to certify fiscal 2004 DHS financial statements as accurate.
“ICE experienced significant budget difficulties during the year due at least in part to the late preparation of agreements to reimburse it for costs incurred on others’ behalf,” Skinner wrote. “As a result, ICE fell seriously behind in basic accounting functions, such as account reconciliations, analysis of material abnormal balances, and proper budgetary accounting.”
However, KPMG absolved ICE of complete responsibility for the errors due to its being seriously overburdened by the accounting burdens of other agencies.
For example, other agencies made payments from ICE accounts without telling ICE accountants, leaving at least $200 million in payments unreported, the audit discovered.
ICE’s inability to track and reconcile expenditures and balances remained unresolved, according to the audit, impacting its accounting practices for fiscal 2005, as well.
ICE and the rest of DHS plans to switch from Savantage’s FFMS system to Oracle Financials, as part of DHS’ Electronically Managing Enterprise Resources for Government Effectiveness and Efficiency, or eMerge2, project. HST
The emergence of eMerge2
The program Electronically Managing Enterprise Resources for Government Effectiveness and Efficiency (eMerge2) is the panacea that is supposed to bring order to DHS’ tangle of accounting systems.
This past September, DHS selected BearingPoint, based in McLean, Va., to develop eMerge2’s new accounting system in a contract potentially worth $229 million. BearingPoint has assembled a team of subcontractors, including BEA Systems; Booz, Allen & Hamilton; Deloitte Consulting; GCE; Hewlett-Packard; and Lockheed Martin.
According to fiscal 2005 acquisition planning data released by DHS in mid-January, the department’s chief financial officer will spend between $10 million and $20 million on the initial task order in eMerge2. The “conference room pilot” (CRP) to test the concepts of the solution under real-life scenarios before implementation is expected to cost $3 million and to be completed by June 30.
The pilot “provides the government with the opportunity to test the complete proposed solution with real-life business scenarios before implementing the solution into the Bureaus/Directorates,” according to a DHS press release.

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The Government Technology & Services Coalition's Homeland Security Today (HSToday) is the premier news and information resource for the homeland security community, dedicated to elevating the discussions and insights that can support a safe and secure nation. A non-profit magazine and media platform, HSToday provides readers with the whole story, placing facts and comments in context to inform debate and drive realistic solutions to some of the nation’s most vexing security challenges.

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