Financial Management:

Control Weaknesses Reported at the Drug Enforcement Administration

AIMD-98-271R: Published: Sep 11, 1998. Publicly Released: Sep 11, 1998.

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Pursuant to a congressional request, GAO provided information on the financial management weaknesses identified during audits of the Drug Enforcement Administration's (DEA) fiscal year (FY) 1996 and 1997 financial statements, focusing on: (1) the financial management weaknesses reported by DEA in its Federal Managers' Financial Integrity Act report and by the independent public accountant (IPA) in its audit reports on DEA's FY 1996 and 1997 financial statements; (2) whether the reported control weaknesses contributed to an operating environment in which embezzlements could take place and not be readily detected; and (3) whether DEA has developed action plans to address the reported financial management weaknesses.

GAO noted that: (1) DEA has a history of serious financial management weaknesses and has actions either under way or planned to address them; (2) in connection with DEA's FY 1996 financial statement audit, the IPA reported four material weaknesses and eight reportable conditions; (3) the IPA reported 5 material weaknesses and 12 reportable conditions in DEA's FY 1997 financial statement audit; (4) the deficiencies identified by the IPA contributed to the disclaimers of opinion on DEA's FY 1996 and FY 1997 financial statements; (5) based on documents in the public record and discussions with DEA officials, during the period in which the embezzlements occurred, financial management weaknesses in DEA's control environment included: (a) ineffective segregation of duties; (b) failure to require appropriate approvals and documentation to support disbursement transactions; and (c) inadequate accounting and control over property and equipment; (6) DEA reports that it has taken, or is planning, a number of actions to address the reported control problems, including: (a) establishing an executive working group to oversee the development and completion of the agency's financial management action plan to effectively address all the audit findings; (b) issuing to the Justice Management Division within the Department of Justice an action plan designed to address the financial management weaknesses identified by the IPA; (c) implementing a new financial management system, the Federal Financial System (FFS), on October 1, 1997; (d) hiring a contractor to assess the impact that the new FFS system would have on various aspects of its operations; (e) revising its on-site inspection/audit protocol specifically to review and assess compliance with the agency's segregation of duties policy, as well as other high-risk financial management areas; and (f) capitalizing its property inventory; and (7) in a continuing effort to improve financial management capabilities, DEA recently awarded a contract for an IPA to conduct a review of the organization, purpose, and staffing of the DEA's Financial Operations Section within DEA's Office of Finance.

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