Drug Enforcement Administration Management Letter Report
Fiscal Year 1996

Report No. 99-09
March 1999
Office of the Inspector General

The Drug Enforcement Administration (DEA) was created on July 1, 1973, to consolidate all federal anti-drug forces under a single component within the Department of Justice (DOJ). The agency is headed by an Administrator and consists of 20 Domestic Divisions and 70 Foreign Offices in 51 countries throughout the world. In FY 1996, DEA employed over 7,400 persons and its budget was approximately $1 billion.

The DEA's mission is to combat drug trafficking. It is responsible for the development of federal drug enforcement strategy, programs, planning, and evaluation. It provides the skeletal structure for drug law enforcement worldwide and a point of reference for efforts against all aspects of the illegal drug problem, including investigations, drug intelligence, chemical control, diversion control and regulation, and crop and laboratory eradication. The DEA conducts 75 percent of its investigations in cooperation with other agencies.

The Office of the Inspector General (OIG) contracted with KPMG Peat Marwick LLP to perform the FY 1996 audit of the DEA's Annual Financial Statement (OIG Report No. 97-31A) as part of the DOJ's effort to implement the Government Management Reform Act of 1994 (GMRA). The GMRA requires an annual financial statement audit of the DOJ beginning with FY 1996. The audit was conducted in accordance with generally accepted government auditing standards and Office of Management and Budget Bulletin No. 93-06, "Audit Requirements for Federal Financial Statements." The OIG performs an oversight role in the audit process and ensures compliance with the GMRA by monitoring the progress of the audit, reviewing supporting workpapers, coordinating the issuance of reports, and following up on findings and management letter issues.

The audit resulted in a disclaimer of opinion on the Combined Statement of Financial Position. The independent auditor was unable to obtain sufficient information regarding an irregularity involving a DEA employee and therefore was not able to determine the effect of the irregularity on the DEA's financial position as of September 30, 1996. In addition, the DEA either did not have, or had not maintained, systems to accurately and completely account for all of its capitalizable property and equipment, report its seized assets and related liabilities, and report the results of active Attorney General exempt and trafficker directed operations. The independent auditors were unable to apply audit procedures sufficient to determine the extent to which the combined Statement of Financial Position may have been affected by these conditions. The auditors were therefore unable to satisfy themselves as to the fair presentation of the related account balances. As a result, the scope of the independent auditors' work was not sufficient for the auditors to express an opinion.

The management letter was prepared by KPMG Peat Marwick as part of their audit of the DEA FY 1996 financial statement. The management letter presents conditions in the internal control structure that in the independent auditors' judgment, are not significant and do not need to be included in the required audit reports. The auditors were not contracted to perform control testing sufficient to enable them to express an opinion on management's assertions over the effectiveness of internal controls or compliance with laws and regulations. Accordingly, they did not express such opinions.

KPMG Peat Marwick noted conditions in the following areas: (1) Information Technology, (2) Property and Equipment, (3) Cash Management, (4) Financial Accountability, and (5) Office of Personnel. Additionally, KPMG Peat Marwick noted several conditions when evaluating compliance with laws and regulations.