Immigration and Naturalization Service Management Letter Report
Fiscal Year 1996

Report No. 99-12
March 1999
Office of the Inspector General

The Immigration and Naturalization Service (INS) was established by the Immigration and Nationality Act, as amended, which charges the Attorney General with the administration and enforcement of its provisions and other laws relating to the immigration and naturalization of noncitizens. The mission of the INS is to determine the admissibility of persons seeking entry and to adjust the status of and provide other benefits to legally entitled noncitizens. This includes assistance to those who seek permanent resident status and those who wish to become citizens through naturalization. To support its mission, INS' operating budget in FY 1996 exceeded $2.6 billion, including $904 million from fees collected for services.

The Office of the Inspector General (OIG) contracted with Urbach Kahn & Werlin PC, Certified Public Accountants, to perform the FY 1996 audit of the INS combined Statement of Financial Position as part of the Department of Justice's (DOJ) 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 of INS' FY 1996 combined Statement of Financial Position resulted in a disclaimer of opinion. The independent auditor was unable to substantiate a significant portion of account balances because INS did not maintain appropriate accounting records and relevant documentation. The independent auditor was unable to apply audit procedures sufficiently to determine the extent to which the combined Statement of Financial Position may have been affected by these conditions. As a result, the scope of the independent auditor's work was not sufficient for the auditor to express an opinion. The independent auditor's reports on the principal financial statement, internal control structure, and compliance with laws and regulations were previously issued in Report No. 97-22A, Immigration and Naturalization Service Annual Financial Statement Fiscal Year 1996.

The management letter was prepared by Urbach Kahn & Werlin as part of its audit of the INS' FY 1996 financial statement. 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 an opinion. However, they noted certain conditions involving the internal control structure and its operations. The management letter presents those internal control weaknesses that, in the independent auditor's opinion, do not have a material effect on the financial statements, but are areas of the management process that could, in some way, affect the organization's ability to record, process, summarize, and report financial data. Urbach Kahn & Werlin noted conditions in the following areas: (1) employer sanction unit, (2) cash receipts, (3) payroll, (4) accounts receivable, (5) bonds, (6) budget system, (7) user fees, (8) cash disbursements, (9) cost allocation, and (10) property.