Independent Auditors' Report on DHS' FY 2016 Financial Statements and Internal Control over Financial Reporting

We recommend that Coast Guard establish new, or improve existing, policies, procedures, and related internal controls to increase training and development of existing resources to better align them to financial reporting oversight roles.

We recommend that FEMA develop and implement policies and procedures that ensure results of reviews and audits performed over WYO insurance companies are communicated to the actuary for consideration in the calculation of the insurance liability.

We recommend that CBP enforce existing policies, procedures, and related internal controls to ensure that the review of manual journal entries is sufficiently precise to identify errors, and that the underlying information utilized in the preparation of the entries is complete and accurate.

We recommend that CBP Attract and deploy additional skilled resources and align them to financial reporting oversight roles.

We recommend that USSS employ additional resources and design and implement policies and controls to track, monitor, and report the complete population of its not in evidence counterfeit note inventory, including any note processing backlog.

We recommend that NPPD involve financial management personnel in the procurement of contracts for NPPD's major IUS projects to ensure they are structured to facilitate isolation of costs between development, maintenance, and research and development (i.e., capitalizable vs. expensed), at an individual asset level, in order to enhance traceability of capital costs.

We recommend that NPPD attract and deploy additional skilled resources to support the control environment and provide the necessary financial reporting oversight.

We recommend that USSS adhere to established inventory policies and procedures and design and implement controls to appropriately track asset activity at the transaction level and ensure the timely recording of asset additions, deletions, or other adjustments.

We recommend that USSS establish new, or improve current communication channels within the Administrative Operations Division and Financial Management Division to ensure sufficient review of personal and real property activity and balances, including equipment, IUS, land, buildings and other structures, and to verify costs are appropriate and reflect USSS's business operations during the fiscal year.

We recommend that USSS attract and deploy additional skilled resources within the Administrative Operations Division and Financial Management Division to support the control environment and provide the necessary financial reporting oversight.

Related to the Entry Process: We recommend that CBP fully implement the automated controls over single transaction bond processing.

Related to the Entry Process: We recommend that CBP provide training to all personnel on new policies to ensure consistent implementation at decentralized locations.

Related to Refunds and Drawbacks: We recommend that CBP continue to enhance the manual controls to detect or prevent excessive drawback claims, including after the implementation of TFTEA, as current claims will take several years to be processed through the drawback lifecycle.

Related to Refunds and Drawbacks: We recommend that CBP implement policies and procedures to ensure supporting documentation related to accelerated filer status is maintained.

We recommend that the Deputy Secretary, Department of Homeland Security establish a formal entity at the Department level to oversee component use of force activities. Once established, the responsible personnel at the Department level should work with the components to: a. establish minimal requirements for what each component should report as a use of force incident and develop a process to collect and report the accurate number of incidents; b. develop a formal mechanism by which components can share lessons learned regarding use of force policies, training, and oversight; c. collaborate with the components and conduct a review or study to identify minimum standards or requirements for less-lethal use of force training, and require the components to implement the training; d. ensure each component has and uses a system of record to actively monitor completion of required recurring training; and e. continuously improve monitoring of training requirements, address training challenges related to resource availability, optimize regional efficiencies, and identify opportunities for cooperation to meet training related goals.