DHS and Coast Guard: Doomed to Repeat Financial History?

Staff Report

The Department of Homeland Security Annual Financial Report Fiscal Year 2008 illustrates that our Coast Guard has some way to go in obtaining a cleaning financial audit.  Secretary of Homeland Security Michael Chertoff released the report in November shortly after the end of the fiscal year.

Coast Guard was identified throughout the report as not having met the mark. In the Secretary’s Assurance Statement Chertoff notes that Department provides reasonable assurance that internal control over financial reporting is designed effectively as of September 30, 2008, with the exception of the following known material weaknesses:

• Financial Reporting at U.S. Coast Guard, Federal Emergency Management Agency
(FEMA), and Transportation Security Administration (TSA);
• Fund Balances with Treasury Management at U.S. Coast Guard;
• Financial System Security at U.S. Coast Guard, FEMA, and TSA;
• Budgetary Resource Management at U.S. Coast Guard and FEMA;
• Property Management at U.S. Coast Guard, TSA, and FEMA; and
• Human Resource Management at U.S. Coast Guard

Coast Guard lead the Department in this area and unfortunately didn’t fare much better in the next area of Conformance with Financial Management System Requirements (FMFIA § 4), where overall thed Department’s financial management systems do not substantially conform to government-wide requirements mandated by the Federal Financial Management Improvement Act. The following are known non-conformances:

• Federal Financial Management Systems Requirements, including:

o Financial Systems Security at DHS Management Directorate, CBP, U.S. Coast Guard, FEMA, FLETC, USCIS, and TSA;
o Integrated Financial Management Systems and Integration of U.S. Coast Guard Financial and Mixed Systems;

• Noncompliance with U.S. Standard General Ledger at U.S. Coast Guard; and
• Federal Accounting Standards at U.S. Coast Guard.

Again Coast Guard was non-compliant in each critical area on the list. RDML Keith Taylor, CG-8 recently made a post to Adm. Thad Allen’s iCommandant Blog on Coast Guards 2008 Financial Statement. Taylor didn’t go so far as to outline the deficiencies identified by Chertoff in his annual report, but he did nonetheless say

Without a long discussion of how we got here, we have some fundamental, structural deficiencies that are preventing us from achieving a financial audit opinion. For example we have multiple General Ledgers (The general ledger is where accounting transactions are posted as the official financial record of an organization).

The reality is that without discussing how we got here, we may need to revisit the saying “Those who cannot learn from history are doomed to repeat it.”