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The Department of Homeland Security underwent an audit. The audit was done by the well known firm of KPMG at the direction of Inspector General Richard Skinner.

The entire report can be found in a very large pdf here but, unless you are a glutton for hundreds of pages of accountant speak, I thought I might save you the eye glazing and sing you some of the real show stoppers from the libretto.

KPMG was unable to render an opinion on DHS’s books because of “financial reporting problems at four bureaus and at the department level.” The auditors found ten material problems, two other reportable conditions, violation of eight separate laws, and a partridge in a pear tree….Oops. Skip that last one. I still have Christmas carols on my mind.

Here’s my favorite. It’s a doozy folks. You may want to read it twice: FEMA was unable to fully support the accuracy and completeness of certain unpaid obligations, and accounts payable, and the related effects on net position, if any, prior to the completion of DHS’s 2006 PAR. These unpaid obligations, as reported in the accompanying DHS balance sheet as of September 30, 2006, were $22.3 Billion or 46% of DHS consolidated unexpended appropriations at September 30, 2006. [emphasis mine]

To give some idea of proportionality, in fiscal year 2005 the entire Grants and Training (formerly know as State and Local Government Preparedness, a/k/a grants to get working radios for NYC firemen and protection for bridges, tunnels, chemical plants and nuclear facilities) was only $171 million.

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So, follow me here, FEMA has lost and/or failed to account for a sum of money that is almost half of DHS’s entire budget and 130 times greater than the amount of money that the Department of Homeland Security is willing to spend to secure the homeland.

There are two scandals here folks.

The first is that DHS is still not getting it. First responders in target cities need equipment that works, and meaningful training to cope with new emergent disaster scenarios.

The second is that the no bid contracts given to campaign contributors and those with the “right” K Street lobbyists at inflated prices were not enough for these mutts. They had to rub salt in the wound, by squandering what goods and services were actually delivered and stockpiling them where they could not be used, and then pour lemon juice in those salted wounds by failing to even keep track of how much money they gave to them.

I don’t know about you, but when I use my debit card at the ATM, I keep the receipt until I can write down the debit in my check register. If I were a better book keeper, I would keep the receipt until I had reconciled my statement to make sure the debit appeared correctly on the bank account statement. If I was subject to audit rules promulgated by the GAO, I might keep the receipt, the check register entry and the bank statement until after a yearly audit or even beyond. However, these common sense principles apply only to mere mortals like me, not to Mike Chertoff.

And where is Congress on all this? Well, the House Committee on Homeland Security has been chaired by none other than Peter (I thank God every night that George Bush is my President) King (R-NY3), so enough said there. In the Senate the committee’s ranking Democrat has been none other than our own beloved Joe Leiberman. Yes, firepups, Holy Joe has been watching this particular cookie jar for us ‘Merican people

And Joe, you've been doin' a heckuva job.

I remember watching the former DHS Inspector General Clark Kent Irvine testify before Congress on the need for extra audit and IG services in the wake of Katrina. The first time, he explained that he did not have enough in-house staff to monitor emergency spending on the level needed for Katrina and recommended bringing in outside investigations and auditing firms to augment GHS OIG staff. This is what the NYC Dept. of Investigations did, to great effect, for the cleanup of Ground Zero and which IG Irvine cited as an example. The second time he testified, his frustration was palpable because his pleas were falling on deaf ears. He tried again to explain that he did not have enough boots to put on the ground and that Katrina was a situation ripe for fraud, waste and abuse if someone was not there to watch the cookie jar. He accurately predicted the scandal we have today.

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I heard a story once, that at the time of Katrina, representatives of AIPSIG, the association of independent counsels, auditors, and investigators (the folks who do monitorships and come in to augment IG offices) went to see Mike Chertoff and handed him information on how the services of such entities had been used so successfully at Ground Zero together with a plan for how they could be implemented in Katrina devastated areas. The story goes that he thanked them, said the decision would be made in the Counsel’s Office and directed them to the person in the counsel’s office who would be handling the matter, Dick Cheney’s son-in-law. Now there’s a guy with incentive to make sure Halliburton doesn’t overcharge us, yes sirree.

But I digress, back to the audit report.

The Coast Guard, a component agency of DHS, evidently never heard of this writing stuff down and keeping receipts idea which is why the auditors found that:

The Unite States Coast Guard (Coast Guard) was unable to provide sufficient evidential matter or make knowledgeable representations of facts and circumstances, that support transactions and account balances of the Coast Guard

-snip-

Particularly with respect to fund balances with Treasury, accounts receivable, actuarially-derived liabilities, environmental and legal liabilities, operating materials and supplies, certain categories of property, plant and equipment, undelivered orders and changes in net position, and adjustments both manual and automated, made as part of the Coast Guards financial reporting process.

Translation: Not only did they not keep the receipts or write shit down, when we asked them what they spent the money on or where the stuff they spent the money on was to be found, they told the auditors, “Duh, I don’t know”. Consequently, they don’t even know what their account balance is at Treasury. So, if there is an attack on the U.S. requiring defense of our shores and they need to buy some extra bullets or fuel for the cutters, they don’t know what, if any, money they have available. So how can they know if they need an emergency appropriation? I feel so much safer knowing that, don’t you?

The Transportation Security Authority (TSA) was unable to even certify that it keeps its books in a manner that is consistent with generally accepted accounting principles or provide receipts.

Oh then there is ICE. Pach’s good buddies at Immigration have their own problems. According to the auditors, ICE could not support $1.2 billion in accounts payable and undelivered ordered.

These items were…dare I say it? UNDOCUMENTED.

How could this happen, you ask breathlessly? Well, it seems DHS has an Office of Financial Management that is SUPPOSED to set up uniform financial reporting systems for all DHS component agencies, write manuals explaining how to implement and use these reporting systems, and then make sure everybody is both doing it and doing it right.

There is a problem though. The auditors found that:

While the OFM is staffed with exceptionally dedicated management and staff, additional managerial skill sets are needed to fully accomplish OFM responsibilities. OFM does not have a sufficient number of management personnel who have the requisite financial accounting background, knowledge and expertise to do the long list of things necessary to perform their jobs.

Translation: They mean well, but have no clue what they are doing. And by they, I mean the managerial appointees. You know, the people hand picked by Chertoff and Cheney…with Rove getting vetting rights. See how this all works?

A last note: KPMG gave a list of recommendations to correct some of these “material” problems. My favorite was item 2(c) on page I.5. They suggested that the Secretary (that’s Mikey) “require” the people who work for him to keep the books. KPMG went on to say that this “will likely require assistance from the Secretary to emphasize the necessity of good financial management….”

So, does this mean they are saying he has been advocating bad financial management up until now? Sounds silly, but the results to date could not have been worse if that was indeed the case.

This audit report reads like a prosecution memo. Some enterprising journalist might want to give it a good read and then go ask some questions. Like where did all the money go? And why isn’t the FBI investigating all the missing money? And will DOJ prosecute the waste fraud and abuse that the IG’s independent auditors have uncovered so far?

Or maybe some Congressional oversight committee might want to do so?

Hmmmm? I hear Henry Waxman’s got subpoena power now.

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  4. Sotomayor Filibuster Threat: You Can Help Expose GOP Hypocrisy
  5. Rep. Anthony Weiner tests the bar on hypocrisy for the GOP (updated at end of post)