Audit finds financial crisis in new immigration agency

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The federal agency charged with hunting down money launderers, sanctions violators and human traffickers, and which is the sole enforcer of immigration laws inside the country, is in a state of financial crisis, says a report from the outgoing inspector general for the Department of Homeland Security.

"The conditions at Immigration and Customs Enforcement are the most critical and ... need immediate attention," Inspector General Clark Kent Ervin wrote to Homeland Security Secretary Tom Ridge last month, reporting the results of an independent financial audit of the department.

The memo to Mr. Ridge, released last week on the final day of Mr. Ervin's tenure, says KPMG auditors were unable to certify the department's accounts, in part because ICE "did not adequately maintain its accounting records during [fiscal] 2004."

ICE "fell seriously behind in basic accounting functions," Mr. Ervin said. "A void exists in the financial management infrastructure at [the agency] that likely will continue to jeopardize the integrity" of the whole department's financial reporting.

The inspector general's letter confirms worries about the impact of ICE's budget shortfalls on agency morale first reported last month by The Washington Times. The results of the audit were first reported by Congressional Quarterly's Homeland Security newsletter.

ICE officials are continuing a hiring freeze and a ban on all "non-mission-critical" travel or other expenditures, instituted earlier this year. Some training has been suspended, agency spokesman Dean Boyd said, but the measures did not affect ongoing investigations.

"We are addressing the problem as swiftly as we can," Mr. Boyd said, "and in the meantime, we obviously have to exercise extreme fiscal caution."

Mr. Ervin's memo said, "The auditors identified weaknesses in [financial] controls that might have allowed [the agency] to become anti-deficient." If a federal agency becomes anti-deficient -- a state of serious budget overspending -- its leadership is exposed to criminal liability and the risk of jail time.

Mr. Boyd blamed the state of financial management in part on the huge complexity of the merger that created ICE from parts of the Customs Service and the Immigration and Naturalization Service.

"We had two different agencies being split among three different components of [the Department of Homeland Security]," he said. "It was the most challenging merger undertaken by any element of the department."

The way the merger was conducted, Mr. Boyd said, left a huge set of unanswered questions, including how to allocate rent, utilities and other costs on premises now parceled out to three parts of the new department.

Mr. Ervin said delays in determining how to reimburse the agency for such costs contributed to its "significant budget difficulties."

Mr. Boyd said there was an audit in progress to recalculate the way these costs were apportioned. "These issues are very, very complex. Every agency is making claims about its costs and how the reimbursements should be done. ... Going forward, we want to ensure that this is resolved."