Homeland Security gets help strengthening financial controls

The Homeland Security Department awarded a contract worth as much as $42 million over five years to PricewaterhouseCoopers for assistance in assessing internal controls over financial reporting, DHS announced last week.

The contract, worth $7.6 million in the first year with four one-year options bringing the potential value up to $42.4 million, will help the department prepare for a mandatory audit of its internal controls, the system of financial checks and balances that guard against waste, fraud and abuse.

"The DHS Financial Accountability Act imposes profound challenges to us -- DHS is the first Cabinet department required to have an audit of its internal controls over financial reporting," said Andrew Maner, the department's chief financial officer, in announcing the award.

Larry Orluskie, a DHS spokesman, said in the first year, the PricewaterhouseCoopers contract will encompass task orders to assess and test the department's internal controls and identify weaknesses. In subsequent years, the contractor will address solutions to those problems, he said.

The financial accountability act requires DHS to complete its first audit of its internal controls for fiscal 2006, which ends on Sept. 30, but Orluskie did not know if the department was on track to finish. In the president's budget for fiscal 2006, the administration proposed postponing the first audit by two years, but Congress did not grant the delay.

Rep. Todd Platts, R-Pa., who sponsored the DHS Financial Accountability Act, downplayed the notion that DHS is unique in being required to prove the effectiveness of its internal controls. "While DHS is the first agency that will be subject to an internal controls audit, all agencies are required to meet new -- more stringent -- standards from OMB, with the first reports to be issued this June," he said in a statement.

Since 1983, agency heads have been required under the 1982 Federal Managers Financial Integrity Act to produce an annual statement on the state of internal controls. That requirement was made more stringent in 2004 with a revision to Circular A-123, the Office of Management and Budget's guidance document for implementing the act. The circular allows OMB to demand an audit if agencies fail to make clear progress.

DHS last year initiated efforts to comply with its accounting requirements by assigning responsibilities for internal controls, launching a series of pilot projects to document and correct material weaknesses and deploying a Government Accountability Office tool for managing internal controls.

The internal control audit is in addition to an annual financial management audit required of DHS and 23 other agencies covered by the 1990 Chief Financial Officers Act.