Financial Audit

GAO reviewed the independent certified public accountants' audits of the Customs Forfeiture Fund's fiscal year 1991 and 1990 financial statements. The Fund accounts for the proceeds that the U.S. Customs Service generates from property and money forfeited during drug seizures. During its review, GAO noted a significant problem that limits the usefulness of the information in the fiscal year 1991 financial statements. GAO believes that the lack of disclosure in the fiscal year 1991 financial statements of two significant cash items obscured a complete understanding of how the Fund's internal control problems have affected its operations. The Fund's statements did not disclose that the Fund has $6.4 million more in cash than what was recorded in the Fund's accounting records. Also, there was no disclosure that Customs had arbitrarily added a $10.6 million item, labeled as a "miscellaneous net increase to cash," in order to balance its statement of cash flows. GAO disagrees with the decision not to disclose these items because stewardship over cash is highly sensitive and critical and GAO believes that the information is relevant to a reader's appraisal of the financial statements.

GAO found that: (1) Customs' and the auditor's failure to disclose two significant unreconciled cash items adversely impacted the usefulness of the audit information and inhibited Congress and other information users from understanding and assessing the impact of the Fund's internal control problems; (2) Customs' inability to detect $6.4 million in unreconciled cash balances and report $10.6 million in unreconciled differences in cash activity increased its vulnerability to waste, fraud, and abuse; (3) the unexplained amounts could have resulted from incorrect entries in accounting records, misappropriation of funds, or theft; (4) the auditor believed that accounting and auditing standards did not require it to disclose the unreconciled items; since they were insignificant; and (5) the remainder of the independent auditor's report materially complied with auditing laws and regulations.