Office of the Attorney General Washington, D.C. 20530   December 29, 2000

The President
The White House
Washington, DC 20500

Dear Mr. President:

I am pleased to provide reasonable assurance that the Department of Justice's (Department) management controls and financial systems, taken as a whole, met the objectives of Section 2 of the Federal Managers' Financial Integrity Act (Integrity Act) for Fiscal Year (FY) 2000. This assurance is qualified by the material issues described in the enclosure with this letter.

The assurance I give for Section 2 compliance recognizes that we continue to have material weaknesses in the Department. For FY 2000, we report a total of 10 open weaknesses, of which 8 are carried over from previous years. We are declaring two new weaknesses, Immigration and Naturalization Services' (INS) Management of Property and Alien Smuggling. All of our reported issues are discussed in detail in the enclosure.

I am also pleased to be able to provide reasonable assurance that Department financial systems, taken as a whole, meet the objectives of Section 4 of the Integrity Act. For FY 2000, we report four material nonconformances, of which three are new.

While we are reporting material financial system nonconformances in four of our components, all Department Components need to continue to actively pursue major improvements to financial systems. Every Department Component has major accounting system enhancement or replacement projects underway or planned. Nonconformances with OMB Circular No. A-127, technical changes, the need to better support critical financial operations and agency programs, and the need to address weaknesses cited in the financial statement audits contribute to the necessity to modernize Department financial systems and improve internal controls.

In FY 1999, all components except the INS received unqualified audit opinions on their financial statements, a substantial improvement over FY 1998. Audits of the FY 2000 financial statements are still in progress. However, for this report, the Department requested that components consider any findings which have been revealed to date by the auditors during the FY 2000 financial statement audits.

The Department's Section 4 certification has been determined by evaluating individual bureau level weaknesses and assessing the impact of those weaknesses on the Department as a whole. Material nonconformances continue to be reported for financial management issues in the INS. This year, we are also reporting at the Department level material nonconformances in the Federal Prison Industries, the U.S. Marshals Service, and the Drug Enforcement Administration. The financial statement audits for FY 1999 reveal other weaknesses at multiple components in accounting and reporting practices, and system access and control. While these weaknesses and concerns do not rise to the level of a material nonconformance, completing needed financial system and control improvements are a Department priority, closely monitored by senior Department management. The Department reports substantial progress in correcting these weaknesses. The details for all material nonconformances are in the enclosure.

In determining the types of assurance I am providing to you for FY 2000, I have considered information from various sources, including management reviews, Office of Inspector General (OIG) and General Accounting Office (GAO) reports, audits of financial statements, reviews of financial systems, reviews of computer systems, and reports and other information provided by the Congressional committees of jurisdiction. This Management Controls Report discusses those issues we consider to be material at the Department level. However, it is just one piece of the Department's multi-faceted reporting strategy. Other elements of the strategy include Government Performance and Results Act reports, through which we present annual measurements of our performance indicators; the Attorney General's Semiannual Management Report to Congress, in which we present our progress in addressing recommendations from the Department OIG and the GAO; and, our Annual Financial Statement and Audit Report, through which we present detailed financial findings from independent auditors.

Also in FY 2000, in a continuing effort to improve the Department's internal controls, we began to establish a senior level review team to address management accountability and related issues within the broader context of agency operations.

Respectfully,

Enclosure