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The U.S. government department involved in protecting against terrorists, guarding borders and responding to disasters still lacks adequate financial controls three years after its creation, an independent audit found.

The auditing firm KPMG LLP said for the third straight year it couldn't provide an opinion on the balance sheet of the $40.3 billion Department of Homeland Security, the second-largest federal agency, because of its lax financial controls and oversight.

Auditors said the agency's finances were exposed to possible error and fraud at four of its biggest units: the Coast Guard, the Federal Emergency Management Agency, the Transportation Security Administration and Immigration and Customs Enforcement.

"In the private sector, if a CEO can't account for a corporation's money, he'd be fired," Rep. Dennis Cardoza, a California Democrat, said in an interview. "But in a billion-dollar public agency, nobody says anything. We don't even know how bad the waste or fraud might be."

Cardoza introduced a bill in May to require all federal agencies to pass an audit in two years. The heads of agencies that did not would have to appear before the Senate to be reconfirmed.

Homeland Security was created after the terrorist attacks of Sept. 11, 2001, in an attempt to unify federal efforts to protect American territory.

The report, posted on the department's Web site Wednesday, said many of Homeland Security's problems can be traced to its formation by Congress "without adequate organizational expertise in financial management and accounting."

The audit, part of a report by the agency's inspector general, said "the control environment" at the department "begins at the top with the secretary."

Among the problems cited by auditors were financial practices at the Coast Guard, which doesn't record all transactions to its general ledger.

"Consequently, the Coast Guard cannot be reasonably certain that its financial statements are complete or accurate at any time," the audit report said.

Homeland Security, whose fiscal 2006 budget is second in size only to the Department of Defense, is one of several agencies with troubled finances. In fiscal 2005, five of 24 U.S. departments or independent agencies received qualified auditor opinions, a less-than-desirable rating reflecting accountants' reservations, according to a September report by the Government Accountability Office, an arm of Congress.

Eighteen of the 24 departments or agencies, including Homeland Security and the Pentagon, couldn't fully meet the requirements of a 1996 law requiring large U.S. government units to maintain management systems that comply with federal accounting standards, the GAO said.

Michael Chertoff has headed Homeland Security since March 2005. The department last year hired a chief financial officer, David Norquist, for the first time.

"We agree with the independent public accountant's conclusions," Norquist, a former Pentagon financial-management official, wrote in a Nov. 15 letter attached to the audit report. "Since my arrival at the department I have made corrective actions my highest priority as chief financial officer.