United States General AccountinPr Office GAO Financial ‘.Management Series December 1997 Seized/Forfeited Asset System Checklist Systems Reviewed Under the Federal Financial Management Improvement Act of 1996 Exposure Draft I GAO/AIMD-9821.25 i r PREFACE The, Feder+,~Finam&l Management Improvement Act (FFMIA) of 1996, requires, among other things, that agencies implement and maintain m&agementgystems that comply with federal financial management systems requirements. These requirements are detailed in the Financial Management Systems Requirements series issued by the Joint Financial Management Improvement Program (JFMIP) and in the Office of Management and Budget (OMB) guidance referred to in those documents. To help agencies review their financial management systems and assist auditors with their responsibilities under FFMIA,’ we have developed eight checklists, which we are issuing concurrently for comment as exposure drafts. Seven of the checklists reflect the system requirements defined by JFMIP. The eighth checklist, based on the JFMIP framework document, describes a single integrated financial management system and is primarily a reference tool rather than a standard-setting document. As more system requirements are issued, we intend to develop additional checklists. When these checklists are issued in final form, they will be available on the Internet on GAO’s Home Page (www.gao.gov). ” Additional copies of the exposure draft of this checklist can be obtained from Room 1100, 700 4th St. NW, U.S. General Accounting Office, Washington, D.C. 20548, or by calling (202) 512-6000. Please send comments by February 28, 1998 to Robert W. Gramling, Director, Corporate Audits and Standards, Accounting and Information Management Division, at U.S. General Accounting Office 441 G Street NW, Room 5089 Washington, DC 20548 -3 &* ene L. Dodaro Assistant Comptroller General Accounting and Information Management Division !l’he final form of this checklist will be included in GAO’s Financial Audit Manual. Page 1 GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (E/97) ,.: ’ : :. - Page 2 GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (X2/97) 1, _. ~. ~_ ___ . .“.._-----J CONTENTS Preface 1 Overview . 3 Authoritative Guidance 3 How to Use This Checklist 3 Agency System Architecture 5 Requirements Checklist 9 Seizure Activities 10 Asset Custody Activities 12 Asset Disposition Activities 16 Abbreviations FFMLA Federal Financial Management Improvement Act of 1996 JFMIP Joint Financial Management Improvement Program OMB Office of Management and Budget Page 3 GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (Q/97) ,o) ,: ‘. .’ ‘, ‘. i .?. ,;1., ‘;-. . .’ ..,/,,. ., ‘.’ . .’ ‘. j,: ‘,, ,.. ” : ; . Page 4. GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) : : , _;: _, I OVERVIEW i The Federal Financial Management Improvement Ait (FFMJA) of 1996; requires, among other things, that agencies implement and maintain financial management systems that comply with federal financial management systems requiremeats., These systen-i :- requirements are detailed in the Financial Management Systems Requirements series issued by the Joint ..$*rll. Financial-Man ,Iur,& ~IzU~wl~.<l‘~~b, (JFMIP)~ and Office of Management and- Budjget COMB) ,~~~*uas~~:~~~~~~~-~~~~~:,,,?,, anagement, Svsterns.. The JFMIP’requirements documents ident@ (1) a ikxtiework fdr financial manag~mkmt : systems, (2) core financial systems re&irem’ents, and (3):,16’oth’er’systerrrs, suppo.rting agency opertitions: Figure 1 illustrates: how, these; elements fit together in ‘an ,agency systems architecturk .’ .. a’ ” J ‘, (7, ..I‘ Figure 1: Agencv Svstem$ Architecture : I’ : ‘3 I, ,:. .’ i ,’ .;.’ .’ .J, ,’ :, ., ‘. rstem , / . . - i!z Source: JFMIP Federal Financid Management System Requirements documerks. .:i- , pige 5 ., .’ GAO/AIMD-98-21.2.5- Proposed Seized/Forfeited Asset Checldist (12/97) To date, JFMIP has issued the framework and core’documents and 6 of the 16 systems identified in the architecture.’ ’ >/I/. ,’ / GAO is issuing this and seven other checklists that correspond to the JFMIP documents as part of its Financial Management Series. GAO will issue other checklists as additional systems requirements are defined; I_ :.’ ‘, ‘ ! .( .’ ,i.‘. :).) ; Authoritative Guidance, J: :‘. > .. I, ,,‘-i.‘,, ‘I ,’ ‘,,‘, / ,, J,I .,,+:; ‘ON& Circular A-127and~~O~B’sImplemenmtion~ Guidance for. the ,Federal: Financial, Management Improvement iAct (FFMLA) of 1996, issued September 9, 1997, provide .the basisfor! assessing compliance ,tith; .the FFMIA requirement for agencies to implement and. maintain financial management systems ,that comply, substantially. with federal requirements.’ ,OMB!s September ‘1997 implementatioti ,guidance identifies various,criteria that an agency must meet to be in substantial compliance with these requirements. The source of all the questions in this checklistis the JointFinancial-Management b Imnrovement Program Federal Financial Management Svstem Reauirements , Seized/Forfeited Asset ,Svstem Reauirements (FFMRS-4, March 1993‘ (Reprinted January 1995)). ,. .’ Purpose of This G&e and H& to Use It . ,. ,,. ‘,’ .., . ‘,, The purpose”of this,,document’ is to provide a checklist to assist (1) agencies in implementing and m’onitoring, their systems and (2) management and auditors in reviewing the systems to,,deteniine if they’ are in substantial compliance with FFMIA. The checklist, the JFMIP source ‘document, and ,the two previously mentioned OMB . documents (Circular A-127 and the September 9,‘ 1997 implementation guidance) should be used concurrently by experienced staff: : I “ .x,;.: OMB’s 1997 implementation guidance provides indicators’for chief financial officers and inspector generals to assist them in determining whether the agency’s financial management systems~subst$ntially comply with federal financial management systems requirements, Filling out this checklist will allow agencies to systematically determine whether specific systems requirements are being met. Agencies can assess the significance, of any noncompliances in ‘determining substantial compliance by considering the “indicators” in OMB’s 1997 implementation guidance. For example, the annual agency ,.,, I , ’ 2Thus far, the series includes the (1) Framework for Federal Financial Management Svstems, (2) Core Financial Svstem Requirements, (3) Inventorv Svstem Reauirements, (4) Seized/Forfeited Asset Svstem Reauirements, (5) Direct Loan Svstem Requirements, (6) Guaranteed Loan Svstem Reauirements, (7) Travel Svstem:!: Reauirements, (8) and Personnel-Pavroll Svstem Reauirements. Page 6 GAO/AIMD-98:2L2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) assurance statement issued pursuant. to section 4 of the Federal Managers’ Financial Integrity Act is one of those indicators. Agencies can use GAO’s checklists to help determine annual compliance with the section 4 requirement. I h. The following Seized/Forfeited Asset System Requirements section contains a brief narrative followed by the checklist, which is organized by functions contained in the source JFMIP document. In the checklist, two columns follow each question. Use the first column to answer each i question “Yes, ” “No,” or “NA.” Use the sec,ond column to explain your answer. A “Yes” 1 answer should indicate that the agency’s system or systems provide for the capability described in the question. For each “Yes” answer, briefly describe how the system(s) contain the capability and refer to a source that explains or shows the capability. A “No” answer indicates that the capability dqes not exist. For a “No” answer, the second column should provide an explanation.and a reference to the supporting -documentation. Such explanations could include the following: (1) The agency is working on modifying or implementing its system(s) to have the capability available in subsequent years. (2) Management believes the capability is not cost effective and will not enhance the systems’ ability to manage operations. Refer to any cost-benefit studies that support such explanation. If there are none, provide a full explanation. Not every guide may apply to an agency;‘. Further, while a guide may be applicable to an agency, certain questions within. the guide may not be applicable. Answer such nonapplicable question(s) with an “NA” and provide an appropriate explanation in the second column. Page 7 GAO/AIMD-9%2L2.5 - Proposed Seized/Forfeited Asset Checklist (B/97) ‘, Page 8 GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Ch&list (12/97) L- !-- I SEIZED/FORFEITED. ASSET. SYSTEM:r,RE&UIREMENTS ,:,: ;: I The seized/forfeited asset systern’requirements helps agencies’ track the’~status’~of a seized asset from’ the time of seizure through%arious processing steps, Which ~mayir-iclude forfeiture, ;,_.: until I final disposition ,(,of ‘<’ the asset. ; .:: ,I,. , ,” : ; ,, .’ ,. _ .:., The three components of the seized/forfeited&set system are ‘discussed ‘b&o&. : 1. Seizure Activities - When certain civil and crimmalla~s, are v@lated~, certain enforcement agencies have the authori?, to, seize the possessions,, of .the violator. (The checklist questions for this area are dra$ri f?om’page:.I3 of”lthe source, : :. . I ,, .I. document.) i .‘// ,,,. 8, : 2. Asset Custodv Activities .- .Organizations that have. custody of seized..and forfeited assets must have adequate policies and procedures to..make sure all assets are properly received, recorded, valued, maintamed, and, controlled. throughout the seizure and forfeiture process. (The che&list,,questions for this area are drawn from pp. 13-14 of the source document.) j !,: ;.: ‘; .. /.‘, ;b “: :,’ ‘,‘, 3. Asset Disnosition ‘Activities - A. ‘key .component of an effective asset seizure ‘and forfeiture process is the orderly disposition of the assets in. accordance with the law applicable to those assets. (The checklist questions for, this area are drawn from pp.’ 14-15’ of’ tk$.$o$ce db&m&t.)’ ” ‘- ; -. . .’ ,j. Ii,, i ,‘.I . The checklist questions follow the JF’MIP source document: It shoul’d be noted that not all questions will apply in all situations and, as with the “use ,bf any checklist; professional judgement should be exercised. tUsing the JI?MIP source. document along with the two previously mentioned OMB documents will help ensure that the user is cog.nizant of the background information and definitions necessary to fully ,tiderstand’ the questions. ,“’ ,1 I 3.. “, *’ GAO/AIMD-98-2’1.2.5 h Proposed Seized/Forfeited Asset Checklist (12/97) SeizedLFotifbite’d ‘As&et’ Syst,“&~ R;eq&etie&+’ : ‘..I,A , !, ‘, l ::,::,:‘. :i :,,.- . ” I I ;,: >i., ._/. .,, 2. :Timely recording of the .date ‘. of seizure; the type of asset; ’ - : .;* ‘1 the locatibfi wh&& ‘seized, ,t& :’ : t ‘. i. ’ physical condition, the ... ‘I” .,/ ‘f; ,, physical location, owner(s) if known, arid’ entities, involvedj\ ,..;:. ,I I I in the seizure?,) “, ‘.. ,, ,. 1.0 :. I,,. 1‘( ‘.: L ,, : ; i ‘,, >li’ii : .’ 3. Timely and accurate recording of* the; originally assigned., i value and the ba;si.s,’for :the: 1’ I’ : ,. . i / initiaJ vaJue .placed on each ., ‘. , ‘,. ‘i(,.’ : ‘: .’ seized.assetandthe. ,, .’ I. ..s, I ‘. identification of vvho assigned, the asset value? 4. Timely recording of any mortgage and claim liabilities against each seized asset? 5. Capability to query the current information on processing status of any seized asset captured in the database? Page 10 GAO/AIMD-9841.25 - Proposed Seized/Forfeited Asset Checklist (E/97) Seized/Forfeited Asset .System, Requireinents j i’ ‘. ‘. Seizure activities cotiponent Yesho NA 6. Information necessary to enable verification that seizure authorization exists and that the seizure/forfeiture criteria established by management have been observed? 7. Provide for the correction, amendment;. m&cmcellat~on .~ of the seizure authorization, with appropriate controls and reports to responsible program officials and other affected parties? 8. Prompt payment of properly authorized and billed services? This system ,must interact _ with the core financial system to accomplish this task. ,,Page 11 GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) Seized/Forfeited Ass,et &stem, Requirements : ,. : ,,..:4:I ,’ ;’ ;,..:,: .,;. Asset ,Ctistody Activities; ” ,Yes/No ; ,,’ Explanation ” Component : NAi I I. Does the system component have .: ‘. ,’ I r.., ,i. .’ the capability to: . ; .,j. :,.J,,;~ ,‘,. : j: ,, .i.. ,. ,, :_ : .’ ‘(.. : : 1. Capture, record, and maintain : ., c, !I ,’ :;. I:, j’ accurate information on the ; “i, ‘,A. ., ‘..i ‘:( current physical condition,’ 1: 1; : ‘ legal status, geographic ,I.,.., . ._. location, responsible i .,; : ‘, ‘,, :,:.<:, .* :I custodian,..andth~-._c~~~~.~~..._.. _ _ ..~~~.. . ._ __. _ _._. _..._~1 .._ _ .. ,’ recorded value of each seized I, .~ : ! ., asset in custody? \ ,’ ,. ‘! ,, i. 2. Provide a record that :. ” : advertising and the issuance ,. of notice of property seized have been accomplished, if ,.’ .., required? 3. Provide information to enable . seized cash to be deposited ‘. promptly into cash holding :. ,‘. “acco’unts? ’ 4. Track and promptly record the deposit of income generated by seized businesses on an asset-by- asset basis? 5. Segregate forfeited assets from those in seized status? Page 12 GAO/AIMD-9S-21.2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) Seized/Forfeited &set ..System~ Requi~~ments:.~~ Y .$J ‘: ‘: “. ! Asset Crqtody Activities~ ‘: ;yeS/NO Explanation : Component :, 1 NA _ 6. Allocate and record all : :/ maintenance and overhead, ,,. I/I costs on an asset by asset : basis? _. ..,.. .., ,I., i 7. Record and account .for all : theft, loss, and damage ! : expenses on an asset by asset basis? ., : 8. Provide accurate and timely. ., reconciliations between : .;:, ‘. agency seized-asset records .’ ‘, and records of contractors. i being used to maintain, store, and dispose of seized assets? ‘, , 9. Provide information to allow the independent verification that each asset exists and that the recorded physical condition, legal status, geographic location, and asset value are accurate? . ,;, 10. Provide information to allow ,, ” . an independent verification that all billed contractor/ vendor services were actually performed? 11. Record and track cost bonds? Page: ‘13 GAO/AIMD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) Seized/Forfeited Asset System’liiequiretients : .l,. .: * i ., Asset Ctistody Activities YidNo ’ ,Eqjlanation Component NA ‘, .._. 12. Obtain collateral coverage ) ‘.2:,> .! from financial institutions as i _, ; : needed? : > :,,I : ,’‘, 13. Accumulate performance : ./ histories on all vendors and ‘: ,, .,” contractors (both private and _‘, ‘.. ,* ,’ government) that perform , ‘.’ :_, ,,._ asset custodial/maintenance services? . I ., ,: 14. Pay promptly all contractors/ : vendors performing asset ‘I ,, ,: , maintenance/management ‘. , ‘, c, services? The system must : interact with the core ‘. ,. ! : financial system to accomplish . ‘this task. ,+ ,, :’ ., .. 15. Inform system users regarding 2 compliance with established asset ,custody controls? ., 16. Retrieve quickly detailed information on the current location, value, and condition .. of individual assets? 17. Record accurately and timely the forfeiture action for each ‘asset? Page 14 GAO/AIMD-98i21.2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) I Seized/Forfeited Asset System ,Requirements. ‘. y Asset. Custody Activities Yes/No ‘_ Explanation Component I’ 1.NA. .~ ./ 18. Produce exception reports?: - . : .’ ,: ‘, ,. 4’ ,I :. Page 15 GAO/AIIviD-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (12/97) .., &set &spo&ion activities ! ~y&/ir;o ‘:’ 1; : Explanation’ 2 !; ; :,I NA: /,’., ,,,,r, :,. ,. component .’ ,: Does the system component have ..! ” ‘,‘Y.’ :.’ I’S the capability to: c ./’ ,. ::: _,.. ,. ,: ’ ‘. 1. Record accurately and timely each asset disposition, including the unique identifier ‘. of specific asset, type of asset, type of disposition, location of disposition, responsible official, and current asset value at time of disposition? 2. Flag low-value and time- sensitive assets to ensure their timely recording and liquidation? 3. Record and account accurately for all revenues and asset specific expenses generated from asset disposition activities (sale, quick release, settlement, remission, or dismissal) on an asset-by-asset basis? 4. Verify that proper authorization exists for all seized asset dispositions? Page 16 GAO/AIMD-98-21.2.5 1 Proposed Seized/Forfeited Asset Checklist (E/97)’ Seized/Forfeited Asset .Sys.tem:.Require~en~~ ;, t .” , I: ‘: :. ;. .I Asset dispqsition activities Yes/no’ Explanation component : NA. ; /,. . ,, 5. Record detailed information \ i -; ,:” 1 ‘: ‘,, :;:.I,,;, I;, on each specific asset disposition transaction, .‘, I’,. ,, including the name, Social ;;1< ,:, ‘,.‘,, ,;I,, Security number or tax : ,. j r, -. identification number, address 1 ,,. ‘, ,. .“’ ” and employment affiliations of : the person(s) receiving the. asset? ‘. 6. Record and account ’ accurately for all distributions of excess revenues over expenses? 7. Provide a complete accounting for both the : applicable asset forfeiture fund balances and the seized asset deposit fund balance? 8. Record deposits of funds associated viith the asset seizure and forfeiture program made into other law enforcement related accounts? 9. Provide an audit trail for assets distributed to other. .’ entities? Page’l7, GAO/AI&ID-98-21.2.5 - Proposed Seized/Forfeited Asset Checklist (E/97) -- Seized/Forfeited Asset System Requirements : :L z Asset dispositian activities Yes/no Explanation ’ component NA 10. Record promptly the deposit .., + of all proceeds from the sale ,.,‘. of forfeited assets into the ; applicable Asset Forfeiture (8 .’ Fundaccount? ‘t: ,. ,.’ ‘, ,* ,: .i ,, 11. Record promptly transfers of cash from the applicable Seized Asset Deposit Account to the applicable Forfeiture: Fund account? 12. Test periodically asset disposition transactions to ensure that the process is not being victimized by insider transactions? 13. Verify independently that all billed contractor services were actually performed? 14. Pay promptly innocent owners or approved petitions for mitigation? The system must. interact with the core financial system to accomplish this task. 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Seized/Forfeited Asset System Checklist: Systems Reviewed Under the Federal Financial Management Improvement Act of 1996 (Exposure Draft)
Published by the Government Accountability Office on 1997-12-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)