oversight

Justice Assets Forfeiture Fund: Transparency of Balances and Controls over Equitable Sharing Should Be Improved

Published by the Government Accountability Office on 2012-07-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to Congressional Requesters




July 2012
             JUSTICE ASSETS
             FORFEITURE FUND
             Transparency of
             Balances and Controls
             over Equitable Sharing
             Should Be Improved




GAO-12-736
                                               July 2012

                                               JUSTICE ASSETS FORFEITURE FUND
                                               Transparency of Balances and Controls over
                                               Equitable Sharing Should Be Improved
Highlights of GAO-12-736, a report to
congressional requesters




Why GAO Did This Study                         What GAO Found
Every year, federal law enforcement            Annual revenues into the Assets Forfeiture Fund (AFF) from forfeited assets
agencies seize millions of dollars in          increased from $500 million in 2003 to $1.8 billion in 2011, in part due to an
assets in the course of investigations.        increase in prosecutions of fraud and financial crimes cases. Expenditures in
The AFF was established to receive             support of forfeiture activities such as equitable sharing payments to state and
the proceeds of forfeiture and holds           local law enforcement agencies and payments to victims also increased over the
more than $1 billion in assets. DOJ            same 9-year period, growing from $458 million in 2003 to $1.3 billion in 2011.
uses the proceeds from forfeitures             The Department of Justice (DOJ) uses the difference between revenues and
primarily to cover the costs of forfeiture     expenditures in any year to help cover anticipated expenses in the next fiscal
activities. DOJ also shares forfeiture
                                               year. Because the AFF uses fund revenues to pay for the expenses associated
proceeds with state and local agencies
                                               with forfeiture activities, DOJ carries over funds at the end of each fiscal year to
that participate in joint investigations
through its equitable sharing program.
                                               ensure it has sufficient resources to cover expenses that may not be covered by
GAO was asked to review (1) AFF’s              the next year’s revenues. When determining the amounts to carry over, DOJ
revenues and expenditures from fiscal          reviews historical data on past program expenditures, analyzes known future
years 2003 through 2011 and DOJ’s              expenses such as salaries and contracts, and estimates the costs of any
processes for carrying over funds for          potential new expenditures. However, DOJ has not documented the process for
the next fiscal year, and (2) the extent       determining the amount of funds needed to cover anticipated expenditures in the
to which DOJ has established controls          next fiscal year in its annual budget justifications. Providing more transparent
to help ensure that the equitable              information as part of the AFF’s annual budget process would better inform
sharing program is implemented in              Congress’ oversight of the AFF. Further, after DOJ obligates funds needed to
accordance with established guidance.          cover program expenses, any remaining AFF funds identified at the end of a
GAO analyzed data on AFF revenues,             fiscal year may be declared an excess unobligated balance. DOJ has the
expenditures, and balances;                    authority to use these balances for any of the department’s authorized purposes.
interviewed DOJ officials; and                 Per Office of Management and Budget guidance, in recent years, DOJ used
analyzed a sample of 25 equitable              these excess unobligated balances to help cover rescissions. Rescissions cancel
sharing determinations, which included         the availability of DOJ’s previously enacted budget authority, making the funds
5 determinations from each relevant            involved no longer available for obligation. For example, in fiscal year 2011, DOJ
DOJ agency. GAO’s analysis of the              used excess unobligated balances to help cover a $495 million AFF program
samples was not generalizable, but
                                               rescission.
provided insight into DOJ’s decisions.

What GAO Recommends                            DOJ has established guidelines for making equitable sharing determinations, but
                                               controls to ensure consistency and transparency could be improved. For
GAO recommends that, among other               example, DOJ agencies responsible for making equitable sharing determinations
things, DOJ clearly document how it            may make adjustments to sharing percentages when work hours alone do not
determines the amount of funds that            reflect the relative value of an agency’s contribution to an investigation. If a state
will need to be carried over for the next
                                               or local law enforcement agency contributed a helicopter or a drug-sniffing dog to
fiscal year, develop guidance on how
                                               an investigation, its sharing percentage might be adjusted upward from what it
components should make adjustments
to equitable sharing determinations,           would be based on work hours alone. However, DOJ’s guidance does not include
and ensure that the basis for equitable        information regarding how decisions about these adjustments to sharing
sharing determinations is documented           determinations should be made. This is particularly important given that these
and subjected to review and approval.          determinations represent DOJ’s overall assessment of each agency’s unique
DOJ concurred with GAO’s                       contributions and are a key component of how DOJ determines how much to
recommendations.                               award to each agency. Furthermore, key information that serves as the basis for
                                               equitable sharing determinations—such as the work hours contributed by each of
                                               the participating agencies in an investigation—is not subject to review by
                                               approving authorities. Developing guidance regarding how these decisions are to
View GAO-12-736. For more information,
contact David C. Maurer at (202) 512-9627 or
                                               be made, documenting the basis for these decisions, and subjecting them to
maurerd@gao.gov.                               review and approval would help ensure the consistency and transparency of
                                               equitable sharing determinations.
                                                                                         United States Government Accountability Office
Contents


Letter                                                                                    1
               Background                                                                 5
               AFF Revenues and Expenditures Have Increased since Fiscal Year
                 2003, and DOJ’s Process for Carrying Over Funds Could Be More
                 Transparent                                                            11
               DOJ Could Enhance Controls and Oversight Mechanisms for Its
                 Equitable Sharing Program                                              25
               Conclusions                                                              38
               Recommendations for Executive Action                                     40
               Agency Comments                                                          40

Appendix I     Equitable Sharing                                                        43



Appendix II    Assets Forfeiture Fund Expenditure Categories                            46



Appendix III   Results of Asset Forfeiture and Money Laundering Section
               Compliance Reviews Completed as of December 2011                         50



Appendix IV    GAO Contact and Staff Acknowledgments                                    52



Tables
               Table 1: AFF’s Expenditures across All Fiscal Years by Type of
                        Expenditure                                                     15
               Table 2: Total Funds Available for Use in Fiscal Year 2010               19
               Table 3: Funds Reserved to Cover AFF’s Annual Rescissions for
                        Fiscal Years 2003 through 2011                                  24
               Table 4: Results of Compliance Reviews of Equitable Sharing
                        Participants                                                    50


Figures
               Figure 1: DOJ Asset Forfeiture Program Participants                       7
               Figure 2: AFF’s Revenue Totals for Fiscal Years 2003 through 2011        12




               Page i                                            GAO-12-736 Asset Forfeiture
Figure 3: Total Forfeiture Program Expenditures from Fiscal Years
         2003 through 2011                                                                14
Figure 4: Funds Carried Over at the End of the Fiscal Year to Cover
         Solvency, Equitable Sharing, and Third-Party Payments in
         the Next Fiscal Year                                                             20
Figure 5: Process for Identifying Excess Unobligated (Super
         Surplus) Balances                                                                23
Figure 6: Process for Making Equitable Sharing Determinations                             28
Figure 7: Equitable Sharing Payments across the United States in
         Fiscal Year 2011                                                                 44




Abbreviations

AFF               Assets Forfeiture Fund
AFMLS             Asset Forfeiture and Money Laundering Section
AFMS              Asset Forfeiture Management Staff
ATF               Bureau of Alcohol, Tobacco, Firearms and Explosives
CATS              Consolidated Asset Tracking System
DAG               Deputy Attorney General
DEA               Drug Enforcement Administration
DOJ               Department of Justice
FBI               Federal Bureau of Investigation
OIG               Office of Inspector General
OMB               Office of Management and Budget
RICO              Racketeering Influenced and Corrupt Organizations
TFF               Treasury Forfeiture Fund
USAO              United States Attorney’s Office
USMS              United States Marshals Service
VOCA              Victims of Crime Assistance




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Page ii                                                        GAO-12-736 Asset Forfeiture
United States Government Accountability Office
Washington, DC 20548




                                   July 12, 2012

                                   Congressional Requesters:

                                   Every year, federal, state, and local law enforcement agencies seize
                                   millions of dollars in assets that are forfeited through the Department of
                                   Justice’s (DOJ) Asset Forfeiture Program. Forfeited assets can include,
                                   but are not limited to, businesses, cash, bank accounts, automobiles,
                                   boats, airplanes, jewelry, art objects, and real estate. 1 A primary goal of
                                   the program is preventing and reducing crime through the seizure and
                                   forfeiture of assets that were used in or acquired as a result of criminal
                                   activity. The Comprehensive Crime Control Act of 1984 established the
                                   Assets Forfeiture Fund (AFF) within DOJ to receive the proceeds of
                                   forfeitures and the AFF currently holds more than $1 billion in assets. 2
                                   Revenues generated from forfeitures are used to fund program-related
                                   expenses including payments to victims and lienholders, the costs of
                                   storing and maintaining forfeited assets, and certain law enforcement
                                   activities, such as the payment of awards for information leading to asset
                                   forfeiture. 3 After funds have been obligated for program expenses in the
                                   current fiscal year, any unobligated funds that remain in the AFF at the
                                   end of the fiscal year are then carried forward to the next fiscal year. 4
                                   Specifically, at the end of each fiscal year, DOJ carries over funds to
                                   ensure it has resources to cover expenses that may not be covered by
                                   the next year’s anticipated revenues. Those funds determined to be in
                                   excess of these requirements (excess unobligated balances) may be


                                   1
                                    Once a seized asset is officially forfeited, it becomes the property of the U.S.
                                   government. DOJ also seizes illegal drugs and counterfeit items that have no resale value
                                   to the federal government. These items are typically held by the agencies until they are
                                   approved for destruction. According to DOJ, forfeited firearms generally must be
                                   destroyed in a way that prevents them from ever being put back together and used.
                                   2
                                    Pub. L. No. 98-473, tit. II, § 310, 98 Stat. 1976, 2052 (codified as amended at 28 U.S.C.
                                   § 524(c)).
                                   3
                                    These authorized uses of these revenues are enumerated in 28 U.S.C. §524(c)(1). The
                                   amount of fund revenues that can be spent on certain types of expenses, such as the
                                   purchase of evidence of a drug offense, is to be specified in annual appropriations acts,
                                   but revenues can be used without limitation for all other authorized purposes. Before
                                   1985, the costs of forfeiture activities were paid out of agency operational funds.
                                   4
                                    Obligated balance refers to the amount of obligations already incurred for which payment
                                   has not yet been made. Unobligated balance is the portion of obligational authority that
                                   has not yet been obligated.




                                   Page 1                                                         GAO-12-736 Asset Forfeiture
declared as Super Surplus and, after congressional notification, can be
used at DOJ’s discretion for a variety of purposes. 5

All federal law enforcement agencies within DOJ participate in the Asset
Forfeiture Program including the United States Marshals Service (USMS);
the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF); the Drug
Enforcement Administration (DEA); and the Federal Bureau of
Investigation (FBI) as well as other agencies not part of DOJ such as the
Department of Defense Criminal Investigative Service. Often, state and
local law enforcement agencies participate in joint investigations with
DOJ’s law enforcement agencies. In return, state and local law
enforcement agencies can receive a portion of the proceeds of forfeited
assets resulting from these investigations in the form of cash or property
through DOJ’s equitable sharing program. 6 From fiscal years 2003
through 2011, DOJ has shared over $3.2 billion in cash and property with
more than 9,200 state and local law enforcement agencies. You
expressed interest in the management of the AFF and oversight of the
equitable sharing program. Thus, this report addresses the following
questions:

1. How, if at all, have the AFF’s revenues and expenditures changed
   from fiscal years 2003 through 2011 and to what extent does DOJ
   have processes in place to ensure transparency when carrying over
   funds for the next fiscal year?
2. To what extent has DOJ established controls to help ensure that the
   equitable sharing program is implemented in accordance with
   established DOJ guidance?

To determine how the AFF’s revenues and expenditures from fiscal year
2003—the year in which the AFF was removed from GAO’s high-risk
list—through fiscal year 2011 had changed, we analyzed DOJ data on




5
 These Super Surplus balances may be allocated at the discretion of the Attorney General
for “…any Federal law enforcement, litigative/prosecutive, and correctional activities, or
any other authorized purpose of the Department of Justice” pursuant to 28 U.S.C. §
524(c)(8)(E).
6
 21 U.S.C. § 881(e)(1)(A) and (e)(3), 18 U.S.C. § 981(e)(2) authorize the Attorney
General to share federally forfeited property with participating state and local law
enforcement agencies.




Page 2                                                          GAO-12-736 Asset Forfeiture
revenues and expenditures by fiscal year. 7 We used information on
revenues and expenditures contained in the department’s financial
accounting systems. We interviewed DOJ officials regarding information
in the financial accounting systems to discuss trends and anomalies in
the revenues and expenditures over this 9-year period. As part of our
review we also determined the extent to which DOJ has processes in
place to ensure transparency when carrying over funds for the next fiscal
year. We reviewed information on unobligated and excess unobligated
balances from DOJ’s annual Congressional Budget Justifications to
Congress, available through DOJ’s public website and also contained in
the AFF’s financial accounting systems. 8 Specifically, we assessed the
extent to which the Congressional Budget Justifications outlined the
processes for carrying over funds for the next fiscal year. We also
reviewed prior GAO reports on the importance of transparency in federal
budget submissions to Congress. We interviewed DOJ officials from the
Asset Forfeiture Management Staff responsible for oversight of the AFF
regarding their processes for carrying over funds at the end of the fiscal
year. Further, we analyzed data on the AFF’s excess unobligated
balances from fiscal years 2003 through 2011, and interviewed officials
about how excess unobligated balances have been used since 2003,
including how these balances have been used to cover the cost of annual
rescissions over this time period.

To assess the reliability of DOJ’s financial accounting system for
providing revenues, expenditures, and excess unobligated balances data,
we reviewed relevant documentation and conducted interviews with
knowledgeable DOJ agency officials to understand how DOJ collects,
categorizes, and tabulates the information and the actions it takes to
ensure its consistency, accuracy, and completeness. We determined
information on the financial accounting system provided by DOJ to be
sufficiently reliable for presenting the total revenues, expenditures, and
excess unobligated balances for fiscal years 2003 through 2011.



7
 We first reported on the Department of Justice’s Asset Forfeiture Program as a high-risk
area in 1990 because of shortcomings in the management of and accountability for seized
and forfeited property. In 2003, actions taken by DOJ resulted in the AFF being removed
from GAO’s high-risk list. See GAO, High-Risk Series, An Update, GAO-03-119
(Washington, D.C.: Jan. 1, 2003).
8
 After revenues to cover program expenses have been carried over, any funds that
remain in the AFF at the end of the fiscal year may be identified as excess unobligated
balances.




Page 3                                                        GAO-12-736 Asset Forfeiture
To determine the extent to which DOJ has established controls to help
ensure that the equitable sharing program is implemented in accordance
with established guidance, we analyzed the most current guidance
provided to DOJ agencies, including the 2009 Guide to Equitable Sharing
for State and Local Law Enforcement Agencies and the 2008 Asset
Forfeiture Policy Manual, which is also provided to all DOJ agencies. In
the course of our review, DOJ officials informed us that they are in the
process of updating the 2008 Asset Forfeiture Policy Manual and
provided us with a copy of the revised chapter on equitable sharing,
which we also analyzed. We interviewed officials from DOJ’s Asset
Forfeiture Management Staff responsible for managing the AFF, and
officials from the Asset Forfeiture and Money Laundering Section
responsible for establishing the policies and procedures of the fund. In
addition, we discussed equitable sharing guidance, policy, and related
issues with headquarters officials from DOJ’s law enforcement agencies,
including ATF, DEA, FBI, and USMS. We also compared DOJ’s equitable
sharing guidance against criteria included in Standards for Internal
Control in the Federal Government. 9

To determine the extent to which DOJ ensures that agencies responsible
for making equitable sharing decisions follow DOJ guidance, we also
reviewed a nonprobability sample of 25 equitable sharing determinations
completed during fiscal year 2010. Specifically, we selected the last 5
equitable sharing determinations approved in fiscal year 2010 by each of
the three DOJ law enforcement agencies responsible for making
equitable sharing decisions, the last 5 determinations that were reviewed
and approved by the Asset Forfeiture and Money Laundering Section in
fiscal year 2010, and the last 5 determinations that were subject to review
and approval by the U.S. Attorney’s Office in fiscal year 2010. 10 We also
interviewed officials from six local law enforcement agencies in two states
to get their perspectives on the equitable sharing program. We selected



9
 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999).
10
  We received sample equitable sharing determinations from each of the DOJ agencies
responsible for making equitable sharing recommendations. These were the Asset
Forfeiture Money Laundering Section, ATF, DEA, FBI, and the United States Attorney’s
Office. Although the results of our review of equitable sharing determinations cannot be
generalized to all equitable sharing determinations, we gained a critical understanding of
how each of the DOJ agencies makes sharing recommendations as well as the process
for reviewing and approving final equitable sharing determinations.




Page 4                                                         GAO-12-736 Asset Forfeiture
             agencies from these two states because they are two of the states that
             received the largest amounts of equitable sharing dollars in fiscal year
             2011. While the views of these local law enforcement agencies cannot be
             generalized to the population of equitable sharing participants, these
             interviews provided insight into the views of select local law enforcement
             agencies on the equitable sharing program. As part of our review of the
             equitable sharing program, we also analyzed information on equitable
             sharing payments by state and by fiscal year. To assess the relationship
             between equitable sharing payments and the population of a state, and
             per capita equitable sharing payments and arrest rates, we reviewed
             equitable sharing payments data from fiscal years 2003 through 2011
             provided by DOJ, U.S. Census Bureau data for the U.S. population in
             2010, and FBI’s annual uniform crime data on arrest rates for 2010, which
             were the most current data available at the time we did our analysis. We
             interviewed FBI officials to assess the reliability of the FBI uniform crime
             data. In the course of the interview we determined that the arrest data for
             Washington, D.C. and Illinois did not capture the entire area, but
             determined the data for all other states was sufficiently reliable for the
             purposes of our review. Consequently, we excluded Washington, D.C.
             and Illinois from our analysis. Because it was out of the scope of our
             work, we did not attempt to determine other factors that could explain the
             relationship between equitable sharing funds and population or arrests.

             We conducted this performance audit from April 2011 through July 2012
             in accordance with generally accepted government auditing standards. 11
             Those standards require that we plan and perform the audit to obtain
             sufficient, appropriate evidence to provide a reasonable basis for our
             findings and conclusions based on our audit objectives. We believe the
             evidence obtained provides a reasonable basis for our findings and
             conclusions based on our audit objectives.


             The Asset Forfeiture Program has three primary goals: (1) to punish and
Background   deter criminal activity by depriving criminals of property used or acquired
             through illegal activities; (2) to enhance cooperation among foreign,
             federal, state, and local law enforcement agencies through the equitable
             sharing of assets recovered through this program; and, as a by-product,



             11
               During the course of our work, we experienced delays in obtaining certain data and
             documents from DOJ. This information was critical to the completion of our work.




             Page 5                                                       GAO-12-736 Asset Forfeiture
(3) to produce revenues in support of future law enforcement
investigations and related forfeiture activities. A number of federal law
enforcement organizations participate in the AFF, including USMS, which
serves as the primary custodian of seized and forfeited property for the
program. See figure 1 for the Asset Forfeiture Program participants.




Page 6                                            GAO-12-736 Asset Forfeiture
Figure 1: DOJ Asset Forfeiture Program Participants




                                        Page 7        GAO-12-736 Asset Forfeiture
Roles and Responsibilities   DOJ’s Asset Forfeiture Management Staff (AFMS) is part of DOJ’s
of Asset Forfeiture          Justice Management Division and is responsible for managing and
Program Participants         overseeing all financial aspects of the AFF, review and evaluation of
                             asset forfeiture program activities, internal controls and audit functions,
                             information systems, and other administrative functions related to the
                             fund. The Asset Forfeiture Money and Laundering Section (AFMLS) is
                             part of DOJ’s Criminal Division and is responsible for legal aspects of the
                             program, including civil and criminal litigation and providing legal advice
                             to the U.S. Attorneys’ Offices. AFMLS is responsible for establishing the
                             Asset Forfeiture Program’s policies and procedures, coordinating
                             multidistrict asset seizures, acting on petitions for remission in judicial
                             forfeiture cases, and coordinating international forfeiture and sharing.
                             AFMLS also oversees the AFF’s equitable sharing program. United
                             States Attorneys’ Offices (USAO) are responsible for the prosecution of
                             both criminal and civil actions against property used or acquired during
                             illegal activity.

                             USMS serves as the primary custodian of seized property for the Asset
                             Forfeiture Program. USMS manages and disposes of the majority of the
                             valued property seized for forfeiture. In serving as the primary custodian
                             of the majority of assets managed by the fund, USMS manages all valued
                             assets that are not considered evidence, contraband, or targeted for use
                             by individual law enforcement agencies. ATF enforces the federal laws
                             and regulations relating to alcohol, tobacco, firearms, explosives, and
                             arson by working directly and in cooperation with other federal, state, and
                             local law enforcement agencies. While USMS is the primary custodian
                             over valued assets, ATF maintains custody over assets seized under its
                             authority, including firearms, ammunition, explosives, alcohol, and
                             tobacco. DEA implements major investigative strategies against drug
                             networks and cartels. DEA maintains custody over narcotics and other
                             seized contraband. The FBI investigates a broad range of criminal
                             violations, integrating the use of asset forfeiture into its overall strategy to
                             eliminate targeted criminal enterprises.

                             There are several agencies outside the Department of Justice that also
                             participate in the DOJ Asset Forfeiture Program. Non-DOJ participants
                             include the United States Postal Inspection Service, the Food and Drug
                             Administration’s Office of Criminal Investigations, the United States
                             Department of Agriculture’s Office of the Inspector General, the
                             Department of State’s Bureau of Diplomatic Security, and the Department
                             of Defense Criminal Investigative Service.




                             Page 8                                                 GAO-12-736 Asset Forfeiture
Types of Forfeiture   There are two types of forfeiture: administrative and judicial, and they
                      differ in a number of ways, including (1) the point in the proceeding,
                      generally at which the property may be seized; (2) the burden of proof
                      necessary to forfeit the property; and (3) in some cases, the type of
                      property interests that can be forfeited.

                      Administrative forfeiture allows for property to be forfeited without judicial
                      involvement. Although property may be seized without any judicial
                      involvement, seizures performed by federal agencies must be based on
                      probable cause. 12 In administrative forfeitures, the government initiates a
                      forfeiture action and will take ownership of the property provided that no
                      one steps forward to contest the forfeiture. Specifically, the administrative
                      forfeiture procedure requires that those with an interest in the property be
                      notified and given an opportunity to request judicial forfeiture
                      proceedings. See below for an example of an administrative forfeiture.

                       Example of Administrative Forfeiture
                       DEA initiated a task force investigation into a drug-trafficking organization. Task force
                       officers received information from a confidential source that the drug-trafficking
                       organization was using a van with hidden compartments to transport methamphetamine
                       and drug proceeds, and a drug detection dog gave a positive alert to the presence of
                       drugs in the van. Officers obtained and executed a search warrant on the vehicle,
                       which resulted in the discovery and seizure of 149 kilograms of cocaine and $1,229,785
                       in U.S. currency. Because no party filed a claim contesting the forfeiture, the currency
                       was administratively forfeited by DEA pursuant to 19 U.S.C. § 1609.
                      Source: DOJ.



                      Judicial forfeiture, both civil and criminal, is the process by which property
                      may be forfeited to the United States by filing a forfeiture action in federal
                      court. In civil forfeiture, the action is against the property and thus does
                      not require that the owner of the property be charged with a federal
                      offense. The government must only prove a connection between the
                      property and the crime. By contrast, criminal forfeiture requires a
                      conviction of the defendant before property is subject to forfeiture.




                      12
                        Probable cause for an administrative forfeiture is defined as a reasonable ground for
                      belief of guilt, supported by less than prima facie proof, but more than mere suspicion.




                      Page 9                                                         GAO-12-736 Asset Forfeiture
  Example of Civil Forfeiture
  After obtaining a search warrant, agents searched a residence and the adjoining land
  on a 50-acre farm. Agents found firearms and ammunition, along with 60 pounds of
  processed marijuana. Agents also found approximately 4,000 marijuana plants growing
  outside in the adjacent field, along with approximately 2,500 plants being processed.
  While the owner of the farm will be subject to prosecution, because the land was used
  for illegal activities, a separate civil forfeiture action was filed against the property. The
  farm where the marijuana plants were located was seized and will be forfeited under
  civil forfeiture proceedings.
Source: U.S. Attorney’s Office.




  Example of Criminal Forfeiture
  According to the United States Attorney, two Philadelphia-based corporations operated
  an Internet enterprise that facilitated interstate prostitution activities. The defendants
  allegedly developed and operated an Internet website and created an online network
  for prostitutes, escort services, and others to advertise their illegal activities to
  consumers and users of those services.
  The case was investigated by state police, FBI, and the Internal Revenue Service
  Criminal Investigations Division. The investigation found that defendants received fees
  in the form of money orders, checks, credit card payments, and wire transfers from
  users of the website. The funds the defendants allegedly received were the proceeds of
  violations of federal laws prohibiting interstate travel in aid of racketeering enterprises,
  specifically prostitution, and aiding and abetting such travel. The money-laundering
  conspiracy charge alleges that the defendants engaged in monetary transactions in
  property of a value greater than $10,000 derived from those unlawful activities.
  The defendants entered guilty pleas to the money-laundering conspiracy charge and
  agreed to serve a probation term of 18 months and to pay a $1,500,000 fine. In
  addition, under the terms of the plea agreement, the defendants agreed to the criminal
  forfeiture of $4.9 million in cash derived from the unlawful activity, as well as forfeiture
  of the domain name, all of which represent property used to facilitate the commission of
  the offenses.
Source: U.S. Attorney’s Office.



The asset forfeiture process involves a number of key steps, including
necessary planning in advance of the seizure, seizing and taking custody
of the asset, notifying interested parties, addressing any claims and
petitions, and equitable sharing with state and local law enforcement
agencies. According to DOJ, enhancing cooperation among federal,
state, and local law enforcement agencies is one goal of the equitable
sharing program. For more information on how agencies qualify for
equitable sharing, see appendix I.




Page 10                                                            GAO-12-736 Asset Forfeiture
                            From fiscal years 2003 through 2011, AFF revenues and expenditures
AFF Revenues and            increased, with annual revenues doubling in fiscal year 2006, due in part
Expenditures Have           to an increase in forfeitures resulting from fraud and financial crimes
                            investigations. DOJ estimates anticipated revenues and expenditures
Increased since Fiscal      based on prior years’ trends and then carries over funds to help cover
Year 2003, and DOJ’s        operational expenses and other liabilities in the next fiscal year, including
Process for Carrying        reserves needed for pending equitable sharing and third-party payments.
                            However, the transparency of DOJ’s process for carrying over these
Over Funds Could Be         funds could be enhanced. Once all expenses have been accounted for
More Transparent            and unobligated funds deemed necessary for next year’s expenses have
                            been carried over to the next fiscal year, DOJ then reserves funds to
                            cover annual rescissions. 13


AFF’s Revenues More than    In the 9-year period from fiscal years 2003 through 2011, AFF revenues
Tripled from Fiscal Years   totaled $11 billion, growing from $500 million in fiscal year 2003 to $1.8
2003 through 2011           billion in fiscal year 2011. Since 2006, an increase in the prosecution of
                            fraud and financial crime cases has led to substantial increases in AFF
                            revenue. 14 For example, a money laundering case in fiscal year 2007
                            involved the misappropriation of funds by the founder of a television cable
                            company, Adelphia Communications, and resulted in over $700 million in
                            forfeited assets. As a result of the increase in forfeitures resulting from
                            money laundering and financial crimes investigations, in 2006, revenues
                            doubled those of previous years, and for the first time in the AFF’s history,
                            total annual revenues grew above $1 billion to approximately $1.2 billion.
                            Since 2006, the AFF’s annual revenues have remained above $1 billion,




                            13
                              A rescission is a law that “cancels the availability of budget authority previously enacted
                            before the authority would otherwise expire.” GAO, A Glossary of Terms Used in the
                            Federal Budget Process, GAO-05-734SP (Washington, D.C.: Sept. 1, 2005). Budget
                            authority refers to authority provided by federal law to enter into financial obligations that
                            will result in immediate or future payments involving federal government funds.
                            Cancellation of this authority makes the funds involved no longer available for obligation.
                            14
                               DOJ’s 2007-2012 Strategic Plan highlights the Asset Forfeiture Program under several
                            of the department’s strategic objectives, including combating public and corporate
                            corruption, fraud, economic crime, and cybercrime, and reducing the threat, trafficking,
                            use, and related violence of illegal drugs. As outlined in the Strategic Plan, prosecutors
                            only recently have had the legal tools to directly forfeit the proceeds of white collar crime.
                            DOJ’s Asset Forfeiture 2008-2012 Strategic Plan also describes the enhanced focus on
                            financial investigations.




                            Page 11                                                           GAO-12-736 Asset Forfeiture
with the highest revenues of $1.8 billion reported in 2011. 15 Figure 2
shows the fund’s revenue growth over time from fiscal years 2003
through 2011.

Figure 2: AFF’s Revenue Totals for Fiscal Years 2003 through 2011




Moreover, according to DOJ officials, in addition to an increase in the
prosecution of fraud and financial crime cases, the increase in revenues
can also be attributed to an overall increase in the number of forfeiture
cases together with higher-value forfeitures. Across all fiscal years,
forfeited cash income constituted 76 percent or more of the AFF’s
revenue sources. Forfeited cash income includes cash/currency, as well
as financial instruments such as money orders, bank accounts, brokerage
accounts, and shares of stock. The second, and much smaller, source of
revenue is the sale of forfeited property including automobiles, boats,
airplanes, jewelry, and real estate, among others. In fiscal year 2011,
revenues from forfeited cash income and the sale of forfeited property
together accounted for over 84 percent of the total revenues. Other



15
  The large growth in revenues in fiscal year 2007 is attributed to the large case deposits
such as the Adelphia Communications investigations, which resulted in approximately
$728 million, or 44 percent of the total revenues.




Page 12                                                        GAO-12-736 Asset Forfeiture
                             sources of income may include transfers from the Treasury Forfeiture
                             Fund (TFF), and transfers from other federal agencies. 16 Additionally,
                             since fiscal year 2006—when the AFF’s revenues from fraud and financial
                             crime cases increased—large-case deposits (forfeitures greater than $25
                             million) of forfeited cash income have contributed an average of 37
                             percent to total revenues. 17 For example, in 2007, DOJ reported a total of
                             six large deposits that totaled $842 million, or slightly over 50 percent of
                             the AFF’s total revenues in that fiscal year. These forfeitures of assets
                             greater than $25 million involved investigations of misappropriation of
                             funds, including corporate fraud and the illegal sales of pharmaceutical
                             drugs. The types of assets that were seized in these investigations were
                             primarily forfeited cash income.


AFF’s Expenditures on        From fiscal years 2003 through 2011, AFF expenditures totaled $8.3
Forfeiture Activities Also   billion. As revenues have increased, there has been a corresponding
Increased                    increase in expenditures in support of asset forfeiture activities.
                             Specifically, expenditures increased from $458 million in fiscal year 2003
                             to $1.3 billion in fiscal year 2011. Figure 3 shows the expenditures from
                             fiscal year 2003 through 2011, including the large growth in expenditures
                             beginning in 2007.




                             16
                                Transfers from the TFF or other federal agencies include DOJ’s share of forfeited assets
                             resulting from investigations initiated by a non-DOJ law enforcement agency. Over this 9-
                             year period, these sources of income have not, individually, exceeded more than 4
                             percent of revenues, and combined have not exceeded 9 percent. One exception is in
                             fiscal year 2011, when the other sources of income totaled nearly 16 percent of total
                             revenues due to the transfer of funds from the TFF, which totaled approximately $270
                             million, or 15 percent of revenues.
                             17
                              Prior to 2006, DOJ officials did not maintain data on large-case deposits because there
                             were few to no forfeitures of this size and scope.




                             Page 13                                                       GAO-12-736 Asset Forfeiture
Figure 3: Total Forfeiture Program Expenditures from Fiscal Years 2003 through
2011




Revenues resulting from forfeitures are used to pay the forfeiture
program’s expenditures in three major categories:

1. payments to third parties, including payments to satisfy interested
   parties such as lienholders, as well as the return of funds to victims of
   large-scale fraud;
2. equitable sharing payments to state and local law enforcement
   agencies that participated in law enforcement efforts resulting in the
   forfeitures; and
3. all other program operations expenses that include a total of 13
   expenditure categories such as asset management and disposal, the
   storage and destruction of drugs, and investigative expenses leading
   to a seizure.

Table 1 shows the AFF’s expenditures across all fiscal years, including
payments to third parties, equitable sharing, and all other program
operations expenses.




Page 14                                                 GAO-12-736 Asset Forfeiture
Table 1: AFF’s Expenditures across All Fiscal Years by Type of Expenditure

Dollars in millions
                                                                                          Fiscal year
                                                    2003       2004         2005   2006      2007       2008    2009      2010      2011
Third-party interests                                $44         $49         $82    $66      $558       $248    $173      $333      $376
Equitable sharing payments                           218         268         271    324       400        437     396       388       445
All other program operations expenses                196         287         215    268       292        409     512       569       491
Total expenditures                                  $458       $604         $568   $658    $1,250   $1,094     $1,081   $1,290    $1,312
                                        Source: GAO analysis of DOJ data.



                                        Equitable sharing payments to state and local law enforcement agencies
                                        have generally increased since fiscal year 2003; in fiscal year 2003,
                                        equitable sharing payments totaled $218 million, and in fiscal year 2011,
                                        equitable sharing totaled $445 million. 18 Moreover, when compared with
                                        DOJ grant programs, equitable sharing is one of the largest DOJ
                                        programs providing funds to recipients in order to support state and local
                                        law enforcement activities. For example, in fiscal year 2010, the Victims
                                        of Crime Assistance (VOCA) Program was DOJ’s largest grant program;
                                        DOJ distributed approximately $412 million in funds through the VOCA
                                        program. By way of comparison, equitable sharing in fiscal year 2010
                                        provided a total of $388 million in equitable sharing payments to state and
                                        local law enforcement agencies. According to state and local law
                                        enforcement officials we met with, because most of their departmental
                                        budgets go toward personnel costs, the equitable sharing program is
                                        extremely important because it helps fund equipment, training, and other
                                        programs that they may otherwise not be able to afford. For example, one
                                        local law enforcement agency stated that salaries make up 96 percent of
                                        its annual budget. As a result, equitable sharing dollars allow them to
                                        purchase equipment they could not otherwise buy with the limited
                                        available annual budget. See appendix I for the total equitable sharing
                                        payments made to each state in fiscal year 2011.

                                        Equitable sharing has generally increased from 2003 through 2011;
                                        however, as a percentage of total expenditures, equitable sharing has



                                        18
                                          When compared with all 15 expenditure categories in the AFF, equitable sharing was
                                        the largest expenditure category in all fiscal years except in 2007, when third-party
                                        payments were the largest expenditure category due to an increase in fraud and financial
                                        crimes cases that involved a larger proportion of payments to lienholders and victims.




                                        Page 15                                                                GAO-12-736 Asset Forfeiture
decreased from 48 percent of total expenditures in 2003 to 34 percent in
2011. This percentage decrease began in fiscal year 2006, when another
expenditure category—payments to third parties including lienholders and
victims—increased from 10 to 44 percent of total expenditures. DOJ
officials attribute the shift among these major expense categories in part
to the increase in the prosecution of fraud cases with significant numbers
of victims. Moreover, because large-case deposits are generally the result
of fraud and financial crime cases, they typically have a greater proportion
of payments to victims than equitable sharing, a fact that may also
contribute to the overall percentage decrease in equitable sharing. 19 For
example, in fiscal year 2007, as a result of a non-prosecution agreement
with Adelphia Communications, over $700 million in cash and stocks was
forfeited and liquidated. 20 In fiscal year 2012, the net proceeds from these
forfeitures, which totaled approximately $728 million, were returned to
victims.

In addition to equitable sharing and third-party payments to victims and
lienholders, the AFF is used to pay for a variety of program operations
expenses. According to DOJ, the primary purpose of the AFF is to
provide a stable source of resources to cover the costs of the Asset
Forfeiture Program, including the costs of seizing, evaluating,
inventorying, maintaining, protecting, advertising, forfeiting, and disposing
of property seized for forfeiture. 21 Among the program operations
expenses covered by the AFF are costs associated with storing,
maintaining, and disposing of forfeited assets. The AFF also funds case-
related expenses including costs of managing paperwork, costs
associated with the prosecution of forfeiture cases, costs associated with




19
  No funds are shared with state and local law enforcement partners until victims or other
third parties have been fully compensated for their financial losses, and forfeiture costs
have been recovered.
20
   Non-prosecution agreements generally require companies to comply with a set of terms
for a specified duration in exchange for prosecutors deciding not to prosecute. These
terms have included restitution to victims, forfeiture of criminal proceeds, and monetary
penalties, among other things.
21
  Under current regulations, the department must advertise each administrative seizure 3
consecutive weeks in a newspaper of general circulation. Judicial forfeitures are
advertised on http://www.forfeiture.gov. In addition, the department must also incur the
cost of providing personal notice, by certified mail or other means, to all individuals or
entities identified as having a potential legal interest in the property.




Page 16                                                        GAO-12-736 Asset Forfeiture
                               the execution of forfeiture judgments, and the costs of advertising. 22 The
                               AFF also funds a variety of investigative expenses associated with
                               forfeiture, including payments to reimburse any federal agency
                               participating in the AFF for investigative costs leading to seizures. Other
                               investigative expenses may include awards for information, purchase of
                               evidence, and costs to fund joint task force operations. For additional
                               details regarding expenditure categories, see appendix II.


DOJ Carries Over Funds         At the end of each fiscal year, DOJ carries over funds in order to help
Needed to Cover                ensure it has sufficient resources to cover all AFF expenses that may not
Anticipated Expenditures       be covered by the next year’s revenues; however, the process DOJ uses
                               to determine how much to carry over each year is not documented or
in the Next Fiscal Year, but   outlined in its Congressional Budget Justifications. While DOJ officials
Transparency Could Be          stated that they cannot predict how much revenue will result from
Improved                       forfeitures in any given year, they attempt to estimate their anticipated
                               revenues based on prior years’ trends. They then carry over funds
                               needed to cover anticipated expenses for the coming year including funds
                               needed to cover the costs of pending equitable sharing and third-party
                               payments as well as funds needed to ensure the Asset Forfeiture
                               Program’s solvency—including the anticipated costs associated with
                               continuing forfeiture activities—at the start of the next fiscal year. Similar
                               to the growth in revenues and expenditures, the funds DOJ carries over
                               to cover these authorized expenses at the end of each fiscal year have
                               grown since 2003. For example, at the end of fiscal year 2003, DOJ
                               carried over approximately $365 million both to maintain solvency and to
                               cover anticipated equitable sharing and third-party payments in fiscal year
                               2004. In comparison, in fiscal year 2011, DOJ carried over a total of $844
                               million to cover these expenditures. Additionally, DOJ officials
                               emphasized that because revenues from fraud and financial crime cases
                               have increased, the funds needed to make third-party payments,
                               including payments to victims, have also increased. The flow of funds into
                               and out of the AFF is complex and involves an interaction among
                               revenues, expenditures, and funds carried over to manage the AFF. The
                               following illustrates how DOJ used revenues, expenditures, and carryover
                               funds to manage the AFF in fiscal year 2010:



                               22
                                 Program operational expenses for managing the paperwork associated with forfeiture,
                               include costs for data entry, data analysis, word processing, file control, file review, quality
                               control, case file preparation, and other process support functions.




                               Page 17                                                           GAO-12-736 Asset Forfeiture
•    At the start of fiscal year 2010, DOJ carried over a total of $634 million
     in funds from fiscal year 2009 to maintain the program’s solvency and
     for pending equitable sharing and third-party payments. These funds
     were used at the start of fiscal year 2010 to continue operations, such
     as paying expenses for asset storage, and to cover pending equitable
     sharing and third-party payments. In addition to the $634 million, $207
     million was reserved to cover DOJ’s fiscal year 2010 rescission. This
     rescission was proposed in the President’s budget, and later passed
     by Congress and enacted into law. As a result, at the start of fiscal
     year 2010, DOJ carried over a total of $841 million in funds from fiscal
     year 2009, as shown in table 2 below.

•    In the course of fiscal year 2010, a total of approximately $1.58 billion
     was deposited into the AFF, including revenues received from
     forfeitures. 23

•    Based on the total of $841 million that was carried over from fiscal
     year 2009 plus the $1.58 billion deposited into the AFF in fiscal year
     2010, DOJ then had approximately $2.42 billion in total available
     resources in fiscal year 2010. Of these resources, DOJ obligated
     $1.45 billion in fiscal year 2010 and carried over $975 million into
     fiscal year 2011 to maintain solvency and reserves and to cover the
     proposed fiscal year 2011 rescission. 24

•    While DOJ had obligated $1.45 billion for the three main expenditure
     categories; equitable sharing, third-party interests, and all other
     program operations expenses, DOJ’s actual expenditures in fiscal
     year 2010 totaled $1.29 billion. The difference of $0.16 billion in fiscal
     year 2010 represents funds that had been obligated, but had not yet
     been spent. According to DOJ officials, there may be a lag between
     the funds obligated in a fiscal year and the actual expenditures, and


23
  The total deposited in the AFF includes the revenues resulting from forfeitures, prior
year rescissions restored to the AFF, current year rescission, and recovery/refund of prior
year obligations. If obligations are ultimately lower than anticipated, funds previously
obligated are “refunded” to the AFF. These funds are referred to as “recoveries/refunds of
prior year obligations.”
24
  According to DOJ officials, they had originally planned to carry over approximately $724
million into fiscal year 2011, but the actual amount carried over ($975 million) was higher
due to the unpredictable dynamics of fund deposits. Specifically, according to DOJ
officials, while DOJ makes some determinations about what is required for carryover, the
actual carryover can differ from the anticipated levels due to the timing of deposits into the
fund.




Page 18                                                          GAO-12-736 Asset Forfeiture
       therefore, it is not uncommon for the total obligations to be higher than
       the expenditures in a given fiscal year. Table 2 shows the total funds
       available for use in fiscal year 2010.


Table 2: Total Funds Available for Use in Fiscal Year 2010

    Dollars in millions
         Carryover from fiscal year 2009a                                                        $841
         Plus deposits into the AFF during fiscal year 2010                                     1,580
    Total resources                                                                  2,420
         Less total obligations for fiscal year 2010                                            -1,450
                                                       b
    Total funds carried over for fiscal year 2011                                    $975
Source: GAO analysis of DOJ data.

Note: Totals may not add due to rounding.
a
 This amount includes funds to maintain solvency, cover pending equitable sharing and third-party
payments, and funds needed to cover the fiscal year 2010 rescission.
b
 According to DOJ officials, they had originally planned to carry over approximately $724 million into
fiscal year 2011, but the actual amount carried over ($975 million) was higher due to the
unpredictable dynamics of fund deposits.


In order to identify the funds that will need to be carried over to cover
anticipated expenses for the coming year, DOJ officials stated that they
use reports generated from its asset-tracking system to identify pending
equitable sharing and third-party payments. 25 These reports provide DOJ
with information to determine carry over funds needed for the
disbursements that must be paid in the next fiscal year. 26 In addition, DOJ
carries over funds needed to ensure the Asset Forfeiture Program’s
solvency at the start of the next fiscal year. According to DOJ officials,
they consider a number of factors when calculating the funds needed to
maintain solvency, such as historical data including information on the
costs of past contracts, salary costs, and other expenses; known future
expenses including salaries and contracts; and the costs of any potential
new expenditures.




25
  DOJ’s Consolidated Asset Tracking System (CATS) is used to track the life cycle of
forfeited assets from seizure to disposition.
26
  DOJ officials noted that they may have large victim pay-outs and expenses in the
coming year that cannot be anticipated.




Page 19                                                                GAO-12-736 Asset Forfeiture
                                         DOJ officials explained the general factors they consider when carrying
                                         over funds needed to cover anticipated expenditures in the next fiscal
                                         year, but they do not specify in the AFF’s Congressional Budget
                                         Justifications how they determine the total amounts carried over each
                                         year. Specifically, the Congressional Budget Justifications do not include
                                         information on how DOJ calculated the amounts carried over nor do they
                                         explain the significant variations from one year to the next in the amount
                                         of funds carried over for solvency. For example, in fiscal year 2007, DOJ
                                         carried over $188 million based on its estimates of what it needed to
                                         cover solvency. The amount carried over to cover solvency then
                                         increased to $402 million in fiscal year 2009 and decreased to $169
                                         million by fiscal year 2011. Figure 4 shows the variation in carryover
                                         funds retained in the AFF at the end of each fiscal year to cover solvency,
                                         equitable sharing, and third-party payments from fiscal years 2003
                                         through 2011.

Figure 4: Funds Carried Over at the End of the Fiscal Year to Cover Solvency, Equitable Sharing, and Third-Party Payments in
the Next Fiscal Year




                                         Note: The funds carried over to maintain AFF solvency include start-of-year operational expenses
                                         such as asset storage.




                                         Page 20                                                              GAO-12-736 Asset Forfeiture
DOJ officials stated that a number of cost drivers may change the funds
needed for solvency from year to year. These cost drivers include salaries
for government employees, information systems costs, asset
management and disposal contracts, and contracts for administrative
support staff, among other things. According to DOJ, these categories
comprise recurring operational costs of the Asset Forfeiture Program.
While these expenses are generally funded by AFF revenues, DOJ
carries over funds to ensure it has sufficient resources that may not be
covered by the next year’s revenues. Moreover, additional funds may
need to be carried over to account for any number of program
uncertainties. 27 For example, the AFF could be responsible for making
payments related to pending judicial actions, in the event that DOJ were
to lose a forfeiture case in court. Therefore, DOJ may carry over more
funds from one fiscal year to the next in order to cover these types of
liabilities. DOJ officials stated that they estimate needed carryover funds
by reviewing the cost drivers, as well as by assessing the risk that
revenues may be less than projected. DOJ officials further noted that
planning for AFF carryover and the actual carryover can differ due to the
unpredictable dynamics of the fund. According to DOJ officials, there is
no documented process used to determine the amount of funds that are
carried over at the end of each fiscal year.

Our prior work has emphasized the importance of transparency in federal
agencies’ budget presentations to help provide Congress the necessary
information to make appropriation decisions and conduct oversight. 28 The
department provides a yearly budget justification to Congress that details
the estimated revenues, expenses, and carryover requirements for the
upcoming fiscal year as well as AFF-related performance information.
Officials further noted that the Congressional Justification includes
discussions of the various categories of fund expenses, but does not
include a detailed discussion of the process used to estimate the amounts
carried over. Without a clearly documented and transparent process that
demonstrates how DOJ determines the amounts that will be carried over
each year, it is difficult to determine whether DOJ’s conclusions regarding


27
  According to DOJ officials, program uncertainties may include several risk factors such
as uncertain revenue streams, unanticipated program expenses, pending congressional
actions on rescissions, and pending judicial actions prior to final order of forfeiture.
28
  GAO, Veterans Disability: More Transparency Needed to Improve Oversight of VBA’s
Compensation and Pension Staffing Levels, GAO-05-47 (Washington, D.C.: Nov. 15,
2004).




Page 21                                                       GAO-12-736 Asset Forfeiture
                             the amounts that need to be carried over each year are well founded.
                             Providing more transparent information as part of the AFF’s annual
                             budget process would better inform Congress’ oversight of the AFF, by
                             making it easier to evaluate whether the funds carried over to maintain
                             Asset Forfeiture Program solvency and cover pending equitable sharing
                             and third-party payments adequately reflect the AFF’s needed resources.


Since 2003, DOJ Has          After revenues needed to cover expenses in the current and upcoming
Retained Excess Balances     fiscal years have been carried over, DOJ reserves funds to cover
in the AFF to Cover Yearly   rescissions. After these funds have been reserved, any funds determined
                             to be in excess of these requirements (excess unobligated balances) may
Proposed Rescissions, and    be declared as Super Surplus. While these Super Surplus balances may
These Rescissions Have       be used at DOJ’s discretion for a variety of purposes, in recent years,
Since Accumulated to Over    these balances have been used as a means to supplement the funds
Half a Billion Dollars       reserved to cover yearly rescissions proposed in the President’s budget,
                             and later passed by Congress and enacted into law. 29 Figure 5 provides a
                             description of the process for identifying Super Surplus balances in any
                             given fiscal year.




                             29
                               Prior to 2008, these excess unobligated balances were also used to fund departmental
                             priorities. However, because rescissions from the AFF have been greater than the existing
                             balance since fiscal year 2008, the funds have been unavailable for departmental priorities
                             in recent years.




                             Page 22                                                       GAO-12-736 Asset Forfeiture
Figure 5: Process for Identifying Excess Unobligated (Super Surplus) Balances




Rescissions are legislative actions to reduce an agency’s budgetary
resources. For example, in fiscal year 2010, $387 million was rescinded
from the AFF, and in fiscal year 2011, the enacted rescission totaled $495
million. Rescinded funds are generally taken from an agency and


Page 23                                                 GAO-12-736 Asset Forfeiture
                                           returned to the Treasury before they are obligated. However, per Office of
                                           Management and Budget (OMB) guidance, rescinded funds from the AFF
                                           have not been returned to the Treasury. Instead, DOJ has treated the
                                           funds as unavailable for obligation for the remainder of the fiscal year for
                                           which the rescission was enacted. 30 At the beginning of each new fiscal
                                           year, DOJ would have made the rescinded funds available for obligation
                                           again, also in response to OMB guidance, had a new rescission not been
                                           enacted. With the enactment of a new rescission for the subsequent fiscal
                                           year, however, DOJ has continued to treat the rescinded funds as
                                           unavailable for obligation. For example, the $387 million that was
                                           rescinded from the AFF in fiscal year 2010 was treated as unavailable for
                                           obligation in fiscal year 2010, and was then used again to cover part of
                                           the enacted $495 million rescission in fiscal year 2011. To make up the
                                           difference needed to meet the $495 million rescission in fiscal year 2011,
                                           DOJ used unobligated balances in the amount of $233 million. 31 Table 3
                                           shows the enacted rescissions for each fiscal year, as well as the
                                           unobligated balances used by DOJ in order to meet the rescissions.

Table 3: Funds Reserved to Cover AFF’s Annual Rescissions for Fiscal Years 2003 through 2011

Dollars in millions
                                                            2003        2004        2005   2006   2007        2008      2009      2010     2011
1   Enacted rescission                                       $51          $62       $102   $102   $170        $240      $285      $387     $495
2        Funds maintained in the AFF from previous             45              51     62    102     102        170        240       285     387
                     a
         rescissions
3        Unobligated balances reserved to help cover         $23          $12        $40     $1     $68        $70        $45     $207     $233
         rescissionb
                                           Source: GAO analysis of DOJ data.

                                           Notes: Rows 2 and 3 generally add up to the total enacted rescissions (as represented in row 1).
                                           However, in fiscal years 2003, 2010, and 2011, DOJ reserved funds greater than the enacted
                                           rescission. According to DOJ officials, DOJ believed that future rescissions would increase and so a
                                           greater amount was reserved to ensure that DOJ could meet proposed future rescissions.
                                           a
                                               Funds from the prior years’ rescission were used to help cover the new year’s rescission.
                                           b
                                            According to DOJ officials, unobligated and excess unobligated balances (Super Surplus) are used
                                           to help cover the annual rescissions.




                                           30
                                               See OMB Circular No. A-11, Sec. 20 & App. F (2011).
                                           31
                                             For fiscal years 2003, 2010, and 2011, DOJ officials reported that the unobligated
                                           balance reserved to cover the rescission was higher than needed in those fiscal years
                                           because a portion of the balances was reserved to cover current and future rescissions.




                                           Page 24                                                                 GAO-12-736 Asset Forfeiture
                            One effect of these rescissions is to reduce the department’s
                            discretionary spending in the year in which the rescission was enacted.
                            This could ultimately decrease the size of the federal deficit, provided the
                            decreased spending from the rescission is not offset by increased
                            spending elsewhere. For example, in fiscal year 2012, DOJ’s
                            discretionary budget authority was reduced to $27.4 billion, due in part to
                            the $675 million enacted AFF rescission.


                            DOJ has established guidelines and oversight mechanisms for the
DOJ Could Enhance           equitable sharing program, but additional controls could enhance the
Controls and                consistency and transparency of the program. Moreover, DOJ has
                            recently started conducting reviews of state and local law enforcement
Oversight                   agencies that participate in the equitable sharing program to determine
Mechanisms for Its          the extent to which they are complying with program policies as well as
Equitable Sharing           bookkeeping, accounting, and reporting requirements.

Program

DOJ Has Established
Guidelines for Making
Equitable Sharing
Determinations, but
Additional Controls Could
Improve Consistency and
Transparency

Guidelines Governing the    DOJ has established written guidelines governing how state and local law
Equitable Sharing Process   enforcement agencies should apply for equitable sharing. 32 Specifically,
                            according to the guidelines, state and local law enforcement agencies
                            must submit an application for equitable sharing in which they outline
                            identifying information for their agency, information on the asset that was
                            forfeited, how they intend to use the asset (or the proceeds of the asset),




                            32
                             Within DOJ, AFMLS is responsible for oversight of the equitable sharing program.




                            Page 25                                                     GAO-12-736 Asset Forfeiture
and the number of work hours their agency contributed to the
investigation. 33

In addition, DOJ has established mechanisms governing how DOJ
agencies should make equitable sharing determinations. Specifically, the
field office for the DOJ agency that served as the lead federal agency in
the investigation is responsible for making an initial recommendation
regarding the percentage of the proceeds of the forfeited asset that each
participating agency should receive. According to forfeiture statutes
governing the transfer of forfeited property to state and local law
enforcement agencies, equitable sharing determinations must bear a
reasonable relationship to the degree of direct participation of the
requesting agency in the total law enforcement effort leading to the
forfeiture. 34 As a general rule, recommendations made by the field office
are to be based on a comparison of the work hours that each federal,
state, and local law enforcement agency contributed to the investigation.
However, according to DOJ guidelines, further adjustments to sharing
percentages may be made when work hours alone do not reflect the
relative value of an agency’s participation in an investigation. For
example, if a state or local law enforcement agency contributed additional
resources or equipment to an investigation, its sharing percentage might
be adjusted upward from what it would be based on work hours alone.

DOJ has also established mechanisms for ensuring that equitable sharing
recommendations are reviewed and approved by the appropriate
authorities within DOJ depending on the amount and type of forfeiture.
Specifically, once state and local law enforcement agencies complete the
application for equitable sharing, DOJ’s written guidelines state that the
field office for the DOJ agency that served as the lead federal agency in
the investigation should document its sharing recommendations for each




33
  The amount of equitable sharing revenues shared with state and local law enforcement
agencies is based on the degree of the agencies’ direct participation in the investigation.
For example, if one agency contributed three officers to an investigation, it might receive a
greater portion of the equitable sharing proceeds than an agency that contributed only one
officer’s time to the investigation. The application for equitable sharing is titled Application
for Transfer of Federally Forfeited Property and is commonly referred to by DOJ officials
and state and local law enforcement agencies as the DAG-71.
34
  See 21 U.S.C. §881(e)(3); 18 U.S.C. §981(e).




Page 26                                                           GAO-12-736 Asset Forfeiture
of the agencies that participated in the investigation. 35 The field office is
then required to forward both the application forms completed by state
and local law enforcement agencies and sharing recommendations to
investigative agency headquarters officials for review. The review process
differs depending on the amount and type of the forfeiture, as follows:

•    For administrative forfeitures less than $1 million, agency
     headquarters officials are responsible for reviewing and approving the
     final sharing determination.
•    For judicial forfeitures less than $1 million, agency headquarters
     officials are to forward the recommendation to the USAO for final
     approval.
•    In any administrative or judicial forfeiture where the total appraised
     value of all forfeited assets is $1 million or more, in multidistrict cases,
     and in cases involving the equitable transfer of real property, the
     agency headquarters officials forward the recommendation to the
     USAO for review, which is then submitted to AFMLS officials for
     review.
     o    Where the investigative agency, the USAO, and AFMLS concur in
          a sharing recommendation, the Assistant Attorney General makes
          the final equitable sharing determination. 36
     o    Where the investigative agency, the USAO, and AFMLS do not all
          concur in a sharing recommendation, the Deputy Attorney General
          (DAG) determines the appropriate share.
Figure 6 shows the steps involved in making equitable sharing
determinations.




35
  DOJ’s recommendations are documented in the Decision Form for Transfer of Federally
Forfeited Property, which is commonly referred to by DOJ officials and state and local law
enforcement agencies as the DAG-72.
36
  By delegation dated August 26, 2011, the Assistant Attorney General for the Criminal
Division delegated his authority to determine equitable sharing matters between $1 million
and $5 million to the Chief of AFMLS, where the seizing agency, USAO, and AFMLS all
agree on the proposed sharing allocations.




Page 27                                                       GAO-12-736 Asset Forfeiture
Figure 6: Process for Making Equitable Sharing Determinations




Guidance for Making                     While DOJ has established guidance indicating that adjustments to
Adjustments to Equitable                sharing percentages may be made when a state or local law enforcement
Sharing Percentages                     agency’s work hours alone do not reflect the value of its participation in
                                        an investigation, DOJ has not developed guidance regarding how to apply
                                        the qualitative factors that may warrant departures from sharing
                                        percentages. DOJ agencies currently make adjustments to sharing
                                        percentages based on a number of qualitative factors regarding the
                                        additional assistance or contributions state or local law enforcement
                                        agencies may have made during an investigation. According to DOJ’s
                                        written guidelines, DOJ agencies must take these factors into account
                                        when determining whether to adjust an equitable sharing percentage
                                        beyond a strict work hour allocation. For example, according to DOJ
                                        guidelines, the deciding authority should consider such factors as the
                                        inherent importance of the activity, the length of the investigation, whether
                                        an agency originated the information leading to the seizure, or whether an



                                        Page 28                                              GAO-12-736 Asset Forfeiture
agency provided unique and indispensable assistance, among others. In
addition, DOJ’s Equitable Sharing Guidelines state that each agency may
use judgment when determining how these qualitative factors should be
used to adjust sharing percentages.

In the course of our review, DOJ officials provided examples of these
qualitative factors. For example, if a state or local law enforcement
agency provided a helicopter, drug-sniffing dog, or a criminal informant to
an investigation, DOJ would consider these contributions to be unique or
indispensible assistance. In one case we reviewed, a local law
enforcement agency that participated in a joint investigation with federal
agents would have received 7.4 percent in equitable sharing based on the
work hours it contributed to the investigation. However, the agency also
provided information obtained from a confidential source that led to the
seizure and provided a helicopter for aerial surveillance. As a result, its
final sharing determination was adjusted upward from 7.4 percent to 12
percent. If the net proceeds of the forfeiture are $1.6 million once all
investigative and forfeiture-related expenses have been paid, the
resulting equitable sharing payment made to the law enforcement agency
will increase from $118,400 to $192,000. 37

Standards for Internal Control in the Federal Government calls for
significant events to be clearly documented in directives, policies, or
manuals to help ensure operations are carried out as intended. AFMLS
officials report that they have established “rules of thumb” based on
historical knowledge or precedent when applying these qualitative factors
to equitable sharing adjustments that are subject to their review, but have
not issued guidance to the DOJ agencies. Further, headquarters officials
for each of the DOJ agencies emphasized that they follow the guidelines
issued by DOJ when making adjustments to sharing percentages.
However, as previously discussed, these guidelines outline the qualitative
factors that may be considered when making adjustments to sharing
percentages, but they do not include any additional information regarding
how qualitative factors should be used to adjust sharing percentages. As
a result, agency headquarters officials stated that field office staff use



37
  In the cases we reviewed, the net proceeds had not yet been determined. Until the asset
has been sold, and all forfeiture expenses—such as storage and advertising—have been
paid, DOJ does not know the net proceeds that will ultimately be paid in each case. For
this reason DOJ agencies identify a percentage (as opposed to a dollar amount) when
making equitable sharing recommendations.




Page 29                                                      GAO-12-736 Asset Forfeiture
                            their own judgment when determining how qualitative factors should be
                            used to adjust sharing percentages. AFMLS officials state that
                            adjustments to equitable sharing percentages based on qualitative factors
                            should be made on a case-by-case basis because each investigation is
                            unique and the facts and circumstances of each case must be considered
                            in totality before making adjustments to sharing determinations. While we
                            recognize the inherently subjective nature of evaluating each agency’s
                            unique contributions to a case based on facts and circumstances,
                            additional guidance regarding how to apply the qualitative factors could
                            help to improve transparency and better ensure consistency with which
                            these qualitative factors are applied over time or across cases. This is
                            particularly important given that these determinations represent DOJ’s
                            overall assessment of each agency’s unique contributions to an
                            investigation and are a key component of how DOJ makes decisions
                            about how much to award each agency.

Transparency of Equitable   Documentation of Work Hours
Sharing Determinations
                            DOJ’s written guidance also requires the DOJ agencies that are
                            responsible for making equitable sharing determinations to use work
                            hours as the primary basis for calculating sharing percentages; however,
                            agencies do not consistently document the work hours each agency
                            contributed to the investigation. According to DOJ officials, the work hours
                            contributed by each of the local, state, and federal law enforcement
                            agencies involved in the investigation should be added together by the
                            DOJ agency leading the investigation to arrive at a total. Each law
                            enforcement agency’s individual work hours are then divided by the total
                            in order to determine each agency’s equitable sharing percentage. DOJ’s
                            guidance states that every agency participating in the investigation should
                            report work hours on either the application for equitable sharing or on the
                            equitable sharing decision form. While state and local law enforcement
                            agencies record their work hours on their applications for equitable
                            sharing, we found that the DOJ agencies did not consistently record their
                            own hours or the total hours contributed by all participating agencies. Of
                            the 25 equitable sharing determinations we reviewed, 5 included
                            supplemental memos provided by the DOJ agencies detailing the work
                            hours provided by all of the agencies involved in the investigation.
                            However, these memos are not required under existing DOJ guidance
                            and were provided in only those investigations subject to AFMLS review.
                            For the remaining 20 determinations, DOJ agencies did not document this
                            information. Specifically, although work hours serve as the primary basis
                            of calculating equitable sharing determinations, in 20 of the 25
                            determinations we reviewed, neither the work hours contributed by DOJ


                            Page 30                                             GAO-12-736 Asset Forfeiture
agencies nor the total number of work hours contributed by all of the
agencies involved in the investigation were recorded in the documents
provided to agency headquarters officials for review. According to DOJ
agency headquarters officials responsible for reviewing and approving
equitable sharing determinations, they rely on agents in the field to
calculate sharing percentages and as a result, they do not verify the work
hours contributed by each agency involved in the investigation. In the
absence of documented work hours, it is unclear how deciding authorities
could verify whether equitable sharing determinations involving millions of
dollars in assets were calculated in accordance with established
guidance.

Documentation of Rationale for Making Adjustments to Sharing
Determinations

DOJ’s guidance does not explicitly require DOJ agencies to record the
rationale for making adjustments to sharing percentages when work
hours alone do not reflect the value of an agency’s participation in the
investigation. In the 25 equitable sharing determinations we reviewed,
state and local law enforcement agencies often reported basic information
regarding their agency’s role in a particular investigation in their
applications for equitable sharing, but DOJ’s rationale for making
adjustments to sharing percentages was not consistently documented in
each investigation. Specifically, agencies did not consistently document
whether they believed the state or local law enforcement agency made
additional contributions that warranted departures from standard sharing
percentages. Of the 25 determinations we reviewed, 5 included
supplemental memos provided by the DOJ agencies indicating whether
adjustments from standard sharing percentages were warranted. In 3 of
these 5 AFMLS determinations, adjustments to sharing percentages were
made based on the additional contributions of the state and local law
enforcement agencies involved in the investigation and the memos
detailed the rationale for making the adjustment in each case. However,
these memos are not required under existing DOJ guidance and were
provided in only those investigations subject to AFMLS review. For the
remaining 20 investigations, DOJ did not document this information.
Moreover, because work hours were not documented in these cases, it
was not possible to determine whether further adjustments were made
based on additional contributions made by each of the agencies involved
in the investigation.

According to DOJ agency headquarters officials responsible for reviewing
and approving equitable sharing determinations, they rely on agents in


Page 31                                             GAO-12-736 Asset Forfeiture
the field to calculate sharing percentages and, as a result, they do not
attempt to verify the adjustments that are made based on each agency’s
additional contributions to the investigation. Specifically, agency
headquarters officials reported that the field is responsible for confirming
state and local law enforcement’s contributions to a case through a
variety of means including face-to-face meetings, telephone
conversations, and e-mails. For example, one agency official noted that
although the rationale for making adjustments to sharing percentages is
not included in the documents provided to headquarters for review and
approval, the field office is most familiar with the investigation and the
contributions that each state and local law enforcement agency may have
made in a given case. Therefore, headquarters considers the field office
to be the best source of information for how qualitative factors should be
taken into account when adjusting sharing percentages. Agency
headquarters officials further noted that it is rare for them to question
equitable sharing recommendations made by the field or to ask for more
information regarding the rationale for adjustments to sharing
percentages. While the field office may have firsthand knowledge of the
contributions of state and local law enforcement agencies in a given
investigation, in the absence of the rationale for adjustments to sharing
percentages being documented, there is limited transparency over how
and why agencies make adjustments to sharing determinations when
work hours alone do not accurately represent an agency’s contribution to
an investigation.

Standards for Internal Control in the Federal Government states that
transactions should be promptly recorded to maintain their relevance and
value to management in controlling operations and making decisions.
This applies to the entire process or life cycle of a transaction or event
from the initiation and authorization through its final classification in
summary records. In addition, control activities help to ensure that all
transactions are completely and accurately recorded. In the absence of
consistently documenting work hours and the rationale for making
adjustments to sharing percentages, it is unclear how the equitable
sharing deciding authorities could evaluate the nature and value of the
contributions of each of the agencies involved in the investigation.
Establishing a mechanism to ensure that this information is documented
by all DOJ agencies responsible for making equitable sharing
determinations could enhance the transparency of equitable sharing
decisions.




Page 32                                             GAO-12-736 Asset Forfeiture
Monitoring of Equitable Sharing Decisions

In the absence of documenting work hours or the rationale for making
adjustments to sharing percentages, deciding authorities have limited
means to verify the basis for equitable sharing decisions. Agency
headquarters officials responsible for reviewing and approving equitable
sharing determinations report that they review equitable sharing
applications and decision forms to ensure that they are complete and that
sharing determinations appear reasonable. However, headquarters
officials for each of the DOJ agencies reported that they rely on field
office staff to ensure that equitable sharing percentages were calculated
correctly based on the work hours and the qualitative factors that each
federal, state, and local law enforcement agency contributed to the
investigation. However, because the information that serves as the basis
for equitable sharing recommendations—including work hours and the
qualitative factors used to make adjustments to sharing percentages—are
not subject to review by agency headquarters officials, DOJ does not
have reasonable assurance that the equitable sharing determinations are
made in accordance with the established guidance. According to
Standards for Internal Control in the Federal Government, controls should
generally be designed to ensure that ongoing monitoring occurs in the
course of normal operations. Such monitoring should be performed
continually and ingrained in the agency’s operations. This could include
regular management and supervisory activities, comparisons,
reconciliations, or other actions. Developing a mechanism to verify the
work hours and qualitative factors that serve as the basis for equitable
sharing determinations could improve DOJ’s visibility over equitable
sharing determinations and help promote confidence in the integrity of the
equitable sharing program. Agency headquarters officials have reported
that altogether, DEA, ATF, and FBI reviewed a total of 52,034 equitable
sharing requests in fiscal year 2011, and 113 of these requests went to
AFMLS for review and approval. As a result, agency headquarters
officials note that they have limited resources to verify the basis for each
and every equitable sharing determination. We recognize that in the face
of these limited resources, it may not be practical for agency
headquarters officials to review all of the information used in support of all
equitable sharing determinations. However, a spot check approach would
allow headquarters officials to assess the extent to which equitable
sharing decisions are made in accordance with established guidelines to
help address resource constraints.




Page 33                                              GAO-12-736 Asset Forfeiture
DOJ Has Established
Requirements Governing
the Use of Equitable
Sharing Funds and Began
Conducting Compliance
Reviews of These Agencies
in 2011

Requirements Governing the   DOJ has established requirements governing the permissible uses of
Uses of and Controls over    equitable sharing funds. Specifically, DOJ’s guidelines state that equitably
Equitably Shared Funds and   shared funds or assets put into official use shall be used by law
Property                     enforcement agencies for law enforcement purposes only. Some of the
                             permissible uses of equitable sharing funds include training, facilities,
                             equipment, travel and transportation in support of law enforcement
                             activities, as well as paying for the costs of asset accounting and auditing
                             functions. 38 Examples of impermissible uses of equitable sharing funds
                             include payments to cover the costs of salaries or benefits and non-law
                             enforcement education and training. 39 DOJ’s guidelines also state that
                             agencies should use federal sharing monies prudently and in such a
                             manner as to avoid any appearance of extravagance, waste, or
                             impropriety. For example, tickets to social events, hospitality suites at
                             conferences, or meals outside of the per diem are all considered
                             impermissible uses of shared funds.

                             DOJ’s guidelines further state that equitable sharing funds must be used
                             to increase or supplement the resources of the receiving state or local law
                             enforcement agency and should not be used to replace or supplant the
                             appropriated resources of the recipient. This means that equitable sharing
                             funds must serve only to supplement funds they would normally receive
                             and must not be used as a substitute for funds or equipment that would
                             otherwise be provided by the law enforcement agency. For example, if



                             38
                               The same restrictions apply to equitably shared assets such as vehicles that are put into
                             official use. DOJ guidelines state such property must be used for law enforcement
                             purposes only.
                             39
                               According to DOJ’s equitable sharing guidelines, the reason that equitable sharing funds
                             should not be used to pay for salaries and overtime is to protect the integrity of the asset
                             forfeiture and equitable sharing programs. Specifically, DOJ wants to ensure that the
                             prospect of receiving equitable sharing monies does not influence, or appear to influence,
                             law enforcement decisions.




                             Page 34                                                        GAO-12-736 Asset Forfeiture
city officials were to cut the police department’s budget by $100,000 as a
result of the police department’s receiving $100,000 in equitable sharing
funds, DOJ would consider this to be an example of improper
supplantation, which is not an allowable use of equitable sharing funds.

In addition to establishing requirements governing the permissible uses of
equitably shared funds and property, DOJ has also established
bookkeeping, internal controls, reporting, and audit requirements that
state and local law enforcement agencies must follow in order to
participate in the equitable sharing program. For example, state and local
law enforcement agencies must establish mechanisms to track equitably
shared funds and property, implement proper bookkeeping and
accounting procedures, maintain compliance with internal controls
standards, and meet defined reporting standards. Among other things,
DOJ’s equitable sharing guidance calls for participating agencies to avoid
commingling DOJ equitable sharing funds with funds from any other
source, maintain a record of all equitable sharing expenditures, and
complete annual reports known as Equitable Sharing Agreement and
Certification Forms. These Equitable Sharing Agreement and Certification
Forms require agencies participating in the equitable sharing program to
report annually on the actual amounts and uses of equitably shared funds
and property. 40 Among other things, agencies must detail the beginning
and ending equitable sharing fund balance, and the totals spent on
specific law enforcement activities (e.g., training, computers, weapons,
and surveillance equipment). In submitting the form each year, agencies
must certify that they will be complying with the guidelines and statutes
governing the equitable sharing program.

In addition to the requirements outlined by DOJ, state and local agencies
that receive equitable sharing funds must also comply with the Single
Audit Act as outlined by OMB guidance. 41 The Single Audit Act requires
state and local governments and nonprofit organizations that expend a
cumulative total of $500,000 or more in federal awards in a fiscal year to
complete a Single Audit. According to DOJ officials, based on these



40
  AFMLS maintains a compliance database that tracks whether agencies have submitted
their Equitable Sharing Agreement and Certification Forms for the current fiscal year.
Agencies that are not in compliance are not eligible to receive equitable sharing funds.
41
 Office of Management and Budget, “Audits of States, Local Governments and Non-Profit
Organizations,” A-133, June 27, 2003.




Page 35                                                      GAO-12-736 Asset Forfeiture
                                 requirements, the substantial majority of equitable sharing participants
                                 are required to comply with the Single Audit Act. 42 Under a Single Audit,
                                 an auditor must provide his or her opinion on the presentation of the
                                 entity’s financial statements and schedule of federal expenditures, and on
                                 compliance with applicable laws, regulations, and provisions of contracts
                                 or grant agreements that could have a direct and material effect on the
                                 financial statements.

Compliance Reviews of            In April 2011, during the course of our review, AFMLS began conducting
Equitable Sharing Participants   compliance reviews of state and local law enforcement agencies
                                 participating in the equitable sharing program to determine the extent to
                                 which they are complying with established requirements. Specifically,
                                 AFMLS established a Compliance Review Team and began conducting
                                 regular compliance reviews of equitable sharing participants in April
                                 2011. 43 According to AFMLS officials, the Compliance Review Team was
                                 established in order to ensure that there were adequate controls and
                                 oversight mechanisms of the equitable sharing program in place. AFMLS
                                 officials stated that the resources needed to establish the Compliance
                                 Review Team did not become available until December 2010, at which
                                 point AFMLS initiated a pilot of the compliance review program. Among
                                 other things, in selecting equitable sharing participants to include in
                                 compliance reviews, AFMLS monitors news briefs regarding potential
                                 misuse of asset forfeiture funds among equitable sharing participants and
                                 also responds to referrals from the DOJ Office of Inspector General (OIG)
                                 and from the U.S. Attorneys’ Offices. 44 AFMLS officials noted that, thus
                                 far, they have not yet found any instances of intentional abuse of funds in
                                 the course of their compliance reviews that were not already identified


                                 42
                                   The Single Audit Act, enacted in 1984 and amended in 1996, is intended to, among
                                 other things, promote sound financial management, including effective internal controls,
                                 with respect to federal awards administered by state and local governments and nonprofit
                                 organizations. Single Audit Act Amendments of 1996, Pub. L. No. 104-152, § 1(b), 110
                                 Stat. 1396, 1396. As part of the Single Audit, auditees must prepare a Schedule of
                                 Expenditures of Federal Awards in order to show the activity of all federal awards
                                 programs within the period covered by the auditee’s financial statements.
                                 43
                                   AFMLS officials reported that pilot testing of the compliance review process was started
                                 in December 2010, but the compliance review team did not start on a full-scale basis until
                                 April 2011.
                                 44
                                   DOJ’s Office of Inspector General also conducts audits of equitable sharing participants
                                 and completes approximately 3 or 4 audits of state and local law enforcement agencies
                                 each year. Since 2010, DOJ OIG has completed a total of 10 audits of equitable sharing
                                 participants.




                                 Page 36                                                       GAO-12-736 Asset Forfeiture
beforehand either through news reports or referrals from the U.S.
Attorneys’ Offices. 45

AFMLS has established guidelines for conducting compliance reviews of
equitable sharing participants in order to determine the extent to which
agencies are following established equitable sharing guidelines. Among
other things, they select a sample of the agency’s expenditures in order to
substantiate the agency’s records and to confirm that the expenditure was
consistent with established DOJ guidelines. AFMLS also determines
whether the agency has established an appropriate system of internal
controls for tracking and recording equitable sharing receipts and
expenditures. Further, AFMLS determines whether the agency was
subject to Single Audit requirements and if so, whether the Single Audit
including reporting on equitable sharing funds was completed as required.

As of December 2011, AFMLS had completed a total of 11 onsite audits
of approximately 9,200 state and local law enforcement agencies that
participate in the equitable sharing program. 46 AFMLS reports it currently
has limited staff (eight total) and resources to conduct compliance
reviews of equitable sharing participants. As a result, AFMLS reported
conducting risk assessments in order to select agencies for compliance
reviews. In addition to monitoring news briefs regarding the potential
misuse of funds among equitable sharing participants, some of the issues
that AFMLS considers as part of these risk assessments include the
amount of each agency’s equitable sharing expenditures, whether a state
or local law enforcement agency has reported spending a significant
amount of money in a sensitive area, and whether a small law
enforcement agency that may be unfamiliar with the equitable sharing
program suddenly received a large equitable sharing payment. The 11
compliance reviews completed in 2011 revealed that participants do not
consistently follow requirements to properly account for equitable sharing
receipts and expenditures, do not consistently comply with the allowable



45
  An example of a misuse of funds that was identified beforehand includes a case in 2011
involving a sheriff that allegedly used $10,000 in equitable sharing funds for personal use.
The money in the account was to be used for vehicles, equipment, and specialized
training, but the prosecutor noted during an opening statement at trial that the sheriff had
used the money “like a personal checking account.”
46
  Of the 9,200 state and local law enforcement agencies that participate in the equitable
sharing program, approximately 4,500 agencies receive equitable sharing payments in
any given year.




Page 37                                                        GAO-12-736 Asset Forfeiture
              uses of equitable sharing funds, and do not consistently complete Single
              Audits as required. AFMLS identified one or more areas for corrective
              action in 9 of the 11 compliance reviews. 47 Two of the state and local law
              enforcement agencies were determined to be in full compliance with all of
              the equitable sharing requirements. In May 2012, AFMLS officials
              reported that all of the agencies had fully addressed the corrective actions
              identified by AFMLS. See appendix III for the results of the 11 compliance
              reviews AFMLS has completed as of December 2011.

              AFMLS has established a mechanism to systematically track and analyze
              the results of these reviews. Specifically, the findings from each
              compliance review are entered into a tracking report, and follow-up with
              each agency is completed to ensure that corrective actions are taken.
              AFMLS officials noted that they may follow up with an agency multiple
              times to ensure that items identified for corrective action are addressed.
              According to AFMLS, tracking frequencies and trends identified in the
              course of compliance reviews is an important tool in risk evaluations for
              both future audit selections and return audits to specific participants with
              particularly troublesome problems. Further, AFMLS officials have stated
              that they plan to use the results of compliance reviews in order to identify
              larger trends that may need to be addressed across all equitable sharing
              participants. For example, AFMLS has found through these reviews that
              equitable sharing recipients are not consistently reporting equitable
              sharing expenditures on Single Audits. AFMLS has reported that it is
              currently working with both equitable sharing recipients and the auditor
              community to address this issue. AFMLS’s approach to conducting
              compliance reviews of equitable sharing participants is consistent with
              standards for internal control, which state that monitoring should assess
              the quality of performance over time and ensure that the findings of audits
              and other reviews are promptly resolved.


              With more than $1 billion in forfeited assets deposited into the AFF every
Conclusions   year since 2006, the Asset Forfeiture Program generates substantial
              revenue for the Department of Justice. These funds are used to cover
              annual operating expenses, to compensate crime victims, or are shared
              with state and local law enforcement agencies that participate in
              investigations resulting in forfeiture. The significant amounts of money



              47
               All 11 agencies complied with at least one of the requirements evaluated by AFMLS.




              Page 38                                                    GAO-12-736 Asset Forfeiture
involved as well as the sensitive nature of asset forfeiture mean it is
imperative to be vigilant in maintaining the transparency of the program.
Since the Asset Forfeiture Program’s operations are supported by annual
revenues, DOJ faces a challenging task estimating future revenues and
expenditures each year. The AFF’s annual revenues have consistently
exceeded annual expenditures, allowing DOJ to cover annual rescissions
and to reserve funds for the next fiscal year. This allows DOJ to ensure
that the AFF has sufficient resources at the start of each fiscal year to
cover solvency and pending equitable sharing and third-party payments.
However, the AFF’s Congressional Budget Justification does not clearly
outline the factors that DOJ considers when determining the total
amounts that need to be carried over each fiscal year. As part of the
AFF’s annual budget process, documenting how DOJ determines the
funds that need to be carried over at the end of each year and providing
additional details on that determination to Congress would provide more
transparency over the process and would help Congress make more
informed appropriations decisions.

In addition, the authorization to share federal forfeiture proceeds with
cooperating state and local law enforcement agencies is one of the most
important provisions of asset forfeiture. DOJ has established guidelines
stating that adjustments to equitable sharing percentages should be
based on qualitative factors; however, additional guidance regarding how
to apply these factors could help to improve the transparency and better
ensure consistency with which adjustments to sharing percentages are
made over time or across cases. Additionally, there are gaps in the extent
to which key information that serves as the basis for equitable sharing
decisions is documented. In the absence of documenting the work hours
used to calculate initial equitable sharing percentages—the primary
means to determine each agency’s share of forfeiture proceeds—it is
unclear how equitable sharing deciding authorities could verify the relative
degree of participation of each of the agencies involved in the case.
Similarly, documenting information on DOJ’s rationale for making
adjustments to sharing percentages could help to improve transparency
over whether equitable sharing decisions are being made in accordance
with DOJ’s guidance. Additionally, establishing a mechanism to verify that
equitable sharing determinations are made in accordance with
established guidance would provide DOJ with greater assurance that
there are effective management practices in place to help promote
confidence in the integrity of the equitable sharing program.




Page 39                                             GAO-12-736 Asset Forfeiture
                      We are making four recommendations to the Attorney General.
Recommendations for
Executive Action      To help improve transparency over the AFF’s use of funds, we
                      recommend that the Attorney General provide more detailed information
                      to Congress as part of the AFF’s annual budget process, clearly
                      documenting how DOJ determines the amount of funds to be carried over
                      into the next fiscal year.

                      To help improve management controls over the equitable sharing
                      program, we recommend that the Attorney General direct AFMLS to take
                      the following three actions:

                      •   Develop and implement additional guidance on how DOJ agencies
                          should apply qualitative factors when making adjustments to equitable
                          sharing percentages.
                      •   Establish a mechanism to ensure that the basis for equitable sharing
                          determinations—including the work hours contributed by all
                          participating agencies and the rationale for any adjustments to sharing
                          percentages—are recorded in the documents provided to agency
                          headquarters officials for review and approval.
                      •   Develop a risk-based mechanism to monitor whether key information
                          in support of equitable sharing determinations is recorded and the
                          extent to which sharing determinations are made in accordance with
                          established guidance.

                      We provided a draft of this report to DOJ for its review and comment.
Agency Comments       DOJ did not provide official written comments to include in our report.
                      However, in an e-mail received on June 21, 2012, the DOJ liaison stated
                      that the department appreciated the opportunity to review the draft report
                      and that DOJ concurred with our recommendations. DOJ further noted
                      that the department will develop a plan of corrective action in order to
                      address the recommendations. DOJ also provided us written technical
                      comments, which we incorporated as appropriate.


                      We are sending copies of this report to the Attorney General, selected
                      congressional committees, and other interested parties. In addition, this
                      report is also available at no charge on the GAO website at
                      http://www.gao.gov.

                      If you or your staff have any further questions about this report, please
                      contact me at (202) 512- 9627 or maurerd@gao.gov. Contact points for
                      our Offices of Congressional Relations and Public Affairs may be found


                      Page 40                                             GAO-12-736 Asset Forfeiture
on the last page of this report. Key contributors to this report are listed in
appendix IV.




David C. Maurer
Director, Homeland Security and Justice Issues




Page 41                                                GAO-12-736 Asset Forfeiture
List of Requesters

The Honorable Charles E. Grassley
Ranking Member
Committee on Judiciary
United States Senate

The Honorable Lamar Smith
Chairman
The Honorable John Conyers, Jr.
Ranking Member
Committee on the Judiciary
House of Representatives

The Honorable Jim Sensenbrenner
Chairman
The Honorable Bobby Scott
Ranking Member
Subcommittee on Crime, Terrorism, and Homeland Security
Committee on the Judiciary
House of Representatives

The Honorable Frank R. Wolf
Chairman
The Honorable Chaka Fattah
Ranking Member
Subcommittee on Commerce, Justice, Science and Related Agencies
Appropriations Committee
House of Representatives

The Honorable Louie Gohmert
House of Representatives




Page 42                                       GAO-12-736 Asset Forfeiture
Appendix I: Equitable Sharing
              Appendix I: Equitable Sharing




              State and local law enforcement agencies typically qualify for equitable
              sharing by participating directly with Department of Justice (DOJ)
              agencies in joint investigations leading to the seizure and forfeiture of
              property. Agencies may either receive a portion of the proceeds resulting
              from the sale of the forfeited asset or may request that a forfeited asset
              such as a vehicle be put into official use. Any property other than
              contraband or firearms may be transferred to a state or local agency for
              official use provided that it is used for law enforcement purposes. State
              and local law enforcement can receive equitable sharing payments after
              working on a joint case with one or more federal law enforcement
              partners or after participating in a case carried out by a federal law
              enforcement task force. Approximately 83 percent of all equitable sharing
              determinations are the result of joint investigations.

              State and local law enforcement agencies can also qualify for equitable
              sharing by requesting that federal partners adopt a case initiated at the
              state or local level. An adoptive forfeiture occurs when local police
              officials effectively hand a case over to federal law enforcement officials
              provided that the property in question is forfeitable under federal law.
              According to DOJ officials, many state and local law enforcement
              agencies will make seizures pursuant to their state laws. However, they
              may reach out to federal law enforcement agencies to adopt a forfeiture if
              they don’t have a state or local statute that allows them to carry out a
              forfeiture. For example, in a particular case, there may be large amounts
              of cash involved but no drugs found or seized. Federal statute allows for
              the forfeiture of assets based on illegal activity even if there are no drugs
              seized, whereas the state or local statute might not allow for this type of
              forfeiture. Alternatively, state and local law enforcement agencies may
              request that DOJ adopt a forfeiture in those cases where federal
              coordination or expertise is needed in the case. Our analysis shows a
              slight decrease in adoptive versus non-adoptive equitable sharing
              payments since 2003. In 2003, adoptions made up about 23 percent of all
              equitable sharing payments, while in 2010, adoptions made up about 17
              percent of all equitable sharing payments. According to DOJ, as more
              states have established their own forfeiture laws, they may rely less on
              DOJ to adopt forfeiture cases and may instead pursue forfeitures under
              state law when appropriate. Figure 7 shows the equitable sharing
              payments made to each state in fiscal year 2011.




              Page 43                                              GAO-12-736 Asset Forfeiture
                                                      Appendix I: Equitable Sharing




Figure 7: Equitable sharing payments across the United States in Fiscal Year 2011
                                                 Directions: Place mouse over each state name for the total equitable sharing payments made to that
      Interactive Graphic                        state in fiscal year 2011.




                      Wash.

                                                   Mont.                                                                                                        Maine
                                                                        N.Dak.
                 Ore.                                                                     Minn.
                                                                                                                                                          Vt.
                                                                                                                                                                        N.H.
                                    Idaho                                                                Wis.                                      N.Y.
                                                                        S.Dak.                                                                                          Mass.
                                                      Wyo.                                                           Mich.                                              R.I.

                                                                                            Iowa                                           Pa.                          Conn.
                                                                         Nebr.
                          Nev.                                                                                               Ohio                                       N.J.
                                          Utah                                                                     Ind.
                                                                                                            Ill.                                                        Del.
                                                           Colo.
                                                                                                                                  W.Va.                                 Md.
                                                                             Kans.                Mo.                                            Va.
                 Calif.                                                                                                    Ky.
                                                                                                                                                                        D.C.
                                                                                                                                                 N.C.
                                                                                                                   Tenn.
                                                                                 Okla.
                                                     N.Mex.                                       Ark.                                 S.C.
                                      Ariz.
                                                                                                                   Ala.          Ga.
                                                                                                           Miss.
                                                                                                                                                          Puerto Rico
                                                                            Tex.                   La.
                     Alaska

                                                                                                                                          Fla.

                                                                                                                                                            Virgin Islands


                                 Hawaii




                                                               :
                                                      Source: GAO analysis of DOJ data.




                                                       Page 44                                                                                        GAO-12-736 Asset Forfeiture
Appendix I: Equitable Sharing




Our analysis shows a strong positive association between the equitable
sharing payments made to each state and the state’s total population.
However, our analysis found no correlation between per capita equitable
sharing payments and arrest rates, once we corrected for population size.
It is important to note that a number of other factors may influence the
amount of equitable sharing payments a state receives in a given year.
For example, if a state or local law enforcement agency participated in a
joint investigation that resulted in a very large forfeiture, the agency might
receive a significant amount of equitable sharing dollars, even if no
arrests were made in conjunction with the case. Alternately, an agency
may work several cases that generate multiple arrests, but no forfeitures,
so no equitable sharing payments would be made. Finally, differences in
equitable sharing between states may be influenced by whether state and
local law enforcement agencies decide to pursue forfeitures under their
state laws versus those cases where federal involvement may be
warranted.




Page 45                                               GAO-12-736 Asset Forfeiture
Appendix II: Assets Forfeiture Fund
              Appendix II: Assets Forfeiture Fund
              Expenditure Categories



Expenditure Categories

              1. Third-Party Payments:

                  Third-party payments are payments to satisfy third-party interests,
                  including lienholders and other innocent parties, pursuant to 28 U.S.C.
                  § 524(c)(1)(D); payments in connection with the remission and
                  mitigation of forfeitures, pursuant to 28 U.S.C. § 524(c)(1)(E).
              2. Equitable Sharing Payments:

                  These funds are reserved until the receipt of the final forfeiture orders
                  that result in distributions to the participants. Equitable sharing
                  payments represent the transfer of portions of federally forfeited cash
                  and proceeds from the sale of forfeited property to state and local law
                  enforcement agencies and foreign governments that directly assisted
                  in targeting or seizing the property. Most task force cases, for
                  example, result in property forfeitures whose proceeds are shared
                  among the participating agencies.

              All other program operations expenses

              3. Asset Management and Disposal:

                  According to DOJ, the primary purpose of the Assets Forfeiture Fund
                  (AFF) is to ensure an adequate and appropriate source of funding for
                  the management and disposal of forfeited assets. Also, funding is
                  required for the assessment, containment, removal, and destruction of
                  hazardous materials seized for forfeiture, and hazardous waste
                  contaminated property seized for forfeiture. The United States
                  Marshals Service (USMS) has primary responsibility for the storage
                  and maintenance of assets, while the Drug Enforcement
                  Administration (DEA) and the Bureau of Alcohol, Tobacco, Firearms
                  and Explosives (ATF) are responsible for the disposal of toxic and
                  hazardous substances.
              4. Case-Related Expenses:

                  Case-related expenses are expenses associated with the prosecution
                  of a forfeiture case or execution of a forfeiture judgment, such as
                  advertising, travel and subsistence, court and deposition reporting,
                  courtroom exhibit services, and expert witness costs. In appropriate
                  cases, the services of foreign counsel may be necessary.




              Page 46                                              GAO-12-736 Asset Forfeiture
Appendix II: Assets Forfeiture Fund
Expenditure Categories




5. Special Contract Services:

    The AFF uses contract personnel to manage the paperwork
    associated with forfeiture, including data entry, data analysis, word
    processing, file control, file review, quality control, case file
    preparation, and other process support functions.
6. Investigative Expenses Leading to Seizure:

    Investigative expenses are those normally incurred in the
    identification, location, and seizure of property subject to forfeiture.
    These include payments to reimburse any federal agency participating
    in the AFF for investigative costs leading to seizures.
7. Contracts to Identify Assets:

    Investigative agencies use these funds for subscription services to
    nationwide public record data systems, and for acquisition of
    specialized assistance, such as reconstruction of seized financial
    records. According to DOJ, these resources are used to identify
    assets during the investigative stage of the case, where such
    research will enhance effective use of the asset forfeiture sanction.
    DOJ officials note that if the government can improve upon the
    identification of ill-gotten assets, the nature of the criminal wrongdoing
    can be better demonstrated and reinforced before the jury. Such
    evidence results in greater penalties for criminals who may have
    avoided such penalties in the past by successfully concealing such
    assets.
8. Awards for Information Leading to a Forfeiture:

    The Omnibus Consolidated Appropriations Act, 1997, 1 amended the
    Justice Fund statute to treat payments of awards based on the
    amount of the forfeiture the same as other costs of forfeiture.
    Therefore, the amount available each year for expenses for awards
    no longer had to be specified in annual appropriations acts.
9. Automated Data Processing:

    Recurring costs include telecommunications support, system and
    equipment maintenance, user support and help desk, software



1
 Pub. L. No. 104-208, div. A, § 114, 110 Stat. 3009, 3009-22 (1996).




Page 47                                                       GAO-12-736 Asset Forfeiture
Appendix II: Assets Forfeiture Fund
Expenditure Categories




    maintenance, user training, equipment, and data center charges in
    support of the Consolidated Asset Tracking System (CATS). All asset
    forfeiture activity for each asset is recorded in CATS. According to
    DOJ, CATS enables access for more than 1,000 locations to a central
    database to perform full asset forfeiture life-cycle tasks more
    efficiently. The system provides current information to field personnel
    on the status of cases, integrates financial analysis capabilities into
    the inventory management process, provides the estimation of
    program income and expenses, and provides the capability for agency
    and department managers to review and assess program activity.
10. Training and Printing:

    This category funds expenses for training personnel on aspects of the
    federal forfeiture program as well as other training necessary to
    maintain the competency of federal and contractor personnel
    dedicated to performing federal forfeiture functions. Printing costs
    reflect the continuing need to provide current legal advice and
    support. Expenses include updating and distributing manuals and
    pamphlets directly related to forfeiture issues, policies, and
    procedures.
11. Other Program Management:

    This category includes several types of expenses in support of the
    overall management of the Asset Forfeiture Program, including
    management analysis, performance assessment, problem analysis,
    requirements analyses, policy development, and other special
    projects designed to improve program performance. This funding is to
    provide travel and per diem funds for temporary duty assignments
    needed to correct program deficiencies. Other activities funded under
    this heading include the annual audit of the financial statements of the
    Assets Forfeiture Fund and the Seized Asset Deposit Fund by an
    independent accounting firm and special assessments and reviews.
    This category also finances the Asset Forfeiture Money Laundering
    Section (AFMLS), Asset Forfeiture Management Staff (AFMS), and,
    since 2001, USMS headquarters administrative personnel and non-
    personnel costs associated with the forfeiture program. In addition,
    the AFF funds Deputy U.S. Marshal salaries to enhance the legal and
    fiduciary responsibilities that are inherent in the seizure of personal
    and real property during the pendency of a forfeiture action.




Page 48                                             GAO-12-736 Asset Forfeiture
Appendix II: Assets Forfeiture Fund
Expenditure Categories




12. Storage, Protection, and Destruction of Controlled Substances:

    These expenses are incurred to store, protect, or destroy controlled
    substances.
13. Joint Federal, State, and Local Law Enforcement Operations:

    Under 28 U.S.C. § 524(c)(1)(l), the AFF has authority to pay for
    “overtime, travel, fuel, training, equipment, and other similar costs of
    state or local law enforcement officers that are incurred in a joint law
    enforcement operation with a federal law enforcement agency
    participating in the Fund.”
14. Awards for Information and Purchase of Evidence

    Awards payable from the AFF directly support law enforcement efforts
    by encouraging the cooperation and assistance of informants. The
    AFF may also be used to purchase evidence of violations of drug
    laws, Racketeering Influenced and Corrupt Organizations (RICO), and
    criminal money laundering laws. According to DOJ, payment of
    awards to sources of information creates motivation for individuals to
    assist the government in the investigation of criminal activity and the
    seizure of assets.
15. Equipping of Conveyances:

    This category provides funding to equip vehicles, vessels, or aircraft
    for law enforcement functions, but not to acquire them. Purchased
    equipment must be affixed to and used integrally with the
    conveyance. This funding is used for emergency and communications
    equipment, voice privacy and surveillance equipment, armoring, and
    engine upgrades and avionic equipment for aircraft. According to
    DOJ, it is only through AFF resources that many of these surveillance
    vehicles are available to the field districts that need them. DEA uses
    various surveillance techniques, including stationary and mobile
    platforms to conduct surveillance and gather intelligence, the
    cornerstone of cases against most major drug violators. In addition,
    evidence obtained through the use of such surveillance often provides
    the audio and video documentation necessary for conviction.




Page 49                                               GAO-12-736 Asset Forfeiture
Appendix III: Results of Asset Forfeiture and
                                             Appendix III: Results of Asset Forfeiture and
                                             Money Laundering Section Compliance
                                             Reviews Completed as of December 2011


Money Laundering Section Compliance
Reviews Completed as of December 2011
                                             DOJ’s Asset Forfeiture and Money Laundering Section completed a total
                                             of 11 compliance reviews of equitable sharing participants in 2011. Table
                                             4 shows the results of the 11 compliance reviews.

Table 4: Results of Compliance Reviews of Equitable Sharing Participants

Results of 11 compliance
reviews                              Example of finding                                  Recommendation by AFMLS
Four agencies did not complete       AFMLS found that one agency submitted its           Per section X.A of the Guide to Equitable
Annual Equitable Sharing             Equitable Sharing Agreement and Certification       Sharing for State and Local Law Enforcement
Agreement and Certification          Form late for 2 consecutive years. In 2009, the     Agencies, state and local law enforcement
Forms on time.                       form was submitted 126 days after the end of        agencies must submit the Equitable Sharing
                                     the fiscal year and in 2010, the form was           Agreement and Certification Form within 60
                                     submitted 118 days after the end of the fiscal      days after the end of the agency’s fiscal year.
                                     year.                                               The law enforcement agency should submit the
                                                                                         Equitable Sharing Agreement and Certification
                                                                                         Form within the time frame specified.


Five agencies did not complete       AFMLS found differences between one agency’s        The police department should restate its fiscal
Annual Equitable Sharing             fiscal year 2010 equitable sharing general ledger   year 2010 Equitable Sharing Agreement and
Agreement and Certification          and its fiscal year 2010 Equitable Sharing          Certification Form to reflect the differences
Forms accurately.                    Agreement and Certification Form. Specifically,     noted.
                                     AFMLS found the total the agency reported
                                     spending on communications and computers
                                     was understated by $1,097.18. Similarly, AFMLS
                                     found that the total spent on electronic
                                     surveillance equipment was overstated by
                                     $4,376.20.


Six agencies did not complete        AFMLS found that although one of the city’s         Per section X.B of the Guide to Equitable
Single Audits (or document           financial statements was subject to Single Audits   Sharing for State and Local Law Enforcement
equitable sharing funds in the       under OMB A-133, the city police department’s       Agencies, agencies that received federally
Single Audit’s schedule of federal   equitable sharing activity was not reviewed and     shared cash, proceeds, or tangible property are
expenditures) as required.           reported on the Single Audit’s schedule of          required to perform an audit consistent with the
                                     federal expenditures.                               Single Audit Act Amendments of 1996 and
                                                                                         OMB Circular A-133. Equitable Sharing
                                                                                         Program activity should be reviewed and should
                                                                                         be included on the schedule of expenditures of
                                                                                         federal awards for fiscal year 2011 and future
                                                                                         years as part of the city’s annual audit.




                                             Page 50                                                          GAO-12-736 Asset Forfeiture
                                          Appendix III: Results of Asset Forfeiture and
                                          Money Laundering Section Compliance
                                          Reviews Completed as of December 2011




Results of 11 compliance
reviews                           Example of finding                                    Recommendation by AFMLS
Three agencies did not comply     In the course of one compliance review, AFMLS         Per section VIII of the Guide to Equitable
with AFMLS guidelines regarding   found that the law enforcement agency used            Sharing for State and Local Law Enforcement
permissible uses of equitable     $2,000 in equitable sharing funds to pay a legal      Agencies, equitably shared funds shall be used
sharing funds.a                   settlement related to injuries suffered by an         by enforcement agencies for law enforcement
                                  individual who was involved in a car accident         purposes only. As legal settlement expenses
                                  with a vehicle driven by a police department          are not listed in the guide as a permissible use,
                                  official. AFMLS determined the use was                the police department should reimburse the
                                  impermissible and required the agency to              equitable sharing account for the amount of the
                                  reimburse the equitable sharing account for the       settlement.
                                  amount of the settlement.


Three agencies did not employ     In the course of AFMLS’s review of one                Per section IX of the Guide to Equitable Sharing
adequate internal controls over   agency’s equitable sharing transactions, the          for State and Local Law Enforcement Agencies,
equitable sharing transactions    reviewers found that 21 out of 30 invoices in         all participating agencies must implement
and balances.                     support of purchases made with equitable              standard accounting procedures and internal
                                  sharing funds contained no evidence of approval       controls to track equitably shared monies and
                                  prior to payment.                                     tangible property. The law enforcement agency
                                                                                        should ensure that approval control is being
                                                                                        performed. This approval can be evidenced by
                                                                                        a signature or initial on the final invoice
                                                                                        received from each vendor.
Three agencies did not have       AFMLS determined that one law enforcement             The law enforcement agency should include
appropriate bookkeeping and       agency was improperly commingling equitable           expenditures of DOJ equitable sharing funds in
accounting procedures in place.   sharing funds with other funds in its accounting      the summary of shared monies spent section of
                                  system.                                               the Equitable Sharing Agreement and
                                                                                        Certification Form. Additionally, per section
                                                                                        IX.A.1 of the Guide to Equitable Sharing for
                                                                                        State and Local Law Enforcement Agencies,
                                                                                        law enforcement agencies must establish a
                                                                                        separate revenue account or accounting code
                                                                                        for the proceeds of the program. The law
                                                                                        enforcement agency should establish and
                                                                                        maintain a separate accounting code to track
                                                                                        DOJ equitable sharing funds.
                                          Source: GAO’s analysis of DOJ data.

                                          Notes: Some agencies had more than one violation, which is why violations do not total to 11.
                                          a
                                           While AFMLS found that these three agencies did not strictly comply with the permissible use of
                                          funds as outlined in the Guide to Equitable Sharing for State and Local Law Enforcement Agencies, it
                                          did not identify any instances among these three agencies of intentional misuse or abuse of equitable
                                          sharing funds.




                                          Page 51                                                               GAO-12-736 Asset Forfeiture
Appendix IV: GAO Contact and Staff
                  Appendix IV: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  David C. Maurer, (202) 512-9627 or maurerd@gao.gov
GAO Contact
                  In addition to the contact named above, Sandra Burrell and Dawn Locke
Staff             (Assistant Directors), Sylvia Bascope, Samantha Carter, Raymond
Acknowledgments   Griffith, Mike Harmond, Shirley Hwang, Valerie Kasindi, and Jeremy
                  Manion made key contributions to the report. Also contributing to this
                  report were Lydia Araya, Benjamin Bolitzer, Frances Cook, Katherine
                  Davis, Richard Eiserman, Janet Temko, Mitchell Karpman, Linda Miller,
                  Jan Montgomery, Bintou Njie, Robert Lowthian, Cynthia Saunders, and
                  Jerry Seigler.




(440970)
                  Page 52                                          GAO-12-736 Asset Forfeiture
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