District of Columbia Courts: Financial Related Issues for Fiscal Year 1998

Published by the Government Accountability Office on 1999-05-18.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on the District of Columbia,
                          Committee on Appropriations, House of Representatives

For Release on Delivery
Expected at
2 p.m.
                          DISTRICT OF COLUMBIA
May 18, 1999              COURTS

                          Financial Related Issues
                          for Fiscal Year 1998
                          Statement of Gloria L. Jarmon
                          Director, Health, Education and Human Services
                          Accounting and Financial Management Issues
                          Accounting and Information Management Division

                        Mr. Chairman and Members of the Subcommittee:

                        I am pleased to be here today to respond to your questions related to the
                        District of Columbia Courts’ (DC Courts) financial operations for fiscal
                        year 1998, its first year of operations with direct federal funding.
                        Consistent with your request, we focused on the following four questions:

                        • What were DC Courts’ obligations for fiscal years 1996, 1997, and 1998?
                        • Did DC Courts have a spending plan for fiscal year 1998 and obligate
                          funds consistent with available resources?
                        • Why were payments to court-appointed attorneys deferred from July
                          through September 1998?
                        • Did DC Courts process payments to court-appointed attorneys in
                          accordance with policies and procedures?

                        In summary, we found that DC Courts experienced difficulties in planning
                        and budgeting during this transition year. As adjusted by us, its records
                        showed that it potentially over-obligated its resources by more than
                        $5 million, which would violate the Anti-Deficiency Act. After we briefed
                        DC Courts officials, they told us they do not believe that a violation of the
                        Anti-Deficiency Act occurred. I will compare the essence of our respective
                        positions later in my statement. We also identified a legal issue regarding
                        the Crime Victims Compensation Program.

                        In performing our work, we reviewed DC Courts’ financial records, and
                        held extensive discussions with DC Courts officials over the past several
                        months. We shared a draft of this statement with DC Courts officials, and
                        incorporated their comments to the extent that it was appropriate. Our
                        work was performed in accordance with generally accepted government
                        auditing standards.

Reported Obligations    DC Courts’ records indicated that total obligations in fiscal years 1996,
                        1997, and 1998 were $115.4, $119, and $126.3 million, respectively. Fiscal
for Fiscal Years 1996   year 1998 obligations reflect our adjustments, as discussed later, and are
Through 1998            not comparable to the prior years’ obligations. This is primarily due to the
                        changes resulting from the Revitalization Act of 1997. For example, DC
                        Courts non-judicial employees received federal benefits that increased DC
                        Courts’ obligations for fiscal year 1998. In addition, the adult probation
                        function was transferred from DC Courts to a new entity, the Court
                        Services and Offender Supervision Agency for the District of Columbia
                        (COSA), in fiscal year 1998. DC Courts also provided its non-judicial

             Leter      Page 1                                                 GAO/T-AIMD/OGC-99-176
                      employees a 7-percent pay raise and assumed responsibility for the judges’
                      pension costs as part of its fiscal year 1998 appropriation for court

                      Prior to the decision to transfer the adult probation function to a new
                      entity, DC Courts had requested $123.5 million to fund its fiscal year 1998
                      operations. When DC Courts received $108 million in its fiscal year 1998
                      appropriation, it no longer had operational responsibility for the adult
                      probation function, but continued to pay salaries and related costs on
                      behalf of the COSA Trustee. In March 1998, the COSA Trustee took over
                      the payments for the operations and subsequently reimbursed DC Courts
                      $7.8 million for the costs DC Courts paid on the COSA Trustee’s behalf.
                      These costs and the related reimbursements were included in DC Courts’
                      fiscal year 1998 obligations and available funds.

DC Courts’ Spending   Upon receipt of its fiscal year 1998 appropriation, DC Courts was
                      responsible for developing a spending plan based on an appropriation that
Plan                  was about $15.5 million less than it requested. DC Courts did not develop a
                      plan to ensure that its obligations did not exceed available resources. It
                      obligated throughout the year based on its expectation of receiving
                      additional funds. While DC Courts received an additional $1.7 million in
                      appropriated funds for the fiscal year, it did not receive all of the funding it
                      anticipated. DC Courts also received $12.1 million in grants, interest, and
                      reimbursements, including the $7.8 million from the COSA Trustee, during
                      the fiscal year.

                      However, letters between DC Courts and the Office of Management and
                      Budget (OMB) during fiscal year 1998 reflect DC Courts officials’
                      expectations of receiving additional resources and OMB’s concern that if
                      DC Courts did not lower its rate of spending, its obligations would exceed
                      available funds. For example, in an April 1998 letter, OMB advised DC
                      Courts that it was incurring obligations at a rate that would necessitate a
                      deficiency or supplemental appropriation. For their part, DC Courts
                      officials continued to seek additional funds during their discussions with
                      the COSA Trustee, Department of Justice, and OMB.

                      By the end of the fiscal year, DC Courts’ records showed that obligations
                      exceeded available resources by about $350,000. Specifically, its records
                      showed obligations of almost $122.2 million and funds received of about
                      $121.8 million. However, as I will now discuss, we found that adjustments
                      needed to be made to these amounts.

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• DC Courts deferred more than $4.1 million of court-appointed attorney
  payments that were eventually paid with fiscal year 1999 funds, but did
  not record these amounts as fiscal year 1998 obligations. While DC
  Courts officials had the authority to make these payments with fiscal
  year 1999 funds, this did not make the deferred payments fiscal year
  1999 obligations. The vouchers were approved by the presiding judges
  or hearing commissioners in fiscal year 1998, and the obligations should
  have been recorded in fiscal year 1998. Accordingly, we added this
  amount to DC Courts’ reported fiscal year 1998 obligations.
• DC Courts treated interest earned primarily from its quarterly
  apportionments of its appropriation as available budgetary resources
  for court operations. However, DC Courts did not have authority to
  spend this interest. For this reason, we have reduced the amount that
  DC Courts reported as available resources for fiscal year 1998 by

As adjusted, DC Courts’ recorded obligations and available funding for
fiscal year 1998 would be $126.3 and $121 million, respectively, resulting in
a potential over-obligation of more than $5 million. The Anti-Deficiency
Act prohibits federal and DC government officials from making
expenditures or obligations in excess of amounts available in an
appropriation or fund unless otherwise authorized by law. The Anti-
Deficiency Act requires the head of an agency to report immediately any
such violation to the President and the Congress, including all relevant
facts and a statement of actions taken. OMB Circular A-34, Instructions on
Budget Execution, provides additional guidance on information that the
agency is to include in its report to the President. OMB instructs agencies
to include the primary reason or cause for the over-obligation, any
extenuating circumstances, the adequacy of the system of administrative
control of funds, any changes necessary to ensure compliance with the
Anti-Deficiency Act, and steps taken to prevent a recurrence of the same
type of violation.

DC Courts officials told us that they do not believe that a violation of the
Anti-Deficiency Act occurred. In essence, DC Courts officials assert that
the authority Congress provided in the fiscal year 1999 Appropriation Act
to use fiscal year 1999 funds for deferred attorney payments constitutes an
exception to the Anti-Deficiency Act. DC Courts officials further assert
that the exception is available whenever they have obligations in excess of
their budgetary resources. We disagree with this position. The fiscal year
1999 Appropriation Act was enacted after fiscal year 1998 ended. The
authority cited by DC Courts only authorizes it to use fiscal year 1999

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appropriations to pay deferred amounts to court-appointed attorneys, but
does not excuse DC Courts from managing its activities within the
appropriation level Congress provided or authorize obligations in excess of
available budgetary resources. Accordingly, the critical issue for applying
the Anti-Deficiency Act in this case is whether the over-obligations were
entirely attributable to the mandatory obligations for court-appointed
attorneys and were, therefore, authorized by law. We conclude that they
were not, primarily because

1. fiscal year 1998 obligations for court-appointed attorneys were similar to
the prior fiscal year and the estimated amount for fiscal year 1998;

2. DC Courts did not base its spending during most of the fiscal year on the
appropriation it received; and

3. DC Courts’ records indicated that a discretionary pay raise of about
$2.8 million was given to its non-judicial employees during fiscal year 1998.

In addition, DC Courts officials told us that they were authorized to retain
the interest earned on quarterly apportionments of their appropriation and
make it available for court operations. They noted that no statute prohibits
retaining interest earned on apportionments. We disagree with this
position primarily because the Revitalization Act specifically requires “that
all money received by the District of Columbia Courts shall be deposited in
the Treasury of the United States or the Crime Victims Fund.” Thus, DC
Courts did not have statutory authority to augment its appropriation with
interest earned on apportioned appropriations.

Recently, DC Courts officials advised us that there were obligations of over
$1 million in their fiscal year 1998 records that needed to be de-obligated.
DC Courts officials stated that these included amounts that the District
should not have recorded as obligations and amounts for services that were
no longer anticipated. We are currently reviewing these proposed de-
obligations. It will be important that DC Courts continue reviewing its
records and do all required investigating and reporting under the Anti-
Deficiency Act.

Page 4                                                 GAO/T-AIMD/OGC-99-176
Deferral of Payments   Throughout fiscal year 1998, it was clear that unless DC Courts modified its
                       spending or received additional funds, it was facing a shortfall. By the third
to Court-Appointed     quarter when DC Courts had not received the additional funds it
Attorneys              anticipated, there were limited options available for addressing the
                       projected shortfall. DC Courts officials considered furloughing employees
                       and closing the courts for a period during the summer, as well as deferring
                       court-appointed attorneys’ and expert service providers’ payments. In May
                       1998, OMB officials advised DC Courts to reduce non-personnel costs
                       instead of furloughing employees or closing the courts to avoid an Anti-
                       Deficiency Act violation. DC Courts made the decision on July 24, 1998, to
                       defer payments for court-appointed attorneys for the remainder of the
                       fiscal year, and then used fiscal year 1999 appropriations to pay those
                       amounts. DC Courts had budgeted $31.6 million for such payments in fiscal
                       year 1998, an amount that was similar to the previous fiscal year, and as of
                       July 1998, $25.8 million had been expended on court-appointed attorney
                       payments. The Congress authorized use of the DC Courts’ fiscal year 1999
                       appropriation to fund these deferred payments. However, this did not
                       change the payments from fiscal year 1998 obligations to fiscal year 1999
                       obligations. The presiding judges or hearing commissioners approved the
                       vouchers in fiscal year 1998 and the obligations should have been recorded
                       in fiscal year 1998.

Processing of          Now I would like to discuss the payments that were made to court-
                       appointed attorneys during fiscal year 1998 in terms of the process for
Payments to Court-     making such payments, and whether they were made promptly. Your
Appointed Attorneys    concern was that court-appointed attorneys were being paid late or not the
                       right amount and that vouchers were sometimes being lost.

                       We found that DC Courts processed vouchers for court-appointed
                       attorneys in accordance with its policies and procedures. However, its
                       procedures did not include time frames for making payments to court-
                       appointed attorneys. Our analysis of DC Superior Court’s fiscal year 1998
                       paid voucher data through July 1998, showed that 94 percent of the
                       vouchers for court-appointed attorneys and expert service providers were
                       paid within 30 days1 of the presiding judge’s or hearing commissioner’s

                       1 TheDistrict’s fiscal year 1999 Appropriation Act provided that DC Courts would be subject to the
                       federal Prompt Pay Act, which requires that DC Courts pay a “proper invoice” within 30 days of its
                       receipt or be subject to an interest penalty.

                       Page 5                                                                    GAO/T-AIMD/OGC-99-176
                approval and 83 percent of these vouchers were paid within 60 days of the
                date submitted.

                You were also interested in the incidence of voucher amounts being
                reduced at the time they are approved by the presiding judges or hearing
                commissioners. Our analysis of fiscal year 1998 paid voucher data showed
                that judges or hearing commissioners reduced voucher amounts in 9
                percent of the cases, of which more than half involved reductions of $100
                or less. DC Courts did not have procedures covering how judges or hearing
                commissioners were to report to the attorney or expert service provider
                their decisions to reduce voucher amounts claimed. However, DC Courts
                officials stated that this information was available to attorneys who
                requested it.

                Regarding lost or missing vouchers, we found that there were no
                procedures for retaining data on the number of vouchers reported as
                missing or the disposition of such vouchers. DC Courts officials stated that
                such data were not maintained.

Crime Victims   I would now like to discuss a matter that did not affect DC Courts’ use of its
                fiscal year 1998 appropriation for court operations, but that will need to be
Compensation    addressed if DC Courts is to have the requisite authority to make payments
Program         out of its Crime Victims Fund. A District law established the Crime Victims
                Compensation Program under DC Courts jurisdiction prior to the
                enactment of the Revitalization Act. The Revitalization Act supports the
                authority of DC Courts to deposit fines, fees, and other money to the credit
                of the Crime Victims Fund under the District law. The District law provides
                that payments of up to $25,000 from the Fund can be made to crime victims
                for shelter, burial costs, or medical expenses. DC Courts’ records indicated
                that over $1.5 million in such payments were made during fiscal year 1998.

                However, there is nothing in the language of the District’s fiscal years 1998
                or 1999 Appropriation Acts that appropriates amounts from the Crime
                Victims Compensation Fund, nor have we identified any other federal law
                authorizing payments from the Fund. Accordingly, we conclude that DC
                Courts did not have the requisite legislative authority to make payments
                from the Fund. This is a matter for the Congress and DC Courts to address.

                Page 6                                                  GAO/T-AIMD/OGC-99-176
                   Mr. Chairman, this concludes my statement. We will be separately
                   reporting to you on these and other issues that you asked us to review and
                   will include recommendations for addressing the matters discussed in this
                   testimony. I will be happy to answer questions from you or other members
                   of the Subcommittee.

(916280)   Leter   Page 7                                               GAO/T-AIMD/OGC-99-176
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