OIG Audit Report 07-06

Objective

The objective of the audit was to determine whether the DEA complied with appropriate requirements governing the handling of cash from seizure through distribution.

Scope and Methodology

The audit was performed in accordance with the Government Auditing Standards issued by the Comptroller General of the United States, and included tests and procedures necessary to accomplish the objective. We performed fieldwork at the following locations.

DEA Headquarters	Arlington, Virginia
Washington Division
Washington Division Office Baltimore District Office Richmond District Office Norfolk Resident Office	Washington, D.C. Baltimore, Maryland Richmond, Virginia Norfolk, Virginia
Los Angeles Division
Los Angeles Division Riverside District Office Ventura Resident Office Los Angeles Airport Group Office	Office Los Angeles, California Riverside, California Ventura, California Los Angeles, California
New York Division
New York Division Office Long Island District Office New York Task Force Office New York John F. Kennedy Airport Office Syracuse Resident Office	New York, New York New York, New York New York, New York New York, New York Syracuse, New York
Houston Division
Houston Division Office McAllen District Office Austin Resident Office Brownsville Resident Office	Houston, Texas McAllen, Texas Austin, Texas Brownsville, Texas
New Orleans Division
Montgomery District Office Birmingham Resident Office Oxford Resident Office	Montgomery, Alabama Birmingham, Alabama Oxford, Mississippi
Miami Division
Miami Division Office Ft. Lauderdale District Office Orlando District Office Tampa District Office West Palm Beach Resident Office	Miami, Florida Ft. Lauderdale, Florida Orlando, Florida Tampa, Florida West Palm Beach, Florida
Detroit Division
Detroit Division Office Columbus District Office Cleveland Resident Office Dayton Resident Office	Detroit, Michigan Columbus, Ohio Cleveland, Ohio Dayton, Ohio

As a result of prior external and internal audits, inspections, reviews, and investigations, the DEA revised and updated its controls for safeguarding seized cash during FY 2005. The new controls became effective on April 5, 2005. To determine whether the DEA complied with appropriate requirements governing the handling of cash from seizure through distribution, we initially identified and evaluated the controls established by the DEA to safeguard seized cash. We tested a preliminary statistical sample of 239 cash seizures totaling $4,314,740 from the Washington Division’s universe of 1,304 cash seizures totaling $21,119,512 from October 1, 2003, through September 30, 2005. The 239 cash seizures tested were handled by four Washington Division offices (Washington Division Office, Baltimore District Office, Richmond District Office, and Norfolk Resident Office). Our sample included: (1) seizures made by the DEA as well as seizures made by state and local agencies and subsequently adopted by the DEA for processing under federal laws, and (2) seizures made before and after the new controls were established.

For each of the seizures sampled, we interviewed DEA officials and reviewed documentation from case files to determine the following.

Were two agents present when the cash was discovered?
Did the agents or officers count the cash?
Did the agents issue a receipt to the person claiming ownership of the currency or, if the cash was seized under a warrant, did the agents leave a copy of the warrant on the premises?
Did the agents’ cash count agree with the bank’s count and if not, were the discrepancies adequately researched and explained (only applies if agents counted the cash)?
Were two agents present when the cash was sealed in an evidence container, transported to the local DEA office, and transported to the bank?
Did the agents or officers complete the proper chain-of-custody documents when transferring custody of the cash to the evidence custodian (only applies if cash was taken to the local DEA office during regular duty hours)?
Did the agents or officers complete the proper chain-of-custody documents when placing seized cash in a secure overnight storage location (only applies if cash was taken to the local DEA office after regular duty hours)?⁵⁰
Were the chain-of-custody documents signed and witnessed by two law enforcement officers?
Did the evidence custodians record the receipt and disposition of cash and cashier’s checks in the HVSRM Ledger?
Did the agents or officers transport the cash to the bank for an official count in a timely manner?
Did the DEA transfer custody of seized cash to the USMS within 15 working days of seizure?

Based on our preliminary audit testing that showed controls for safeguarding seized cash were not always followed, we performed additional testing to include other DEA offices. The scope of our audit work was limited because we excluded many cash seizures from our testing based on requests from the DEA or based on the results of our preliminary testing as follows.

Based on our preliminary audit testing, we determined the DEA implemented revised cash handling procedures effective April 5, 2005. We sought to test controls for cash seized both prior to and after April 5, 2005. However, the DEA denied us access to records for cases where cash was seized prior to April 5, 2005, and the case was still open at the time of our planned tests. For this reason, we excluded from further testing cash seizures made prior to April 5, 2005.
At the request of the DEA, we excluded 2,109 cash seizures totaling $85,670,364 from the Atlanta Division offices because of an ongoing investigation in that Division regarding the alleged misappropriation of seized cash by a DEA agent.
At the request of DEA officials, we excluded from our testing cash seizures in some New Orleans Division offices because of the effects of hurricane Katrina on the DEA’s operations in that area.
Based on our preliminary audit testing that determined that DEA agents generally did not handle the seized cash when the DEA adopted seizures made by state and local law enforcement agencies, we excluded adopted seizures from further testing.

After the preliminary audit testing, we selected an additional 503 cash seizures totaling $40,665,978 at 24 additional DEA locations within 6 additional DEA Divisions. Including the preliminary sample reviewed for the Washington Division, our total sample consisted of 742 cash seizures totaling $44,980,718 at 28 DEA locations within 7 DEA Divisions from the sample universe of 3,705 seizures valued at $160,680,618. Further details of our statistical sample design are presented in Appendix II. The number and dollar value of seizures we tested at each DEA office and Division are shown in the following table.

Number and Dollar Value of Cash Seizures Tested

Division/Office	Number of Seizures	Dollar Value of Seizures
New York Division New York Division Office New York Task Force Office Long Island District Office Syracuse Resident Office John F. Kennedy Airport Office Total	30 30 21 15 9 105	$975,235 $7,740,242 $631,870 $1,285,106 $619,646 $11,252,099
Houston Division Houston Division Office McAllen District Office Brownsville Resident Office Austin Resident Office Total	30 25 6 4 65	$1,214,181 $9,240,962 $37,843 $66,119 $10,559,105
Detroit Division Detroit Division Office Columbus District Office Cleveland Resident Office Dayton Resident Office Total	30 29 24 6 89	$2,693,179 $3,437,611 $331,043 $109,495 $6,571,328
Los Angeles Division Los Angeles Division Office⁵¹ Riverside District Office Ventura Resident Office Total	50 30 7 87	$3,657,064 $2,082,283 $248,576 $5,987,923
Washington Division⁵² Washington Division Office Baltimore District Office Richmond District Office Norfolk Resident Office Total	117 89 23 10 239	$798,716 $1,855,260 $1,447,647 $213,117 $4,314,740
New Orleans Division Birmingham Resident Office Montgomery District Office Oxford Resident Office Total	30 29 9 68	$2,035,693 $1,043,643 $314,194 $3,393,530
Miami Division Miami Division Office Orlando District Office Tampa District Office West Palm Beach Resident Office Ft. Lauderdale District Office Total	32 24 16 9 8 89	$1,315,102 $548,041 $673,088 $222,832 $142,930 $2,901,993
Grand Total	742	$44,980,718

Source: Statistical sample taken from CATS

Footnotes

To complete this test we compared the date of seizure to the date the currency was converted to a cashier’s check. If those dates were different, we concluded agents should have placed the currency in secure storage along with the appropriate transferring documentation and made a entry in an overnight ledger.
The 50 seizures tested for the Los Angeles Division Office included 20 seizures for the Los Angeles Airport Group Office.
The number of cash seizures tested in the Washington Division included both adopted seizures and DEA seizures. As previously noted, after our preliminary testing in the Washington Division, we excluded adopted seizures from our expanded testing. Thus, we tested more seizures in the Washington Division than in the other DEA Divisions.