Criminal organizations and individuals frequently use the telecommunication systems of the United States to further serious crimes, including terrorism, kidnapping, extortion, organized crime, drug trafficking, and public corruption. One of the most effective tools law enforcement agencies use to acquire evidence of these crimes is electronic surveillance techniques.1 However, continuing advances in telecommunication technology have impaired and in some instances prevented law enforcement from conducting some types of authorized electronic surveillance.
With advances in telecommunication technologies and law enforcement’s growing concern about the ability to conduct authorized electronic surveillance, Congress passed the Communications Assistance for Law Enforcement Act (CALEA) in 1994. The purpose of CALEA was to enable law enforcement to conduct electronic surveillance despite the deployment of new technologies and wireless services that have altered the character of electronic surveillance. To facilitate CALEA implementation, Congress appropriated nearly $500 million to the Telecommunications Carrier Compliance Fund (TCCF). The Attorney General was designated to reimburse telecommunication carriers for the cost of modifying equipment, facilities, or services installed or deployed on or before January 1, 1995, to assist law enforcement authorities in carrying out its surveillance activities. In February 1995, the Attorney General delegated CALEA management to the Federal Bureau of Investigation (FBI).
Background
Pursuant to CALEA, the Department of Justice (DOJ) Office of the Inspector General (OIG) is required to report to Congress biennially on the equipment, facilities, and services modified to comply with CALEA requirements.2 In prior audits, we reported on FBI agreements that applied TCCF funds to pay manufacturers for software feature updates and associated licensing fees, referred to as Right-To-Use (RTU) agreements. These payments allowed carriers to obtain CALEA software solutions once the FBI reimbursed the manufacturer for development costs. As shown in the following table, over the past 10 years the FBI spent almost $452 million on these RTU licenses.
TCCF COST SUMMARY
(1997-2007)
| Type of Cost | Amount ($) * |
 |
|---|---|---|
| RTU Agreements | 451.7 | |
| Carrier CALEA Solution Deployment, Activation, and Testing |
7.5 | |
| 2007 TCCF Rescissions | 40.3 | |
| TOTAL | $ 499.5 |
* Figures in millions, rounded to nearest $100,000
Before finalizing various RTU software license agreements, the FBI prepared reports entitled Determination and Findings Regarding the Implementation of CALEA because it was unable to verify the reasonableness of the cost of the RTU software licenses through traditional means, such as actual cost data or price estimates. According to the FBI, manufacturers were unwilling to furnish adequate cost or price information despite repeated FBI attempts to obtain such information through extensive negotiations. As a result, prior OIG reports have not offered an opinion regarding the reasonableness of the nearly $452 million the FBI spent on RTU licensing costs.3
In addition to the RTU agreements, the FBI has spent nearly $7.5 million, including about $4.6 million during this audit period, to pay wire line carriers for deploying, activating, and testing CALEA solutions. By the end of the audit period, the FBI expended a total of $459 million primarily on RTU license agreements and carrier CALEA solution deployment and testing. In 2007, Congress rescinded over $40 million from the TCCF, which left only $5,037 remaining in the fund.4
Audit Approach
The objectives of the audit were to determine: (1) the type of equipment, facilities, and services brought into compliance with CALEA, and (2) whether payments during the most recent 2-year review period for CALEA-required modifications were reasonable and cost effective. Considering the 2007 TCCF rescissions, our audit also reviewed how the FBI has continued to work with telecommunication providers to help ensure that emerging communication technologies are CALEA compliant.
Our review focused on TCCF-financed activity occurring between January 1, 2006, and December 31, 2007. During the audit, we interviewed officials at FBI Headquarters, the FBI CALEA Implementation Unit, various units of FBI’s Finance Division, and selected telecommunication providers. We also reviewed CALEA annual reports, assessments, associated files, contracts, obligations, and payments for CALEA-implementation activities.
Results in Brief
Between January 2006 and December 2007, the FBI spent a total of $4.6 million in TCCF funds to implement CALEA provisions. Of this amount, the FBI paid $4.5 million to two carriers under formal agreements to deploy CALEA solutions on over [SENSITIVE INFORMATION REDACTED] network switches, while nearly $100,000 was paid to a carrier for testing various CALEA solutions on its telecommunication network.5 We could not assess the reasonableness or cost effectiveness of TCCF expenditures paid during the audit period because the FBI based these costs on negotiated terms instead of independent cost data or competing price estimates derived from more than one carrier.
As of December 2007, the end of the audit period, only $5,037 remained in the TCCF. T he FBI is working with DOJ to transfer remaining TCCF funds to the DOJ Working Capital Fund and close the TCCF account. As a result, t he report makes no recommendations. The remaining sections of this Executive Summary describe in more detail our audit results.
TCCF Expenditures
During the 2-year period under review, the FBI had formal agreements with two carriers to deploy CALEA solutions. At a total cost of $4.5 million, carriers certified that they upgraded their networks to allow law enforcement agencies to receive CALEA compliant surveillance results. Although internal FBI communications stated that the $4.5 million compensated carriers only for reasonable CALEA deployment costs, the FBI did not provide any evidence based on independent cost data or competing price estimates to support this statement.6 As a result, we could not determine the reasonableness or cost effectiveness of payments made to carriers that deployed CALEA solutions under these agreements.
The FBI also paid nearly $100,000 to a carrier to test various CALEA solutions. Our assessment of the reasonableness and cost effectiveness of these payments found that the FBI based them on negotiated terms instead of independent cost data. However, the FBI has issued statements justifying the costs associated with various CALEA solutions because such solutions would result in long-term financial savings to law enforcement agencies.
Measuring and Enhancing CALEA’s Impact on Electronic Surveillance
Over the past 2 years, the FBI has continued developing tools and implementing resources to help facilitate and measure CALEA compliance of telecommunication providers. We found that the FBI has hosted and attended forums and other types of meetings with law enforcement personnel, developed and updated its AskCALEA website, conducted and issued annual threat assessment surveys, and surveyed telecommunication providers regarding the status of CALEA solutions on their networks.7
The FBI participates as a member of the telecommunication industry electronic surveillance standard-setting groups.8 However, FBI officials advised that because of the voting structure of these groups, which are industry dominated, the FBI has had limited ability to ensure that adequate CALEA solutions are available for newly developed communication standards. As a result, the FBI is concentrating its efforts on working with and testing packet-mode based telecommunication providers and manufacturers to develop and deploy adequate CALEA solutions.9
Conclusion
Of the nearly $4.6 million spent between January 2006 and December 2007, about $4.5 million was paid to two carriers to deploy CALEA-related solutions. The FBI also paid $96,878 to a carrier for testing CALEA solutions on its telecommunication network. We could not assess the reasonableness or cost effectiveness of these expenditures because the FBI did not base its costs on independent cost data or competing price estimates.
Our audit also reviewed how the FBI has continued to work with telecommunication providers to help ensure that emerging communication technologies are CALEA compliant. We found that the FBI has revamped its testing group and enhanced its resources to help measure and facilitate CALEA compliance. In addition, the FBI has implemented an extensive testing program to ensure carrier compliance and capability with regard to emerging technologies.
At the end of the audit period, only $5,037 remained in the TCCF. According to a DOJ finance official, the FBI is working with DOJ to transfer the remaining funds to the DOJ Working Capital Fund and close the TCCF.
We provided a draft of the report to the FBI for comment and review. Since the report made no recommendations, the FBI did not provide a response and we issued the report closed.
Electronic surveillance consists of the acquisition of call-identifying information and the interception of communications content. Call-identifying information identifies the origin, direction, destination, or termination of a communication generated or received by a subject of surveillance, while content is the substance of a communication.
Since 1998, the OIG has issued five audit reports on CALEA implementation activities. Appendix II presents a summary of these reports and their findings and recommendations.
Our March 2006 report found, in part, that the FBI negotiated substantially reduced costs for the RTU licenses at least when compared to the manufacturers’ initial cost proposals for these licenses. See U.S. Department of Justice Office of the Inspector General, The Implementation of the Communications Assistance for Law Enforcement Act, Audit Report 06-13 (March 2006), 15.
A switch is a telephone device that “makes the connection” when a call is placed. Modern switches are specialized computers.
Before one carrier deployment agreement was finalized, the FBI conducted an audit to assess the fairness and reasonableness of proposed carrier costs. Although the FBI audit found that certain proposed costs were reasonable, the FBI audit did not consider independent cost data or competing price estimates in making this determination. As a result, we could not use the results of the FBI audit in our analysis of whether carrier deployment costs paid under the agreement were reasonable or cost effective.
AskCALEA is a website established by the FBI to assist law enforcement and carrier personnel with surveillance issues.
Electronic surveillance standards provide the basis for the development and deployment of technology to permit carriers to assist law enforcement in conducting electronic surveillance.
A telecommunication network based on packet-mode technology operates by routing and transferring data by means of packets of information.