I have reviewed the Draft Audit Report of Immigration and Naturalization Service Expenditures Charged to the Organized Crime Drug Enforcement Task Forces Program for Fiscal Years 1997-2002. I appreciate this opportunity to provide my comments on the recommendations contained in the Report.

Recommendation No. 1

I concur with your recommendation that the OCDETF Director should determine an appropriate remedy to deal with any instance of costs being inappropriately billed to the OCDETF Program. We intend to review carefully with the Bureau of Customs Enforcement1 all of the costs in question and to request, where appropriate, additional supporting documentation of actual expenditures. Based upon this review, OCDETF will seek to collect amounts determined to be due and owing to the Program.

As noted in the audit Report, during FY 2002, the Immigration and Naturalization Service was not reimbursed by OCDETF for 25% of its OCDETF program costs but rather was required to fund those costs from its direct budget. For your information only, this amounted to approximately $2.9 million.

Recommendation No. 2

I concur with your recommendation that OCDETF should clarify the term "indirect costs," which appears in its reimbursable agreements, and OCDETF already has done so.

During the summer of 2003, at my direction, OCDETF undertook its own review and analysis of its reimbursable agreements to ensure that those agreements fully and clearly conveyed appropriate financial and program standards. This was done as part of the OCDETF Program's overall emphasis on program management and accountability. As a result of this process, OCDETF revised its FY 2004 Reimbursement Agreement with all OCDETF agency participants in several significant respects, including to address the vagueness of the term "indirect costs." The FY 2004 Reimbursement Agreement will replace the term "indirect costs" with "direct overhead expenses."

A copy of the revised Reimbursement Agreement form, containing the "direct overhead expenses" language, is attached as Exhibit A. Given that no FY 2004 funds have yet been authorized, there is no signed FY 2004 agreement with the Bureau of Customs Enforcement (BICE) in place at this time. However, the terms of this agreement have been reviewed and approved by the Justice Management Division and approved by me, as Acting Director for OCDETF, for use in FY 2004. Any modifications to the attached form would be minor and would not affect the substance of the requirements. In addition, the budget representatives from each participating agency have been advised that the requirements contained in the FY 2004 Reimbursement Agreement are in effect as of October 1, 2003, even if the agencies are operating without a signed agreement under a Continuing Resolution. A copy of that memorandum is attached hereto as Exhibit B.

I also concur that OCDETF's reimbursable agreements should include language to address whether unobligated funds may be transferred among object classes. OCDETF similarly had identified this precise issue when it undertook its own review and analysis of its reimbursable agreements. Accordingly, OCDETF's revised FY 2004 Reimbursement Agreement with all OCDETF agency participants specifically states: "Object class amounts may not be transferred from one object class to another without prior written notice to the OCDETF budget section." The revised Reimbursement Agreement form, attached as Exhibit A, contains this language.

Recommendation No. 3

I concur with establishing a process that enables the OCDETF Executive Office to obtain adequate documentation for all billed costs. It is the practice of most OCDETF-member agencies that all OCDETF obligations and expenditures be approved in the field by the agency's OCDETF Regional Coordinator. It is also generally the responsibility of the Regional Coordinator to track the receipt of any goods and services and to maintain appropriate documentation. This practice ensures that the obligations and expenditures are reviewed and monitored by an individual who is knowledgeable about the underlying investigations to which the costs relate. For FY 2004, OCDETF has included language in its revised Reimbursement Agreement to ensure that this procedure, in fact, is followed by all participating agencies. The Agreement specifically provides: "Supporting documentation for all expenditures must be received and reviewed by the Agency or its designee prior to the submission of billings to OCDETF to ensure that such expenditures are proper OCDETF-related expenditures. Submission of the billings will constitute a certification by the Agency that such a review has been conducted and that expenditures are appropriate for payment. Supporting documentation shall be retained by the Agency or its designee for a period of six (6) years."

A copy of the FY 2004 Reimbursable Agreement form containing this language is attached as Exhibit A.

In addition, the way in which OCDETF agent time will be calculated by the Bureau of Customs Enforcement beginning in FY 2004 also will address this issue. Indeed, as you note in your Report, INS was the only agency participating in the OCDETF Program that designated particular agents to work only on OCDETF matters; all other agencies track and aggregate the total OCDETF work hours of their entire workforce to calculate the number of FTEs allocated to the OCDETF Program and, therefore, eligible for reimbursement. It will be the practice of BICE, for purposes of OCDETF participation, to employ the latter method and to track and aggregate total OCDETF work hours of both its "legacy Customs" and "legacy INS" agents.

Recommendation No. 4

I concur with your recommendation that only expended obligations should be reimbursed. In fact, this has been the recent policy of the OCDETF budget section, and the revised FY 2004 Reimbursement Agreement contains an explicit statement of that policy. In particular, the Agreement specifically provides: "All billings shall be based on accrued expenditures, not anticipated obligations." A copy of the FY 2004 Reimbursement Agreement form containing this language is attached as Exhibit A. In addition, I have issued a memorandum to the OCDETF budget staff reiterating this policy and the fact that no exceptions to this policy will be permitted. A copy of that memorandum is attached hereto as Exhibit C.

Recommendation No. 5

I concur with your recommendation that an agency should submit a quarterly comparison of costs incurred to budgeted amounts, by object classification. OCDETF already identified this as a sound practice, and has taken steps to implement a quarterly reporting process. In particular, OCDETF's revised FY 2004 Reimbursement Agreement provides: "Prior to the approval and funding of OCDETF resources, the Agency will submit a financial operating plan, by quarter and by object class, to the OCDETF budget section, Quarterly obligation reports by object class must be submitted to the OCDETF budget section within 21 days from the close of the quarter." A copy of the FY 2004 Reimbursement Agreement form is attached as Exhibit A.

Recommendation No. 6

I concur with your recommendation and recognize that INS's former three-year retention policy was inadequate. Consistent with your recommendation, OCDETF's revised FY 2004 Reimbursement Agreement requires that all participating agencies retain supporting documentation for a period of six (6) years. A copy of the FY 2004 Reimbursement Agreement form is attached as Exhibit A.

Recommendation No. 7

I concur that it is important for the OCDETF Executive Office to have access to documentation to validate agent work hours. As noted above, however, BICE will no longer be dedicating specific INS investigative agents to work OCDETF matters. Rather, all agent work hours on OCDETF will be aggregated to calculate the total number of agent FTE allocated to the OCDETF Program and, therefore, eligible for reimbursement. This practice will take effect at the start of FY 2004. The time sheets maintained by BICE will be available to OCDETF to track and to monitor the OCDETF-related hours of all BICE agents, including those formerly from INS.

If you have any questions concerning these comments or the attached information, please feel free to call me directly at (202) 307-2090.

cc: Marilyn Kessinger, OIG
     Michael Garcia, BICE
     Joseph Greene, BICE

On September 25, 2003, I distributed the revised FY 2004 OCDETF Reimbursement Agreement for your review. The agreement already had been reviewed and approved by JMD budget staff. As I discussed with your Operations Chiefs, the Agreements reflect the new requirements that will be imposed on all participating agencies to improve overall accountability throughout the OCDETF Program.

Please be advised that, despite the fact that OCDETF and its participants will operate under a Continuing Resolution, the fundamental requirements contained in the Agreement will be in effect, and will apply to any OCDETF funds expended, beginning October 1, 2003. This will be the case whether or not FY 2004 funds have been authorized.

For your convenience, I have re-attached the Reimbursement Agreement to this memorandum. Please remember that any concerns regarding the new requirements should be directed to me on or before October 10, 2003.

If you have any questions, please contact Budget Officer Donna Ching at (202) 514-1860.

Attachment

Please be advised that it has been the policy of the OCDETF Program that only accrued expenditures by OCDETF member agencies - and not anticipated obligations - may be reimbursed. The FY 2004 Reimbursement Agreement for OCDETF agency participants will contain the following language:

"All billings shall be based on accrued expenditures, not anticipated obligations."

All OCDETF member agencies have been made fully aware of this policy. There will be no exceptions. Please direct any questions you have regarding this directive to my attention.