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Budget Execution in the United States Marshals Service During Fiscal Years 2002 and 2003

Report No. 04-02
October 2003
Office of the Inspector General

Appendix IV
USMS Response to the Draft Audit Report

  U.S. Department of Justice

United States Marshals Service

Management and Budget Division

  Washington, DC 20530-1000

October 1, 2003
MEMORANDUM TO: Guy K. Zimmerman
Assistant Inspector General For Audit
FROM: Edward Dolan (original signed)
SUBJECT: Draft Audit Report, "Budget Execution In The United States Marshals Service During Fiscal Years 2002 And 2003"
Thank you for the opportunity to review the Draft Audit Report, "Budget Execution In The United States Marshals Service During Fiscal Years 2002 And 2003." My staff has fully read and reviewed the report. Our response disagrees with the recommendation to develop a revised budget execution system, agrees with the recommendation to have a motor vehicle replacement plan, and agrees with the recommendation to re-evaluate the Justice Detainee Information System (JDIS) appropriation language.

However, we believe there are numerous instances regarding conclusions that are drawn from incomplete analysis, contradictory statements, and inaccurate facts. We have addressed these issues, and strongly encourage the Inspector General (IG) to consider modifying the draft report to incorporate these changes in order to improve the quality of the final report.

For your review, I have attached the following: 1. Response to IG Recommendations; II. Clarification and Correction of Inaccuracies and Misstatements (this section only addresses the Executive Summary), and; III. Summary. Additional suggested technical edits and corrections to the report will be provided directly to the audit team.

Please contact me on extension 7-9027 with any questions.



I. USMS Response To Findings And Recommendations

Recommendation I (a): We recommend the Director of the USMS develop a budget execution system that tracks changes, obligations, and expenditures to the budget estimates included in spending instructions.

USMS Response: The USMS disagrees with Recommendation 1(a).

We believe that the USMS has a budget execution system that fully tracks obligations, changes and expenditures. Further, it is inaccurate to assert, "the USMS can't clearly demonstrate that budgeted funds are allocated in accordance with Congressional intent." Every allocation requirement identified by the audit staff was addressed with supporting documentation. In addition, the body of the report itself supports item-by-item USMS allocations that adhere to Congressional items identified the audit. Therefore, it is unclear why this statement was made throughout the report.

Further, there has been no direction from DOJ, 0MB, or the Congress to DOJ components to establish a system that would track a specific increment of funding. Therefore, it has not been a USMS priority to track a specific increment of funding. However, the USMS can verify that each new Deputy United States Marshal (DUSM~ receives training, a weapon, computer, a drug test, a background investigation, etc. But, having the capability to know the increase in agency costs (for example, the rent) that results from every increase in personnel would require project code tracking for every program increase. This strategy was not pursued since it has not been directed, would create a significant administrative burden on both financial and program office staffs, would be of questionable benefit.

Recommendation I (b): Reexamine its (USMS) annual Congressional request of$4 million for JDIS (Justice Detainee Information System), in light of the USMS's record not allocating more than $5.5 million of the available $28 million of these funds over past seven years.

USMS Response: The USMS agrees with Recommendation 1(b) to the extent th~ the USMS will "reexamine its annual Congressional request of $4 million for JDI prior to the submission of the FY 2005 President's Budget Request to the Congress.

Justice Detainee Information System (JDIS)

The report states the following, "the JDIS is an automated prisoner information system. Since FY 1997, Congress has allocated the USMS up to $4 million annually, $28 million in total, to develop the JDIS. However, to date the USMS has allocated JDIS only $5.5 million of the available $28 million over the past 7 years."

By including the language, "of which not to exceed $4,000,000 shall be available for development, implementation, maintenance and support, and training for an automated prisoner information system and shall remain available until expended," ti Congress provides the USMS "passive authority" to identify funding for JDIS from within the total amount appropriated. The language, "available until expended" is significant because it indicates "no-year" funding as opposed to annual funding. The USMS's Salaries and Expenses annual funding is the "source" for this requirement. Our practice has been to determine "availability" after the annual appropriation has "expire for some time. Funding for JDIS is made available after expired annual funding has been identified. This funding is then transferred, through DOJ and Treasury via an SF-1151, from the USMS Salaries and Expenses annual appropriation to the Salaries and Expenses "no-year" appropriation.

Recommendation II: Develop a vehicle replacement plan to ensure that the USMS motor vehicle fleet is brought into, and then remains, in compliance with the GSA mileage requirements.

USMS Response: The USMS agrees with Recommendation II concerning the value of a motor vehicle replacement plan. As reported to the audit staff, this plan has been implemented to the extent possible within funding available to the USMS. Further, this plan is in accordance with standards established by the USMS.

Vehicle Replacement Plan

The report states the following, "The USMS motor vehicle fleet is aging beyond replacement criteria established by the General Services Administration (GSA). We determined that 55 percent of the vehicles in the districts and 37 percent of the vehicles the USMS 's Headquarters exceeded the GSA 's minimum mileage replacement criteria Although the USMS has a vehicle maintenance plan, it does not have a regular vehicle replacement plan to address the needed vehicle upgrades. In order to reduce the ave mileage of the USMS motor vehicle fleet from the current 105,000 miles to the miles criteria set by the GSA, the USMS needs to develop and implement a vehicle replace, plan."

As cited in the report, the GSA mileage criteria is for a minimum replacement cycle of 3 years/60,000 miles. This is not the point at which GSA vehicles must be replaced, but the point at which they may be replaced. Further, this replacement criteria is not binding.

The USMS believes that the quality of today's vehicles, coupled with the service's maintenance program, makes it unnecessary to replace vehicles so soon. We believe that vehicles used for general operations need only be replaced at 4 years or 80,000 miles. Vehicles used for daily prisoner transportation are currently replaced a years or 60,000. Since FY 2002, the Marshals Service has reduced the average mileage of the motor vehicle fleet from 115,000 to the current level. During FY 2003, the US has purchased 435 new vehicles to replace high mileage ones. Further, the Marshals Service has instituted a policy to replace older vehicles with new vehicles without the option of "retaining" the older vehicle. This enables the USMS to continue to lower the average mileage of vehicles and reduce funding needs associated with maintaining an older fleet. The USMS will continue to implement its vehicle replacement plan and, adequate funding, we project our vehicle fleet average mileage can be reduced to 80,000 miles within the next 3 fiscal years.

II.Clarification And Correction Of Inaccuracies and Misstatements

Before addressing each of the particular issues within the Executive Summary narrative, the two paragraphs below clarify the ability and use of the USMS cost modules.

Cost Module

Within the report, there are repeated references to deficiencies within USMS Budget Execution procedures that are recommended for improvement to the cost model allocation process. The report indicates that the USMS cannot identify expenses to individual cost model allocations.

Throughout the report, the OIG uses the term "cost model" rather than the appropriate term "cost module." DOJ has worked diligently to make the cost modules for all of its components as precise as possible, but in the end, they are budget estimates used as budget development tools.

Page ii

Paragraph (I) states, "Beginning in FY 2002, the USMS has undertaken an initiative to reorganize and centralize spending and budget execution at the USMS Headquarters. For example, until FY 2002, the MBD operated on the assumption of a base budget adjusted annually to reflect increases. However, in FY 2002 the USMS implemented "zero-base budgeting" under which a new base amount is calculated each fiscal year for each decision unit and program area. Once a base amount is calculated, MBD officials stated that they provide each cost center, including the 94 districts, with an initial allocation amount. Each cost center must then create a workplan that details the amount of money the cost center plans to spend during each quarter of the fiscal year. That workplan is sent to MBD for review and approval. The workplan does not include salary and benefits, because these funds are held and disbursed centrally by the MBD."

The USMS is not re-organizing via centralization. Also, a Zero Based Budgeting (ZBB) process was implemented during FY 2002. This is not an annual process; instead, the ZBB established a new base allocation for HQ offices. Cost centers are no longer in use (FY 2002 was the last year); project codes are now used in FY 2003. Further, neither cost centers nor project codes create workplans. A workplan is an allocation of funding to a district or program office that includes project codes.

Paragraph (2) states, "in addition, districts previously could realign funds between accounts without the approval of MBD officials."

The term "account" is usually referred to in the same context as an appropriation. The USMS never independently realigns funding between appropriations. District and HQ offices are issued funding by project code and object class. These workplan holders must seek approval to re-align funding by object class or project code, but never had authority to move funding between accounts.

Paragraph (4,) states, "the USMS needs to improve its budget execution process in order to more clearly demonstrate that budgeted funds are allocated in accordance with Congressional intent."

As stated previously, the USMS has clearly demonstrated and provided supporting documentation to the IG Audit Staff that funding appropriated by Congress for specific purposes was fully allocated in accordance with Congressional direction.

Page iii

Paragraph (1) states, "Generally, these deficiencies were due to two factors. First, the USMS does not track changes, obligations, and expenditures to cost centers or against estimates developed from cost models." Second, the USMS records do not document that certain funds were allocated to the purpose intended by Congress.

The USMS is strongly opposed to the term "deficiency." The USMS has a system that specifically identifies funding for every program office (that receives cost module funding) in accordance with DOJ and 0MB approved cost modules. Further, the USMS employs an additional internal control that is used to systematically document every allocation change made in STARS.

The USMS disagrees with the continued reference to "USMS records do not document that certain funds were allocated to the purpose intended by Congress." Without a further explanation, this statement appears to be associated with an incomplete analysis.

Page iv

Full paragraph (2) states, "In addition, because the USMS cannot trace corresponding expenditures, the USMS cannot verify the accuracy of the estimates formulated by the cost model, on which the USMS bases its allocations to cost centers. Thus, any errors in the cost model may be perpetuated year after year. For example, a variation between formulated costs and actual costs for vehicles for a particular unit required the BSD to compensate for over $32,000 of expenses for which it had received no funding. While the actual costs of other vehicles the BSD acquired in FY2002 may have fallen short of their estimates and offset any loss to the BSD, under its current system, the USMS cannot track these expenditures to ensure that the vehicles line item, as well as the other line items in the cost model, remain accurate."

Underlined portions are addressed below:

First, 0MB, DOJ, and USMS use cost modules to develop budget estimates. Modules set the standards for each category of expenses for agents, attorneys, computer specialists, and other types of administrative positions.

Second, cost modules have been used for over 20 years in the DOJ budget process. In 1997, at the request of 0MB, a joint working group was established to examine the cost module and update the standards for law enforcement positions. The working group included representatives from 0MB, JMD, USMS, FBI, DEA, and INS.

Attached is the June 4, 1997 memorandum from Adrian Curtis, Director, JMD Budget Staff, requesting comments to the revised law enforcement cost module. Also attached is the July 16, 1997 memorandum from Stephen Colgate, Assistant Attorney General for Administration, finalizing the working group's recommendations. Each year since then, the cost module standards have been used consistently. Further, the costs associated with each line item are updated based on the preceding year's actual obligations and/or expenditures. For example, the FY 2002 budget request included cost modules that had been approved by 0MB in November 2000. These cost modules reflected refined estimates from the fiscal year that ended on September 30, 2000.

The example highlighted in the report refers to the FY 2002 enacted budget that included a program increase of "$3,150,000 for Electronic Surveillance Unit (ESU) personnel and equipment." The fact that Congress provided $3,150,000 implies that the USMS had formulated this request. This is not the case. The USMS had requested $3,437,000 for ESU in its spring call request to DOJ. However, DOJ denied the request and no additional resources were included as part of the President's Budget request to Congress. To conclude that the cost module understated the funding for 9 ESU vehicles is factually incorrect. Instead, it is more important to determine if the USMS had obligated the program increase to hire and equip additional ESU personnel. The conference language provided $3,150,000 for ESU personnel and equipment. Upon enactment, the USMS determined that hiring 15 personnel would be the best use of resources. The balance of the program increase was used to purchase necessary ESU equipment. This USMS allocated the entire program increase as Congress intended, and to imply that the funding was not allocated in support of ESU is incorrect.

Full paragraph (3) states, "when questioned, MBD officials asserted their support for the use of cost models, which they have been using for the last four years. MBD officials also stated that they do not have the staff available to track expenditures related to the cost models, and that practice would be an inefficient use of resources. In our opinion, without being able to track expenditures related to the cost models, the USMS could not demonstrate to us that the funds provided by Congress in response to the cost model were used for the specific purposes in the estimates. Therefore, we conclude that the USMS needs to implement a methodology for tracking expenditures to cost model estimates in order to demonstrate to Congress that it is adhering to its spending instructions.

The USMS does not agree that additional project codes to track the specific expenses associated with the cost module portion of program increases is an efficient use of staff resources or the accounting system. Further, the USMS disagrees with the assertion that, "the USMS needs to implement a methodology for tracking expenditures to cost model estimates in order to demonstrate to Congress that it is adhering to its spending instructions." The USMS believes that it has fully complied with established guidelines with regard to budget execution of appropriated funding.

Pages iv-v

Paragraph (4) states, "according to the criteria (established by the General Services Adtninistration - GSA), sedans and wagons should be replaced every 3 years or 60,000 miles, whichever comes first." It further states, "in order to reduce the average mileage of the USMS motor vehicle fleet from the current 105,000 miles to the GSA criteria, and to increase the safety of the staff who use the vehicles, we recommend that the USMS develops and implements a vehicle repl acement plan."

As stated above, the USMS agrees with the value of having a vehicle replacement plan. However, the USMS does not agree to develop a plan that meets the GSA standard of 3 years and 60,000 miles. GSA does not provide the funding to implement a plan to these standards. And as stated previously, a standard of 4 years and 80,000 miles provides adequate value for a vehicle replacement plan.

Page v

Full paragraph (2) states, "since 1997, Congress has allocated the USMS up to $4 million annually, or $28 million in total, to develop JDIS."

This is inaccurate. The Congress appropriates funding, it does not allocate.

Full paragraph (3) states, "while we understandfrom the appropriation language that the USMS is not required to obligate the full $4 million to JDIS each fiscal year, we believe the USMS should clarify the need for and intent of this annual appropriation to ensure that it is meeting congressional expectations with respect to the development of JDIS."

The USMS has not received appropriated funding specifically for JDIS. This funding was to be identified after all other requirements have been met. The USMS has operated fully within the "umbrella" of Congressional expectation and intent.

Full paragraph (4) states, "As a result of our review, we recommend that the USMS develop a budget execution system that allows expenditures to be traced accurately to their corresponding allocations."

The USMS does trace expenditures to corresponding allocations by project code. However, the USMS does not trace by each individual program increase, but rather by the total program. The USMS will comply with any additional JMD guidance issued to all components on this issue.

Finally, the following is stated on page 31, "in addition to acquiring vehicles for use by operational units, during FY 2002 the USMS also purchased two new sedans for the Director and Deputy Director at a cost of $56,268."

Although we fail to understand the relevance of this statement, it is inaccurate. The Director was assigned a vehicle that was purchased with FY 2002 funds, but the Deputy Director was not assigned a vehicle purchased with FY 2002 funds.


The scope of the Inspector General (IG) Audit was broadly based on "budget execution", without identifying criteria or benchmarks that define appropriate and "auditable" DOJ, 0MB, or Congressional standards. Since there are no budget execution allocation standards, the USMS follows its own internal procedures. Because these are internal procedures, the USMS is not obligated by law, or even Executive Branch guidelines to follow them.

What the IG Report failed to state is that the USMS does follow Congressional funding direction, and issues proper notification to Congress when reprogramming actions are necessary. In addition to meeting these requirements at lower levels of financial operation, the USMS takes extra measures to ensure full accountability. Several USMS practices go beyond government standards. And, most importantly, the USMS did not exceed its appropriated funding in FY 2002 or FY 2003. As the IG report finally stated on page 3 of the introduction, "we also reviewed the USMS's Standard Form 133 Reports on Budget Execution (SF-133) submitted to the Office of Management & Budget for FY 2002 and FY 2003 to determine whether the USMS's total spending in these years is within its total budget authority. And it is in this regard we accepted the amounts reported on the SF-133s based on our reliance on the results in the Office of the Inspector General Audit Report Number 03-26, the United States Marshals Annual Financial Statement Audit, Fiscal Year 2002, July 2003, which resulted in an unqualfied opinion."

During the past fiscal year, MBD has implemented project code budgeting that has further strengthened the USMS's financial management. This process has improved the USMS's capability to programmatically track obligations and expenses, and has improved program office and MBD oversight of funds. This new process was not required by law or Executive Branch guidelines. Similarly, the USMS bases funding for new position allocations on the cost module. Unless something changes, the cost module approach is the DOJ module for developing fully burdened costs associated new positions. As stated and inferred, the USMS expanded the use of this module in order to better link budget execution and budget formulation. The IG has incorrectly criticized the USMS's use of the module, instead of acknowledging the positive and independent adoption of its implementation.

In summary, the USMS is confident that its budget execution procedures fully comply with DOJ, 0MB, and Congressional financial management policies, procedures, and appropriation law.