Follow-up Audit of the Department of Justice Counterterrorism Fund
Report No. 03-33
Office of the Inspector General
After the September 11, 2001 terrorist attacks, the Attorney General declared that fighting terrorism was the Department of Justice's (Department's) top and overriding priority. One of the resources available to address terrorist activity is the Department Counterterrorism Fund (the Fund), which was created by Congress in July 1995 in the wake of the bombing of the Alfred P. Murrah Federal Building in Oklahoma City, Oklahoma.
The Fund was established to assist Department components with the unanticipated costs of responding to and preventing terrorism. Since its inception in 1995, Congress has appropriated over $360 million to the Fund, of which about $290 million has been obligated for reimbursement of certain counterterrorism expenses of agencies such as the Federal Bureau of Investigation (FBI), the Executive Office for United States Attorneys (EOUSA), and the United States Marshals Service (USMS).
Legislative and Department guidelines stipulate that only extraordinary expenses are to be reimbursed from the Fund. In other words, the Fund should only be used to pay for expenses that are beyond what the agency's general appropriation could reasonably be expected to fund. At times, however, Congress has earmarked portions of the Fund appropriations for specific initiatives such as a 5-year counterterrorism plan and the creation of an alternate government facility for the continuation of Department operations in the event of an emergency.
According to the initial legislation, the Fund was established to provide reimbursement to Department components only. Since 1996, however, Congress has allowed over $167 million to be passed through the FBI, the Justice Management Division (JMD), and OJP to support counterterrorism initiatives of non-DOJ agencies, often when these activities are performed in conjunction with Department initiatives.2 Aside from the fact that the Fund has been used to reimburse agencies outside of the Department, the intent of the Fund has not changed since its inception.
Administration of the Fund
JMD, the administrative arm of the Department, administers the Fund for the Attorney General. The JMD Budget Staff handles the Fund's day-to-day operations, while the JMD Finance Staff executes all financial transactions between Department agencies. Components seeking resources from the Fund submit a request to the JMD Budget Staff detailing the counterterrorism initiative (e.g., the investigation of the U.S. embassy bombings in Africa) and the types of expenditures for which it is requesting reimbursement (e.g., travel and overtime expenses). The Budget Staff reviews the request and makes a recommendation to the Attorney General. Ultimately, each request must be approved by the Department, the Office of Management and Budget, and Congress. Once an initiative has been approved, JMD can enter into reimbursement agreements (RAs) with the requesting agencies; these agencies then bill for actual expenditures. The RA is a binding document, which includes the Fund mission, the approved counterterrorism initiative, the types of expenditures eligible for reimbursement, and the approved amount of funding. The RA requires the receiving component to certify that the reimbursed expenditures are allowable and fully supported. As the Fund administrator, the JMD Budget Staff is ultimately responsible for ensuring that the Fund is used appropriately and that the expenditures are adequately supported.
In 1998, the OIG conducted an audit of the Fund covering fiscal years (FYs) 1995 through 1997. We found that JMD needed to take a more proactive approach to its administration of the Fund. Specifically, JMD needed to strengthen its controls over the distribution and use of Fund monies, particularly those passed through to non-DOJ agencies. We identified dollar-related deficiencies totaling over $4 million, or almost 17 percent of the total funds tested, resulting from expenditures that were either improper or not adequately supported at the Drug Enforcement Administration, EOUSA, the FBI, the USMS, and other non-DOJ agencies. Although primary responsibility for ensuring the appropriate use of Fund monies rests with the components incurring the costs, JMD was still accountable for the Fund and these deficiencies pointed to weaknesses in JMD's oversight. The report concluded that increased oversight by JMD would help ensure that Fund resources are used properly and would increase the availability of additional resources to respond rapidly and effectively to unanticipated terrorist incidents.
We initiated this follow-up audit because of the significance of the deficiencies found during the prior audit as well as the considerable amount of recent appropriations to the Fund.3 In our current audit, we reviewed Fund expenditures for FYs 1998 through 2002 at the Criminal Division, EOUSA, the FBI, the Security and Emergency Planning Staff (SEPS), the USMS, and other non-DOJ agencies.4 These expenditures were made in support of a wide range of counterterrorism activities, including the investigations and prosecutions related to the federal building bombing in Oklahoma, the U.S. embassy bombings in Africa, and the Freemen antigovernment extremists in Montana; responding to the September 11, 2001, terrorist attacks; and security preparations for the 2002 Winter Olympics in Utah.
Results in Brief
We found that some improvements had been made in JMD's administration of the Fund. Specifically, during the initial audit, we identified several inactive reimbursement agreements (RAs) that needed to be closed so that the unused funds could be made available in the event of an emergency. JMD took appropriate action to close these RAs, and in our current audit, we found that JMD continued to actively monitor the status of RAs. In addition, our testing of expenditures for reasonableness, appropriateness, compliance with Fund legislation, and adequacy of supporting documentation revealed that the overall error rate improved from about 17 percent in the prior audit to 8 percent in our follow-up review.5
In response to our prior audit, JMD stated that it would review component billings, including back-up documentation, prior to processing the billings. However, our current audit findings indicate that JMD has not fully implemented an effective review process and, as a result, Fund users were inappropriately reimbursed for some expenditures, as detailed in the following table.
In total, we tested more than $38.3 million in expenditures, including about $36 million expended directly by Department components and over $2.3 million passed through to non-DOJ users.10 Our testing revealed, in the aggregate, over $3 million in questioned costs from Fund monies expended by Department components and non-DOJ users.
Department Component Expenditures
At the Department components, we identified about $2.6 million in dollar-related deficiencies resulting from expenditures that were either improper or not adequately supported. Specifically:
Funds disseminated to non-DOJ agencies continued to be at risk due to the lack of federal oversight, as evidenced by the $430,000 in funds that were either improperly used or unsupported. These findings amounted to 19 percent of the pass-through expenditures reviewed; this is comparable to the 20 percent error rate we identified in our prior audit and indicates that very little improvement has been achieved. Details of the end-users, amounts reimbursed, and our findings are shown in the following table.
In general, the funds passed through to non-DOJ users were not adequately monitored by the Department components acting as pass-through agencies. We found that:
Although our current audit has revealed that the rate of unallowable and unsupported costs for Department components and non-DOJ users has decreased, the dollar value of these exceptions, over $3 million, continues to be significant. Many of the exceptions we identified could have been avoided if JMD had strengthened its controls over the administration of the Fund, particularly during its review of billings. Our review revealed that components were billing and receiving funds for expenditures that: 1) were not approved costs of the Fund, 2) were explicitly denied, or 3) lacked supporting documentation for costs incurred. Further, we found that significant weaknesses persisted or worsened at the USMS and that funds provided to non-DOJ users continued to be at risk of misuse.
Since JMD is ultimately responsible for the integrity of the Fund, it must implement and utilize controls that will preserve that integrity. Due to the large scale of recent terrorist attacks and the immediate and costly response that follows, it is critical that the Fund be adequately monitored to ensure that sufficient monies are available to respond to unexpected terrorist incidents. If controls are enhanced, additional resources should be available when necessary.
Based upon our review, we offer 13 recommendations to improve JMD's administration of the Fund. Specifically, we recommend that JMD work with the individual Fund recipients to remedy the questioned costs we identified and improve controls where necessary. We also recommend that JMD increase its oversight of the Department components, particularly the USMS, including periodically monitoring actual expenditures. For the instances in which funds are to be passed through a Department component to an external agency, we recommend that JMD establish a framework for this process that provides guidance for the pass-through agencies.