Assets Forfeiture Fund and Seized Asset Deposit Fund Annual Financial Statement
Fiscal Year 2004

Audit Report No. 05-12
March 2005
Office of the Inspector General

Commentary and Summary

The Assets Forfeiture Fund and Seized Asset Deposit Fund (AFF/SADF) is a reporting entity within the U.S. Department of Justice (DOJ). The AFF and SADF were created to serve as repositories for funds seized by participating agencies and the sale proceeds from forfeited property. The proceeds deposited in the AFF are used to cover certain operating costs of the DOJ Asset Forfeiture Program (AFP). These include equitable sharing payments to state, local, and foreign governments; joint law enforcement operations; contract services in support of the program; and satisfaction of innocent third party claims. Operational expenses do not include the salaries and administrative expenses of AFP participants incurred while conducting investigations leading to seizure and forfeiture, and these expenses are not reported in the AFF/SADF financial statements.

This audit report contains the financial statements of the AFF/SADF for the fiscal years (FY) ended September 30, 2004, and 2003. Under the direction of the Office of the Inspector General (OIG), the FY 2004 audit was performed by KPMG LLP (KPMG). The audit resulted in an unqualified opinion on the FY 2004 financial statements. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and results of operations of the entity. The FY 2003 audit of the AFF/SADF was performed by PricewaterhouseCoopers LLP and also resulted in an unqualified opinion on its financial statements (OIG Report No. 04-32).

The Independent Auditors’ Report on Internal Control over Financial Reporting identified one reportable condition relating to the information system controls environment. Specifically, weaknesses were noted regarding entity-wide security program planning, access controls, change controls, and segregation of duties monitoring in the Justice Management Division’s (JMD) Financial Management Information System (FMIS2) accounting system. The AFF/SADF uses the FMIS2 as its core financial management system. As a result, the control improvements needed in the FMIS2 accounting system also affected the AFF/SADF. However, all related recommendations were addressed to JMD in the Offices, Boards and Divisions’ FY 2004 Annual Financial Statement Report. Thus, no recommendations are included in this report. Furthermore, the Independent Auditors’ Report on Compliance and Other Matters included no instances of noncompliance or other matters that are required to be reported for FY 2004.

The OIG reviewed KPMG’s report and related documentation and made necessary inquiries of its representatives. Our review, as differentiated from an audit in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, an opinion on the AFF/SADF’s financial statements, conclusions about the effectiveness of internal control, conclusions on whether the AFF/SADF’s financial management systems substantially complied with the Federal Financial Management Improvement Act, or conclusions on compliance with laws and regulations. KPMG is responsible for the attached auditors’ report dated November 5, 2004, and the conclusions expressed in the report. However, our review disclosed no instances where KPMG did not comply, in all material respects, with generally accepted government auditing standards.