ASSET FORFEITURE PROGRAM
MANAGEMENT LETTER REPORT
FISCAL YEAR 1995

Audit Report 98-03, (1/98)

TABLE OF CONTENTS

OFFICE OF THE INSPECTOR GENERAL COMMENTARY AND SUMMARY

REPORT TO MANAGEMENT

UNITED STATES MARSHALS SERVICE

Segregation of Duties
Gross Proceeds from Sale of Forfeited Property
Contracts/Procurement

Issues Repeated from the FY 1994 Management Letter Report
Property Appraisals
Property Inspections
Compliance Reviews

FEDERAL BUREAU OF INVESTIGATION

Asset Management and Disposal Costs

IMMIGRATION AND NATURALIZATION SERVICE

Reimbursable Expenses

APPENDIX I--Justice Management Division's Response to the Draft Report dated October 7, 1997

APPENDIX II--Audit Division's Analysis and Summary of Actions Necessary to Close the Report

OFFICE OF THE INSPECTOR GENERAL
COMMENTARY AND SUMMARY

The Department of Justice Asset Forfeiture Program (Program) is a nationwide law enforcement program. Federal employees, contract personnel, and state and local law enforcement officials work cooperatively in the investigation and prosecution of cases involving asset seizure and forfeiture. There are six Department of Justice components that execute the Program: the Drug Enforcement Administration; the Federal Bureau of Investigation; the Immigration and Naturalization Service; the U.S. Marshals Service; the U.S. Attorneys; and the Criminal Division. The U.S. Postal Inspection Service, the U.S. Park Police, and the Food and Drug Administration are the non-Department of Justice federal participants in the Program.

The Justice Management Division's Asset Forfeiture Management Staff provides administrative and financial management functions for the Program. The legal, policy, and oversight responsibilities reside with the Asset Forfeiture and Money Laundering Section, Criminal Division.

The Office of the Inspector General (OIG) contracted with Brown & Company to perform the audit. The management letter report was prepared by Brown & Company, Certified Public Accountants, as part of their audit of the Program's annual financial statement for the fiscal year ended September 30, 1995 (OIG Report #96-21A). The auditors were not contracted to perform control testing sufficient to enable them to express an opinion on management's assertions about the effectiveness of the internal control structure. However, certain conditions involving the internal control structure and its operations were identified and are being reported to management through this report. The management letter presents those areas of concern that, in the independent auditors' judgment, do not adversely affect the Program's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. However, strengthening internal controls in these areas is considered important and presents an opportunity to improve operating efficiency.

The OIG performs an oversight role in the audit process and ensures compliance with the Chief Financial Officers Act of 1990 by monitoring the progress of the audit, reviewing supporting workpapers, coordinating the issuance of reports, following up on management letter issues, and performing other functions deemed necessary under the circumstances. The audit was conducted in accordance with generally accepted government auditing standards.

Brown & Company noted control issues in the following areas: (1) segregation of duties, (2) gross proceeds from the sale of forfeited property, (3) contracts/procurement, (4) asset management and disposal costs, and (5) reimbursable expenses. The auditors again reported issues, previously reported in the FY 1994 Management Letter Report (OIG Report #96-03) in the following areas: (1) property appraisals, (2) property inspections, and (3) compliance reviews. Although the conditions are the same, it should be noted that the control deficiencies occurred in different locations than those of the prior report.

APPENDIX I

APPENDIX II

OFFICE OF THE INSPECTOR GENERAL, AUDIT DIVISION
ANALYSIS AND SUMMARY OF ACTIONS NECESSARY
TO CLOSE THE REPORT

Recommendation Number:

1. Resolved. This recommendation can be closed when the USMS provides the OIG with associated memoranda documenting how it has reinvigorated its policy enforcement of segregation of duties.
2. Resolved. This recommendation can be closed when we receive a copy of the revised USMS policy/procedures requiring all vendors to remit gross sales proceeds and submit invoices for their expenses.
3. Resolved. This recommendation can be closed when the USMS provides us with documentation supporting its reiteration of procurement policy relative to procurement and purchase requirements exceeding the acquisition threshold ($25,000).
4. Resolved. This recommendation can be closed when the USMS informs us of how it plans to monitor District Offices and ensure compliance with its policy to perform and document property appraisals and monthly inspections of seized property.
5. Resolved. This recommendation can be closed when the USMS informs us of how it plans to ensure that required compliance reviews are performed and appropriately documented.

   Your response stated that the compliance review policy is meant to cover only those contractors whose aggregate business exceeds $25,000 and that the requirement for reviews used as a basis for the recommendation is considered beyond the intent of the USMS policy. We accept your response on this point; however, we would advise that your policy be clarified to reflect the actual meanings and intentions.

6. Closed. Based on your response, we are closing this recommendation. Your response states that the Attorney General's Guidelines on Seized and Forfeited Property allow some exceptions for a seizing agency to maintain custody of assets (vehicles) that will be placed into official use. In the future, please ensure that all AFP participants maintain adequate support for exceptions to these policies.
7. Resolved. This recommendation can be closed when the Immigration and Naturalization Service provides us with documentation identifying the changes made to its internal systems that now ensure appropriate support documentation for Asset Forfeiture Program transactions is available for review.

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