ASSETS FORFEITURE FUND AND SEIZED ASSET DEPOSIT FUND ANNUAL FINANCIAL STATEMENT FISCAL YEAR 2001

U.S. Department of Justice
Office of the Inspector General
Audit Division
 

June 2002
02-22

OFFICE OF THE INSPECTOR GENERAL
COMMENTARY AND SUMMARY

     The Assets Forfeiture Fund and Seized Asset Deposit Fund (AFF/SADF), an entity within the Department of Justice (DOJ), reports the amount of monies seized, along with the amounts realized from forfeitures, by agencies participating in the DOJ Asset Forfeiture Program (AFP). The AFF/SADF also reports the operating expenses of the AFP and the status of property seized and forfeited. In FY 2001, the AFF/SADF reported $707 million in forfeited property and $551.6 million in seized property.

     The SADF and AFF were created to serve as repositories for seized funds and the sale proceeds from forfeited property. The proceeds deposited in the AFF are used to cover the operating costs of the AFP. These include 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 are not reported in the AFF/SADF financial statements.

     This audit report contains the financial statements of the AFF/SADF for the fiscal years ended September 30, 2001 and 2000. Under the direction of the Office of the Inspector General, the audit was performed by PricewaterhouseCoopers LLP (PwC) which resulted in an unqualified opinion on the FY 2001 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. For FY 2000, the AFF/SADF also received an unqualified opinion on its financial statements (OIG Report No. 01-23).

     Improvements have also been made in internal controls and the financial reporting process. All prior year reportable conditions have been completed and no findings or recommendations were reported. Issues identified by PwC were limited to matters considered to be less significant and these were communicated to management in a separate letter. No instances of noncompliance with laws and regulations were cited.

 

ASSETS FORFEITURE FUND AND SEIZED ASSET DEPOSIT FUND
ANNUAL FINANCIAL STATEMENT
FISCAL YEAR 2001

 

TABLE OF CONTENTS
MANAGEMENT DISCUSSION & ANALYSIS
REPORT OF INDEPENDENT ACCOUNTANTS
REPORT OF INDEPENDENT ACCOUNTANTS ON INTERNAL CONTROL
REPORT OF INDEPENDENT ACCOUNTANTS ON COMPLIANCE WITH LAWS AND REGULATIONS
PRINCIPAL FINANCIAL STATEMENTS
  BALANCE SHEET
  STATEMENT OF NET COST
  STATEMENT OF CHANGES IN NET POSITION
  STATEMENT OF BUDGETARY RESOURCES
  STATEMENT OF FINANCING
NOTES TO PRINCIPAL FINANCIAL STATEMENTS
REQUIRED SUPPLEMENTARY INFORMATION

U.S. Department of Justice

 

 


 

 

 

ASSETS FORFEITURE FUND AND
SEIZED ASSET DEPOSIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS

I.   Mission and Organization Structure

The mission of the asset forfeiture program is to disrupt, damage and dismantle criminal organizations, through the use of civil and criminal forfeiture. The program attempts to remove those assets that are essential to the operation of those criminal organizations and punish the criminals involved by denying them use of the proceeds of their crimes.

The funds of the asset forfeiture program are under the management control of the Asset Forfeiture Management Staff, Justice Management Division (AFMS). The Seized Asset Deposit Fund (SADF) is listed in the U.S. Treasury Federal Account Symbols and Titles as 15X6874. The Assets Forfeiture Fund (AFF or Fund) is a special fund and is listed as 15X5042. The SADF and most AFF activities are administered by the U.S. Marshals Service (USMS).

The SADF was created administratively by the Department of Justice to ensure positive control over and security of funds seized by agencies participating in the Department's asset forfeiture program. Public Law (P.L.) 102-140, dated October 28, 1991, provided authority for the investment of SADF monies. The SADF serves as a repository for seized funds that are not the property of the Government. The SADF holds seized cash, the proceeds of any pre-forfeiture sale of seized property, and forfeited cash not yet transferred to the AFF. The income and expenses from operating businesses under seizure may also be managed through the SADF. Because most funds held in the SADF are not Government property, funds in the SADF cannot be spent for law enforcement purposes of the Department. The SADF is a dynamic fund. At any given time, there are several thousand cash seizures resident in the SADF in various stages of the forfeiture process. During any accounting period, several hundred accounting transactions occur that affect the balance in the SADF. The majority of these transactions involve the deposit of new seizures into the SADF or the withdrawal of funds from the SADF for deposit. Once the funds have been forfeited, they are transferred from the SADF to the AFF upon the successful conclusion of a forfeiture action.

The AFF was created by the Comprehensive Crime Control Act of 1984 (P.L. 98-473, dated October 12, 1984) to be a repository of the proceeds of forfeitures under any law enforced and administered by the Department of Justice (see 28 U.S.C. 524(c)). Forfeited cash is transferred from the SADF to the AFF by the USMS. Proceeds from the sale of forfeited property are also deposited into the AFF by the USMS. Also, pursuant to 28 U.S.C. 524(c)(5), all amounts earned on investment of AFF and SADF balances are deposited to the AFF. The interest earned on the AFF balances is the property of the Government. Interest earned on SADF balances is initially deposited to the AFF pursuant to the statute cited above. These earnings are either returned to the owner with the underlying principal or become the property of the government upon forfeiture of the principal.

A.     Limitations on the Use of the Assets Forfeiture Fund

The AFF is defined by statute. Authorities and limitations governing use of the AFF are specified in 28 U.S.C. 524(c). In addition, use of the AFF is controlled by laws and regulations governing the use of public monies and appropriations (e.g., 31 U.S.C. 1341-1353, 1501-1558, Office of Management and Budget (OMB) Circulars, and provisions of annual appropriation acts). It is further controlled by the Attorney General's Guidelines on Seized and Forfeited Property (July 1990), policy memoranda, and statutory interpretations issued by appropriate authorities. Restrictions on the use of AFF monies retain those limitations after the monies are made available to a recipient agency unless otherwise provided by law. Monies are available for use only to the extent receipts are available in the AFF.

In Fiscal Year (FY) 2001, these monies were available under a permanent indefinite appropriation to finance the following:

(1) The operational costs of the forfeiture program, including handling and disposal of seized and forfeited assets, and the execution of legal forfeiture proceedings to perfect the title of the United States in that property.
(2) The satisfaction of innocent third party claims.
(3) The payment of equitable shares to participating foreign governments and state and local law enforcement agencies.
(4) The costs of ADP equipment and ADP support for the program.
(5) Contract services in support of the program.
(6) Training and printing associated with the program.
(7) Other management expenses of the program.

The monies deposited in the AFF are not available for general use by a recipient agency for investigative, prosecutive, or other purposes, even if that activity may result in the seizure of assets for forfeiture. Resources of the AFF are intended to cover the business expenses of the asset forfeiture program, with any excess balances available for other more discretionary purposes, including investigative expenses covered by the appropriated, definite portion of the Fund. Excess unobligated balances identified at the end of a fiscal year may be declared a "Super Surplus" balance. Super Surplus balances may be allocated at the discretion of the Attorney General for " . . . any Federal law enforcement, litigative, prosecutive, and correctional activities or any other authorized purpose of the Department of Justice" pursuant to 28 U.S.C. 524(c)(8)(E).

B.     Holding and Accounting for Seized and Forfeited Property

The USMS is responsible for holding and maintaining real and tangible personal property, seized by participating agencies, for disposition. Seized property can be either returned to the owner or forfeited to the Government. Forfeited property is subsequently sold, placed into official use, destroyed, or transferred to another agency. Seized and forfeited property is not to be considered inventory held for resale in the normal course of business.

The estimated value of non-monetary seized assets (property), net of estimated liens, held by the USMS at the end of FY 2000 and FY 2001 is presented in the Notes to the Principal Statements, rather than within the Principal Statements, because the Government does not have title to the property. The Statement of Federal Financial Accounting Standards (SFFAS) Number 3, Accounting for Inventory and Related Property, mandates this method of presentation in order to avoid overstating the entity's assets and liabilities while providing needed accountability over seized assets.

II.   Performance Goals and Results

The AFF directly supports the Department's Strategic Plan for FY 2000-2005, Goal 1, to keep America safe by enforcing federal criminal laws and, Goal 2, to prevent and reduce crime and violence by assisting state, tribal, local and community-based programs. In support of the Department's goals, allocations in the amount of $444.6 million were provided in FY 2001 for program operations, investigative expenses, joint law enforcement operations, and equitable sharing, net of earned revenue. In FY 2000, $428.4 million were provided for these expenses. This was made possible by $433.9 million and $440.1 million in non-exchange revenue net of transfers in FY 2001 and 2000, respectively, generated from the cash and proceeds from the sale of assets deposited into the AFF. To the extent that deposits do not cover expenses, AFF carryforward balances are used to support program expenses. The carry forward balances consist primarily of special case funds and reserves for operational requirements.

From current balances, $248.1 million in FY 2001 and $231.4 million in FY 2000 was shared with foreign governments and state and local law enforcement agencies that participated in joint investigations with Federal agencies that led to asset seizures and forfeitures. Goal 2 expenses are displayed in Figure 4, under Section III.

The program invests cash balances from both the AFF and SADF in Government securities. These investments resulted in earnings of $52.2 million during FY 2001 and $61.5 million during FY 2000, including $310,077 in interest earnings on deposits from the Bank of Credit and Commerce International (BCCI) case in FY 2001 and $5.2 million in FY 2000. In prior years, BCCI activity was discussed separately because the earnings were material. Since the earnings are expected to decrease significantly in FY 2002, they will not be a material factor in the FY 2002 financial statements. Investment earnings over a six-year period are indicated in Figure 3, under Section III.

The AFF's end-of-year unobligated balance decreased to $379.3 million, a change of $40.6 million from the 2000 balance of $419.9 million. The decrease is due in part to payment of pending extraordinary equitable sharing distributions associated with revenues recognized as a result of deposits into the Fund from the disposal of forfeited assets in a prior fiscal year. For example, one of the cases paid out in FY 2001 is Nasser-David for which sharing totaled almost $47.0 million. As of September 30, 2001, known extraordinary sharings pending (comprises 47 cases with asset values in excess of $1.0 million for which the forfeiture process, including disposition, has concluded and assets proceeds have been deposited into the Fund) total $58.2 million. Due to the size of the expected equitable sharing payments, it is extremely unlikely that current year receipts will be available to support these extraordinary payments. A portion of the unobligated balance, therefore, is reserved to ensure sufficient funds are available for payment when final approval is received.

During FY 2001 a concentrated effort was made to improve the program's cash management procedures. For the first time, a consolidated national reconciliation was performed between the USMS Financial Management System (FMS) and the AFF's Consolidated Asset Tracking System (CATS) on a district-by-district basis for all assets on deposit in the SADF account as of September 30, 2001. This national reconciliation provided the detail level information necessary to allow program managers to focus on specific data clean-up requirements in each of the respective systems. During FY 2002, mid-year and year-end reconciliations are planned to ensure the benefits gained from this year's reconciliation are maintained. In addition to this effort, the USMS issued a new policy directive that should significantly decrease the time lag between declaring a cash asset on deposit in the SADF forfeited and recording the disposition of the asset in the financial system. Prior to the policy change, which became effective on September 1, 2001, the USMS required receipt of the hard copy declaration or order of forfeiture by the custodian district before disposing of forfeited cash. The resulting time delay adversely affected the program's ability to post revenue receipts to the financial system in a timely manner. As of September 1, 2001, the USMS began processing the transfer of forfeited currency on deposit in the SADF to the AFF based on the forfeiture information recorded in CATS. The full benefit of this processing change will be realized starting in FY 2002.

III.   Financial Performance

During FY 2001, a total of $439.9 million in cash and proceeds was deposited into the AFF (see Figure 1). This is $67.1 million less than the $507.0 million deposited in FY 2000. Receipts in FY 2001 were lower primarily due to (1) a decrease in seizure and forfeiture activity resulting from the Civil Asset Forfeiture Reform Act of 2000 (CAFRA, P.L. 106-185, April 25, 2000), and (2) lower rates of interest on invested balances. The FY 2002 Budget of the United States Government (Budget) estimated FY 2001 receipts at $400.0 million, $39.9 million less or 10 percent lower than realized.

Figure 1(A)

Composition of FY 2001 Deposits
CATEGORY AMOUNT (Millions) PERCENTAGE
FORFEITED CASH

$ 357.90

81.3%
PROCEEDS FROM SALES OF FORFEITED PROPERTY $ 67.10 15.3%
INTEREST INCOME ON IDLE AFF/SADF BALANCE (1) $ 51.90 11.8%
PAYMENTS/PENALTIES IN LIEU OF FORFEITURE $ 11.50 2.6%
OTHER MISCELLANEOUS INCOME $ 6.10 1.4%
BCCI NET EFFECT (2) $ 0.30 0.1%
TRANSFERS TO/FROM TREASURY FORFEITURE FUND $ (31.50) -7.2%
OTHER REFUNDS $ (23.40) -5.3%



TOTAL

$ 439.90 100.0%



Figure 1(B)

Composition of FY 2000 Deposits
CATEGORY AMOUNT (Millions) PERCENTAGE
FORFEITED CASH $ 406.00 80.2%
PROCEEDS FROM SALES OF FORFEITED PROPERTY $ 101.90 20.1%
INTEREST INCOME ON IDLE AFF/SADF BALANCE (3) $ 56.30 11.1%
PAYMENTS/PENALTIES IN LIEU OF FORFEITURE $ 15.90 3.1%
OTHER MISCELLANEOUS INCOME $ 5.60 1.1%
BCCI NET EFFECT (4) $ (43.50) -8.6%
TRANSFERS TO/FROM TREASURY FORFEITURE FUND $ (7.50) -1.5%
OTHER REFUNDS $ (27.70) -5.5%



TOTAL

$ 507.00 100.0%




1 Excludes BCCI interest income.
2 Includes interest income of $310,077.
3 Excludes BCCI interest income.
4 Includes interest income of $5.2 million and payments of principal and interest in the amounts of $24.6 million and $24.1 million respectively..


A six-year history of AFF deposits is indicated in Figure 2.


AFF Deposits
d
Figure 2

Revenues represent actual or expected cash inflows that occur as a result of the asset forfeiture program's ongoing activities. Revenues are a measurement of the activities that occurred in FY 2001. To be recognized, revenues must meet two criteria: (1) they have been realized (noncash resources have been converted to cash or rights to cash) and (2) they have been earned. SFFAS Number 3, Accounting for Inventory and Related Property, requires that revenue associated with property not disposed of through sale be recognized upon approval of distribution. AFF net revenues over a six-year period are shown in Figure 3.


AFF Revenue
d
Figure 3

 

 


Investment earnings realized totaled $52.2 million for FY 2001, $9.3 million less than the $61.5 million in interest earned in FY 2000 and are 74 percent greater than the $30.0 million estimated for FY 2001 in the FY 2002 Budget. The greater earnings are due primarily to the availability of greater amounts for investment and longer investment periods. The amounts available for investment are difficult to predict because many factors influence the balance. For example , one significant factor is the level of equitable sharing distributions, associated with uncertainties in the amount of timing of disbursements of payments, including the time needed for Departmental approval of equitable sharing requests for cases with asset values exceeding $1.0 million and appeals of forfeiture judgments.

 

 

Net forfeiture revenue is the sum of cash and proceeds from the sale of forfeited property and includes adjustments for transactions such as transfers to and from other Federal agencies, refunds to other Federal agencies, and recoveries of asset management costs.

The investment of seized cash from the BCCI case accounted for $310,077 or 0.59 percent of the interest earnings. BCCI funds are restricted funds subject to claims and are disbursed by court order. Earnings from the investment of BCCI funds will continue to decline as the balance is disbursed.

Expenses in support of Goal 1 of the Department's Strategic Plan include program operation expenses such as asset management expenses, case related expenses, payment to third parties, special contract services, training and printing, and ADP equipment. Expenses in support of Goal 2 include equitable sharing and joint law enforcement operations. The distribution of Goal 1 and Goal 2 expenses over a six-year period is shown in Figure 4.


AFF Expenses
d
Figure 4

Net position, which is the equity of the U.S. Government in the AFF, has decreased 2.0 percent since FY 2000. The ratio of net position to total assets was .42 to 1.0 in FY 2001, the same as in FY 2000. Due to the continual investment of cash in government securities, the AFF and SADF Fund balances with the U.S. Treasury remain low.

Current assets exceeded short term liabilities by a ratio of 3.6 to 1.0. This relationship reflects no change from FY 2000. The ratio continues to indicate that the AFF will be able to meet its obligations when due. In the ratio of current assets to current liabilities, current assets equal total entity assets while current liabilities equal the total of liabilities covered by budgetary resources except for deposit funds.

IV.   Systems, Controls, and Legal Compliance

AFMS is responsible for maintaining internal accounting and administrative controls that are adequate to ensure that (1) transactions are executed in accordance with applicable budgetary and financial laws and other requirements, consistent with the purposes authorized, and are recorded in accordance with Federal accounting standards; (2) assets are properly safeguarded to deter fraud, waste, and abuse; and (3) appropriate performance measurement information is adequately supported. AFMS is materially in compliance with the requirements and responsibilities defined in numerous laws and administrative requirements, including the Federal Manager's Financial Integrity Act of 1982, Federal Financial Management Improvement Act of 1996, and OMB Circulars A-123 and A-127.

The General Accounting Office has reported the asset forfeiture programs of the Department of the Treasury and the Department of Justice on their most recent list of high risk program areas. This designation has been based on an assertion that the two cabinet agencies have failed to properly implement the provisions of Section 887 of Title 21 of the United States Code. The two Departments have disagreed with the interpretation of the statute in light of subsequent enactments for the following reasons.

In 1990, all agencies except the U.S. Customs Service participated in one fund (Justice Assets Forfeiture Fund) and the USMS managed all property subject to judicial forfeiture. The Treasury Forfeiture Fund Act of 1992 (P.L. 102-393, Sec. 638) created the Treasury Forfeiture Fund (see 31 U.S.C. 9703), and established separate property and funds management as the new national public policy. All Treasury agency seizures were directed to the Customs property management contractor.

At the present time, consolidation is feasible only if one Department adopts the additional workload of the other fund and provides property management services to the other. In addition, the sample data GAO relied on for its conclusion that savings could be realized was very limited, was developed several years prior to creation of a separate Treasury forfeiture program, and is not directly applicable to the current environment. In our view, the savings of such a consolidation have not been proven to be sufficient to embark upon this complicated undertaking. Before any policy decision is made to consolidate, a thorough, independent review should be conducted to determine if consolidation makes sense operationally as well as financially.

Limitations of the Financial Statements

The financial statements have been prepared to report the financial position and results of operations of the program, pursuant to the requirements of 31 U.S.C. 3515(b).

While the statements have been prepared from the books and records of the asset forfeiture program in accordance with GAAP for federal entities and the formats prescribed by OMB, the statements are in addition to the financial reports used to monitor and control budgetary resources which are prepared from the same books and records.

The statements should be read with the realization that they are for a component of the U.S. Government, a sovereign entity. Should unfunded liabilities arise, the cost of which may be met by the permanent, indefinite portion of the Fund, these liabilities may be met without further appropriation action.

V.   A Prospective View

Deposits for FY 2001 totaled $439.9 million, which is $67.1 million less than the $507.0 million received in FY 2000. It is difficult to project future receipt levels since receipts are dependent upon many factors including new cases being developed, the uneven flow of cases through the forfeiture process, the level of appropriations that federal law enforcement agencies receive, the level of personnel and monetary resources dedicated to the forfeiture program, international cooperation in forfeiture and repatriation matters, federal court decisions, and evolving forfeiture legislation.

In FY 2000, CAFRA made various changes to federal laws relating to the forfeiture of civil assets that lead to a decrease in civil seizures over the past thirteen months. This decline in seizure activity, with a corresponding decline in forfeitures, has resulted in a significant decrease in receipts deposited into the AFF. The reform legislation was effective on August 23, 2000.

AFMS is projecting a continuing decline in receipts in FY 2002 of $107.0 million or 21 percent from FY 2000 receipts and a decline of $40.0 million or 9 percent from FY 2001. By FY 2003, overall receipts are anticipated to decline for a third consecutive year by another $10.0 million. This represents a $117.0 million drop or 23 percent from FY 2000 receipts, 11 percent or $50.0 million decrease from FY 2001, and $10.0 million drop or 2.5 percent from 2002.

While it is too early to judge with confidence the mid- and long-term effects of the reform legislation, through FY 2001, the Department has documented a decline of 10 to 15 percent in the value of new seizures by the Drug Enforcement Administration and the Federal Bureau of Investigation (FBI), compared to a year earlier. These agencies are the principal drivers of Fund receipts. Unless this trend is reversed, revenue in 2002 and 2003 is expected to continue to decline. Significant decreases in forfeiture revenue will make it more difficult to cover operational expenses. Moreover, the FY 2003 budget projections do not take into consideration the effects of the events of September 11, 2001. The fiscal resources of the AFF must first cover the business or operational expenses of the asset forfeiture program, and the Fund is not allowed to operate at a deficit. At risk are the discretionary expenses, with the most at risk being allocations for joint operations with state and local law enforcement agencies, followed by investigative expenses. Also considered discretionary are storage, protection and destruction of controlled substances, and, to some extent, training and printing.

On the other hand, CAFRA expands forfeiture into new areas, resolves ambiguities and issues that split the courts, and gives the Government new procedural tools. The potentially significant negative impacts of CAFRA can be decreased if the Department moves aggressively to use the expanded forfeiture of proceeds authority and is cautious in allocating Fund monies for discretionary expenses that might be in excess of anticipated receipts.

In FY 2002, as a result of the Attorney General's November 8, 2001 announcement on a comprehensive review and reorganization of the Department to meet the counter terrorism mission, there will undoubtedly be a reorienting of program activities to support the goals of the Attorney General's new strategic plan for 2001-2006. It is uncertain at this point how this realignment of resources will impact the asset forfeiture program. Two of the AFF's participants, the FBI and Immigration and Naturalization Service, are scheduled to be restructured.

The Fund is repositioning itself to align to the Department's new goals that will impact the Fund, some of which are to streamline, eliminate or consolidate duplicative functions; improve communications; improve financial performance; and utilize technology to improve government. The Fund is already meeting some of these goals. CATS (Consolidated Assets Tracking System) has received Automated Information System (AIS) approval to begin a technology refreshment initiative in FY 2002. The implementation of CATS brought together all AFF participants under one integrated system and eliminated seven legacy systems. CATS technology, however, is now 10 to 15 years old and is being replaced by an open system that is more efficient and effective in accomplishing its mission to manage and track assets, bring order and uniformity, eliminate diverse information systems, and improve the accuracy and dependability of data.

 

 

 

 

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REPORT OF INDEPENDENT ACCOUNTANTS

 

Office of the Inspector General
U.S. Department of Justice

Director
Asset Forfeiture Management Staff
U.S. Department of Justice

We have audited the accompanying consolidated balance sheets of the Assets Forfeiture Fund and the Seized Asset Deposit Fund, a financial reporting component of the U.S. Department of Justice referred to herein as the AFF/SADF, as of September 30, 2001 and 2000, and the related consolidated statements of net cost and changes in net position, and the combined statements of budgetary resources and financing for the years then ended. These financial statements are the responsibility of the Asset Forfeiture Management Staff. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the AFF/SADF at September 30, 2001 and 2000, and its net cost of operations, changes in net position, budgetary resources and financing for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The Management's Discussion and Analysis (MD&A) and Required Supplementary Information (RSI) are not required parts of the financial statements but are supplementary information required by the Federal Accounting Standards Advisory Board and OMB Bulletin No. 97-01, Form and Content of Agency Financial Statements, as amended. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the MD&A and RSI. However, we did not audit the information and express no opinion on them.

In accordance with Government Auditing Standards, we have also issued a report dated January 4, 2002 on our consideration of the AFF/SADF's internal control and a report dated January 4, 2002 on its compliance with laws and regulations. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

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REPORT OF INDEPENDENT ACCOUNTANTS ON INTERNAL CONTROL

 

Office of the Inspector General
U.S. Department of Justice

Director,
Asset Forfeiture Management Staff
U.S. Department of Justice

We have audited the balance sheets of the Assets Forfeiture Fund and Seized Asset Deposit Fund, a financial reporting component of the U.S. Department of Justice referred to herein as the AFF/SADF, as of and for the years ended September 30, 2001 and 2000, and the related consolidated statements of net cost and changes in net position, and the combined statements of budgetary resources and financing for the years then ended, and have issued our report thereon dated January 4, 2002, except as to Note 13, which is as of January 14, 2002. We conducted our audits in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements.

The Asset Forfeiture Management Staff (AFMS) is responsible for establishing and maintaining accounting systems and internal control. In fulfilling this responsibility, estimates and judgments are required to assess the expected benefits and related costs of internal control policies and procedures. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that: (1) transactions are properly recorded, processed, and summarized to permit the preparation of reliable financial statements in accordance with accounting principles generally accepted in the United States of America, and to safeguard assets against loss from unauthorized acquisition, use or disposition; (2) transactions are executed in compliance with laws governing the use of budget authority and other laws and regulations that could have a direct and material effect on the financial statements, and any other laws, regulations and government-wide policies identified in Appendix C of OMB Bulletin No. 01-02; and (3) transactions and other data that support reported performance measures are properly recorded, processed, and summarized to permit the preparation of performance information in accordance with criteria stated by the AFMS. Because of inherent limitations in any internal control, errors or fraud may nevertheless occur and not be detected. Also, projection of any evaluation of internal control to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.

In planning and performing our audit of the AFF/SADF's financial statements, we obtained an understanding of the design of significant internal controls and whether they had been placed in operation, tested certain controls and assessed control risks in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements. We limited our internal control testing to those controls necessary to achieve the objectives described above and we did not test all controls relevant to the operating objectives as broadly defined by the Federal Managers' Financial Integrity Act of 1982. Our purpose was not to provide an opinion on the AFF/SADF's internal controls. Accordingly, we do not express such an opinion.

With respect to internal control relevant to data that support reported performance measures, we obtained an understanding of the design of significant internal controls relating to the existence and completeness assertions, as required by OMB Bulletin No. 01-02. Our procedures were not designed to provide an opinion on internal control over reported performance measures, and, accordingly, we do not express such an opinion.

Our consideration of the internal controls would not necessarily disclose all matters that might be a material weakness under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the AFF/SADF's internal control and its operation that we considered to be material weaknesses as defined above.

Status of Prior Year Findings and Recommendations

As required by Government Auditing Standards and OMB Bulletin No. 01-02, we have reviewed the status of the AFF/SADF's corrective actions with respect to findings and recommendations from our prior audits of the AFF/SADF. The analysis below provides our assessment of the progress the AFF/SADF have made in correcting the reportable conditions identified during these audits. We also provide the Office of the Inspector General report number where this condition remains open, our recommendation for improvement, and the status of the condition as of the end of fiscal year 2001:

Report Reportable Condition Status
00-24
(1999)

Condition: Improved inventory procedures are needed to validate the status and value of seized and forfeited property at year-end.
Recommendation: Continue monitoring and evaluating seized and forfeited property.

Completed
(
a)
00-24
(1999)
Condition: Improved security is required at Departmental data centers and for FMIS.
Recommendation: Improve security for FMIS and review corrective actions taken by the data centers.
Completed
(a) Improvements were made to seized and forfeited property inventory procedures. These improvements are attributed in part to the reviews performed by the AFMS's Data Quality Management team, during which it corrected errors noted in previous audits. Accordingly, we did not find this issue to be a reportable condition in this audit. However, during our testing we noted that some improvements are still needed; we will report these issues in a separate letter to management.

We noted certain less significant matters involving the AFF/SADF's internal controls that we will communicate to management in a separate letter.

This report is intended solely for the information and use of the U.S. Department of Justice Office of the Inspector General, the management of the Department of Justice, the Asset Forfeiture Management Staff, the OMB and Congress. It is not intended to be and should not be used by anyone other than these specified parties.

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REPORT OF INDEPENDENT ACCOUNTANTS
ON COMPLIANCE WITH LAWS AND REGULATIONS

 

 

Office of the Inspector  General
U.S. Department of Justice

 

 

Director
Asset Forfeiture Management Staff
U.S. Department of Justice

We have audited the balance sheets of the Assets Forfeiture Fund and Seized Asset Deposit Fund, a financial reporting component of the U.S. Department of Justice referred to herein as the AFF/SADF, as of and for the years ended September 30, 2001 and 2000, and the related consolidated statements of net cost and changes in net position, and the combined statements of budgetary resources and financing for the years then ended, and have issued our report thereon dated January 4, 2002, except as to Note 13, which is as of January 14, 2002. We conducted our audits in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements.

Compliance with laws and regulations applicable to the AFF/SADF is the responsibility of the Asset Forfeiture Management Staff. As part of obtaining reasonable assurance about whether the AFF/SADF's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts, and certain other laws and regulations specified in OMB Bulletin No. 01-02, including the requirements referred to in the Federal Financial Management Improvement Act of 1999. However, the objective of our audit of the financial statements was not to provide an opinion on overall compliance with such provisions and, accordingly, we do not express such an opinion.

The results of our tests of compliance disclosed no instances of noncompliance with laws and regulations required to be reported under Government Auditing Standards or OMB Bulletin No. 01-02.

This report is intended solely for the information and use of the U.S. Department of Justice Office of the Inspector General, the management of the Department of Justice, the Asset Forfeiture Management Staff, the OMB and Congress. It is not intended to be and should not be used by anyone other than these specified parties.

 

 

PriceWaterhouseCoopers LLP
January 4, 2002
Washington, DC

 

 


Assets Forfeiture Fund and Seized Asset Deposit Fund
Consolidated Balance Sheet
As of September 30, 2001 and 2000

Dollars in Thousands 2001 2000
ASSETS (Note 11)      
  Intra-governmental      
  Fund Balance with U.S. Treasury (Note 2) $31,447 $8,731
  Investments, Net (Note 4) 1,137,697 1,133,771
  Accounts Receivable, Net (Notes 1G & 5) 2,769 2,526
  Other (Note 6) 6,680 6,423
   

  Total Intra-governmental $1,178,593 $1,151,451
       
  Cash and Other Monetary Assets (Note 3) 23,368 43,899
  Forfeited Property, Net (Note 7) 56,643 71,901
  Advances and Prepayments (Note 6) 3
--- 
 

Total Assets $1,258,607 $1,267,251
   

LIABILITIES (Note 1K)      
  Intra-governmental      
  Accounts Payable $86,950 $54,777
   

  Total Intra-governmental $86,950 $54,777
         
  Accounts Payable 37,528 58,833
  Deferred Revenue 50,450 64,749
  Seized Cash and Monetary Assets 536,522 529,920
  Other (Note 8) 21,311 22,439
 

Total Liabilities $732,761 $730,718
   

  Contingencies and Commitments (Note 10)
---
---
NET POSITION      
  Cumulative Results of Operations (Note 9) 525,846 536,533
 

Total Net Position $525,846 $536,533
 

Total Liabilities and Net Position $1,258,607 $1,267,251
 

         

 

 

 

 

 

 

 

 


The accompanying notes are an integral part of these financial statements.


Assets Forfeiture Fund and Seized Asset Deposit Fund
Consolidated Statement of Net Cost
For the Fiscal Years Ended September 30, 2001 and 2000

    Program Costs


   
   

Intra- governmental


With the Public


Less Earned Revenue


Net Cost of Operation


Investigation and Prosecution
of Criminal Offenses 
     
               
Assistance to Tribal, State,
and Local Governments
               
           
Total (Note 17)
 
 

 
 
 

 


The accompanying notes are an integral part of these financial statements.


Assets Forfeiture Fund and Seized Asset Deposit Fund
Consolidated Statements of Changes in Net Position
For the Fiscal Years Ended September 30, 2001 and 2000

Dollars in Thousands 2001 2000
Net Cost of Operations ($444,597) ($428,440)
Financing Sources (other than exchange revenues):      
  Other Non-exchange Revenues (Note 14) 459,026 467,653
  Transfers-Out    
  Allocation of Prior Years Surplus (Note 15) (17,302) (19,187)
  Transfers Out of Forfeited Property Revenue (Note 16) (7,747) (8,328)
  Other (67)
 

Net Results of Operations ($10,687) $11,698
Prior Period Adjustments (Note 12) 17,446
   

Net Change in Cumulative Results of Operations ($10,687) $29,144
Net Position - Beginning of Period 536,533 507,389
   

Net Position - End of Period $525,846 $536,533
   

 

Dollars in Thousands 2001 2000
Budgetary Resources (Note 13):      
         
  Budget Authority $442,883 $544,277
  Unobligated Balances - Beginning of Period 447,878 354,679
  Spending Authority from Offsetting Collections 2,433 3,705
  Adjustments 36,824 3,524
   

  Total Budgetary Resources $930,018 $906,185
   

Status of Budgetary Resources:     
  Obligations Incurred $550,765 $486,321
  Unobligated Balances - Available 346,740 361,673
  Unobligated Balances - Not Available 32,513 58,191
   

  Total Status of Budgetary Resources $930,018 $906,185
   

Outlays:      
  Obligations Incurred $550,765 $486,321
  Less: Spending Authority from Offsetting Collections and Adjustments (45,451) (35,241)
   

  Subtotal $505,314 $451,080
  Obligated Balance, Net - Beginning of Period 201,641 271,943
  Less: Obligated Balance, Net - End of Period (255,426) (201,641)
   

  Total Outlays $451,529 $521,382
   

         


The accompanying notes are an integral part of these financial statements.

 


Assets Forfeiture Fund and Seized Asset Deposit Fund
 Combined Statement of Financing
For the Fiscal Year Ended September 30, 2001 and 2000

       
Obligations and Nonbudgetary Resources    
       
  Obligations Incurred $550,765 $486,321
  Less: Spending Auth. from Offsetting Collections and Adj. (45,451) (35,241)
  Transfers, Net (17,302) (19,187)
  Other
--- 
5,261
   

      Total Obligations as adjusted, and Nonbudgetary Resources $488,012 $437,154
   

Resources That Do Not Fund Net Cost of Operations    
  Change in Amount of Goods, Services and Benefits Ordered But Not Yet Received     ($42,027) ($26,204)
  Change in Unfilled Customer Orders (1,388) 44
  Other
--- 
17,446
   

  Total Resources That Do Not Fund Net Cost of Operations ($43,415) ($8,714)
   

Net Cost of Operations $444,597 $428,440
   

Dollars in Thousands 2001 2000

The accompanying notes are an integral part of these financial statements.



Note 1.   Summary of Significant Accounting Policies
 

A.

Summary of Reporting Entity

The mission of the asset forfeiture program is to disrupt, damage and dismantle criminal organizations through the use of civil and criminal forfeiture. The program attempts to remove those assets that are essential to the operation of those criminal organizations and punish criminals involved by denying them use of the proceeds of their crimes.

The Assets Forfeiture Fund (AFF) was created by the Comprehensive Crime Control Act of 1984 to be a repository of proceeds from forfeitures under any law enforced and administered by the Department of Justice. AFF funds are managed by the Assets Forfeiture Management Staff, Justice Management Division. The Seized Asset Deposit Fund (SADF) was created administratively by the Department to ensure positive control over and security of funds seized by agencies participating in the Department's asset forfeiture program until a decision on final forfeiture is made.

B.

Basis of Presentation

Generally accepted accounting principles in effect as of September 30, 2001, were followed in the preparation of these financial statements. The statements were prepared from the books and records of the AFF and SADF in accordance with Office of Management and Budget (OMB) Bulletin 97-01, Form and Content of Agency Financial Statements, as amended, and the AFF and SADF accounting policies which are summarized in these notes. These statements are, therefore, different from the financial reports, also prepared by the AFF and SADF pursuant to OMB directives, used to monitor and control the program's use of budgetary resources.

C. Basis of Accounting

The financial statements were prepared on an accrual basis of accounting. Transactions are recorded on an accrual and budgetary accounting basis. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal restraints and controls over the use of Federal funds.

D. Revenues and Other Financing Sources

The funds in the AFF are derived primarily from non-exchange revenue and are presented on the Statement of Changes in Net Position as financing sources other than exchange revenue. Non-exchange revenue includes forfeited cash, proceeds from the sale of forfeited property, interest earned on investments, receipt of payments in lieu of property forfeiture, and recovery of asset management expenses. This revenue is recognized when cash is forfeited, forfeited property is sold, or when forfeited property is placed into official use or transferred to another federal agency. The revenue from judgments is not recognized until the judgment has been enforced. Revenue from judgments is recognized at the time they are collected or when the forfeited property is sold or put into official use.

The AFF recognizes exchange revenue when services to other Federal agencies have been provided. This revenue is presented on the Statement of Net Cost as earned revenue.

The funds in the SADF are held in trust until a determination is made as to their disposition. These funds include seized cash, proceeds from preforfeiture sales of seized property, and income from property under seizure. No revenue recognition is given to cash deposited in the SADF.

E.

Fund Balance with U.S. Treasury and Cash

The funds in the AFF are an entity asset and are used to finance the operations of the Asset Forfeiture Program. Seized cash is deposited and accounted for in the SADF until a determination has been made as to its disposition. If title passes to the U.S. Government, the forfeited cash is then transferred from the SADF to the AFF. The cash balance in the SADF is not available to finance the Asset Forfeiture Program activities and is a non-entity asset.

F.

Investments in U.S. Government Securities

Pursuant to 28 U.S.C. § 524(c), idle SADF and AFF cash is invested in U.S. Treasury securities. The earnings and principal on Bank of Credit and Commerce International (BCCI) funds held by the AFF are tracked separately due to special disposition requirements. Investments in U.S. Government Securities are recorded at their cost and associated premiums and/or discounts are amortized through the end of the reporting period. Investments are held to maturity; therefore, no provision is made for unrealized gains or losses on these securities.

G.

Accounts Receivable

Accounts receivable consist of amounts due from other Federal agencies for goods or services provided by the Asset Forfeiture Program. Receivables from services provided to other Federal agencies are considered fully collectible. Therefore, no allowance for doubtful accounts was established.

H.

Advances and Prepayments

Advances and prepayments classified as assets on the balance sheet include the current balance of travel advances issued to Federal employees in advance of official travel. Amounts issued are limited to meals and incidental expenses expected to be incurred by the employees during official travel. Payments in advance of the receipt of goods and services are recorded as prepaid charges at the time of prepayment and recognized as expenses when the related goods and services are received.

I.

Seized and Forfeited Property

Property is seized in consequence of a violation of public law. Seized property can include monetary instruments, real property, and tangible personal property of others in the actual or constructive possession of the custodial agency. The value of seized property is its estimated fair market value at the time it was seized. Seized property is held by the U.S. Marshals Service from the point of seizure until its disposition. In certain cases, the investigative agency will keep seized property in its custody if the intention is to place the property into official use after forfeiture or to use the property as evidence in a court proceeding. If title passes to the U.S. Government, the proceeds from the sale of forfeited property are deposited in the AFF.

Forfeited property is property for which title has passed to the U.S. Government. This property is recorded at the estimated fair market value at the time of forfeiture. The value of the property is reduced by estimated liens of record.

Amounts reported as assets of the AFF and SADF at September 30, 2001 and 2000, as well as in related revenue and liability accounts, include management's estimates of forfeitures and seizures that occurred during FY 2001 and 2000. They also include management's estimates of the value of forfeited and seized assets. The amount ultimately realized from the forfeiture and disposition of these assets could differ from the amounts reported.

In accordance with Federal Financial Accounting and Auditing Technical Release Number 4, Reporting on Non-Valued Seized and Forfeited Property, effective July 31, 1999, seized and forfeited property on hand with no legal market in the United States was disclosed in item number only with no value reported. In addition, the value of unenforced forfeiture judgments has not been disclosed because there is no market value for this type of legal instrument. The judgments are collected either in total or by installments and are recognized as revenue at the time they are collected.

J.

Non-Entity Assets

Non-entity assets consist of seized property and investments made with seized cash and are not available to fund the operations of the Asset Forfeiture Program.

K.

Liabilities

Liabilities represent the amount of monies or other resources that are due to be paid by the AFF as the result of a transaction or event that has already occurred. All liabilities of the AFF are covered by budgetary resources, since the AFF has no imputed or unfunded costs. AFF accounts payable represent liabilities with both federal and nonfederal entities. Other liabilities include deferred revenue, the SADF and seized cash not on deposit, expected BCCI distributions (Note 8), and liability for prior year surplus allocations (Note 15)

L.

Use of Estimates

The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

M.

Reclassifications

The FY 2000 financial statements were reclassified to conform with FY 2001 Departmental financial statement presentation requirements. The reclassifications had no material effect on total assets, liabilities, net position, or the change in net position as previously reported.

Note 2.   Fund Balance with Treasury

The AFF is classified as a special fund with the Department of the Treasury. The Fund Balance with Treasury balances as of September 30, 2001 and 2000, are presented below.

  2001 2000
Total Fund Balance with Treasury
$31,447
$8,731

Note 3. Cash and Other Monetary Assets

Other monetary assets consist of seized cash, which is a non-entity asset of the SADF. The balances on September 30, 2001 and 2000, are presented below.

  2001 2000
Seized Monetary Instruments $15,118 $15,287
Seized Cash Deposited 8,250 28,612
 

Total Cash and Other Monetary Assets $23,368 $43,899
 

Note 4.   Investments -Federal Securities, Net

Investments are short term Federal debt securities issued by the Bureau of the Public Debt and purchased exclusively through Treasury's Financial Management Service. All securities purchased by the AFF and SADF are intra-governmental, non-marketable securities. When securities are purchased, the investment is recorded at acquisition cost. Premiums and/or discounts are amortized through the end of the reporting period. Estimated market value of investments is presented for informational purposes only.

As of September 30, 2001

 

Unamortized


 
AFF  
  Intra-governmental
Non-Marketable
Securities
SADF  
  Intra-governmental
Non-Marketable
Securities

Total Net Investments

As of September 30, 2000

 

Unamortized


 
AFF  
  Intra-governmental
Non-Marketable
Securities
SADF  
  Intra-governmental
Non-Marketable
Securities

Total Investments

Note 5. Accounts Receivable

Accounts receivable are the result of services provided by the Asset Forfeiture Program to other Federal agencies. The accounts receivable reported as of September 30, 2001 and 2000, were
$2,769 and $2,526, respectively.

Note 6. Other Assets

Other assets consist primarily of intra-governmental advances of prior years' surplus allocations to entities authorized to receive the funds. On September 30, 2001 and 2000, these advances totaled $6,680 and $6,423, respectively. On September 30, 2001, the AFF also had travel advances outstanding in the amount of $3. There were no travel advances outstanding on September 30, 2000.

Note 7.  Seized and Forfeited Property:

A.    Forfeited Property

The following tables show the analysis of change in and methods of disposition of forfeited property as of September 30, 2001 and 2000.

Assets Forfeiture Fund and Seized Asset Deposit Fund
Analysis of Change in Forfeited Property

The following table represents the analysis of change for forfeited property during FY 2001.
Period ending September 30, 2001:

Forfeited Property Category (1)    Beginning Balance    Adjustments(2)   Forfeited During FY 2001 Disposed During FY 2001(3) Ending Balance   Liens and Claims Ending Bal. Net of Liens
 
Financial & Other Monetary Assets Number 65 (4) 82 65 78 1 77
Value $3,887 ($1,162) $7,653 $6,371 $4,007 $123 $3,884
         
Real Property   Number 288 46 273 359 248 4 244
Value $36,634 $5,985 $34,173 $48,932 $27,860 $190 $27,670
         
Personal Property   Number 6,427 788 9,656 14,193 2,678 316 2,362
Value $30,363 $1,428 $63,018 $69,582 $25,227 $1,679 $23,548
         
Other   Number 112 (27) 142 126 101 1 100
Value $1,017 ($420) $3,688 $2,714 $1,571 $30 $1,541
         
Non-Valued   Number 802 (6) 1,434 1,338 892 6 886
Value --- --- --- --- --- --- ---
 
Total   Number 7,694 797 11,587 16,081 3,997 328 3,669
Value $71,901 $5,831 $108,532 $127,599 $58,665 $2,022 $56,643
 
(1) Federal Financial Accounting and Auditing Technical Release 4, "Reporting Non-Valued Seized and Forfeited Property", requires disclosure of property that does not have a legal market in the United States or does not have a salable value to the Federal government. This property includes: alcohol, chemicals, drug paraphernalia, gambling devices, pornography, and weapons.

(2) Adjustments include property status and valuation changes received after, but properly credited to FY 2000. Valuation changes include updates and corrections to an asset's value recorded in a prior year.

(3) There were 120 partial disposals included in number of assets disposed during the year.

Assets Forfeiture Fund and Seized Asset Deposit Fund
Methods of Disposition of Forfeited Property

The following table represents the method of disposition for forfeited property during FY 2001.
Period ending September 30, 2001:

Forfeited Property Category   
Converted Financial Instrument/Property & Deposit/Transfer of Seized Cash
Destroyed Donated Transferred to GSA Other
Sold/ Liquidated
Official Use/ Transfer for Equitable Sharing
Returned Asset
Variance (2)
Total (3)
 
Financial & Other Monetary Assets (1) Number 61 2 1 --- 6 --- 70
Value $5,645 $5 $27 --- $694 --- $6,371
               
Real Property   Number 3 9 337 2 13 --- 364
Value $353 $719 $45,735 $31 $2,024 $70 $48,932
               
Personal Property   Number 3 1,171 9,199 1,142 2,776 --- 14,291
Value $9 $1,593 $31,228 $12,646 $24,099 $7 $69,582
               
Other   Number 1 35 69 24 3 --- 132
Value $14 $1,924 $651 $83 $43 ($1) $2,714
               
Non-Valued   Number --- 1,337 3 4 6 --- 1,350
Value --- --- --- --- --- --- ---
 
Total Number 6,811 82 39,487 37,935 8,445 751 7,694
Value $80,233 ($1,450) $194,849 $199,203 $74,429 $2,528 $71,901
 

(1) Federal Financial Accounting and Auditing Technical Release 4, "Reporting Non-Valued Seized and Forfeited Property", requires disclosure of property that does not have a legal market in the United States or does not have a salable value to the Federal government. This property includes: alcohol, chemicals, drug paraphernalia, gambling devices, pornography, and weapons.

(2) Adjustments include property status and valuation changes received after, but properly credited to FY 1999. Valuation changes include updates and corrections to an asset's value recorded in a prior year.

(3) There were 145 partial disposals included in number of assets disposed during the year.

(4) In prior years the AFF/SADF presented certain assets that had been converted to cash under both the classification in which they were seized and as cash. Beginning in fiscal year 2001, the AFF/SADF discontinued presenting this dual accountability in the financial statements, though it continues to track assets according to their original character for management purposes. Prior period amounts have been reclassified to conform to the current year's presentation. This reclassification had no effect on the Net Position of the AFF.

Assets Forfeiture Fund and Seized Asset Deposit Fund
Methods of Disposition of Forfeited Property

The following table represents the method of disposition for forfeited property during FY 2000.
Period ending September 30, 2000:

Forfeited Property Category   
Converted Financial Instrument/Property & Deposit/Transfer of Seized Cash
Destroyed Donated Transferred to GSA Other
Sold/ Liquidated
Official Use/ Transfer for Equitable Sharing
Returned Asset
Variance (2)
Total (3)
 
Financial & Other Monetary Assets (1)(4) Number 75 1 4 2 3 --- 85
Value $4,183 $25 $174 $90 $20 --- $4,492
               
Real Property   Number 4 11 347 4 24 --- 390
Value $109 $666 $45,002 $359 $3,519 ($315) $49,340
               
Personal Property Number 1 2,543 22,861 1,347 9,098 --- 35,850
Value $100 $3,590 $53,829 $14,393 $71,982 ($389) $143,505
               
Other   Number 1 35 108 38 14 --- 196
Value $5 $141 $1,476 $233 $66 ($55) $1,866
               
Non-Valued   Number 15 1,523 11 4 6 --- 1,559
Value --- --- --- --- --- --- ---
 
Total   Number 5,721 3,295 12,902 13,800 8,118 1,357 6,761
Value $154,680 $9,863 $147,449 $142,428 $169,564 $20,688 $148,876
 

(1) Federal Financial Accounting and Auditing Technical Release 4, "Reporting Non-Valued Seized and Forfeited Property", requires disclosure of property that does not have a legal market in the United States or does not have a salable value to the Federal government. This property includes: alcohol, chemicals, drug paraphernalia, gambling devices, pornography, and weapons.

(2) Adjustments include property status and valuation changes received after, but properly credited to FY 2000. Valuation changes include updates and corrections to an asset's value recorded in a prior year.

(3) There were 20 partial disposals included in number of assets disposed during the year.

Assets Forfeiture Fund and Seized Asset Deposit Fund
Methods of Disposition of Seized Property

The following table represents the method of disposition for forfeited property during FY 2001.
Period ending September 30, 2001:

Seized Property Category   
Converted Financial Instrument/Property & Deposit/Transfer of Seized Cash
Destroyed Donated Transferred to GSA Other
Sold/ Liquidated
Returned Assets
Forfeited (2)
Variance (3)
Total (4)
 
Financial & Other Monetary Assets (1) Number --- 4 --- 20 79 --- 103
Value --- $21 --- $554 $7,556 --- $8,131
               
Real Property   Number --- 1 3 15 222 --- 241
Value --- $60 $152 $1,989 $28,987 --- $31,188
               
Personal Property   Number --- 56 2 2,034 9,648 --- 11,740
Value --- $410 $10 $35,822 $62,914 --- $99,156
               
Other   Number --- 7 --- 17 142 --- 166
Value --- $50 --- $215 $3,688 --- $3,953
               
Non-Valued   Number --- 124 --- 13 1,433 --- 1,570
Value --- $0 --- $0 $0 --- $0
 
Total   Number --- 192 5 2,099 11,524 --- 13,820
Value --- $541 $162 $38,580 $103,145 --- $142,428
 
(1) This category excludes cash.

(2) Forfeitures reported on the Analysis of Change in Forfeited Property are greater because some assets are not seized until after they are declared forfeited.

(3) The variance represents the difference between the value of the property when seized and recorded in CATS, and the value of the property when disposed.

(4) Some assets are disposed of in segments (e.g., part of an asset may be returned to the owner and part may be forfeited). As a result, the number of disposals on the Analysis of Change may not agree to the number of disposals on the Method of Disposition.

Assets Forfeiture Fund and Seized Asset Deposit Fund
Analysis of Change in Seized Property

The following table represents the analysis of change for seized property during FY 2000.
Period ending September 30, 2000:

Seized Property Category (1)    Beginning Balance    Adjustments(2)   Seized During FY 2000 Disposed During FY 2000(3) Ending Balance   Liens and Claims Ending Bal. Net of Liens
 
Financial & Other Monetary Assets (4) Number 151 2 204 102 255 10 245
Value $9,243 --- $40,714 $4,319 $45,638 $3,373 $42,265
               
Real Property   Number 333 32 263 328 300 112 188
Value $37,437 $15,707 $56,355 $49,681 $59,818 $10,176 $49,642
               
Personal Property   Number 10,777 (111) 36,998 40,457 7,207 3,035 4,172
Value $93,055 ($13,098) $187,209 $186,415 $80,751 $23,999 $56,752
               
Other   Number 273 16 201 237 253 15 238
Value $5,371 $151 $5,182 $3,169 $7,535 $1,514 $6,021
               
Non-Valued   Number 871 37 1,901 1,912 897 19 878
Value --- --- --- --- --- --- ---
 
Total   Number 2 283 26 3,331 39,413 --- 43,055
Value $1,530 $652 $946 $52,088 $188,437 ($69) $243,584
 
(1) This category excludes cash.

(2) Forfeitures reported on the Analysis of Change in Forfeited Property are greater because some assets are not seized until after they are declared forfeited.

(3) The variance represents the difference between the value of the property when seized and recorded in CATS, and the value of the property when disposed.

(4) Some assets are disposed of in segments (e.g., part of an asset may be returned to the owner and part may be forfeited). As a result, the number of disposals on the Analysis of Change may not agree to the number of disposals on the Method of Disposition.

(5) In prior years the AFF/SADF presented certain assets that had been converted to cash under both the classification in which they were seized and as cash. Beginning in fiscal year 2001, AFF/SADF discontinued presenting this dual accountability in the financial statements, though it continues to track assets according to their original character for management purposes. Prior period amounts have been reclassified to conform to the current year's presentation. This reclassification had no effect on the Net Position of the AFF.

C.    Anticipated Equitable Sharing in Future Periods

The statute governing the use of the AFF (28 U.S.C. §524(c)) permits the payment of equitable shares of forfeiture proceeds to participating foreign governments and state and local law enforcement agencies. The statute does not require such sharing and permits the Attorney General wide discretion in determining those transfers. Actual sharing is difficult to predict because many factors influence both the amount and time of disbursement of sharing payments, such as the length of time required to move an asset through the forfeiture process to disposition, the amount of net proceeds available for sharing, the elapse of time for Departmental approval of equitable sharing requests for cases with asset values exceeding $1 million, and appeal of forfeiture judgments. Because of uncertainties surrounding the timing and amount of any equitable sharing payment, an obligation and expense are recorded only when the actual disbursement of the equitable sharing payment is imminent. From 1996 through 2001, equitable sharing allocation levels averaged $234 million. The anticipated equitable sharing allocation level for FY 2002 is $220 million.

Note 8.   Other Liabilities.

Other liabilities include seized funds invested in US Treasury securities and seized cash on deposit with Treasury. In addition, the AFF is expected to pay third party claimants proceeds from the BCCI case.

  2001 2000
Seized Cash (undeposited)
$15,118
$15,287
Pending BCCI Distributions
6,193
7,152

Total Other Liabilities
$21,311
$22,439

Note 9. Cumulative Results of Operations

The AFF is funded primarily from non-exchange revenue. The permanent indefinite appropriation authority of the AFF is authorized by 28 U.S.C. §524(c) and ensures that all liabilities of the AFF are covered by budgetary resources. The authorizing legislation also provides certain restrictions on the use of the AFF's authority. AFF authority may be used for the:

On September 30, 2001 and 2000, cumulative results of operations were $525,846 and $536,533, respectively. Undelivered orders were $133,717 and $91,945, respectively.

Note 10. Contingencies and Commitments

The AFF and SADF have been named as defendants in a number of legal actions, some of which are purported class actions relating to seizure and forfeiture activity. These actions typically allege, among other things, the improper retention of earnings on seized assets or that forfeitures are invalid. Management believes that the Government has meritorious defenses to these actions and that it has acted properly at all times in administering seizure and forfeiture actions.

Note 11. Non-Entity Assets

  2001 2000
Intra-governmental Investments, Net
$528,271
$501,308
Other Monetary Assets
23,368
43,899
 
Total Non-Entity Assets $551,639 $545,207
Total Entity Assets
$706,968
$722,044

Total Assets
$1,258,6071
$1,267,251

Note 12. Prior Period Adjustments

The Unobligated Balances - Available and Not Available, for FY 2000 do not agree to the Unobligated Balances - Beginning of the Period, for FY 2001. This $28 million difference is the result of forfeited BCCI funds held in the Assets Forfeiture Fund.

During FY 2000, a reassessment of the nature of transfers among entities within the Department determined that certain amounts had been recorded erroneously as non-expenditure transfers in FY 1999. As a result, a prior period adjustment of $17.4 million was recorded on the FY 2000 Statement of Changes in Net Position.

Note 13. Statement of Budgetary Resources vs Budget of the United States Government

Reconciliations of budgetary resources, obligations incurred, and outlays from the Statement of Budgetary Resources to amounts included in the Budget of the United States Government for the periods ending September 30, 2001, and September 30, 2000, are presented below.

 
Budgetary Resources
Obligations Incurred
Outlays
 
2001
2000
2001
2000
2001
2000
Statement of Budgetary Resources $930,000 $906,000 $551,000 $486,000 $452,000 $521,000



Forfeiture Activity not in the Budget (32,000) (8,000) (7,000) --- (7,000) ---



Other --- (4,000) --- --- (2,000) ---



Budget of the United States Government $898,000 $894,000 $544,000 $486,000 $433,000 $521,000

Note 14. Other Non-exchange Revenue

  2001 2000
Forfeiture income
$464,497
$495,031
Forfeiture income returned
(57,629)
(88,883)
Investment income 52,158 61,505
 
Total Other Non-exchange Revenue
$459,026
$467,653
 
A. Forfeiture income includes forfeited cash, sales of forfeited property, penalties in lieu of forfeiture, recovery of returned asset management costs, judgment collections, and other miscellaneous income.
B.

Forfeiture income is returned to certain individuals or agencies that participated in seizures that led to forfeiture.

 
2001
2000
Payments to individuals or organizations for proceeds from assets forfeited and deposited into the AFF and subsequently returned to them through a settlement agreement or by court order. (This includes a BCCI payment to the office of the District Attorney for the County of New York in the amount of $1.4 million)
$9,247
$15,617
Return of forfeiture income to the Treasury Forfeiture Fund for its participation in seizures that led to forfeiture.
34,179
12,532
Return of forfeiture income to the U.S. Postal Service for its participation in seizures that led to forfeiture.
2,097
10,129
Return of forfeiture income to other Federal agencies for their participation in seizures that led to forfeiture.
2,542
1,845
BCCI distributions to victims and other permanent court-ordered distributions.
 

48,643

Return to the Resolution Trust Corporation, the FDIC or other Federal financial institutions or regulatory agency monies recovered under FIRREA.
9,564
---
Return of forfeiture income to the Department of Agriculture for monies recovered in criminal forfeiture actions related to food stamp fraud.
---
117

Total Return of Forfeiture Income $57,629 $88,883

C. Investment income is derived from the investment of the AFF and SADF in U.S. Treasury securities. The earnings of BCCI funds held by the AFF and SADF are tracked separately due to special disposition requirements.
 
2001
2000
Investment Income from AFF
$25,171
$28,114
Investment Income from SADF
26,677
28,202
Investment Income from BCCI
310
5,189

Total Investment Income
$52,158
$61,505

Note 15. Allocation of Prior Year Surplus

28 U.S.C. § 524(c)(9)(E), provides authority for the Attorney General to use excess end-of-year monies, without fiscal year limitation, in the AFF for any Federal law enforcement, litigative, prosecutorial, and correctional activities, or any other authorized purpose of the Department of Justice. During FYs 2001 and 2000, the following allocations were approved by the Attorney General.

   

2001

2000

Community Relations Service $600 $307
Criminal Division 607 607
Environment and Natural Resources Division 420 - - -
Executive Office of U.S. Attorneys 126 214
Executive Office for Weed and Seed,    
  Office of Justice Programs 15,500 6,500
Federal Bureau of Investigation 22 - - -
Information Resources Management Staff,    
  Justice Management Division 6,433 20,937
Office of the Inspector General 500 - - -
Office of Justice Programs 25,000 - - -
U.S. Marshals Service - - - 2,600

Total Allocations $49,208 $31,165

1991 Capital Surplus $0 $88
1992 Super Surplus 3,553 202
1993 Super Surplus 2,117 4,980
1996 Super Surplus 191 1,192
1997 Super Surplus 420 - - -
1998 Super Surplus 4,118 20,892
1999 Super Surplus 38,809 3,811

Total Allocations $49,208 $31,165

During FY 2001, $17,302 in prior years' surpluses were transferred out to the agencies listed above. As of September 30, 2001, $12,186 is owed and $6,680 was advanced to these agencies for super surplus allocations in the current and prior years.
On September 30, 2000, $19,187 was transferred out, $7,864 was owed, and $6,423 was advanced.

Note 16. Transfers Out of Forfeited Property Revenue

Statement of Federal Financial Accounting Standards Number 3, Accounting for Inventory and Related Property, requires that revenue associated with property not disposed of through sale be recognized upon approval of distribution. Property was distributed pursuant to the Attorney General's authority to share forfeiture revenues with agencies that participated in the forfeiture that generated the property, and pursuant to the Department's authority to place forfeited property into official use by the Government. The following transfers of forfeited property revenue are presented below.

 
2001
2000
Forfeited property placed into official use by Federal agencies
$7,747
$8,328

Total Transfers Out of Official Use Property Revenue
$7,747
$8,328

Note 17. Gross Cost and Earned Revenue by Budget Functional Classification

All expenses and distributions of revenue are recorded under Budget Functional Code 750, Administration of Justice. Expenses and distributions of forfeiture revenue, net of earned income, for FYs 2001 and 2000 are presented below.

FY 2001

Assets Forfeiture Program Expenses

Gross Cost Earned Revenue Net Cost
  Payment to Third Parties $43,564   $43,564
  Asset Management Expense 25,224   25,224
  Special Contract Services 43,909 ($3,821) 40,088
  ADP Equipment 13,938   13,938
  Forfeiture Case Prosecution 12,848   12,848
  Forfeiture Training and Printing 4,561   4,561
  Other Program Management 6,441   6,441
Distributions of Revenue      
  Equitable Sharing 252,902   252,902
  Awards for Information 11,877   11,877
  Purchase of Evidence 5,402   5,402
  Equipping Conveyances 987   987
  Joint Law Enforcement Operations 23,954   23,954
  Contracts to Identify Assets 2,811   2,811

Net Cost of Operations $448,418 ($3,821) $444,597

FY 2000

Assets Forfeiture Program Expenses

Gross Cost Earned Revenue Net Cost
  Payment to Third Parties $35,153   $35,153
  Asset Management Expense 38,906   38,906
  Special Contract Services 43,439 ($3,661) 39,778
  ADP Equipment 24,122   24,122
  Forfeiture Case Prosecution 9,498   9,498
  Forfeiture Training and Printing 460   460
  Other Program Management 1,048   1,048
Distributions of Revenue      
  Equitable Sharing 228,082   228,082
  Awards for Information 14,204   14,204
  Purchase of Evidence 5,718   5,718
  Equipping Conveyances 2,722   2,722
  Joint Law Enforcement Operations 26,353   26,353
  Contracts to Identify Assets 2,396   2,396

Net Cost of Operations $432,101 ($3,661) $428,440


 


Assets Forfeiture Fund and Seized Asset Deposit Fund

Required Supplementary Information
Consolidated Intra-governmental Assets

 

Dollars in Thousands
As of September 30, 2001
 
Trading Partner Fund Balance with
Treasury
Investments Accounts
Receivable
Advances and
Other Assets
15
Department of Justice
---
---
---
$6,680
20
Department of the Treasury
$31,447
$1,137,697
$2,769
---
 
  Total Intra-governmental Assets
$31,447
$1,137,697
$2,769
$6,680
 

As of September 30, 2000
 

Trading Partner Fund Balance with
Treasury
Investments Accounts
Receivable
Advances and
Other Assets
15
Department of Justice
---
---
---
$6,423
20
Department of the Treasury
$8,731
$1,133,771
$2,526
---
 
  Total Intra-governmental Assets
$8,731
$1,133,771
$2,526
$6,423
 

Assets Forfeiture Fund and Seized Asset Deposit Fund
Required Supplementary Information
Consolidated Intra-governmental Liabilities

Dollars in Thousands

 

Trading Partner
Accounts
Payable
15
Department of Justice
$82,847
12
U.S. Department of Agriculture
939
14
Department of the Interior
278
18
U.S. Postal Service
1,227
75
Department of Health and Human Services
1,609
 
  Total Intra-governmental Liabilities
$86,950
 
Trading Partner
Accounts
Payable
15
Department of Justice
$53,810
75
Department of Health and Human Services
368
12
U.S. Department of Agriculture
225
18
U.S. Postal Service
231
00
Unknown
117
20
Department of the Treasury
26
 
  Total Intra-governmental Liabilities
$54,777
 

Assets Forfeiture Fund and Seized Asset Deposit Fund
Required Supplementary Information
Consolidated Intra-governmental Earned Revenue and
Other Financing Sources

Dollars in Thousands

For the Fiscal Year Ended September 30, 2001

Trading Partner Earned Revenue Transfers (Out) Non-Exchange Revenue and Other Financing Sources
15
Department of Justice
---
($25,044)
---
18
U.S. Postal Service
---
(5)
---
20
Department of the Treasury
$3,821
---
$52,158
47
General Services Administration
---
(67)
---
 
  Total Intra-governmental Earned Revenue and Other Financing Sources
$3,821
($25,116)
$52,158
 

For the Fiscal Year Ended September 30, 2000

Trading Partner Earned Revenue Transfers (Out) Non-Exchange Revenue and Other Financing Sources
15
Department of Justice
---
($27,515)
---
20
Department of the Treasury
$3,661
---
$61,505
 
  Total Intra-governmental Earned Revenue and Other Financing Sources
$3,661
($27,515)
$61,505
 

Assets Forfeiture Fund and Seized Asset Deposit Fund
Required Supplementary Information
Consolidated Intra-governmental Gross Cost

Dollars in Thousands

For the Fiscal Ended September 30, 2001

Trading Partner
Gross Cost
15
Department of Justice
$115,275
12
U.S. Department of Agriculture
848
14
Department of the Interior
(60)
18
U.S. Postal Service
569
75
Department of Health and Human Services
697
 
  Total Intra-governmental Gross Cost
$117,329
 

For the Fiscal Ended September 30, 2000

Trading Partner
Gross Cost
15
Department of Justice
$120,766
75
Department of Health and Human Services
871
12
U.S. Department of Agriculture
590
18
U.S. Postal Service
26
00
Unknown
---
20
Department of the Treasury
279
 
  Total Intra-governmental Gross Cost
$122,532
 
Updated March 10, 2015