JMD: AFP: Notes To The Principal Financial Statements

FY 2003 AFF/SADF Annual Financial Statements
Notes to the Principal Financial Statements
(Dollars in Thousands)


        Note 1. Summary of Significant Accounting Policies

A.      Summary of Reporting Entity

The AFF and SADF are a financial reporting entity of the DOJ involving specified funds, property seized for forfeiture and the transactions and program activities of DOJ AFP components and other participating agencies as described herein.

The primary mission of the DOJ AFP is to employ asset forfeiture powers in a manner that enhances public safety and security. This is accomplished by removing the proceeds of crime and other assets relied upon by criminals and their associates to perpetuate their criminal activity. Components responsible for administration and financial management of the AFP are charged with lawfully, effectively and efficiently supporting law enforcement authorities in the application of specified forfeiture statutes.

The 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 DOJ. AFF funds are managed by the Asset Forfeiture Management Staff, Justice Management Division. The SADF was created administratively by the Department to ensure positive control over and security of funds seized by agencies participating in the Department's AFP until a decision on final forfeiture is made.

The Homeland Security Act established within the DOJ the ATF. These financial statements include the seizure and forfeiture activities of ATF as a departmental law enforcement participant in the AFP effective January 24, 2003.

B.      Basis of Presentation

Generally accepted accounting principles in effect as of September 30, 2003, were followed in the preparation of these financial statements. GAAP for Federal entities are the standards prescribed by the Federal Accounting Standards Advisory Board, which is designated as the official accounting standards-setting body for the Federal Government by the American Institute of Certified Public Accountants. The statements were prepared from the books and records of the AFF and SADF in accordance with Office of Management and Budget (OMB) Bulletin No. 01-09, Form and Content of Agency Financial Statements (effective for fiscal years beginning October 1, 2001), 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

Transactions are recorded on an accrual and a budgetary basis of accounting. Under the accrual method, revenues are recorded when earned and expenses are recorded when incurred, regardless of when cash is exchanged. Under the budgetary basis, however, funds availability is recorded based upon legal considerations and constraints. As a result, certain line items on the proprietary financial statements may not equal similar line items on the budgetary financial statements. Examples include, but are not limited to, the following:

  • Total Accounts Receivable on the Balance Sheet may not equal Accounts Receivable on the Statement of Budgetary Resources because receivables due from the public are presented on the Balance Sheet and not on the Statement of Budgetary Resources;
  • Total Accounts Payable on the Balance Sheet may not equal Accounts Payable on the Statement of Budgetary Resources because funded liabilities that are not presented on the Balance Sheet are included on the Statement of Budgetary Resources; and
  • Appropriations Received on the Statement of Changes in Net Position may not equal Appropriations Received on the Statement of Budgetary Resources because offsetting receipts for Special funds are reported as Appropriations Received on the Statement of Budgetary Resources but are reported as either exchange revenue on the Statement of Net Cost or non-exchange revenue on the Statement of Changes in Net Position.

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 other financing sources. 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, including recovery of asset management expenses, 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 it is collected or when the forfeited property is sold or put into official use.

Deferred revenue represents a liability for forfeited property held for sale. The deferred revenue is recorded when the property is forfeited and is reversed when the property is sold or otherwise disposed and forfeiture revenue is recorded.

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 the U.S. Department of Treasury and Cash

The funds in the AFF are an entity asset and are used to finance the operations of the AFP. 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 (See Note 2). The cash balance in the SADF is a non-entity asset and is not available to finance the AFP activities.

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 AFP. Receivables from services provided to other Federal agencies are considered fully collectible. Therefore, no allowance for doubtful accounts was established.

H.      Property, Plant and Equipment

Property, plant and equipment consists of enhancements to the Consolidated Asset Tracking System (CATS), which meet the SFFAS 10 definition of "internal use software." Internal use software is capitalized when developmental phase costs or enhancement costs are $500 or more and the asset has an estimated useful life of two or more years. Depreciation is calculated using the straight-line method over the useful lives of the asset. Internal use software purchases with an acquisition cost of less than $500 are expensed when purchased.

I.      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.

J.      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, 2003 and 2002, as well as in related revenue and liability accounts, include management's estimates of forfeitures and seizures that occurred during FY 2003 and 2002. 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.

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.

K.      Non-Entity Assets

Non-entity assets consist of seized property and investments of seized cash and are not available to fund the operations of the AFP.

L.      Liabilities and Loans and Interest Payable to the U.S. Treasury

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, pending BCCI distributions (Note 10), and liability for prior year surplus allocations (Note 16A).

M. Interest on Late Payments

Pursuant to the Prompt Payment Act, 31 U.S.C. § 3901-3907, Federal agencies must pay interest on payments for goods or services made to concerns after the due date. The due date is generally 30 days after receipt of a proper invoice or acceptance of the goods or services, whichever is later.

N. 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.

Note 2. Fund Balance with Treasury

The Fund Balance with Treasury consists of funds in the AFF. The balances on September 30, 2003 and 2002 are presented below.

  2003 2002
Fund Balances:    
Other Fund Types $50,640 $98,764
Total Fund Balance with Treasury $50,640 $98,764
     
Status of Fund Balances:    
Unobligated Balance - Available $ - $ -
Unobligated Balance - Unavailable - -
Obligated Balance not yet Disbursed 50,640 98,764
Total Status of Fund Balances $50,640 $98,764

The status of fund balances reported above includes only fund balances with Treasury, while the AFF invests excess funds in short term securities, which are considered budgetary resources and are included with fund balance as unobligated balances on the Statement of Budgetary Resources. Because of this difference, amounts reported as obligated (or unobligated) in this note will not agree to amounts reported on the Statements of Budgetary Resources.

Note 3. Cash and Other Monetary Assets

Other monetary assets consist of seized cash deposited in the SADF and seized monetary instruments, including cash not on deposit. The balances on September 30, 2003 and 2002, are presented below.

  2003   2002
Cash:      
Seized Cash Deposited $51,115   $9,533
Other Monetary Assets:      
Seized Monetary Instruments 20,218   26,691
Total Cash and Other Monetary Assets $71,333   $36,224

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 intragovernmental, 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, 2003:
    Unamortized    
  Acquisition Cost Premium Discount Net Investments Market Value Disclosure
Intragovernmental          
Non-marketable securities:          
Market-based          
AFF $569,170   $(453) $568,717 $568,756
SADF 497,924   (434) 497,490 497,591
Subtotal $1,067,094   $(887) $1,066,207 $1,066,317
Accrued Interest -       -
Total $1,067,094       $1,066,317
As of September 30, 2002:
    Unamortized    
  Acquisition Cost Premium Discount Net Investments Market Value Disclosure
Intragovernmental          
Non-marketable securities:          
Market-based          
AFF $506,106 $- $(766) $505,340 $505,453
SADF 518,181   (822) 517,359 517,485
Subtotal $1,024,287 $- $(1,588) $1,022,699 $1,022,938
Accrued Interest -       -
Total $1,024,287       $1,022,938

Note 5. Accounts Receivable, Net

Accounts receivable consist of amounts owed to the AFF for CATS-related services provided to the U.S. Treasury. There is no allowance for uncollectible accounts since accounts receivable from business with other Federal entities is considered fully collectible.

  2003   2002
Intragovernmental      
Accounts Receivable $2,799   $551

Note 6. Forfeited and Seized Property

Property seized for any purpose other than forfeiture and held by the seizing agency or a custodial agency is disclosed by the seizing agency. All property seized for forfeiture, including property with evidentiary value, is reported in the statements of the AFF/SADF. 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 value to the Federal government. The Non-Valued property category includes: alcohol, chemicals, drug paraphernalia, gambling devices, pornography, and weapons.

A. Forfeited Property

The following tables show the analysis of change in and methods of disposition of forfeited property, excluding cash, during the FYs ended September 30, 2003 and 2002. The tables reflect the addition of ATF as a departmental law enforcement participant in the AFP effective January 24, 2003.

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

(Dollars in Thousands)

The following table represents the analysis of change for forfeited property during FY 2003.

Period Ending September 30, 2003:

Forfeited Property Category   Beginning Balance Adjustments (1) Forfeited During
the Period
Disposed During
the Period (2)
Ending Balance Liens and Claims Ending Bal. Net
of Liens
Financial &
Other Monetary
Assets
Number 66 (9) 146 (105) 98   98
Value $3,801 $306 $3,626 ($5,038) $2,695 --- $2,695
                 
Real Property Number 283 49 364 (358) 338   338
Value $37,299 $7,615 $62,541 ($56,161) $51,294 ($87) $51,207
                 
Personal Property Number 3,595 20 16,192 (15,983) 3,824   3,824
Value $26,068 ($540) $76,795 ($74,162) $28,161 ($1,280) $26,881
                 
Non-Valued Number 791 8,803 17,875 (7,817) 19,652   19,652
Value --- --- --- --- --- --- ---
     
Total Number 4,735 8,863 34,577 (24,263) 23,912   23,912
Value $67,168 $7,381 $142,962 ($135,361) $82,150 ($1,367) $80,783

(1) Adjustments represent changes in the valuation or status of property as a result of fair market appraisals and court orders received during the period as well as the addition of ATF as a DOJ law enforcement component, effective January 24, 2003. The ATF balances transferred to the Justice Forfeiture Program include 5 Financial & Other Monetary Assets valued at $24,000 and 8,993 Non-Valued items.

(2) Disposals in the Analysis of Change table may not agree with disposals on the Method of Disposition table as a result of partial dispositions.

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

(Dollars in Thousands)

The following table represents the method of disposition for the forfeited property during FY 2003.

Period Ending September 30, 2003:

Forfeited Property Category   Converted Financial Instrument/Property
& Deposit/Transfer
of Seized Cash
Destroyed/ Donated/ Transferred to GSA/ Other Sold/ Liquidated (1) Official Use/ Transfer for Equitable Sharing Returned Asset Variance (2) Total (3)
Financial & Other Monetary Assets Number 90 7 5 --- 11   113
Value $4,738 $74 $120 --- $106 --- $5,038
                 
Real Property Number 5 5 319 --- 29   358
Value $329 $274 $40,540 --- $15,018 --- $56,161
                 
Personal Property Number --- 745 11,314 1,118 2,928   16,105
Value --- $3,699 $32,902 $13,497 $24,350 ($286) $74,162
                 
Non-Valued Number --- 7,518 --- 239 88   7,845
Value --- --- --- --- --- --- ---
     
Total Number 95 8,275 11,638 1,357 3,056   24,421
Value $5,067 $4,047 $73,562 $13,497 $39,474 ($286) $135,361

(1) The sold/liquidated total dollar value does not agree to Donations and Forfeitures of Property on the Statment of Changes in Net Position and the Statement of Financing because the sold/liquidated amount above represents the assets at their appraised values at forfeiture, and the Donations and Forfeitures of Property on the Statement of Changes in Net Position and the Statement of Financing represents the proceeds realized upon disposition.

(2) Variances can result from differences between the value of the property when seized and the value of the property when disposed.

(3) Disposals in the Analysis of Change table may not agree with disposals on the Method of Disposition table as a result of partial dispositions.

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

(Dollars in Thousands)

The following table represents the analysis of change for the forfeited property during FY 2002.

Year Ending September 30, 2002:

Forfeited Property Category   Beginning Balance Adjustments (1) Forfeited During the Period Disposed During the Period (2) Ending Balance Liens and Claims Ending Bal. Net of Liens
Financial & Other Monetary Assets Number 77 5 93 (109) 66   66
Value $3,884 $139 $11,377 ($11,598) $3,802 ($1) $3,801
                 
Real Property Number 244 40 325 (326) 283   283
Value $27,670 $5,412 $52,105 ($47,761) $37,426 ($127) $37,299
                 
Personal Property Number 2,462 474 11,705 (11,046) 3,595   3,595
Value $25,089 $1,558 $62,011 ($59,224) $29,434 ($3,366) $26,068
                 
Non-Valued Number 886 (132) 705 (668) 791   791
Value --- --- --- --- --- --- ---
     
Total Number 3,669 387 12,828 (12,149) 4,735   4,735
Value $56,643 $7,109 $125,493 ($118,583) $70,662 ($3,494) $67,168

(1) Adjustments represent changes in the valuation or status of property as a result of fair market appraisals and/or court orders received during fiscal year 2002.

(2) The number of assets disposed during FY2002 only includes those assets which have been fully disposed. However, the value of assets disposed includes 80 partially disposed assets.

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

(Dollars in Thousands)

The following table represents the method of disposition for the forfeited property during FY 2002.

Year Ending September 30, 2002:

Forfeited Property Category   Converted Financial Instrument/Property
Deposit/Transfer
of Seized Cash
Destroyed/ Donated/ Transferred
to GSA/ Other
Sold/ Liquidated (1) Official Use/ Transfer for Equitable Sharing Returned Asset Variance (2) Total (3)
Financial & Other Monetary Assets Number 92 10 12 --- 2   116
Value $9,416 $43 $2,122 --- $17 --- $11,598
                 
Real Property Number 6 10 286 --- 27   329
Value $560 $2,679 $40,013 --- $4,526 ($17) $47,761
                 
Personal Property Number 1 1,351 6,834 1,032 1,959   11,177
Value $5 $3,892 $29,317 $10,640 $15,370 --- $59,224
                 
Non-Valued Number --- 670 4 5 14   693
Value --- --- --- --- --- --- ---
     
Total Number 99 2,041 7,136 1,037 2,002   12,315
Value $9,981 $6,614 $71,452 $10,640 $19,913 ($17) $118,583

(1) The sold/liquidated total dollar value does not agree to Donations and Forfeitures of Property on the Statement of Changes in Net Position or the Statement of Financing because the sold/liquidated amount represents the assets at their appraised values at forfeiture, and the Donations and Forfeitures of Property on the Statment of Changes in Net position and the Statement of Financing represents the proceeds realized upon disposition.

(2) 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.

(3) 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 A nalysis of Change may not agree to the number of disposals on the Method of Disposition.

B. Seized Property

The following tables show the analysis of change in and methods of disposition of property seized for forfeiture, excluding cash, during the FYs ended September 30, 2003 and 2002. The tables reflect the addition of ATF as a departmental participant in the AFP effective January 24, 2003.

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

(Dollars in Thousands)

The following table represents the analysis of change for the seized property during FY 2003.

Period Ending September 30, 2003:

Seized Property Category   Beginning Balance Adjustments (1) Seized During the Period Disposed During the Period (2) Ending Balance Liens and Claims Ending Bal. Net of Liens
Financial & Other Monetary Assets Number 432 (218) 323 (158) 379   379
Value $38,433 ($21,286) $27,959 ($3,162) $42,044 ($208) $41,836
                 
Real Property Number 301 15 312 (305) 323   323
Value $47,385 $2,132 $57,338 ($57,230) $49,625 ($7,992) $41,633
                 
Personal Property Number 8,123 781 19,027 (18,940) 8,991   8,991
Value $83,977 ($3,182) $129,249 ($113,551) $96,493 ($14,456) $82,037
                 
Non-Valued Number 625 44,007 13,508 (18,194) 39,946   39,946
Value --- --- --- --- --- --- ---
     
Total Number 9,481 44,585 33,170 (37,597) 49,639   49,639
Value $169,795 ($22,236) $214,546 ($173,943) $188,162 ($22,656) $165,506

(1) Adjustments represent changes in the valuation or status of property as a result of fair market appraisals and court orders received during the period as well as the addition of ATF as a DOJ law enforcement component, effective January 24, 2003. The ATF balances transferred to the Justice Forfeiture Program include 21 Financial & Other Monetary Assets valued at $94,000,478 Personal Property items valued at $3,419,000 and 43,698 Non-Valued items.

(2) Disposals in the Analysis of Change table may not agree with disposals on the Method of Disposition table as a result of partial dispositions.

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

(Dollars in Thousands)

The following table represents the method of disposition for the seized property during FY 2003.

Period Ending September 30, 2003:

Seized Property Category   Converted Financial Instrument/Property
and
Deposit/Transfer of
Seized Cash
Destroyed/
Donated/ Transferred
to GSA/ Other
Sold/ Liquidated Returned Asset Forfeited (1) Variance (2) Total (3)
Financial & Other Monetary Assets Number --- 8 --- 47 103   158
Value --- $17 --- $1,423 $1,722 --- $3,162
                 
Real Property Number 2 10 5 29 261   307
Value $120 $500 $1,089 $4,785 $50,736 --- $57,230
                 
Personal Property Number --- 129 8 2,638 16,173   18,948
Value --- $3,689 $173 $33,076 $76,613 --- $113,551
                 
Non-Valued Number --- 52 --- 295 17,847   18,194
Value --- --- --- --- --- --- ---
     
Total Number 2 199 13 3,009 34,384   37,607
Value $120 $4,206 $1,262 $39,284 $129,071 --- $173,943

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

(2) Variances can result from differences between the value of the property when seized and the value of the property when disposed.

(3) Disposals in the Analysis of Change table may not agree with disposals on the Method of Disposition table as a result of partial disposition.

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

(Dollars in Thousands)

The following table represents the analysis of change for the seized property during FY 2002.

Year Ending September 30, 2002:

Seized Property Category   Beginning Balance Adjustments (1) Seized During the Period Disposed During the Period (2) Ending Balance Liens and Claims Ending Bal. Net of Liens
Financial & Other Monetary Assets Number 429 (24) 145 (118) 432   432
Value $38,753 ($1,398) $6,011 ($4,705) $38,661 ($228) $38,433
                 
Real Property Number 203 125 275 (302) 301   301
Value $46,416 $17,033 $38,234 ($46,533) $55,150 ($7,765) $47,385
                 
Personal Property Number 5,307 1,483 15,192 (13,859) 8,123   8,123
Value $63,707 $4,034 $121,391 ($91,977) $97,155 ($13,178) $83,977
                 
Non-Valued Number 822 (203) 722 (716) 625   625
Value --- --- --- --- --- --- ---
     
Total Number 6,761 1,381 16,334 (14,995) 9,481   9,481
Value $148,876 $19,669 $165,636 ($143,215) $190,966 ($21,171) $169,795

(1) Adjustments represent changes in the valuation or status of property as a result of fair market appraisals and/or court orders received during fiscal year 2002.

(2) The number of assets disposed during FY2002 only includes those assets which have been fully disposed. However, the value of assets disposed includes 9 partially disposed assets.

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

(Dollars in Thousands)

The following table represents the method of disposition for the seized property during FY 2002.

Year Ending September 30, 2002:

Seized Property Category   Converted Financial Instrument/Property
and
Deposit/Transfer
of Seized Cash
Destroyed/ Donated/ Transferred to GSA/ Other Sold/ Liquidated Returned Asset Forfeited (1) Variance (2) Total (3)
Financial & Other Monetary Assets Number 2 8 --- 30 78   118
Value $75 $278 --- $342 $4,011 --- $4,706
                 
Real Property Number --- 2 3 29 268   302
Value --- $155 $370 $2,020 $43,988 --- $46,533
                 
Personal Property Number --- 146 6 2,034 11,684   13,870
Value --- $461 $45 $30,452 $61,018 --- $91,976
                 
Non-Valued Number --- 15 --- 20 683   718
Value --- --- --- --- --- --- ---
     
Total Number 2 171 9 2,113 12,713   15,008
Value $75 $894 $415 $32,814 $109,017 --- $143,215

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

(2) 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.

(3) 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.

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 1998 through 2003, equitable sharing allocation levels averaged $246,045. The anticipated equitable sharing allocation level for FY 2004 is $236,000.

Note 7. General Property, Plant and Equipment (PP&E)

As of September 30, 2003:
  Acquisition Cost Accumulated Depreciation Net Book Value Useful Life
Internal Use Software in Development $2,409 - $2,409 7 years
As of September 30, 2002:
  Acquisition Cost Accumulated Depreciation Net Book Value Useful Life
Internal Use Software in Development $842 - $842 7 years

Note 8. Other Assets

  2003   2002
Intragovernmental      
Advances to Others $2,426   $2,688
Total Other Assets $2,426   $2,688

Note 9. Non-Entity Assets

  2003 2002
Intragovernmental    
Investments, Net $497,490 $517,359
Total Intragovernmental $497,490 $517,359
Cash and Other Monetary Assets 71,333 36,224
Total Non-Entity Assets $568,823 $553,583
Total Entity Assets 707,783 675,356
Total Assets $1,276,606 $1,228,939

Note 10. Other Liabilities

Other liabilities include seized funds invested in U.S. Treasury securities and seized cash not on deposit with the U.S. Treasury. In addition, the AFF is expected to pay third party claimants proceeds from the BCCI case. All other liabilities are liabilities with the public and are current liabilities of the AFF/SADF.

As of September 30, 2003:
  Current
Liability for Deposit Fund $20,218
Other Liabilities:  
Pending BCCI Distributions 6,379
Total Other Liabilities $26,597
As of September 30, 2002:
  Current
Liability for Deposit Fund $26,691
Other Liabilities:  
Pending BCCI Distributions 6,305
Total Other Liabilities $32,996

Note 11. Contingencies and Commitments

SFFAS No. 5 and SFFAS No. 12 contain the criteria for recognition and disclosure of contingent liabilities. A loss contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible loss. The uncertainty should ultimately be resolved when one or more future events occur or fail to occur. The likelihood that the future event or events will confirm the loss or the incurrence of a liability can range from probable to remote.

The AFF and SADF are parties to various legal actions and claims, 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. In the opinion of management, the ultimate resolution of the proceedings, actions and claims will not materially affect the financial position or cost of operations of the AFF and SADF. The amount of loss or range of loss cannot be determined. However, management believes that the Government has meritorious defenses to these actions and that it acted properly at all times in administering seizure and forfeiture actions.

Note 12. Gross Cost and Earned Revenue by Budget Functional Classification

Year ended September 30, 2003:

Consolidated Gross Cost and Earned Revenue by Budget Functional Classification

Budget Functional Classification Gross Cost Earned
Revenue
Net Cost
       
Administration of Justice - 750      
AFP Expenses      
Payment to Third Parties $78,612 $- $78,612
Asset Management Expenses 24,329 - 24,329
Special Contract Services 55,269 (3,473) 51,796
ADP Equipment 14,802 - 14,802
Forfeiture Case Prosecution 14,094 - 14,094
Forfeiture Training and Printing 3,453 - 3,453
Other Program Management 14,562 - 14,562
Distributions of Revenue      
Equitable Sharing 178,257 - 178,257
Awards for Information 14,641 - 14,641
Purchase of Evidence 4,378 - 4,378
Equipping Conveyances 443   443
Joint Law Enforcement Operations 33,773 - 33,773
Contracts to Identify Assets 2,400 - 2,400
Net Cost of Operations $439,013 $(3,473) $435,540
Year ended September 30, 2003

Intragovernmental Gross Cost and Earned Revenue by Budget Functional Classification:

Budget Functional Classification Gross Cost Earned
Revenue
Net Cost
       
Administration of Justice - 750      
AFP Expenses      
Payment to Third Parties $229 $- $229
Asset Management Expenses 13,931 - 13,931
Special Contract Services 27,638 (3,473) 24,165
ADP Equipment 6,028 - 6,028
Forfeiture Case Prosecution 7,362 - 7,362
Forfeiture Training and Printing 2,880 - 2,880
Other Program Management 13,338 - 13,338
Distributions of Revenue      
Equitable Sharing - - -
Awards for Information 15,235 - 15,235
Purchase of Evidence 4,556 - 4,556
Equipping Conveyances - - -
Joint Law Enforcement Operations 19,073 - 19,073
Contracts to Identify Assets 2,497 - 2,497
Net Cost of Operations $112,767 $(3,473) $109,294
Year ended September 30, 2002

Consolidated Gross Cost and Earned Revenue by Budget Functional Classification:

Budget Functional Classification Gross Cost Earned
Revenue
Net Cost
       
Administration of Justice - 750      
AFP Expenses      
Payment to Third Parties $32,988 $- $32,988
Asset Management Expenses 55,231 - 55,231
Special Contract Services 49,786 (3,661) 46,125
ADP Equipment 8,710 - 8,710
Forfeiture Case Prosecution 11,206 - 11,206
Forfeiture Training and Printing 3,519 - 3,519
Other Program Management 14,295 - 14,295
Distributions of Revenue      
Equitable Sharing 232,825 - 232,825
Awards for Information 16,956 - 16,956
Purchase of Evidence 4,167 - 4,167
Equipping Conveyances 364 - 364
Joint Law Enforcement Operations 31,072 - 31,072
Contracts to Identify Assets 2,223 - 2,223
Net Cost of Operations $463,342 $(3,661) $459,681
Year ended September 30, 2002

Intragovernmental Gross Cost and Earned Revenue by Budget Functional Classification:

Budget Functional Classification Gross Cost Earned
Revenue
Net Cost
       
Administration of Justice - 750      
AFP Expenses      
Payment to Third Parties $- $- $-
Asset Management Expenses 22,605 - 22,605
Special Contract Services 31,484 (3,661) 27,823
ADP Equipment 369 - 369
Forfeiture Case Prosecution 5,867 - 5,867
Forfeiture Training and Printing 2,444 - 2,444
Other Program Management 11,463 - 11,463
Distributions of Revenue      
Equitable Sharing - - -
Awards for Information - - -
Purchase of Evidence - - -
Equipping Conveyances - - -
Joint Law Enforcement Operations 28,403 - 28,403
Contracts to Identify Assets 2,460 - 2,460
Net Cost of Operations $105,095 $(3,661) $101,434

Note 13. Permanent Indefinite Appropriations

28 U.S.C. § 524(c)(4) authorized the Attorney General to retain AFF receipts to pay program operations expenses, equitable sharing to state and local law enforcement agencies who assist in forfeiture cases, and lienholders. This permanent indefinite authority is open-ended in its period of availability and amount.

Note 14. 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 year ending September 30, 2002 is presented below. The reconciliation as of September 30, 2003, is not presented because the Budget of the United States Government is not available for that period.

  Budgetary
Resources
Obligations
Incurred
Outlays
As of September 30, 2002      
Statement of Budgetary Resources $882,00 $486,000 $475,000
Unavailable Collections Carried Forward (113,000) - -
Forfeiture Activity not in the Budget (85,000) (40,000) (45,000)
Unfilled Customer Orders not Realized 2,000 - -
Other (1,000) (1,000)  
Budget of the United States Government $685,000 $445,000 $430,000

In addition to the above, a reconciliation with the SF-133, Report on Budget Execution and Budgetary Resources, was also performed and confirmed that differences between the Statement of Budgetary Resources and the SF-133 are also the result of the adjustments identified above.

Note 15. Apportionment Categories of Obligations Incurred

Apportionment categories are determined in accordance with the guidance provided in OMB Circular A-34, Instructions on Budget Execution. Category A represents resources apportioned for calendar quarters. Category B represents resources apportioned for program operations expenses, equitable sharing payments, and prior year surplus allocations.

  Direct Obligations   Reimbursable Obligations   Total Obligations Incurred
For the Year Ended September 30, 2003          
Amounts Apportioned Under:          
Category A $16,314   $-   $16,314
Category B 461,828   3,473   465,301
Total $478,142   $3,473   $481,615
           
For the Year Ended September 30, 2002          
Amounts Apportioned Under:          
Category A $18,331   $-   $18,331
Category B 464,425   3,661   468,086
Total $482,756   $3,661   $486,417

Note 16. Allocation Transfers of Appropriation

Allocation transfers by the AFF include transfers of Super Surplus Allocations and transfers of forfeited property to participating agencies for official use:

  2003 2002
Transfers-out of Super Surplus Allocations $11,699 $18,937
Transfers-out of Forfeited Property for Official Use 8,403 6,134
Total Allocation Transfers-out $20,102 $25,071
  1. Transfers-out of Super Surplus Allocations. 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 DOJ. During FYs 2003 and 2002, the following allocations were approved by the Attorney General.
  2003 2002
Community Relations Service $- $374
Executive Office of U.S. Attorneys - 44
Information Resources Management Staff,
Justice Management Division
- 3,791
Office of the Inspector General - 220
Office of Justice Programs 9,452 25,000
U.S. Marshals Service - 2,000
Total Allocations $9,452 $31,429
     
1992 Super Surplus $3,390 $3,553
1993 Super Surplus 1,483 1,483
1996 Super Surplus 64 108
1998 Super Surplus - 239
1999 Super Surplus 4,515 26,046
Total Allocations $9,452 $31,429

During FY 2003, $11,699 in prior years' surpluses were transferred out to the agencies listed above, $8,329 was owed and $2,426 was advanced to these agencies for super surplus allocations in the current and prior years. On September 30, 2002, $18,937 was transferred out, $8,563 was owed, and $2,688 was advanced.

  1. Transfers-out of Forfeited Property for Official Use. 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. In FY 2003 and 2002, transfers out of forfeited property for official use totaled $8,403 and $6,134, respectively.

Note 17. Non-exchange Revenue

Non-exchange revenue consists of income 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.

  2003   2002
Income from AFF investments $5,986   $9,706
Income from SADF investments 6,631   10,703
Income from BCCI investments 74   111
Total Investment Income $12,691   $20,520

Note 18. Donations and Forfeitures

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. Net forfeiture income totaled $486,120 and $423,628 in FYs 2003 and 2002, respectively.

Forfeiture income is returned to certain individuals or agencies that participated in seizures that led to forfeiture and is a component of net forfeiture income, above.

  2003   2002
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.
$12,786   $7,107
Return of forfeiture income to the Treasury Forfeiture Fund for its
participation in seizures that led to forfeiture.
16,871   14,329
Return of forfeiture income to the U.S. Postal Service for its
participation in seizure that led to forfeiture.
2,230   3,212
Return of forfeiture income to other Federal agencies for
their participation in seizures that led to forfeiture.
880   741
Return to the Resolution Trust Corporation, the FDIC or other Federal
financial institutions or regulatory agency monies recovered under FIRREA.
4   6,532
Total Return of Forfeiture Income $32,771   $31,921
Updated March 9, 2015