Management of Seized Assets and Evidence by the
Bureau of Alcohol, Tobacco, Firearms and Explosives
Audit Report 06-37
Office of the Inspector General
The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) law enforcement functions were transferred on January 24, 2003, from the Department of the Treasury (Treasury) to the Department of Justice (DOJ) under the Homeland Security Act of 2002. ATF’s tax and trade functions remained with Treasury.
The ATF conducts criminal investigations, oversee the firearms and explosives industries, and enforces federal laws and regulations related to alcohol, tobacco, firearms, explosives, and arson. ATF headquarters is located in Washington, D.C., and there are 23 field divisions comprised of multiple field offices.
In the course of criminal investigations, ATF seizes items for forfeiture and evidentiary purposes, and stores the items in ATF vaults and explosive storage bunkers.1 Items seized may include alcohol, tobacco, firearms, explosives, ammunition, vehicles, real property, currency, and computer equipment. Between October 2003 and June 2006 ATF seized 240,802 items with an estimated fair market value of $57,510,372. ATF subsequently disposes of forfeited assets after judicial action is completed. Forfeited assets are disposed of using one of three actions: destruction, sale, or placement into official use. Only certain items are deemed suitable for official use: firearms, vehicles, or investigative equipment.2
Items seized by ATF for forfeiture are recorded, monitored, and managed by ATF’s Asset Forfeiture and Seized Property Branch through its Forfeited and Seized Assets Tracking System (FASTRAK), which is unique to ATF. ATF currently does not participate in the DOJ asset forfeiture program, which is managed by the United States Marshals Service (USMS). The DOJ asset forfeiture program includes federal partners both within and outside DOJ.3 The USMS has not yet assumed management of any of ATF’s assets seized for forfeiture, because ATF uses FASTRAK to track its seized assets, while the USMS and the other asset forfeiture partners use the Consolidated Asset Tracking System (CATS).
At the time of ATF’s transfer to DOJ, DOJ and Treasury signed a memorandum of understanding (MOU) regarding the management and disposition of assets seized for forfeiture by ATF. In accordance with the MOU, assets seized on or before January 23, 2003, remained the property and responsibility of Treasury, while assets seized on or after January 24, 2003, became the property and responsibility of DOJ.
The MOU also stipulated that all assets seized for forfeiture by ATF on or after January 24, 2003, would continue to be transferred to and disposed of by Treasury’s national property contractor until an asset transition plan between Treasury and DOJ could be implemented. All net proceeds from the disposition of the assets were to be transferred to the DOJ Asset Forfeiture Fund.4
The Office of the Inspector General (OIG) conducted this audit to assess ATF’s management of seized assets. Our objectives were to: (1) determine the status of ATF’s transition to DOJ’s system for managing seized assets; and (2) assess the adequacy of ATF’s accounting for, storing, safeguarding, and disposing of seized assets and evidence in its possession.
To accomplish our objectives, we reviewed and analyzed federal laws, regulations, and DOJ policies and procedures applicable to seized assets, as well as internal inspection reports for all 23 ATF field divisions. We reviewed the MOU between Treasury and DOJ for the management and disposition of property seized for forfeiture by ATF. We also reviewed three contractor reports on FASTRAK and CATS. We interviewed officials from the ATF Asset Forfeiture and Seized Property Branch, Asset Forfeiture Management Staff, Special Agents-in-Charge of field divisions, and Resident Agents-in-Charge of field offices.
Under the asset forfeiture statutes, property is formally forfeited only after the government has completed a legal proceeding intended to give any potential claimant due notice and an opportunity to contest the forfeiture. Such forfeiture proceedings fall under the following categories:
ATF categorizes items either as valued properties, which are items that can be legally sold in the United States, or non-valued properties, which either do not have a legal market in the United States or a saleable value to the federal government. In general, valued and non-valued seized property is initially recorded at its estimated fair market value in accordance with Federal Accounting Standards, the Government Accountability Office, and Office of Management and Budget guidelines. The values assigned are for accounting recognition purposes only and are not necessarily the amount realized upon final disposal. As detailed in the following table, the quantity and value of items seized varies between fiscal years (FY) and by type of property.
ATF SEIZED ITEMS AND THEIR ESTIMATED VALUES
Types of Items Seized by ATF
In FY 2005, ATF seized 199,284 valued and non-valued property items at an estimated fair market value of $24,307,331. As of June 30, 2006, an additional 22,030 items were seized at an estimated fair market value of $17,345,448. Valued property items include vehicles, alcohol, currency, jewelry, real property and computer equipment. Alcohol products are considered valued property because they can be sold, but only under certain conditions, such as if they are in the manufacturer’s original sealed packaging. Non-valued property items, which include firearms, silencers, ammunition, explosives, arson materials, contraband alcohol, and tobacco products are destroyed by ATF.5
Analysis of Seized Property Asset Management Systems
As noted earlier, DOJ asset forfeiture participants use CATS and ATF uses FASTRAK to track the life cycle of property seized for forfeiture. Data maintained within the two systems identify specific pieces of property and provide details about the items, such as the seizing office; seizing agent; case number; the type, description, value, and quantity of the property; and any other information necessary to ensure the proper monitoring and disposition of the property.
When ATF transferred to the Department of Justice in January 2003, the Asset Forfeiture Management Staff (AFMS) and ATF’s Asset Forfeiture and Seized Property Branch reached a verbal agreement that suspended the planned migration of ATF’s seized asset data into the Department’s CATS because AFMS was upgrading its system. The upgrade changed the CATS system from dedicated terminals in users’ offices to a browser-based system allowing authorized users access to the system using non-dedicated computers and the Internet. AFMS officials were concerned that injecting ATF’s system requirements into CATS would delay the upgrade, adversely affecting the rest of the DOJ asset forfeiture participants. The suspension was intended to allow AFMS time to complete the upgrade of CATS prior to migrating ATF data and its system requirements. The final conversion and migration of ATF data from FASTRAK to CATS is on schedule and expected to be completed by June 30, 2007.
After ATF transferred to DOJ, the AFMS contracted with a non-profit corporation for an analysis of the differences between CATS and FASTRAK, an evaluation of alternative asset tracking approaches, and identification of the preferred solution for managing both DOJ and ATF seized and forfeited assets. AFMS utilized an existing ATF support contractor to develop a summary of ATF data requirements that CATS did not support. Under the identified preferred alternative, both CATS and FASTRAK capabilities would be fully integrated into one system, a browser-based CATS. As a result, in June 2005, the non-profit corporation issued a report that summarized 99 data requirements of FASTRAK that CATS did not support. ATF requires more detailed information for its forfeiture case management system than CATS provides. Some of the unsatisfied requirements are related to cases, seizures, assets, firearms, forfeitures, disposition of items, and legal counsel information. Examples of the unsatisfied requirements are the ability to enter and maintain an Agent ID and the ability to enter and maintain the item seizure number. As of June 14, 2006, 38 of the original 99 requirements remained unresolved. The remaining 38 requirements are expected to be resolved by October 2006.
Until all of ATF’s system requirements are satisfied, ATF will continue to use FASTRAK to account for seized property. Operating ATF’s seized asset management system cost DOJ $147,000 in FY 2004 and $210,000 in FY 2005. Additionally, $300,000 was funded for FASTRAK in FY 2006. As of August 26, 2006 ATF had expended approximately $76,000 and the balance will be obligated prior to the end of the fiscal year.
Accounting for ATF Funds at Treasury
Since ATF uses its own asset management system, proceeds from the sale of forfeited seized assets continue to be deposited with Treasury as agreed in the MOU. As of June 30, 2006, ATF reported that Treasury was holding $21,166,103 in combined seized and forfeited funds due DOJ.6 Of that amount, $16,164,234 represents seized currency pending forfeiture. The remaining balance of $5,001,869 has been forfeited and when deposited into the Asset Forfeiture Fund will be available for use by DOJ.
The table below shows a breakdown of funds still on deposit at Treasury that are due DOJ.
FUNDS AT TREASURY DUE DOJ
The Department’s AFMS and ATF’s Asset Forfeiture and Seized Property Branch established a comprehensive record to serve as the detailed accounting for all amounts due to DOJ and Treasury under the MOU. Until May 2006, there was a disagreement between the two offices regarding the documentation provided by ATF. According to the Assistant Director of the AFMS, as of May 8, 2006, ATF had not provided adequate supporting documentation regarding the number of cases, gross amounts, and sources of expense and revenue attributable to the dollar amounts of each item included in the forfeited currency and sales activity through September 30, 2005. ATF’s Asset Forfeiture and Seized Property Branch disagreed and asserted that it had provided the AFMS with the necessary detailed accounting records.
In June 2006, the AFMS informed the OIG that ATF’s Asset Forfeiture and Seized Property Branch had provided it with the necessary documentation and certification of completeness so that it could start the process of the initial transfer of funds from Treasury. The initial transfer request sent to Treasury was for $2,361,907 based on data as of March 31, 2006. The two offices are still reconciling the remaining balance of $2,639,962 ($5,001,869 minus $2,361,907), and will initiate transfer of those funds once the reconciliation process is complete. Both offices expect on-going reconciliation of any future funds that become available thereafter. This ongoing reconciliation will facilitate quarterly transfer requests to Treasury from the AFMS.
After 44 months, ATF and the AFMS have resolved the accounting documentation problem regarding the forfeited fund balance deposited at Treasury. However, the funds are still at Treasury and therefore, are not available for immediate use by DOJ to fund the Asset Forfeiture Fund or to pay for operating costs and related law enforcement programs associated with the Fund. The key problem – that ATF has not migrated its forfeited asset data to CATS – remains the underlying issue. Once ATF can migrate to CATS all of its assets seized for forfeiture will be captured by CATS. Once the data maintained in ATF’s FASTRAK system is migrated to CATS, AFMS and ATF will be in a position to acquire and manage all of the funds (both forfeited and pending forfeiture).
Storing and Safeguarding Seized Assets
ATF does not have a plan that specifically addresses safeguarding seized assets and evidence in the event of a natural disaster or other significant event. Of the three field offices affected by Hurricane Katrina (New Orleans, Louisiana; Mobile, Alabama; and Biloxi, Mississippi), none identified an alternate storage location for safeguarding its seized assets and evidence. The Biloxi, Mississippi, Field Office, located on the shoreline, encountered significant hurricane damage. Because ATF did not have a contingency plan in place to safeguard seized assets and evidence from potential theft, destruction, or damage, the vault contents remained in Biloxi during the hurricane and had to be recovered from the structurally unstable Biloxi Field Office after the hurricane and relocated multiple times to various alternate sites.7 By having a plan in place, ATF may have been able to reduce the number of times the vault contents were moved.
Further, ATF management has not enforced all of the requirements of ATF Order 3400.1B, Property Taken Into Bureau Custody. This Order prescribes basic procedures governing reporting and controlling of property from the time of initial acquisition to its final disposition. The Order sets forth facility and equipment requirements, access requirements and restrictions, inventory procedures, and property control. We found that one of the eight vaults we tested did not meet vault construction standards because a wire-mesh barrier above the chain-link fence intended to protect against unauthorized entry had not been installed. This condition was noted as an exception to the requirements of ATF Order 3400.1B in ATF’s 1997, 2000, and 2003 Office of Field Operations inspection reports. The condition leaves the vault vulnerable to unauthorized entry and increases the risk of theft of seized property and evidence. (See Appendix IV for a complete list of our test results.)
Effective July 2005, every firearm coming into ATF custody or being investigated by ATF is required to be traced through the ATF National Tracing Center. We found 6 of 130 firearms we tested, or 5 percent were not traced through the National Tracing Center. We determined that the seizing agents either did not request a trace of the seized firearms through the National Tracing Center or traced them with an incorrect serial number. All firearms manufactured in 1968 or after have unique serial numbers. Not tracing a firearm or submitting a wrong serial number through the National Tracing Center equates to not accounting for the correct firearm. Further, this situation prevents the correct information from being received in an accurate and timely manner. It also potentially prevents ATF from linking a suspect to a firearm in a criminal investigation; identifying potential traffickers; detecting intrastate, interstate, and international patterns in the sources and kinds of firearms used in crimes.
Our audit disclosed areas where improvements can be made to ATF’s management of seized assets relating to the use of DOJ’s asset management system; accounting for, storing, and safeguarding seized property; and proactively responding to natural disasters.
This report contains five recommendations that focus on the need to resolve ATF’s asset management system requirements that are necessary to fully support migration of FASTRAK data into CATS, provide appropriate supporting documentation to the AFMS about seized and forfeited assets, and expedite the reconciliation so that current and future funds at Treasury can be promptly transferred to the DOJ Asset Forfeiture Fund. Equally important, we determined that seizing agents either did not request a trace of seized firearms through the National Tracing Center or traced them with an incorrect serial number. ATF also lacks a proactive contingency plan that addresses accounting for, storing, and safeguarding seized assets and evidence in the event of a natural disaster or significant event.
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