The Drug Enforcement Administrationís Handling of Cash Seizures

Audit Report 07-06
January 2007
Office of the Inspector General


Findings and Recommendations

CONTROLS ESTABLISHED TO SAFEGUARD SEIZED CASH WERE OFTEN NOT FOLLOWED OR NOT DOCUMENTED AS FOLLOWED

THE DEAíS INTERNAL CONTROLS OVER CASH SEIZURES

The DEA has implemented a system of controls requiring documentation of the handling of seized cash in the presence of two officials and a clear chain-of-custody over seized cash throughout the process. To assess DEA’s cash handling controls, we interviewed DEA officials and reviewed guidance established by the DEA. We concluded that the DEA had developed comprehensive internal control policies to safeguard: (1) cash during seizure, (2) cash during transfer to the local DEA office or to the bank, and (3) cashier’s checks until transfer to the USMS. However, we found evidence that these controls were not being followed. We first describe the controls established by the DEA, and then discuss our testing of the DEA’s compliance with these controls.

Controls to Safeguard Cash upon Seizure

As described in the DEA Agents Manual, the DEA established multiple controls to safeguard cash during seizure. Section 6682 of the DEA Agents Manual requires an agent discovering currency to immediately summon a witnessing agent or officer. If the amount of currency is such that an immediate count is “practical,” a count is to be conducted by the seizing agent and witnessing agent or officer. However, the DEA Agents Manual does not contain criteria to guide agents in determining whether or not a count is practical. The manual does provide procedures to follow if the amount of seized cash is “too large” for an immediate count, but the manual does not define what amount of money is “too large.” As discussed later in this report and detailed in Appendix IV, our testing identified significant differences in when DEA offices count seized cash, and we found confusion among many DEA employees about this policy. In fact, DEA officials in 9 of the 28 offices we tested told us they believed it was the DEA’s policy that agents should not count the seized cash. These results indicate that the DEA needs to clarify its policy on under what circumstances cash is to be counted.

The manual also requires that a DEA agent or Task Force Officer and another witnessing agent be present when the seized cash is secured in a Heat Sealed Evidence Envelope (HSEE) and when the cash is transported to the local DEA office or the bank for an official count.26 The manual further requires that seized currency be counted and sealed in the HSEE in the presence of the person from whom the currency was seized, providing the person does not present a threat to the law enforcement officers.

Agents are required to issue a Form DEA-12 (DEA 12), Receipt for Cash or Other Items, to the person from whom the currency was seized showing either the amount seized or that “an undetermined amount of U.S. currency pending an official count” was seized.27 When currency is seized as the result of a seizure warrant, law enforcement officers are not required to issue a DEA-12.28 Instead, the officers are required to either provide the person from whom the items were seized with a copy of the warrant and a list of the items seized, or leave a copy of the warrant and the list of items seized at the seizure location if the person from whom the items were seized is not present.

When cash is seized, the seizing agent is required to prepare a Form DEA-6 (DEA-6), Report of Investigation, to document the events surrounding the seizure. According to the DEA Agents Manual, the DEA-6 should record details surrounding the acquisition of any high-value item with a value greater than $1,000 and should include details of the seizure and a description of the articles, exhibit numbers, and chain-of-custody information for each item of evidence.

Section 6682 of the DEA Agents Manual requires the DEA evidence custodians to document the receipt, transfer, and disposition of any high-value item in a High-Value Seized and Recovered Monies (HVSRM) Ledger book.

Controls for Transferring Seized Cash to the Local DEA Office or to the Bank

The DEA established controls in the DEA Agents Manual to safeguard seized cash during its transfer to the local DEA office or bank. When the seized cash is taken to the local DEA office during regular duty hours, the agent or task force officer is to release custody of the seized cash to the DEA evidence custodian using a DEA-12; Form DEA-7a (DEA 7-a), Acquisition of Non-drug Property form; or Standard Seizure Form (SSF). After regular duty hours, the agent is to place the cash in temporary overnight storage using the appropriate transferring document and make an entry in the temporary overnight ledger.29 Copies of the DEA-6, DEA‑7a, DEA-12, and SSF should be maintained in the case files as part of the chain-of-custody records.

Section 6682 of the DEA Agents Manual states that seized currency not retained as evidence must be transported to the bank by the seizing agents as soon as arrangements can be made with the bank for an official count and conversion to a cashier’s check.30 Prior to April 5, 2005, if the exact amount of seized cash was unknown, the DEA Agents Manual required agents to transport currency to the bank for an official count and conversion to a cashier’s check on the next business day following the seizure. If the exact amount was known, the agents were required to transport the cash to the bank within 5 working days. Effective April 5, 2005, DEA made this control less stringent by requiring agents to transport the currency to a bank as soon as arrangements could be made with the bank. Later in this report we present our assessment of the time taken by seven DEA Divisions to transport cash to the bank. We note that the DEA Divisions in New Orleans, Detroit, and Houston transported cash to the bank on average in 1.4, 1.6, and 1.8 working days respectively. We also note that the DEA Divisions in Miami and New York transported cash to the bank on average in 4.5 and 4.7 working days respectively. Under the DEA’s revised policy, each of these Divisions is in compliance with the control although it appears the New Orleans, Detroit, and Houston Divisions have achieved significantly better accountability by limiting the time that they control seized cash.

Controls for Transferring Seized Cash to the USMS

The Attorney General’s Guidelines on Seized and Forfeited Property provide that seized cash, except when held as evidence, is to be deposited promptly into the SADF.31 Transfers of cash to the USMS are required to occur within 60 days of seizure or 10 days of indictment. However, Section 6654 of the DEA Agents Manual requires that seized cash be transferred to the USMS within 15 working days of seizure.

As discussed later in this report and as detailed in Appendix IX, on average DEA offices comply with the 15-day requirement. However, the New York Division had an average transfer time of 5.6 working days as compared to 9.6 to 15.6 working days for the other six Divisions. This quicker transfer time for New York was linked to use of wire transfer of funds rather than a cashier’s check. We believe the DEA could strengthen the control for transferring cash to the USMS by requiring rather than encouraging, as is currently done, the use of wire transfers.

Conclusion about DEA’s Controls over Cash Seizures

The DEA has implemented internal control policies to safeguard seized cash, but we believe the following improvements are needed.

IMPLEMENTATION OF CONTROLS FOR SAFEGUARDING SEIZED CASH

While the DEA had established internal control policies for safeguarding seized cash, we found that the controls were not adequately implemented. Our testing of the DEA’s implementation of controls for safeguarding cash is discussed in the following sections.

Preliminary Audit Testing (Phase I)

To gain an understanding of the DEA’s handling of seized cash, we initially tested cash seizures within the DEA’s Washington, D.C. Division from October 1, 2003, through September 30, 2005. We selected a statistical sample of 239 cash seizures valued at $4,314,740 from the Division’s universe of 1,304 cash seizures valued at $21,119,512. The sample was designed to be representative of all seizures by the Washington Division for the period tested. The 239 cash seizures sampled were handled by four Washington Division locations (Washington Division Office, Baltimore District Office, Richmond District Office, and Norfolk Resident Office). Our sample included seizures made by state and local law enforcement agencies that were adopted by the DEA, seizures from both open and closed investigative cases, and seizures made before and after April 5, 2005, when the DEA’s modified procedures for handling and processing seized currency became effective. For each of the seizures sampled, we interviewed DEA officials and reviewed documentation from case files to determine the following.

Our preliminary testing indicated that the Washington Division generally transported seized currency to the bank for an official count and conversion to a cashier’s check and transferred the cashier’s checks to the USMS in a timely manner. However, the Division either did not follow or did not maintain documentation to show that:

We briefed DEA headquarters and field office officials on the results of our preliminary audit tests at the Washington Division. DEA officials told us that based extensive prior experience in managing investigations they believed two agents were present for some of the seizure activities but their presence was not documented. Although the DEA policy is for agents to count seized cash when such counts are practical, the officials also said that agents do not like to count seized cash because of problems that could result if the agents’ count differs from the bank’s count. The DEA officials told us that the seal attached to the evidence bag or container would show the signatures of the two agents involved in sealing the cash. However, DEA officials told us that the evidence bags are no longer needed after the bank counts the cash and thus the evidence bags are discarded and unavailable for subsequent testing.

Additional Audit Testing (Phase II)

Because our preliminary audit work demonstrated that controls for safeguarding seized cash were not consistently followed, we performed additional testing at other DEA offices. We selected 503 cash seizures totaling $40,665,978 at 24 DEA locations within 6 additional DEA Divisions. Including the preliminary sample reviewed for the Washington Division, our complete sample consisted of 742 cash seizures valued at $44,980,718 from 28 DEA locations within 7 DEA Divisions.33 The 742 cash seizures sampled were selected using statistical sampling techniques to be representative of all DEA cash seizures in the universe from which the seizures were sampled. The statistical sampling techniques we used are presented in Appendix II. The number and dollar value of seizures we tested at each DEA office and Division are shown in the following table.

Number and Dollar Value of Cash Seizures Tested

Division/Office Number of
Seizures
Dollar Value of
Seizures
New York Division
New York Division Office
New York Task Force Office
Long Island District Office
Syracuse Resident Office
John F. Kennedy Airport Office
Total

30
30
21
15
9
105

$975,235
$7,740,242
$631,870
$1,285,106
$619,646
$11,252,099
Houston Division
Houston Division Office
McAllen District Office
Brownsville Resident Office
Austin Resident Office
Total
30
25
6
4
65
$1,214,181
$9,240,962
$37,843
$66,119
$10,559,105
Detroit Division
Detroit Division Office
Columbus District Office
Cleveland Resident Office
Dayton Resident Office
Total
30
29
24
6
89
$2,693,179
$3,437,611
$331,043
$109,495
$6,571,328
Los Angeles Division
Los Angeles Division Office34
Riverside District Office
Ventura Resident Office
Total
50
30
7
87
$3,657,064
$2,082,283
$248,576
$5,987,923
Washington Division35
Washington Division Office
Baltimore District Office
Richmond District Office
Norfolk Resident Office
Total
117
89
23
10
239
$798,716
$1,855,260
$1,447,647
$213,117
$4,314,740
New Orleans Division
Birmingham Resident Office
Montgomery District Office
Oxford Resident Office
Total
30
29
9
68
$2,035,693
$1,043,643
$314,194
$3,393,530
Miami Division
Miami Division Office
Orlando District Office
Tampa District Office
West Palm Beach Resident Office
Ft. Lauderdale District Office
Total
32
24
16
9
8
89
$1,315,102
$548,041
$673,088
$222,832
$142,930
$2,901,993

Grand Total

742

$44,980,718

Source: Statistical sample taken from CATS

Results of Audit Testing

We found that DEA Divisions consistently did not fully implement or document implementation of many critical controls established to safeguard seized cash. The detailed results of our testing of controls for the 742 sampled seizures are contained in the following 8 sections.

Presence of a Witnessing Agent or Officer When Cash is Seized

A critical control for safeguarding cash requires that when an agent locates cash, the agent immediately summons a witnessing agent or officer. This control is essential to ensure that seized cash is always handled in the presence of two or more agents or officers to minimize the risk that seized cash is lost or stolen. For the 742 cash seizures tested, we reviewed the DEA-6 and other documentation from the DEA case files to determine if DEA agents followed the control. Overall, we found that in the documentation for 31 percent of the cash seizures, there was no indication that a witnessing agent or officer was present. A summary of our test results for this control is shown in the following chart.

Presence of a Witnessing Agent or Officer
when Cash was Discovered
36

Witness Present During Discovery: 69% yes, 12% could not determine, 19% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division tested are presented in Appendix III. Among the 28 DEA offices tested, the compliance rate ranged from 100 percent in four offices (McAllen, Texas, District Office; Resident Offices in West Palm Beach, Florida; and Austin, Texas; and the John F. Kennedy Airport Office in New York) to 22 percent in the Washington Division Office.

DEA officials told us that based on their extensive prior experience in managing investigations they believed a witness was usually present when the cash was discovered but that the agents just did not document the presence of a witness. However, without such documentation, we could not determine whether or not a witness was actually present during discovery of the cash. Moreover, a failure to document the presence of a witness, if one was present, violated DEA policies.

Counting Seized Cash

Another critical control requires that the seizing and witnessing agents or officers count the cash upon seizure if the amount of seized currency is such that an immediate count is “practical.” The DEA Agents Manual does not define when it is “practical” to count the cash. The manual does state that if the amount of cash is too large for an immediate count, the agents should secure the cash pending an official count. However, the manual does not define what amount is “too large” to count.

For the 742 cash seizures tested, we reviewed the DEA-6 and other documentation from the DEA case files to determine if the agents followed this control. We found that DEA agents counted the cash upon seizure for only 16 percent of the seizures we tested. A summary of our test results for this control is shown in the following chart.

Counting Seized Cash37

Agents Counted Seized Cash: 16% yes, 15% could not determine, 69% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are presented in Appendix IV. The results showed a wide disparity in the implementation of this control among the 28 DEA offices we tested. The rate at which the control was implemented ranged from 63 percent in the Los Angeles Division Office to 0 percent in 11 offices.38 Moreover, we found that implementation of the control was not consistent within some Division offices. For example, within the Washington Division 33 percent of the cash seizures we tested in the Washington Division Office were counted, while none of the seizures we tested in the Richmond, Virginia, District Office were counted. Likewise, in the Los Angeles Division, 63 percent of the cash seizures tested in the Los Angeles Division Office were counted, while none of the seizures tested in the Ventura Resident Office were counted.

While DEA’s written policy in the DEA Agents Manual is to count seized cash when practical, DEA officials in 9 of the 28 offices we tested erroneously told us they believed it was the DEA’s policy that agents should not count the seized cash. The officials told us they do not count the cash to avoid discrepancies between the agents’ counts and the official bank counts, which could lead to additional paperwork and could subject the agents to an investigation. However, our analysis of cash seizures counted by both the agents and the banks found such differences to be rare. For the 79 seizures we tested that were counted by both the agents and the banks, differences between the counts occurred in 6 seizures. Of the six differences, the amounts involved were immaterial ($40 or less) in two instances. The remaining four differences are discussed below.

We also believe that it is misguided for DEA agents to not count cash to avoid possible complaints about discrepancies in cash counts by the bank. We examined 11 DEA Office of Professional Responsibility (OPR) reports from August 2003 to February 2005, and 4 OIG Investigation reports from October 2004 through April 2006, related to the theft or loss of cash, and noted that agents have become the subject of investigations when they did not count the seized currency.

In one OPR case, a complainant alleged that DEA agents interviewed him at the airport, seized $9,000 in cash, and gave him a receipt for an undetermined amount of money. Even though the agents detained the complainant in the controlled environment of an airport for a significant amount of time, the agents did not count the cash. DEA records prepared subsequent to the seizure indicated the agents seized $1,895 in cash from the complainant. The OPR report gave no indication why the agents did not follow DEA policy and count the cash. The OPR report concluded that no evidence existed to show the agents seized more than $1,895 from the complainant and therefore no action was taken against the agents.

In another OPR case, a complainant alleged that DEA agents seized approximately $5,000 in cash and gave her a receipt for an unknown amount of cash. The subsequent bank count was $2,661. The cash was seized during the execution of a search warrant at the complainant’s residence. Again, the agents did not count the cash. The documentation provided with the investigative report showed that the agent who discovered the cash stated that per DEA policy, he did not count the cash at the scene. The documentation also noted that the cash was not taken to the bank until 3 days later and there was no indication the cash was counted at any point during the 3 days between seizure and delivery to the bank. As in the previous example, the OPR report concluded that no evidence existed to show the agents seized more than $2,661 from the complainant and therefore no action was taken against the agents.

In an OIG Investigations case, a complainant alleged that DEA agents seized $50,000. The subsequent bank count was $35,000. The cash was seized at the complainant’s residence and the agents did not count the cash. The agents also did not photograph the cash or maintain a copy of the DEA-12 receipt that agents said was provided to the owner of the seized cash.

Because DEA officials in at least nine offices told us they believe that agents should not count cash when seized, we surveyed other Department components about their polices for counting seized currency. Officials from the United States Marshals Service and the Federal Bureau of Prisons stated that they do not have a policy for counting seized cash. Officials from the Federal Bureau of Investigation (FBI) and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) provided their policies as follows.

FBI Policy:  Seized currency must be counted and the count verified by two officials. To verify the accuracy of the original count, counting should be conducted at least twice. It is suggested that seized currency be counted and verified at the scene. When circumstances such as officer safety, volume of currency, or available resources make on-site count and verification unfeasible, it is permissible to secure the currency and count and verify it at another location. The seizing agent is strongly encouraged to use a money counting machine when counting and verifying seized currency.

ATF Policy:  The special agent will, in the presence of a witnessing agent, conduct an accurate account of all money or financial instruments. If, in the opinion of the special agent, with the authorization of the immediate supervisor, it is determined that the monetary instruments are of such amounts that an accurate count is impractical, the special agent along with the witnessing agent shall place the funds in sealed evidence bags, initial the bags, and transport the money to a financial institution for counting.

The importance of counting money has also been emphasized by the International Association of Chiefs of Police (IACP). An IACP policy paper stated that no matter how extensive the precautions taken to safeguard items entering a law enforcement agency’s property system, extra measures should always be effected in accepting and controlling money taken into agency custody. The IACP stated that alleged missing money, whether the personal property of an arrestee or the fruits of crime, is one of the major sources of complaints against police personnel. The IACP recommended that substantial amounts of money should be counted and verified by a supervisor.

We also examined the 11 DEA Office of Inspections’ reports covering 11 DEA Divisions, as discussed on pages 5 and 6 of this report, to determine if the inspections included a review of the Divisions’ compliance with the cash counting control. We found that none of the 11 inspection reports discussed compliance with the cash counting requirement. Given the inconsistent implementation of this critical control, we recommend that all future Division inspections examine compliance with this control.

Providing a Receipt to the Owner of Seized Cash

According to the DEA Agents Manual, DEA agents are required to issue a DEA-12, Receipt for Property or Other Items, to the person from whom the cash was seized showing either the amount seized or that “an undetermined amount of U.S. currency pending an official count” was seized. The owner or person claiming ownership should be asked to sign the receipt. If the individual refuses to sign the receipt, this fact should be noted on the DEA‑12 and the DEA-6, Report of Investigation. If no one claims ownership of the cash, this fact should also to be noted on the DEA-12 and DEA-6. When cash is seized as the result of a warrant, agents are not required to issue a DEA-12. Instead, the agents are required to leave a copy of the warrant on the premises showing either the amount of cash seized or that an undetermined amount of cash was seized.

For the 742 cash seizures tested, we reviewed the DEA-6, DEA-12, and other documentation from the DEA case files to determine if the DEA followed this control. The documentation we reviewed did not indicate that the DEA agents regularly issued a receipt or warrant to the owner of the seized cash or did not maintain documentation to confirm they did so in 48 percent of the seizures tested. A summary of our test results for this control is shown in the following chart.

Agents Provided a Receipt or Warrant
to the Owner of the Seized Cash
39

Agents Provided a Receipt or Warrant: 52% yes, 1% could not determine, 47% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are shown in Appendix V. Among the 28 DEA offices we tested, the compliance rate ranged from 100 percent in the Montgomery, Alabama, District Office; New York’s John F. Kennedy Airport Office; and Brownsville, Texas, Resident Office to 0 percent in the McAllen, Texas, District Office and Cleveland, Ohio, and Ventura, California, Resident Offices.

DEA officials told us that based on their extensive prior experience in managing investigations they believed a DEA-12 or warrant was usually provided to the owner of the seized cash, but that the agents did not document that action. However, without such documentation we cannot determine whether a DEA-12 or warrant was provided to the owner. Moreover, failing to issue a DEA-12 or copy of the warrant and maintain this required documentation violated DEA policies.

Presence of a Witnessing Agent or Officer When Handling Seized Cash

The DEA’s controls require that a witnessing agent or officer be present when the cash is sealed in a Heat Sealed Evidence Envelope or other suitable container, transported to the local DEA office, and transported to the bank. For the 742 cash seizures tested, we reviewed the DEA-6 and other documentation from the DEA case files to determine if the DEA followed this control. Overall, our review found that the DEA did not maintain documentation indicating that a witnessing agent or officer was present at the various stages of the cash handling process. A summary of our test results for this control is shown in the following chart.

Presence of a Witnessing Agent or Officer
at Various Stages of the Cash Handling Process
40

Witness Present During Sealing: 21% yes, 75% could not determine, 4% no. Witness Present During Transport to the DEA: 30% yes, 49% could not determine, 21% no. Witness Present During Transport to the Bank: 63% yes, 26% could not determine, 11% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are shown in Appendix VI. Among the 28 DEA offices we tested, we found that:

DEA officials told us that they believed, based on their extensive prior experience, that witnesses were usually present when the cash was sealed in the evidence envelope and that the evidence envelope contained the signature of the witnessing agent. However, the DEA discarded the evidence envelopes after the cash was counted by the bank and usually did not document in the case records that a witness was present during sealing of the cash in the evidence envelope. The DEA officials also told us that they believed witnesses were usually present when the cash was transferred to the local DEA office and to the bank but that the agents did not document that a witness was present. However, without such documentation we cannot confirm whether a witness was actually present during sealing of the cash in the evidence envelopes or during transport of the cash to the DEA office and bank.

Recording Cash Seizures in the High-Value Seized and Recovered Monies Ledger

Beginning January 1, 2005, the DEA required that all high-value seized items, including cash, cashier’s checks, and recovered Official Advanced Funds, valued at $1,000 or more be recorded in a High-Value Seized and Recovered Monies (HVSRM) ledger. The HVSRM ledger should be used to record the receipt, transfer, and disposition of the high-value items. For the 742 cash seizures tested, we reviewed the HVSRM ledgers maintained by the evidence custodians to determine if the DEA implemented this control. Overall, we found that more than 80 percent of the cash seizures we tested that were valued at $1,000 or more were not recorded in the HVSRM ledger. A summary of our test results for this control is shown in the following chart.

Recording Seized Cash in the HVSRM Ledger43

Seized Cash Recorded in the HVSRM Ledger: 19% yes, 81% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are shown in Appendix VII. Among the 28 DEA offices we tested, the compliance rate ranged from 100 percent in 2 offices (John F. Kennedy Airport Office in New York and the Oxford, Mississippi, Resident Office) to 0 percent in 21 offices.44

We found that cash seizures typically were not recorded in the HVSRM ledgers because many DEA offices were not using the ledgers as required by DEA policy. For the 28 DEA offices tested, we found that only 6 (21 percent) used the HVSRM ledger to record all types of high-value seized and recovered items. The remaining 22 DEA offices either used the HVSRM ledger to record some types of high-value items but not others, or did not use the HVSRM ledger at all. The chart below summarizes our analysis of how the 28 DEA offices we tested used the HVSRM ledgers.

DEA Offices’ Use of the HVSRM Ledger

Seized cash, cashierís checks, and recovered Official Advanced Funds (OAF)-6 offices/21%, Cashierís checks only-5 offices/18%, Recovered OAF and evidence only-5 offices/18%, Cashierís checks and evidence only-2 offices/7%, Used two ledgers (seized cash only and evidence only)-6 offices/21%, Used two ledgers (evidence only and cashierís checks only)- 3 offices/11%, Did not use a ledger-1 office/4%.
Source: OIG analysis of DEA records and interviews with DEA staff

We attribute the disparity in how the different DEA offices used the HVSRM ledgers to the evidence custodians not having attended current training, as discussed on pages 33 and 34 of the report. Not recording cash in the ledgers can cloud the chain-of-custody of seized cash because we found numerous instances where other chain-of-custody forms were not completed making it difficult or impossible to identify who had custody of the cash. Improper use of the ledgers also increases the risk that seized cash could be lost or stolen without detection.

Timeliness of Transporting Seized Cash to the Bank for an Official Count and Conversion to a Cashier’s Check

The DEA established an internal control to safeguard seized cash by minimizing the time the cash is in the DEA’s possession. The control requires that agents transfer seized cash to the bank for an official count and conversion to a cashier’s check as soon as arrangements can be made with the bank.45

For the 742 cash seizures tested, we reviewed documentation from the DEA case files and interviewed the DEA officials to determine if the DEA followed this control. The documentation we reviewed showed that the DEA transported seized cash to the bank in an average time of 3.2 working days after seizure. Three of the seven Divisions we tested had average times at or below the average and the other four divisions had average times ranging from 3.3 to 4.7 working days as shown in the following chart. The detailed results for each office we tested are shown in Appendix VIII.

Average Number of Working Days from Seizure
to Transport of Cash to the Bank (By Division)

DEA Divisions average time: New Orleans-1.4, Detroit-1.6, Houston-1.8, Los Angeles-3.3, Washington-3.5, Miami-4.5, New York-4.7. Average of all 7 divisions tested-3.2.
Source: OIG analysis of DEA records

We found that some offices took seized cash to the bank much more quickly than others. As shown in Appendix VIII, for the 28 DEA offices tested the average working days from when the cash was seized to when it was taken to the bank ranged from 0.5 days (Austin, Texas) to 7.4 days (West Palm Beach, Florida). The wide divergence resulted because some offices required agents to take the cash to the bank daily, while other offices required weekly trips to the bank. Other offices did not have set schedules for taking cash to the bank but instead made impromptu bank trips when agents were available.

The risk of mishandling all seized cash and particularly cash that is not counted prior to transportation to the bank increases the longer the cash is held. We believe that the DEA should review the cash handling processes in the timeliest Divisions – Houston, New Orleans, and Detroit – to determine if those processes can be used in other offices to reduce the time that cash is on hand.

Timeliness of Transferring Seized Cash to the USMS

To minimize the time cash is held, the DEA requires that seizures subject to forfeiture and not retained as evidence be transferred to the custody of the USMS within 15 working days of seizure.

For the 742 cash seizures tested, we reviewed case file records showing the date cash was seized and the Form DEA-48a (Disposition of Non-drug Evidence) or other documentation showing the date cash was transferred to the USMS to determine if the DEA followed this control. With the exception of the Detroit Division, the DEA Divisions generally transferred seized cash to the USMS in a timely manner. Overall, the average time from seizure to transfer of the seized cash to the USMS was 10.6 working days. Four of the seven divisions had average times of 5.6 to 10.2 working days and the other three divisions had average times ranging from 10.9 to 15.6 working days as shown in the following chart. The detailed results for each office we tested are shown in Appendix IX.

Average Number of Working Days from
Seizure to Transfer of Cash to the USMS

DEA Divisions within 15 working day limit: New York-5.6 days, Los Angeles-9.6 days, Houston-9.6 days, Washington-10.2 days, New Orleans-10.9 days, Miami-13.3 days. DEA Divisions that exceeded the 15 day working limit: Detroit-15.6 days. The average for all divisions tested was 10.6 days.
Source: OIG analysis of DEA records

While the overall averages for 6 of the 7 divisions tested were within the 15 working day limit established by the DEA, we found that 10 of the 28 individual DEA offices tested exceeded the limit for the cash seizures we tested. As shown in the chart at Appendix IX, for the sample seizures the average time from seizure to transfer of the cash to the USMS for these 10 offices ranged from 15.2 to 28.8 working days. Some offices, such as the Long Island, New York, office had banks wire the funds directly to the USMS instead of obtaining a cashier’s check from the bank and then delivering the check to the USMS. None of the 10 offices that exceeded the 15-day limit used the wire transfer process. The DEA Agents Manual encourages Divisions to collaborate with the USMS to arrange for wire transfers in cities where this procedure is not already in place. We believe the use of wire transfers could significantly reduce the amount of time that seized funds remain in the possession of the DEA and reduce the risk of loss.

Maintaining Chain-of-Custody Records

The DEA Agents Manual specifies that all due care must be exercised to create an unimpeachable record of the chain of custody and processing of high-value items. Thus, DEA agents and officials are required to use a DEA-12, signed by the transferring agent and witnessed by another law enforcement person, to document the transfer of any high-value item. The DEA established this requirement to avoid any discrepancies, accusations of theft, or misappropriation of the seized item.

In some cases, the manual allows the transfer of cash using the DEA-12 or another acceptable form, such as the DEA-7a, or Standard Seizure Form (SSF).46 When cash is seized and taken to the local DEA office during regular duty hours, the agent is to release custody of the seized cash to the evidence custodian using a DEA-12, DEA-7a, or SSF. After regular duty hours, the agent is required to place the cash in temporary overnight storage using a DEA-12 or DEA-7a and make an entry in the temporary overnight ledger.47 Copies of the DEA-12, DEA-7a, and SSF documenting the delivery of the cash are to be put in the case files and preserved as part of the chain-of-custody records.

For the 742 cash seizures tested, we reviewed documentation from the DEA case files and interviewed DEA officials to determine if the DEA followed this control. The documentation we reviewed showed that agents in many of the DEA offices generally did not use a DEA-12, DEA-7a, or SSF to document the transfer of seized cash when placing the seized cash into temporary overnight storage or when transferring the cash directly to an evidence custodian. A summary of our test results for this control is shown in the following chart.

Transfer of Cash to the Evidence Custodian
Using the Proper Chain-of-Custody Form
48

Agents Transferred Cash Using Proper Form: 26% yes, 74% no.
Source: OIG analysis of DEA records

The detailed results for each office and Division we tested are shown in Appendix X. Among the 28 DEA offices tested, the compliance rate ranged from 100 percent in the Syracuse, New York, Resident Office to 0 percent in 16 offices.49

The evidence custodians and other DEA officials in the offices we tested told us that making an entry in the HVSRM ledger was sufficient to document the transfer of the currency to an evidence custodian. However, we found 275 instances where the transfer of cash to the evidence custodian was not documented on the proper chain-of-custody form and the cash was not recorded in the HVSRM ledger.

Failure to maintain the proper chain-of-custody records unnecessarily increases the risk that seized cash can be misappropriated. We identified 119 cash seizures where the risk of misappropriation was exceptionally high because: (1) the agents did not count or did not document that they counted the seized cash upon discovery; (2) the agents did not take the seized cash directly to the bank for an immediate count; (3) the agents did not document the transfer of the cash to the evidence custodian using a DEA-12 or other appropriate chain-of-custody form; and (4) the seized cash was not recorded in the HVSRM ledger. As shown in the following chart, the location of these 119 cash seizures totaling about $4.7 million was not documented for from 1 to 35 days.

Seizures with Significant Risk of Loss or Theft

Division Number of
Seizures
Dollar
Value of
Seizures
Days
Unaccounted
For

Washington

11

$73,083

1 to 17

New Orleans

12

$732,793

1 to 4

Miami

59

$1,707,373

1 to 35

Houston

11

$198,984

1 to 2

Detroit

19

$563,978

1 to 3

Los Angeles

7

$1,382,512

1 to 4

Totals

119

$4,658,723

1 to 35

Source: OIG analysis of DEA records

DEA officials at some offices (Tampa, Orlando, and Baltimore) told us that supervisors have safes in their offices where they secure currency pending an official count. However, we found no evidence that these supervisors recorded cash seizures on a ledger and obtained a DEA-12 or other chain-of-custody form to document receipt of seized cash from the agents.

Training and Website Guidance

As discussed in the Prior Audits, Inspections, and Reviews section of this report, the DEA responded to prior report recommendations by: (1) developing a classroom training program for agents and evidence custodians that included training on handling seized cash; and (2) adding a Frequently Asked Questions segment that focuses on the handling of evidence including seized and recovered monies to the DEA’s electronic library. We reviewed the content of the new training program and the Frequently Asked Questions segment and found that both appeared to cover the problem areas that we found during this audit.

To determine if the evidence custodians were using the training and website to improve their knowledge of handling seized cash, we interviewed the evidence custodians at the seven Divisions we tested. We found that only 16 of the 72 evidence custodians interviewed had attended the updated training. Other custodians stated that they did not know about the training or when the classes were held. However, 61 of 72 evidence custodians were familiar with the Frequently Asked Questions document available on the DEA’s electronic library. We recommend that DEA ensure that all agents and evidence custodians that handle seized cash receive the new training, which should improve their handling of seized cash.

Documentation Errors and Supervisory Oversight

Throughout our audit, DEA managers in Headquarters and in individual offices told us that problems we identified resulted from documentation errors alone, and that DEA staff routinely follow cash-handling controls. We acknowledge that this explanation may provide a partial explanation for some of the deficiencies we identified. However, unless the DEA creates and maintains documentation regarding the handling of seized cash, a requirement of current DEA policy, neither we nor the DEA can be certain that cash is handled appropriately and according to the DEA’s policies. Moreover, in many cases we know that the seized cash was not handled in accord with DEA policies by our review of the documents that existed and by our interviews of DEA agents who acknowledged that they did not follow certain DEA policies.

Moreover, several DEA supervisors acknowledged to us that agents were not following DEA cash seizure policies and that they were not enforcing such polices. A lack of supervisory oversight appeared to be a direct cause of the problems that we identified in the New York Division. At the conclusion of our work in that Division an Assistant Special Agent in Charge (ASAC) reviewed our results and generally concurred with our findings. The ASAC immediately issued an e-mail directive to the office’s Group Supervisors requiring improved documentation of cash handling. The ASAC’s e-mail provided detailed reminders of the documentation requirements with which the Group Supervisors were to ensure compliance.

This action by the ASAC constituted prompt and appropriate corrective action to address problems related to documentation failures. Given the deficiencies we identified across the DEA, and to the extent that our deficiencies derive from documentation failures, similar strengthening of supervisory oversight is necessary in many DEA offices. We believe that increased supervisory oversight should take the form of more frequent reminders to staff of the documentation requirements and better supervisory review, including review during periodic inspections, of documentation to ensure compliance with requirements.

Conclusion

Our audit found that while the DEA had established internal control policies for safeguarding seized cash, some of those policies should be strengthened. For example, the DEA needs to better define what is meant by “practical” in its guidance for counting cash that states if the amount of currency is such that an immediate count is “practical,” a count is to be conducted by the seizing agent and witnessing agent or officer. Furthermore, the timeframe for seized cash to be taken to the bank needs to be redefined to ensure that DEA offices minimize the time they have custody of all seized cash and particularly uncounted seized cash. In addition, the transfer of seized cash to the USMS needs to be speeded by mandating the use of wire transfers where possible.

Moreover, our testing found that the DEA did not adequately follow many of its controls regarding cash seizures. For most seizures we tested, documentation did not show that a witnessing agent or task force officer was present at critical stages of the cash handling process, as required by the DEA Manual. Further, we found that agents and task force officers generally did not follow DEA requirements on when to count the seized currency; did not provide a receipt to the subject from whom the currency was taken; did not complete documents transferring custody of the currency to an evidence custodian; and did not record the receipt, transfer, or disposal of the currency in a temporary or permanent control ledger.

The failures to enforce effective controls for safeguarding seized cash can lead to discrepancies, accusations of theft, or misappropriation of seized cash. We identified 12 instances where either the DEA’s OPR or the OIG’s Investigations Division investigated allegations of stolen or missing seized cash and the investigations showed that DEA personnel did not follow established controls for safeguarding the seized cash, including not counting the seized cash, not providing a DEA-12 receipt to the suspect, and transporting the seized cash without a witness present.

While the DEA claims, without support or documentation, that its agents follow DEA policies regarding handling of cash seizures, our audit indicated otherwise. The DEA should not rely on its hope, without documentation, that its internal controls are followed. Rather, the DEA should more rigorously enforce its internal controls, which require documentation that employees comply with its cash seizure policies.

RECOMMENDATIONS

We recommend that the DEA:

  1. Clarify the policy on counting seized cash and clearly define the circumstances under which it is and is not required to count cash at the time of seizure.

  2. Research best practices associated with timely transport of seized cash to banks, including those in several DEA offices that timely transfer cash to banks, and implement those practices as widely as possible.

  3. Ensure that seized cash is wire-transferred to the USMS whenever possible.

  4. Issue to all staff involved in cash seizure activities periodic reminders of the internal controls to be followed and documented, including:

  5. Instruct DEA staff who supervise cash handling activities to monitor documentation such as the Report of Investigation (DEA-6) and other cash handling forms completed by agents to ensure the forms are sufficiently detailed to show cash handling controls are followed. In addition, instruct the supervisors to ensure that the required forms are maintained in the case files.

  6. Identify all evidence custodians who have not attended the DEA’s comprehensive classroom training course that includes training on cash handling controls. Ensure these custodians receive the appropriate training.

  7. After the DEA clarifies its policy on counting cash and implements best practices for timely transferring cash to banks, ensure that inspection procedures are revised to include steps to measure DEA’s implementation of the controls established for counting cash and for transporting seized cash to the bank in a timely manner.



Footnotes
  1. A Heat Sealed Evidence Envelope is a clear plastic bag or other suitable container used to hold seized currency or other property. With limited exceptions, the HSEE or other container should not be opened until the currency is transported to a bank for conversion to a cashier’s check, or processed as an evidentiary exhibit. When an evidence container has been opened, the evidence and all parts of the old evidence container should be put in a new evidence bag or container and resealed. Details of the opening and resealing of the container should be recorded on a DEA-6, Report of Investigation. The HSEE is discarded after being opened at the bank for the bank’s official count.

  2. The DEA-12, Receipt for Cash or Other Items, is a multipurpose form used to document the following actions: (1) providing a receipt to the owner, or person claiming ownership, of property that is seized; (2) documenting the return of property held less than 5 working days; (3) placing non-drug evidence into temporary custody; and (4) recording the short-term transfer of non-drug evidence exhibits between agents and evidence custodians or other law enforcement personnel for production in court.

  3. A seizure warrant is a written order by the court authorizing the search or seizure of property.

  4. According to the DEA Agents Manual, temporary storage refers to a safe, locker, or other secure place. Many DEA offices have bank style night-drops or similar facilities for overnight temporary storage of high-value items such as currency. Agents are not permitted to store seized currency in locked desks, unoccupied vehicles, or hotel rooms.

  5. The DEA considers the bank’s count to be the official count for accountability purposes.

  6. United States Attorneys Manual, Chapter 9-118, The Attorney General’s Guidelines on Seized and Forfeited Property, July 31, 1990.

  7. To complete this test, we compared the date of seizure to the date the currency was converted to a cashier’s check. If those dates were different, the agents should have placed the currency in secure storage along with the appropriate transferring documentation and made a entry in an overnight ledger.

  8. Our statistical sample was derived from a sample universe of 3,705 seizures valued at $160,680,618. As previously stated, the overall universe was 16,007 seizures valued at $616 million. Appendix I includes a detailed discussion of why certain cash seizures were excluded from our sample universe based on requests from the DEA or based on the results of our preliminary testing.

  9. The 50 seizures tested for the Los Angeles Division Office included 20 seizures for the Los Angeles Airport Group Office.

  10. The number of cash seizures tested in the Washington Division included both adopted seizures and DEA seizures. After our preliminary testing in the Washington Division, we excluded adopted seizures from our expanded testing, as explained in Appendix I. Thus, we tested more seizures in the Washington Division than in the other DEA Divisions.

  11. “Yes” means the DEA-6, Report of Investigation, or other documentation showed that a witnessing agent or officer was involved. “No” means the DEA-6 or other documentation showed that only one agent or officer was involved. “Could not determine” means the DEA-6 or other documentation did not provide sufficient information to confirm whether a witnessing agent or officer was involved. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 5 percentage points of what they would have been if the entire population had been tested.

  12. For the test of whether agents counted the seized cash, “Yes” means the DEA-6 or other documentation showed that agents counted the cash. “No” means the DEA-6 or other documentation showed that agents did not count the cash. “Could not determine” means the DEA-6 or other documentation did not provide sufficient information to confirm whether the agents counted the cash. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 5 percentage points of what they would have been if the entire population had been tested.

  13. The offices were the: Division Offices in Detroit, Michigan; Miami, Florida; John F. Kennedy Airport Office in New York; District Offices in Richmond, Virginia; and Riverside, California; and Resident Offices in Ventura, California; Austin, Texas; Dayton, Ohio; Cleveland, Ohio; West Palm Beach, Florida; and Syracuse, New York.

  14. “Yes” means the DEA-12, DEA-6, or other documentation showed that agents provided a receipt or warrant to the owner of the cash. “No” means the DEA-12, DEA-6, or other documentation showed that agents did not provide a receipt or warrant to the owner of the cash. “Could not determine” means the DEA-6 did not contain sufficient information to confirm whether the agents provided a receipt or warrant to the owner of the cash, and the DEA provided no other documentation to show a receipt or warrant was provided to the owner. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 2 percentage points of what they would have been if the entire population had been tested.

  15. “Yes” means the DEA-6 or other documentation showed that a witnessing agent or officer was involved. “No” means the DEA-6 or other documentation showed that only one agent or officer was involved. “Could not determine” means the DEA-6 or other documentation did not provide sufficient information to confirm whether a witnessing agent or officer was involved. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus: (1) 6 percentage points of what they would have been if the entire population had been tested for the test of a witness present during sealing of the cash, (2) 6 percentage points for the test of a witness present during transport of the cash to the local DEA office, and (3) 2 percentage points for the test of a witness present during transport of the cash to the bank.

  16. The offices were the: Division Office in Houston, Texas; District Offices in Fort Lauderdale, Florida; Baltimore, Maryland; and Richmond, Virginia; and Resident Offices in Birmingham, Alabama; Oxford, Mississippi; Ventura, California; Austin, Texas; Brownsville, Texas; Cleveland, Ohio; and Norfolk, Virginia.

  17. The offices were the District Office in Tampa, Florida; and the Resident Offices in Oxford, Mississippi; Austin, Texas; Brownsville, Texas; and Cleveland, Ohio.

  18. “Yes” means documentation showed that the cash seizure tested was recorded on the HVSRM ledger. “No” means documentation showed that the cash seizure tested was not recorded on the HVSRM ledger. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 5 percentage points of what they would have been if the entire population had been tested.

  19. The offices were the Division Offices in Washington, D.C.; Detroit, Michigan; Houston, Texas; and Miami, Florida; the District Offices in Baltimore, Maryland; Richmond, Virginia; Columbus, Ohio; McAllen, Texas; Riverside, California; Fort Lauderdale, Florida; Orlando, Florida; Tampa, Florida; Birmingham, Alabama; and Long Island, New York; and the Resident Offices in Norfolk, Virginia; Cleveland, Ohio; Dayton, Ohio; Brownsville, Texas; Austin, Texas; Ventura, California; and Syracuse, New York.

  20. This control became effective on April 5, 2005. Prior to this date, the DEA’s policy required that for unknown amounts, agents were to transport cash to the bank for an official count and conversion to a cashier’s check on the next business day following the seizure. If the exact amount was known, the agents were to transport the cash to the bank within 5 working days.

  21. The SSF is a 5-page form that includes case and asset information, names and addresses of potential claimants, and other details such as probable cause and chain-of-custody information.

  22. According to the DEA Agents Manual, temporary storage refers to a safe, locker, or other secure place. Many DEA offices have bank style night-drops or similar facilities for overnight temporary storage of high-value items such as cash. Agents are not permitted to store seized currency in locked desks, unoccupied vehicles, or hotel rooms.

  23. “Yes” means documentation showed that the agents transferred the seized cash to the evidence custodian using a DEA-12 or other appropriate form. “No” means documentation showed that the agents transferred the seized cash to the evidence custodian without using a DEA-12 or other appropriate form. Based on our statistically valid projected point estimates, the percentages reported in this analysis of the sampled items are within plus or minus 3 percentage points of what they would have been if the entire population had been tested.

  24. The offices were the Division Offices in Washington, D.C.; Los Angeles, California; and Miami, Florida; the District Offices in Baltimore, Maryland; Richmond, Virginia; Birmingham, Alabama; Montgomery, Alabama; Long Island, New York; and Orlando, Florida; and the Resident Offices in Norfolk, Virginia; Cleveland, Ohio; Oxford, Mississippi; Ventura, California; Austin, Texas; and Brownsville, Texas; and the John F. Kennedy Airport Office in New York.



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