SCOPE, METHODOLOGY, AND BACKGROUND INFORMATION
1. DEA Property Management Systems
We conducted our audit in accordance with Government Auditing Standards issued by the Comptroller General of the United States. The audit included tests of DEA's property systems for administrative property, badges and credentials, firearms, technical equipment, and vessels. The audit concentrated on, but was not limited to, the current inventory at the time of testing.
Two other property management systems, motor vehicles and aircraft, were subject to limited reviews. Aircraft were reviewed in detail in OIG Report Number 95-29, Drug Enforcement Administration Management of Aviation Operations. Our survey work on motor vehicles identified minor errors. Therefore, this system appeared generally adequate and was excluded from detailed testing.
We conducted our work at DEA Headquarters located in Arlington, Virginia, and select offices in Quantico and Newington, Virginia. At the field level, we performed tests at five of DEA's largest division offices as well as two sub-offices within each division. A vessel was tested at an additional division office. In addition, we conducted testing at the El Paso Intelligence Center and at four laboratories because of the high dollar amount of equipment located at these facilities. See Appendix II for a detailed listing of locations and systems reviewed.
To perform the audit, we: (1) reviewed laws, policies, regulations, manuals, and memoranda; (2) interviewed responsible personnel; (3) performed tests of internal controls; and (4) reviewed property listings, records and files, accounting data, and invoices. In total, we interviewed 157 individuals and tested 3,763 property items.
Furthermore, the audit team performed tests of inventory for administrative property, badges and credentials, firearms, and technical equipment at the locations audited. We selected a sample of items from the property inventory records and attempted to physically verify each item. Conversely, we also selected a sample of items on-site and attempted to trace the items to the applicable property listing. Due to the overlap of property management systems, if an administrative or technical equipment item was not located on its respective listing, the audit team attempted to locate the item in the other database.
In addition, for firearms, we tested weapons maintained in storage (stock weapons). We verified items both to and from the property listings. Additionally, for badges in stock, we reconciled the property listing to the badges in storage at DEA Headquarters.
For the testing of vessels, we: (1) physically verified the existence and location of 3 vessels (there was a total 17 nationwide); (2) interviewed vessel operators; (3) inventoried DEA accountable property on board the sampled vessels; and (4) attempted to trace these items to a property management system.
In the course of the audit, we found that some of the property identified as exceptions did not have any value assigned. There were two reasons for the missing values: (1) the item was not found on a property listing, and (2) the item was a piece of technical equipment, which did not have a value assigned on the property listing (72 percent of the values in TEIS were missing, as explained in the Findings and Recommendations section of the report).
We used a conservative approach when assigning a value to these exceptions. We reviewed the DEA property listings for similar brands and/or models. If the identical item was found on a property list, we assigned that value. If similar types of items were found, we selected the lowest value. If no similar items were found on a property listing, we assigned a minimum retail value or the minimum required value for personal property, $100, to the item.
2. DEA's Fixed Assets
The review period for the testing of fixed asset accounts focused on activities occurring between April 1, 1994 and March 31, 1995. Audit work was conducted at DEA Headquarters and included interviews of accounting personnel and reviews of pertinent records, invoices, and memoranda.
Purchases - We selected a sample of equipment purchases using statistical sampling techniques and analyzed the corresponding invoices to determine if DEA correctly classified the equipment as capitalized or non-capitalized property. We calculated the error rates for the sample and for the population, which included purchases that were paid for between April 1, 1994 and March 31, 1995.
The following table provides additional information about the sample and the universe of purchases that were included in our scope:
|BASIC INFORMATION ABOUT TESTS OF PURCHASED EQUIPMENT|
|CHARACTERISTICS OF THE UNIVERSE AND SAMPLE|
|Size (in dollars)||$41,364,797.38||$15,837,232.33|
|Size (in invoices)||3,910||43|
|Amount Tested (in dollars)||N/A||$15,810,881.30|
|Number of Invoices Tested||N/A||42|
|Amount Not Tested (in dollars) [ One invoice was not tested due to a lack of detailed information concerning individual items.]||N/A||$26,351.03|
|SAMPLE SELECTION INFORMATION|
|Sample Selection Method||Dollar Unit Sampling|
|Sample as a percentage of the Universe (calculation based on dollars)||38.29%|
We used a 95 percent confidence level and a precision of plus or minus 7 percent to statistically select a sample of 43 invoices valued at $15.8 million from a universe of 3,910 invoices valued at $41.4 million.
We also traced the serial numbers of items purchased, when shown on the sampled invoices, to a property management system to determine if the property had been recorded in a property management system.
Non-Purchased Property - We reviewed forfeited assets placed into official use by DEA between April 1, 1994 through March 31, 1995 which met capitalization criteria. However, the figures in the report are instead based upon work performed by DEA accounting personnel. These employees had identified all forfeited and transferred in motor vehicles, aircraft, and vessels placed into service and currently on hand that needed to be recorded in the general ledger. These figures were used because they were more current and complete.
Disposals - We analyzed printouts of capitalized property disposed of between April 1, 1994 and March 31, 1995, and traced a limited sample of disposed items to DEA's financial records to corroborate that the items were not removed from the general ledger.
DEA OFFICES AND PROPERTY SYSTEMS REVIEWED
|OFFICE||PROPERTY SYSTEMS REVIEWED|
|ADMINISTRATIVE PROPERTY||AIRCRAFT||BADGES & CREDENTIALS||FIREARMS||MOTOR VEHICLES||TECHNICAL EQUIPMENT||VESSELS|
|TECHNICAL OPERATIONS SECTION||X||X||X||X||X|
|FIREARMS TRAINING UNIT||X||X||X||X|
|EL PASO INTELLIGENCE CENTER||X|
|MID ATLANTIC LABORATORY||X|
|NORTH CENTRAL LABORATORY||X||X||X|
|AIR WING (CHICAGO)||X|
|MILWAUKEE RESIDENT OFFICE||X||X||X||X||X|
|MADISON POST OF DUTY||X||X||X||X||X|
|SAN ANTONIO DISTRICT OFFICE||X||X|
|AUSTIN RESIDENT OFFICE||X||X|
|LOS ANGELES DIVISION||X||X||X||X|
|LAS VEGAS RESIDENT OFFICE||X||X|
|RIVERSIDE RESIDENT OFFICE||X||X|
|MIAMI DIVISION OFFICE||X||X||X||X||X|
|TAMPA DISTRICT OFFICE||X||X|
|FORT MYERS RESIDENT OFFICE||X||X|
|NEW YORK DIVISION||X||X||X||X|
|BUFFALO RESIDENT OFFICE||X||X|
|LONG ISLAND RESIDENT OFFICE||X||X|
|WASHINGTON D.C. DIVISION||X|
LIST OF ACRONYMS
DEA - Drug Enforcement Administration
DOJ - Department of Justice
JMD - Justice Management Division
JPMR - Justice Property Management Regulations
OIG - Office of the Inspector General
OMB - Office of Management and Budget
PMO - Property Management Officer
STT - Office of Science and Technology, Technical Operations Section
TEIS - Technical Equipment Inventory System
DEFINITIONS OF TERMS
Administrative Property: All equipment with a value over $100 (excluding technical equipment), all furniture with a value over $1,000, and all forfeited property (excluding conveyances).
Allowance Holders: Employees authorized to purchase property.
Prior to July 19, 1995: Generally, property with an acquisition cost in excess of $5,000 and a useful life of two or more years.
July 19, 1995 and after: Generally, property with an acquisition cost in excess of $25,000 and a useful life of two or more years.
Disposed Assets: All property which has been sold, lost, destroyed, or transferred out of the agency.
General Ledger: A cumulative chronological record of all financial transactions, which forms the basis for financial reports.
Fixed Asset Balance: The sum of accounts in the general ledger listing all capitalized property.
Forfeited Property: All property obtained through the seizure and forfeiture process which has been placed into official use.
Non-Capitalized Property: All DEA owned property which does not meet the capitalization criteria.
Non-Purchased Assets: Assets received through forfeiture and transfers from other agencies.
Object Classification Code: A four digit numeric field that classifies obligations and expenditures as to their nature. These codes determine whether property should be capitalized or not.
Personal Property: Property of any kind or interest therein, except real property and records of the Federal Government. This is property for which good management practice dictates that it would be in the interest of the Government to assign and record accountability to assure the proper use, maintenance, protection, and disposal of property for which the Government is responsible.
Personal Property Management: A system for controlling the acquisition, receipt, storage issue, utilization, maintenance, protection, accountability, and disposal of personal property to best satisfy the program needs of the Department.
Property Management Officer: An individual responsible for the overall administration, coordination, and control of the personal property management program of a bureau.
Sample Interval: The dollar amount that is added to a randomly selected starting point in the population and applied systematically in order to select a sample for review.
Technical Equipment: Investigative, communications, and communications security equipment.
As agreed upon at the exit conference held on December. 13, 1995, the Drug Enforcement Administration (DEA) has undertaken a more thorough review of the Draft Working Product in the above-referenced matter. Although the initial agreement was that DEA would consent in writing to each of the eight recommendations as well as address, in generalities, how we plan to accomplish each recommendation, the significant responses received by the Office of Inspections from the affected components demand a more complete exposition of DEA's position. Accordingly, as subsequently agreed upon by our respective staffs, I am submitting the following formal response.
The Administrator, DEA, establish a comprehensive personal property management program which is adequately administered, controlled, and coordinated by a single property management officer. This program should include a system of adequate, standardized internal controls and reliable inventory records.
DEA concurs with the recommendation, subject to the availability of adequate and manpower resources. Due to past and current resource limitations, DEA had requested the Department of Justice (DOJ) to take the lead in developing a standardized property management program, which interacts with the general ledger, for use by all DOJ components opting to use the system. DOJ is developing this new system with adequate standardized internal controls reliable inventory records.
DEA further concurs that this program should be administered, controlled, and coordinated by a single property management officer. However, our dependence upon DOJ precludes DEA from providing you with any date for implementation.
The Administrator, DEA, ensure that allowance holders and accounting personnel receive adequate training in the use of object classification codes.
DEA concurs with the recommendation. In fact, fiscal training workshops are scheduled to begin in February 1996, to include a review of the proper use of subobject classification codes (SOC). Further, the Accounting Section (FRA) is in the process of developing additional training programs for DEA's fiscal personnel with a greater emphasis on the proper use of SOCS. A copy of the outline to be used for additional training programs can be found at Attachment A. Also, it is FRA's policy to notify all allowance holders in writing regarding any changes to SOCS, as reflected in Attachment B.
Finally, FRA also trains its own personnel on detecting errors during the document reviews of SOCs during the payment process as well as reinforcing training measures with written notification(s). Examples of these written notifications are contained in Attachment C.
The Administrator, DEA, ensure that the object classification codes on the invoices are verified during the payment process.
DEA concurs with the recommendation. The subobject classification codes require review at several stages during the payment process by both allowance holders and FRA personnel. Correspondence contained in Attachments B and C reflect the various stages of review.
In addition, FRA staff reconcile the fixed asset accounts to the appropriate inventory subsystem on a quarterly basis. At the time of reconciliation, FRA staff identify and correct any inaccurate SOC postings to the General Ledger (GL).
The Administrator, DEA, ensure that the Accounting Section is notified of forfeited and transferred assets placed into service, and the assets are properly recorded in the general ledger.
DEA concurs with the recommendation. FRA is in the process of reviewing each of the fixed asset categories, copies of which reviews can be found at Attachment D. A common deficiency identified in each of these reviews was that FRA had not been provided with notification of the forfeited and transferred assets placed into service. As corrective action, the Property Management Unit is now required to notify FRA at the time forfeited/transferred assets are placed into service. Upon notification, FRA will record these assets into the GL. Please refer to Attachment E for copies of the official notification requirements established for each fixed asset category.
In addition to the foregoing, FRA staff reconcile the fixed asset accounts to the appropriate inventory subsystem on a quarterly basis. This reconciliation will identify any additions or deletions that are- not recorded in the GL.
The Administrator, DEA, ensure that the Accounting Section is notified of dispositions of capitalized property, and the assets are deleted from the general ledger.
DEA concurs with the recommendation. Much like the forfeited/transferred assets referenced in Recommendation 4, above, FRA notification concerning dispositions of capitalized property has also been identified as a common deficiency as indicated in Attachment D. Resolution of these deficiencies has been likewise accomplished via the documentation contained in Attachment E.
Accordingly, upon notification, FR-A will remove the nondepreciated balance from the GL. In addition, FRA staff will use its quarterly reconciliation of the fixed asset accounts as a control mechanism to identify those items that have been disposed of, but have not been removed from the GL balance.
The Administrator, DEA, ensure that the reconciliation of all the fixed asset accounts is completed, and the appropriate adjusting entries to the accounting records are made.
DEA concurs with the recommendation. As indicated in the responses to the previous two recommendations, FRA is in the process of reviewing each of the fixed asset accounts. These reviews include performing a reconciliation of the GL records with the property records, Reviews have been completed for. Official Boats, Land, Construction In Progress, Buildings and Official Vehicles, with FRA making adjustments to the GL balance for these accounts to bring, each into agreement with the property records.
The Administrator, DEA, ensure that the fixed asset accounts are regularly reconciled with the property records.
DEA concurs with the recommendation. FRA requires that property managers provide FRA with a current inventory listing quarterly so that the current inventory listing can be reconciled to the GL. These reconciliations serve as a control mechanism to ensure that the GL balance is in agreement with the property records.
For the quarter ending September 30, 1995, reconciliations were performed for Official Boats, Land, Construction in Progress, and Buildings. There were no exceptions found between the GL accounts and the inventory records. For the quarter ending December 31, 1995, these GL fixed asset accounts will be reconciled alone with Official Vehicles. This latter reconciliation will be completed by February 28, 1996.
The Administrator, DEA, ensure that the assets recorded in the accounting records and the property records have a common identifier.
DEA concurs with the recommendation. FRA has established unique identifiers for all of DEA's fixed assets. FRA notified all allowance holders as well as its own staff of these unique identifiers and the requirement to provide them, along with the accounting classification, on the payment document on September 6, 1995 (See Attachment B).
In closing, I understand that, upon review of this response, you will issue a revised draft. Based on the foregoing, I anticipate that you will be able to issue your revised draft and/or final report with most, if not all, recommendations resolved. If you have any questions regarding this memorandum, please contact Acting, Audit Liaison Joan Henry at (202) 307-8299.
cc: Vickie Sloan
Audit Liaison Office
THE ATTACHMENTS TO THE DEA CONCURRENCE MEMORANDUM WERE OMITTED DUE TO THEIR VOLUME