Review of the Drug Enforcement Administrationís Use of the Diversion Control Fee Account

Evaluation and Inspections Report I-2008-002
February 2008
Office of the Inspector General


Executive Digest

INTRODUCTION

The Office of the Inspector General (OIG) initiated this review in response to congressional concern about the Drug Enforcement Administration’s (DEA) use of the Diversion Control Fee Account (Fee Account). The Chairman of the Permanent Subcommittee on Investigations of the Senate Homeland Security and Governmental Affairs Committee (the Chairman) wrote to the OIG stating that he had been informed that the DEA may have been using Fee Account funds to pay for agency activities unrelated to the Diversion Control Program. The Chairman’s letter also stated that the DEA may have prohibited Diversion Investigators from working overtime and initiating travel and did not hire new Diversion Investigators due to a lack of Fee Account funds. (See Appendix I for the Chairman’s letter to the Inspector General.)

The mission of the DEA’s Diversion Control Program is to prevent, detect, and investigate the redirection from legitimate channels of controlled pharmaceuticals (such as narcotics, stimulants, and depressants) and certain listed chemicals (such as ephedrine). Federal law requires the DEA to recover “the full costs of operating the various aspects” of its Diversion Control Program through the fees charged to DEA registrants, such as manufacturers, distributors, dispensers (including physicians), importers, and exporters of controlled substances and listed chemicals.1

The objectives of our review were to determine whether the DEA had used Fee Account funds for non-diversion control activities and whether it had fully funded its Diversion Control Program by using the Fee Account as required by law. Our review assessed these issues between fiscal year (FY) 2004 and FY 2007. We chose this time period for our review because FY 2004 was the first full year after the DEA created an organization within headquarters known as the Validation Unit to review and ensure that every Fee Account expense over $500 is related to a diversion control activity.2 The DEA established the Validation Unit to address concerns of registrants and diversion control employees about how it was using Fee Account funds.

To examine the DEA’s use of Fee Account funds and assess the allegations referred to us, we reviewed documents pertaining to the Fee Account; conducted interviews with Office of Diversion Control, Financial Management Division, and Office of Chief Counsel personnel at DEA headquarters; and conducted interviews with diversion control employees at three DEA field divisions we visited and telephone interviews with employees in four additional DEA field divisions. We also reviewed financial documents to determine whether Fee Account funds had been used for non-diversion control activities. To assess whether the DEA fully funded its Diversion Control Program salary costs with Fee Account funds, we analyzed work hour data for FY 2004 through FY 2007.

RESULTS IN BRIEF

We did not substantiate the allegations that the DEA misused Fee Account funds for non-diversion control activities between FY 2004 and FY 2007. However, 14 out of the 34 (41 percent) Diversion Investigators in field divisions we interviewed told us that they thought that the DEA had used Fee Account funds inappropriately.3 We believe that the DEA’s recent policy of using more Special Agents and Intelligence Analysts within the Diversion Control Program to support investigations, combined with inaccurate understandings of how the DEA is permitted to use the Fee Account, contributed to this misperception among Diversion Investigators.

However, although we found no use of Fee Account funds for non-diversion activities, our review concluded that the DEA did not fully fund all Diversion Control Program salary costs with the Fee Account, as required by 21 U.S.C. § 886a(1)(C). Our analysis showed that the DEA used an estimated $15.4 million of its appropriated funds to support criminal diversion investigations between FY 2006 and FY 2007 that it could have charged to the Fee Account based on the DEA’s definition of the Diversion Control Program at the time the costs were incurred.

These findings are summarized in more detail below.

We did not substantiate the allegations that the DEA misused Fee Account funds for non-diversion control activities between FY 2004 and FY 2007.

In our review of DEA obligations exceeding $500, interviews with diversion control personnel at headquarters and in the field, various DEA documents concerning diversion, and an investigation of the allegations themselves, we found no instance of the DEA using Fee Account funds for non-diversion control activities between FY 2004 and FY 2007.4 In addition, our analysis of a random sample of 265 obligations of $500 and under in the three field divisions we visited showed that all of the obligations were for allowable diversion control activities. We found that 247 of 265 (93 percent) of the expenses were for a supply or service for a diversion control employee, to support a diversion investigation, for travel or training of a diversion control employee, or for a government vehicle funded through the Fee Account (fee-funded). The remaining 18 obligations (7 percent) were for office supplies that were approved and signed by a Diversion Program Manager as part of the DEA’s process for ensuring that Fee Account expenses of $500 and under are legitimate diversion control expenses.

We also reviewed a sample of 50 DEA-wide diversion obligations exceeding $500 to assess whether they were used for diversion control activities and whether they had been validated by the Validation Unit as required.5 We found that all 50 obligations were used for diversion control activities. Three had not been validated as required, but we were able to determine from their written justifications that these obligations represented diversion control activities.

In addition to reviewing two samples of obligations of Diversion Control Program expenses to determine whether the DEA used Fee Account funds for non-diversion activities, we reviewed the allegations the Chairman had reported to the OIG. We categorized the allegations into three general categories: (1) that the DEA did not adequately fund overtime, travel, and investigative expenses to support diversion investigations because of a lack of Fee Account funds; (2) that the DEA had not hired new Diversion Investigators because of a lack of Fee Account funds; and (3) that the DEA used Fee Account funds to pay for salaries and other associated costs of Special Agents and Intelligence Analysts who did not perform diversion control activities.

Regarding the first general category of allegations, we found that overtime, travel, and equipment purchases had been limited during the period of our review because of two specific events that occurred during FY 2006, which restricted the amount of money in the Diversion Control Program budget. First, a delayed collection of registration fees resulted in the DEA collecting less in funds than expected. Second, the DEA incurred costs from the settlement of an overtime lawsuit brought by Diversion Investigators. To ensure that the Fee Account had funds to pay for the increased overtime costs that resulted from the lawsuit, in July 2006 the Deputy Assistant Administrator Office of Diversion Control began requiring advance approval for all purchases of fee-fundable equipment, travel expenses not related to investigations, and overtime. The DEA also temporarily restricted the overtime hours available to field divisions.

Our interviews in the three field divisions we visited indicated that these restrictions had not undermined diversion control operations. For example, when we asked Diversion Investigators whether Fee Account funding was adequate for their diversion control investigations, 25 of 27 (93 percent) told us that it was. We also found that most requests submitted to the Office of Diversion Control for overtime, travel, and equipment had been approved. From July 2006 through September 2007, the Office of Diversion Control recorded 327 requests to use Fee Account funds in areas that had been restricted. The DEA approved 311 (95 percent) of those requests. However, the DEA does not track, and we were unable to determine the number of requests made by Diversion Investigators that were not submitted by their Diversion Program Managers to the Office of Diversion Control at headquarters.

Regarding the second general category of allegations that the DEA was not hiring new Diversion Investigators, we determined that the DEA had not hired any Diversion Investigators since November 2005. Office of Diversion Control managers told us that they had suspended the hiring of Diversion Investigators because they were awaiting a final decision regarding a request to reclassify the Diversion Investigator position to include law enforcement authority. However, in September 2007 the Office of Personnel Management rejected this request, stating that a new position was not warranted because the proposed position is essentially the current Special Agent position. DEA managers stated that because the proposal is no longer pending they would begin hiring additional Special Agents dedicated to diversion control. Managers also stated that their decisions regarding the hiring of new Diversion Investigators will depend on the results of an ongoing staffing study to determine the optimal balance of Diversion Investigators and Special Agents in field divisions.

In addition, we did not substantiate the third general category of allegations that the DEA used Fee Account funds to pay for salaries and other associated costs of Special Agents and Intelligence Analysts who did not perform diversion control activities. We examined the DEA’s method of calculating fee-fundable salary costs and found that it accounts for time that fee-funded Special Agents and Intelligence Analysts spend on matters other than criminal diversion investigations. We found that the DEA charges the Fee Account only for Special Agent and Intelligence Analyst salary costs associated with diversion investigations. Also, during our site visit interviews, field division managers and supervisors stated that the Special Agents and Intelligence Analysts assigned to diversion control worked almost exclusively on diversion investigations and that the minimal amount of time they spent on other duties did not interfere with their support of the diversion investigations.

We examined how some Diversion Investigators came to believe that the DEA had used the Fee Account inappropriately. For example, 14 of 34 (41 percent) Diversion Investigators we interviewed in field divisions told us that they thought the DEA was using Fee Account funds inappropriately. In reviewing the allegations referred to us by the Chairman and in our interviews with Diversion Investigators, we found that Diversion Investigators’ primary concern was based on two perceptions regarding the DEA’s use of Fee Account funds. First, Diversion Investigators questioned whether the increased use of Fee Account funds for Special Agent and Intelligence Analyst salaries was worth the additional costs to the Diversion Control Program. Second, Diversion Investigators had misperceptions about whether the DEA was allowed to use Fee Account funds for certain diversion control activities.

Regarding the first of those two perceptions, 13 of 34 (38 percent) of the Diversion Investigators we interviewed questioned whether the additional Special Agents and Intelligence Analysts were worth the additional costs they represented to the Diversion Control Program. According to one supervisor, from the Diversion Investigators’ perspective fee-funded Special Agents cost more in terms of salary and benefits than Diversion Investigators, but do not generally perform all Diversion Investigator duties such as regulatory investigations. Diversion Investigators also tended to view fee-funded Intelligence Analysts as an unnecessary cost to the Fee Account because Diversion Investigators were used to performing the investigative support tasks of Intelligence Analysts themselves.

Since 2004, the DEA began increasing the number of Special Agents assigned to diversion control groups because they perform law enforcement duties Diversion Investigators cannot, such as serving warrants and conducting surveillance activities.6 In FY 2006, the DEA also began assigning Intelligence Analysts to diversion investigations to analyze data, prepare background profiles on targets, and conduct database checks. At the same time, the number of Diversion Investigators decreased due to attrition. Meanwhile, between FY 2004 and FY 2007, the number of Diversion Investigators and administrative support staff for the Diversion Control Program traditionally funded through the Fee Account decreased by 51 positions (from 786 to 735). The number of fee-funded Special Agents and Intelligence Analysts increased by 79 positions (from 10 to 89) during that time.7

Moreover, we believe that an inaccurate understanding of the scope of activities that are fee-fundable contributed to Diversion Investigators’ perception that the DEA used Fee Account funds inappropriately. During our interviews with Diversion Investigators, we asked whether what was and was not covered by the Fee Account was clear to them. Eight Diversion Investigators out of 24 (33 percent) stated that it was not clear and that the line between what could and could not be paid for with Fee Account funds was blurred. We also found that all Diversion Program Managers did not necessarily know that the DEA could fund investigations from the Fee Account as long as the investigation s pertained to a controlled substance or listed chemical, even if no Diversion Investigator was involved in the investigation.

We discussed with DEA diversion control managers the misconceptions of their staff concerning the Fee Account. They told us that the DEA had provided its employees with guidance regarding the Fee Account in the form of the Diversion Control Fee Account User’s Guide. The guide was last updated in October 2005 and is available on the DEA’s Intranet site to all DEA employees. However, the guide primarily describes the Validation Unit’s role in Fee Account spending and does not give an overall description of the DEA’s requirements for using Fee Account funds. Managers also told us that they had conveyed information pertaining to Fee Account spending to diversion control employees through conferences for Diversion Program Managers and that they regularly respond to questions from diversion control personnel about how the Fee Account can be used. Nonetheless, these managers told us that they believe that more communication with diversion control personnel about the Fee Account may be needed.

The DEA did not fully fund all diversion control salary costs with the Fee Account.

Our review determined that for FY 2006 and FY 2007, the DEA did not include in its Diversion Control Program budget or charge the Fee Account an estimated $15.4 million in Diversion Control Program salary costs that were directly related to Diversion Control Program activities.8 The $15.4 million represented 8 percent of the total salary costs ($188 million) funded by the Fee Account in those years. It included $14.1 million for Special Agent salaries and $1.3 million for Forensic Chemist (Chemist) salaries that were attributable to diversion investigations.

Under 21 U.S.C. § 886a(1)(C), the DEA is required to recover “the full costs of operating the various aspects” of its Diversion Control Program (such as salaries for Special Agents, Chemists, and Intelligence Analysts involved in diversion investigations) through the fees charged to DEA registrants. The statute also provides the DEA with discretion to define the scope of fee-fundable activities included in the Diversion Control Program and, in doing so, to control which of its activities must be funded from the Fee Account and which can be paid for out of appropriated funds.

To define diversion control activities and determine the fees to be collected to fund them, the DEA uses its authority under 21 U.S.C. § 821 to “promulgate rules and regulations and to charge reasonable fees relating to the registration and control of the manufacture, distribution, and dispensing of controlled substances and to listed chemicals.” In Final Rule notices published in the Federal Register, the DEA lists and explains the activities that it has determined are part of the Diversion Control Program (and that are therefore fee-fundable) and notifies registrants of the amount of fees they are required to pay. The most recent Final Rule was published on August 29, 2006.

The DEA has defined the salary costs for Special Agent, Intelligence Analysts, and Chemists attributable to Diversion Control Program activities as fee-fundable. Each year, Congress authorizes the number of Special Agent, Intelligence Analyst, and Chemist full-time equivalents (FTE) that the DEA can charge to the Fee Account based on estimates provided by the DEA.9 However, when ongoing investigations exceed the cumulative number of authorized FTEs the DEA allows Special Agents to continue working on the investigations, but does not charge the Fee Account for more positions (or FTEs) than are congressionally authorized. The DEA funds any salary costs for Special Agents, Intelligence Analysts, and Chemists attributable to Diversion Control Program activities above the authorized levels with appropriated funds.

Although directly related to Diversion Control Program activities, the $15.4 million in salary costs that we identified were above the authorized levels, and the DEA paid for these costs with appropriated funds. Additionally, the $15.4 million in salary costs was not included in the Diversion Program’s budget. The DEA determines the amount of fees to charge registrants based on its estimate of the costs to operate the Diversion Control Program’s fee-fundable activities. The Diversion Control Program’s budget must reflect all fee-fundable costs so the DEA has an accurate reflection of the program’s true costs when it set registration fees. Including these additional costs would not have increased fees significantly. For example, if the DEA had computed the FY 2006 through FY 2008 fees based on the total salary costs for the time that Special Agents and Chemists spent on diversion investigations, the 3-year registration fee for physicians would have increased by $19 from $551 to $570, approximately $6 per year.10

CONCLUSIONS AND RECOMMENDATIONS

We did not substantiate the allegations that the DEA misused Fee Account funds for non-diversion control activities from FY 2004 through FY 2007. We reviewed a statistical sample of obligations of $500 and under in three field divisions as well as a sample of obligations over $500 for spending Fee Account funds and found that all the obligations were for legitimate diversion control activities. In addition, interviews with DEA personnel and documents pertaining to the use and availability of Fee Account funds did not substantiate allegations that the DEA had used Fee Account funds for non-diversion control activities.

Moreover, while the DEA had restricted diversion-related overtime, travel, and other related expenses, we determined that the DEA had legitimate reasons for these restrictions. The DEA restricted the use of funds for these purposes because of a delayed collection of registration fees and because funds were needed to cover the costs of an increase in the rate of Diversion Investigator overtime resulting from the settlement of a lawsuit. Although the DEA imposed restrictions on purchases of equipment, travel expenses not related to investigations, and overtime, our interviews in the three field divisions we visited indicated that these restrictions did not undermine diversion control operations. The allegations also stated that the DEA did not hire new Diversion Investigators because of a lack of Fee Account funds. We found that the DEA’s reason for not hiring new Diversion Investigators – that it was awaiting an Office of Personnel Management decision on reclassifying the Diversion Investigator position – was reasonable.

However, many Diversion Investigators we interviewed still perceived that Fee Account funds were being used inappropriately. We believe that the DEA’s recent policy of using more Special Agents and Intelligence Analysts within the Diversion Control Program, combined with an inaccurate understanding of how the DEA can use the Fee Account, contributed to the Diversion Investigators’ perception.

We also concluded that for FY 2006 and FY 2007, the DEA did not fund all Diversion Control Program activities through the Fee Account. We identified an estimated $15.4 million in salary costs for Special Agents and Chemists between FY 2006 and FY 2007 attributable to criminal diversion investigations that were not included in the program’s current budget and were not paid with Fee Account funds.

As a result of our review, we recommend that the DEA:

  1. Determine the total of actual and planned program costs, including salary costs attributable to diversion control activities, especially for Special Agents, Intelligence Analysts, and Chemists, and include these costs in the Diversion Control Program’s budget from this point forward.

  2. Provide more information to DEA personnel on the requirements governing the use of Fee Account funds, particularly for salary and other associated costs of Special Agents and Intelligence Analysts.



Footnotes
  1. 21 U.S.C. § 886a(1)(C).

  2. In March 2003, the DEA created the Validation Unit to certify (or validate) that all spending requests for Fee Account funds exceeding $500 are for legitimate diversion control-related activities. The unit reviews documents related to requests for Fee Account funding to determine whether the expense is related to a diversion control activity. If an expense only partially supports the Diversion Control Program, such as a field office’s rent or utility cost, the Validation Unit determines portion of the expense that should be funded by the Fee Account.

  3. When discussing interview data, we use Diversion Investigators to mean Diversion Program Managers, Diversion Group Supervisors, and Diversion Investigators assigned to field divisions.

  4. An obligation is an action by an authorized individual that creates a liability on the part of the government to make a disbursement at a later time. When an authorized individual incurs an obligation on behalf of the government, it reduces the available balance of funding remaining in an allowance used to fund the obligation. Obligations of $500 and under represented 68 percent of all diversion program obligations from FY 2004 through the second quarter of FY 2007.

  5. To ensure that we reviewed expenses in certain categories, we subjectively sampled 10 obligations from 5 different categories of spending.

  6. See U.S. Department of Justice Office of the Inspector General, Follow-Up Review of the Drug Enforcement Administration’s Efforts to Control the Diversion of Controlled Pharmaceuticals, Evaluation and Inspections Report I-2006-004 (July 2006), for a discussion on the Diversion Control Program’s need for Special Agents.

  7. On January 16, 2008, the DEA informed the OIG that on December 20, 2007, Congress approved the reprogramming of 108 vacant Diversion Investigator positions to Special Agent positions. This increased the number of authorized fee-funded Special Agent FTEs to 97 for FY 2007.

  8. The reprogramming of 108 vacant Diversion Investigator positions to Special Agent positions discussed in Footnote 7 increased the number of fee-funded authorized Special Agent FTEs by 27, from 70 to 97 for FY 2007. As a result, we estimate that the Special Agent and Chemist salary costs attributable to the Diversion Control Program but not funded with the Fee Account for FY 2006 and FY 2007 totaled $11.2 million.

  9. An FTE is the number of total hours worked divided by the maximum number of compensable hours in a work year. The DEA defines 1 full-time work year as 2,080 hours (or 2,600 hours for Special Agents conducting criminal investigations). One worker occupying a full-time job all year would consume one FTE. Similarly, two employees working for 1,040 hours each would consume one FTE.

  10. The DEA computed the current fees based on the estimated costs of operating the Diversion Control Program for FY 2006 through FY 2008. The current fees will be in place until the DEA next raises fees.



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