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Follow-up Audit of the Department of Justice Counterterrorism Fund

Report No. 03-33
September 2003
Office of the Inspector General


Executive Summary

After the September 11, 2001 terrorist attacks, the Attorney General declared that fighting terrorism was the Department of Justice's (Department's) top and overriding priority. One of the resources available to address terrorist activity is the Department Counterterrorism Fund (the Fund), which was created by Congress in July 1995 in the wake of the bombing of the Alfred P. Murrah Federal Building in Oklahoma City, Oklahoma.

Fund History

The Fund was established to assist Department components with the unanticipated costs of responding to and preventing terrorism. Since its inception in 1995, Congress has appropriated over $360 million to the Fund, of which about $290 million has been obligated for reimbursement of certain counterterrorism expenses of agencies such as the Federal Bureau of Investigation (FBI), the Executive Office for United States Attorneys (EOUSA), and the United States Marshals Service (USMS).

COUNTERTERRORISM FUND USERS1
Source: JMD Budget Staff

Legislative and Department guidelines stipulate that only extraordinary expenses are to be reimbursed from the Fund. In other words, the Fund should only be used to pay for expenses that are beyond what the agency's general appropriation could reasonably be expected to fund. At times, however, Congress has earmarked portions of the Fund appropriations for specific initiatives such as a 5-year counterterrorism plan and the creation of an alternate government facility for the continuation of Department operations in the event of an emergency.

According to the initial legislation, the Fund was established to provide reimbursement to Department components only. Since 1996, however, Congress has allowed over $167 million to be passed through the FBI, the Justice Management Division (JMD), and OJP to support counterterrorism initiatives of non-DOJ agencies, often when these activities are performed in conjunction with Department initiatives.2 Aside from the fact that the Fund has been used to reimburse agencies outside of the Department, the intent of the Fund has not changed since its inception.

Administration of the Fund

JMD, the administrative arm of the Department, administers the Fund for the Attorney General. The JMD Budget Staff handles the Fund's day-to-day operations, while the JMD Finance Staff executes all financial transactions between Department agencies. Components seeking resources from the Fund submit a request to the JMD Budget Staff detailing the counterterrorism initiative (e.g., the investigation of the U.S. embassy bombings in Africa) and the types of expenditures for which it is requesting reimbursement (e.g., travel and overtime expenses). The Budget Staff reviews the request and makes a recommendation to the Attorney General. Ultimately, each request must be approved by the Department, the Office of Management and Budget, and Congress. Once an initiative has been approved, JMD can enter into reimbursement agreements (RAs) with the requesting agencies; these agencies then bill for actual expenditures. The RA is a binding document, which includes the Fund mission, the approved counterterrorism initiative, the types of expenditures eligible for reimbursement, and the approved amount of funding. The RA requires the receiving component to certify that the reimbursed expenditures are allowable and fully supported. As the Fund administrator, the JMD Budget Staff is ultimately responsible for ensuring that the Fund is used appropriately and that the expenditures are adequately supported.

Audit History

In 1998, the OIG conducted an audit of the Fund covering fiscal years (FYs) 1995 through 1997. We found that JMD needed to take a more proactive approach to its administration of the Fund. Specifically, JMD needed to strengthen its controls over the distribution and use of Fund monies, particularly those passed through to non-DOJ agencies. We identified dollar-related deficiencies totaling over $4 million, or almost 17 percent of the total funds tested, resulting from expenditures that were either improper or not adequately supported at the Drug Enforcement Administration, EOUSA, the FBI, the USMS, and other non-DOJ agencies. Although primary responsibility for ensuring the appropriate use of Fund monies rests with the components incurring the costs, JMD was still accountable for the Fund and these deficiencies pointed to weaknesses in JMD's oversight. The report concluded that increased oversight by JMD would help ensure that Fund resources are used properly and would increase the availability of additional resources to respond rapidly and effectively to unanticipated terrorist incidents.

We initiated this follow-up audit because of the significance of the deficiencies found during the prior audit as well as the considerable amount of recent appropriations to the Fund.3 In our current audit, we reviewed Fund expenditures for FYs 1998 through 2002 at the Criminal Division, EOUSA, the FBI, the Security and Emergency Planning Staff (SEPS), the USMS, and other non-DOJ agencies.4 These expenditures were made in support of a wide range of counterterrorism activities, including the investigations and prosecutions related to the federal building bombing in Oklahoma, the U.S. embassy bombings in Africa, and the Freemen antigovernment extremists in Montana; responding to the September 11, 2001, terrorist attacks; and security preparations for the 2002 Winter Olympics in Utah.

Results in Brief

We found that some improvements had been made in JMD's administration of the Fund. Specifically, during the initial audit, we identified several inactive reimbursement agreements (RAs) that needed to be closed so that the unused funds could be made available in the event of an emergency. JMD took appropriate action to close these RAs, and in our current audit, we found that JMD continued to actively monitor the status of RAs. In addition, our testing of expenditures for reasonableness, appropriateness, compliance with Fund legislation, and adequacy of supporting documentation revealed that the overall error rate improved from about 17 percent in the prior audit to 8 percent in our follow-up review.5

In response to our prior audit, JMD stated that it would review component billings, including back-up documentation, prior to processing the billings. However, our current audit findings indicate that JMD has not fully implemented an effective review process and, as a result, Fund users were inappropriately reimbursed for some expenditures, as detailed in the following table.

AGENCY REIMBURSEMENT
AMOUNTS6
AMOUNT REVIEWED QUESTIONED COSTS7
FUNDED BILLED
CRIMINAL
DIVISION
$1,000,000 $944,351 $196,141 $0
EOUSA 3,845,039 2,763,817 1,043,611 17,491
FBI 82,618,139 75,892,377 32,607,795 1,319,691
SEPS8 510,000 510,000 656,251 19,504
USMS 6,026,138 2,640,368 1,503,420 1,284,453
NON-DOJ
USERS9
3,966,550 2,744,478 2,324,541 430,132
TOTALS $97,965,866 $85,495,391 $38,331,759 $3,071,271
Source: JMD Budget Staff and OIG analysis

In total, we tested more than $38.3 million in expenditures, including about $36 million expended directly by Department components and over $2.3 million passed through to non-DOJ users.10 Our testing revealed, in the aggregate, over $3 million in questioned costs from Fund monies expended by Department components and non-DOJ users.

Department Component Expenditures

At the Department components, we identified about $2.6 million in dollar-related deficiencies resulting from expenditures that were either improper or not adequately supported. Specifically:

  • The USMS did not adequately manage its reimbursements from the Fund. The USMS improperly used or could not support almost $1.3 million of the $1.5 million we reviewed. This represented an error rate of approximately 85 percent. These questioned costs included approximately $560,000 for which the agency could not provide supporting documentation. The remaining $720,000 was comprised of unallowable costs, including expenses that were not related to the approved counterterrorism initiative or costs that were denied. For example, the USMS billed the Fund for overtime, equipment, and supplies that JMD had explicitly denied for reimbursement when the RA was signed.
  • Our testing at the FBI resulted in over $1.3 million in questioned costs, or 4 percent of the $32.6 million reviewed. These exceptions included almost $530,000 in unsupported transactions. In addition, we identified about $791,000 in expenditures that were not approved, were not clearly connected to the approved initiative, or were erroneously billed. The FBI has shown progress since the prior audit when its error rate was 12 percent.
  • We found about $19,500 in deficiencies, or 3 percent of the dollars tested, related to expenses incurred by SEPS. In FY 1999, Congress earmarked $1 million in Fund monies to be used to create an alternate location from which Department officials could conduct operations in the event of an emergency. Our review of related transactions disclosed $17,339 in unsupported expenses and an accounting error of $2,165.
  • At EOUSA, we identified over $17,000 in questioned costs, including expenses prior to the effective date of the RA and inappropriate authorization of travel vouchers. This represented an error rate of less than 2 percent. Compared to its error rate of 15 percent in our prior audit, EOUSA has made significant improvements in the management of its expenditures.

Non-DOJ Users

Funds disseminated to non-DOJ agencies continued to be at risk due to the lack of federal oversight, as evidenced by the $430,000 in funds that were either improperly used or unsupported. These findings amounted to 19 percent of the pass-through expenditures reviewed; this is comparable to the 20 percent error rate we identified in our prior audit and indicates that very little improvement has been achieved. Details of the end-users, amounts reimbursed, and our findings are shown in the following table.

END-USER PASS-
THROUGH
AGENCY
REIMBURSEMENT
AMOUNTS
AMOUNT
REVIEWED
QUESTIONED
COSTS
FUNDED BILLED
City of Ogden,
Utah11
JMD $3,000,000 $1,993,863 $2,082,331 $187,922
Denver Police
Department
FBI 108,290 108,290 108,290 108,290
Georgia
Department of
Corrections
FBI 652,560 525,772 17,367 17,367
USDA Forest
Service
FBI 205,700 116,553 116,553 116,553
TOTALS $3,966,550 $2,744,478 $2,324,541 $430,132
Source: FBI Budget Execution Unit, JMD Budget and Finance Staffs, and OIG analysis

In general, the funds passed through to non-DOJ users were not adequately monitored by the Department components acting as pass-through agencies. We found that:

  • JMD allowed payments for expenses expressly prohibited in the funding agreement with the city of Ogden, Utah. Although the agreement clearly stated that funds were to be provided for only direct costs related to communications enhancements in preparation for the 2002 Winter Olympic Games, indirect costs were also reimbursed.
  • In each of its arrangements, the FBI failed to obtain or maintain documentation to support the overall amounts billed by the end-users. Therefore, we could not perform testing on many of the transactions because neither the end-user nor the pass-through agency was able to provide adequate records.
  • The Georgia Department of Corrections, which assisted the FBI in its pursuit of a terrorism suspect, received over $17,000 in reimbursement for equipment, telephone charges, and other costs even though the agreement stipulated that only travel and overtime were to be reimbursed.

JMD Oversight

Although our current audit has revealed that the rate of unallowable and unsupported costs for Department components and non-DOJ users has decreased, the dollar value of these exceptions, over $3 million, continues to be significant. Many of the exceptions we identified could have been avoided if JMD had strengthened its controls over the administration of the Fund, particularly during its review of billings. Our review revealed that components were billing and receiving funds for expenditures that: 1) were not approved costs of the Fund, 2) were explicitly denied, or 3) lacked supporting documentation for costs incurred. Further, we found that significant weaknesses persisted or worsened at the USMS and that funds provided to non-DOJ users continued to be at risk of misuse.

Since JMD is ultimately responsible for the integrity of the Fund, it must implement and utilize controls that will preserve that integrity. Due to the large scale of recent terrorist attacks and the immediate and costly response that follows, it is critical that the Fund be adequately monitored to ensure that sufficient monies are available to respond to unexpected terrorist incidents. If controls are enhanced, additional resources should be available when necessary.

Based upon our review, we offer 13 recommendations to improve JMD's administration of the Fund. Specifically, we recommend that JMD work with the individual Fund recipients to remedy the questioned costs we identified and improve controls where necessary. We also recommend that JMD increase its oversight of the Department components, particularly the USMS, including periodically monitoring actual expenditures. For the instances in which funds are to be passed through a Department component to an external agency, we recommend that JMD establish a framework for this process that provides guidance for the pass-through agencies.


Footnotes

  1. This chart does not include $151 million provided to the Office of Justice Programs (OJP) for grants to state and local agencies. These funds were reviewed in a previous audit conducted by the Office of the Inspector General (OIG), entitled Office of Justice Programs State and Local Domestic Preparedness Grant Programs, report number 02-15, issued March 2002.
  2. Several different non-DOJ agencies have received reimbursement from the Fund, including the state of Georgia; the city and county of Denver, Colorado; the Department of the Interior; and the Department of the Treasury.
  3. Between FYs 1998 and 2003, about $279.5 million was appropriated to the Fund. In contrast, during our initial audit covering FYs 1995 through 1997, about $80.6 million was appropriated.
  4. Our audit objectives, scope, and methodology are contained in Appendix I.
  5. The error rate was calculated using the total dollar value tested and the dollar value of the exceptions identified.
  6. Some agencies have not billed the Fund for the entire amount made available by the RAs. The billed amounts shown reflect funds received as of September 10, 2002, the end date of our review period.
  7. The Inspector General Act of 1988 contains our reporting requirements for questioned costs and funds to better use. See Appendix II for the definitions of these terms.
  8. SEPS was unable to distinguish the reimbursed transactions from its total expenditures for its counterterrorism initiative. Therefore, we selected a sample of transactions to test based upon the entire universe of transactions expended on the initiative, which totaled $1,158,134.
  9. Non-DOJ agencies receiving Fund reimbursements during this audit period included: 1) the Georgia Department of Corrections; 2) the Denver, Colorado Police Department; 3) the U.S. Department of Agriculture (USDA) Forest Service; and 4) the city of Ogden, Utah.
  10. We also reviewed about $8 million in FBI overtime costs related to the attacks on the World Trade Center and the Pentagon. However, these costs were calculated as an estimate based on historical data for the agency. These expenses are not included in our total amount tested due to differences in our methodology.
  11. We reviewed approximately $90,000 more than the amount reimbursed because the city of Ogden reduced one of its billings to account for an expenditure that it thought had been billed to the Fund twice. However, based upon our testing, no expenditures were charged to the Fund more than once.