Department of Justice
Asset Forfeiture Program
Notes to Principal Financial Statements
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
These financial statements have been prepared to report the financial position and results of operations of the Asset Forfeiture Program, including the Assets Forfeiture Fund (AFF) and the Seized Asset Deposit Fund (SADF), as required by the Chief Financial Officers Act of 1990. The statements have been prepared from the books and records of the Asset Forfeiture Program in accordance with Office of Management and Budget (OMB) Bulletin 94-01, Form and Content of Agency Financial Statements, dated November 16, 1993, and the Asset Forfeiture Program accounting policies which are summarized in these notes. These statements are therefore different from the financial reports, also prepared by the Asset Forfeiture Program pursuant to Office of Management and Budget directives, used to monitor and control the program's use of budgetary resources.
The Asset Forfeiture Program is a nationwide law enforcement program administered by the Department of Justice. The Program is comprised of the following: the Drug Enforcement Administration, the Federal Bureau of Investigation, the Immigration and Naturalization Service, the U.S. Marshals Service, the U.S. Attorneys, and the Asset Forfeiture and Money Laundering Section, Criminal Division. The U.S. Postal Inspection Service, the Food and Drug Administration, and the U.S. Park Police are non-Department of Justice participants in the program.
The accompanying financial statements include the accounts of the AFF and the SADF. The AFF is a special fund and is listed in the U.S. Treasury Federal Account Symbols and Titles as 15X5042. The cash balance in the AFF is considered an entity asset. The SADF is a deposit fund and is listed in the U.S. Treasury Federal Account Symbols and Titles as 15X6874. Seized cash is deposited and accounted for in the SADF until a determination has been made as to its disposition. If title passes to the U.S. Government, the forfeited cash is then transferred from the SADF to the AFF. The cash balance in the SADF is not available to finance the Asset Forfeiture Program activities, and is considered a non-entity asset. Pursuant to 28 U.S.C. § 524 (C), idle SADF and AFF cash is invested in U.S. Treasury securities and the income derived is deposited in the AFF. The earnings on Bank of Credit and Commerce International (BCCI) funds held by the SADF and AFF are tracked separately due to special disposition requirements. Most noncash property is held by the U.S. Marshals Service from the point of seizure until disposition. In certain cases, the investigative agency will keep seized property in custody if the intention is to place the property into official use after forfeiture. If title passes to the U.S. Government, the proceeds from the sale of forfeited property are deposited in the AFF.
The accompanying financial statements of the Asset Forfeiture Program do not include the salaries and administrative expenses incurred by the Asset Forfeiture Program participants while conducting investigations leading to seizure and forfeiture. Salaries are paid out of the AFF for the Asset Forfeiture Management Staff (AFMS) and administrative costs are paid for the U.S. Marshals Service and the AFMS. There are no operating expenses charged to the SADF.
Budgets and Budgetary Accounting
All proceeds deposited to the AFF are available to the Attorney General without fiscal year limitation (permanent indefinite budget authority), except for the amounts specified in the Department of Justice annual appropriations act which are subject to fiscal year limitation (current definite budget authority). All cash for AFF budget authority is derived from proceeds of the Asset Forfeiture Program.
Basis of Accounting
Transactions are recorded on both a proprietary and budgetary basis. Expenses are recorded on an accrual basis of accounting whereby expenses are accrued when goods have been delivered or when services have been rendered. Under the accrual method, expenses are recognized when a liability is incurred, without regard to payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds.
Accounting Principles and Standards
Until a sufficiently comprehensive set of accounting standards is agreed to and published by the Joint Financial Management Improvement Program (JFMIP) principals, which will constitute generally accepted accounting principles for the Federal Government, the following hierarchy shall constitute an other comprehensive basis of accounting used for preparing these financial statements:
Revenues and Other Financing Sources
Revenue is recognized when cash has been forfeited or proceeds have been deposited from the sale of forfeited property under: (a) any criminal proceeding; (b) any civil judicial forfeiture proceeding; or (c) any civil administrative forfeiture proceeding conducted by the Department of Justice. Revenue from the forfeited property is recognized when the property is: (a) placed into official use; (b) transferred to another federal government agency; (c) distributed to a state or local law enforcement agency; or (d) distributed to a foreign government. No revenue recognition is given to any cash deposited in the SADF which remains subject to forfeiture.
The funds in the AFF are primarily derived from forfeited cash, proceeds from the sale of forfeited property, interest earned on investments, payment of penalties in lieu of forfeiture, and recovery of asset management expenses. The funds in the SADF are seized cash held in trust until a determination has been made as to the disposition. This cash includes seized cash, proceeds from preforfeiture sales of seized property, and income from property under seizure.
Liabilities represent the amount of monies or other resources that are due to be paid by the Asset Forfeiture Program as the result of a transaction or event that has already occurred. Asset Forfeiture Program accounts payable are due principally to nonfederal government entities and are funded by the permanent indefinite portion of the AFF. These liabilities may be met without further appropriation action. All liabilities are therefore classified as Liabilities Covered by Budgetary Resources.
Interest Paid On Late Payments
The Prompt Payment Act, 31 U.S.C. § 3901-3907, requires Federal agencies to pay interest on payments for goods and services made to business concerns after the due date. Payments made pursuant to this law amounted to $37 thousand and $9 thousand in FYs 1996 and 1995.
Note 2. Fund Balance with U.S. Treasury
The amounts reported for FYs 1996 and 1995 represent the unexpended cash balance on the Department's books at September 30 of each FY presented. The variance from the U.S. Treasury balance for Account Symbol 15X5042 (AFF) at September 30, 1996, is $806 thousand, which represents Cash in Transit on the Department's books.
The following schedule reconciles the difference between the AFF and SADF balance per the Statement of Financial Position with the Treasury balance.
|Dollars in Thousands||
|Fund Balance with Treasury per Treasury||$79,879||$56,778||$188,924||$71,042|
|Cash In Transit||806||0||(16)||(2)|
|Fund Balance with Treasury per Asset Forfeiture Program||$80,685||$56,778||$188,908||$71,040|
Asset Forfeiture Program funds held outside the U.S. Treasury as of September 30, 1996, and 1995, were $24.4 million and $15.9 million, respectively. These figures were reported by the investigative agencies maintaining custody of the assets. The funds held outside the U.S. Treasury represent cash held as evidence (or funds not yet forwarded to the USMS as of September 30, 1996), and are not presented elsewhere in these financial statements.
Note 3. Investments
All Investments are short term, nonmarketable, par value Federal debt securities issued by the Bureau of the Public Debt and purchased exclusively through Treasury's Financial Management Service. Investment are recorded at cost. Discounts are recorded for the full amount earned at maturity. No investments are made in nonfederal securities.
The following schedule shows the investment balance at September 30, 1996.
|Dollars in Thousands||Investments||(Discount)||Investments Net|
|Assets Forfeiture Fund||$282,130||($1,066)||$281,064|
|Seized Asset Deposit Fund||590,745||(2,811)||587,934|