See below for an example of an administrative forfeiture. For more information on how agencies qualify for  equitable sharing, see appendix I.

	AFF Revenues and Expenditures Have Increased since Fiscal Year 2003, and DOJ’s Process for Carrying Over Funds Could Be More Transparent

From fiscal years 2003 through 2011, AFF revenues and expenditures  increased, with annual revenues doubling in fiscal year 2006, due in part  to an increase in forfeitures resulting from fraud and financial crimes  investigations. AFF’s Revenues More than Tripled from Fiscal Years 2003 through 2011

In the 9-year period from fiscal years 2003 through 2011, AFF revenues  totaled $11 billion, growing from $500 million in fiscal year 2003 to $1.8  billion in fiscal year 2011. Specifically, expenditures increased from $458 million in fiscal year 2003  to $1.3 billion in fiscal year 2011. Revenues resulting from forfeitures are used to pay the forfeiture  program’s expenditures in three major categories:  1.  payments to third parties, including payments to satisfy interested  parties such as lienholders, as well as the return of funds to victims of  large-scale fraud;  2.  equitable sharing payments to state and local law enforcement  agencies that participated in law enforcement efforts resulting in the  forfeitures; and  3.  all other program operations expenses that include a total of 13  expenditure categories such as asset management and disposal, the  storage and destruction of drugs, and investigative expenses leading  to a seizure. DOJ Carries Over Funds Needed to Cover Anticipated Expenditures in the Next Fiscal Year, but Transparency Could Be Improved

At the end of each fiscal year, DOJ carries over funds in order to help  ensure it has sufficient resources to cover all AFF expenses that may not  be covered by the next year’s revenues; however, the process DOJ uses  to determine how much to carry over each year is not documented or  outlined in its Congressional Budget Justifications. They then carry over funds  needed to cover anticipated expenses for the coming year including funds  needed to cover the costs of pending equitable sharing and third-party  payments as well as funds needed to ensure the Asset Forfeiture  Program’s solvency—including the anticipated costs associated with  continuing forfeiture activities—at the start of the next fiscal year. According to DOJ officials,  they consider a number of factors when calculating the funds needed to  maintain solvency, such as historical data including information on the  costs of past contracts, salary costs, and other expenses; known future  expenses including salaries and contracts; and the costs of any potential  new expenditures. After these funds have been reserved, any funds determined  to be in excess of these requirements (excess unobligated balances) may  be declared as Super Surplus. To make up the  difference needed to meet the $495 million rescission in fiscal year 2011,  DOJ used unobligated balances in the amount of $233 million. DOJ Could Enhance Controls and Oversight Mechanisms for Its Equitable Sharing Program

DOJ has established guidelines and oversight mechanisms for the  equitable sharing program, but additional controls could enhance the  consistency and transparency of the program. In addition, DOJ has established mechanisms governing how DOJ  agencies should make equitable sharing determinations. For  example, if a state or local law enforcement agency contributed additional  resources or equipment to an investigation, its sharing percentage might  be adjusted upward from what it would be based on work hours alone. While DOJ has established guidance indicating that adjustments to  sharing percentages may be made when a state or local law enforcement  agency’s work hours alone do not reflect the value of its participation in  an investigation, DOJ has not developed guidance regarding how to apply  the qualitative factors that may warrant departures from sharing  percentages. This is  particularly important given that these determinations represent DOJ’s  overall assessment of each agency’s unique contributions to an  investigation and are a key component of how DOJ makes decisions  about how much to award each agency. Establishing a mechanism to ensure that this information is documented  by all DOJ agencies responsible for making equitable sharing  determinations could enhance the transparency of equitable sharing  decisions. However, because the information that serves as the basis  for equitable sharing recommendations—including work hours and the  qualitative factors used to make adjustments to sharing percentages—are  not subject to review by agency headquarters officials, DOJ does not  have reasonable assurance that the equitable sharing determinations are  made in accordance with the established guidance. Conclusions

With more than $1 billion in forfeited assets deposited into the AFF every  year since 2006, the Asset Forfeiture Program generates substantial  revenue for the Department of Justice. To help improve transparency over the AFF’s use of funds, we  recommend that the Attorney General provide more detailed information  to Congress as part of the AFF’s annual budget process, clearly  documenting how DOJ determines the amount of funds to be carried over  into the next fiscal year. Establish a mechanism to ensure that the basis for equitable sharing  determinations—including the work hours contributed by all  participating agencies and the rationale for any adjustments to sharing  percentages—are recorded in the documents provided to agency  headquarters officials for review and approval. Develop a risk-based mechanism to monitor whether key information  in support of equitable sharing determinations is recorded and the  extent to which sharing determinations are made in accordance with  established guidance. 5.
Why GAO Did This Study

Every year, federal law enforcement agencies seize millions of dollars in assets in the course of investigations. The AFF was established to receive the proceeds of forfeiture and holds more than $1 billion in assets. DOJ uses the proceeds from forfeitures primarily to cover the costs of forfeiture activities. DOJ also shares forfeiture proceeds with state and local agencies that participate in joint investigations through its equitable sharing program. GAO was asked to review (1) AFFs revenues and expenditures from fiscal years 2003 through 2011 and DOJs processes for carrying over funds for the next fiscal year, and (2) the extent to which DOJ has established controls to help ensure that the equitable sharing program is implemented in accordance with established guidance. GAO analyzed data on AFF revenues, expenditures, and balances; interviewed DOJ officials; and analyzed a sample of 25 equitable sharing determinations, which included 5 determinations from each relevant DOJ agency. GAOs analysis of the samples was not generalizable, but provided insight into DOJs decisions.

What GAO Found

Annual revenues into the Assets Forfeiture Fund (AFF) from forfeited assets increased from $500 million in 2003 to $1.8 billion in 2011, in part due to an increase in prosecutions of fraud and financial crimes cases. Expenditures in support of forfeiture activities such as equitable sharing payments to state and local law enforcement agencies and payments to victims also increased over the same 9-year period, growing from $458 million in 2003 to $1.3 billion in 2011. The Department of Justice (DOJ) uses the difference between revenues and expenditures in any year to help cover anticipated expenses in the next fiscal year. Because the AFF uses fund revenues to pay for the expenses associated with forfeiture activities, DOJ carries over funds at the end of each fiscal year to ensure it has sufficient resources to cover expenses that may not be covered by the next years revenues. When determining the amounts to carry over, DOJ reviews historical data on past program expenditures, analyzes known future expenses such as salaries and contracts, and estimates the costs of any potential new expenditures. However, DOJ has not documented the process for determining the amount of funds needed to cover anticipated expenditures in the next fiscal year in its annual budget justifications. Providing more transparent information as part of the AFFs annual budget process would better inform Congress oversight of the AFF. Further, after DOJ obligates funds needed to cover program expenses, any remaining AFF funds identified at the end of a fiscal year may be declared an excess unobligated balance. DOJ has the authority to use these balances for any of the departments authorized purposes. Per Office of Management and Budget guidance, in recent years, DOJ used these excess unobligated balances to help cover rescissions. Rescissions cancel the availability of DOJs previously enacted budget authority, making the funds involved no longer available for obligation. For example, in fiscal year 2011, DOJ used excess unobligated balances to help cover a $495 million AFF program rescission.
DOJ has established guidelines for making equitable sharing determinations, but controls to ensure consistency and transparency could be improved. For example, DOJ agencies responsible for making equitable sharing determinations may make adjustments to sharing percentages when work hours alone do not reflect the relative value of an agencys contribution to an investigation. If a state or local law enforcement agency contributed a helicopter or a drug-sniffing dog to an investigation, its sharing percentage might be adjusted upward from what it would be based on work hours alone. However, DOJs guidance does not include information regarding how decisions about these adjustments to sharing determinations should be made. This is particularly important given that these determinations represent DOJs overall assessment of each agencys unique contributions and are a key component of how DOJ determines how much to award to each agency. Furthermore, key information that serves as the basis for equitable sharing determinationssuch as the work hours contributed by each of the participating agencies in an investigationis not subject to review by approving authorities. Developing guidance regarding how these decisions are to be made, documenting the basis for these decisions, and subjecting them to review and approval would help ensure the consistency and transparency of equitable sharing determinations.

What GAO Recommends

GAO recommends that, among other things, DOJ clearly document how it determines the amount of funds that will need to be carried over for the next fiscal year, develop guidance on how components should make adjustments to equitable sharing determinations, and ensure that the basis for equitable sharing determinations is documented and subjected to review and approval. DOJ concurred with GAOs recommendations.