NATIONAL OCEANIC 

AND ATMOSPHERIC 

ADMINISTRATION 

More Action Needed 

to Improve Controls 

in Asset Forfeiture Fund 

FINAL REPORT NO. OIG-12-019-I 

FEBRUARY 8, 2012 

U.S. Department of Commerce 

Office of Inspector General 

Office of Audit and Evaluation 

FOR PUBLIC RELEASE 
UNITED STATES DEPARTMENT OF COMMERCE 

Office of Inspector General 

Washington, D.C. 20230 

February 8, 20 12 

MEMORANDUM FOR: 	Dr. Jane Lubchenco 

Under Secretary of Commerce for Oceans 

t f{t

and Atmos

General for Audit and Eva

~ ~ 

phere 

FROM: Ann C. Eilers • 

Principal Assis spector luation 

SUBJECT: More Action Needed to Improve Controls in A~set Forfeiture Fund 

Final Report No. OIG-12-0 19-1 

This memorandum provides our final report, More Action Needed to Improve Controls in Asset 

Forfeiture Fund. We conducted the review to address concerns with controls over the Asset 

Forfeiture Fund (AFF) raised in OIG reports published in January 20 I 0 and July 20 I 0, which 

revealed several weaknesses in NOAA's management and internal controls over the AFF. The 

July 20 I 0 report also showed that NOAA inconsistently identified accounts that constituted the 

AFF. 

Our review focused on determining (I) if NOAA properly defined assets comprising the AFF, 

including the completeness and accuracy of funding sources, (2) if NOAA appropriately defined 

allowable uses of fund assets and developed controls over collections and disbursements, and 

(3) if the audit plan of the independent auditor of the AFF financial statements was designed to 

provide reliance on the AFF cash balances as of March 31, 20 I I, and if the independent auditor 

could provide an opinion on the balance. 

We found that NOAA (I) lacks appropriate controls to assure that all proceeds from fines, 

penalties, and forfeitures are received and accurately recorded, and (2) has not accurately 

recorded or adequately pursued the total amount owed for fines and penalties. Our report 

describes these weaknesses in detail and recommends steps to strengthen controls over Asset 

Forfeiture Fund activities. We also noted that the AFF does not contain all fines, penalties, and 

forfeited proceeds collected by NOAA for marine resource violations; described NOAA's 

accounting for the use of fines and penalties from Northeast Multispecies Fishery Management 

Plan violations; and provided a further clarification of AFF inflow and outflow data. 

In accordance with Department Administrative Order 213-5, within 60 days of the date of this 

memorandum, please provide us with an action plan that responds to all of the report 

recommendations. 

We would like to thank the NOAA staff and management for its cooperation. Please contact 

me either via email or by phone at (202) 482-2754, if you would like to discuss the results of 

this review. 
Attachment 

cc: 	 Cameron F. Kerry, General Counsel, DOC 

Scott B. Quehl, Chief Financial Officer and Assistant Secretary for Administration, DOC 

Monica Medina, Principal Deputy Undersecretary for Oceans and Atmosphere 

Charles S. Baker, Acting Deputy Under Secretary for Operations, NOAA 

Samuel D. Rauch Ill, Acting Assistant Administrator for Fisheries 

Paul Doremus, Deputy Assistant Administrator for Operations, NOAA 

Lois J. Schiffer, General Counsel, NOAA 

Mary Beth Ward, Deputy General Counsel, NOAA 

Benjamin Friedman, Deputy General Counsel, NOAA 

Charles L. Green, Acting Section Chief, Enforcement Section, NOAA OGC 

Edward Horton, Chief Administrator Officer, NOAA 

Bruce Buckson, Director, NOAA Office of Law Enforcement, NMFS 

jon P. Alexander, Acting Chief Financial Officer, NOAA 

Mack Cato, Audit Liaison 
Report In Brief 

FEBRUARY 8, 2012

WHAT WE FOUND 

NOAA lacks controls to assure that all proceeds are received and accurately 

recorded. Also, NOAA has not accurately recorded or adequately pursued the 

total amount owed for fines and penalties. 

WHAT WE RECOMMEND 

We recommend that the Under Secretary of Commerce for Oceans and 

Atmosphere require the following: 

1. NOAA’s Office of Law Enforcement (OLE) and Enforcement Section develop 

policies and procedures that ensure that payments due to the government 

are recorded accurately and in a timely manner, and implement a 

segregation-of-duties matrix identifying compatible and incompatible 

functions associated with the collection, recording, deposit, and 

reconciliation of fines, penalties, and forfeitures. 

2. OLE train agents and enforcement technicians on collection procedures and 

policies. 

3. Enforcement Section headquarters work with the Enforcement Section 

Northeast division to improve the timeliness of the division’s lockbox 

submissions. 

4. OLE, the Enforcement Section, and NOAA Finance implement a process to 

ensure that deposit account cases are periodically reviewed and that legally 

resolved cases are transferred from the deposit account or returned to a 

respondent in a timely manner. 

5. OLE implement procedures to track and reconcile how Enforcement Action 

Reports are used and issued, including those issued to joint enforcement 

partners and the U.S. Coast Guard. 

6. OLE evaluate the Law Enforcement Accessible Database System (LEADS) 

internal control weaknesses, develop specific protocol for recording 

information, and restrict LEADS user access to cases. 

7. The Enforcement Section develop policies and procedures to ensure that 

debts are recorded in the Commerce Business System (CBS) as soon as 

legally enforceable, which will include independent monitoring for amounts 

not yet recorded in CBS. 

8. The Enforcement Section standardize its case monitoring process and 

reinforce use of the JustWare system. 

9. The Enforcement Section and NOAA Finance develop policies and 

procedures to consistently pursue collection of fines and penalties in a 

manner that treats all respondents uniformly and in compliance with the 

Debt Collection Improvement Act of 1996.

NATIONAL OCEANIC AND ATMOSPHERIC 

ADMINISTRATION 

More Action Needed to Improve Controls 

in Asset Forfeiture Fund 

OIG-12-019-I 

Background 

The Asset Forfeiture Fund (AFF) 

contains proceeds from marine 

resource violations that are expendable under the guidelines of 

the Magnuson-Stevens Act section 

311 (e)(1). Clifton Gunderson, an 

independent audit firm, determined 

the AFF asset balance to be $13.6 

million, with $7.5 million of unrestricted cash, as of March 31, 2011. 

Why We Did This Review 

We addressed concerns over the 

Asset Forfeiture Fund raised in 

OIG reports published in January 

2010 and July 2010, which revealed 

several weaknesses in NOAA’s 

management and internal controls 

over the AFF. We reviewed 

NOAA’s approach to defining and 

reporting on the AFF. We also examined AFF policies and procedures and controls over AFF collections and disbursements. 

Our review sought to determine 

whether (1) NOAA properly defined assets comprising the AFF, 

including the completeness and 

accuracy of funding sources, (2) 

NOAA appropriately defined allowable uses of fund assets and developed controls over collections and 

disbursements, and 

(3) the audit plan of the AFF financial statements, compiled by an 

independent auditor, was designed 

to provide reliance on the AFF cash 

balances as of March 31, 2011, and 

whether the independent auditor 

could provide an opinion on the 

balance. 
 

         

       

           

Contents 

Introduction ....................................................................................................................................................... 1
 

Findings and Recommendations .................................................................................................................... 3

 I. NOAA Has No Assurance That All Proceeds from Assessed Fines, Penalties, and 

Forfeitures Are Received and Accurately Recorded......................................................................3

 A. OLE and the Enforcement Section collection and deposit processes for fines, penalties, 

 and forfeitures are not adequately segregated .............................................................................. 3

 B. The AFF deposit account lacks monitoring .................................................................................... 6

 C. Enforcement Action Reports are not tracked and reconciled..................................................7

 D. LEADS lacks controls to ensure data integrity and consistent case reporting .....................7

 II. NOAA Has Not Accurately Recorded or Adequately Pursued the Total Amount Owed 

for Fines and Penalties ............................................................................................................................ 8

 A. Debts due NOAA are not always recorded accurately or in a timely manner.....................8

 B. NOAA failed to pursue collection of overdue fines and penalties ...........................................9
 

Other Matters ................................................................................................................................................ 10

 I. The AFF Does Not Contain All Fines, Penalties, and Forfeited Proceeds Collected 

 by NOAA for Marine Resource Violations..................................................................................... 10

 II. NOAA’s Accounting for the Use of Fines and Penalties from the Northeast Multispecies

 Fishery Management Plan.................................................................................................................... 11

 III. Further Clarification of AFF Inflow and Outflow Data ................................................................. 11
 

Recommendations....................................................................................................................................... 13
 

Summary of Agency and OIG Comments................................................................................................ 14
 

Appendix A: Objectives, Scope, and Methodology ................................................................................ 15
 

Appendix B: Monetary Benefits.................................................................................................................. 16
 

Appendix C: Agency Response................................................................................................................... 17
 

COVER: Detail of fisheries pediment,

U.S. Department of Commerce headquarters,

by sculptor James Earle Fraser, 1934
       

       

     

         

       

         

     

     

       

         

         

       

                                                           

 

 

 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Introduction 

We began a nationwide review of the policies and practices of the 

National Oceanic and Atmospheric Administration’s (NOAA’s) 

Office of Law Enforcement (OLE) and NOAA Office of the 

General Counsel Enforcement Section (Enforcement Section) in 

June 2009, at the request of Dr. Jane Lubchenco, Under Secretary 

of Commerce for Oceans and Atmosphere. In January 2010, we 

reported that controls over the accounting of payments for 

marine resource violations were weak and, therefore, we could 

not readily determine how NOAA used the funds. As a result, we 

contracted with KPMG, an independent certified public 

accounting firm, to conduct a forensic review of asset forfeiture 

fund (AFF) expenditures. KPMG’s review, published in July 2010,1 

revealed several weaknesses in NOAA’s management and internal 

The Asset Forfeiture Fund

(AFF) contains proceeds from

marine resource violations

that are expendable under the

guidelines of the Magnuson

Stevens Act section 311 (e)(1).

Clifton Gunderson, an

independent audit firm,

determined the AFF asset

balance to be $13.6M, with

$7.5M of unrestricted cash, as

of March 31, 2011.

controls over the AFF.2

 The report also showed that NOAA inconsistently identified accounts 

that constituted the AFF. KPMG could not accurately segregate these accounts and therefore 

could not identify AFF revenues and expenditures.3 

NOAA quickly outlined a corrective action plan to address the recommendations in our July 

report. The plan’s key initiatives included 

• defining the fund; 

• obtaining an independent review and confirmation of its balance; 

•	 documenting a formal interpretation of the statutory language in the MagnusonStevens Fishery Conservation and Management Act (the Magnuson-Stevens Act)4 

and identifying authorized uses; 

•	 developing an internal, formal policy for authorized and prohibited uses of AFF 

money; and 

•	 centralizing approval processes for expenditures, including formal approval for all 

AFF expenditures over $1,000. 

1

 Commerce OIG, Review of NOAA Fisheries Enforcement Asset Forfeiture Fund, OIG-19887-1, July 2010.
 2 See Other Matters, section I, for a list of fines, penalties, and forfeitures that currently are included in the AFF.
 3

 See Other Matters, section III.
 4 The Magnuson-Stevens Act is codified, as amended, at 16 U.S.C. § 1801 et seq.
 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 1 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 2 

OLE

•Duties not adequately segregated

•Lacks deposit account monitoring

•Lacks EAR tracking

•LEADS lacks data integrity controls

 o

Enforcement Section

•Duties not adequately segregated

•Debts not recorded accurately or

in timely way

•Lacks deposit account monitoring

NOAA Finance

•Lacks deposit account monitoring

•Fails to pursue collection of

overdue fines

Figure 1. Breakdown of Issues by Office

In February 2011 we initiated a review that evaluated key aspects of 

AFF operations. Specifically, our follow-up focused on determining (1) 

if NOAA properly defined assets comprising the AFF, including the 

completeness and accuracy of funding sources; (2) if NOAA 

appropriately defined allowable uses of fund assets and developed 

controls over collections and disbursements; and (3) if the audit plan of

Clifton Gunderson, the independent auditor of the AFF, was designed t

provide reliance on the AFF cash balances as of March 31, 2011, and if 

the firm can provide an opinion on the balance. 

Our review found that NOAA 

• lacks appropriate controls to assure that all proceeds from 

fines, penalties, and forfeitures are received and accurately 

recorded; and 

• has not accurately recorded or adequately pursued the total 

amount owed for fines and penalties. 

We also 

• noted the AFF does not contain all fines, penalties, and 

forfeited proceeds collected by NOAA for marine resourc

violations; 

e 

• described NOAA’s accounting for the use of fines and penalties from Northeast 

Multispecies Fishery Management Plan; and 

• provided further clarification of the AFF inflow and outflow data. 

Figure 1 shows a comprehensive look of the various control weaknesses we identified during 

our review. These are further described in detail throughout this report. 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

     

     

   

       

     

  

     

             

OLE

• Duties not adequately segregated

• Lacks deposit account monitoring

• Lacks EAR tracking

• LEADS lacks data integrity controls

Enforcement Section

• Duties not adequately segregated

• Lacks deposit account monitoring

NOAA Finance

• Lacks deposit account monitoring

Figure 2. Issues by Office for Finding I

e 

Findings and Recommendations 

I. NOAA Has No Assurance That All Proceeds from Assessed Fines, Penalties, 

and Forfeitures Are Received and Accurately Recorded 

Our review indicates NOAA lacks adequate internal controls over its 

collection of fines, penalties, and forfeiture proceeds included in the fund, 

and therefore does not have assurance that all amounts due NOAA are 

actually received. Office of Management and Budget (OMB) Circular A123, Management’s Responsibility for Internal Control, 8, states: “Monitoring 

the effectiveness of internal control should occur in the normal course of 

business. In addition, periodic reviews, reconciliations or comparisons of 

data should be included as part of the regular assigned duties of 

personnel. Periodic assessments should be integrated as part of 

management’s continuous monitoring of internal control, which should b

ingrained in the agency’s operations.” 

Our review of NOAA’s fine and penalty collection process identified 

significant internal control weaknesses that increase the risk of fraud. 

These include inadequate segregation of duties; policies and procedures 

that lack financial controls and methods for monitoring collection; lack of 

deposit fund monitoring; failure to track and reconcile Enforcement 

Action Reports (EARs); and lack of system controls in NOAA’s case 

management system. 

Figure 2 provides a summary of the control weaknesses that we identified during our review 

related to receipt of fines and penalties. 

A. OLE and the Enforcement Section collection and deposit processes for fines, penalties, and 

forfeitures are not adequately segregated 

OLE and the Enforcement Section do not maintain effective segregation of duties for the 

collection and deposit of fines and penalties. To prevent opportunities for fraud, duties should 

be segregated to ensure that no single person is responsible for several key activities associated 

with collections. Failure to adequately segregate key collection activities may result in 

undetected misuse of funds. We reviewed summary settlement collection procedures and 

found the following three examples of inadequate segregation of duties within OLE and the 

Enforcement Section: 

1.	 Regional enforcement technicians have both custody and recording roles that should be 

segregated (see table 1). Regional enforcement technicians collect all incoming mail that 

contains summary settlement payments, prepare payments for deposit to a dedicated 

lockbox, and enter the payment receipts into the Law Enforcement Accessible Database 

System (LEADS), an OLE web-based system for entering, managing, and reporting law 

enforcement data. The enforcement technicians also have access to altering fine and
 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 3 
 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

penalty amounts within the LEADS database, which should not be provided to the 

person who collects the payments. 

Table 1. Compatibility of Regional Enforcement Technicians’ Multiple Roles 

Role Process Incoming Checksa Send Checks to Lockboxa Update LEADSb 

Process Incoming Checksa ----- Incompatible Incompatible 

Send Checks to Lockboxa Incompatible ----- Incompatible 

Update LEADSb Incompatible Incompatible -----

a

Custodial role. bRecording role. 

Source: OIG 

2.	 OLE agents can perform asset custody and recording roles that should be performed by 

three different people (see table 2). OLE agents have the authority to seize fish caught in 

violation of marine resource laws. OLE agents who identify unallowable marine catches 

are responsible for seizing the catch, negotiating the sale of the seized catch, receiving 

proceeds from the sale, updating LEADS, and delivering the proceeds to the regional 

enforcement technician. 

Table 2. Compatibility of OLE Agents’ Multiple Roles 

Role Seizing Catch and 

Negotiating Salea 

Receiving Proceeds 

from Salea Updating LEADS b Delivering Proceeds 

to Techniciana 

Seizing Catch and 

Negotiating Salea ----- Incompatible Incompatible Incompatible 

Receiving Proceeds 

from Salea Incompatible ----- Incompatible Incompatible 

Updating LEADSb Incompatible Incompatible ----- Incompatible 

Delivering Proceeds 

to Techniciana Incompatible Incompatible Incompatible -----

a

Custodial role. bRecording role. 

Source: OIG 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 4 
 

 

 

                                                           

 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

3.	 Within their own authority, Enforcement Section attorneys can perform authorization, 

asset custody, and recording roles that should be performed by three different people 

(see table 3). Enforcement Section attorneys are responsible for issuing a Notice of 

Violation and Assessment, negotiating payment options, updating EMIS/JustWare,5 

collecting the first payment, submitting the first payment to the Enforcement Section 

paralegal who prepares the payment for lockbox deposit, and if any remaining balance 

exists for the case, forwarding a case package to NOAA Finance to establish a 

receivable in NOAA’s financial system. 

Table 3. Compatibility of Enforcement Section Attorneys’ Multiple Roles 

Role Issuing 

NOVAc 

Negotiating 

Paymentc 

Updating 

JustWareb 

Collecting 

Paymenta 

Submitting 

Payment to 

Lockboxa 

Submitting 

Remaining 

Balance to 

NOAA 

Financea 

Issuing 

NOVAc ----- Compatible Compatible Incompatible Incompatible Incompatible 

Negotiating 

Paymentc Compatible ----- Compatible Incompatible Incompatible Incompatible 

Updating 

JustWareb Compatible Compatible ----- Incompatible Incompatible Incompatible 

Collecting 

Paymenta Incompatible Incompatible Incompatible ----- Incompatible Incompatible 

Submitting 

Payment to 

Lockboxa 

Incompatible Incompatible Incompatible Incompatible ----- Incompatible 

Submitting 

Remaining 

Balance to 

NOAA 

Financea 

Incompatible Incompatible Incompatible Incompatible Incompatible -----

a

Custodial role. bRecording role. cAuthorization role. 

Source: OIG. 

In all three examples, an OLE or Enforcement Section employee is assigned excessive control 

over a revenue collection process, without compensating controls. This represents a failure to 

adequately segregate roles associated with fine and penalty collection, deposits, and recording. 

It also increases the risk that funds can be misappropriated without detection. 

5

 EMIS was GCEL’s electronic case management system until it was replaced with the JustWare case management 

system in 2011. 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 5 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Adding to the control deficiencies is that OLE’s and Enforcement Section’s written fine and 

penalty collection policies do not address financial internal controls for OLE and Enforcement 

Section operations. Although some OLE regional offices provided us with policies, none of the 

policies adequately addressed key internal controls related to segregation of duties, which are 

needed to prevent misappropriation of government assets. Other key duties, related to 

reconciling collection accounts and monitoring payment status, also were not addressed. 

In addition to the segregation of duties issues, one Enforcement Section division is holding 

checks received for case payments for as long as a month or more before depositing funds in 

the lockbox. Per Enforcement Section collection guidance, all checks received should be 

submitted to the lockbox once or twice a week. Failure to remit checks to the lockbox in a 

timely manner increases the risk of misappropriation. 

B. The AFF deposit account lacks monitoring 

Neither OLE nor the Enforcement Section are monitoring deposit account balance to ensure 

that amounts are transferred to the AFF or returned to the respondent upon final disposition 

of a case. The deposit account holds proceeds that are pending legal determination from the 

sale of property seized by OLE agents. Once a case has a determination, funds should be moved 

from the deposit account in accordance with the legal disposition; either by returning money to 

the respondent or transferring money to one of NOAA’s marine resource funds. Funds held in 

the deposit account are not available for NOAA’s use. Because these amounts represent both 

an asset and a liability to the government until the case is legally resolved, it is essential that 

NOAA maintains an accurate deposit fund account and remits all funds due to respondents in a 

timely manner. As of March 31, 2011, NOAA’s deposit account had a balance of $4.8 million. 

Our analysis identified that more than $1 million, or 22 percent of the deposit account balance, 

has been held by NOAA for at least 4 years (see figure 3). 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 6 
     

        

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Figure 3. Deposit Account Balances (as of March 31, 2011) by Age of Deposit 

$2,649,287

56%

$260,386

5%

$495,753

10%

$323,708

7%

$331,136

7%

$569,447

12%

$42,808

1%

$31,910

1%

$54,272

1%

4 Years or More

$1,029,573

22%

0‐1 Year 1‐2 Years 2‐3 Years 3‐4 Years 4‐5 Years

5‐6 Years 6‐7 Years 7‐8 Years 8‐9 Years

All Cases

Total: $4,758,707

Cases 4 Years and Older

Source: OIG analysis of NOAA data 

As a result of our findings, NOAA reviewed the deposit account balance and identified 113 

cases that had received final dispositions from as far back as 2002. Of these, 13 require NOAA 

to refund respondents over $41,000, and the other 100 dispositions require NOAA to transfer 

more than $830,000 from the restricted deposit account to the unrestricted asset account of 

the AFF. This accounting should be reflected in the AFF financial statements. 

C. Enforcement Action Reports are not tracked and reconciled 

OLE agents prepare Enforcement Action Reports for marine resource violations but do not use 

these to identify all potential fines and penalties due NOAA. As a result, NOAA is unable to 

reconcile EARs to amounts recorded in the accounting system. NOAA managers can use EARs 

to identify and monitor all enforcement activity conducted either by OLE agents, joint 

enforcement partners, or the U.S. Coast Guard, and to anticipate fines, penalties, and seized 

property that should be remitted to NOAA. However, before April 2011, NOAA had not 

inventoried these reports and was not tracking their use. This significantly limits NOAA’s ability 

to monitor OLE operations and collections, and increases the risk that funds can be 

misappropriated without detection. 

D. LEADS lacks controls to ensure data integrity and consistent case reporting 

OLE agents and technicians have unrestricted access to cases in LEADS and can readily and 

easily modify case information—of their own cases and those of other agents. As a result, 

NOAA cannot ensure the integrity of case data. Although NOAA does not consider LEADS a 

financial system of record, it is the first place that collections of fines and penalties are 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 7 
     

         

       

     

             

Enforcement Section

•Debts not recorded

accurately or in a timely way

NOAA Finance

•Failure to pursue collection

of overdue fines

Figure 4. Issues by Office for Finding II

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

recorded. With proper controls, the information recorded in LEADS could be relied on to 

supplement and/or verify the completeness of NOAA’s accounting records. 

OLE also has not established a protocol for consistently entering case information in LEADS, so 

data extracted from the system has limited value. OLE uses LEADS to track case information, 

including summary settlement payments. However, the system’s drop-down menus provide 

multiple options to describe a case’s status or other actions. Based on inquiries with OLE 

management, we found that an agent’s selection on the drop-down menu is subjective; agents 

may choose different descriptions for the same case status. For example, when seized items are 

transferred to labs for testing, some agents will classify this item as "transferred,” while others 

may classify it as “on hand.” 

II. NOAA Has Not Accurately Recorded or Adequately Pursued the Total 

Amount Owed for Fines and Penalties 

Although NOAA is required to record payments due as soon as 

NOAA has a claim to the money and it should6

 take prompt action 

to recover debts, our review found that NOAA does not 

consistently record, monitor, and pursue the collection of Notices 

of Violation and Assessment (NOVAs). As a result, NOAA was 

required to write off accounts receivable balances totaling 

approximately $3.9 million, which represented accounts receivable 

more than 2 years past due. The total owed to NOAA prior to the 

write-off was $4.9 million. 

Figure 4 provides a summary of the recording control weaknesses we identified during our 

review. 

A. Debts due NOAA are not always recorded accurately or in a timely manner 

The Enforcement Section does not inform NOAA Finance in a timely manner when NOAA has 

a claim to the fine levied in a NOVA, which should be recorded as an outstanding accounts 

receivable. A marine resource fine or penalty in a NOVA becomes effective if no response is 

received by 30 days after a NOVA is served or by the end of any extension period. In such 

cases, those fines are due 30 days after the effective date. Marine resource fines or penalties 

may also come due if a settlement agreement is reached. Enforcement Section attorneys 

forward case information, including balances owed, to NOAA Finance once a debt is final and 

therefore legally enforceable. However, only the Enforcement Section attorneys assigned to the 

case know when the fine becomes final. There is no independent method of monitoring 

whether cases are submitted to NOAA Finance in a timely manner. For example, although one 

NOVA we identified became past due in June 2007, the Enforcement Section did not request 

that NOAA Finance establish a receivable until December 2007, when the NOVA was another 

                                                            

6

 The Federal Accounting Standards Advisory Board SFFAS 1, Accounting for Selected Assets and Liabilities, states 

that a receivable “should be recognized when a federal entity establishes a claim to cash or other assets against 

other entities, either based on legal provisions, such as a payment due date, (e.g., taxes not received by the date 

they are due), or goods or services provided.” 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 8 
                                                           

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

6 months past due. Because of this delay, NOAA’s accounts receivable were understated for 

two consecutive quarters. 

NOAA also has not developed adequate process controls over AFF accounts receivable 

balances to ensure that what is recorded in its financial system accurately reflects the balance 

due the government. For example, one case recorded in the Commerce Business System 

(CBS), NOAA’s financial recording system, in 2008 remains outstanding even though the 

Enforcement Section accepted a modified settlement agreement that forgave the remaining 

balance. The respondent fulfilled the terms of the agreement in June 2010. 

Issues related to the timely and accurate recording of receivables may continue until process 

controls are adequately addressed in policy and enforced. Enforcement Section’s written 

guidelines do not contain adequate internal controls for monitoring case payments prior to 

debts becoming legally enforceable. Currently, Enforcement Section attorneys are solely 

responsible for monitoring the status of NOVAs before the balance is recorded in NOAA’s 

financial system. The guidelines, however, do not describe how, or how often, Enforcement 

Section attorneys should monitor cases; nor do they provide a method for independent 

monitoring of case resolution. Most attorneys interviewed did not use the Enforcement 

Section’s case-tracking software (JustWare) to monitor cases. JustWare is the Enforcement 

Sections’s web-based case management software used to record pertinent case information. 

Instead, attorneys tracked the status of open cases with other methods, such as individual 

worksheets or hard copy files. Monitoring cases this way does not permit independent 

oversight of collection status by Enforcement Section management or NOAA Finance. 

B. NOAA failed to pursue collection of overdue fines and penalties 

The Debt Collection Improvement Act of 1996 “requires agencies to take prompt action to 

recover debts, aggressively monitor all accounts . . . [and] transfer all non-tax debts delinquent 

more than 180 days to the Department of the Treasury.”7 NOAA has not implemented 

sufficient practices to ensure compliance with the requirement and to follow up on cases in 

which payment has not been received. 

As a result of Clifton Gunderson’s independent audit, NOAA has written off accounts 

receivable balances totaling $3.9 million. The write-offs occurred because NOAA was not 

pursuing collections of amounts owed by respondents. Our review of the AFF accounts 

receivable balance indicates that as of March 31, 2011, nearly all balances reported in the 

financial statement were more than 360 days past due. NOAA’s past attempts to pursue 

collection−including hiring a contractor for this purpose−were ineffective. 

7 Office of Mgmt. & Budget, Executive Office of the President, OMB Memorandum M-04-10, Debt Collection 

Improvement Act Requirements (2004). 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 9 
 

 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Other Matters 

I. The AFF Does Not Contain All Fines, Penalties, and Forfeited Proceeds 

Collected by NOAA for Marine Resource Violations 

NOAA defines the AFF as marine resource violation proceeds that can be expended according 

to the Magnuson-Stevens Act, section 311(e)(1). However, this definition does not encompass 

all marine resource violation proceeds that NOAA collects. OLE enforces approximately 32 

statutes related to marine resources and most of these statutes are silent on how to expend 

collected proceeds. For marine resource statutes silent on how to expend proceeds, NOAA 

applies Magnuson-Stevens Act, section 311(e)(1), and includes the proceeds in the AFF. 

However, some marine resource statutes include language that NOAA interprets to exclusively 

control how NOAA disposes of fines, penalties and forfeited property. See table 4 for a list of 

other statutes identified by NOAA as having similar characteristics. 

Table 4. NOAA’s Classification of Marine Resource Fines, Penalties, and Forfeitures 

AFF Fines, Penalties, & Forfeitures Other Fines, Penalties, & Forfeitures NOT 

Included in AFF 

Fines, penalties, and forfeited proceeds that can be 

retained under Magnuson-Stevens Act, § 311(e)(1) 

Fines, penalties, and forfeited proceeds for violations of the 

South Pacific Tuna Act 

Marine Sanctuaries criminal fines Marine Sanctuaries civil penalties and forfeited 

proceeds 

Direct cost related to fines, penalties, and forfeited 

proceeds from American Samoa, Guam, or 

Northern Mariana Islands 

Fines, penalties and forfeited proceeds, less direct costs, 

for American Samoa, Guam, or Northern Mariana Islands 

Forfeited proceeds by foreign vessels within the 

exclusive economic zones of Midway Atoll, Johnston 

Atoll, Kingman Reef, Palmyra Atoll, Jarvis, Howland, 

Baker, and Wake Islands 

Fines and penalties by foreign vessels within the exclusive 

economic zones of Midway Atoll, Johnston Atoll, Kingman 

Reef, Palmyra Atoll, Jarvis, Howland, Baker, and Wake 

Islands 

Source: OIG summary of NOAA’s Chart of Statutory Provisions and Fund, Project and Task Code Crosswalk, December 

20, 2010 

NOAA does not consider proceeds collected under statutes that it interprets to have specific, 

exclusively controlling expenditure language as part of the AFF since the funds cannot be spent 

under Magnuson-Stevens Act, section 311(e)(1). NOAA segregates these proceeds from the 

AFF in its financial accounting system. 

Because some proceeds are not considered part of the AFF, they are subject to different 

controls. For example, NOAA developed policies and procedures to improve the AFF 

expenditure process; however, marine sanctuary civil penalties are not covered because they 

do not fall within NOAA’s definition of the AFF. In addition, non-AFF proceeds were not 

subjected to an independent audit of the AFF in March 2011. While NOAA’s current definition 

of the AFF includes the collections for a majority of the marine resource statutes which NOAA 

enforces, the disparity in how they are monitored may be misleading to the public. 

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Another account outside of NOAA’s definition of the AFF, and therefore not included in the 

independent audit, is the Special Operations Fund. NOAA agents use the Special Operation 

Fund to perform undercover operations. The Special Operations Fund is comprised solely of 

AFF monies and is maintained in multiple commercial bank accounts.8 We did not conduct a 

detailed review of the Special Operation Fund’s activity, but acquired an understanding of the 

location of accounts and method of account replenishment and withdrawal. Even though this 

fund contains only the proceeds of fines, penalties and forfeitures under the Magnuson-Stevens 

Act, the fund’s transactions are not recorded in NOAA’s financial system and therefore are not 

subject to the AFF’s new accounting policies. This separation could result in Special Operations 

Fund monies being used for activities outside of what the Magnuson-Stevens Act allows. 

II. NOAA’s Accounting for the Use of Fines and Penalties from the Northeast 

 Multispecies Fishery Management Plan 

The Magnuson-Stevens Act, section 311(f)(4), states that proceeds attributable to fines and 

penalties for violations of the Northeast Multispecies Fishery Management Plan (the Plan) shall 

be expended for further enforcement of the Plan. As part of NOAA’s effort to define the AFF, 

NOAA requested Department of Commerce Office of General Counsel (OGC) interpret the 

statute and specifically identify restrictions placed on proceeds collected pursuant to the 

section. OGC concluded in its February 28, 2011, Legal Memorandum that fines and penalties 

collected for violations of the Plan can also be expended according to the broader guidelines of 

the Magnuson-Stevens Act, section 311(e)(1). 

While the February 28, 2011, Legal Memorandum provides NOAA with the flexibility to use 

Plan proceeds against the broader guidelines of the Magnuson-Stevens Act, NOAA has 

developed accounting project codes that track Plan proceeds separately. In our July 2010 

report, we noted that NOAA used the AFF for wide-ranging purposes and that it comingled 

AFF funds with other bureau funds. In response to this report, NOAA Finance implemented an 

accounting structure that separately tracks AFF proceeds and expenditures and that further 

identifies proceeds specifically collected pursuant to the Plan, section 311 (f)(4). Because the 

accounting project codes remain and are being used in FY 2012, we expect that the separate 

tracking of previously comingled funds will continue. 

III. Further Clarification of AFF Inflow and Outflow Data 

In July 2010, we reported that KPMG was unable to discern the current balance of the AFF 

because it found that NOAA did not have a consistent definition of the AFF, and indicated the 

AFF was more of an abstract concept than a tangible entity within NOAA. As a result, KPMG 

needed to develop a methodology so that all potential AFF activities would be included in its 

forensic review. Because AFF was not reliably defined, KPMG’s criteria were intentionally broad 

to ensure that all potential AFF transactions were subjected to their forensic review. While this 

is a common technique that auditors use to address concerns about the completeness of a 

8 The statute governing the Special Operations Fund provides that NOAA may obtain appropriations for the Fund.

Despite this, the Special Operations Fund monies currently derive solely from AFF accounts.

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 11 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

population, KPMG’s criteria caused some confusion about the true balance of the fund. KPMG’s 

criteria included all transactions 

• identified as civil monetary penalties, 

• made by OLE and the Enforcement Section, and 

• included in the deposit account. 

From these criteria, KPMG identified $96 million of inflows and $49 million of outflows from 

723 project codes between January 1, 2005, and June 30, 2009. However, the inflows and 

outflows identified by KPMG should not be subtracted to calculate the AFF activity for this time 

period. These values represent all transactions−including journal entries and accounting 

adjustments−not just AFF inflows and outflows of fines, penalties, and forfeitures. Additionally, 

the 723 project codes contain non-AFF activity made by OLE and the Enforcement Section. In 

March 2011, Clifton Gunderson, an independent audit firm, audited the AFF and determined 

the unrestricted cash balance to be $7.5M. 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 12 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Recommendations 

We recommend that the Under Secretary of Commerce for Oceans and Atmosphere 

require that 

1.	 OLE and Enforcement Section develop policies and procedures that ensure payments 

due to the government are recorded accurately and in a timely manner, and implement 

a segregation-of-duties matrix identifying compatible and incompatible functions 

associated with the collection, recording, deposit, and reconciliation of fines, penalties, 

and forfeitures; 

2.	 OLE train agents and enforcement technicians on collection procedures and policies; 

3.	 Enforcement Section headquarters work with the Enforcement Section Northeast 

division to improve the timeliness of the division’s lockbox submissions; 

4.	 OLE, the Enforcement Section, and NOAA Finance implement a process to ensure that 

deposit account cases are periodically reviewed and that legally resolved cases are 

transferred from the deposit account or returned to a respondent in a timely manner; 

5.	 OLE implement procedures to track and reconcile how Enforcement Action Reports 

are used and issued, including those issued to joint enforcement partners and the U.S. 

Coast Guard; 

6.	 OLE evaluate LEADS internal control weaknesses, develop specific protocol for 

recording information, and restrict LEADS user access to cases;
 

7.	 Enforcement Section develop policies and procedures to ensure that debts are recorded 

in CBS as soon as legally enforceable, and that will include independent monitoring for 

amounts not yet recorded in CBS; 

8.	 Enforcement Section standardize its case monitoring process and reinforce use of the 

JustWare system; and 

9.	 Enforcement Section and NOAA Finance develop policies and procedures to 

consistently pursue collection of fines and penalties in a manner that treats all 

respondents uniformly, and in compliance with the Debt Collection Improvement Act of 

1996. 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 13 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Summary of Agency and OIG Comments 

We reviewed NOAA’s response, included in appendix C, and considered NOAA’s comments 

in preparing this final report. NOAA concurred with the recommendations in our report and 

noted that corrective actions are already under way to address many of the recommendations 

in the report. 

We look forward to reviewing NOAA’s action plan to address our report recommendations. 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 14 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix A: Objectives, Scope, and 

Methodology 

The objective of this review was to determine (1) if NOAA properly defined assets comprising 

the asset forfeiture fund, including the completeness and accuracy of funding sources; (2) if 

NOAA appropriately defined allowable uses of fund assets and developed controls over 

collections and disbursements; and (3) if the audit plan from Clifton Gunderson, the 

independent auditor of the AFF, is designed to provide reliance on the AFF cash balances as of 

March 31, 2011, and if the firm can provide an opinion on the balance. 

We obtained an understanding of the definition of the fund and the assets that comprise the 

fund by interviewing NOAA Finance management and NOAA headquarters general counsel and 

reviewing newly established NOAA policies and other relevant documents. In addition, we 

obtained and reviewed data from the general ledger, the Commerce Business Systems (CBS), 

NOAA’s financial accounting system. To assess the reliability of the CBS data, we reconciled 

the detailed data files with general ledger reports to ensure accuracy and completeness. We 

also reviewed supporting documentation for collection and disbursement transactions selected 

for control test work, which was provided by NOAA Finance, OLE, and the Enforcement 

Section. For our third objective, we reviewed a copy of the audit plan used to support Clifton 

Gunderson’s opinion. 

We conducted our review from February through August 2011 at the Department’s and 

NOAA’s offices in the Washington, D.C., area. OIG focused its review on AFF activities 

occurring from October 1, 2010, to March 31, 2011. 

The review was conducted under the authority of the Inspector General Act of 1978, as 

amended, and Department Organization Order 10-13, dated August 31, 2006. We conducted 

the evaluation in accordance with Quality Standards for Inspection and Evaluation, January 

2011, issued by the Council of Inspectors General on Integrity and Efficiency. 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 15 
  

   

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix B: Monetary Benefits 

Questioned Costs Unsupported Costs and 

Write-offs Funds Put to Better Use 

Accounts Receivable 

Processing $ 0 $ 3,900,000 $ 0 

Deposit Account Balances $0 $0 $871,000 

Source: OIG prepared (Findings and Recommendations Section II.B and Recommendation 9) 

OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 16 
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

FROM: 

National Marine Fisheries Service 

(~Sam el D. Rauch ~<\-:""-C- 1 1\cting Assistant 1\dministra\ot-c_} 

SUBJJ<::CT: Comments on the Draft Report Entitled, "More Aclion Needed to 

Improve Conlrofs in Asse/ Forfeilure Fund"' 

This memorandum responds to the Drafl report from the Office of Inspector General (OIG), 

entitled "More Action Needed to Improve Controls in Asset Forfeiture Fund'. (the " report-') 

issued on December 20, 20 I I. In a letter accompanying that report, the OIG asked the National 

Oceanic and Atmospheric Administration (NOAA) to "submit any comments to the draft report 

by January 27, 20 12," and that these comments would be considered by the OIG and attached as 

an appendix to the iinal report. To complement the record offered by the OIG's Draft report, 

NOAA provides the following comments on the report's recommendations. 

At the outset, NOAA appreciates the OIG's recognition that NOAA has formally defined the 

Asset Forfeiture Fund (the "Fund") and improved internal controls over disbursements from the 

found. NOAA has made significant efforts to improve the management and oversight of the Fund 

since February 20 I 0. 

NOAA concurs with recommendations I through 9 ofthc report. These recommendations 

identify areas that we can and continue to work to improve through greater management 

oversight of the fund. As a result of the 20 II audit of the Fund, NOAA has corrective actions 

already underway that will address many of these recommendations, such as efforts to improve 

the monitoring of deposits associated with the Fund and to pursue and record fines and penalties 

owed to the government. ln addition, NOAA has referred all debts to Treasury in accordance 

with the Debt Collection Improvement 1\ct of 1996, as appropriate, and the National Marine 

Fisheries Service Office of Law Enforcement is implementing procedures to track and reconcile 

how Enforcement Action Reports arc used and issued. To the extent that the report provides 

recommendations for actions not already underway, NOAA will modify its corrective action plan 

and begin implementing these further improvements. 

We value the contribution that the OIG has made in identifying opportunities to further improve 

the management and oversight of the Fund. and remain committed to improving our 

Enforcement P-rogram. 

Appendix C: Agency Response 

UNITED STATES DEPARTMENT OF COMMERCE 

Net:lonal Ocaanlc Br'ld Aetmo• pharlg Admlnlatrl!ll'tlan 

NAT IONAL M ARIN E F ISHERIES SERVICE 

1 31 EJ E eat:.-Weat Highway 

S11ve r S~rl , Maryland 20910 

THE ~EC OFI 

JAN 2 7 201 MEMORANDUM FOR: Ann Eilers 

Principal Assistant Inspector General 

Office of Audit and Evaluation 

Office of Inspector General, U.S. Department of Commerce 

2 

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THE ASSIS TANT A O M INIS TF=lATO A 

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OFFICE OF AUDIT AND EVALUATION: FINAL REPORT OIG-12-019-I 17