Asset Forfeiture Programs: Justice and Treasury Should Determine Costs and Benefits of Potential Consolidation
Released: 2012-09-12T00:00:00

Letter

Background

Asset Forfeiture Process

For both the Justice and the Treasury program, the asset forfeiture process involves a number of key steps, including necessary planning of the seizure, seizing and taking custody of the asset, notifying interested parties, and addressing any claims and petitions. Noncash personal property, such as vehicles, airplanes, jewelry, and collectibles, that has been seized must be stored and maintained until it is either returned to the owner or has been forfeited to the government and then disposed of. Seized and forfeited real property, while not stored, must also be maintained. Once property is forfeited to the government, it is subsequently sold, put into official use, destroyed, or transferred to another agency. In fiscal year 2011, Justice was responsible for overseeing 452 pieces of real property at a value of about $97 million, and over 3,000 pieces of personal property at a value of about $74 million. Treasury was responsible for 251 pieces of real property at a value of about $41 million, and over 15,000 pieces of personal property at a value of about $20 million. Cash and monetary instruments that have been forfeited and property that has been forfeited and sold are subsequently deposited in the forfeiture fund, in the case of Justice—the AFF—and for Treasury—the TFF. Money collected in the funds is used to pay for expenses related to the asset forfeiture program and for other law enforcement initiatives. Figure 1 demonstrates the key steps involved in the asset forfeiture process.

The primary mission of the Justice Asset Forfeiture Program is to prevent and reduce crime by disrupting, damaging, and dismantling criminal organizations through the use of the forfeiture sanction. The program has three primary goals: (1) to punish and deter criminal activity by depriving criminals of property used or acquired through illegal activities; (2) to enhance cooperation among foreign, federal, state, and local law enforcement agencies through the equitable sharing of assets recovered through the program; and as a by-product, (3) to produce revenues in support of future law enforcement investigations and related forfeiture activities. The Justice Asset Forfeiture Program includes activity by the Department of Justice components as shown in table 1, as well as several components outside of the department.

Likewise, the mission of the Treasury Forfeiture Program is to affirmatively influence the consistent and strategic use of asset forfeiture by Treasury law enforcement bureaus to disrupt and dismantle criminal enterprises. The program has four primary goals: (1) to deprive criminals of property used in or acquired through illegal activities; (2) to encourage joint operations among federal, state, and local law enforcement agencies, as well as foreign countries; (3) to strengthen law enforcement; and (4) to protect the rights of the individual.

The Treasury Executive Office for Asset Forfeiture administers the TFF, which is the receipt account for the deposit of non-tax forfeitures made by member agencies. The member agencies include one Department of the Treasury agency and four Department of Homeland Security (DHS) agencies, as shown in table 2.

Justice and Treasury Have Shown Limited Progress since 2003 in Consolidating Asset Forfeiture Property Management Activities

Since 2003, Justice and Treasury have taken some steps to explore coordinating forfeiture program efforts, including sharing a website for posting notifications, pursuing a contract for seizure efforts abroad, and potentially sharing recycling facilities. However, the departments have made limited progress in sharing storage facilities or contracts, and Justice and Treasury have not fully explored the possibility of coordinating the management of their assets that could be consolidated to achieve efficiencies, effectiveness, and cost savings. As a result, each department maintains separate IT asset tracking systems, separate contracts, and separate storage facilities.

Some Efforts Have Been Made or Are Under Way to Coordinate Forfeiture Activities but the Departments Continue to Maintain Separate Programs

In 2003, we reported that Justice’s and Treasury’s progress in improving the management of and accountability for seized and forfeited property, and their demonstrated commitment to communicate and coordinate where joint efforts could help reduce costs and eliminate duplicative activities, were sufficient to remove the high-risk designation from the asset forfeiture programs. We noted that Justice and Treasury were moving toward sharing website locations for Internet sales, sharing selected vehicle storage and warehouse facilities, and exploring opportunities to jointly contract for specific services in high-volume areas. However, the departments have not assessed the feasibility of consolidating asset management activities and continue to separately manage assets.

Since 2003, Justice and Treasury have coordinated in other areas such as developing and sharing a single electronic certification form and database to collect, process, and analyze the submission of online forms from state and local law enforcement agencies participating in the Equitable Sharing Program and sharing a website to post forfeiture notices to the public. According to Treasury officials, since 2008 Treasury has saved approximately $1.8 million in advertising costs because of the migration of advertising notices to the shared website.addition, Justice and Treasury officials noted other cooperative efforts they have planned or under way, which include the following: Justice procured a contract for claims administration in large-scale victim remission cases that participating agencies of each program will be able to use. According to Justice officials, as of August 2012 implementation was under way.

Justice and Treasury are pursuing an international property contract for use by both departments for seizure efforts related to real and personal property located abroad, and the departments expect to award a contract by October 2013.

Justice uses Treasury’s Bureau of Public Debt brokerage account in order to dispose of forfeited paper stocks and bonds rather than opening its own account for the disposal of such securities.

Treasury is exploring the possibilities of using Justice’s UNICOR as a recycler of seized and forfeited goods and, as of June 2012, had conducted several site visits to selected UNICOR recycling facilities to review the program and ensure adequate security measures were in place during the recycling process.

Treasury provided its personal and real property contract structures to Justice for informational purposes in an effort to share information and to assist in their procurement process.

Senior officials from both departments also stated that they routinely consult and coordinate with each other to ensure that they develop consistent policies and practices relating to many areas of the programs, especially for major policies such as equitable sharing and third-party victims.

Additionally, Justice and Treasury had contracted for a study in 2000 to identify opportunities for increased cooperation and sharing of agency and contractor resources. The study contained recommendations for improving the effectiveness and efficiency of property management functions. For example, the study recommended sharing fixed-cost vehicle storage facilities and jointly disposing of vehicles, vessels, and aircraft. The study also recommended that Treasury consolidate its IT asset tracking systems into one. However, Justice rejected the findings of the study because it asserted that the contractor did not satisfy the terms of the contract. For example, the contractor was supposed to develop performance metrics for property management and disposition but, according to Justice, did not do so. As a result, the departments continue to separately manage and dispose of their seized and forfeited property. According to Justice and Treasury officials, when Congress passed a law establishing the TFF in 1992, it recognized the differences in the programs’ missions, which warranted creating separate programs, and this encouraged independent operational decisions that eventually created differences between the two programs. Treasury officials further noted that with the enactment of the Homeland Security Act of 2002 and the creation of DHS in 2003, Congress did not choose to mandate any consolidation of the programs, and therefore Congress’ intent was that the programs remain separate. We recognize the separate legal authorities of the asset forfeiture funds, but those legal authorities do not preclude coordinating more or consolidating certain asset management activities within the programs that we have found to be duplicative over the years across the federal government. Further, after the statutory creation of the Treasury Forfeiture Fund in 1992, a 1995 House Appropriations Committee report directed Justice to review the feasibility of consolidating Justice and Treasury contracts with vendors that provide asset management and disposal services for both agencies, in order to address duplication and provide cost savings. Additionally, over the past 2 years, pursuant to a statutory mandate, we have reported on many areas that appear to be duplicative, overlapping, or fragmented. These past reports have suggested that federal agencies could increase their efficiency and effectiveness by consolidating their physical infrastructure or management functions.

Justice and Treasury Have Made Limited Progress to Decrease Duplication in the Management of Assets in the Justice and Treasury Forfeiture Programs

While the departments were moving toward more coordination in 2003, limited progress has been made since then in sharing the management of its assets. Specifically, the departments continue to maintain separate IT asset tracking systems, storage facilities, and contracts.

Justice and Treasury maintain four separate IT asset tracking systems— one for Justice and three for Treasury—to support their respective asset forfeiture program activities, and these four tracking systems have similar functionality. In February 1995, we reported that Justice and Treasury were pursuing consolidation of IT asset tracking systems and that both departments had agreed to develop, implement, manage, operate, enhance, and support a consolidated IT asset tracking system. According to Justice officials, Treasury had intended to use Justice’s system and participated for 2 years in its design, development, and implementation, but subsequently withdrew to use its own tracking system. Treasury officials stated that they developed their own IT asset tracking system that would link to the program’s financial system of record in order to satisfy the Chief Financial Officers Act of 1990 and the federal financial requirements mandated by the Federal Accounting Standards Advisory Board. Our prior work shows that information technology solutions can be identified in areas in which agencies have made individual investments for systems that are common and duplicative. For example, the federal payroll consolidation initiative consolidated 26 payroll systems to four shared-service centers, standardized payroll policies and procedures, and resulted in achieving cost effectiveness through economies of scale and the elimination of duplicative systems. Further, in 1996, we reported that Treasury recognized that the Justice IT asset tracking system could be modified to meet the Treasury financial reporting requirements but believed that developing a new system to meet the requirements was preferable.officials stated that they had not compared the different systems to determine similarities or differences between them or whether consolidation was feasible or desirable. Treasury officials stated that they In 2012, Justice and Treasury did not believe that consolidation would be cost-effective, and Justice and Treasury continue to use separate systems to perform similar functions that reside on different hardware and software platforms.

We analyzed the major functions of Justice and Treasury’s four systems and found that all systems perform similar functions that are duplicative across government agencies overseeing asset forfeiture programs, as shown in table 3. All four systems have the ability to record seizures, details on the asset, movement of the asset through various stages, and disposition of the asset. Further, all systems could generate detailed and various reports related to the management of assets.

Officials at CBP, the agency responsible for managing SEACATS—the Treasury system of record—stated that a committee had been established in 2011 to begin an IT evaluation of an analysis of alternatives that would explore combining the three IT asset tracking systems under the Treasury program. However, just as the effort began, funding for the evaluation was eliminated because of overall federal government program budget cuts. While CBP attempted an evaluation, officials responsible for the overall Treasury program stated that given the unique requirements of Treasury participating agencies, it would not be beneficial to develop a consolidated asset tracking system. Likewise, according to Justice officials, Justice has done little outreach to the Treasury participating agencies about coordinating or consolidating IT asset tracking systems. However, Justice officials believed that there was room to consolidate asset tracking systems, and said a “best of breed” approach could be used, wherein the best features from each system would be combined. Further, in our analysis of the systems, we found that the technology in the Treasury system of record, SEACATS, was based on 1990s mainframe technology with no existing formal documentation; officials from the Office of Information Technology would like to move the application from the mainframe to a more modern technology environment. According to Justice and Treasury data, the cost of developing, maintaining, and overseeing their four asset tracking systems in fiscal year 2011 totaled $16.2 million for CATS and $10.4 million combined for the three Treasury asset tracking systems.

As we reported in May 2012, consolidating management functions, such as information technology services, can increase the efficiency and effectiveness of programs or contribute to cost savings, but information is needed to help effectively evaluate consolidation proposals and activities. As shown in table 4, fundamental questions should be answered while considering consolidation because, while consolidation is beneficial in some situations, it is not in others. Consolidation initiatives can be immensely complex, politically charged, and costly and are not quick, easy, or automatic ways of producing desired change. As a result, a case-by-case analysis is necessary—evaluating the goals of the consolidation against the realistic possibility of the extent to which those goals would be achieved—to ensure effective stewardship of government resources in a constrained budget environment. By conducting a study that takes into account the expected costs, benefits, and other key questions to consider when evaluating consolidation proposals, Justice and Treasury would have the information needed to determine if consolidation would result in improvements such as increases in efficiency, effectiveness, or cost savings.

Justice and Treasury have made limited progress in sharing storage facilities or contracts and continue to separately store assets seized under each program. In some cases, storage facilities are located in the same geographic area. Under the Justice program, the Marshals Service—the primary custodian of Justice’s seized assets—generally takes a decentralized approach to facility and contract management. In fiscal year 2011, the Marshals Service had multiple contracts for the management, storage, and disposal of assets at a cost of about $19 million. Treasury, using a centralized approach, has two nationwide contracts that provide custodial services either directly or through subcontracts with other vendors at a cost of about $49 million for fiscal year 2011. Treasury reported overseeing 5 government warehouse facilities, 61 vehicle locations, and 82 outside specialty vendor locations such as cold storage or storage of hazardous materials. Justice and Treasury stated that the volume and types of properties seized by the participating agencies of each department vary. For example, according to Treasury officials, CBP seizes and holds a much higher volume of items that have no resale value to the government, such as narcotics and contraband, than Justice. While there are some variations in the types of properties seized, both departments also seize similar assets such as vehicles and real property.

Our analysis of contracted asset storage facilities showed that about 23 to 40 percent of Marshals and Treasury’s contracted facilities in each category are in close proximity to one another—or within 20 miles or less of one another. Because there is some variation in the types and volumes of assets seized under each program, we analyzed storage locations for assets that both departments seize and that generally are managed similarly. In our analysis, we examined a total of 212 contract-owned asset storage facilities utilized by Marshals and Treasury as of June 2012 for the storage of three categories of assets—vehicles (143), vessels (54), and aircraft (15). As shown in figure 2, each agency maintains, for example, vehicle storage facilities in numerous states and territories across the country. However, several states—including the border states of Texas and California in addition to Florida—contain higher concentrations of vehicle storage facilities.

With respect to contracted vehicle storage facilities, our analysis shows that Treasury uses 61 of the 143 vehicle storage facilities, of which 40 percent are located 20 miles or less from a Marshals contracted vehicle storage facility. This includes 4 facilities, managed by the same vendor, which Treasury shares with Marshals under separate contracts, as shown in figure 3.

Vendors at one of the vehicle facilities we visited stated that because of the small size of the facility, they were at full capacity and could not accommodate more vehicles; however officials managing the other, larger facility nearby that we visited stated that there would be room for additional vehicles. We recognize that excess capacity might not exist for all vehicle storage facilities that are near one another, and that other factors might influence whether vehicle storage facilities could be shared, such as different agency contracting rules and specialized requirements. However, this example indicates that the potential for sharing resources exists and could be further explored.

For the storage of vessels, Treasury and Marshals use a total of 54 contracted facilities—23 facilities for Treasury and 31 for Marshals. Our analysis shows that 39 percent (9 of 23) of the Treasury contracted vessel storage facilities were located 20 miles or less from a Marshals contracted vessel storage facility—including 1 facility that both Treasury and Marshals use but under separate contracts, as shown in figure 4.

Treasury and Marshals also maintain 15 contracted facilities for the storage of aircraft—7 facilities for Treasury and 8 for Marshals. Our analysis shows that 28 percent (2 of 7) of the Treasury contracted aircraft facilities were located 20 miles or less from a Marshals contracted vessel storage facility, as shown in figure 5.

In addition to contracted facilities, in fiscal year 2011, Marshals reported having 87 government-run storage locations and Treasury reported overseeing 5 government warehouse facilities.participant in the Treasury program, reported using about 80 warehouses where assets that cannot be handled by contractors—such as drugs, weapons, and money—are stored. Treasury officials stated that sharing warehouses would not be practical under Treasury’s current contract structure. However, the practicality of sharing warehouses cannot be known without more information. A study to evaluate the feasibility of consolidation that included government-run storage facilities would provide Treasury and Justice with information to determine whether improved effectiveness, efficiencies, or cost savings were possible.

Additionally, CBP, as a Marshals and Treasury also have separate contracts for the management and disposal of real property, which includes single-family homes, multifamily homes, warehouses, and land. In fiscal year 2011, Marshals reported using one national contract for the management of real property in every U.S. Marshals District except three. Treasury uses a similar model for managing real property and also uses one national contract for the management of real property, which includes maintaining and eventually disposing of the property. Marshals and Treasury use different national contractors, and have not evaluated the feasibility of consolidating the contracting for real property management. They therefore do not know if there could be improved effectiveness, efficiency gains, or cost savings realized because of economies of scale.

In fiscal year 2011, Marshals had contracts for the management, storage, and disposal of all assets at a cost of about $19 million. Treasury’s two nationwide contracts—one for the management of personal property and one for the management of real property—cost about $49 million for fiscal year 2011. Given the resources needed to maintain separate asset tracking systems, asset storage facilities, and contracts for the management of property; consolidating these systems, storage facilities, and contracts could result in increased efficiency, effectiveness, and cost savings. However, gathering additional information would be important to help effectively evaluate consolidation proposals and activities, as well as any expected benefits.

Given the proximity of many Marshals and Treasury asset storage facilities as detailed above, we asked officials from the two agencies if they had studied the feasibility of consolidating their separate contracting activities for the storage of similar assets. Both Marshals and Treasury responded that, while they have attempted to consolidate storage facilities where practical, they had not considered such an analysis because of factors such as (1) the unique security requirements for their stored assets; (2) variations in the types of assets maintained by each agency that may create unique storage needs; (3) different contracting rules and requirements for each agency; (4) the inability to accurately predict the combined storage needs of both agencies, which affects their ability to contract for these services; and (5) overall lack of assurance that combining storage contracts will result in cost savings. However, according to these same officials, the departments have not analyzed the similarities or differences in each department’s security requirements, storage needs, or contracting rules. Thus, the extent to which variations in these factors hinder consolidation efforts is not known. Conducting a study that assesses the feasibility of consolidation, including the costs, benefits, and key questions to consider when evaluating consolidation, would better position Justice and Treasury to determine if consolidation would result in increases in efficiency, effectiveness, or cost savings.

Conclusions

Justice and Treasury separately manage over $9 billion in seized assets. The departments use different information systems and separate contracts, and maintain separate storage facilities that are frequently within 20 miles of a similar facility. While the agencies have taken some steps to coordinate forfeiture program efforts, the current fiscal environment and the billions of dollars of assets involved underscore the need for agencies to examine how consolidating operations might contribute to cost savings or effectiveness gains. By conducting a study that takes into account the costs, benefits, and key questions to consider when evaluating consolidation proposals, the departments could have critical information to better identify whether increased efficiencies, effectiveness, and cost savings can be realized.

Recommendations for Executive Action

Given that information is needed to determine the feasibility of consolidating potentially duplicative Justice and Treasury asset forfeiture management activities, we recommend that the Attorney General and the Secretary of the Treasury conduct a study to determine the feasibility of consolidating asset management activities including, but not limited to, the use of asset tracking systems and the sharing of vendor and contract resources. This study should include the likely costs and benefits of consolidation as well as GAO’s key questions to consider when evaluating consolidation proposals.

Agency Comments

We provided a draft of this report to Justice and Treasury for their review and comment. Justice and Treasury did not provide official written comments to include in this report. However, in e-mails received on August 28, 2012, from Justice and Treasury officials, both departments concurred with the recommendation. Justice further noted that once the final report is issued, the department will provide a formal plan of action to Congress within 60 days. Treasury also noted that DHS would need to be consulted as part of the study since DHS owns and operates two of the IT asset tracking systems used in the Treasury program. Both Justice and Treasury provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the Attorney General, the Secretary of the Treasury, selected congressional committees, and other interested parties. In addition, this report is be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any further questions about this report, please contact me at (202) 512-9627 or maurerd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix I.

Appendix I: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Sandra Burrell and Dawn Locke, Assistant Directors, and Valerie Kasindi, Analyst-in-Charge, managed this assignment. Samantha Carter and Mike Harmond made key contributions to the report. Also contributing to this report were Chuck Bausell, Frances Cook, Katherine Davis, Eric Hauswirth, Linda Miller, John Mingus, Gary Mountjoy, Cynthia Saunders, Karl Seifert, and Janet Temko.