NOAA CFO says accounting firm "found no abuse" of the Asset Forfieture Fund. Inspector General says the report tells "a different story than the news release.
WASHINGTON – Aug. 25, 2011 – This afternoon, Maureen Wylie, NOAA chief financial officer, stated in a press release "Today, we are pleased to release an independent report from the accounting firm Clifton Gunderson, LLP, of NOAA's Asset Forfeiture Fund (AFF), that found no abuse of the fund. The report primarily evaluated fund expenditures prior to NOAA's implementation of actions taken to improve fund management beginning in February 2010.
The report referenced by Ms. Wylie examined the smaller transactions – under $3000 — made by NOAA officials from the Asset Forfeiture Fund.
Shorly after the NOAA press release was issued, Commerce Department Inspector General Todd Zinser, in an interview with the Gloucester (Massachusetts) Daily Times, told reporter Richard Gaines "I don't find NOAA's news release particularly helpful." The Inspector General said, "The numerous exceptions (to proper record keeping and documentation) tell a different story than the news release tells."
Asked if the Gunderson report contradicted the findings by the IG and KPMG, NOAA spokeswoman Monica Allen said in an email that "the independent auditor's report from Clifton Gunderson examines transactions of $3,000 or less to address concerns raised by the IG that its financial reviews did not examine small-scale transactions to ensure there was no abuse of the AFF at the level of micro-transactions.
Commenting on the NOAA release and the Inspector General's criticism of it, Congressman John Tierney said: "Let's be clear, this seemingly narrowly focused audit does not rewrite the Asset Forfeiture Fund's well-documented history of being misused and abused. The Department of Commerce's Inspector General's staff advised my office that they are already examining this latest audit, and I will be interested in the IG's review. In the meantime, I will continue to press for a change in leadership at NOAA and fight for fairness for our fishing families."
Read the Clifton Gunderson report
The NOAA press release, including a statement from Maureen Wylie, NOAA chief financial officer, on Asset Forfeiture Fund micropurchase review is reproduced below:
"Today, we are pleased to release an independent report from the accounting firm Clifton Gunderson, LLP, of NOAA's Asset Forfeiture Fund (AFF), that found no abuse of the fund. The report primarily evaluated fund expenditures prior to NOAA's implementation of actions taken to improve fund management beginning in February 2010.
"The auditors who examined transactions from 2005 to 2010 found no significant deficiencies as defined by accounting standards. They further recommended ways to improve oversight and controls to ensure more transparent and effective management of the fund, consistent with actions NOAA has already implemented in response to the recommendations contained in the July 2010 Inspector General report.
"In the review of AFF transactions, the auditors identified four travel, equipment and maintenance transactions totaling $1,971 that while appropriate to NOAA's law enforcement mission, were viewed by the auditors as not being in compliance with the NOAA AFF policy in place at the time of the transactions. The four transactions occurred prior to 2010 when NOAA began implementing significant reforms to the management and oversight of the AFF, including limiting its uses and improving internal controls and accountability.
"We have spent $427,000 to conduct a comprehensive independent audit and micropurchase review to validate that the fund has a current balance of $4.2 million available for new obligations as of August 25, 2011, and that our micropurchases were appropriate. We now intend to turn our attention and resources to implementing our new enforcement policies including improving outreach and compliance assistance.
"Over the last year, NOAA has implemented reforms that ensure a well managed fund and will take additional actions as warranted in response to today's report. Ensuring proper use of the Asset Forfeiture Fund is essential to carrying out our duties as responsible financial managers and as stewards of coastal and marine resources."
The independent auditor's report focuses on micro-purchases (under $3,000 for purchase cards, cell phones, and other general expenditures and between $150 and $1,000 for travel expenses) because the Inspector General and others expressed concern that this was an area not fully studied in the previous IG financial review.
The auditors review of six years of financial transactions was undertaken at the direction of Jane Lubchenco, Ph.D., under secretary of commerce for oceans and atmosphere and NOAA administrator, as part of a comprehensive action plan to ensure that moneys collected from fisheries enforcement penalties in the Asset Forfeiture Fund are properly used and accounted for by NOAA. The retrospective review follows an earlier financial statement audit by Clifton Gunderson, LLP, for the year ending March 31, 2011, that gave the fund an unqualified (clean) opinion, the best type of audit opinion one can receive.
Today's report is one of a series of the significant steps that NOAA has taken over the last two years to improve transparency, accountability and the effectiveness of its enforcement program.
The following story by Richard Gaines will run in the Gloucester Times in the morning:
NOAA officials announced Thursday that a comprehensive independent audit of micro-purchases "found no abuse" of the asset forfeiture fund for fisheries that was subject of a scathing report documenting improper large-scale purchases and mismanagement a year ago by the U.S. Commerce Department's inspector general.
But in a telephone interview Thursday soon after NOAA's release went out, that Inspector general, Todd Zinser, disputed the findings as described in a statement by Maureen Whylie, the chief financial officer for the National Oceanic and Atmospheric Administration.
"The auditors who examined transactions from 2005 to 2010 found no significant deficiencies as defined by accounting standards," Whylie said in a prepared statement that was released together with the findings of the Calverton, Md., office of the certified public accounting firm, Clifton Gunderson.
The IG's office was provided a copy of the report that Zinser said his staff was reviewing.
"I don't find NOAA's news release particularly helpful," the IG said.
He added that, in reviewing the smaller charges to the fund's account, Clifton Gunderson reported finding "lots of transactions that lacked documentation."
KPMG, one of the "big four" auditing firms in the U.S, and the one employed by the IG's a year ago to conduct a forensic audit of NOAA's asset forfeiture fund, "found the same thing," Zinser noted.
"The numerous exceptions (to proper record keeping and documentation) tell a different story than the news release tells," Zinser said.
Nowhere in its Aug. 5 report to NOAA for which it was paid $427,000 does Clifton Gunderson discuss or reach any conclusions about "abuse" of the asset forfeiture fund's small transactions – $3,000 or less.
These were largely ignored by KPMG on a $140,000 contract. That auditing firm's forensic audit of the fund – the first time the multi-million dollar assembly of fines from the fishing industry was ever subjected to intense examination – found improper purchases of automobiles, a luxury speed boat and overseas travel unrelated to cases, all made in an environment of fiscal anarchy that frustrated the work.
KPMG exhausted its thin budget before completing its search for as much as $46 million that was taken in over a five year period through mid-2009 and was spent in 82,000 transactions, many impossible to trace.
The findings from IG Zinser's investigation into NOAA law enforcement and the work of KPMG last year helped cement the image of the agency's law enforcement units, case officers and litigators, acting over aggressively and capriciously at times as crime-busters, while responsible for the enforcement of the maze of civil regulations statutory congressional mandates.
Clifton Gunderson made a number of criticisms of procedures for tracking income and outflow from the fund in the period 2005 through 2010.
Among the criticisms, the firm noted, were that NOAA did not have an "integrated" system to track receivables or inventory as required by the General Accounting Office.
Clifton Gunderson also reported that, in over half the 360 sample transactions that were examined, "for over half" of them, a "full set of documentary support was not provided."
The firm did note that most of the problems traced to the period before the Obama administration.
"The sufficiency of these procedures is solely the responsibility of the NOAA Finance Office 's Financial Policy and Compliance Division," Clifton Gunderson wrote in a cover note to NOAA. "Consequently, we make no representation regarding the sufficiency of the procedures…."
Similarly, the firm noted that it had not completed work that would have allowed it to express an opinion on the financial statements or related financial data.
"Had we performed additional procedures," Clifton Gunderson wrote, "other matters might have come to our attention that would have been reported to you… We will not express an opinion or limited assurance on the Asset Forfeiture Fund's financial statements or any elements, accounts, or items thereof…"
Wylie's statement, however, began with the claim that "Today, we are pleased to release an independent report from the accounting firm Clifton Gunderson LLP, of NOAA's Asset Forfeiture Fund that found no abuse of the fund."
Clifton Gunderson did not respond to telephone calls from the Times.
Asked if the Gunderson report contradicted the findings by the IG and KPMG, NOAA spokeswoman Monica Allen said in an email that "the independent auditor's report from Clifton Gunderson examines transactions of $3,000 or less to address concerns raised by the IG that its financial reviews did not examine small-scale transactions to ensure there was no abuse of the AFF at the level of micro-transactions.
"The auditor's review made from 2005 to 2010 found no abuse of the fund." she said. "Auditors recommended ways to improve oversight and controls and to integrate data systems to ensure a more transparent and effective management of the fund, consistent with actions NOAA has already implemented."
Allen also summarized the steps taken since the IG began reporting on NOAA law enforcement and how the Asset Forfeiture Fund was used to underwrite day-to-day operations of the General Counsels's Office of Enforcement and Litigation and pay for the administrative law judges.
After the IG testified to Congress that Dale J. Jones Jr., then the director of law enforcement, led a document-shredding session that might have destroyed materially relevant papers, Jones was reassigned; since then, the Jones leadership was also shifted or allowed to resign and the entire cadre of agents and litigators in the Northeast regional office in Gloucester were moved out – but no one was fired or sanctioned.
Eleven victims were given public apologies and more than $600,000 in reparations last spring.
"Soon after the first IG report in January 2010, NOAA shifted oversight of the fund to the NOAA comptroller in February 2010 and required justification and approval from the comptroller for any expenditures above $1,000 from the fund," Allen said in an email to the Times.
"The Secretary of Commerce and NOAA announced in September 2010 additional sweeping reforms to the Asset Forfeiture Fund policy that restricted use of the fund, prohibiting 50 percent of the fund's historical uses, including the purchase of vehicles and vessels and paying for travel that is not related to investigations, proceedings or training," Allen said. "…NOAA has also made significant improvements in the fund's financial management and accounting over the two years."
"NOAA had an independent review which confirmed the Asset Forfeiture Fund balance at $8.7 million as of March 31, 2010. This was completed in August 2010. NOAA had an independent financial audit of the AFF financial statements as of March 31, 2011 that gave the AFF received an unqualified "clean" opinion on its financial statements. This was completed in June 2011."