District of Columbia Courts: Financial Related Issues for Fiscal Year
1998 (Testimony, 05/18/99, GAO/T-AIMD/OGC-99-176).

Pursuant to a congressional request, GAO discussed the issues related to
the District of Columbia (DC) Courts' financial operations for fiscal
year (FY) 1998, focusing on: (1) identifying DC Courts' total
obligations for fiscal years 1996, 1997, and 1998; (2) whether DC Courts
had a spending plan for FY 1998, and whether it obligated funds
consistent with available resources; (3) why payments to court-appointed
attorneys were deferred between July and September 1998; and (4) whether
DC Courts processed payments to court-appointed attorneys in accordance
with policies and procedures.

GAO noted that: (1) DC Courts experienced difficulties in planning and
budgeting during this transition year; (2) DC Courts' records showed
that it did not operate within its available resources, potentially in
violation of the Anti-Deficiency Act; (3) GAO also identified a legal
issue regarding the Crime Victims Compensation Program; (4) DC Courts'
records indicated that total obligations in fiscal years 1996, 1997, and
1998 were $115.4, $119, and $126.3 million, respectively; (5) FY 1998
obligations reflect GAO's adjustments, and are not comparable to the
prior years' obligations; (6) upon receipt of its FY 1998
appropriations, DC Courts was responsible for developing a spending plan
based on an appropriation that was about $15.5 million less than it
requested as a result of funding changes under the Revitalization Act
and the FY 1998 appropriation act; (7) DC Courts did not develop such a
plan or properly monitor spending to ensure that its obligations did not
exceed available resources; (8) it obligated throughout the year based
on its expectation of receiving additional funds; (9) by the end of the
fiscal year, DC Courts' records showed obligations of almost $122.2
million and funds received of about $121.8 million; (10) however, GAO
found that adjustments needed to be made to these amounts; (11) as
adjusted, DC Courts' recorded obligations and available funding for FY
1998 would be $126.3 and $121 million, respectively; (12) thus, DC
Courts potentially over-obligated available funds by more than $5
million; (13) the Anti-Deficiency Act prohibits federal and DC
government officials from making expenditures or obligations in excess
of amounts available in an appropriation or fund unless otherwise
authorized by law; (14) to avoid an Anti-Deficiency Act violation, the
DC Courts made the decision to defer payments for court-appointed
attorneys for the remainder of the fiscal year, and then used FY 1999
appropriations to pay those amounts; (15) however, since the vouchers
were approved by the presiding judges or hearing commissioners in FY
1998, the obligations should have been recorded in FY 1998; (16) DC
Courts processed vouchers for court-appointed attorneys in accordance
with its policies and procedures; and (17) however, its procedures did
not include timeframes for making payments to court-appointed attorneys.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-AIMD/OGC-99-176
     TITLE:  District of Columbia Courts: Financial Related Issues for
	     Fiscal Year 1998
      DATE:  05/18/99
   SUBJECT:  Financial management
	     Budget obligations
	     Public defenders
	     Accounting procedures
	     Courts (law)
	     Budget administration
	     Noncompliance
	     Reporting requirements
	     Internal controls
	     Budget deficit
IDENTIFIER:  District of Columbia Crime Victims Compensation Program
	     Crime Victims Fund

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AG99176t.book GAO United States General Accounting Office

Testimony Before the Subcommittee on the District of Columbia,
Committee on Appropriations, House of Representatives

For Release on Delivery Expected at 2 p. m. Tuesday, May 18, 1999

DISTRICT OF COLUMBIA COURTS Financial Related Issues for Fiscal
Year 1998 Statement of Gloria L. Jarmon Director, Health,
Education and Human Services Accounting and Financial Management
Issues Accounting and Information Management Division

GAO/ T- AIMD/ OGC- 99- 176

Page 1 GAO/ T- AIMD/ OGC- 99- 176

Mr. Chairman and Members of the Subcommittee: I am pleased to be
here today to respond to your questions related to the District of
Columbia Courts' (DC Courts) financial operations for fiscal year
1998, its first year of operations with direct federal funding.
Consistent with your request, we focused on the following four
questions:

 What were DC Courts' obligations for fiscal years 1996, 1997, and
1998?  Did DC Courts have a spending plan for fiscal year 1998 and
obligate

funds consistent with available resources?  Why were payments to
court- appointed attorneys deferred from July through September
1998?

 Did DC Courts process payments to court- appointed attorneys in
accordance with policies and procedures? In summary, we found that
DC Courts experienced difficulties in planning and budgeting
during this transition year. As adjusted by us, its records showed
that it potentially over- obligated its resources by more than $5
million, which would violate the Anti- Deficiency Act. After we
briefed DC Courts officials, they told us they do not believe that
a violation of the Anti- Deficiency Act occurred. I will compare
the essence of our respective positions later in my statement. We
also identified a legal issue regarding the Crime Victims
Compensation Program.

In performing our work, we reviewed DC Courts' financial records,
and held extensive discussions with DC Courts officials over the
past several months. We shared a draft of this statement with DC
Courts officials, and incorporated their comments to the extent
that it was appropriate. Our work was performed in accordance with
generally accepted government auditing standards.

Reported Obligations for Fiscal Years 1996 Through 1998

DC Courts' records indicated that total obligations in fiscal
years 1996, 1997, and 1998 were $115.4, $119, and $126.3 million,
respectively. Fiscal year 1998 obligations reflect our
adjustments, as discussed later, and are not comparable to the
prior years' obligations. This is primarily due to the changes
resulting from the Revitalization Act of 1997. For example, DC
Courts non- judicial employees received federal benefits that
increased DC Courts' obligations for fiscal year 1998. In
addition, the adult probation function was transferred from DC
Courts to a new entity, the Court

Services and Offender Supervision Agency for the District of
Columbia (COSA), in fiscal year 1998. DC Courts also provided its
non- judicial

Let t er

Page 2 GAO/ T- AIMD/ OGC- 99- 176

employees a 7- percent pay raise and assumed responsibility for
the judges' pension costs as part of its fiscal year 1998
appropriation for court operations. Prior to the decision to
transfer the adult probation function to a new entity, DC Courts
had requested $123.5 million to fund its fiscal year 1998
operations. When DC Courts received $108 million in its fiscal
year 1998 appropriation, it no longer had operational
responsibility for the adult probation function, but continued to
pay salaries and related costs on behalf of the COSA Trustee. In
March 1998, the COSA Trustee took over the payments for the
operations and subsequently reimbursed DC Courts $7. 8 million for
the costs DC Courts paid on the COSA Trustee's behalf. These costs
and the related reimbursements were included in DC Courts' fiscal
year 1998 obligations and available funds.

DC Courts' Spending Plan Upon receipt of its fiscal year 1998
appropriation, DC Courts was responsible for developing a spending
plan based on an appropriation that was about $15.5 million less
than it requested. DC Courts did not develop a plan to ensure that
its obligations did not exceed available resources. It obligated
throughout the year based on its expectation of receiving
additional funds. While DC Courts received an additional $1.7
million in appropriated funds for the fiscal year, it did not
receive all of the funding it anticipated. DC Courts also received
$12.1 million in grants, interest, and reimbursements, including
the $7.8 million from the COSA Trustee, during the fiscal year.

However, letters between DC Courts and the Office of Management
and Budget (OMB) during fiscal year 1998 reflect DC Courts
officials' expectations of receiving additional resources and
OMB's concern that if DC Courts did not lower its rate of
spending, its obligations would exceed available funds. For
example, in an April 1998 letter, OMB advised DC Courts that it
was incurring obligations at a rate that would necessitate a
deficiency or supplemental appropriation. For their part, DC
Courts officials continued to seek additional funds during their
discussions with the COSA Trustee, Department of Justice, and OMB.
By the end of the fiscal year, DC Courts' records showed that
obligations exceeded available resources by about $350,000.
Specifically, its records showed obligations of almost $122.2
million and funds received of about $121.8 million. However, as I
will now discuss, we found that adjustments needed to be made to
these amounts.

Page 3 GAO/ T- AIMD/ OGC- 99- 176

 DC Courts deferred more than $4. 1 million of court- appointed
attorney payments that were eventually paid with fiscal year 1999
funds, but did not record these amounts as fiscal year 1998
obligations. While DC Courts officials had the authority to make
these payments with fiscal year 1999 funds, this did not make the
deferred payments fiscal year

1999 obligations. The vouchers were approved by the presiding
judges or hearing commissioners in fiscal year 1998, and the
obligations should have been recorded in fiscal year 1998.
Accordingly, we added this amount to DC Courts' reported fiscal
year 1998 obligations.  DC Courts treated interest earned
primarily from its quarterly

apportionments of its appropriation as available budgetary
resources for court operations. However, DC Courts did not have
authority to spend this interest. For this reason, we have reduced
the amount that DC Courts reported as available resources for
fiscal year 1998 by $773,000. As adjusted, DC Courts' recorded
obligations and available funding for fiscal year 1998 would be
$126. 3 and $121 million, respectively, resulting in a potential
over- obligation of more than $5 million. The Anti- Deficiency Act
prohibits federal and DC government officials from making
expenditures or obligations in excess of amounts available in an
appropriation or fund unless otherwise authorized by law. The
AntiDeficiency

Act requires the head of an agency to report immediately any such
violation to the President and the Congress, including all
relevant facts and a statement of actions taken. OMB Circular A-
34, Instructions on Budget Execution, provides additional guidance
on information that the agency is to include in its report to the
President. OMB instructs agencies to include the primary reason or
cause for the over- obligation, any

extenuating circumstances, the adequacy of the system of
administrative control of funds, any changes necessary to ensure
compliance with the Anti- Deficiency Act, and steps taken to
prevent a recurrence of the same type of violation.

DC Courts officials told us that they do not believe that a
violation of the Anti- Deficiency Act occurred. In essence, DC
Courts officials assert that the authority Congress provided in
the fiscal year 1999 Appropriation Act to use fiscal year 1999
funds for deferred attorney payments constitutes an exception to
the Anti- Deficiency Act. DC Courts officials further assert that
the exception is available whenever they have obligations in
excess of their budgetary resources. We disagree with this
position. The fiscal year 1999 Appropriation Act was enacted after
fiscal year 1998 ended. The authority cited by DC Courts only
authorizes it to use fiscal year 1999

Page 4 GAO/ T- AIMD/ OGC- 99- 176

appropriations to pay deferred amounts to court- appointed
attorneys, but does not excuse DC Courts from managing its
activities within the appropriation level Congress provided or
authorize obligations in excess of available budgetary resources.
Accordingly, the critical issue for applying the Anti- Deficiency
Act in this case is whether the over- obligations were

entirely attributable to the mandatory obligations for court-
appointed attorneys and were, therefore, authorized by law. We
conclude that they were not, primarily because 1. fiscal year 1998
obligations for court- appointed attorneys were similar to the
prior fiscal year and the estimated amount for fiscal year 1998;
2. DC Courts did not base its spending during most of the fiscal
year on the

appropriation it received; and 3. DC Courts' records indicated
that a discretionary pay raise of about $2.8 million was given to
its non- judicial employees during fiscal year 1998. In addition,
DC Courts officials told us that they were authorized to retain
the interest earned on quarterly apportionments of their
appropriation and make it available for court operations. They
noted that no statute prohibits retaining interest earned on
apportionments. We disagree with this position primarily because
the Revitalization Act specifically requires that all money
received by the District of Columbia Courts shall be deposited in
the Treasury of the United States or the Crime Victims Fund. Thus,
DC Courts did not have statutory authority to augment its
appropriation with interest earned on apportioned appropriations.

Recently, DC Courts officials advised us that there were
obligations of over $1 million in their fiscal year 1998 records
that needed to be de- obligated. DC Courts officials stated that
these included amounts that the District should not have recorded
as obligations and amounts for services that were

no longer anticipated. We are currently reviewing these proposed
deobligations. It will be important that DC Courts continue
reviewing its records and do all required investigating and
reporting under the AntiDeficiency

Act.

Page 5 GAO/ T- AIMD/ OGC- 99- 176

Deferral of Payments to Court- Appointed Attorneys

Throughout fiscal year 1998, it was clear that unless DC Courts
modified its spending or received additional funds, it was facing
a shortfall. By the third quarter when DC Courts had not received
the additional funds it anticipated, there were limited options
available for addressing the projected shortfall. DC Courts
officials considered furloughing employees and closing the courts
for a period during the summer, as well as deferring court-
appointed attorneys' and expert service providers' payments. In
May 1998, OMB officials advised DC Courts to reduce non- personnel
costs instead of furloughing employees or closing the courts to
avoid an AntiDeficiency Act violation. DC Courts made the decision
on July 24, 1998, to defer payments for court- appointed attorneys
for the remainder of the fiscal year, and then used fiscal year
1999 appropriations to pay those amounts. DC Courts had budgeted
$31. 6 million for such payments in fiscal year 1998, an amount
that was similar to the previous fiscal year, and as of July 1998,
$25.8 million had been expended on court- appointed attorney
payments. The Congress authorized use of the DC Courts' fiscal
year 1999

appropriation to fund these deferred payments. However, this did
not change the payments from fiscal year 1998 obligations to
fiscal year 1999 obligations. The presiding judges or hearing
commissioners approved the vouchers in fiscal year 1998 and the
obligations should have been recorded in fiscal year 1998.

Processing of Payments to CourtAppointed Attorneys

Now I would like to discuss the payments that were made to
courtappointed attorneys during fiscal year 1998 in terms of the
process for making such payments, and whether they were made
promptly. Your concern was that court- appointed attorneys were
being paid late or not the

right amount and that vouchers were sometimes being lost. We found
that DC Courts processed vouchers for court- appointed attorneys
in accordance with its policies and procedures. However, its
procedures did not include time frames for making payments to
courtappointed

attorneys. Our analysis of DC Superior Court's fiscal year 1998
paid voucher data through July 1998, showed that 94 percent of the
vouchers for court- appointed attorneys and expert service
providers were paid within 30 days 1 of the presiding judge's or
hearing commissioner's 1 The District's fiscal year 1999
Appropriation Act provided that DC Courts would be subject to the
federal Prompt Pay Act, which requires that DC Courts pay a proper
invoice within 30 days of its receipt or be subject to an interest
penalty.

Page 6 GAO/ T- AIMD/ OGC- 99- 176

approval and 83 percent of these vouchers were paid within 60 days
of the date submitted.

You were also interested in the incidence of voucher amounts being
reduced at the time they are approved by the presiding judges or
hearing commissioners. Our analysis of fiscal year 1998 paid
voucher data showed that judges or hearing commissioners reduced
voucher amounts in 9

percent of the cases, of which more than half involved reductions
of $100 or less. DC Courts did not have procedures covering how
judges or hearing commissioners were to report to the attorney or
expert service provider their decisions to reduce voucher amounts
claimed. However, DC Courts officials stated that this information
was available to attorneys who requested it.

Regarding lost or missing vouchers, we found that there were no
procedures for retaining data on the number of vouchers reported
as missing or the disposition of such vouchers. DC Courts
officials stated that such data were not maintained. Crime Victims
Compensation Program

I would now like to discuss a matter that did not affect DC
Courts' use of its fiscal year 1998 appropriation for court
operations, but that will need to be addressed if DC Courts is to
have the requisite authority to make payments out of its Crime
Victims Fund. A District law established the Crime Victims
Compensation Program under DC Courts jurisdiction prior to the
enactment of the Revitalization Act. The Revitalization Act
supports the authority of DC Courts to deposit fines, fees, and
other money to the credit of the Crime Victims Fund under the
District law. The District law provides that payments of up to
$25, 000 from the Fund can be made to crime victims for shelter,
burial costs, or medical expenses. DC Courts' records indicated
that over $1.5 million in such payments were made during fiscal
year 1998.

However, there is nothing in the language of the District's fiscal
years 1998 or 1999 Appropriation Acts that appropriates amounts
from the Crime Victims Compensation Fund, nor have we identified
any other federal law authorizing payments from the Fund.
Accordingly, we conclude that DC Courts did not have the requisite
legislative authority to make payments from the Fund. This is a
matter for the Congress and DC Courts to address.

Page 7 GAO/ T- AIMD/ OGC- 99- 176

Mr. Chairman, this concludes my statement. We will be separately
reporting to you on these and other issues that you asked us to
review and will include recommendations for addressing the matters
discussed in this testimony. I will be happy to answer questions
from you or other members of the Subcommittee.

(916280) Let t er

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