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EXHIBIT #1
Regular Council Meeting of 01/24/2011
City of Dover
Finance Department
PO Box 475
Dover DE 19903-0475
Phone: (302-736-7018
FAX: (302) 760-4930
E-Mail: dmitchell @dover.de.us
MEMORANDUM
To: Members of Legislative, Finance, & Administration Committee
From: Donna Mitchell, Controller/Treasurer
Chief Hosfelt, Police Chief
Copy: Mayor, City Council, City Manager, City Clerk, & Asst. Finance Director
Date: December 29, 2010
Subject: Accounting Procedures for Federal Forfeiture Funds
Background
This past summer, it was brought to my attention that a separate bank account was being maintained by
the Police Department and the transactions were not being accounted for in the City’s records. I met
with Chief Hosfelt and he confirmed that this statement was correct. Chief Hosfelt also agreed to
provide the documentation to have a compliance review completed of the deposits and disbursements
and to explain to City Council the existence of the account and the purpose for which it was being
used. Chief Hosfelt provided a discussion on the Criminal Investigation Fund to the Legislative,
Finance, & Administration Committee on August 23, 2010. It was agreed that once all records and
documents have been transferred to the Finance Department and an audit has been performed, an
update will be provided to Committee members.
Update
Chief Hosfelt and the Police Department staff worked cooperatively with the Finance Department to
close out the separate bank account and deposit the cash balance into our City account we currently use
for Law Enforcement Grants. All activity is now being processed through the City’s accounting
system in compliance with all policies and procedures. Please note, the previous bank account was
being reconciled, financial reports were being prepared by the Police Department, and controls were in
place to prohibit unauthorized spending per the Department’s internal policies. However, these
activities were not shared with anyone outside of the Police Department.
The Chief agreed to a compliance review conducted by the City auditor, Faw, Casson & Company,
LLC to be paid for out of the federal forfeiture funds. It was decided to review a sample of
transactions back to July 2006 (4 years) for time and cost purposes. Faw, Casson’s report is attached
for your review. Most of the non-compliance items were a result of not using the City’s financial
systems and has now been remedied. Also attached is a summary of the Fund Balances, Receipts, and
Disbursements for the four years reviewed.
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Accounting Procedures for Federal Forfeiture Funds
December 29, 2010
Staff Recommendations
We recommend that annual budgets be established for Police Grants and all other Criminal
Investigation Funds. All estimated receipts and planned disbursements be adopted through the budget
process and accounted for in the same manner as all other funds to insure visibility and accountability
of the use of these funds. Everyone understands, through the use of the City’s budgeting and financial
systems all policies and procedures will be adhered to. Until such time a budget can be established the
Finance Department will issue a summary of activity for these funds in conjunction with our monthly
report.
Use of Federal Forfeiture Funds
Federal Forfeiture Funds come with some restrictions for their use. We have included a summary of
permissible uses and impermissible uses.
General restriction – Sharing must be used to increase or supplement the resources of the receiving
local law enforcement agency. Shared resources shall not be use to replace or supplant the
appropriated resources of the recipient. The agency must receive a benefit from the shared funds.
Example – A police department receives $100,000 in federal sharing money only to have its budget cut
$100,000 by city council. In this instance, the police department has received no direct benefit from
equitable sharing. Rather, the city as a whole has.
Permissible Uses
Law enforcement investigations Language assistance services
Law enforcement training Transfers to other law enforcement agencies
Law enforcement and detention facilities Law enforcement awards and memorials
Law enforcement equipment, furniture, supplies Asset accounting and tracking; Grant audits
Law enforcement travel and transportation Support of community based programs
Drug and gang education and awareness Matching funds for the agency’s matching
programs contribution in a federal program
Pro rata funding – for the Police departments Exercise prudence to avoid the appearance of
share of interdepartmental items or facilities. i.e. extravagance, waste, or impropriety
computerized payroll system with 20% use for
police payroll
Impermissible Uses
Salaries & benefits of current personnel unless Use of forfeited property by non-law
permitted by: enforcement personnel. Includes equipment;
(1) Express statutory authorization – i.e. Payment of education-related costs
COPS program matching funds Uses contrary to the laws of the state or local
(2) Overtime of officers and investigators government
(3) New positions. First year salary & Non-official government use of shared assets
benefits of a new officer that Purchase of food and beverages, unless for a
supplements the current force conference package policy or meals during local
(4) Salary of an officer hired to replace an operation
officer assigned to a task force
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Accounting Procedures for Federal Forfeiture Funds
December 29, 2010
Federal Forfeiture Funds 2007 2008 2009 2010
Beginning Balance $ 73,475.84 $ 34,709.68 $ 15,533.02 $ 187,855.42
Receipts 20,223.32 6,288.49 208,678.31 8,939.93
Expenditures (58,989.48) (25,465.15) (36,355.91) (55,015.99)
Ending Balance $ 34,709.68 $ 15,533.02 $ 187,855.42 $ 141,779.36
A hold was put on non-essential spending from this account until the auditor completed their review.
We have received additional federal funds this fiscal year and the cash balance as of December 31 is
$166,986. Included with the January monthly report will be a financial report on Police Grants for this
fiscal year as included in the staff recommendation.
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