Internal controls protect the integrity of federal court operations and programs and enhance public trust in the Judiciary’s oversight and accountability.
Studies, Reviews, and Management Tools
Audits and Reviews
The AO supports the establishment of sound administrative management and internal control processes at the AO and in the courts. Among other activities, the AO conducts financial audits, cyclical audits, and program reviews that include administrative, management, and operational assessments, as well as technical reviews.
Court audits are conducted on a 4 year cycle for most courts, and on a 30-month cycle for larger courts. In fiscal year 2013, the Administrative Office issued final reports for 68 cyclical financial audits of the courts. It completed 52 other financial audits, including audits of Chapter 7 bankruptcy trustees and Criminal Justice Act defender grantees, and audits in response to a change of clerk or other special request. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 also requires audits of randomly selected debtors to determine the accuracy, veracity, and completeness of the information contained in the petitions, schedules, and statements filed by individual Chapter 7 and 13 debtors. During fiscal year 2013, 108 debtor audits were conducted.
Each year, on-site management assistance and program reviews of various kinds are conducted in court units and federal defender organizations. Reviews may cover budget management, jury administration, court reporting, program operations and management, human resources management, property management, procurement, succession planning, and continuity of operations plans and disaster preparedness. Review procedures generally include observations of office operations, interviews with key staff, and review of records and files. During fiscal year 2013, on-site management reviews were conducted for 2 appellate courts, 6 district courts, 3 bankruptcy courts, 18 federal defender organizations, and 15 probation/pretrial services offices.
Government Accountability Office (GAO) Studies
In FY 2013, the GAO completed 10 congressionally requested studies involving the Judiciary. The AO responds to studies and requests for information from GAO. The AO also reviews and comments on GAO’s draft reports in coordination with Conference committees and the courts. One of the 10 completed studies made recommendations regarding the Judiciary’s planning for courthouses, and another study contained a recommendation concerning the use and disposal of old courthouses that was primarily directed at the General Services Administration (GSA):
- Capital Planning Process. GAO recommended that the Judiciary provide additional information to decision makers on the total cost of the courthouse projects and the alternatives considered for housing the Judiciary. GAO also recommended that the Judiciary impose a moratorium on projects currently on the Five-Year Plan until AMP evaluations have been completed. The House Committee on Transportation and Infrastructure held a hearing on this report in April 2013.
- Use and Disposal of Old Federal Courthouses. When proposing new courthouses, GAO recommended that GSA, in consultation with the Judiciary as appropriate, include plans for re-using or disposing of the old courthouse. When plans involve the relocation of federal tenants, GAO also recommended that GSA include long-term cost estimates for leasing space versus occupying old courthouses.
GAO also issued informational reports on eight other studies.
- Consolidation of and Sharing of Administrative Services of District and Bankruptcy Clerks’ Offices. GAO discussed the efforts by district and bankruptcy courts to implement organizational changes to contain costs. It also noted the Judiciary’s cost-containment efforts to share administrative services.
- The General Accuracy of District and Appellate Judgeship Case-Related Workload Measures. Based on work completed and reported in 2003 on the Judiciary’s quantitative analysis for determining additional Article III judgeships, this report was submitted as a statement for the record at a Congressional hearing, “Federal Judgeship Act of 2013.”
- The other studies addressed the Judicial Survivors’ Annuities System, the bankruptcy of large financial companies as required by the Dodd-Frank Act, the Sex Offender Registration and Notification Act, the Fair Labor Standards Act, drug prevention and treatment programs, and patent litigation.
As part of the broader agency restructuring announced in June 2013, former AO Director Judge Thomas F. Hogan announced the creation of an Ethics Staff in the Office of the General Counsel. This will bring together key ethics-related Judiciary operations into a single, executive-level office, consolidating AO support for the Judicial Conference Committees on Financial Disclosure, Codes of Conduct, and Judicial Conduct and Disability.
The Judiciary is committed to providing a workplace where employees report violations of law or suspected fraud, waste, abuse, or mismanagement of funds without fear of reprisal. This commitment extends to providing whistleblowers with a means to address allegations of adverse employment actions. Following the recommendation of the Committee on Judicial Resources, the Judicial Conference amended the Judiciary’s Model Employment Dispute Resolution Plan to create an administrative vehicle providing whistleblower protections.
Risk-Based Audit Program
In January 2013, the Judicial Conference Committee on Audits and Administrative Office Accountability unanimously endorsed a risk-based approach to auditing and adopted it as a strategic initiative supporting the implementation of the Strategic Plan for the Federal Judiciary.
Risk-based auditing is a streamlined approach that focuses audit procedures on those areas or processes with the greatest potential for risk that could result in material financial misstatements, significant non-compliance with applicable laws and regulations, and/or fraud, waste, and abuse.
The first step in the implementation process will be risk-based audit pilots. A select number of courts units have volunteered to participate in these risk-based audits, the results of which will be used to establish a baseline for the new risk-based audit program and will assist management in identifying any needed updates to the Guide to Judiciary Policy.
A primary benefit of the risk-based audit approach is that it will help managers identify and manage areas of significant risk to the courts and the Judiciary through a strengthened internal control framework that ensures reliability of financial reporting, and compliance with applicable laws and regulations.
Updated Internal Control Policies
To complement a risk-based update to the Judiciary’s audit program, the Conference Committee on Audits and Administrative Office Accountability, at its January 2013 meeting, also endorsed the AO’s plans to update the Judiciary’s policies relating to internal control. This internal control policy update is designed to eliminate redundant or unnecessary internal control requirements while ensuring effective prevention, detection, correction, and/or mitigation of risk.
Internal Control Self-Assessment Tool
In FY 2013, the AO finalized a self-assessment tool that court units and federal defender organizations can use to review their local internal control policies and procedures. This tool highlights internal controls that address higher-risk areas of operation and helps courts and defender organizations conduct a required annual review of their internal control programs. Internal control measures provide reasonable assurance that Judiciary assets are protected from error, fraud, waste, loss, or abuse; that operations are efficient and effective; that financial reports are accurate and reliable; and that business practices comply with all applicable statutes and policies. The AO plans to provide limited on-site implementation assistance to requesting courts.
National Internal Control Evaluation (ICE) System
In fiscal year 2013, the ICE system was implemented in 119 individual court units in 31 districts. As of November 2013, 429 court units in 94 district courts and 12 appellate courts had installed ICE. A useful application for court managers, the ICE system includes: (1) a separation-of-duties component that assists in identifying potential conflicts that may be caused when one person performs multiple financial and other administrative actions, such as purchasing goods and approving payment for those goods, and (2) a data-mining report component that can identify potentially problematic financial transactions, such as high-cost purchases or repeat purchases from the same vendor. The ICE system generates various reports that can be used in conjunction with the self-assessment tool to assess internal controls.
Centralized Solicitation for Audits of Chapter 13 Bankruptcy Trustees in Bankruptcy Administrator Districts
The Bankruptcy Administrator (BA) program was established in the six judicial districts of Alabama and North Carolina to provide estate administration oversight in bankruptcy cases. The Director’s guidelines for the program provide that each Chapter 13 bankruptcy trustee — there are currently 16 — in the BA districts is subject to an annual audit. Under the guidelines, the BA solicits and selects an audit firm to perform the work. While the BA oversees the audit, it is paid for by the individual Chapter 13 trustee as part of the trustee’s budget, which is approved by the local bankruptcy court. Chapter 13 trustee operations are funded through debtor payments to the trustees rather than appropriated funds. Until fiscal year 2011, management and oversight of these audits was decentralized, and audits were contracted and administered by the six bankruptcy administrators.
To ensure consistency and completeness in the scope of Chapter 13 trustee audits, and to leverage the Judiciary’s buying power by soliciting for all 16 audits, the Committee on Audits and Administrative Office Accountability and the Committee on the Administration of the Bankruptcy System recommended in June 2012 that the AO develop a national contract, to be awarded in FY 2014, for audits of the Chapter 13 bankruptcy trustees. AO staff would be responsible for ensuring that the any audits conducted under this contract were performed in accordance with relevant auditing standards and the Guide to Judiciary Policy.
While a national contracting approach was under development, an interim process to conduct the Chapter 13 bankruptcy trustee audits was established for the audits being performed in fiscal year 2013. The AO worked with the bankruptcy administrators to prepare a uniform statement of work that each bankruptcy administrator used to solicit bids and award individual contracts. The audits of all Chapter 13 bankruptcy trustees were completed during the spring of fiscal year 2013 with oversight by the AO program office supporting bankruptcy administrator operations.
Meeting and Event Planning Authorization Reporting Tool
The AO has developed a new tool to facilitate the implementation of Judicial Conference policy (pdf) on the planning and administration of meetings and conferences using appropriated funds. That policy is intended to ensure that meetings and conferences are planned and administered in the most cost-effective way.
The new reporting tool provides event planners with a mechanism for obtaining the appropriate approvals, where necessary, for meetings and conferences, along with the ability to more accurately track and manage event spending through automated reporting.