RD176 - Report on the Independent Evaluation of Court Fines and Fees -- May 2013

Executive Summary:
Under § 3-6.05 DEPOSIT OF FINES AND FEES, (C) of the 2012 Special Session I Acts of the General Assembly (hereafter referred to as the 2012 Appropriations Act), Chapter 3, the Office of the State Inspector General is required to conduct an independent evaluation of court fines and fees using consultant assistance. This report contains the result of our evaluation. Based on the language in § 3-6.05(A), which states that the Auditor of Public Accounts (APA) "shall annually calculate the amount of total fines and fees collect by the District Courts," and on our discussion with those involved in writing § 3-6.05, we focused our review on the General District Court System's criminal and traffic code sections.

Overall, our analysis of court fine and fee revenue generated from the code violations covered data from fiscal years (FYs) 2010 through 2012. Certain tests, such as our examination of the long-term impact of fines and fees on the Literary Fund and our review of summonses at a sample of courts, included data from longer periods of time in order to provide more information upon which to perform analyses and to reach conclusions.

We performed the following procedures:

• Recalculated excess fines and fees.

• Analyzed financial data.

• Performed site visits to 21 General District Courts, where we interviewed the clerk, the sheriff, the local treasurer, and the local fiscal or budget director, and reviewed Court records.

• Developed online surveys regarding the efficiency of § 3-6.05 and gained an understanding of the related changes in deposit procedures and their impact on operations. Distributed these surveys to all General District Court clerks, sheriffs, county administrators, and city managers.

• Hired auditors from an accounting firm to review the following areas at selected localities:

* Coordination of traffic enforcement between the locality and the Virginia State Police.

* Expenditures incurred by the sheriff and police departments.

* Funding of sheriff's department and General District Court personnel through the Compensation Board, the Supreme Court of Virginia, and the locality.

Based on our review, we determined that:

• Under § 3-6.05(A) and (B), the APA is required to determine the amount of excess local fines and fees for applicable localities, and the State Comptroller is required to recover those amounts. The amount of excess fines and fees is defined as being half of the amount of total local collections exceeding 50 percent of the total state and local fines and fees collected from the locality. In FY 2013, the Commonwealth recovered $261,973 in excess local fines and fees related to FY 2011 through the implementation of these provisions; however, this amount had been calculated incorrectly. Had the amount been calculated appropriately and had sheriffs' fees and town revenues been considered in the calculation, the Commonwealth would have collected $380,450.

• The procedures implemented with regard to the new deposit process for court fines and fees are inefficient. The localities (125 total) are required to deposit all local revenues collected each month with the State Treasurer. The state then returns all of these funds to the localities, except to those localities that must repay the state according to the APA's calculations. (In 2011, this included six localities.)

• According to an opinion from the Attorney General, the fines generated from local ordinances under § 46.2-1313 are not deemed to be fines collected for offenses committed against the Commonwealth, but instead are deemed to be revenue of the locality. However, the General Assembly enacted legislation to appropriate such funds to the Literary Fund, via § 3-6.05 of the Appropriations Act.

• The Literary Fund balance has been impacted more by increased expenditures than by a decline in state fine and fee revenue. The effect on the Literary Fund balance as a result of the localities' implementation of additional traffic enforcement programs is inconclusive.

• The court fines and fees are used as follows: state fine and fee revenue primarily goes to the Literary Fund, while local fine and fee revenue goes to the localities' general funds to support local government operations. A portion of this local revenue typically goes back to the sheriff's or police departments in cases where those departments operate additional traffic enforcement programs, and some goes toward equipment purchases.

Below are several of the more significant recommendations which, if implemented, will improve the present system:

• We recommend that the APA use the correct calculation when determining excess fine and fee amounts for the localities in accordance with § 3-6.05. The General Assembly may also consider recovering any excess fines and fees not collected in the previous year.

• We recommend that the General Assembly re-evaluate the effectiveness of § 3-6.05 and the related change in deposit procedures with respect to generating additional revenue for the Literary Fund.

• According to the Attorney General's legal opinion, the localities are entitled to the revenues they collect under similar ordinance provisions of the Code of Virginia (Code), and the state is entitled to appropriate those funds to the Literary Fund. In order to satisfy the needs of both, we recommend that the state require the localities that have implemented additional traffic enforcement programs to apply a percentage of the revenues earned from the enforcement programs to support the localities' educational programs or the court operations, or both. Alternatively, the General Assembly will determine if localities should continue to have the authority to adopt ordinances that parallel state statues and to retain the fines and fees collected through these ordinances, even though these revenues may not necessarily be used for education or court-system purposes.