Financial Management:

Customs Needs to Establish Adequate Accountability and Control Over Its Resources

AFMD-92-30: Published: Aug 25, 1992. Publicly Released: Aug 25, 1992.

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GAO reviewed the Customs Service's financial management, focusing on: (1) whether Customs' financial management systems and operations adequately control resources and accurately report financial management information; (2) Customs' efforts to identify duties and fees owed; (3) Customs' efforts to collect delinquent accounts receivable; (4) Customs' actions to improve its financial systems; and (5) Customs' efforts to implement the Chief Financial Officers Act.

GAO found that: (1) Customs' accounting and internal control systems do not provide complete and accurate financial information, its financial reports do not accurately reflect its financial position, and its financial management personnel are inadequately trained; (2) Customs' accounting and internal control systems do not fully account for its property and accounts receivable; (3) Customs may have failed to collect some duties and fees owed due to limited internal controls and deficient policies and procedures; (4) Customs' collection efforts on delinquent accounts receivable have such serious problems as system design deficiencies, noncompliance with debt collection policies and procedures, and legal limitations; (5) Customs has taken action to improve its debt collection by setting up a task force on accounts receivable over a year old, and by establishing financial advisor positions in some of its larger districts; (6) Customs has attempted to modernize and improve its accounting operations and fix its accounting system problems through two systems development efforts, one of which was unsuccessful, while the other shows promise; (7) Customs is not coordinating its financial systems improvements with its debt collection enhancements, which may render these two systems incompatible; (8) Customs has an effective chief financial officer structure in place and is actively addressing issues mandated by law, but additional steps are necessary to fully implement legislative requirements; and (9) Customs may not be able to consolidate all of its financial management operations under its chief financial officer because of its multifaceted mission.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The House Committee on Ways and Means, Subcommittee on Trade, introduced H.R. 700 on January 27, 1993. Section 318 of the bill includes a provision which would allow Customs to use private collection agencies. As of August 31, 1993, the bill is still pending before the Committee. A new bill (H.R. 3450--The Customs Modernization Act) was folded into NAFTA and enacted in December 1993. Section 671 allows Customs to contract with private collection agencies.

    Matter: Congress may wish to consider enacting legislation to allow Customs to use private collection agencies. This could be accomplished by: (1) enacting legislation similar to the provision contained in section 269 of H.R. 5100; or (2) amending the Debt Collection Act of 1982 to eliminate the prohibition on the use of private collection agencies to recover debts arising under tariff laws.

  2. Status: Closed - Not Implemented

    Comments: Congress considered this issue in amending the provisions of the Debt Collection Improvement Act in 1996, but it decided not to extend the administrative offsets provisions in the act to Customs duties. As such, it appears that additional action to address this recommendation is not intended.

    Matter: Congress may wish to consider enacting legislation to allow Customs to use administrative offsets.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Customs plans to develop and implement an integrated accounts receivable system as part of the Automated Commercial Environment (ACE). ACE, a comprehensive redesign of Customs' Automated Commercial System (ACS), requires a significant investment of planning and resources. Customs stated that it has been working with GAO and several contractors to ensure that the proposed system meets a wealth of new system requirements. However, according to Customs, ACE design and implementation have been delayed because a stable funding source, which is required before further steps are taken, has not yet been agreed upon. In its fiscal year 2000 audit report, Treasury's Office of the Inspector General (OIG) noted that ACS (1) could not provide summary information on the total unpaid assessments for duties, taxes, and fees by individual importer; (2) did not generate periodic managment information on outstanding receivables, such as the age of receivables; and (3) did not interface with Customs general ledger system which resulted in Customs determining the fiscal year end balances of its non-entity accounts receivable balance through the use of ad hoc reports and manual procedures. Because the Treasury OIG continues to report on a similar recommendation, we are closing our recommendation as action taken not fully responsive due to the lack of significant progress made by Customs over the years to address this recommendation.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to develop and implement an integrated accounts receivable system to record and control all amounts (duties, fees, fines, and penalties) from the time they are owed until they are collected or determined to be uncollectible.

    Agency Affected: Department of the Treasury: United States Customs Service

  2. Status: Closed - Implemented

    Comments: Customs has been monitoring acquisitions using the central data entry process. During FY1992, Customs conducted four site quality assurance visits, trained 254 staff on the Property Information Management System (PIMS) or property inventory, and issued directives on personal property, physical inventory, government property, and a handbook on government furnished property.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to account for and control property by: (1) monitoring the central data entry process to ensure accurate recording of acquisitions; (2) training local property officers on the property system to ensure proper recording of receipts, transfers, and disposals; (3) developing procedures to clearly identify property that should be capitalized or expensed; and (4) developing procedures to ensure all government-furnished property is recorded consistently and accurately in Customs' accounting systems.

    Agency Affected: Department of the Treasury: United States Customs Service

  3. Status: Closed - Implemented

    Comments: Customs conducted a study to determine the feasibility and cost-effectiveness of utilizing audit resources in the field to serve this review function. Customs concluded that this review function will be phased out beginning in FY1994. Specifically, current, technological enhancements and current efforts to redesign the selectivity processes of the Automated Commercial System will replace the manual review process.

    Recommendation: The Commissioner of Customs should direct the Office of Regulatory Audit to determine whether the New York Regulatory Audit Division's reviews of entry summaries that are either bypassed or reviewed by import specialists are cost-effective and whether the reviews should be expanded to other regions.

    Agency Affected: Department of the Treasury: United States Customs Service

  4. Status: Closed - Implemented

    Comments: Customs designated the User Fee Task Force as the unit to manage the collection of user fees and to ensure fees due are collected. As a first step, the task force has contracted with an independent accounting firm to prepare a risk assessment on all user fees.

    Recommendation: The Commissioner of Customs should designate a unit to manage the collection of various types of user fees and ensure that all user fees owed the government are identified for collection.

    Agency Affected: Department of the Treasury: United States Customs Service

  5. Status: Closed - Implemented

    Comments: Based on Census Bureau data, Customs is matching shipment and payment data. The process will be on-going.

    Recommendation: The Commissioner of Customs should perform periodic computer matches of shipment and payment data to identify importers and shippers who did not pay or who underpaid harbor maintenance fees.

    Agency Affected: Department of the Treasury: United States Customs Service

  6. Status: Closed - Implemented

    Comments: According to the Treasury OIG, the fines, penalties, and forfeitures, bonds, and protest modules, which support the timely collection of accounts receivable, have been implemented and are effectively operating in SEACATS.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to establish Automated Commercial System (ACS) enhancement efforts relating to the Fines, Penalties, and Forfeitures (FPF); Bond; and Protest modules as high-priority initiatives to support the timely collection of accounts receivable.

    Agency Affected: Department of the Treasury: United States Customs Service

  7. Status: Closed - Implemented

    Comments: Customs determined the feasibility of requiring, by regulation, that a separate protest be filed where unrelated categories of goods are contested on an entry summary document and concluded that the costs outweigh the benefits. In addition, according to Customs, for protested duties that are denied, the Customs Modernization Act requires that interest be calculated and charged on the protested amounts from the time the entry was initially filed. This removes incentives for frivolous protests to be filed. As such, the primary concern that the recommendation addressed is no longer applicable.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to determine the feasibility of requiring, by regulation, that a separate protest be filed where unrelated categories of goods are contested on an entry summary document.

    Agency Affected: Department of the Treasury: United States Customs Service

  8. Status: Closed - Implemented

    Comments: The National Finance Center Accounts Receivable Section is currently responsible for the collection of delinquent supplement duty, reimbursable services, and miscellaneous bills. Customs is examining the feasibility of moving all delinquent debt collection activities from field offices to this unit. The National Finance Center's Debt Collection Unit aggressively pursued collection of delinquent debt and as a result, as of January 1, 1994, collected $31.1 million (delinquent bills issued prior to October 1, 1990, totalled $165 million) and cancelled $67.7 million of mostly erroneously created bills. The Debt Collection Unit identified weaknesses in the debt collection process and initiated corrections including educating the field as to the negative impact on debt collection of their not adequately maintaining entry processing documents. This unit is to serve as the coordinator and focal point for all of Customs debt collection activities.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to establish an Accounts Receivable Department responsible for collecting delinquent accounts receivable and coordinate its activities with the financial advisors in the districts and regions.

    Agency Affected: Department of the Treasury: United States Customs Service

  9. Status: Closed - Implemented

    Comments: Systems limitations and time constraints to complete the necessary manual work impeded Customs' ability to report a gross receivable amount for fines and penalties in FY1992. Customs plans to report such a gross amount on the FY1993 statements. During FY1993, GAO assisted Customs in developing and implementing a methodology for defining receivables, determining when they are valid, determining the amount to record them in the financial records, and establishing an allowance account that is based in part on the debtors' ability to pay. This included receivables resulting from fines and penalties. During FY1993, Customs tested the validity and collectibility of its accounts receivables and reported a more reliable accounts receivable balance. Customs plans to continue to use this methodology for the FY 1994 financial statements.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to record the accounts receivable balance for fines and penalties in the general ledger and on financial reports at the full amount assessed, and establish an allowance for doubtful accounts that: (1) reduces the accounts receivable to the net realizable value; and (2) is determined by including an adjustment based on Customs' historical experience with the mitigation process and an evaluation of the debtor's ability to pay.

    Agency Affected: Department of the Treasury: United States Customs Service

  10. Status: Closed - Not Implemented

    Comments: Customs established an ACS project team, including users and auditors, in AIMS. It will coordinate AIMS and ACS efforts. Also, the AIMS Steering Committee meets to monitor progress of AIMS development. AIMS is now an operational system, so this recommendation is no longer pertinent to that development effort. GAO has other audit work in progress that addresses broader system development efforts (primarily related to ACS) at Customs.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to establish a formalized structure, such as frequent meetings between top management, the project team, users, and auditors, to coordinate systems development efforts under the Asset Information Management System (AIMS) Project Plan with the system enhancement and redesign efforts for ACS and to document the agreements reached through this process.

    Agency Affected: Department of the Treasury: United States Customs Service

 

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