Financial Audit:

Examination of Customs' Fiscal Year 1993 Financial Statements

AIMD-94-119: Published: Jun 15, 1994. Publicly Released: Jun 15, 1994.

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Pursuant to a legislative requirement, GAO audited the Customs Service's financial statements for fiscal year (FY) 1993.

GAO found that: (1) Customs was unable to resolve all the critical problems that were identified in its FY 1992 financial statement audit; (2) Customs had unreliable financial information, inadequate financial systems and processes, and an ineffective internal control structure; (3) Customs' internal controls were not properly designed and implemented to safeguard assets, determine material compliance with relevant laws and regulations, and ensure that there were no material misstatements in the financial statements; and (4) there were no material instances of noncompliance with selected laws and regulations.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: This recommendation is no longer applicable because Customs has decided to modify in-bond processing and because the objectives of the recommendation are now being addressed in conjunction with another recommendation made in GAO/AIMD-94-38.

    Recommendation: The Commissioner of Customs should direct the Assistant Commissioner for Inspection and Control to distribute written guidance emphasizing to district offices the importance of maintaining accurate data on in-bond shipments and monitor the districts to ensure they comply with headquarters directives requiring the entry of in-bond departure and arrival data and the resolution of overdue shipments.

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

  2. Status: Closed - Implemented

    Comments: Customs implemented the Customs Undercover Fundamental Financial System (CUFFS) for covert operations. CUFFS is a system of recordkeeping which was developed to meet the operational needs of the field, the oversight needs of headquarters, the advance tracking needs of the NFC, and the accounting requirements of the CFO Act. The OIG noted that its testing indicated that the system functioned effectively.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with the Assistant Commissioner for Enforcement and other appropriate officials, to develop and maintain an appropriately secure accounting system to record all of the essential activity that occurs in undercover operations.

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

  3. Status: Closed - Implemented

    Comments: On June 1, 1994, Customs' Director, National Finance Center (NFC), sent a memorandum to all of Customs District Directors outlining procedures for analyzing the budget clearing accounts. In addition, the Director, NFC, issued a memorandum dated May 16, 1994, that outlined the proper use of the budget clearing accounts in an effort to reduce the amount of incorrect postings to these accounts. Field offices and NFC are working together to clear old revenue fund items from the accounts. A system modification to enhance the process was being implemented. The OIG's fiscal year 1996 audit report indicates that all action is completed on this recommendation.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to promptly review all reconciliations of budget clearing accounts and suspense accounts, verify that all discrepancies are fully researched and properly resolved, and identify and propose for write-off any unreconciliable amounts.

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

  4. Status: Closed - Implemented

    Comments: Customs' Office of Procurement held a "workout" session to eliminate unnecessary procurement reviews for solicitations and contracts. The Director, Office of Procurement, issued Procurement Instruction Memorandum No. 94-06, which revises portions of the Treasury Acquisition/Procurement Regulation (TAPR) regarding contracting officer warrant authority, internal review systems, cost or pricing data waivers, and Departmental and legal review of solicitations, contracts, and other types of procurement actions. The changes streamline the process by eliminating layers of review.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials to, where Customs has the authority to do so, eliminate any unnecessary procurement reviews identified in Customs assessment of such processes.

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

  5. Status: Closed - Implemented

    Comments: Customs has initiated a centralized management plan which calls for the establishment of maximum stock levels based on prior usage, and preparing lists of suspected overstocked items to determine if retention is justified. The plan is administered by a contractor with oversight executed by Customs. To date, the contractor has established interim maximum stock levels and modified the computer system that accounts for inventory to prevent the ordering of materials in excess of program needs. The maximum stock levels will be adjusted quarterly based on actual usage. Additionally, the contractor has prepared initial lists of suspected overstocked items and these are currently being reviewed by Customs.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to monitor implementation of the policies and procedures identified in Customs' centralized inventory management plan to ensure that aircraft parts inventory levels do not exceed program needs.

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

  6. Status: Closed - Implemented

    Comments: Customs has developed Standard Operating Procedures for its contractor to account for the annual changes in aircraft materials and parts inventory. As a result, edits have been incorporated into the computer system that accounts for inventory, and Customs will require the contractor to reconcile inventory activity on a quarterly basis and submit the results.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to develop procedures to account for annual changes to aircraft materials and parts inventory records.

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

  7. Status: Closed - Implemented

    Comments: Customs developed a proposal to delegate responsibility for property with an acquisition value of less than $5,000 to field offices. The proposal was forwarded to Treasury on August 22, 1995. In addition, X-Press, a subsystem of PIMS, was implemented in fiscal year 1995 and it distinguishes between assets purchased and those expensed. X-Press will assist ports in tracking, managing, and controlling non-capitalized personal property items.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to determine the relative costs and benefits of using the Property Information Management System to maintain accountability only for items with a value over $5,000 and consider delegating record-keeping responsibility for small value items to field personnel. Appropriate centralized controls, such as monitoring levels of repairs and maintenance expense and conducting periodic inventories, should still be maintained. In addition, the distinction between asset purchases and expense items should occur when the item is requested and the local property officer checks for availability, not by accounting personnel after the invoice is received.

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

  8. Status: Closed - Implemented

    Comments: Customs completed the study of the vehicle utilization and distribution. Vehicle-to-employee ratios have been approved by the Commissioner and have been distributed to the Acting Associate Commissioner, the Assistant and Regional Commissioners, and the Chief Counsel in a July 25, 1994, memo from the Commissioner. The Commissioner stressed that the ratios are to be viewed as a maximum, rather than a minimum. In addition, Customs is already working with GSA on the disposal of excess vehicles, and vehicle disposals have been running at a high rate throughout fiscal year 1994.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to complete the study of utilization and distribution of Customs' vehicle fleet and coordinate with the General Services Administration to dispose of excess assets and implement a policy to ensure effective use of vehicles retained.

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

  9. Status: Closed - Implemented

    Comments: During fiscal year 1995, the Law Enforcement Availability Pay Act of 1994 became effective. This law applies to most employees previously eligible for administratively uncontrollable overtime (AUO). For employees still covered by AUO, Customs has taken actions to ensure that ongoing payments are justified. For example, Customs' Office of Enforcement distributed a memorandum reminding certifying officials that they should review the eligibility and rate of AUO pay for all covered employees at the beginning of each quarter and advise the Office of Enforcement (Administration) in writing, at the beginning, of each calendar year whether all personnel continue to meet the requirements for AUO pay. In addition, the Office of Enforcement is also maintaining a central file of all changes in AUO percentages and certifications for eligible employees.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to review, in conjunction with the Director of Human Resources and the Office of Enforcement, administratively uncontrollable overtime charges to ensure that ongoing payments at the maximum rate are justified.

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

  10. Status: Closed - Implemented

    Comments: As announced in a March 9, 1993, memorandum from the Director, Office of Human Resources, to the Directors, Personnel Operations Divisions, Branch Chiefs, and Executive Services Staff, the Office of Human Resources is conducting a one-time review of every official personnel folder to ensure that the documents and papers retained in the files comply with federal regulations, including ensuring that documentation supporting personnel pay rates and deductions is maintained. The results of the OIG's fiscal year 1996 audit showed that personnel files were updated and current.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer, in conjunction with other appropriate officials, to review and update documentation supporting personnel pay rates and deductions and institute procedures to ensure that such documentation is maintained on a current basis.

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

  11. Status: Closed - Implemented

    Comments: Customs stated that it concurred with the recommendations of Treasury's Office of the Inspector General (OIG) and has taken several measures to address the issues related to this recommendation. However, according to the Treasury OIG's fiscal year 2000 and 1999 audit results, Customs' controls over open bills of lading and in-bond shipments continued to need improvement during fiscal years 2000 and 1999. The OIG's tests for fiscal year 2000 again revealed that ACS could not match open transactions to events. Additionally, the OIG again noted in its fiscal year 2000 report that Customs is still unable to ensure that goods moving in-bond were not substituted or diverted without proper assessment. Because the Treasury OIG continues to report on a similar recommendation, GAO is closing this recommendation as "action taken not fully responsive" due to the lack of significant progress made by Customs over the years to address GAO's recommendation.

    Recommendation: The Commissioner of Customs should direct the Assistant Commissioner for Inspection and Control to require personnel at ports of entry to maintain accurate and up-to-date data in the Automated Manifest System (AMS) and to routinely investigate all shipments that have not been released by the end of a prescribed period.

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

  12. Status: Closed - Implemented

    Comments: Customs' Chief Financial Officer initiated a task force evaluating financial management in Customs and the appropriate organization required to fulfill financial management responsibilities. In fiscal year 1994, Customs evaluated staffing needs for the CFO team responsible for financial statement preparation, and approved new positions. Customs reorganized its Office of Finance, upgraded positions in its CFO group at the Accounting Services Division, and appointed a GS-15 to oversee its financial statement preparation process.

    Recommendation: The Commissioner of Customs should evaluate the technical proficiency and experience of existing staff under the Chief Financial Officer to determine specific staff needs for effectively addressing Customs' financial management problems.

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

 

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