Financial Management:

Customs Did Not Adequately Account For or Control Its Accounts Receivable

AIMD-94-5: Published: Nov 8, 1993. Publicly Released: Nov 8, 1993.

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Pursuant to a legislative requirement, GAO reviewed the U.S. Customs Service's accounts receivable, focusing on the: (1) validity and collectibility of Customs' reported gross accounts receivable; and (2) effectiveness of Customs' collection efforts.

GAO found that: (1) Customs' reported accounts receivable balance is inaccurate and unreliable; (2) Customs lacks adequate policies and procedures and accounting systems for recording and reporting receivables; (3) the lack of supervisory review and system deficiencies contribute to Customs' erroneous accounts receivables balance; (4) Customs' methodology for estimating the collectibility of individual and group accounts requires consideration of historic, current, and forecast data on the debtors' ability to pay; (5) Customs' collectibility methodology is unreliable; (6) delinquent accounts receivable have resulted from deficient management practices; (7) Customs' operational barriers have inhibited debt collection; and (8) large differences exist between the amount of fines and penalties assessed and mitigated.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Customs stated that the procedural changes to ensure timely and accurate updates were being implemented. The fines, penalties, and forfeitures case processing system being developed was terminated. Customs' new system, the Seized Assets and Case Tracking System (SEACATS), manages fines, penalties, and forfeitures, as well as seized property. Customs began phasing in SEACATS in November 1996. As part of the implementation, data accuracy was being examined. Customs experienced difficulties in converting data from the old systems to SEACATS, but according to Customs, the problems had been corrected by the end of 1997. Customs also indicated that it had performed steps to test and validate that the fines and penalties converted to SEACATS were valid. In its FY1997 audit report, the OIG agreed that Customs had taken steps to correct the conversion problem, which included conducting case file reviews. The OIG did not note any problems with fines and penalties during its FY1997 testing.

    Recommendation: To help strengthen the accuracy of the accounts receivable balance reported in Customs' financial statements, the Commissioner of Customs should direct the Chief Financial Officer to require Customs personnel to review fines and penalties assessments recorded in the Automated Commercial System (ACS) and correct any inaccuracies before transfer to the redesigned system.

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

  2. Status: Closed - Implemented

    Comments: Customs stated that the changeover from several previous systems used to record fines, penalties, and forfeiture data (FP&F) in Customs' ACS involved a massive cleanup of the files and the implementation of new data procedures. Customs further stated that these procedures emphasize better supervisory and quality control over the data input into the Seized Asset and Case Tracking System (SEACATS), now used to track FP&F data. In addition, during August 2000 site visits, OIG staff found that Customs managers review technician's ACS collection input.

    Recommendation: To help strengthen the accuracy of the accounts receivable balance reported in Customs' financial statements, the Commissioner of Customs should direct the Chief Financial Officer to require supervisory personnel to review the work of staff responsible for updating and changing information in ACS to ensure that all assessments are accurately and completely recorded.

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

  3. Status: Closed - Implemented

    Comments: Customs stated that the development and implementation of an integrated accounts receivable system will be done under the umbrella of the Automated Commercial Environment (ACE), which is a comprehensive redesign of its Automated Commercial System that requires a significant investment of planning and resources. According to Customs, design and implementation of ACE 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 management 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 balance 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, GAO is closing recommendation as "action taken not fully responsive" due to the lack of significant progress made by Customs over the years to address the recommendation.

    Recommendation: Customs should develop and maintain an integrated accounting system that can capture accurate and reliable information on all types of assessments (including duties, taxes, fines, and penalties) from assessment through collection of any related amounts.

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

  4. Status: Closed - Implemented

    Comments: For its fiscal year 1993 financial statements, Customs implemented a collectibility methodology that analyzes the debtors ability to pay.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to modify Customs' methodology for assessing the collectibility of its receivables based on the asset and liability standard recommended by the Federal Accounting Standards Advisory Board (FASAB) and recently approved by GAO, the Office of Management and Budget (OMB), and the Treasury Department by analyzing individual debtor accounts to assess their ability to pay.

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

  5. Status: Closed - Implemented

    Comments: For its fiscal year 1993 financial statements, Customs implemented a collectibility methodology that bases group analyses on categories of assessments with similar collection risk characteristics.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to modify Customs' methodology for assessing the collectibility of its receivables based on the asset and liability standard recommended by FASAB and recently approved by GAO, OMB, and Treasury by basing group analyses on categories of assessments with similar collection risk characteristics.

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

  6. Status: Closed - Implemented

    Comments: For its fiscal year 1993 financial statements, Customs implemented a collectibility methodology that considers current and forecast economic conditions, as well as historical collection data, in analyses of groups of assessments.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to modify Customs' methodology for assessing the collectibility of its receivables based on the asset and liability standard recommended by FASAB and recently approved by GAO, OMB, and Treasury by considering current and forecast economic conditions, as well as historical collection data, in analyses of groups of assessments.

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

  7. Status: Closed - Implemented

    Comments: Customs has stated that procedures have been developed to address this issue. Testing performed by the Treasury Inspector General in the Fiscal Year 1994 Customs Financial Statement Audit showed that the procedures appeared to be properly implemented.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to implement procedures to ensure that entry summaries are reviewed and liquidated within 1 year or provide documentation why this time frame cannot be met for specific cases.

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

  8. Status: Closed - Implemented

    Comments: Customs stated that it is currently using an automated report to track all aged protests. Additionally, a national cleanup of aged protests over 2 years was recently conducted.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to monitor Customs' efforts to resolve protested supplemental duty cases in a timely manner.

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

  9. Status: Closed - Implemented

    Comments: Commissioner Weise directed field offices to maintain supporting documentation for receivables through collection. During GAO testing of accounts receivable for the FY1993 financial statement audit, GAO observed that Customs' field offices were adequately maintaining supporting documentation for receivables.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to require that supporting documents, such as the entry summary and surety bond, are maintained in the field offices for all outstanding receivables until they are collected.

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

  10. Status: Closed - Implemented

    Comments: Customs stated that it currently sanctions importers and personally contacts debtors to encourage them to pay. Customs is also exploring using contractors to obtain payment and is considering centralizing all debt collection at NFC.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to use all debt collection tools available to Customs, such as sanctioning importers and personally contacting debtors who are delinquent in paying their bills.

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

  11. Status: Closed - Implemented

    Comments: Customs is developing performance indicators as part of the final stages of the SEACATS development action plan. In its fiscal year 2000 audit report, the Treasury OIG noted that Customs made modifications to SEACATS that it considered to be responsive to its recommendations.

    Recommendation: The Commissioner of Customs should direct the Chief Financial Officer to develop performance indicators to measure the effectiveness of Customs' fines and penalties program.

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

  12. Status: Closed - Implemented

    Comments: For its fiscal year 1993 financial statements, Customs used statistical sampling in its accounts receivable collectibility methodology. It plans to continue using this methodology for FY1994.

    Recommendation: The Customs Service Chief Financial Officer should use statistical sampling to analyze the collectibility of accounts on a group basis, in addition to separately analyzing individual accounts. Such sampling should consider factors that are essential for estimating the level of losses, such as historical loss experience, recent economic events, and current and forecast economic conditions.

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

  13. Status: Closed - Implemented

    Comments: For its fiscal year 1993 statements, Customs implemented a methodology that reported substantiated receivables at a gross amount and defined the receivable balance including sources of information.

    Recommendation: To help strengthen the accuracy of the accounts receivable balance reported in Customs' financial statements, the Commissioner of Customs should direct the Chief Financial Officer to develop policies and procedures to record and report all substantiated accounts receivable at a gross amount. The procedures should also provide a detailed methodology for deriving the accounts receivable balance, including a description of the relevant sources of needed data.

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

  14. Status: Closed - Implemented

    Comments: Customs included a separate allowance amount for the billed fines and penalties cases for FY1993 financial statements and plans to do so in the FY1994 financial statements.

    Recommendation: The Customs Service Chief Financial Officer should include a separate allowance amount relating to billed fines and penalties cases in Customs' allowance for uncollectible accounts balance.

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

 

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