Profitability of Customs Forfeiture Program Can Be Enhanced

T-GGD-90-1: Published: Oct 10, 1989. Publicly Released: Oct 10, 1989.

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GAO discussed how effectively the U.S. Customs Service managed its noncash assets seized from criminal enterprises. GAO found that: (1) the volume of seized assets has increased 3,800 percent, to $1.3 billion, since 1979; (2) remission of property to the owners after payment of fines or penalties accounted for $301.8 million of the total property disposed, while sales, the next highest disposal category, accounted for $42.8 million; (3) Customs did not maintain information on liens paid, storage costs, or any other program costs, and understated revenues, because it did not collect data on fines and penalties collected in lieu of forfeiture; (4) in 1988, remissions expenses exceeded revenues by $3.2 million because Customs granted relief for innocent owners for all or a portion of storage costs; (5) Customs' guidelines on constructive seizures, which allowed owners to maintain but not sell or mortgage properties, applied only to actions taken against offenders carrying small amounts of drugs; (6) declining average property prices reduced revenues 57 percent between 1988 and 1989 because drug traffickers used low-value vehicles in an effort to hold down their overhead caused by Customs seizure and forfeiture; (7) Customs lost an average of $204 per vehicle due to storage and sale expenses because regulations provided that it could junk property appraised at less than $1,000; and (8) Customs' lack of internal controls has allowed the sale of property substantially below fair-market value without prior management approval.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Customs has determined that administrative action can solve the problem and corrective action has been taken.

    Matter: Congress should examine the desirability of raising the authorized dollar level in Customs' quick disposal authority.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The response under 31 U.S.C. 720 promised corrective action. The new contractor is using the new overhead cost rates. The new contractor assumed operation in September 1990.

    Recommendation: The Secretary of the Treasury should direct the Customs Service to ensure, once the formula is revised, that all costs, including all overhead costs for remissions, are billed to the owner, and that these costs are collected.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: The agency established a new policy on April 2, 1990 implementing the recommendation.

    Recommendation: The Secretary of the Treasury should direct the Customs Service to aggressively use constructive seizure, in conjunction with the posting of bonds where appropriate, on cases likely to result in remission.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Implemented

    Comments: Customs has determined that other changes made in the program have eliminated the need to revise the dollar thresholds for quick sales. Other efforts have been taken to reduce the number of unprofitable seizures entering the inventory.

    Recommendation: The Secretary of the Treasury should, upon enactment of legislation, develop, for each property category, specific dollar thresholds that would trigger use of quick sale procedures.

    Agency Affected: Department of the Treasury

  4. Status: Closed - Implemented

    Comments: Customs has instituted minimum bid requirements for high-value items.

    Recommendation: The Secretary of the Treasury should instruct the Customs Service to consider providing a minimum bid requirement for high-value items.

    Agency Affected: Department of the Treasury

  5. Status: Closed - Implemented

    Comments: The new contract includes timely dispositions as one measure of the contractor's effectiveness.

    Recommendation: The Secretary of the Treasury should instruct the Customs Service to link the award fee to the contractor's timely disposal of property and minimization of contract costs.

    Agency Affected: Department of the Treasury

  6. Status: Closed - Implemented

    Comments: There is no longer an internal audit function in Customs. Those responsibilities have been assumed by Treasury's Office of the Inspector General. Treasury's Inspector General fiscal year 1992 audit plan incorporates audits of Customs' seized property program, particularly those aspects determined to be high risk.

    Recommendation: The Secretary of the Treasury should instruct the Customs Service to ensure that all areas within the program that are identified as vulnerable to internal control risk are effectively covered by Customs' internal audit plan.

    Agency Affected: Department of the Treasury

  7. Status: Closed - Implemented

    Comments: Customs revised its Seized Property Handbook in October 1991. That handbook details procedures to be followed in acquiring and disposing of seized property. Customs has also established on-site training programs and conducts on-site reviews to help ensure that its system of internal controls is properly implemented.

    Recommendation: The Secretary of the Treasury should instruct the Customs Service to rigorously monitor the contractor's risk management efforts, particularly efforts to avoid fraud, waste, and abuse.

    Agency Affected: Department of the Treasury

  8. Status: Closed - Implemented

    Comments: The response under 31 U.S.C. 720 promised corrective action. Customs' overhead cost allocation formula has been revised to reflect actual expenses incurred.

    Recommendation: The Secretary of the Treasury should direct the Customs Service to revise its overhead cost allocation formula to more accurately reflect actual expenses incurred.

    Agency Affected: Department of the Treasury

  9. Status: Closed - Implemented

    Comments: For fiscal year 1991, Customs produced forfeiture fund financial statements covering program operations by type of disposal and category of property. Those statements were audited by an independent CPA firm. The auditors concluded the financial statements presented fairly, in all material aspects, the financial position and results of its forfeiture fund operations.

    Recommendation: The Secretary of the Treasury should instruct the Customs Service to collect accurate program cost data by seizure, including lien costs, to effectively report the financial performance of seizure and disposal operations both by type of disposal and category of property.

    Agency Affected: Department of the Treasury

 

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