Customs Service: The Self-Inspection Program Shows Promise but
Remains a Work in Progress (01-JUN-01, GAO-01-676).
The U.S. Customs Service's responsibilities include (1)
collecting revenue from imports and enforcing Customs and other
U.S. laws and regulations, (2) preventing the smuggling of drugs
into the United States, and (3) overseeing export compliance and
money laundering issues. Customs recently implemented a
self-inspection program (SIP) to aid in its diverse
responsibilities. This report discusses (1) SIP's use as a
mechanism for oversight and accountability, (2) problems related
to SIP implementation, and (3) improvements and refinements
underway to enhance the value of the program. GAO found that (1)
SIP is a useful mechanism for managers to identify and correct
problems at the local level and to obtain more control over
activities that they oversee, (2) implementation problems
included a lack of detailed instructions on how to complete
self-inspection worksheets and inadequate worksheet review by
responsible officials, and (3) Customs is taking steps to correct
deficiencies in key internal control areas.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-676
ACCNO: A00981
TITLE: Customs Service: The Self-Inspection Program Shows
Promise but Remains a Work in Progress
DATE: 06/01/2001
SUBJECT: Customs administration
Internal audits
Internal controls
Reporting requirements
Customs Service Self-Inspection Program
Customs Service Self-Inspection
Reporting System
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GAO-01-676
Report to Congressional Committees
United States General Accounting Office
GAO
June 2001 CUSTOMS SERVICE The Self- Inspection Program Shows Promise but
Remains a Work in Progress
GAO- 01- 676
Page i GAO- 01- 676 Customs Self- Inspection Program Implementation Letter 1
Appendix I Comments From the Customs Service 20
Appendix II GAO Contacts and Staff Acknowledgments 21
Figure
Figure 1: MID Completed and Scheduled On- Site Verification and Validation
Inspections 5
Abbreviations
CEO Canine Enforcement Officer CMC Customs Management Center LAX Los Angeles
International Airport MID Management Inspections Division OFO Office of
Field Operations OI Office of Investigations RA Resident Agent RAIC Resident
Agent- in- Charge SAIC Special Agent- in- Charge SIP Self- Inspection
Program SIRS Self- Inspection Reporting System Contents
Page 1 GAO- 01- 676 Customs Self- Inspection Program Implementation
June 1, 2001 The Honorable Charles E. Grassley Chairman Committee on Finance
United States Senate
The Honorable Bill Thomas Chairman Committee on Ways and Means House of
Representatives
The Honorable Philip M. Crane Chairman Subcommittee on Trade Committee on
Ways and Means House of Representatives
Various governmental and private sector organizations use a selfinspection
program (SIP) as a mechanism to provide management oversight of programs and
processes to build accountability and to foster integrity throughout their
organizations. Because of the U. S. Customs Service?s diverse
responsibilities and geographic dispersion, the former Commissioner wanted
such a program for Customs that placed primary responsibility for reviewing
operations and identifying corrective actions on the managers and
supervisors overseeing the activities. As its name denotes, SIP emphasizes
self- assessment by managers and supervisors responsible for the activity,
rather than an assessment performed by outsiders. Under Customs? program,
the Management Inspections Division (MID) was to independently verify and
validate the self- inspections.
We reported to you last year about Customs? SIP design, the first of two
issues that we agreed with your offices to address. 1 This report focuses on
the second issue, program implementation and discusses (1) SIP?s use as a
mechanism for oversight and accountability, (2) problems relating to SIP
implementation, and (3) improvements and refinements underway to enhance the
value of the program.
1 Customs Service: Information on the Design of the Self- Inspection Program
(GAO/ GGD- 00- 151, June 23, 2000).
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 676 Customs Self- Inspection Program Implementation
Our visits to eight Customs entities and review of 127 MID verification and
validation inspection reports showed that SIP is a useful mechanism for
managers to identify and correct problems at the local level and to obtain
more control over activities that they oversee. Local self- inspections and
MID verification and validation inspections discovered several areas of
vulnerability in Customs? activities, including weak controls over imprest
fund, 2 seized property, and collections and deposits activities, and helped
prompt corrective action at the local level. In addition, at every entity we
visited managers and supervisors told us that the program has made a
positive contribution to oversight and accountability.
These positive conditions notwithstanding, our review also disclosed several
problems relating to SIP implementation. For example, MID reported that
about 23 percent of the SIP worksheets that they reviewed had no or
insufficient documentation to support managers? conclusions that activities
were being performed properly; 16 percent of the worksheets had questions
incorrectly answered. 3 MID attributed these problems to a lack of detailed
instructions on how to complete worksheets and inadequate worksheet review
by responsible officials. Our review found incomplete documentation to
support the majority of worksheet results at three of the eight entities
that we visited and a lack of key internal control questions on the
worksheets. In addition, more than half of the 54 managers and supervisors
we interviewed told us that
SIP has been very paperwork- intensive, burdensome, and timeconsuming; 2
An imprest fund is a fixed- cash or petty cash fund in the form of currency
or coin. The funds are charged against a government appropriation by a
federal government agency official and advanced to an authorized cashier.
The fund may be revolving, replenished to the level of a fixed amount as
spent or used, or stationary such as a change- making fund. See Department
of the Treasury, Financial Management Service, Manual of Procedures and
Instructions for Cashiers, p. 19 (March 2000).
3 Self- inspection worksheets are designed to evaluate financial
vulnerability and corruption, mission performance and resource utilization,
and internal/ external relationships. During self- inspections, managers and
supervisors are to complete worksheets for all areas under their control.
This involves assessing their operations and answering questions on the
worksheets as ?yes,? ?no,? or ?N/ A? (? No Activity? or ?Never Applies?).
They are to then rate their areas of responsibility as either ?acceptable?
or ?needs improvement.? Results in Brief
Page 3 GAO- 01- 676 Customs Self- Inspection Program Implementation
too much time was being spent on low- risk activities, such as internal
and external relations; 4 and
reporting requirements for some low- risk activities were too frequent.
Customs is taking steps to correct these deficiencies. For example, key
internal control questions are being incorporated into the worksheets, and
the time spent self- inspecting low- risk activities is being reduced. In
addition to addressing deficiencies, Customs plans to have its automated
Self- Inspection Reporting System (SIRS) fully implemented in early 2002,
which should allow for monitoring the status of the self- inspections,
tracking corrective actions, and identifying trends nationwide. However,
another program deficiency still needs corrective action. Not all worksheet
guidance and instructions are sufficient or clear enough to ensure accurate
and complete self- inspection results. This report contains a recommendation
to the Acting Commissioner of Customs concerning actions needed to clarify
self- inspection worksheet guidance. Customs will shortly be implementing an
action plan to fully address our recommendation.
The U. S. Customs Service has a diverse mission spanning a large geographic
area. Customs? responsibilities include (1) collecting revenue from imports
and enforcing Customs and other U. S. laws and regulations, (2) preventing
the smuggling of drugs into the United States, and (3) overseeing export
compliance and money- laundering issues. At the close of fiscal year 2000,
Customs had a permanent workforce of about 20,000 employees. These employees
carry out Customs? mission at its headquarters, 20 Customs Management
Centers (CMC), 20 Special Agentin- Charge (SAIC) offices, 301 U. S. ports of
entry, 5 Strategic Trade Centers, and over 25 international offices. Customs
processed over 23 million import entries, with a value of $1.17 trillion;
140 million conveyances; 5 and 489 million land, sea, and air passengers in
fiscal year 2000.
Every manager and supervisor is responsible for conducting a selfinspection
of the activities, such as entry processing, that they oversee,
4 The internal relations worksheet covers how Customs? managers communicate
and interact with subordinates. The external relations worksheet covers how
Customs? personnel communicate and interact with other agencies such as the
Immigration and Naturalization Service.
5 Conveyances include aircraft, trucks, trains, passenger vehicles, and
ocean vessels. Background
Principal Features of SIP
Page 4 GAO- 01- 676 Customs Self- Inspection Program Implementation
using uniform self- inspection worksheets. The worksheets are used to
evaluate the key internal control points in a particular program or process,
assess mission/ program accomplishments, and better define priorities and
identify areas needing improvement. Customs? entities are to conduct
selfinspections every 6 months, which are referred to as self- inspection
cycles. At the time of our review, four self- inspection cycles had been
completed, with the fifth cycle due to start in July 2001.
Self- inspection results, including problems identified and potential
corrective actions, are to be funneled up the chain of command. For example,
worksheet results addressing port activities are to be certified by
approving officials at the ports of entry. The officials are to send results
to the CMC, which in turn sends the results to the cognizant assistant
commissioner at Customs headquarters. The assistant commissioners are to
report SIP results to MID after ensuring that self- inspection worksheets
have been completed, are accurate, and have been analyzed; key issues have
been identified; corrective actions have been determined; and timeframes for
completing corrective actions have been established.
MID is responsible for monitoring and directing SIP worksheet development
and managing the program. In addition, MID is to conduct independent
verification and validation inspections of the completed selfinspection
worksheets to ensure that they are correct and accurate. MID?s inspections
are more in- depth for certain areas than the local selfinspection reviews
in order to verify that all problems in those areas have been found.
MID performs its verification and validation inspections with a staff of 65
professionals, located at headquarters and at seven field offices around the
country. MID also supplements its staff by detailing managers and
supervisors from other entities to help conduct the inspections. In addition
to managing SIP, MID?s staff devotes about 30 percent of their time to
auditing funds involved in undercover operations. Figure 1 shows that MID
has inspected or is scheduled to inspect, more than half of Customs?
entities by June 30, 2001. In particular, MID has inspected or is scheduled
to inspect 19 of the 20 CMCs, 17 of the 20 SAICs, and several of its
subordinate entities, including ports of entry, Resident Agent- in- Charge
(RAIC) offices, and Resident Agent (RA) offices.
Page 5 GAO- 01- 676 Customs Self- Inspection Program Implementation
Figure 1: MID Completed and Scheduled On- Site Verification and Validation
Inspections
a Includes Internal Affairs Special and Regional Agent in Charge, air and
marine branches, Customs? attaches, field laboratories, preclearance ports,
strategic trade centers, regulatory audit, and headquarters divisions.
Source: U. S. Customs Service?s Management Inspections Division.
To identify (1) SIP?s usefulness as a mechanism for oversight and
accountability and (2) problems relating to SIP implementation, we
interviewed officials from several Customs? organizations, including MID,
which oversees SIP and is within the Office of Internal Affairs. In addition
to MID, during our review, we interviewed officials from the Office of Field
Operations (OFO), which oversees CMCs and ports of entry, and the Office of
Investigations (OI), which oversees SAICs, RAICs, and RAs, because these are
geographically dispersed components with the responsibility for completing a
large number of self- inspection worksheets. Also, we judgmentally selected
seven ports of entry and one Scope and
Methodology
Page 6 GAO- 01- 676 Customs Self- Inspection Program Implementation
SAIC office from these components for field visits 6 and accompanied MID on
inspections of four of the entities. We also visited the CMCs affiliated
with the two San Diego ports of entry and Los Angeles International Airport
(LAX). At the ports of entry and SAIC office, we interviewed supervisors and
managers responsible for implementing SIP at the local level. We also
reviewed relevant agency documents, including nationwide results of several
self- inspection cycles, self- inspection results at the field entities
visited, and the results of MID verification and validation inspections.
We reviewed MID verification and validation inspection reports for 144
Customs? entities. We summarized the results of these reports using
spreadsheets, detailing the number of areas MID reviewed, the number of
documentation errors MID identified, the number of self- inspections with
questions answered incorrectly, and MID?s assessments and observations of
SIP implementation. Because we could not glean such specific information
from reports for 17 of these entities, these reports were not included in
our analysis. MID?s results from inspections of 127 entities and over 2,000
self- inspection worksheets were used in our analysis. Because the MID
reports did not follow a consistent format and it was often difficult to
extract the appropriate information, we used the reports only to validate
overall assessments given by MID. Because the entities inspected were
judgmentally selected by MID, the findings from these reports and our
analysis of these reports may not be representative of the entire Customs
Service.
To identify improvements and refinements that could enhance the value of the
program, we worked closely with directors, managers, and supervisors at
selected Customs sites. We also interviewed MID, OFO, and OI officials to
obtain their views and plans for improving and refining the program. In
addition, we reviewed MID documentation concerning changes and refinements
to the program.
We performed our work between June 2000 and April 2001 in accordance with
generally accepted government auditing standards. We provided the Customs
Service with a draft of this report. Customs? written comments
6 The ports selected were John Fitzgerald Kennedy International Airport,
LAX, Miami International Airport, land border ports of Detroit, Mich.,
Laredo, Tex., San Ysidro and Otay Mesa near San Diego, Calif., and the San
Francisco SAIC.
Page 7 GAO- 01- 676 Customs Self- Inspection Program Implementation
are discussed in our agency comments section and are included as appendix I
to this report.
Our visits to eight Customs? entities and review of 127 MID verification and
validation inspection reports found SIP to be a useful mechanism for
managers and supervisors to identify and correct problems at the local level
and to obtain more control over activities they oversee. During
selfinspections, the entities uncovered areas of vulnerability and
identified numerous areas needing improvement in their local operations. The
MID also identified areas needing improvement through their verification and
validation inspections. The managers and supervisors we talked with said
that SIP had made a positive contribution to oversight and accountability
and to improving their operations.
SIP has been a useful mechanism for identifying and correcting problems. The
Customs? entities that we visited had uncovered numerous areas of
vulnerability in their local operations as a result of self- inspections.
For example, all eight entities had identified weak controls over seized
property and were implementing corrective actions. Corrective actions
included developing evidence and sign- in logs for property rooms and vaults
and improving processes for transferring seized property to secure vaults in
a timely manner. In addition, at one port of entry we visited, Customs
officials discovered problems in the imprest fund as a result of a self-
inspection. According to the port director, the self- inspection raised
questions about a cashier?s handling of the fund, which led to a
determination that the cashier had embezzled $1,000 from the fund.
According to an OFO report, CMCs and ports of entry identified approximately
3, 000 items needing improvement with corresponding corrective actions
nationwide during the second SIP cycle. The OFO SIP Program Coordinator
tracks the status of the corrective actions for issues that occur at many
ports. Financial management, trade programs, passenger processing (including
personal searches), and fines, penalties, and forfeitures (including seized
property) were the areas identified most frequently as needing improvement.
In addition, all the entities we visited had identified numerous areas
needing improvement and had implemented a number of corrective actions. For
example, one port of entry identified 37 areas needing improvement out of 54
they inspected during the second SIP cycle. Of the 37 areas, corrective
actions for 31 had been completed at the time of our SIP Shows Promise as
a Useful Mechanism for Oversight and Accountability
Self- Inspections Uncovered Vulnerable Areas Needing Improvement
Page 8 GAO- 01- 676 Customs Self- Inspection Program Implementation
visit; the rest were in process. During the third SIP cycle, the port
identified 27 different areas needing improvement out of 64 inspected. Of
the 27 areas, corrective actions for 23 had been completed by the time of
our visit; the rest were in process.
In addition to problems uncovered through local level self- inspections, MID
verification and validation inspections identified additional areas needing
improvement. For example, at one port of entry, MID inspectors found late
filing of travel vouchers, security checks not being conducted, and personal
search facilities having privacy and safety shortcomings. In response, MID
made numerous recommendations to port management for corrective actions. MID
officials explained that the recommendations were based on problems
identified during their inspection that the port should have found during
its self- inspection or MID found in areas it reviews but are not addressed
by the self- inspection worksheets. MID officials further explained that
while on- site at a port of entry or other entity, they conduct more in-
depth reviews that go beyond the scope of the worksheet questions. These in-
depth reviews have been targeted toward higher- risk areas, such as airport
security programs, and may lead to worksheet revisions where warranted.
MID also conducts follow- up activities to ensure that its recommendations
have been completed. MID generally sends a follow- up memorandum to the
applicable entity about 6 months after the inspection to determine the
status of the corrective actions taken in response to the recommendations.
The entity then provides MID with a letter stating the status of the
corrective action( s) and provides supporting documentation. After receiving
this letter, MID may close out the recommendation, require more
documentation, or visit the entity to obtain more documentation. For
example, during the second and third SIP cycles, MID made a total of 65
recommendations to improve imprest fund management. At the time of our
review, 17 of the 65 recommendations had been implemented and were closed
out. Forty- one recommendations were pending; MID sent out follow- up
memorandums to determine the status of the pending recommendations but had
not received responses at the time of our review. MID officials told us that
it was too soon to send out follow- up memorandums on the remaining seven
recommendations. MID Identified Areas
Needing Improvement
Page 9 GAO- 01- 676 Customs Self- Inspection Program Implementation
Managers and supervisors at every port of entry and SAIC office we visited
told us that SIP was useful as a mechanism for oversight and accountability
and that it had contributed to improving their operations. They said that
they had uncovered and corrected problems they would not have discovered had
they not performed the self- inspections.
For example, one port director said that SIP highlighted problem areas in
the port?s operations and brought them to the attention of managers and
supervisors more effectively than had Customs? prior management inspection
program. Under one component of the prior program, teams of officers from
areas such as passenger processing would inspect different areas such as
fines, penalties, and forfeitures. Because these teams did not work in the
areas being inspected, they generally had limited knowledge and expertise of
the activities they were inspecting. With this limited knowledge, they were
often unable to verify the information they were given or investigate any
problems in the activities further.
In contrast, under SIP, supervisors inspect their own activities and their
immediate superiors review the results. According to this port director, SIP
helps supervisors maintain accountability for their area of responsibility
because it requires them to ?back- up? the results of their self- inspection
with supporting documentation. The next level of local management is to
certify that the results are correct and, should MID inspect their area of
responsibility, managers and supervisors will be asked to explain how they
determined worksheet answers. Many supervisors told us that these different
levels of review helped give the process integrity.
Managers and supervisors also said that self- inspections assisted them in
uncovering and correcting problems that they would have otherwise not known
about, and that SIP helps to keep them informed and current on Customs?
policies and directives. For example, at one entity, purchase cardholders
were not locking up their purchase cards as required, but were carrying them
in their wallets. The cardholders reported that they were not aware of the
requirement to keep the cards secured, but because of SIP, they now lock up
the cards.
Notwithstanding the positive aspects of the program, several problems have
surfaced during SIP implementation. During its verification and validation
inspections, MID found insufficient supporting documentation for some
worksheet answers and inaccurate reporting of some selfinspection results.
Largely due to these findings, MID was also concerned Managers and
Supervisors
Believed SIP to Be Useful as an Oversight Mechanism
Several Problems Have Surfaced During SIP Implementation
Page 10 GAO- 01- 676 Customs Self- Inspection Program Implementation
that some officials may not have conducted adequate reviews of completed
self- inspection worksheets before certifying them as accurate. We also
found insufficient documentation to support worksheet answers and questions
answered incorrectly to some extent at the entities that we visited. In
addition to problems with worksheet completion and accuracy, many of the
managers and supervisors we interviewed believed the program to be
burdensome and time- consuming.
MID inspections and our analysis of MID inspection reports identified
problems concerning insufficient documentation to support worksheet answers
and incorrectly answered questions. According to the results of inspections
conducted since January 2000, MID reported finding insufficient supporting
documentation on 23 percent of the worksheets reviewed and questions
answered incorrectly on 16 percent of the worksheets. Results from our
review of MID inspection reports were consistent with MID?s assessment.
Insufficient documentation and inaccurate worksheet results indicated to MID
inspectors that approving officials may not have sufficiently reviewed
completed worksheets in order to certify their accuracy. MID inspectors
explained that by signing worksheet certifications, approving officials,
such as port directors, are indicating that they reviewed the self-
inspection and that they agree that the results are accurate. However, MID
inspectors believed that if support for answers was not indicated on the
worksheets, it was not clear how the officials could have determined that
the results were accurate. In effect, MID inspectors believed that some
approving officials might be ?rubber- stamping? self- inspection results.
According to MID inspection reports, problems at some entities with
insufficient supporting documentation and inaccurate worksheet answers
resulted, in part, from a lack of detailed guidance and instructions on how
to complete and review worksheets and determine appropriate sample sizes.
Many managers and supervisors that we interviewed agreed with MID?s
assessment and believed that more guidance and more specific instructions
were necessary to answer some worksheet questions. Specifically, they
mentioned having difficulty determining the proper supporting documentation
for answers to some questions, the appropriate universe from which to draw a
sample, and the appropriate sample size.
We also found worksheets lacking supporting documentation and with incorrect
answers, to some extent, at all the entities that we visited. At three of
the eight Customs entities that we visited, the majority of the Worksheet
Answers Lack
Adequate Support and SelfInspection Results Inaccurately Reported
Page 11 GAO- 01- 676 Customs Self- Inspection Program Implementation
worksheets we analyzed either lacked supporting documentation or had
incorrectly answered questions. We found instances of managers and
supervisors having difficulty determining (1) proper support for worksheet
answers, (2) appropriate sampling universe and timeframes, and (3)
appropriate sample sizes.
For example, at one entity we visited with MID inspectors, a purchase
cardholder answered ?yes? to a worksheet question asking whether the monthly
purchase card statements were reconciled within 10 days after their receipt.
While it is a requirement to provide supporting documentation for worksheet
answers, the purchase cardholder did not indicate that any records, reports,
or other documents were reviewed to support the answer. During their
inspection, MID accessed a report that showed some purchase card statements
had not been reconciled within the prescribed timeframe. According to the
MID inspector, the report should have been reviewed when answering the
question and a copy included with the self- inspection worksheet as
supporting documentation. The purchase cardholder explained that he was
unaware of this report and, lacking documentation, had answered the question
based on what he remembered. As a result, MID inspectors concluded that
incorrect results had been funneled up the chain of command. Purchase
cardholders at two of the other three entities we visited with MID also said
that they were unaware of this reconciliation report.
We also found supervisors having difficulty determining the appropriate
sampling universe and timeframes. For example, at one entity we visited, a
MID inspector found that a supervisor completing the collections and
deposits worksheet had sampled supporting documents from only 1 month in the
6- month reporting period. The MID inspector explained that this was not
representative of the activity in the review period. The supervisor
explained that he had received no training or guidance on how to conduct the
self- inspection and only had instructions on the worksheet for guidance. We
reviewed the self- inspection worksheet and found that the instructions read
?Review at least 10 documents randomly selected from the day?s deposit and
collection documents.? The instructions do not explain that the sample of
documents should be from every month or describe how the documents should be
representative of the entire reporting period. At another port of entry, we
found that supervisors had sampled collection and deposit activity from only
1 day in the 6- month reporting period, which appeared to be consistent with
the limited instructions referenced above.
Page 12 GAO- 01- 676 Customs Self- Inspection Program Implementation
In addition, we found examples of difficulties in determining appropriate
sample sizes. For example, questions on one worksheet ask about controls
over narcotic training aids for canines. The worksheet did not contain
specific instructions or guidance about how to support answers to these
questions. At one entity we visited, the supervisor who completed the
worksheet used control documents from one canine enforcement officer?s (CEO)
file as supporting documentation for the worksheet answers. We interviewed
the supervisor and found that there were 16 CEOs at the port of entry in
possession of narcotic training aids, although only one file had been
reviewed for the self- inspection. The supervisor said that no guidance or
instructions had been provided on how many files needed to be reviewed to
support the worksheet answers, so the supervisor randomly picked one file to
answer the worksheet questions.
At another port of entry, the supervisor who completed the canine narcotics
training aid worksheet indicated that without guidance on how to determine
the sample size, the local CMC instructed that a 5- percent sample should be
taken. The supervisor drew a 5- percent sample of CEOs in possession of
narcotic training aids, which resulted in only 2 out of 53 files being
included in the self- inspection.
At six of the eight entities we visited, more than half of the 54 managers
and supervisors we interviewed said that SIP can be paperwork- intensive,
burdensome, and time- consuming. In particular, some self- inspection
worksheets have more questions than others, from only 1 to 15 questions, and
some worksheets require extensive research to determine and support
worksheet answers. For example, a supervisory import specialist we
interviewed explained that to answer one worksheet question, a data query of
over 120,000 records had to be retrieved before a sample could be taken.
According to the supervisor, other questions on this worksheet required
similar efforts, taking several days to gather the information. Although
other worksheets may not require such extensive research, neither MID nor
any of the entities we visited tracked the amount of time required to
complete various self- inspections. Consequently, we were unable to
determine the actual time burden of the program or to what extent completing
self- inspection worksheets may impact primary job duties.
About three- quarters of the managers and supervisors who told us that SIP
was time- consuming and burdensome said that too much time was being spent
on low- risk activities, such as internal and external relations, and
reporting requirements for low- risk activities were too frequent. At
several Many Managers and
Supervisors Believed SIP to Be Burdensome and Time- Consuming
Page 13 GAO- 01- 676 Customs Self- Inspection Program Implementation
of the entities we visited, managers and supervisors said that Customs
needed to prioritize the activities covered by the worksheets and focus on
high- risk activities such as collections and deposits and seized narcotics.
One port director said that based on the port?s activities, the areas of
collections and deposits of cash/ checks and seized currency should be the
two highest priorities under the port?s self- inspection. These are risky
areas that could be vulnerable to abuse, making them good candidates for
continuous scrutiny under SIP. The port director also believed that other
areas are not as important and should receive less scrutiny during the SIP
cycles. As discussed later in this report, MID is taking action to address
these concerns.
Based on feedback MID received from our review, its own inspections, and
comments from managers and supervisors, several improvements and refinements
to SIP are being implemented. These include (1) adding key internal control
questions to worksheets, (2) reducing the time spent selfinspecting low-
risk activities, (3) standardizing MID?s verification and validation
inspection reporting format, and (4) developing and implementing a
computerized self- inspection reporting system.
During our review, we found that some key internal control concepts were not
being addressed by self- inspection questions. According to the Comptroller
General?s Standards for Internal Control in the Federal Government (Nov.
1999), a key factor in helping federal managers improve accountability and
minimize operational problems to better achieve agencies? missions and
program results is to implement appropriate internal control. Internal
control is a series of actions and activities that occur throughout an
entity?s operations and on an ongoing basis as part of its infrastructure to
help managers run the entity and achieve their aims. An organization?s
internal control provides reasonable assurance that its operations are
effective and efficient, its financial reporting is reliable, and it is in
compliance with applicable laws and regulations. Management sets the
objectives, puts the control mechanisms and activities in place, and
monitors and evaluates the control.
Not all self- inspection worksheet questions, however, fully address the
concepts in the internal control standards. On the imprest fund worksheet,
for example, we found a question that read: ?If there is no separation of
duties for a cashier who performs other procurement/ change making
functions, does management perform any extra reviews?? This question, SIP
Improvements
and Refinements Are Underway
Key Internal Control Questions Being Incorporated Into Worksheets
Page 14 GAO- 01- 676 Customs Self- Inspection Program Implementation
however, was not specific enough to address the segregation of duties
internal control activity.
The Comptroller General?s internal control activity states that:
?Key duties and responsibilities need to be divided or segregated among
different people to reduce the risk of error or fraud. This should include
separating the responsibilities for authorizing transactions, processing and
recording them, reviewing the transactions, and handling any related assets.
No one individual should control all key aspects of a transaction or event.?
We believed that the question on the imprest fund worksheet should be
revised to address the fundamental concept by specifically asking whether
key duties and responsibilities were segregated among different people in
the imprest fund area. We also noted that the worksheet for the purchase
card program did not have a question about segregation of duties.
In addition, we noticed that a key internal control question had been
removed from the third cycle imprest fund worksheet. The question was
whether quarterly unannounced cash counts were being conducted. This
pertains to the Comptroller General?s internal control activity on
safeguarding vulnerable assets:
?An agency must establish physical control to secure and safeguard
vulnerable assets. Examples include security for and limited access to
assets such as cash, securities, inventories, and equipment which might be
vulnerable to risk of loss or unauthorized use. Such assets should be
periodically counted and compared to control records.?
We discussed our internal control concerns with the MID Director at Customs
headquarters, who added the question on unannounced cash counts back into
the imprest fund worksheet for the fourth SIP cycle, and began a
reassessment of all SIP worksheets to ensure that questions cover basic
internal controls.
As a result of our discussion and the MID Director?s reassessment, MID
issued worksheet revision guidelines that describe and outline internal
control concepts that must be in place for a federal agency to have
assurance that it is running efficiently and effectively. In all, MID?s
guidance outlines 10 key internal control concepts to consider when revising
the worksheet questions. For example, as we suggested in the imprest fund
example noted above, MID?s guidance for including segregation of duties
worksheet questions essentially states:
Page 15 GAO- 01- 676 Customs Self- Inspection Program Implementation
Key duties and responsibilities are divided to reduce the risk of error or
mismanagement. No one individual should control all key aspects of a
transaction or event. Examples of programs requiring key functions to be
separated include procurement (approving, purchasing, and receiving),
imprest fund (cashier and approver), and collections and deposits (preparer,
verifier and receiver); and
Individuals who account for assets are not the same as those that have
custody of the assets. Preventing this assures that individuals who record
assets can not misappropriate the asset and conceal its whereabouts in the
inventory records.
MID left the implementation of the revision to the discretion of each
assistant commissioner and said that for the revised worksheets to be
available for the January 2002 SIP cycle; the worksheets should be completed
by October 2001. We were concerned about the lengthy implementation
timeframe, but after discussing the issue with program manager
representatives of the OFO and OI Assistant Commissioners, we were assured
that work on the revisions was well underway. In fact, both the OFO and OI
program managers told us that their goal is to complete the revised
worksheets in May 2001 so that they can be used for the next SIP cycle
beginning in July 2001.
In these instances of key internal control questions missing from worksheets
whose programs could be subject to financial vulnerability and corruption,
we worked closely with MID officials to correct the deficiencies. Because
the officials were very responsive to our concerns and took corrective
action during this engagement, we will not be making a recommendation on
this issue in this report.
A second area where improvements are being made is by reducing the time
spent self- inspecting low- risk activities. To help reduce the SIP
paperwork burden and time requirements, Customs? activities are being
prioritized for self- inspection based on risk level. Many worksheets
covering activities considered to be low- risk are to be completed on an
annual, instead of semiannual basis. Worksheets covering activities that are
vulnerable to fraud and abuse, however, are being retained for semiannual
completion. For example, OFO began prioritizing its activities and
associated worksheets after the first SIP cycle because they found that it
was too burdensome to complete all the worksheets during one cycle.
According to the OFO Acting SIP Program Coordinator, worksheets covering
high- risk areas such as money, narcotics, or seized property, were retained
on a semiannual cycle. OFO placed low- risk activities on an annual cycle,
an example being customer service operations. In all, OFO Reducing the Time
Spent
Self- Inspecting Low- Risk Activities
Page 16 GAO- 01- 676 Customs Self- Inspection Program Implementation
placed the majority of their worksheets- 52 out of 78- on an annual, instead
of semiannual cycle.
OI began prioritizing its activities and worksheets by risk level for the
fourth SIP cycle that began in January 2001 for field offices such as SAICs
because they have the most worksheets to complete. Like OFO, OI placed
activities considered low- risk on an annual, instead of semiannual cycle;
an example would be whether a threat analysis has been conducted to
determine the potential for fraud investigations. Similar to OFO, the OI SIP
Program Coordinator said that worksheets covering high- risk areas such as
money, narcotics, seized property, and other sensitive areas were retained
on a semiannual cycle. In all, OI placed the majority of its worksheets- 16
out of 22- on an annual, instead of semiannual cycle.
A third area where MID is making improvements is in the way it reports
inspection results. MID is to prepare a management inspection report after
each inspection it performs at Customs entities. The report is used to
document the identification and correction of management and operational
deficiencies and contains various sections such as executive digest,
national issues, and SIP verification summaries. Our review of MID
inspection reports showed a wide range of reporting formats as well as
inconsistent information included in the various report sections. For
example, while accompanying MID inspectors to various ports of entry, we
asked three MID field directors where in their subsequent reports they would
place shortcomings they might find with worksheet questions. Each field
director gave us a different section of the report where they would report
the findings.
MID identified the problem and has recently developed a draft standard
operating procedure and format for its verification and validation
inspection reports. After consultation with its field directors, MID will
finalize the report format, which is to standardize identification of
national issues, recommendations, and best practices sections. According to
the MID Director, standardizing MID inspection reports should make it much
easier to track national trends and subsequent corrective actions, as well
as to identify and disseminate best practices among the various Customs?
entities. MID Is Revising its
Inspection Report Format
Page 17 GAO- 01- 676 Customs Self- Inspection Program Implementation
A final area where progress is being made is developing and implementing a
computerized self- inspection reporting system, SIRS. SIRS should make it
easier to record and analyze SIP data and track nationwide trends and
corrective actions. An important part of the system is operational but the
remaining components are under software development or have not yet entered
the development process. With the completion of the first component, the
results of each SIP worksheet, including corrective actions and
certifications, may be entered into SIRS via a personal computer. However,
the SIRS component that will allow analyses of SIP data to identify
regional, national, and systemic issues is currently being developed with an
expected rollout date in August 2001.
The final SIRS component, which is not yet under development, is intended to
allow MID to track whether corrective actions from MID inspection reports
have been taken. MID officials told us that they are unsure when this final
component will be available, but they believe it will be early in 2002.
Completion of all SIRS components is critical to achieving the full
potential of SIP in identifying overall problems and trends and
institutionalizing solutions, according to the MID officials.
SIP is a work in progress; a program under continuous change and refinement.
Although many managers recognized that SIP enables them to obtain more
control over the activities that they oversee, many also view it as somewhat
burdensome and time- consuming. These and other implementation concerns have
been identified and addressed as SIP enters its third full year of operation
and completes its fourth self- inspection cycle. Several projects are
underway which should contribute to a more streamlined, effective, and less
burdensome program. Until SIRS is fully implemented, however, it will be
difficult to determine the full extent of the program?s impact on
identifying problems and trends and institutionalizing corrective actions.
One primary benefit of self- inspection is that as activities are reviewed
and results certified as accurate, management should have confidence that
problems are being identified and corrected at the local level. This is not
the case, however, if worksheet guidance is insufficient and instructions
are unclear. Because of inadequate guidance, inaccurate and incomplete self-
inspection results can and do occur, reducing the credibility of the
program. More can be done to ensure that all worksheets contain complete and
clear guidance and instructions for making determinations such as sampling
sizes and timeframes. Clarifying and refining all worksheet guidance and
instructions will not only assist managers and An Automated Self
Inspection Reporting System Is Being Implemented
Conclusions
Page 18 GAO- 01- 676 Customs Self- Inspection Program Implementation
supervisors in conducting self- inspections, but will also provide approving
officials and MID inspectors with a clear set of criteria for determining
whether self- inspections were done correctly and completely. This could go
a long way toward ensuring that the self- inspection program meets its goals
of building accountability and fostering integrity throughout the agency.
To help improve SIP, we recommend that the Acting Commissioner of Customs
direct the Management Inspections Division Director to review all worksheets
and provide clear guidance for
proper documentation to support worksheet answers and
determining the universe of activity to include in the self- inspection
and the appropriate sample size, if required.
We requested comments on a draft of this report from the Acting Commissioner
of Customs or his designee. On May 22, 2001, the Director, Office of
Planning, provided us with written comments, which are reprinted in appendix
I. The Director said that most of Customs? concerns relating to the report
had been addressed through discussions with our audit team during the
engagement. The Director also said that Customs will shortly be implementing
an action plan to fully address our recommendation.
We will send copies of this report to Senator Max Baucus, Ranking Member of
the Senate Committee on Finance; Representative Charles Rangel, Ranking
Minority Member of the House Ways and Means Committee; and Representative
Sander Levin, Ranking Minority Member of the House Ways and Means
Subcommittee on Trade. In addition, we are providing copies to the Honorable
Paul H. O?Neill, the Secretary of the Treasury; Charles W. Winwood, the
Acting Commissioner of Customs; and other interested parties. Copies of this
report also will be made available to others upon request. This report will
also be available on GAO?s homepage at http:// www. gao. gov. Recommendation
for
Executive Action Agency Comments
Page 19 GAO- 01- 676 Customs Self- Inspection Program Implementation
The major contributors to this report are acknowledged in appendix II. If
you or your staff have any questions about the information in this report,
please contact me on (202) 512- 8777 or Darryl W. Dutton on (213) 8301000.
Richard M. Stana Director, Justice Issues
Appendix I: Comments From the U. S. Customs Service
Page 20 GAO- 01- 676 Customs Self- Inspection Program Implementation
Appendix I: Comments From the U. S. Customs Service
Appendix II: GAO Contacts and Staff Acknowledgments
Page 21 GAO- 01- 676 Customs Self- Inspection Program Implementation
Richard M. Stana, (202) 512- 8777 Darryl W. Dutton, (213) 830- 1000
Cheryl L. Gordon Samuel S. Van Wagner Andrew J. Von Ah Michele C. Fejfar
Bethany L. Letiecq Appendix II: GAO Contacts and Staff
Acknowledgments GAO Contacts Acknowledgments
(264463)
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