Customs Service Modernization: Results of Review of First	 
Automated Commercial Environment Expenditure Plan (05-JUN-01,	 
GAO-01-696).							 
								 
This report discusses the U.S. Custom Service's expenditure plan 
for its Automated Commercial Environment System (ACE). GAO found 
that (1) Customs' expenditure plan satisfies the legislative	 
conditions specified in the 2001 Consolidated Appropriations Act,
(2) activities described in the plan are consistent with GAO's	 
two open recommendations regarding the need for Customs to	 
justify and make ACE investment decisions incrementally and	 
strengthen ACE software acquisition management, and (3) there are
two areas needing improvement. Customs has not adequately	 
justified investing in the International Trade Data System (ITDS)
pilot project in parallel with, and separate from, planned ITDS  
efforts under ACE modernization. Also, Customs has defined	 
conflicting roles and responsibilities for its independent	 
verification and validation (IV&V) contractor.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-696 					        
    ACCNO:   A01114						        
  TITLE:     Customs Service Modernization: Results of Review of First
             Automated Commercial Environment Expenditure Plan                
     DATE:   06/05/2001 
  SUBJECT:   Customs administration				 
	     Management information systems			 
	     Information resources management			 
	     Systems conversions				 
	     ADP procurement					 
	     Customs Service Automated Commercial		 
	     Environment System 				 								 
	     Customs Service International Trade Data		 
	     System						 
								 

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GAO-01-696
     
A

Report to Congressional Committees

June 2001 CUSTOMS SERVICE MODERNIZATION

Results of Review of First Automated Commercial Environment Expenditure Plan

GAO- 01- 696

June 5, 2001 The Honorable Ben Nighthorse Campbell Chairman The Honorable
Byron L. Dorgan Ranking Member Subcommittee on Treasury and General
Government Committee on Appropriations United States Senate

The Honorable Ernest J. Istook Chairman The Honorable Steny H. Hoyer Ranking
Minority Member Subcommittee on Treasury, Postal Service, and General
Government Committee on Appropriations

House of Representatives Pursuant to the U. S. Customs Service?s fiscal year
2001 appropriation, 1 Customs submitted to the Congress in March 2001 its
first expenditure plan, requesting $45 million for its Automated Commercial
Environment

(ACE). ACE is intended to be Customs? new import processing system and the
first project under the Customs Modernization Program. As required by the
act, we reviewed the expenditure plan. Our objectives were to (1) determine
whether the plan satisfied the legislative conditions specified

in the act, (2) determine whether the plan is consistent with our open
recommendations, and (3) provide any other observations about the
expenditure plan and Customs? modernization.

On April 23, 2001, we briefed your offices on the results of this review.
This report officially transmits the results of our work and our
recommendations to the Commissioner of Customs. The full briefing, including
our scope and methodology, is reprinted as appendix I. In summary, we made
three major points:

 First, Customs? expenditure plan satisfies the legislative conditions
specified in the appropriations act, including (1) meeting the Office of 1
The Consolidated Appropriations Act, 2001 (Public Law 106- 554, dated
December 21, 2000).

Management and Budget?s (OMB) capital planning and investment control review
requirements; (2) complying with Customs? enterprise architecture; 2 (3)
complying with federal acquisition rules,

requirements, guidelines, and systems acquisition management practices; and
(4) being reviewed by the Customs Investment Review Board, 3 Treasury, and
OMB.  Second, activities described in the plan are consistent with our two
open

recommendations regarding the need for Customs to (1) justify and make ACE
investment decisions incrementally and (2) strengthen ACE software
acquisition management.  Third, we observed two areas needing improvement.
One, Customs has

not adequately justified investing in the International Trade Data System
(ITDS) 4 pilot project in parallel with, and separate from, planned ITDS
efforts under the ACE modernization. Two, Customs has defined conflicting
roles and responsibilities for its independent verification and validation
(IV& V) 5 contractor.

Recommendations for To improve Customs? ACE modernization management, we
recommend

Executive Action that the Commissioner of the U. S. Customs Service direct
the Chief Information Officer, as the modernization executive, to

 immediately transfer responsibility and accountability for the ITDS pilot
to the ACE modernization program manager;  include any plans for further
investing in the ITDS pilot, including cost,

benefit, and risk justification, in the next ACE expenditure plan; and 
clarify the ACE modernization IV& V agent?s roles and responsibilities to

ensure that independence is not compromised. 2 An enterprise architecture
establishes the roadmap to achieving an agency?s mission through optimal
performance of its core business processes within an efficient information
technology environment. 3 Customs? Investment Review Board makes information
technology funding decisions on the basis of comparisons and trade- offs
among competing project proposals.

4 ITDS is a system that Customs is acquiring for the governmentwide
collection, use, and dissemination of trade data. 5 The purpose of
independent verification and validation (IV& V) is to provide an independent
review of system processes and products. The use of IV& V is a recognized
best practice for large and complex systems development and acquisition
projects. To be effective, IV& V must be performed by an entity that is
independent of the processes and products that are being reviewed.

Agency Comments In commenting on a draft of this report, the Director,
Office of Planning, U. S. Customs Service agreed with our findings and
recommendations. The

Director?s written comments are reprinted in appendix II. We are sending
copies of this report to Senator Charles E. Grassley, Chairman, and Senator
Max Baucus, Ranking Member, Senate Committee on Finance; and Representative
William M. Thomas, Chairman, and Representative Charles B. Rangel, Ranking
Minority Member, House Committee on Ways and Means. We are also sending
copies of this report to the Honorable Paul H. O?Neill, Secretary of the
Treasury; the Honorable Charles W. Winwood, Acting Commissioner of the U. S.
Customs Service;

and the Honorable Mitchell E. Daniels Jr., Director of OMB. Should you or
your staff have any questions on matters discussed in this report, please
contact me at (202) 512- 3439. I can also be reached by e- mail at HiteR@
gao. gov. Key contributors to this report were Mark Bird, Madhav

Panwar, Jamelyn Smith, and Aaron Thorne. Randolph C. Hite Director,
Information Technology Systems Issues

Appendi xes Results of Review of Customs? First Automated Commercial
Environment (ACE)

Appendi x I

Expenditure Plan Results of Review of Customs? First Automated Commercial
Environment (ACE) Expenditure Plan

Briefing to Staffs of the Subcommittee on Treasury and General Government

Senate Committee on Appropriations and Subcommittee on Treasury, Postal
Service,

and General Government House Committee on Appropriations

April 23, 2001 1

Briefing Overview

 Introduction

 Objectives

 Scope and Methodology

 Background

 Results in Brief

 Results

 Conclusions

 Recommendations for Executive Action

 Appendix I 2

Introduction

 The Automated Commercial Environment (ACE) is intended to be Customs? new
import processing system.

 In February 1999 we reported 1 that ACE suffered from serious management
weaknesses, such as inadequate economic justification for investing in the
proposed system solution and ineffective software management processes, and
we recommended that Customs

 rigorously analyze alternative approaches to building ACE, including
satisfying some ACE requirements through Treasury?s International Trade Data
System (ITDS); 2

 justify and make ACE investment decisions incrementally; and

 strengthen ACE software acquisition management. 1 Customs Service
Modernization: Serious Management and Technical Weaknesses Must Be Corrected
(GAO/ AIMD- 99- 41, February 26, 1999). 2 At the time of our report, ITDS
was a system that Treasury was acquiring for the governmentwide collection,
use and dissemination of trade data.

3 Since then, responsibility for ITDS was transferred to Customs.

Introduction (cont?d.)

 In response, Customs? FY 2001 appropriations act (Public Law 106- 554)
provided $130 million for ACE, but stated that these funds may not be
obligated until Customs submits to the Congress for approval an ACE
expenditure plan that

 meets OMB capital planning and investment control review requirements;

 complies with the Customs Service?s enterprise architecture;

 complies with federal acquisition rules, requirements, guidelines, and
systems acquisition management practices;

 is reviewed and approved by the Customs Investment Review Board (IRB),
Treasury, and OMB; and

 is reviewed by GAO.

 Consistent with our open recommendation for incrementally investing in
ACE, Customs plans to submit a series of expenditure plans seeking release
of funds to acquire ACE.

4

Introduction (cont?d.)

 On March 5 and 6, 2001, the House and Senate subcommittees, respectively,
released to Customs $5 million in stopgap funding to sustain program
activities until Customs submitted its first expenditure plan.

 On March 26, 2001, Customs submitted its first expenditure plan to its
House and Senate appropriations subcommittees seeking release of $45 million
from the ACE appropriation.

5

Introduction (cont?d.)

Customs Fiscal Year 2001 ACE Appropriation - $130 Million

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