Federal Firearms Licensee Data: ATF's Compliance with Statutory
Restrictions (Letter Report, 09/11/96, GAO/GGD-96-174).

Pursuant to a congressional request, GAO reviewed various aspects of the
Bureau of Alcohol, Tobacco, and Firearms' ((ATF) operations, focusing on
ATF compliance in meeting specific legislative restrictions regarding
federal firearms licensee data.

GAO found that: (1) there are 14 national data systems and 4 subsystems
that contain data on firearms transactions; (2) five of the systems and
one of the subsystems contain data that identify retail purchasers of
specific firearms; (3) these systems play a significant role in the
firearms tracing process, contain data obtained from nonlaw enforcement
sources, and involve large numbers of records on firearms transactions
and purchasers; (4) the Out-of-Business Records System contains the
serial number of the firearm and the federal firearms licensee number,
but does not store firearms purchasers' names or other information; (5)
the Multiple Sales System contains data on sales of two or more pistols
or revolvers to an unlicensed person at one time or during any 5
consecutive business days; (6) ATF has adopted a requirement that allows
the name and other identifying information of a multiple sales purchaser
to be purged from the system after 2 years, but it has not fully
implemented the requirement; (7) the Out-of-Business Records System and
the Multiple Sales System comply with the data restrictions, since they
predate the Firearms Owners' Protection Act; (8) the two systems also
comply with the appropriation rider prohibition, which prohibits ATF
from consolidating or centralizing licensee records; (9) the
appropriation rider should be interpreted in the context of other
statutory provisions governing ATF acquisition and information gathering
operations; and (10) ATF has not systematically analyzed its data
systems and information practices to give appropriate effect to the
appropriation rider.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-96-174
     TITLE:  Federal Firearms Licensee Data: ATF's Compliance with 
             Statutory Restrictions
      DATE:  09/11/96
   SUBJECT:  Firearms
             Gun control law
             Law enforcement agencies
             Licenses
             Data bases
             Information resources management
             Appropriation limitations
             Statutory law
IDENTIFIER:  BATF Out-of-Business Records System
             BATF Multiple Sales System
             BATF Firearms Tracking System
             BATF National Firearms Act Database
             BATF Project Lead
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Treasury, Postal Service, and
General Government, Committee on Appropriations, House of
Representatives

September 1996

FEDERAL FIREARMS LICENSEE DATA -
ATF'S COMPLIANCE WITH STATUTORY
RESTRICTIONS

GAO/GGD-96-174

ATF Compliance with Firearms Licensee Data Restrictions

(187015)


Abbreviations
=============================================================== ABBREV

  ATF - Bureau of Alcohol, Tobacco and Firearms
  FOPA - Firearms Owners' Protection Act
  RACF - Resource Access and Control Facility
  TECS - Treasury Enforcement Communications System

Letter
=============================================================== LETTER


B-272242

September 11, 1996

The Honorable Jim Lightfoot
Chairman, Subcommittee on Treasury,
 Postal Service, and General Government
Committee on Appropriations
House of Representatives

Dear Mr.  Chairman: 

Your August 2, 1995, letter requested that we review various aspects
of the Bureau of Alcohol, Tobacco and Firearms' (ATF) operations. 
This report, the last in a series,\1 responds to your request that we
review ATF's compliance with legislative restrictions on maintaining
certain federal firearms licensee\2

data.  You requested this review because of concerns that ATF may not
have been complying with the legislative restrictions on centralizing
and consolidating data from federal firearms licensee records. 

Specifically, we agreed to (1) identify and describe the ATF data
systems that contain retail firearms purchaser data and (2) determine
whether ATF's Out-of-Business Records System and Multiple Sales
System\3 comply with the legislative data restrictions.  In addition,
we agreed to assess ATF's overall legal interpretation of the data
restrictions.  In April 1996, we testified on several issues before
your Subcommittee, including our findings related to ATF's
Out-of-Business Records System's compliance with the data
restrictions.\4 Those findings are included in this report. 


--------------------
\1 On March 29, 1996, we issued the following reports in connection
with the Subcommittee's request--Use-of-Force:  ATF Policy, Training
and Review Process Are Comparable to DEA's and FBI's (GAO/GGD-96-17)
and Federal Firearms Licensees:  Various Factors Have Contributed to
the Decline in the Number of Dealers (GAO/GGD-96-78). 

\2 ATF issues various categories of federal firearms licenses,
including those for manufacturers, importers, and dealers of
firearms.  Firearms dealer licenses are granted to dealers and
pawnbrokers who sell firearms at wholesale or retail and gunsmiths
who repair firearms.  Federal firearms dealer licensees account for
about 90 percent of all federal firearms licensees. 

\3 The data system containing multiple sale report data is a
subsystem of ATF's Firearms Tracing System.  However, in this report
it will be referred to as the Multiple Sales System, unless
specifically noted otherwise. 

\4 Alcohol, Tobacco and Firearms:  Issues Related to Use of Force,
Dealer Licensing, and Data Restrictions (GAO/T-GGD-96-104, Apr.  25,
1996). 


   BACKGROUND
------------------------------------------------------------ Letter :1

ATF, a criminal and regulatory enforcement agency within the
Department of the Treasury, is responsible for providing industry
regulation; collecting revenue; and enforcing federal statutes
regarding firearms, explosives, alcohol, tobacco, and arson.  A
critical component of ATF's criminal enforcement mission is the
tracing of firearms used in crimes to identify the last known
purchaser of a firearm.  To accomplish its criminal enforcement
responsibilities, ATF has 22 field divisions, headed by special
agents in charge, located throughout the United States.\5

To efficiently and effectively carry out its enforcement
responsibilities, ATF maintains certain computerized information on
firearms and firearms purchasers.  Over the years, Congress has tried
to balance the law enforcement need for this information with the
competing interest of protecting the privacy of firearms owners.  To
achieve this balance, Congress has required federal firearms
licensees to provide ATF certain information about firearms
transactions and the ownership of firearms while placing restrictions
on ATF's maintenance and use of such data. 

The Gun Control Act of 1968, as amended, established a system
requiring federal firearms licensees to record firearms transactions,
maintain that information at their business premises, and make these
records available to ATF for inspection and search under certain
prescribed circumstances.\6 The system was intended to permit law
enforcement officials to trace firearms involved in crimes while
allowing the records themselves to be maintained by the licensees
rather than by a governmental entity.  Through the use of these
records,\7 ATF provides firearms tracing services to federal, state,
local, and foreign law enforcement agencies.  To carry out its
firearms tracing responsibilities, ATF maintains a firearms tracing
operation at the National Tracing Center in Falling Waters, West
Virginia.  The Center traces firearms suspected of being involved in
crimes to the last known purchaser to assist law enforcement in
identifying suspects.  Appendix II provides a detailed description
and flowchart of ATF's tracing operation. 

Since the passage of the Gun Control Act, Congress has enacted two
provisions that place restrictions on ATF's handling of federal
firearms licensee records.  Since fiscal year 1979, the annual
Treasury appropriation act generally has prohibited ATF from using
appropriated funds in connection with consolidating or centralizing
the records of acquisition and disposition of firearms maintained by
federal firearms licensees.\8

In addition, a provision of the Firearms Owners' Protection Act of
1986 (P.L.  99-308, 100 Stat.  449 (May 19, 1986)), codified at 18
U.S.C.  926(a), prohibits ATF from issuing any rule or regulation,
after the date of that act, requiring that (1) firearms licensee
records (or any portion of the contents of the records) be recorded
at or transferred to a facility owned, managed, or controlled by the
United States or any state or any political subdivision thereof or
(2) any system of registration of firearms, firearms owners, or
firearms transactions or dispositions be established.  Further,
section 926(a) provides that ATF's authority to inquire into the
disposition of a firearm during a criminal investigation is not
restricted or expanded by this section.  The act also limited ATF's
authority to require reports from licensees to those specified by
statute and codified several reporting requirements that ATF had
previously imposed on licensees by regulation, including those
related to out-of-business licensee records and reports of multiple
handgun (pistols and/or revolvers) sales.\9


--------------------
\5 To carry out its regulatory responsibilities, ATF has its Firearms
and Explosives Licensing Center in Atlanta as well as 5 district
offices, headed by a district director, and within them 37 area
offices, headed by an area supervisor. 

\6 P.L.  90-618, 82 Stat.  1213 (Oct.  22, 1968). 

\7 These records include an acquisition and disposition logbook and
Firearms Transaction Records (ATF Form 4473), which include, among
other things, the name of the purchaser, the type of firearm
purchased, and the firearm model and serial number. 

\8 In 1978, under the general authority provided for in the Gun
Control Act of 1968, ATF proposed additional reporting requirements
that would have required firearms licensees to report virtually all
of their firearms transactions to ATF on a quarterly basis (43 Fed. 
Reg.  11,800 (Mar.  21, 1978)).  To prevent the final issuance of
these regulations, Congress passed a fiscal year 1979 appropriation
restriction that prohibited ATF from "consolidating or centralizing
within the Department of the Treasury the records of receipt and
disposition of firearms maintained by Federal firearms licensees" or
"issuing or carrying out any provisions" of the proposed regulations. 
P.L.  95-429, 92 Stat.  1002 (Oct.  10, 1978).  Congress has passed a
similar restriction in each ATF appropriation since fiscal year 1979. 
In fiscal year 1994, the rider was expanded to prohibit the
consolidation or centralization of "any portion" of these records. 
P.L.  103-123, 107 Stat.  1229 (Oct.  28, 1993).  In the same fiscal
year, the reference to the 1978 proposed rules was dropped. 

\9 See 18 U.S.C.  923(g).  As originally enacted, the Gun Control Act
required licensees to submit such reports and information as the
Secretary of the Treasury prescribed by regulation and authorized the
Secretary to prescribe such rules and regulations as he deemed
reasonably necessary to carry out the provisions of the act.  See 18
U.S.C.  923(g) and 926 (1976 ed.). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

ATF identified and described for us 14 national data systems and 4
subsystems that relate to firearms.  According to ATF, five systems
and one subsystem contain data that readily identify retail
purchasers or possessors of specific firearms.  We reviewed in detail
the Out-of-Business Records and Multiple Sales Systems.  These
systems (1) play a significant role in the firearms tracing process,
(2) contain data obtained from nonlaw enforcement sources, and (3)
involve large numbers of records and reports containing data on
firearms transactions and purchasers. 

The Out-of-Business Records System contains records that federal
firearms licensees are required by statute to forward to ATF within
30 days following a permanent discontinuance of their business.  The
National Tracing Center microfilms and indexes these records to
facilitate locating them for firearms tracing purposes.  The
computerized index contains such information as the serial number of
the firearm and the federal firearms licensee number but does not
capture and store firearms purchasers' names or other identifying
information into an automated file.  This information remains stored
on microfilm. 

The Multiple Sales System contains data from reports that federal
firearms licensees are required by statute to send to ATF showing
sales or other dispositions of two or more pistols and/or revolvers
to an unlicensed person at one time or during any 5 consecutive
business days.  In November 1995, ATF initiated a new policy on
multiple sale reports and began computerizing at the Tracing Center
the information contained in the reports, including firearms
purchaser information.  As part of this new policy, ATF adopted a
requirement for purging from the system after 2 years the names of,
and other identifying information on, multiple sale purchasers whose
firearms have not been identified in a trace. 

We determined that the Out-of-Business Records System and the
Multiple Sales System, as designed, comply with the data
restrictions.  With regard to 18 U.S.C.  926(a), this restriction
applies to certain rules or regulations issued after the effective
date of the Firearms Owners' Protection Act that require the
recording at or transferring of firearms licensee records to a
government facility or the establishment of a registry of firearms,
firearms owners, or firearms transactions or dispositions.  At the
same time it enacted the section 926(a) restriction, Congress
codified the then-existing regulatory requirements that licensees
forward out-of-business records and multiple sale reports to ATF. 
The current regulatory requirements concerning these records and
reports do not violate section 926 because they predate the Firearms
Owners' Protection Act and thus are not subject to section 926(a). 

We also determined that the two systems do not violate the
appropriation rider prohibition against consolidating or centralizing
licensee records.  The regulatory requirements that licensees send
these records and reports to ATF existed before the appropriation
rider was first passed for fiscal year 1979, and there is no
indication in the legislative history that the rider was intended to
overturn ATF's existing practices concerning the acquisition or use
of licensee information.  Moreover, the Firearms Owners' Protection
Act gave ATF specific statutory authority to collect these records
and reports.  The legislative history of the act indicates that
Congress considered placing constraints on ATF's maintenance of these
records and reports, but did not do so.  Lastly, Congress has
appropriated funds related to these systems. 

In addition, on the basis of our review, observations, and
discussions with ATF officials, we believe that ATF operated the two
systems consistently with their design, with one exception relating
to the Multiple Sales System.  Specifically, ATF had not fully
implemented its 2-year purge requirement, which it subsequently
informed us that it had taken action to correct. 

Concerning ATF's overall legal interpretation of the data
restrictions, we agree with ATF's view of section 926(a), but we
believe that its interpretation of the annual appropriation rider was
too narrow.  ATF contended that both section 926(a) and the
appropriation rider restricted it from issuing rules and regulations
imposing additional reporting requirements on licensees but did not
restrict what it did internally with information it otherwise
acquired. 

We agree that the restriction in section 926(a) limits ATF only from
prescribing certain rules or regulations.  The appropriation rider,
however, contains no language that would limit its application either
to prescribing rules and regulations or to imposing additional
reporting requirements on licensees.  We believe that the rider has
legal effect independent of section 926.  Congress enacted it for a
number of years predating the Firearms Owners' Protection Act and has
continued to enact it for each subsequent year.  In our view, ATF's
interpretation that the appropriation rider applied only to the
issuance of rules and regulations that impose additional reporting
requirements on licensees, and did not reach ATF's internal
information practices, was not supported by the statutory language or
legislative history of the rider. 

However, we do not believe that the rider precludes all information
practices and data systems that involve an element of "consolidating
or centralizing" licensee records.  The legislative history of the
rider indicates that it was originally enacted in response to an ATF
proposal that was viewed as a wholesale aggregation of licensee
firearms transaction records that went beyond the intent of Congress
when it enacted the Gun Control Act of 1968.  In our view, the rider
must be interpreted in light of its purpose and in the context of the
other statutory provisions governing ATF's acquisition and use of
information contained in the Gun Control Act, as amended. 

Pursuant to the Gun Control Act, ATF is responsible for certain
regulatory and law enforcement functions.  The act, as amended,
contains specific statutory authorities that allow ATF to obtain
certain firearms transaction information from licensees.  To
implement these responsibilities and authorities, ATF necessarily
gathers specific firearms transaction data, and must centralize or
consolidate the data to some degree.  However, the Firearms Owners'
Protection Act, and its legislative history, indicate a clear
congressional concern that a registry of firearms, firearms owners,
or firearms transactions or dispositions not be established. 

Therefore, to the extent that the centralization or consolidation of
firearms transaction records is incident to carrying out a specific
ATF responsibility and does not entail the aggregation of data on
firearms transactions in a manner that would go beyond the purposes
of the Gun Control Act of 1968, as amended, we do not believe that
the rider would be violated. 

Given its legal position on the limited scope of the rider, ATF had
not systematically analyzed its data systems and information
practices to give appropriate effect to the appropriation rider.  In
response to a draft of this report, ATF stated that it (1) adopted
our broader interpretation of the rider, as summarized above and
discussed later, (2) had applied it to a legal review of the systems
listed in appendix IV that we did not review, and (3) is committed to
applying it to any record systems it establishes in the future.  ATF
concluded that the systems it reviewed, as described, were in
compliance with the appropriation rider under the revised
interpretation.  However, ATF did not determine whether the systems
were actually operating as described, as we did for the
Out-of-Business Records and the Multiple Sales Systems. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To address our objectives, we reviewed ATF documents and data and
discussed ATF policies and operations with agency officials.  We
obtained from ATF officials descriptions of national data systems
that ATF officials determined were related to firearms, including
those that contained retail firearms purchaser data.  Although we
reviewed the descriptive data provided by ATF on the firearms-related
data systems, with the exception of the Out-of-Business Records and
the Multiple Sales Systems, we did not verify whether these or any
other ATF data systems contained retail firearms purchaser data or
observe system operations.  We reviewed relevant laws and ATF
regulations, legal opinions, and documents relating to ATF's firearms
tracing, out-of-business records, and multiple sale reports
processing operations.  We also observed and conducted some tests of
these operations and discussed them with officials at ATF's National
Tracing Center.  We did not review ATF's other systems for compliance
with the data restrictions.  With regard to the Out-of-Business
Records and Multiple Sales Systems, we did not review their
compliance with other statutory requirements, such as the Privacy Act
and the Computer Security Act. 

We reviewed relevant laws and ATF regulations, legal opinions, and
other documents concerning the data restrictions.  We discussed ATF's
legal interpretation of the data restrictions with ATF's Associate
Chief Counsel (Firearms and Explosives) and other headquarters and
Tracing Center officials.  Appendix I contains a detailed discussion
of our objectives, scope, and methodology. 

We did our work at ATF's headquarters in Washington, D.C., and
National Tracing Center in Falling Waters, West Virginia, from August
1995 through July 1996 in accordance with generally accepted
government auditing standards.  We obtained comments on a draft of
this report from ATF.  These comments are discussed at the end of
this letter and are reprinted in appendix IX.  ATF officials also
provided some technical comments, which we incorporated where
appropriate. 


   ATF HAS SEVERAL NATIONWIDE
   COMPUTER SYSTEMS THAT CONTAIN
   RETAIL FIREARMS PURCHASER DATA
------------------------------------------------------------ Letter :4

ATF collects and maintains data from the firearms industry to carry
out its criminal and regulatory enforcement responsibilities more
efficiently and effectively.  ATF's criminal enforcement
responsibilities include investigating firearms-related crimes and
tracing firearms used in crimes, and its regulatory responsibilities
include regulating the manufacture and importation of firearms and
licensing firearms dealers.  ATF has established national data
systems to maintain the data it collects from the firearms industry,
including federal firearms licensees. 

To identify ATF national data systems that contain retail firearms
purchaser data, we requested from ATF a description of its national
data systems that relate to firearms.  ATF identified and provided
documentation on 14 national data systems and 4 subsystems relating
to firearms.  Appendix III provides a brief description of these
systems and subsystems. 

ATF indicated that five systems and one subsystem contain retail
firearms purchaser data.\10 These are the (1) Firearms Tracing System
and one of its three subsystems--the system dealing with multiple
sale reports; (2) Firearms Tracking System; (3) Project Lead; (4)
Out-of-Business Records System; and (5) National Firearms Act
Database.  Appendix IV provides a detailed description of the five
systems and one subsystem. 

We reviewed the descriptive information provided by ATF to determine
whether we agreed with its categorization of the data systems and
subsystems.  On the basis of that review and follow-up discussions
with ATF officials, ATF recategorized several of the systems and
subsystems.  On the basis of the information provided by ATF, we
agreed with its categorization of its data systems as presented in
appendixes III and IV. 


--------------------
\10 An ATF official told us that he based his determination of
whether the ATF data systems contained retail firearms purchaser data
on the systems' ability to readily identify a retail purchaser or
possessor of a specific firearm. 


   ATF'S OUT-OF-BUSINESS RECORDS
   AND MULTIPLE SALES SYSTEMS
   COMPLY WITH LEGISLATIVE
   RESTRICTIONS
------------------------------------------------------------ Letter :5

The Out-of-Business Records and Multiple Sales Systems, as designed,
comply with the legislative data restrictions.  Also, on the basis of
our review, observations, and discussions with ATF officials, we
believe that ATF operates the systems consistently with their design,
with one exception relating to the purging of data from the Multiple
Sales System, which ATF subsequently informed us it had taken action
to correct. 


      OUT-OF-BUSINESS RECORDS
      SYSTEM
---------------------------------------------------------- Letter :5.1

Shortly after the passage of the Gun Control Act of 1968, ATF issued
regulations requiring federal firearms licensees who permanently
discontinued their businesses to forward their transaction records to
ATF within 30 days following the discontinuance.  This ensured that
ATF had access to these records for its tracing operation.  In 1986,
the Firearms Owners' Protection Act codified this regulatory
reporting requirement.\11 Accordingly, since the enactment of the Gun
Control Act, ATF has maintained the out-of-business records at a
central location, currently the National Tracing Center. 

Before fiscal year 1991, ATF maintained these records in hard copy in
boxes, with a file number assigned to each firearms licensee.  If ATF
determined during a trace that a firearm had been sold by a firearms
licensee who was out of business and had sent in its records, an ATF
employee was to locate the boxes containing the records and manually
search them for the appropriate serial number.  According to ATF,
this was a time-consuming and labor-intensive process, which also
created storage problems for ATF. 

In 1991, ATF began a major project to microfilm these records and
destroy the originals.  In fiscal year 1992, ATF began using a
minicomputer to create a computerized index of the microfilm records
containing the information necessary to identify whether ATF had a
record relating to a firearm being traced.  The index contains the
following information:  (1) the cartridge number of the microfilm;
(2) an index number; (3) the serial number of the firearm; (4) the
federal firearms licensee number; and (5) the type of document on
microfilm, i.e., a Firearms Transaction Record (ATF Form 4473) or
acquisition and disposition logbook pages.  The index information
that is entered into the minicomputer is stored on a database in
ATF's mainframe computer to allow searches of the index information. 
The other information, including the firearms purchaser's name or
other identifying information and the firearms manufacturer, type,
and model, remains stored on microfilm cartridges and is not
computerized.  Appendix V provides a more detailed description of the
Out-of-Business Records System along with pertinent statistical data. 

We believe that ATF's current Out-of-Business Records System complies
with the data restrictions.  With regard to 18 U.S.C.  926(a), as
discussed earlier, it prohibits ATF from prescribing certain rules or
regulations after the date of enactment of the Firearms Owners'
Protection Act.  At the same time it added the section 926(a)
restriction, Congress codified at 18 U.S.C.  923(g)(4) the
then-existing regulatory requirement that licensees who permanently
go out of business send their records to ATF.  ATF's current
regulatory requirement concerning the out-of-business records
predates the Firearms Owners' Protection Act, and is thus not subject
to section 926(a).\12

With regard to the annual appropriation rider, in our view, the
Out-of-Business Records System does not violate the general
prohibition on "consolidation or centralization" of firearms
acquisition and disposition records.  The regulatory requirement that
licensees send these records to ATF existed before the appropriation
rider was first passed for fiscal year 1979, and there is no
indication in the legislative history that the rider was intended to
overturn ATF's existing practices concerning the acquisition or use
of licensee information.  According to ATF, the out-of-business
records historically have been maintained at a central location. 

Moreover, the Firearms Owners' Protection Act provided ATF with
specific statutory authority to collect these records.  In the
legislative history of the act, there is evidence that Congress
considered placing constraints on ATF's maintenance of
out-of-business records, but did not do so.  The Senate-passed
version of the act prohibited the Secretary of the Treasury from
maintaining out-of-business records at a centralized location and
from entering them into a computer for storage or retrieval.\13 This
restrictive provision was dropped from the version of the bill
enacted by Congress. 

Lastly, in fiscal year 1992, Congress appropriated $650,000 "for
improvement of information retrieval systems at the National Firearms
Tracing Center."\14 These funds were for the microfilming of the
out-of-business records.  For fiscal year 1995, Congress appropriated
funds for the President's firearms initiative, which included a
request for funding of the Out-of-Business Records System.\15
Congress provided these funds in the same legislation that contained
the rider restricting consolidation and centralization of licensee
records.  According to ATF, the system solved storage and trace
timing problems, thereby enhancing ATF's tracing capabilities.  At
the same time, the system does not computerize certain key
information, such as firearms purchaser information.  In conclusion,
we believe that the system for maintaining the out-of-business
records does not violate either data restriction provision.  (Our
legal analysis of the Out-of-Business Records System is contained in
app.  VIII.)

Furthermore, on the basis of our review of the Out-of-Business
Records System documentation provided by ATF, our discussions with
ATF officials, and our observation of the out-of-business records
process, we believe that ATF was operating the system in a manner
consistent with the way it was designed by ATF.  During a visit to
the Tracing Center, we observed that the Out-of-Business Records
System does not permit the operator to enter the name or other
identifying information of any firearm purchaser, or the type or
model of any firearm.  Thus, we found no evidence that ATF captures
and stores firearms purchasers' names or other identifying
information from the out-of-business records in an automated file. 


--------------------
\11 See 18 U.S.C.  923(g)(4).  The provision states, "[W]here a
firearms or ammunition business is discontinued and succeeded by a
new licensee, the records required to be kept by this chapter shall
appropriately reflect such facts and shall be delivered to the
successor.  Where discontinuance of the business is absolute, such
records shall be delivered within thirty days after the business
discontinuance to the Secretary [of the Treasury].  However, where
State law or local ordinance requires the delivery of records to
other responsible authority, the Secretary may arrange for the
delivery of such records to such other responsible authority."

\12 While some revisions have been made since the enactment of the
Firearms Owners' Protection Act, these revisions do not expand the
scope of the regulation.  See 27 C.F.R.  178.127 (1995). 

\13 S.  49, 99th Cong., 1st Sess.  (1985). 

\14 P.L.  102-141, 105 Stat.  836 (Oct.  28, 1991). 

\15 P.L.  103-329, 108 Stat.  2384 (Sept.  30, 1994); see S.  Rep. 
No.  103-286, 103d Cong., 2d Sess.  at 19 (1994). 


      MULTIPLE SALES SYSTEM
---------------------------------------------------------- Letter :5.2

Since 1975, federal firearms licensees have been required by
regulation\16 and subsequently by law\17 to report all transactions
in which an unlicensed person\18 has acquired two or more pistols
and/or revolvers at one time or during any 5 consecutive business
days (called a multiple sale).  The purpose of the multiple sale
reporting requirement regulation was to enable ATF to "monitor and
deter illegal interstate commerce in pistols and revolvers by
unlicensed persons."\19 According to ATF, that purpose has remained
unchanged since 1975. 

In an August 1993 memorandum on gun dealer licensing, the President
listed a number of steps that ATF could take to ensure compliance
with federal firearms licensing requirements.  These steps included,
among other things, increasing scrutiny of licensees' multiple sale
reports and providing automated access to those reports. 

In November 1995, ATF issued a new policy centralizing and
computerizing multiple sale reports at its National Tracing
Center.\20 Prior to that time, ATF's criminal enforcement field
divisions maintained multiple sale reports locally.  To computerize
the reports, ATF developed a Multiple Sales Subsystem as part of its
Firearms Tracing System so that the reports could be entered directly
into the Tracing System and used for tracing purposes.  As of June
30, 1996, ATF had computerized about 91,600 multiple sale reports and
associated 521 firearms traces with those reports.  The head of the
National Tracing Center estimated that in the future the Center will
receive 130,000 multiple sale reports annually.  In addition to using
multiple sale reports for tracing purposes, ATF also provides
multiple sale report data to its criminal enforcement field divisions
through Project Lead\21 for use in developing investigative leads,
such as leads on firearms traffickers, straw purchasers,\22 and
federal firearms licensees who appear to be engaged in suspicious
activity. 

Unlike the Out-of-Business Records System, reports entered into ATF's
computerized Multiple Sales System are retrievable by firearm
purchaser name.  However, as part of its November 1995 policy, ATF
adopted a requirement to purge firearms purchaser data in the system
that were over 2 years old if they had not been linked to firearms
traces.  According to the Chief of the Firearms Enforcement Division,
the primary reason for purging purchaser data over 2 years old is to
delete data that may not be useful because of its age.  In addition,
the head of the Tracing Center said that ATF is sensitive for privacy
reasons about retaining firearms purchaser data that may no longer be
useful.  Appendix VI provides a detailed description of the multiple
sale reporting requirement and the data system along with pertinent
statistical data. 

We believe that ATF's Multiple Sales System complies with the data
restrictions.  As discussed earlier, the prohibitions in section
926(a) only apply to certain rules or regulations prescribed after
the enactment of the Firearms Owners' Protection Act.  In the same
act, Congress codified the then-existing regulatory requirement that
federal firearms licensees prepare these multiple sale reports and
forward them to ATF.  ATF's current regulatory requirement concerning
the multiple sale reports predates the Firearms Owners' Protection
Act and thus is not subject to section 926(a).\23

With regard to the annual appropriation rider, in our view, the
Multiple Sales System does not violate the general prohibition on the
"consolidation or centralization" of firearms acquisition and
disposition records.  The requirement that licensees prepare these
reports and send them to ATF existed in regulation before the first
appropriation rider was passed in fiscal year 1979, and there is no
indication in the legislative history that the rider was intended to
overturn ATF's existing practices concerning the acquisition or use
of licensee information. 

Although the multiple sale reports historically have been maintained
at the field level, the provisions and legislative history of the
Firearms Owners' Protection Act, which gave ATF specific statutory
authority to collect these records, indicate that ATF would not be
precluded from computerizing the multiple sale reports.  The act
requires that licensees send the reports "to the office specified" on
the ATF form.\24 Under this provision, ATF could specify that
licensees forward the multiple sale reports to a central location. 
In addition, the legislative history of the act indicates that
Congress considered placing constraints on ATF's maintenance of
multiple sale reports but did not do so.  The Senate-passed version
of the Firearms Owners' Protection Act prohibited the Secretary of
the Treasury from maintaining multiple sale reports at a centralized
location and from entering them into a computer for storage or
retrieval.\25 This restrictive provision was dropped from the version
of the bill enacted by Congress. 

Lastly, for fiscal year 1995, Congress appropriated funds to
implement the President's firearms initiative, which included plans
to automate multiple sale reports.\26 Congress provided these funds
in the same legislation that contained the rider restricting
consolidation and centralization of licensee records.  In conclusion,
we believe that the Multiple Sales System does not violate either
data restriction provision.  (Our legal analysis of the Multiple
Sales System is contained in app.  VIII.)

With regard to the operation of the Multiple Sales System, on the
basis of our review and observations and discussions with ATF
officials, we believe that ATF was, with one exception, operating the
system in a manner consistent with its design.  Our test of the
Multiple Sales System at the Tracing Center showed that ATF's
requirement to purge firearms purchaser data over 2 years old if not
linked to firearms traces had not been fully implemented.  At our
request, a Tracing Center computer specialist queried the system for
multiple sale records with sales dates over 2 years old.  The results
of this query identified 2,291 records\27 (of the over 86,000 that
had been entered) that contained purchaser data for sales over 2
years old.  The computer specialist indicated that he thought
multiple sale purchaser data over 2 years old had been purged during
the last upgrade of the Firearms Tracing System.  In July 1996, the
Chief of the Firearms Enforcement Division provided us with
documentation stating that the affected purchaser data had been
purged from the Multiple Sales System and that future purges would be
performed weekly.  We did not verify whether the affected purchaser
data were purged and whether weekly purges were being done. 

In addition, ATF officials also told us that while the 2-year purge
requirement pertained to the Multiple Sales System at the Tracing
Center, it was not being applied to multiple sale data maintained
locally by ATF criminal enforcement field divisions through Project
Lead.  ATF had no requirement or mechanism for purging multiple sale
purchaser data over 2 years old after it was received by field
divisions.  The Chief of the Firearms Enforcement Division told us
that ATF planned to place Project Lead on its mainframe computer in
about a year.  At that time, ATF plans to apply the 2-year purge
requirement to multiple sale data in Project Lead. 


--------------------
\16 27 C.F.R.  178.126a (1995). 

\17 See 18 U.S.C.  923(g)(3)(A).  The provision states, "Each
licensee shall prepare a report of multiple sales or other
dispositions whenever the licensee sells or otherwise disposes of, at
one time or during any five consecutive business days, two or more
pistols, or revolvers, or any combination of pistols and revolvers
totalling two or more, to an unlicensed person.  The report shall be
prepared on a form specified by the Secretary [of the Treasury] and
forwarded to the office specified thereon and to the department of
State police or State law enforcement agency of the State or local
law enforcement agency of the local jurisdiction in which the sale or
other disposition took place, not later than the close of business on
the day that the multiple sale or other disposition occurs."

\18 Multiple sales between federal firearms licensees are not
required to be reported. 

\19 40 Fed.  Reg.  19,201 (May 2, 1975). 

\20 ATF's National Tracing Center began computerizing multiple sale
reports from 3 of its then 24 criminal enforcement field divisions on
a test basis in June 1995.  In November 1995, ATF required all of its
field divisions to forward these reports to the Tracing Center for
processing. 

\21 Project Lead is a computer software program that allows ATF
criminal enforcement field divisions to query and manipulate data
downloaded from the Firearms Tracing System.  These data include
firearms dealer and purchaser information from firearms traces and
information from all multiple sale reports, including purchaser and
firearms information.  ATF criminal enforcement field divisions are
provided information that is applicable to their respective
geographic area of responsibility. 

\22 According to ATF, a "straw" purchaser is a person who buys
firearms for another person.  In some instances, a straw purchaser
may be used because the actual purchaser is prohibited by law from
acquiring a firearm.  For example, the actual purchaser may be a
felon. 

\23 The regulation is now codified at 27 C.F.R.  178.126a (1995). 
While some revisions have been made since the enactment of the
Firearms Owners' Protection Act, the requirement concerning licensee
reports to ATF has not changed. 

\24 18 U.S.C.  923(g)(3)(A). 

\25 S.  49, 99th Cong., 1st Sess.  (1985). 

\26 P.L.  103-329, 108 Stat.  2384 (Sept.  30, 1994); see S.  Rep. 
No.  103-286, 103d Cong., 2d Sess.  at 19 (1994). 

\27 Some of these records may have involved firearms linked to
firearms traces and thus the firearms purchaser data should not have
been purged from the system. 


   IN RESPONSE TO OUR REVIEW, ATF
   HAS ADOPTED A BROADER
   INTERPRETATION OF THE DATA
   RESTRICTION IN THE ANNUAL
   APPROPRIATION RIDER
------------------------------------------------------------ Letter :6

ATF's interpretation of the data restrictions in the annual
appropriation rider and 18 U.S.C.  926(a) was contained in a number
of opinions and correspondence that ATF provided us during our
review.  Although we agreed with ATF's interpretation of 18 U.S.C. 
926(a), we believed that ATF was interpreting the data restriction
contained in the annual appropriation rider too narrowly.  As a
result, ATF would not have reviewed its data systems and information
practices to ensure compliance with the broader interpretation of the
rider, as discussed below.  Appendix VIII contains our detailed legal
analysis. 

In response to a draft of this report, ATF stated it adopted the
broader interpretation of the rider, had applied it to a legal review
of the systems listed in appendix IV that we did not review, and is
committed to applying it to record systems it might establish in the
future. 

Previously, ATF maintained that the restrictions in section 926(a)
and the appropriation rider had the same effect, and that they were
intended only to preclude rules or regulations issued after the
enactment of the Firearms Owners' Protection Act that impose
additional reporting requirements upon licensees.  Thus, ATF viewed
the data restrictions as having no application to the agency's
internal practices, i.e., they did not restrict what ATF did with
information it had acquired through reporting requirements in effect
before the act or through other means, such as ATF's criminal
enforcement and regulatory activities. 

ATF's interpretation relied on the language and context of section
926 and related provisions (primarily section 923), as well as the
language and context of the 1979 appropriation rider, which was
enacted to counter the broad reporting requirements that ATF sought
to impose on licensees through the 1978 proposed rulemaking.  ATF
maintained that the basic effect of the Firearms Owners' Protection
Act--codifying certain former regulatory reporting requirements in
section 923 and restricting the agency's authority to prescribe
certain rules and regulations in section 926--was to preempt any
additional reporting requirements that the agency might impose on
licensees. 

We agreed with ATF's interpretation of the data restrictions as far
as it went; clearly the data restrictions apply to rules or
regulations that would impose additional reporting requirements upon
licensees.  The question was whether they have any effect beyond such
reporting requirements, and, in particular, whether they restrict how
ATF compiles or otherwise uses firearms transaction records once they
have been acquired from licensees through current reporting
requirements or other means. 

With regard to the restriction in section 926(a), we agree that it is
limited to ATF actions in the form of prescribing rules and
regulations.  The appropriation rider, however, contains no language
that would limit its application either to prescribing rules and
regulations or to imposing additional reporting requirements on
licensees.  Although the original version of the rider did refer to
the 1978 proposed rulemaking that would have required new reporting
by licensees, it was not limited to that proposal.  Furthermore,
beginning in fiscal year 1994, the reference to the 1978 proposal was
dropped from the appropriation rider, and the language of the
restriction was expanded to include "any portion" of these licensee
records.  In our view, given its structure and language prohibiting
the use of appropriations in connection with consolidating or
centralizing certain firearms licensee records within the Department
of the Treasury, the rider appears to encompass ATF's internal
operations. 

ATF's prior legal opinions did not analyze the rider, other than to
treat it as "similar to" the section 926(a) restriction.  However, we
believe that the appropriation rider clearly has legal effect
independent of section 926.  Congress enacted it for a number of
years predating the Firearms Owners' Protection Act and has continued
to enact it for each subsequent year.  As referred to above, the
language of the appropriation rider was expanded in fiscal year 1994
to include portions of licensee firearms records.\28 Further, there
are significant differences in the language of the two
provisions--most notably, the absence from the rider of any
limitation on its coverage to rules or regulations.  There is no
indication in the legislative history of the Firearms Owners'
Protection Act that section 926 was intended to subsume or otherwise
affect the appropriation rider. 

Therefore, in our view, ATF's interpretation that the appropriation
rider applied only to the issuance of rules and regulations that
impose additional reporting requirements on licensees, and did not
reach ATF's internal information practices, was not supported by the
statutory language or legislative history of the rider. 

Determining the extent to which the appropriation rider restricts
ATF's internal information practices posed more difficult questions. 
The appropriation rider applies to "consolidating or centralizing,
within the Department of the Treasury, the records, or any portion
thereof, of acquisition and disposition of firearms maintained by
Federal firearms licensees." However, we do not believe that the
rider precludes all information practices and data systems that
involve an element of "consolidating or centralizing" licensee
records. 

The legislative history of the rider indicates that it was originally
enacted in response to an ATF proposal that was viewed as a wholesale
aggregation of licensee firearms transaction records that went
"beyond the intent of Congress when it passed the Gun Control Act of
1968."\29 There is no evidence in the legislative history that the
rider was intended to overturn existing ATF information practices or
data systems.  Indeed, the Firearms Owners' Protection Act, which
amended the Gun Control Act and was enacted 8 years after the
original rider was passed, reaffirmed several long-standing ATF
information practices.  The rider must be interpreted in light of its
purpose and in the context of the other statutory provisions
governing ATF's acquisition and use of information contained in the
Gun Control Act, as amended. 

Pursuant to the Gun Control Act, ATF is responsible for certain
regulatory functions, such as licensing and monitoring firearms
licensees, as well as certain law enforcement functions, such as the
tracing of firearms.  The act, as amended, contains specific
statutory authorities that allow ATF to obtain certain firearms
transaction data from licensees.  Section 923 contains licensee
recordkeeping and reporting authorities, as well as the authorities
for ATF to conduct inspections and searches of licensee business
premises for certain purposes.  To implement these responsibilities
and authorities, ATF necessarily gathers specific firearms
transaction data, and must centralize or consolidate the data to some
degree. 

However, as discussed above, section 926(a) precludes ATF from
issuing rules or regulations after enactment of the Firearms Owners'
Protection Act that require the establishment of any system of
registration of firearms, firearms owners, or firearms transactions
or dispositions.  The legislative history of the Firearms Owners'
Protection Act indicates a clear congressional concern that such a
registry not be established.\30

Therefore, to the extent that the centralization or consolidation of
records is incident to carrying out a specific ATF responsibility and
does not entail the aggregation of data on firearms transactions in a
manner that would go beyond the purposes of the Gun Control Act of
1968, as amended, we do not believe that the rider would be violated. 


--------------------
\28 P.L.  103-123, 107 Stat.  1229 (Oct.  28, 1993). 

\29 S.  Rep.  No.  95-939, 95th Cong., 2d Sess.  at 11-12 (1978); see
also H.R.  Rep.  No.  95-1249, 95th Cong., 2d Sess.  at 9-10 (1978). 

\30 For example, see S.  Rep.  No.  98-583, 98th Cong., 2d Sess.  at
18 (1984). 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

ATF's Out-of-Business Records and Multiple Sales Systems comply with
the data restrictions, including the restriction in the annual
appropriation rider, as discussed above.  However, we did not review
the other data systems and subsystems ATF identified as containing
firearms-related information to determine their compliance with the
data restrictions.  ATF's legal interpretation of the restriction in
the appropriation rider was that the restriction had no application
to ATF's internal information practices under any circumstances. 
Given this, ATF had not reviewed its data systems and information
practices to determine whether they involved the type of
centralization or consolidation of records that might be affected by
the rider, as discussed above.  Such a review would help provide
assurance that the systems and subsystems we did not review currently
comply with the rider. 

In response to a draft of this report, ATF (1) revised its
interpretation of the rider to adopt the broader interpretation we
believed was appropriate; (2) applied this interpretation to a legal
review of the systems, as described in appendix IV, that we did not
review; and (3) stated it will apply the new interpretation to future
systems.  Although it found that the current systems, as described,
comply with the broader interpretation, ATF did not determine whether
the systems are operating as described.  Such a determination would
provide fuller assurance that the systems are in compliance. 


   RECOMMENDATION
------------------------------------------------------------ Letter :8

We recommend that the Secretary of the Treasury require the Director
of ATF to

  -- review ATF's firearms data systems and information practices to
     ensure that they comply with the appropriation rider, as
     discussed above; and

  -- report the results of these actions to the Subcommittee in
     conjunction with ATF's fiscal year 1998 budget submission. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

ATF provided written comments on a draft of this report.  These
comments are reprinted in appendix IX.  Overall, ATF concurred with
our findings and conclusions concerning the compliance of the
Out-of-Business Records and Multiple Sales Systems with the statutory
data restrictions.  However, ATF disagreed with our conclusions
regarding systems we did not review because it believed those systems
were outside the scope of our review.  Nevertheless, ATF agreed with
and adopted the broader interpretation of the data restriction in the
annual appropriation rider, as discussed in this report, for its
existing, as well as future, systems.  It also applied its revised
interpretation to a legal review of the systems containing retail
firearms purchaser data that we did not review and found them to be
in compliance.  In light of these actions ATF requested that we
reconsider our recommendation. 

With regard to the issue of ATF's interpretation of the data
restriction contained in the annual appropriation rider, we concluded
in our draft report that given ATF's legal interpretation that the
appropriation rider had no application to its internal information
practices, ATF had not analyzed its data systems and information
practices to determine whether they involved the type of
centralization and consolidation of records that might be affected by
the rider.  Therefore, we concluded that ATF could not ensure that
the systems and subsystems that we did not review complied with the
rider; nor could ATF provide Congress with reasonable assurance that,
in the future, its data systems, subsystems, and information
practices would be in compliance with the rider, assuming that
Congress continued to enact it. 

In commenting on our draft report, ATF stated that these assertions
were speculative and ranged far beyond the scope of our review.  We
do not agree that our conclusion and recommendation go beyond the
scope of our review.  While we were asked to review only two systems'
compliance with the data restrictions, our third objective--to assess
ATF's overall legal interpretation of the data restrictions--covered
all of its data systems and information practices.  However, we did
not suggest or imply that the ATF data systems and practices that we
did not review were not in compliance with the law.  Rather, our
intention was to focus on the lack of assurance that ATF was
providing related to its systems' compliance with the restriction in
the rider based on its narrow interpretation. 

Nevertheless, ATF stated that it "will hereafter apply GAO's
interpretation of the rider to its record systems and any future
systems it might establish." It further stated that it saw "no
disadvantage to ATF in changing its position to be in conformity with
the reading given by GAO since our record systems actually comply
with GAO's interpretation of the rider." Also, as part of its written
response to our draft report, ATF enclosed an August 23, 1996,
opinion of the ATF Chief Counsel, whose Office reviewed those ATF
data systems that contain retail firearms purchaser data (with the
exception of the two systems that we reviewed) and found them to be
in compliance with the rider, under the revised interpretation.  The
Chief Counsel's opinion also indicated that if ATF adopted our
interpretation of the rider, the Office of the Chief Counsel would,
in the future, review any proposed new record system to determine
compliance with the rider. 

We believe ATF has taken several important actions toward fulfilling
the recommendation.  Most notably, ATF has revised its legal analysis
of the rider, applied it to the descriptions of the remaining systems
that contain retail firearms purchaser information, and stated that
future systems will be reviewed under the revised analysis.  These
actions, in our view, constitute major steps toward providing
assurance that ATF is currently complying with the rider and that the
agency will continue to comply with it in the future.  Accordingly,
we have modified our final report to reflect ATF's actions. 

Although ATF has taken significant steps toward implementing our
recommendation, in our view, it has not fully implemented the
recommendation.  ATF's legal analysis of the description of the
remaining systems that contain retail firearms purchaser information
appears to apply appropriate criteria and rationale.  In addition,
the legal analysis discusses various general controls that ATF had in
place and actions it had taken to help ensure that existing, as well
as future, records systems and information practices comply with the
law.  However, it was not clear how these controls specifically
applied to the systems discussed in ATF's legal analysis or whether
they were used to help ensure that the systems were in compliance
with the data restrictions.  To fully respond to our recommendation,
ATF needs to provide assurance that the systems are actually
operating as they were described.  Thus, we believe that ATF should
perform an operational review of the systems listed in appendix IV
that we did not review.  Therefore, we are retaining our
recommendation that ATF review these systems and report the results
to the House Appropriations Subcommittee. 


---------------------------------------------------------- Letter :9.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter.  At that time, we will send copies of
the report to the Ranking Minority Member of the Subcommittee,
appropriate congressional committees, the Secretary of the Treasury,
the Director of ATF, and other interested parties.  Copies will also
be made available to others upon request. 

The major contributors to this report are listed in appendix X.  If
you have any questions about this report, please call me on (202)
512-8777. 

Sincerely yours,

Norman J.  Rabkin
Director, Administration
 of Justice Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Because of concerns regarding ATF's compliance with the legislative
restrictions regarding centralizing and consolidating data from
federal firearms licensee records, the Chairman of the House
Subcommittee on Treasury, Postal Service, and General Government,
Committee on Appropriations, requested that we review ATF's
compliance with the legislative restrictions on maintaining certain
federal firearms licensee data.  We agreed to (1) identify and
describe the ATF data systems that contain retail firearms purchaser
data and (2) determine whether ATF's Out-of-Business Records System
and Multiple Sales System\1 comply with the legislative data
restrictions.  We also agreed to assess ATF's overall legal
interpretation of the legislative data restrictions. 

To identify and describe the ATF data systems that contain retail
firearms purchaser data, we obtained from ATF headquarters officials
descriptions of ATF national data systems that they determined relate
to firearms.  We also asked ATF to identify those national data
systems that contained retail firearms purchaser data.  We reviewed
the provided descriptive data to determine whether we agreed with
ATF's categorization of each data system.  We also interviewed
appropriate ATF headquarters and National Tracing Center officials to
obtain additional information and clarification concerning the data
systems.  However, with the exception of the Out-of-Business Records
and the Multiple Sales Systems, we did not independently verify the
contents of the data systems because of time constraints. 

At the Subcommittee's request, we focused on assessing ATF's
Out-of-Business Records System and Multiple Sales System.  These
systems (1) play a significant role in the firearms tracing process,
(2) contain data obtained from nonlaw enforcement sources, and (3)
involve large numbers of records and reports containing data on
firearms transactions and purchasers.  To obtain information on the
firearms tracing process and the Out-of-Business Records and Multiple
Sales Systems, we interviewed officials and reviewed system
documentation and other data at ATF headquarters and at ATF's
National Tracing Center in Falling Waters, West Virginia.  We also
observed the firearms tracing, out-of-business records, and multiple
sale reports processing operations at the Center and discussed these
operations with Center officials. 

To address whether the Out-of-Business Records and Multiple Sales
Systems were in compliance with the legislative data restrictions, we
reviewed relevant laws and ATF regulations, legal opinions, and
documentation on the design of these systems.  We also discussed
ATF's legal opinions with ATF's Associate Chief Counsel (Firearms and
Explosives) and other officials.  We did not review ATF's other
systems for compliance with the data restrictions.  With regard to
the Out-of-Business Records and Multiple Sales Systems, we did not
review their compliance with other statutory requirements such as the
Privacy Act and the Computer Security Act.  Furthermore, to determine
whether ATF's actual handling of the records and reports in these
systems was in accord with the systems' designs, we observed the
processing and maintenance of the out-of-business records and the
multiple sale reports at the Tracing Center, conducted some tests,
and discussed these operations with ATF headquarters and Tracing
Center officials.  To determine whether ATF was implementing its
requirement to purge certain firearms purchaser data from the
Multiple Sales System, we conducted data entry and retrieval tests. 

To assess ATF's overall legal interpretation of the legislative data
restrictions and their application to ATF operations, we reviewed
relevant laws and their legislative histories, ATF regulations and
legal opinions, and other documentation concerning the data
restrictions.  We also interviewed ATF's Associate Chief Counsel
(Firearms and Explosives) and other ATF headquarters and Tracing
Center officials. 


--------------------
\1 The data system containing multiple sale report data is a
subsystem of ATF's Firearms Tracing System.  However, in this report
we refer to it as the Multiple Sales System, unless specifically
noted otherwise. 


DESCRIPTION OF ATF'S FIREARMS
TRACING PROCESS
========================================================== Appendix II

The Gun Control Act of 1968, as amended, requires federal firearms
licensees to record firearms transactions, maintain that information
at their business premises, and make such records available to ATF
for inspection and search under certain prescribed circumstances.\2
Through the use of these records,\3 ATF provides firearms tracing
services to federal, state, local, and foreign law enforcement
agencies.  ATF also uses the records for other law enforcement
purposes.  To carry out its firearms tracing responsibilities, ATF
maintains a firearms tracing operation, located at the National
Tracing Center in Falling Waters, West Virginia.  With a staff of 45
as of July 1996, the Tracing Center tracks firearms suspected of
being involved in crimes to assist law enforcement in identifying
suspects. 

The Tracing Center receives trace requests by facsimile, telephone,
and mail.  To do a trace, the manufacturer and the serial number of
the firearm must be known.  The Tracing Center determines the
ownership of firearms being traced by using documentation, such as
out-of-business licensee records and multiple sale reports, which are
maintained in ATF's national data systems, and/or by contacting
manufacturers, importers, wholesalers, and retailers (i.e., firearms
dealers).  The objective of the trace is to identify the last known
purchaser of the firearm.  ATF is to document each trace request and
its results and provide that information to the requester.  ATF
considers a request completed when it traces the firearm to a retail
firearms licensee or a purchaser or when it cannot identify the
purchaser for various reasons.  For example, the description of the
firearm as submitted by the requester may not have contained
sufficient information to perform a trace.  Figure II.1 provides a
macro flowchart of ATF's firearms tracing process. 

   Figure II.1:  Flowchart of
   ATF's Firearms Tracing Process

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)

Legend:

OOBR - Out-of-business records

\a From this point in the tracing process, an active and/or inactive
manufacturer, importer, or licensee may be involved.  It should also
be noted that not all traces are successfully completed.  Some are
closed due to age of firearm, incomplete/inaccurate description of
firearm, loss of licensee records, or inability to locate licensee. 

Source:  ATF. 

For fiscal years 1992 through 1995, ATF received a total of 262,984
trace requests.  The number of trace requests received by ATF
increased about 56 percent during this 4-year period, from 51,210 in
fiscal year 1992 to 80,042 in fiscal year 1995.  During this period,
ATF completed a total of 243,584 traces, including those that did not
result in the identification of a retail firearms licensee or
purchaser.  As shown in figure II.2, the number of traces completed
more than doubled, from 42,980 in fiscal year 1992 to 86,215 in
fiscal year 1995.  During this 4-year period, ATF identified a retail
firearms licensee or a purchaser of the traced firearm, on average,
in about 41 percent of the completed trace requests.  In fiscal year
1995, the number of completed trace requests resulting in the
identification of retail licensees or purchasers increased to about
52 percent. 

   Figure II.2:  Number of Traces
   ATF Completed and Those
   Completed by Tracing Firearm to
   a Retail Licensee or Purchaser,
   FYs 1992-1995

   (See figure in printed
   edition.)

Source:  ATF. 


--------------------
\2 P.L.  90-618, 82 Stat.  1213 (1968).  As originally enacted, the
Gun Control Act required licensees to submit such reports and
information as the Secretary of the Treasury prescribed by
regulation, and authorized the Secretary to prescribe such rules and
regulations as he deemed reasonably necessary to carry out the
provisions of the act.  See 18 U.S.C.  923(g) and 926 (1976 ed.). 

\3 These records include an acquisition and disposition logbook and
Firearms Transaction Records (ATF Form 4473), which include, among
other things, the name of the purchaser, the type of firearm
purchased, and the firearm model and serial number. 


ATF'S FIREARMS-RELATED DATA
SYSTEMS
========================================================= Appendix III

System                     Contents                   Function
-------------------------  -------------------------  --------------------------
1. Annual Firearms         Contains firearms data     Tracks firearms production
Manufacturing and          but does not               and exports data that are
Exportation Report System  identify retail firearms   gathered annually from
                           purchasers.                licensed manufacturers and
                                                      exporters for regulatory
                                                      enforcement.

2. Area Office Program     Contains firearms data     Tracks inspectors'
                           but does not               assignments, certain
                           identify retail firearms   performance measures, and
                           purchasers.                workflow data within ATF's
                                                      Office of Regulatory
                                                      Enforcement.

3. Criminal Enforcement    Contains firearms data     Automates the preparation
Investigative Reports\a    collected for criminal     of three ATF reports:
                           investigative purposes     Investigative Case
                           that, in some cases, may   Summary, Report of
                           identify retail firearms   Investigation, and
                           purchasers.\b              Property Taken Into ATF's
                                                      Custody for criminal
                                                      enforcement.

4. Federal Excise Tax      Contains firearms data     Tracks information on tax
System\                    but does not               payments, including tax
                           identify retail firearms   returns and return
                           purchasers.                information, from more
                                                      than 10,000 excise
                                                      taxpayers\c for regulatory
                                                      enforcement.

a. Firearms and            Contains firearms data     Used to manage sales
Ammunition Excise          but does not               information about firearms
Tax Subsystem              identify retail firearms   and ammunition
                           purchasers.                manufacturers, who are
                                                      required to pay federal
                                                      excise taxes, to determine
                                                      whether the proper amounts
                                                      of tax were paid when due
                                                      for regulatory
                                                      enforcement.

5. Federal Licensing       Contains firearms data     Tracks applications and
System\                    but does not               permits for federal
                           identify retail firearms   firearms and explosives
                           purchasers.                licenses for regulatory
                                                      and criminal enforcement.

6. Firearms and            Contains firearms data     Tracks information on the
Explosives Import          that identify the          importation of firearms
System                     consignees of firearms,    and explosives into the
                           who, in some cases, may    United States and their
                           be retail firearms         release into commerce by
                           purchasers.\d              the U.S. Customs Service
                                                      for regulatory
                                                      enforcement.

7. Firearms Tracing        Contains firearms data     Collects and tracks data
System\e                   that identify retail       on traces of firearms
                           firearms purchasers.       suspected of being
                                                      involved in a crime to
                                                      assist law enforcement
                                                      agencies in identifying
                                                      suspects for regulatory
                                                      and criminal enforcement.

a. Federal Firearms        Contains firearms data     Collects and tracks data
Licensees Theft Subsystem  but does not               on firearms stolen, or
                           identify retail firearms   missing in inventory, from
                           purchasers.                federal firearms
                                                      licensees' place of
                                                      business for regulatory
                                                      and criminal enforcement.

b. Interstate Theft        Contains firearms data     Collects and tracks, for
Subsystem                  that identify the          criminal enforcement
                           consignees of firearms,    purposes, information on
                           who, in some cases, may    thefts of firearms during
                           be retail firearms         interstate shipment
                           purchasers.\d              between the manufacturer
                                                      and the wholesaler, the
                                                      wholesaler and the
                                                      retailer, or retailers.

c. Multiple Sales          Contains firearms data     Collects and tracks data
Subsystem\e                that                       on purchasers of two or
                           identify retail firearms   more pistols and/or
                           purchasers.                revolvers at one time or
                                                      during any 5 consecutive
                                                      business days for
                                                      regulatory and criminal
                                                      enforcement.

8. Firearms Tracking       Contains firearms data     Collects and tracks data
System\e                   that                       (derived from the Firearms
                           identify retail firearms   Tracing System) on
                           purchasers.                firearms recovered in
                                                      ATF's field divisions'
                                                      geographic areas of
                                                      responsibility for
                                                      criminal enforcement.
                                                      Allows ATF to analyze
                                                      information concerning
                                                      problem dealers,
                                                      questionable purchasers,
                                                      and other descriptive
                                                      firearms data.

9. Law Enforcement         Contains firearms data     Tracks all aspects of
Management Information     but does not               special agents' duty time
System                     identify retail firearms   by various categories,
                           purchasers.                including court time,
                                                      investigative time, and
                                                      leave for criminal
                                                      enforcement. Also
                                                      maintains information on
                                                      individual cases,
                                                      including information on
                                                      the type of case,
                                                      defendants, and seizures.

10. Leads,                 Contains firearms data     Collects and tracks data
Investigations, and        but does not               for regulatory enforcement
Cases                      identify retail firearms   by name and address of
System                     purchasers.                subject, alleged firearms
                                                      excise tax violation,
                                                      action taken, business
                                                      type, potential leads,
                                                      investigations, product
                                                      detention, and reporting
                                                      offices.

11. National Firearms Act  Contains firearms data     Collects and tracks data
Database\e                 that identify retail       from applications and
                           firearms purchasers.       forms submitted by
                                                      manufacturers, dealers,
                                                      and owners of machine
                                                      guns, destructive devices,
                                                      and certain other firearms
                                                      to monitor and enforce
                                                      these classes of firearms
                                                      for regulatory and
                                                      criminal enforcement.

12. Out-of-Business        Contains firearms data     Collects, indexes, and
Records System\e           that identify retail       retrieves microfilmed
                           firearms purchasers.       copies of firearms
                                                      transaction records of
                                                      federal firearms licensees
                                                      who have permanently gone
                                                      out of business for
                                                      regulatory and criminal
                                                      enforcement.

13. Project Lead\e         Contains firearms data     Analyzes firearms data
                           that identify retail       contained in the Firearms
                           firearms purchasers.       Tracing System by ATF's
                                                      field divisions'
                                                      geographic areas of
                                                      responsibility for their
                                                      use in identifying and
                                                      investigating suspected
                                                      firearms traffickers,
                                                      "straw" purchasers, and
                                                      licensees suspected of
                                                      being involved in criminal
                                                      activity for regulatory
                                                      and criminal enforcement.

14. Special Occupational   Contains firearms data     Tracks the tax payment
Tax System                 but does not               records of taxpayers in
                           identify retail firearms   certain occupations,
                           purchasers.                including manufacturers of
                                                      firearms and persons
                                                      dealing in commodities
                                                      regulated by the National
                                                      Firearms Act, who are
                                                      required to pay special
                                                      occupational taxes for
                                                      regulatory enforcement.
--------------------------------------------------------------------------------
\a The Criminal Enforcement Investigative Reports program is not a
database.  It is a word processing application that can be queried by
case number, but not by name, to generate investigative reports. 

\b Data collected on a defendant could identify him or her as the
retail purchaser or possessor of a specific firearm.  For example, a
defendant may be identified as a retail firearms purchaser in an
investigative report relating to a potential criminal violation(s). 
However, the data on defendants in the system are not in a readily
retrievable form, i.e., the system has no specific data field on
retail firearms purchasers. 

\c Alcohol, tobacco, firearms, and ammunition producers and other
selected taxpayers. 

\d Although the consignees of firearms that are imported or shipped
interstate could, in some cases, be retail purchasers, they cannot be
specifically identified as such through the system alone, i.e., the
system has no specific data field on retail firearms purchasers. 

\e See appendix IV for a detailed description. 

Source:  ATF. 


ATF DATA SYSTEMS THAT CONTAIN
RETAIL FIREARMS PURCHASER DATA
========================================================== Appendix IV

This appendix describes the five national data systems and one
subsystem that ATF identified as containing sufficient data, or
automated interfaces to related databases, to readily identify the
retail purchaser or possessor of a specific firearm.  The
descriptions in tables IV.1 through IV.5 include data sources, data
input, data location, authorized users,\4 and security measures. 


--------------------
\4 An "authorized user" is a user who has an approved user personal
identification and password that allows access to the system with
defined access rights and privileges (i.e., read only, write, delete,
modify, etc.) to the system data. 


   FIREARMS TRACING SYSTEM
-------------------------------------------------------- Appendix IV:1

The Firearms Tracing System collects and tracks data on traces of
firearms suspected of being involved in a crime to assist law
enforcement in identifying suspects.  Trace data are used by law
enforcement agencies worldwide.  In addition, the Firearms Tracing
System contains three subsystems:  (1) Interstate Theft, (2) Federal
Firearms Licensees Theft, and (3) Multiple Sales.  As shown in tables
IV.1 and IV.1a, the overall System and the Multiple Sales Subsystem
contain firearms purchaser data. 

According to ATF, the data collected in the Firearms Tracing System
are firearms trace-specific duplicates of firearms transaction data
kept by licensees pursuant to 18 U.S.C.  923(g).  Section 923(g)
requires licensees to maintain firearms data at their place of
business and to make the information in those records available to
ATF for certain purposes.  Specifically, section 923(g)(7) requires
licensees to respond within 24 hours after the receipt of a request
from the Secretary of the Treasury for information contained in their
records as may be required for determining the disposition of one or
more firearms in the course of a bona fide criminal investigation. 



                                    Table IV.1
                     
                     Characteristics of the Firearms Tracing
                                      System

                                                Authorized      Security
Data sources    Data input      Data location   users           measures
--------------  --------------  --------------  --------------  ----------------
Data are from   Data in the     Data are        About 40        The electronic
the trace       system include  maintained on   National        data are
request form    serial number,  a mainframe     Tracing Center  protected by the
(ATF Form       make, model,    computer        personnel have  Resource Access
7520.5),        type, and       system at the   complete        and Control
telephone       caliber of      National Data   access to the   Facility
requests, and   firearm; trace  Center in       system. About   (RACF).\\a User
the results of  requester's     Falling         60 contractors  access
the traces.     name; reasons   Waters, West    and special     privileges are
                for the trace;  Virginia.       agents in       defined by the
                possessor of                    certain field   RACF
                the weapon at                   divisions have  administrator
                the time of                     restricted      with the
                recovery;                       access. In      permissions
                place of                        addition, ATF   approved by the
                recovery; name                  agents and      National Tracing
                and address of                  other law       Center and
                the licensee                    enforcement     user's first
                to whom the                     personnel       line supervisor.
                firearm was                     nationwide      The hard copy
                transferred;                    have            data are
                and name,                       electronic      protected by
                address, date                   access to the   provisions of
                of birth, and                   system,         ATF's Physical
                place of birth                  through the     Security
                of the                          National Law    Program order.\b
                individual                      Enforcement
                purchaser.                      Telecommunicat
                                                ions Network,
                                                only for
                                                purposes of
                                                submitting a
                                                trace request.
--------------------------------------------------------------------------------
\a RACF is an IBM software program that controls who can log in,
where they can go within the system once logged in, what they can do
(read, write, modify, delete), when they can do it, and from where
they can do it. 

\b ATF's Order 1720.1c, Physical Security Program, requires the
protection of hard copy data from unauthorized use by personnel and
destruction from natural and malicious intent. 

Source:  ATF. 


      MULTIPLE SALES SUBSYSTEM
------------------------------------------------------ Appendix IV:1.1

The Multiple Sales Subsystem collects and tracks information on
purchasers of two or more pistols and/or revolvers at one time or
during any 5 consecutive business days.  Data are used to conduct
traces of firearms suspected of being used in crimes and to develop
investigative leads as part of Project Lead, which is discussed later
in this appendix. 

A provision of the Gun Control Act of 1968, as amended, 18 U.S.C. 
923(g)(3)(A) requires federal firearms licensees to report these
transactions.  The implementing regulation is at 27 C.F.R.  178.126a. 



                                   Table IV.1a
                     
                      Characteristics of the Multiple Sales
                                    Subsystem

                                                Authorized      Security
Data sources    Data input      Data location   users           measures
--------------  --------------  --------------  --------------  ----------------
Data are taken  Data in the     Data are        About 40        The electronic
from the        system include  maintained on   National        data are
multiple sale   the name,       a mainframe     Tracing Center  protected by the
reports (ATF    address, date   computer at     personnel have  RACF. \a User
Form 3310.4).   of birth,       the National    complete        access
                place of        Data Center.    access to the   privileges are
                birth, race,                    system. About   defined by the
                and sex of                      60 contractors  RACF
                purchasers;                     and special     administrator
                the serial                      agents in       with the
                number, make,                   certain field   permissions
                model, type,                    divisions have  approved by the
                and caliber of                  restricted      National Tracing
                firearms                        access.         Center and
                purchased; and                                  user's first
                the name,                                       line supervisor.
                address and                                     The hard copy
                license number                                  data are
                of the federal                                  protected by
                firearms                                        provisions of
                licensee.                                       ATF's Physical
                                                                Security Program
                                                                order.\b
--------------------------------------------------------------------------------
\a RACF is an IBM software program that controls who can log in,
where they can go within the system once logged in, what they can do
(read, write, modify, delete), when they can do it, and from where
they can do it. 

\b ATF's Order 1720.1c, Physical Security Program, requires the
protection of hard copy data from unauthorized use by personnel and
destruction from natural and malicious intent. 

Source:  ATF. 


   FIREARMS TRACKING SYSTEM
-------------------------------------------------------- Appendix IV:2

The Firearms Tracking System was designed to enable ATF to study
firearms recovered in ATF field divisions' geographic areas of
responsibility and analyze information concerning problem dealers,
questionable purchasers, and other descriptive firearms data.  It was
developed as an investigative tool to be used by ATF field divisions. 
This system was designed to be an interim system and was to be
replaced by Project Lead, which is discussed next.  However, as of
July 1996, ATF field offices could use the Firearms Tracking System,
Project Lead, or both. 

According to ATF, the data in this system are the same as the trace
data in the Firearms Tracing System.  Therefore, the statutory
authority for the data collected is the same as that for the Firearms
Tracing System. 



                                    Table IV.2
                     
                     Characteristics of the Firearms Tracking
                                      System

                                                Authorized      Security
Data sources    Data input      Data location   users           measures
--------------  --------------  --------------  --------------  ----------------
Data are        Data in the     Data are        ATF special     Only ATF
manually        system include  maintained on   agents in       personnel with
derived         the type of     either the      about 10 field  authorized
directly from   firearms; name  local area      divisions have  identifications
the completed   of the dealer,  network server  or had access   and passwords
trace reports.  purchaser, and  or on a         to their        can access data
                possessor of    personal        divisions'      in the Firearms
                traced          computer hard   systems.        Tracking System.
                firearms;       drive.
                recovery
                location; type
                of crime;
                quantity of
                firearms in a
                multiple sale
                report; and
                agency and
                project
                identification
                .
--------------------------------------------------------------------------------
Source:  ATF. 


   PROJECT LEAD
-------------------------------------------------------- Appendix IV:3

Project Lead is currently a personal computer-based system designed
to analyze firearms data contained in the Firearms Tracing System by
ATF's field divisions' geographic areas of responsibility.  The field
divisions use the data to help identify and investigate suspected
firearms traffickers, "straw" purchasers, and federal firearms
licensees suspected of involvement in criminal activity.  ATF plans
to make Project Lead a mainframe system at the National Data Center. 

Since, according to ATF, the data in this system are obtained
directly from the Firearms Tracing System, the statutory authority
for the data collected is the same as that for the Firearms Tracing
System. 



                                    Table IV.3
                     
                         Characteristics of Project Lead

                                                Authorized      Security
Data sources    Data input      Data location   users           measures
--------------  --------------  --------------  --------------  ----------------
Data are        Data in the     Data from the   Selected ATF    The electronic
directly from   system are      Firearms        special agents  data are
the Firearms    exact replicas  Tracing System  and inspectors  protected by
Tracing         of data in the  are             in the field    users'
System.         Firearms        periodically    divisions have  authorized
                Tracing         downloaded to   access to data  identifications
                System. This    and maintained  that are        and passwords
                includes        on stand-       appropriate to  built into the
                firearms        alone           their           Project Lead
                recovered that  computers in    geographic      application. The
                are suspected   certain ATF     area of         hard copy data
                of being        field           responsibility  are protected by
                involved in a   divisions.      .               provisions of
                crime and                                       ATF's Physical
                traced by the                                   Security Program
                National                                        order.\a
                Tracing Center
                (includes the
                purchasers' or
                possessors'
                names;
                multiple sales
                reported by
                licensees;
                names of
                individuals
                associated
                with the
                recovery of a
                firearm, e.g.,
                names of
                people
                associated
                with a vehicle
                in which a
                firearm was
                recovered; and
                the recovery
                locations of
                firearms.
--------------------------------------------------------------------------------
\a ATF's Order 1720.1c, Physical Security Program, requires the
protection of hard copy data from unauthorized use by personnel and
destruction from natural and malicious intent. 

Source:  ATF. 


   OUT-OF-BUSINESS RECORDS SYSTEM
-------------------------------------------------------- Appendix IV:4

The Out-of-Business Records System was designed to collect, index,
and retrieve microfilmed copies of firearms transactions records that
federal firearms licensees have forwarded to ATF when the licensees
permanently discontinued their business operations.  The data are
used to conduct traces of firearms suspected of being used in crimes. 

A provision of the Gun Control Act of 1968, as amended, 18 U.S.C. 
923(g)(4), requires federal firearms licensees who permanently
discontinue their business to forward their records to ATF within 30
days after the discontinuance.  The implementing regulation is at 27
C.F.R.  178.127. 



                                    Table IV.4
                     
                      Characteristics of the Out-Of-Business
                                  Records System

                                                Authorized      Security
Data sources    Data input      Data location   users           measures
--------------  --------------  --------------  --------------  ----------------
Data are from   The microfilm   The microfilm   About 100       The electronic
records of      system          cartridges      National        data in the
out-of-         contains an     containing      Tracing Center  index system are
business        exact           microfilmed     personnel and   protected by the
federal         photographic    records are     contractors     RACF\a on the
firearms        image of the    maintained in   have complete   mainframe and by
licensees.      firearms        file cabinets   access to the   users' personal
These records   transaction     at the          system.         identification
include         record. The     National                        and passwords on
acquisition     record          Tracing                         the
and             contains,       Center. The                     minicomputer.
disposition     among other     computerized                    The hard copy
logbooks and    things, the     index data                      data are
firearms        name and        that are                        protected by
transaction     address of the  captured by a                   provisions of
records (ATF    firearms        minicomputer                    ATF's Physical
Form 4473).     purchaser.      are stored on                   Security Program
                These records   a mainframe                     order.\b
                are indexed on  computer
                a               system at the
                minicomputer.   National Data
                The index       Center.
                system
                contains,
                among other
                things,
                microfilm
                cartridge
                numbers, film
                frame numbers,
                and serial
                numbers of
                firearms
                recorded on
                each
                cartridge.
--------------------------------------------------------------------------------
\a RACF is an IBM software program that controls who can log in,
where they can go within the system once logged in, what they can do
(read, write, modify, delete), when they can do it, and from where
they can do it. 

\b ATF's Order 1720.1c, Physical Security Program, requires the
protection of hard copy data from unauthorized use by personnel and
destruction from natural and malicious intent. 

Source:  ATF. 


   NATIONAL FIREARMS ACT DATABASE
-------------------------------------------------------- Appendix IV:5

The National Firearms Act Database contains data on certain classes
of firearms, such as machine guns and destructive devices, as defined
by the National Firearms Act of 1934, 26 U.S.C.  Chapter 53.  (This
act was recodified as Title II of the Gun Control Act of 1968.) The
act requires the registration of these defined categories of weapons
and requires that the Secretary of the Treasury collect transfer
taxes and maintain a central registry of these firearms, which is
known as the National Firearms Registry and Transfer Record. 
(Implementing regulations are set forth in 27 C.F.R.  Part 179.) ATF
uses this system to monitor and enforce these classes of firearms. 
Federal, state, and local law enforcement agencies use the data for
criminal prosecutions. 



                                    Table IV.5
                     
                     Characteristics of the National Firearms
                                   Act Database

                                                Authorized      Security
Data sources    Data input      Data location   users           measures
--------------  --------------  --------------  --------------  ----------------
Data are from   Data in the     Electronic      Fifteen         The electronic
applications    system include  data are        National        data are
and other       the type,       maintained on   Firearms Act    protected by
forms           model, and      a mainframe     Branch          RACF.\a User
submitted by    serial number   computer at     personnel and   access
manufacturers,  of firearm;     the National    special agents  privileges are
dealers, and    the name and    Data Center.    assigned to     defined by the
owners of       address of the  ATF captures    the             RACF
Title II        retail          about 40        Enforcement     administrator
firearms.       purchaser or    percent of the  Operations      with the
                possessor; and  data from the   Center of the   permissions
                the amount of   applications    National        approved by the
                tax paid and    and forms into  Communications  National
                other           an electronic   Center,         Firearms Act
                accounting      format. Hard    Intelligence    Branch and
                data, such as   copies of the   Division,       user's first
                the date the    applications,   Criminal        line supervisor.
                tax was paid.   forms, and      Enforcement     The hard copy
                                correspondence  Program, have   data are
                                are maintained  access to the   protected by
                                in ATF files    system.         provisions of
                                or on                           ATF's Physical
                                microfilm or                    Security Program
                                computer                        order.\b
                                disks. They
                                are filed at
                                ATF
                                headquarters
                                or the
                                National
                                Archives and
                                Records
                                Administration
                                warehouses in
                                the
                                Washington,
                                D.C., area.
--------------------------------------------------------------------------------
\a RACF is an IBM software program that controls who can log in,
where they can go within the system once logged in, what they can do
(read, write, modify, delete), when they can do it, and from where
they can do it. 

\b ATF's Order 1720.1c, Physical Security Program, requires the
protection of hard copy data from unauthorized use by personnel and
destruction from natural and malicious intent. 

Source:  ATF. 


DESCRIPTION OF ATF'S
OUT-OF-BUSINESS RECORDS SYSTEM
=========================================================== Appendix V

When firearms licensees discontinue their businesses, ATF needs
access to their records for tracing purposes.  To ensure that it had
access to these records, shortly after the passage of the Gun Control
Act, ATF issued a regulation requiring federal firearms licensees who
permanently discontinued their businesses to forward their records to
ATF within 30 days following the discontinuance (27 C.F.R.  178.127). 
The Firearms Owners' Protection Act codified this reporting
requirement (18 U.S.C.  923(g)(4)).  Accordingly, since the enactment
of the Gun Control Act, ATF has maintained the out-of-business
records at a central location, currently the National Tracing
Center.\5

Before fiscal year 1991, ATF stored the out-of-business records in
boxes with a Tracing Center file number assigned to each licensee. 
If during a trace ATF determined that the firearms licensee who sold
the firearm was out of business and had sent in his or her records,
ATF employees were to locate the boxes containing the records and
manually search them for the appropriate serial number.  According to
ATF, this was a time-consuming and labor-intensive process, which
also created storage problems for ATF. 

In 1991, ATF began a major project to microfilm the out-of-business
records and destroy the originals.  Instead of in boxes, the
out-of-business records were stored on microfilm cartridges, with the
firearms licensee numbers assigned to them.  Although this system
occupied much less space than the hard copies of the records, ATF
officials said it was still time consuming to conduct firearms traces
because employees had to examine up to 3,000 images on each microfilm
cartridge to locate a record. 

In fiscal year 1992, ATF began using a minicomputer to create a
computerized index of the out-of-business microfilm records
containing the information necessary to identify whether ATF had a
record relating to a firearm being traced.  The index contains the
following key information:  (1) the cartridge number of the
microfilm; (2) an index number; (3) the serial number of the firearm;
(4) the federal firearms licensee number; and (5) the type of
document on microfilm, i.e., a Firearms Transaction Record (ATF Form
4473) or acquisition and disposition logbook pages.  The index
information that is captured by the minicomputer is then stored on a
database in ATF's mainframe computer to allow searches of the index
information by an employee.  The other information, including the
firearms purchaser's name or other identifying information and
firearms manufacturer, type, and model, remains on the microfilm
cartridges and must be viewed with a microfilm reader. 

Since the establishment of the computerized out-of-business records
index, ATF does not begin a trace by contacting firearms
manufacturers and importers.  Rather it queries the Out-of-Business
Records System to determine if the firearm being traced is contained
in the records of an out-of-business licensee.  To perform a query of
the system, employees are to enter the serial number of the firearm
in question into the mainframe computer's database.  If the serial
number is matched with a particular out-of-business licensee record,
the query will produce a list of one or more microfilm cartridges
indicating the cartridge number and frame where the serial number in
question may be found.  After locating the appropriate cartridges,
the employee is to use the location information in the index to
search the microfilm frames to locate the record containing the
serial number.  Since the index does not associate a firearm's serial
number with the manufacturer and type or model, the employee may need
to examine several frames on one or more cartridges to locate a
record.  After locating the record, the employee is to examine the
record to identify the purchaser of the firearm.  If the identified
purchaser is not another licensee, the trace is considered complete. 
If the purchaser is another licensee, the Tracing Center is to
contact the licensee.  If the serial number is not located in the
out-of-business records, the Tracing Center is then to contact the
manufacturer or importer to determine who purchased the firearm. 

According to ATF officials, the indexed Out-of-Business Records
System has (1) greatly reduced the need to contact manufacturers,
importers, and other licensees and (2) reduced the time and cost,
including storage costs, necessary to conduct firearm traces. 

As shown in table V.1, during fiscal years 1992 through 1995, ATF
received out-of-business records from 68,660 firearms licensees.  ATF
officials estimated that during this period, ATF spent about $9.6
million, including the cost of contract employees (65 as of July
1996), to process and maintain out-of-business records.  According to
ATF officials, ATF is receiving an increased number of records
primarily because the number of licensees going out of business has
increased, and more of these licensees have sent in their records. 
The number of licensees who have gone out of business more than
doubled, from 34,663 in fiscal year 1992 to 75,569 in fiscal year
1995.\6 About 43 percent of the licensees who went out of business in
fiscal year 1995 sent in their records, compared to about 25 percent
in fiscal year 1992--an increase of about 75 percent.  ATF officials
estimated that during fiscal years 1992 through 1995, ATF microfilmed
about 47 million documents contained in about 20,000 boxes.  Although
ATF does not systematically collect data on the number of traces
involving out-of-business records, ATF officials estimated that ATF
used the out-of-business records to help complete about 42 percent of
all completed trace requests during this period.  ATF had no
information on the number of completed traces that identified retail
firearms licensees or purchasers and involved the use of
out-of-business records. 



                               Table V.1
                
                   Disposition of Records of Federal
                   Firearms Licensees Who Went Out of
                        Business, FYs 1992-1995



                                        Percen          Percen
Fiscal year                     Number       t  Number       t   Total
------------------------------  ------  ------  ------  ------  ------
1992                             8,692      25  25,971      75  34,663
1993                             7,189      17  34,195      83  41,384
1994                            20,504      32  42,699      68  63,203
1995                            32,275      43  43,294      57  75,569
======================================================================
Total                           68,660      32  146,15      68  214,81
                                                     9               9
----------------------------------------------------------------------
Source:  GAO analysis of ATF data. 


--------------------
\5 The ATF regulation allows firearms licensees who discontinue their
businesses to deliver their records to any ATF office in the region
in which the business was located.  The local office is to forward
them to the Tracing Center. 

\6 See Federal Firearms Licensees:  Various Factors Have Contributed
to the Decline in the Number of Dealers (GAO/GGD-96-78, Mar.  29,
1996). 


DESCRIPTION OF ATF'S MULTIPLE
SALES SYSTEM
========================================================== Appendix VI

Since 1975, federal firearms licensees have been required by
regulation (27 C.F.R.  178.126a) and subsequently by law (18 U.S.C. 
923(g)(3)(A)) to report all transactions in which an unlicensed
person\7 has acquired two or more pistols and/or revolvers\8 at one
time or during any 5 consecutive business days (referred to as a
multiple sale).  As ATF stated at the time the regulation was issued,
the purpose for requiring multiple sale reports was to enable ATF to
"monitor and deter illegal interstate commerce in pistols and
revolvers by unlicensed persons."\9

The Firearms Owners' Protection Act of 1986 codified the multiple
sale regulatory reporting requirement.  Also, in November 1993, under
Title II of Public Law 103-159, federal firearms licensees were
required to send a copy of the multiple sale report to the state or
local law enforcement agency in whose jurisdiction the sale or other
disposition took place. 

Under 18 U.S.C.  923(g)(3)(A), ATF can specify the multiple sale
reporting form and designate the ATF office where the report is to be
sent.  Currently, federal firearms licensees are required to send
multiple sale reports to the ATF criminal enforcement field division
located in their respective area.  Reports are to be sent no later
than the close of business on the day that the multiple sale occurs. 
In addition, licensees are required by regulation to retain a copy of
the multiple sale reports. 

Before November 1995, ATF required that multiple sale reports be
maintained by its field divisions.  According to ATF, these divisions
in the past maintained multiple sale reports in a variety of ways: 
some used local computer information tracking systems, others used
alphabetical card files, and before 1987 some used the Department of
the Treasury's Enforcement Communications System (TECS),\10 a law
enforcement data system that includes centralized databases used by
Treasury and other law enforcement agencies. 

According to ATF policy, field divisions are to use multiple sale
reports to develop investigative leads for those persons who engage
in business as unlicensed firearms dealers or who transport or sell
firearms illegally in interstate commerce.  These reports are to
provide an investigative tool to identify traffickers and other
violators of federal firearms laws. 

In an August 1993 memorandum on gun dealer licensing, the President
listed a number of steps that ATF could take to ensure compliance
with federal firearms licensing requirements, including increasing
scrutiny of licensees' multiple sale reports and providing automated
access to those reports.  Further, according to ATF, plans to
automate multiple sale reports were included in the President's
firearms initiative, and Congress appropriated fiscal year 1995 funds
to implement the initiative. 

In November 1995, ATF began implementing a new policy to process and
computerize multiple sale reports at its National Tracing Center. 
Field divisions were instructed to forward their multiple sale
reports to the Tracing Center for processing.\11

ATF's decision to computerize multiple sale reports at the Tracing
Center was based on a test conducted from June through October 1995. 
In June 1995, to provide the capability for computerizing multiple
sale reports, ATF upgraded its Firearms Tracing System by developing
a Multiple Sales Subsystem.  This system allows the entry of multiple
sale information directly into the Firearms Tracing System.  ATF then
tested the system by entering multiple sale reports forwarded by
three field divisions.  Following successful completion of the test,
ATF issued its new policy. 

ATF decided to computerize the handling of multiple sale reports at
the Tracing Center for several reasons.  First, by computerizing the
reports as part of ATF's Firearms Tracing System, multiple sale
information became readily available for firearms traces.  When
maintained locally by field divisions, multiple sale reports were not
readily available for firearms tracing.  Second, and most important
according to the Chief of the Firearms Enforcement Division, by
entering multiple sale information into the Firearms Tracing System,
the information would be available to field divisions through Project
Lead.  ATF, through Project Lead, provides monthly firearms trace
information along with multiple sale and other data on computer
diskettes to its field divisions to develop investigative leads.\12

Once the Tracing Center receives multiple sale reports from field
divisions, the information is entered into the Multiple Sales System. 
The data entered includes (1) purchaser information such as name,
address, date of birth, place of birth, race, and sex; (2) firearms
identification information, including serial numbers of pistols
and/or revolvers purchased; and (3) federal firearms licensee
identification information.  Multiple sale data in the system are
retrievable by purchaser name and firearm serial number.  After the
information is entered into the system, the multiple sale reports are
to be microfilmed, and the original reports are to be destroyed.  The
current ATF Form 3310.4--Report of Multiple Sale or Other Disposition
of Pistols and Revolvers--showing the information requested of
licensees is reproduced in appendix VII. 

The Tracing Center has been processing multiple sale reports received
from field divisions since June 1995.  Through June 1996, the Tracing
Center had entered data on 91,599 multiple sale reports and had 521
firearms traces linked to multiple sale reports.  The Special Agent
in Charge of the National Tracing Center estimated that in the future
the Center will receive 130,000 multiple sale reports annually.  This
official estimated that each multiple sale report includes an average
of 2.3 firearms.  Table VI.1 provides monthly data on the number of
multiple sale reports processed at the Tracing Center along with the
number of firearms linked to multiple sale reports. 



                                    Table VI.1
                     
                         Number of Multiple Sale Reports
                     Processed at the National Tracing Center
                      and Firearms Traces Linked to Multiple
                        Sale Reports, June 1995-June 1996

                  Multiple     Multiple     Multiple                    Firearms
                      sale         sale         sale      Firearms     traced to
                   reports      reports     firearms        traces      multiple
Month          received\\a    entered\b      entered       entered  sale reports
-------------  -----------  -----------  -----------  ------------  ------------
June 1995              N/A          795        1,831         6,814             0
July 1995              N/A        2,403        5,489         5,962            14
Aug. 1995              N/A        6,867       15,838         4,648             7
Sept. 1995           6,332        4,685       10,812         6,264             6
Oct. 1995           13,894        2,788        6,455         6,906             3
Nov. 1995           17,846        5,374       12,546         5,391            24
Dec. 1995           19,954        4,851       11,164         6,102            14
Jan. 1996           11,650        3,671        8,419         7,661            23
Feb. 1996           15,200        8,270       19,040         8,192            24
Mar. 1996           17,716       12,344       27,842        11,523            40
Apr. 1996           12,598       19,117       43,696        18,617           158
May 1996             8,699       14,877       33,344        10,324           157
June 1996           10,248        5,557       12,906         8,653            51
================================================================================
Total              134,137       91,599      209,382       107,057           521
--------------------------------------------------------------------------------
N/A = ATF did not maintain data. 

\a Three field divisions--Atlanta, Birmingham, and Dallas--forwarded
reports to the National Tracing Center from June through October
1995.  In November, all field divisions were instructed to forward
reports to the Tracing Center. 

\b According to ATF officials at the Tracing Center, as of April 30,
1996, approximately 25 percent of the multiple sale reports forwarded
by field divisions were missing critical data and could not be
entered into the Multiple Sales Subsystem.  According to the Chief of
the Firearms and Explosives Regulatory Division, Tracing Center
personnel were to begin contacting licensees to obtain missing
information on future reports.  If unsuccessful, they were to forward
incomplete multiple sale reports to ATF inspectors for face-to-face
contact with licensees. 

Source:  ATF. 

As part of its November 1995 policy to computerize multiple sale
reports at the Tracing Center, ATF included a requirement for purging
firearms purchaser data not identified in firearms traces.  The
requirement calls for purging the purchaser data not identified in a
trace 2 years after the date of the sale.  The remainder of the data
entered for each multiple sale, such as firearms descriptive data, is
not to be purged and is to remain in the system to be used as
investigative intelligence.  In contrast, all multiple sale data
identified in firearms traces, including purchaser data, is not to be
purged from the system.  According to the Chief of the Firearms
Enforcement Division, the primary reason for purging purchaser data
over 2 years old is to delete data that may not be useful.  The
Special Agent in Charge of the National Tracing Center said that ATF
is sensitive for privacy reasons to retaining firearms purchaser data
that may have lost its utility. 


--------------------
\7 Multiple sales between federal firearms licensees are not required
to be reported. 

\8 As defined in 27 C.F.R.  178.11, a pistol is "[a] weapon
originally designed, made, and intended to fire a projectile (bullet)
from one or more barrels when held in one hand, and having (a) a
chamber(s) as a integral part(s) of, or permanently aligned with, the
bore(s); and (b) a short stock designed to be gripped by one hand and
at an angle to and extending below the line of the bore(s)." The
regulations also define a revolver as "[a] projectile weapon, of the
pistol type, having a breechloading chambered cylinder so arranged
that the cocking of the hammer or movement of the trigger rotates it
and brings the next cartridge in line with the barrel for firing."

\9 40 Fed.  Reg.  19,201 (May 2, 1975). 

\10 According to ATF officials, those ATF criminal enforcement field
divisions using TECS stopped using the system when multiple sale
report data were lost during a TECS system upgrade in 1987.  The lost
data were rebuilt manually from information collected from ATF field
divisions. 

\11 In the future, ATF plans to have federal firearms licensees send
multiple sale reports directly to the Tracing Center, eliminating
entirely the handling of the reports by field divisions.  However,
according to the Chief of the Firearms Enforcement Division,
distributing revised multiple sale report forms to federal firearms
licensees may not occur for a year or two.  ATF has a large inventory
of the current multiple sale report forms designating field divisions
as recipients of the reports.  Therefore, for cost reasons, ATF would
like to deplete the existing supply of forms before distributing a
revised version. 

\12 Project Lead is a computer software program that allows ATF
criminal enforcement field divisions to query and manipulate data
downloaded from the Firearms Tracing System.  These data include
firearms dealer and purchaser information from firearms traces and
information from all multiple sale reports, including purchaser and
firearms information.  ATF criminal enforcement field divisions are
provided information that is applicable to their respective
geographic area of responsibility. 


REPORT OF MULTIPLE SALE OR OTHER
DISPOSITION OF PISTOLS AND
REVOLVERS
========================================================= Appendix VII



   (See figure in printed
   edition.)


LEGAL ANALYSIS OF STATUTORY
RESTRICTIONS CONCERNING FEDERAL
FIREARMS LICENSEE DATA
======================================================== Appendix VIII

We were asked to evaluate ATF's interpretation of data restrictions
contained in 18 U.S.C.  926(a) and in a rider to its annual
appropriation act.  We have reviewed the relevant laws, legislative
history, and ATF legal opinions and met with ATF lawyers regarding
their interpretation.  Set forth below are the relevant statutory
provisions, our analysis of ATF's interpretation of these provisions,
and our analysis of the application of these restrictions to the two
ATF data systems that we reviewed in detail, the Out-of-Business
Records System and the Multiple Sales System.  Although we agree with
ATF's interpretation of 18 U.S.C.  926(a), we believe that ATF's
interpretation of the restriction in its annual appropriation was too
narrow.\13 However, we found that the two data systems that we
reviewed did not violate the data restrictions. 


--------------------
\13 In response to a draft of this report, ATF has revised its
analysis of the restriction.  See ATF's written comments in appendix
IX. 


   BACKGROUND
------------------------------------------------------ Appendix VIII:1

The Gun Control Act of 1968 established a system requiring federal
firearms licensees to record firearms transactions, maintain that
information at their business premises, and make such records
available to ATF for inspection and search under certain prescribed
circumstances.  This system was intended to permit law enforcement
officials to trace firearms involved in crimes while allowing the
records themselves to be maintained by the licensees rather than by a
governmental entity.  As originally enacted, the Gun Control Act
required licensees to submit such reports and information as the
Secretary of the Treasury prescribed by regulation and authorized the
Secretary to prescribe such rules and regulations as deemed
reasonably necessary to carry out the provisions of the act.\14


--------------------
\14 See 18 U.S.C.  923(g) and 926 (1976 ed.). 


   THE APPROPRIATION RIDER
------------------------------------------------------ Appendix VIII:2

In 1978, pursuant to the general authorities contained in the Gun
Control Act, ATF proposed regulations that would have required
licensees to report virtually all of their firearms transactions to
ATF through quarterly reports.\15 Under the proposed regulations,
these licensee reports of sales and other dispositions would not have
identified a nonlicensed transferee by name and address.  These
proposed regulations prompted criticism from those who believed that
the reporting requirements would lead to the establishment of a
system of firearms registration.  In response to this criticism,
Congress placed a rider in ATF's fiscal year 1979 appropriation act
prohibiting the centralization or consolidation of licensee records
and specifically prohibiting final issuance of the 1978 proposed
regulations.  The rider provided

     "[t]hat no funds appropriated herein shall be available for
     administrative expenses in connection with consolidating or
     centralizing within the Department of the Treasury the records
     of receipt and disposition of firearms maintained by Federal
     firearms licensees or for issuing or carrying out any provisions
     of the proposed rules of the Department of the Treasury, Bureau
     of Alcohol, Tobacco and Firearms, on Firearms Regulations, as
     published in the Federal Register, volume 43, number 55, of
     March 21, 1978."\16

The Senate Appropriations Committee report explained the purpose of
the rider as follows: 

     "The Bureau of Alcohol, Tobacco, and Firearms (BATF) has
     proposed implementation of several new regulations regarding
     firearms.  The proposed regulations, as published in the Federal
     Register of March 21, 1978 would require: 

     "(1) A unique serial number on each gun manufactured or imported
     into the United States. 

     "(2) Reporting of all thefts and losses of guns by
     manufacturers, wholesalers and dealers. 

     "(3) Reporting of all commercial transactions involving guns
     between manufacturers, wholesalers and dealers. 

     "The Bureau would establish a centralized computer data bank to
     store the above information.  It is important to note that the
     proposed regulations would create a central Federal computer
     record of commercial transactions involving all
     firearms--whether shotguns, rifles, or handguns.  There are
     approximately 168,000 federally licensed firearms dealers,
     manufacturers, and importers.  It is estimated that the proposed
     regulations would require submission of 700,000 reports annually
     involving 25 million to 45 million transactions. 

     "It is the view of the Committee that the proposed regulations
     go beyond the intent of Congress when it passed the Gun Control
     Act of 1968.  It would appear that BATF and the Department of
     Treasury are attempting to exceed their statutory authority and
     accomplish by regulation that which Congress has declined to
     legislate."\17

While the reference to the 1978 proposed rules was later dropped, the
general prohibition against the centralization or consolidation of
records has been included in each of ATF's annual appropriations
since fiscal year 1979.  The fiscal year 1996 appropriation rider
prohibits the consolidation or centralization of "the records, or any
portion thereof, of acquisition and disposition of firearms
maintained by Federal firearms licensees" within the Department of
the Treasury.\18


--------------------
\15 43 Fed.  Reg.  11,800 (Mar.  21, 1978). 

\16 P.L.  95-429, 92 Stat.  1002 (Oct.  10, 1978). 

\17 S.  Rep.  No.  95-939, 95th Cong., 2d Sess.  at 11-12 (1978); see
also H.R.  Rep.  No.  95-1249, 95th Cong., 2d Sess.  at 9-10 (1978). 

\18 P.L.  104-52, 109 Stat.  471 (Nov.  19, 1995). 


   18 U.S.C.  926(A)
------------------------------------------------------ Appendix VIII:3

Congress passed the second data restriction as part of the Firearms
Owners' Protection Act (FOPA) in 1986.  Specifically, the act amended
18 U.S.C.  926 to provide in part: 

     "(a) The Secretary may prescribe only such rules and regulations
     as are necessary to carry out the provisions of this chapter,
     including--

     "(1) regulations providing that a person licensed under this
     chapter, when dealing with another person so licensed, shall
     provide such other licensed person a certified copy of this
     license;

     "(2) regulations providing for the issuance, at a reasonable
     cost, to a person licensed under this chapter, of certified
     copies of his license for use as provided under regulations
     issued under paragraph (1) of this subsection; and

     "(3) regulations providing for effective receipt and secure
     storage of firearms relinquished by or seized from persons
     described in subsection (d)(8) or (g)(8) of section 922. 

     "No such rule or regulation prescribed after the date of the
     enactment of the Firearms Owners' Protection Act [May 19, 1986]
     may require that records required to be maintained under this
     chapter or any portion of the contents of such records, be
     recorded at or transferred to a facility owned, managed, or
     controlled by the United States or any State or any political
     subdivision thereof, nor that any system of registration of
     firearms, firearms owners, or firearms transactions or
     dispositions be established.  Nothing in this section expands or
     restricts the Secretary's authority to inquire into the
     disposition of any firearm in the course of a criminal
     investigation." (Emphasis supplied.)

This data restriction was one of several amendments to the Gun
Control Act made by FOPA to limit ATF's authority over licensees and
their records.  For example, FOPA amended section 923 of title 18 to
provide that licensed "importers, manufacturers, and dealers shall
not be required to submit to the Secretary reports and information
with respect to such records [they are required to maintain] and the
contents thereof, except as expressly required by this section."\19
The act went on to codify in section 923 several reporting
requirements that ATF previously had imposed on licensees by
regulation, including those related to out-of-business licensee
records and reports of multiple handgun sales.\20


--------------------
\19 18 U.S.C.  923(g)(1)(A). 

\20 See 18 U.S.C.  923(g)(3) and (4). 


   ATF'S LEGAL INTERPRETATION
------------------------------------------------------ Appendix VIII:4

ATF's interpretation of the data restrictions in the annual
appropriation rider and section 926(a) was contained in a number of
opinions and correspondence that ATF provided to us during the course
of the audit.  These opinions generally address whether the data
restrictions prohibit the establishment of a specific data system or
apply to information gathered during the course of ATF audits of a
licensee's compliance with recordkeeping requirements.  On the basis
of its interpretation of the two provisions, as set forth below, ATF
concluded in each instance that the provisions did not apply to the
systems or information collections at issue. 

Essentially, ATF maintained that the restrictions in section 926(a)
and the appropriation act rider have the same effect, and that they
only were "intended to preclude future [post-FOPA] regulations
imposing additional reporting requirements upon licensees."\21

Thus, ATF viewed the data restrictions as having no application to
the agency's internal information practices--i.e., they did not
restrict what ATF did with information it had acquired from licensees
through pre-FOPA reporting requirements or other means.\22

ATF's interpretation relied on the language and context of section
926 and related provisions (primarily section 923), as well as the
language and context of the 1979 appropriation rider, which was
enacted to counter the broad reporting requirements that ATF sought
to impose on licensees through the 1978 proposed rulemaking.  ATF
maintained that the basic effect of FOPA--codifying certain former
regulatory reporting requirements in section 923 and restricting the
agency's authority to prescribe rules and regulations in section
926--was to preempt any additional reporting requirements that the
agency might impose on licensees.  ATF also cited the principle of
deference to be accorded an agency's interpretation of laws that it
administers. 


--------------------
\21 See, for example, Memorandum dated April 21, 1989, from the
Assistant Chief Counsel (Firearms and Explosives), ATF, to the Chief,
Firearms and Explosives Division, captioned "North Atlantic Region
Firearms Initiative."

\22 In response to a draft of this report, ATF has revised its
analysis of the restriction.  See ATF's written comments in appendix
IX. 


   ANALYSIS OF ATF'S
   INTERPRETATION
------------------------------------------------------ Appendix VIII:5

We agreed with ATF's interpretation of the data restrictions as far
as it went; clearly the data restrictions apply to rules or
regulations that would impose additional reporting requirements upon
licensees.  The question was whether they have any effect beyond such
reporting requirements, and, in particular, whether they restrict how
ATF compiles or otherwise uses firearms transaction records once they
have been acquired from licensees through current reporting
requirements or other means. 

With regard to the restriction in section 926(a), we agree with ATF
that it is limited to prescribing rules and regulations.  The
appropriation rider, however, contains no language that would limit
its application either to prescribing rules and regulations or to
imposing additional reporting requirements on licensees.  The
original version of the rider did refer to the 1978 proposed
rulemaking, but it was not limited to that proposal.  The reference
to the 1978 proposal was dropped in fiscal year 1994.  Moreover,
given its structure and language--prohibiting the use of
appropriations in connection with consolidating or centralizing
certain records within the Department of the Treasury--the rider
appears to encompass ATF's internal operations. 

The ATF opinions we reviewed did not analyze the appropriation rider,
other than to treat it as "similar to" the section 926 restriction. 
However, we believe that the appropriation rider clearly has legal
effect independent of section 926.  Congress enacted it for a number
of years predating FOPA and has continued to enact it for each
subsequent year.  In fact, the language of the appropriation rider
was expanded in fiscal year 1994 to include portions of licensee
firearms records.\23 There also are significant differences in the
language of the two provisions--most notably, the absence from the
rider of any limitation on its coverage to rules or regulations. 
Also, there is no indication in the legislative history of FOPA that
section 926 was intended to subsume or otherwise affect the
appropriation rider.  Finally, the appropriation rider was originally
intended to prevent ATF from obtaining and computerizing large
volumes of information on firearms transactions in a manner that was
viewed as "accomplish[ing] by regulation that which Congress has
declined to legislate." It would be incongruous to conclude that the
appropriation rider would not reach efforts to accomplish the same
result through means other than regulatory requirements imposed on
licensees. 

Therefore, in our view, ATF's interpretation that the appropriation
rider applied only to the issuance of rules and regulations that
impose additional reporting requirements on licensees, and did not
reach ATF's internal information practices, was not supported by the
statutory language or legislative history of the rider. 

Determining the extent to which the appropriation rider restricts
ATF's internal information practices poses more difficult questions. 
The appropriation rider applies to "consolidating or centralizing,
within the Department of the Treasury, the records, or any portion
thereof, of acquisition and disposition of firearms maintained by
Federal firearms licensees." However, we do not believe that the
rider precludes all information practices and data systems that
involve an element of "consolidating or centralizing" licensee
records. 

As discussed above, the legislative history of the rider indicates
that it was originally enacted in response to an ATF proposal that
was viewed as a wholesale aggregation of licensee firearms
transaction records that went "beyond the intent of Congress when it
passed the Gun Control Act of 1968." There is no evidence in the
legislative history that the rider was intended to overturn existing
ATF information practices or data systems.  Indeed, FOPA, which
amended the Gun Control Act and was enacted 8 years after the
original rider was passed, reaffirmed several long-standing ATF
information practices.  The rider must be interpreted in light of its
purpose and in the context of the other statutory provisions
governing ATF's acquisition and use of information contained in the
Gun Control Act, as amended. 

Pursuant to the Gun Control Act, ATF is responsible for certain
regulatory functions, such as licensing and monitoring firearms
licensees, as well as certain law enforcement functions, such as the
tracing of firearms.  The act, as amended, contains specific
statutory authorities that allow ATF to obtain certain firearms
transaction information from licensees.  Section 923 contains
licensee recordkeeping and reporting authorities, as well as the
authorities for ATF to conduct inspections and searches of licensee
business premises for certain purposes.  To implement these
responsibilities and authorities, ATF necessarily gathers specific
firearms transaction data and must centralize or consolidate the data
to some degree. 

However, as discussed above, section 926(a) precludes ATF from
issuing post-FOPA rules or regulations that require that any system
of registration of firearms, firearms owners, or firearms
transactions or dispositions be established.  The legislative history
of FOPA indicates a clear congressional concern that such a registry
not be established.  For example, the Senate report accompanying an
earlier version of FOPA stated: 

     "the Committee wishes to emphasize that, notwithstanding any
     other provision of law, the authority granted under 18 U.S.C. 
     923(g)(3), (4) and (5), as well as that contained in paragraph
     (1), as amended, are not to be construed to authorize the United
     States or any state or political subdivision thereof, to use the
     information obtained from any records or forms which are
     required to be maintained for inspection or submission by
     licensees under Chapter 44 to establish any system of
     registration of firearms, firearms owners, or firearms
     transactions or dispositions."\24

Therefore, to the extent that the centralization or consolidation of
records is incident to carrying out a specific ATF responsibility and
does not entail the aggregation of data on firearms transactions in a
manner that would go beyond the purposes of the Gun Control Act of
1968, as amended, we do not believe that the rider would be violated. 


--------------------
\23 P.L.  103-123, 107 Stat.  1229 (Oct.  28, 1993). 

\24 S.  Rep.  No.  98-583, 98th Cong., 2d Sess.  at 18 (1984). 


   ATF'S OUT-OF-BUSINESS RECORDS
   SYSTEM AND MULTIPLE SALES
   SYSTEM COMPLY WITH DATA
   RESTRICTIONS
------------------------------------------------------ Appendix VIII:6

We reviewed two ATF data systems, the Out-of-Business Records System
and the Multiple Sales System, to determine if they comply with the
data restrictions.  We found that the systems do not violate the
restrictions. 


      OUT-OF-BUSINESS RECORDS
      SYSTEM
---------------------------------------------------- Appendix VIII:6.1

Shortly after the passage of the Gun Control Act of 1968, ATF issued
regulations requiring firearms licensees who permanently discontinued
their businesses to forward their records to ATF within 30 days
following the discontinuance.  In 1986, FOPA codified this regulatory
reporting requirement.\25

According to ATF, prior to 1991 the out-of-business records were
maintained at a central location in boxes, with a file number
assigned to each firearms licensee.  If ATF determined during a trace
that a firearm had been sold by a firearms licensee who was out of
business, an ATF employee manually searched the records for the
appropriate serial number.  According to ATF, this was a
time-consuming and labor-intensive process, and the volume of records
created storage problems. 

In 1991, ATF began a major project to microfilm these records.  In
fiscal year 1992, ATF established a computerized index of the
microfilm records.  The index contains the following information: 
(1) the cartridge number of the microfilm, (2) an index number, (3)
the serial number of the firearm, (4) the federal firearms licensee
number, and (5) the type of document on microfilm.  The other
information on the microfilm frames, including the firearms
purchaser's name or other identifying information, remains stored on
the microfilm and is not computerized.  The Out-of-Business Records
System is described in detail in appendix V. 

We believe that ATF's Out-of-Business Records System does not violate
the data restrictions.  As noted previously, 18 U.S.C.  926(a)
prohibits ATF from prescribing certain rules or regulations after the
date of enactment of FOPA.  At the same time it added the section
926(a) restriction, Congress codified at 18 U.S.C.  923(g)(4) the
then-existing regulatory requirement that licensees who permanently
go out of business send these records to ATF.  ATF's current
regulatory requirement concerning the out-of-business records
predates FOPA and, thus, is not subject to section 926(a).\26

With regard to the annual appropriation rider, in our view, the
Out-of-Business Records System does not violate the general
prohibition on "consolidation or centralization" of firearms
acquisition and disposition records.  The regulatory requirement that
licensees send these records to ATF existed before the appropriation
rider was first passed for fiscal year 1979, and there is no
indication in the legislative history that the rider was intended to
overturn ATF's existing practices concerning the acquisition or use
of licensee information.  According to ATF, the out-of-business
records historically have been maintained at a central location. 

Moreover, FOPA provided ATF with specific statutory authority to
collect these records.  In the legislative history of FOPA, there is
evidence that Congress considered placing constraints on ATF's
maintenance of out-of-business records but did not do so.  The
Senate-passed version of FOPA prohibited the Secretary of the
Treasury from maintaining out-of-business records at a centralized
location and from entering them into a computer for storage or
retrieval.\27 This restrictive provision was dropped from the version
of the bill enacted by Congress. 

Lastly, in fiscal year 1992, Congress appropriated $650,000 "for
improvement of information retrieval systems at the National Firearms
Tracing Center."\28 These funds were for the microfilming of the
out-of-business records.  For fiscal year 1995, Congress appropriated
funds for the President's firearms initiative, which included a
request for funding of the Out-of-Business Records System.\29
Congress provided these funds in the same legislation that contained
the rider restricting consolidation and centralization of licensee
data.  According to ATF, the system solved storage and trace timing
problems, thereby enhancing ATF's tracing capabilities.  At the same
time, the system does not computerize certain key information, such
as firearms purchaser information.  In conclusion, we believe that
the system for maintaining the out-of-business records does not
violate either data restriction provision. 


--------------------
\25 18 U.S.C.  923(g)(4).  The provision states, "Where a firearms or
ammunition business is discontinued and succeeded by a new licensee,
the records required to be kept by this chapter shall appropriately
reflect such facts and shall be delivered to the successor.  Where
discontinuance of the business is absolute, such records shall be
delivered within thirty days after the business discontinuance to the
Secretary [of the Treasury].  However, where State law or local
ordinance requires the delivery of records to other responsible
authority, the Secretary may arrange for the delivery of such records
to such other responsible authority."

\26 While some revisions have been made since the enactment of FOPA,
these revisions do not expand the scope of the regulation.  See 27
C.F.R.  178.127 (1995). 

\27 S.  49, 99th Cong., 1st Sess.  (1985). 

\28 P.L.  102-141, 105 Stat.  836 (Oct.  28, 1991). 

\29 P.L.  103-329, 108 Stat.  2384 (Sept.  30, 1994); see S.  Rep. 
No.  103-286, 103d Cong., 2d Sess.  at 19 (1994). 


      MULTIPLE SALES SYSTEM
---------------------------------------------------- Appendix VIII:6.2

Since 1975, federal firearms licensees have been required by
regulation and subsequently by law\30 to report all transactions in
which an unlicensed person has acquired two or more pistols and/or
revolvers at one time or during any 5 consecutive business days
(referred to as a multiple sale).  The purpose of the multiple sale
reporting requirement was to enable ATF to "monitor and deter illegal
interstate commerce in pistols and revolvers by unlicensed
persons."\31

According to ATF, the multiple sale reports have historically been
maintained at local ATF field divisions.  In November 1995, ATF
issued a new policy to centralize and computerize multiple sale
reports at its National Tracing Center.  The Multiple Sales Subsystem
is described in detail in appendix VI. 

We believe that ATF's Multiple Sales System complies with the data
restrictions.  As discussed earlier, the prohibitions in section
926(a) only apply to certain rules or regulations prescribed after
the enactment of FOPA.  In the same act, Congress codified the
then-existing regulatory requirement that federal firearms licensees
prepare these multiple sale reports and forward them to ATF.  ATF's
current regulatory requirement concerning the multiple sale reports
predates FOPA and, thus, is not subject to section 926(a).\32

With regard to the annual appropriation rider, in our view, the
Multiple Sales System does not violate the general prohibition on the
"consolidation or centralization" of firearms acquisition and
disposition records.  The requirement that licensees prepare these
reports and send them to ATF existed in regulation before the first
appropriation rider was passed in fiscal year 1979, and there is no
indication in the legislative history that the rider was intended to
overturn ATF's existing practices concerning the acquisition or use
of licensee information. 

Although the multiple sale reports historically have been maintained
at the field level, the provisions and legislative history of FOPA,
which gave ATF specific statutory authority to collect these records,
indicate that ATF would not be precluded from computerizing the
multiple sale reports.  FOPA requires that licensees send the reports
"to the office specified" on the ATF form.\33 Under this provision,
ATF could specify that licensees forward the multiple sale reports to
a central location.  In addition, the legislative history of the act
indicates that Congress considered placing constraints on ATF's
maintenance of multiple sale reports but did not do so.  The
Senate-passed version of FOPA prohibited the Secretary of the
Treasury from maintaining multiple sale reports at a centralized
location and from entering them into a computer for storage or
retrieval.\34 This restrictive provision was dropped from the version
of the bill enacted by Congress. 

Lastly, for fiscal year 1995, Congress appropriated funds to
implement the President's firearms initiative, which included plans
to automate multiple sale reports.\35 Congress provided these funds
in the same legislation that contained the rider restricting
consolidation and centralization of licensee data.  In conclusion, we
believe that the current Multiple Sales System does not violate
either data restriction provision. 



(See figure in printed edition.)Appendix IX

--------------------
\30 18 U.S.C.  923(g)(3)(A), as added by FOPA.  The provision states,
"Each licensee shall prepare a report of multiple sales or other
dispositions whenever the licensee sells or otherwise disposes of, at
one time or during any five consecutive business days, two or more
pistols, or revolvers, or any combination of pistols and revolvers
totalling two or more, to an unlicensed person.  The report shall be
prepared on a form specified by the Secretary [of the Treasury] and
forwarded to the office specified thereon and to the department of
State police or State law enforcement agency of the State or local
law enforcement agency of the local jurisdiction in which the sale or
other disposition took place, not later than the close of business on
the day that the multiple sale or other disposition occurs."

\31 40 Fed.  Reg.  19,201 (May 2, 1975). 

\32 The regulations are codified at 27 C.F.R.  178.126a (1995). 
While some revisions have been made since the enactment of FOPA, the
requirement concerning licensee reports to ATF has not changed. 

\33 18 U.S.C.  923(g)(3)(A). 

\34 S.  49, 99th Cong., 1st Sess.  (1985). 

\35 P.L.  103-329, 108 Stat.  2384 (Sept.  30, 1994); see S.  Rep. 
No.  103-286, 103d Cong., 2d Sess.  at 19 (1994). 


COMMENTS FROM THE BUREAU OF
ALCOHOL, TOBACCO AND FIREARMS
======================================================== Appendix VIII



(See figure in printed edition.)



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The following is GAO's comment on ATF's August 23, 1996, letter. 


   GAO COMMENT
------------------------------------------------------ Appendix VIII:7

1.  Concurrent with ATF's Chief Counsel's review of the unaudited
systems in appendix IV, ATF's Office of Science and Information
Technology recategorized several of the ATF data systems discussed in
appendix III.  One of these systems, the Firearms Explosives and
Import System, was determined not to identify retail firearms
purchasers and thus we deleted it from appendix IV. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix X

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

Daniel C.  Harris, Assistant Director
Katrina R.  Moss, Evaluator-in-Charge
Samuel A.  Caldrone, Senior Evaluator
Lou V.B.  Smith, Evaluator
Barry J.  Seltser, Supervisory Social Science Analyst
Pamela V.  Williams, Communications Analyst
Michael Little, Communications Analyst

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Ronald B.  Bageant, Assistant Director
Brian C.  Spencer, Technical Assistant Director

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Jan B.  Montgomery, Assistant General Counsel
Rosemary Healy, Senior Attorney


*** End of document. ***