U.S. Customs Service: Observations on Selected Operations and Program
Issues (Testimony, 04/20/2000, GAO/T-GGD/AIMD-00-150).

This testimony provides GAO's observations on (1) the Customs Service's
development of a Resource Allocation Model, (2) an Automated Commercial
Environment, and (3) a recently issued GAO report on Customs' personal
searches of airline passengers. (See GAO/GGD-00-38, Mar. 2000.) These
three issues are all extremely important to optimizing the quality and
efficiency of Customs' operations.

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

 REPORTNUM:  T-GGD/AIMD-00-150
     TITLE:  U.S. Customs Service: Observations on Selected Operations
	     and Program Issues
      DATE:  04/20/2000
   SUBJECT:  Air transportation operations
	     Human resources utilization
	     Inspection
	     Customs administration
	     Drug trafficking
	     Search and seizure
	     Contraband
	     Discrimination
	     Information resources management
	     Systems conversions
IDENTIFIER:  Customs Service Resource Allocation Model
	     Customs Service Automated Commercial Environment System
	     Los Angeles International Airport (CA)
	     John F. Kennedy International Airport (NY)
	     Customs Service Cost Management Information System
	     Customs Service Overtime and Scheduling System

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GAO/T-GGD/AIMD-00-150

United States General Accounting Office
GAO

Testimony

Before the Subcommittee on Government
Management, Information and Technology
Committee on Government Reform
House of Representatives

For Release on Delivery
Expected at 10:00 a.m., PDT
on Thursday
April 20, 2000
GAO/T-GGD/AIMD-00-150

U.S. CUSTOMS SERVICE
Observations on Selected Operations and Program

Issues

Statement of Laurie E. Ekstrand, Director
Administration of Justice Issues
General Government Division
and
Randolph C. Hite, Associate Director
Governmentwide and Defense Information Systems
Issues
Accounting and Information Management Division

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 (264458)

Statement
U.S. Customs Service: Observations on Selected
Operations and Program Issues
Page 7                      GAO/T-GGD/AIMD-00-150
Mr. Chairman and Members of the Subcommittee,

     I am pleased to be here today to discuss our
observations on the Customs Service's development
of a Resource Allocation Model (RAM), on an
Automated Commercial Environment (ACE), and on our
recently released report on Customs' airline
passenger personal searches.  While these are
three distinct issues, all are extremely important
to optimizing the quality and efficiency of
Customs' operations.  My testimony is based on
products we issued during 1998 on Customs'
resource allocation process, and on limited new
work in response to your recent request.  In
addition, my testimony discusses several products
concerning ACE that we issued during 1999, and our
recently issued Customs' airline passenger
inspection report.1

     In relation to both RAM and ACE, Customs has
responded to our recommendations and has moved
forward.  However, in both cases, more needs to be
done.  In relation to Customs' airline passenger
personal searches, Customs made some changes prior
to the release of our report that could result in
more effective operations.

Customs' Resource Allocation Process and Model
Development
     In 1998, we reported on selected aspects of
the Customs Service's process for determining its
need for inspectors and canine enforcement
officers to process commercial cargo or land and
sea passengers at all of its 301 ports.2

At the time of our 1998 report, Customs had not
conducted a needs assessment to determine its
agencywide needs for all inspectional personnel.
It did, however, conduct three needs assessments
aimed at specific program objectives.  Because of
their focus on specific ports and enforcement
objectives, they could not be the basis for
accurately estimating the agencywide need for
inspectional personnel and their appropriate
allocation to ports.

In our 1998 report, we identified significant
discrepancies in the workload data we obtained
from Customs headquarters, one Customs Management
Center (CMC), and two ports. We are mentioning
these data quality problems because, as I will
explain later, the accuracy and reliability of
some workload data inputs to the new RAM appear
questionable.  We further concluded and
recommended that for Customs to successfully
implement the Government Performance and Results
Act3 (GPRA), which requires it to link performance
to results, it had to determine its needs for
personnel for all of its operations and ensure
that they are allocated where they are needed
most.

Customs, responding to our 1998 report
recommendation, awarded a contract for the
development of a resource allocation model.  The
model is intended to estimate the number of
inspectors and other personnel needed to process
passengers and inspect cargo at all ports of
entry.

Objectives and Scope of Our Current RAM Work
You asked us to determine the current status of
the RAM and how it, as a methodology, estimates
personnel needs agencywide.  We selected the Los
Angeles International Airport (LAX), John F.
Kennedy International Airport (JFK), Los
Angeles/Long Beach Seaport, and Port of New
York/Newark all previously addressed in our 1998
report, as the focus of our current work.

The Resource Allocation Model
Customs contracted with PricewaterhouseCoopers
(PwC) in September 1998 to develop a RAM.  PwC
delivered a model based on two methodologies,
regression analysis and activity analysis, on
schedule in March 1999 at a cost of $556,000.

The RAM predicts what staffing levels will be
needed agencywide and locally by occupation (e.g.,
inspectors and canine enforcement officers) and by
core functions (e.g., passenger processing) on a
yearly basis.  The RAM uses actual and estimated
workload, staffing, cost, and performance data in
predicting future staffing needs.  Fiscal year
1998 data are used as the baseline because they
were the most recent for which an entire year of
data was available.

According to Customs, RAM results may be used to
support budget requests, planning, analysis of
"what if" scenarios (e.g., if Congress
appropriates funds for staffing at a particular
location), and audits.  However, Customs maintains
that it is not intended to be used as a business
process improvement tool.  That is, it will not be
used to analyze opportunities to reduce passenger
waiting and cargo examination times.  Customs also
indicated that the RAM is not intended to be used
to reallocate existing resources from one location
or one function to another.

Customs officials told us that they are still in
the early stages of analyzing the model results
and fully understanding its capabilities. PwC has
been retained to do additional work to make the
model's results more understandable and easier to
use.

The Department of the Treasury and the Office of
Management and Budget (OMB) have reviewed the
detailed RAM results for fiscal year 2000, and are
currently reviewing fiscal years 2001 and 2002
results, according to Customs officials.
Consequently, Customs made fiscal year 2000
results available to us in time for this
testimony, but not the port-level 200l and 2002
results.

RAM Methodology
     RAM components include inputs, regression
analysis, activity analysis, and results modules.
RAM input data systems include

ï¿½    Automated Commercial System (ACS),
ï¿½    Case Management Information System,
ï¿½    Cost Management Information System (CMIS),
ï¿½    Customs Automated Port Profile System
(CAPPS),
ï¿½    Customs Integrated Personnel/Pay System
(CIPPS),
ï¿½    Detector Dog System (K-9),
ï¿½    Operations Management Report Database (OMR),
and
ï¿½    Regulatory Audit Management Information
System (RAMIS).

Using inputs from these data systems, the RAM
performed two separate analyses to predict
staffing needs by occupation and location:
regression analysis, and activity analysis.
Regression analysis predicted the number of
positions at each location using the factors shown
in figure 1.

Figure 1: Regression Analysis Inputs and Outputs

Source: GAO Analysis of Customs' Data.

     PwC ultimately decided not to use regression
analysis as the only method to predict staffing
needs because it did not account for
infrastructure differences between ports and
because it yielded some illogical results.
Unaccounted for differences between ports
included:

ï¿½    Passenger processing: number of facilities,
multiple duty tours for inspectors, automation
systems, numbers and diversity of flights, threat
factors.
ï¿½    Cargo inspection: container examinations,
hours of operation, number of entries, type and
experience of brokers, use of longshoremen.

Examples of illogical regression analysis results
included the following:

ï¿½    Three inspector positions were predicted for
Bath, Maine, a port that had no previous inspector
presence and, according to Customs, required none.
ï¿½    147 inspectors were predicted for Memphis,
Tennessee, a highly automated FedEx hub requiring,
according to Customs, approximately 28 inspectors.

Activity analysis also predicts the number of
positions needed to complete a task by location,
and used fiscal year 1998 workload data as the
baseline.  It uses workload (e.g., number of
passengers), workload assumptions (e.g., percent
of passengers examined and percent increases in
passenger volume), and workload activity times
(e.g., time required to process one passenger) to
predict the number of positions needed.

The activity analysis formula is:

[Workload x Workload Activity Time] / One Staff
Year4= Predicted Number of Positions (e.g.,
inspectors).

PwC and Customs concluded that the activity
analysis is a better method for predicting needed
positions.  By using the workload activity times,
differences between ports, including automation
and facilities, may be accounted for.  For
example, highly automated ports would likely show
lower workload activity times than would ports
with fewer automated processes.

RAM Results
The RAM activity analysis predicted

ï¿½    staffing needs for 8 core occupations (e.g.,
inspectors) and 15 mission support occupations or
organizations (e.g., intelligence specialists or
the Office of Field Operations) at 462 locations
(e.g., ports and CMCs) for fiscal years 2000,
200l, and 2002;
ï¿½    the need for 722 more inspectors, an increase
of  9.4 percent, from 7,677 positions in fiscal
year 1998 to 8,399 positions in fiscal year 2000;
and
ï¿½    the need for an aggregate staffing increase
of 4,564 Customs positions, an increase of 23.5
percent, from 19,428 positions in fiscal year 1998
to 23,992 positions in fiscal year 2002.

 We reviewed the detailed activity analysis
estimates for fiscal year 2000 for LAX, JFK, Los
Angeles/Long Beach Seaport, and the Port of New
York/Newark.  Figure 2 displays the number of
inspectors at these ports in fiscal year 1998 and
the predicted number of inspectors needed in
fiscal year 2000.

Figure 2: Baseline and Predicted Number of
Inspectors at Selected Ports

Note: Port of NY/Newark includes both the
NY/Newark Seaport and the Newark International
Airport.
Source: GAO Analysis of Customs' data.

Data Reliability Issues
     The accuracy and reliability of some RAM
input data are questionable.  For example, we
reported in February 2000 that CMIS data based on
surveys lacked adequate supporting documentation
to verify the estimated time Customs personnel
spent on air and sea passenger processing
activities.5  In addition, the methods Customs
used to complete the surveys were inconsistent
among ports.  Even a small amount of imprecision
in the CMIS data can have a large effect on RAM
results.  Customs is, however, developing a system
to capture data at the activity level through
modifications to its Customs Overtime and
Scheduling System (COSS) that should improve the
reliability of CMIS data.

     We also observed, and PwC documented, certain
anomalies concerning the OMR and CMIS databases.
For example:

ï¿½    CMIS data indicated air passenger processing
activity by the Port of Champlain-Rouses Point,
New York, although the OMR database contained no
air passenger processing data for the port.
ï¿½    The OMR database indicated that the Port of
Buffalo, New York, processed air passengers,
although CMIS did not contain any air passenger
data for the port.

Finally, we observed that activity times for
specific processes (e.g., cargo inspections)
differed significantly from port to port.  These
differences could be the result of unexplained
variations in the CMIS data or because of actual
differences in automation, employee skills,
importer sophistication, or cargo variations
(e.g., textiles vs. vehicles) at the different
ports.  In any event, the RAM is a potentially
viable tool for Customs to use in estimating its
personnel needs.  However, in accordance with our
previously cited April 1998 recommendation, we
believe that more verification needs to be
performed on some questionable RAM input data.
Customs data improvement efforts, such as the COSS
modifications, should reduce some concerns about
the accuracy and reliability of RAM input data.

Customs Is Positioning Itself to Begin Acquisition
of a New Import Processing System
Customs' need to revamp the way it does business
in its import arena is undeniable.  Its existing
import processes are paper-intensive, error-prone,
transaction-based, and out of step with just-in-
time inventory practices of the trade community.
Put simply, its approach to enforcing trade import
laws and regulations, and assessing and collecting
import duties, taxes, and fees, which total $22
billion annually, is not responsive to the needs
of Customs or its commercial clients.

Since 1994, Customs has tried unsuccessfully to
modernize import processing by building what it
calls its Automated Commercial Environment, or
ACE.   In February 1999,6 we reported on the
reasons for Customs' inability to produce a new
import processing system.  Specifically, we stated
that Customs was building ACE without (1) having a
complete and enforced enterprise architecture, (2)
knowing that it was a cost-effective solution, and
(3) employing software engineering rigor and
discipline.  As a result, Customs did not know
whether ACE, as it was defined at the time, was
the right system solution (i.e., a cost effective
solution), and its approach to investing in ACE
would not allow it to determine this before it had
already invested hundreds of millions of dollars.
Moreover, even assuming that its definition of ACE
was the right solution, Customs was not employing
the requisite system engineering discipline to
reasonably ensure that ACE would meet specified
requirements, and be delivered within cost and
schedule goals.  In short, Customs did not know
whether it was doing the right thing, the right
way.  To address these weaknesses, we made a
series of detailed recommendations that Customs
agreed to implement.

We are pleased to say that Customs has already
taken significant actions to implement some of our
recommendations.  For example, the Treasury
Department and Customs have addressed our concern
about possible duplication and incompatibilities
between ACE and the Treasury system development
effort, known as the Integrated Trade Data System,
by combining the two efforts.  Similarly, Customs
has addressed our recommendation for completing an
enterprise systems architecture in order to
provide the needed agencywide business and
technological context within which to permit
optimization of ACE's business value and mission
performance.

We are also encouraged by Customs' clear
commitment to seeing that the fundamental
acquisition and investment management capabilities
that our remaining recommendations call for are
firmly in place before investing huge sums of
money in ACE.  For example, Customs' draft request
for proposals for its systems modernization
integration contractor requires that the
contractor/ subcontractors possess mature software
development capabilities.  Also, Customs has
developed a software acquisition improvement plan
aimed at Customs possessing the necessary software
acquisition maturity to effectively manage its
contractor.  By implementing and adhering to
mature software acquisition processes, and by
requiring its contractor/subcontractors to have
mature development capabilities, Customs will
increase the likelihood of ACE being built and
deployed successfully.

Also consistent with our recommendations, Customs'
acquisition plan for ACE calls for investing in
the system in four increments in order to minimize
the inherent risk associated with large, multiyear
system acquisition projects.  For each increment,
Customs plans to task its integration contractor
with preparing a life-cycle cost estimate and
realistic and supportable benefit expectations.
It also plans to make funding of each increment
conditional upon the results of a return-on-
investment assessment and compliance with its
enterprise systems architecture.  Further, once an
increment is completed, Customs plans to validate
that actual costs and benefits are meeting
expectations and to use this information in
deciding whether to invest in further system
increments.  By doing so, Customs will be able to
minimize the risks associated with investing huge
sums of money over many years in a large
monolithic system.

Nevertheless, much remains to be accomplished
before Customs is fully positioned to begin
building a large, expensive software-intensive
system like ACE.  For some of these open areas,
Customs says it cannot complete them until funds
are made available to do so, and for others,
Customs' plans call for first hiring a systems
integration contractor to assist the agency in
fulfilling its commitments to fully implement our
recommendations.  The fact that the success of
these planned actions is thus to-be-determined,
combined with the more than $1 billion expected
cost of ACE and its criticality to achieving more
effective and efficient import processing and to
supporting billions of dollars in revenue
collection, continues to make ACE a high-risk
endeavor that we plan to monitor closely.

Customs' Airline Passenger Inspections
     The Customs Service faces a major challenge
in effectively carrying out its drug interdiction
and trade enforcement missions, while facilitating
the flow of cargo and persons into the United
States.  To carry out its mission, Customs
inspectors are authorized to detain and search
airline passengers they suspect may be bringing
contraband, such as illegal drugs, into the
country.  Concerns have been raised about Customs'
policies and procedures for selecting or
"targeting" passengers for examinations and
conducting personal searches, including strip-
searches and x-rays.

     We were asked to review Customs' policies and
procedures for conducting personal searches and to
determine the controls Customs has in place to
ensure that airline passengers are not
inappropriately selected or subjected to personal
searches.

     Our analysis of personal search data for
fiscal years 1997 and 1998 was limited to data
contained in Customs databases, and therefore
focused on the passenger characteristics available
for 102,000 arriving international passengers whom
Customs subjected to some form of personal search.
As a result, we could not include in our analysis
any information about the remainder of the
approximately 140 million international passengers
who arrived during fiscal years 1997 and 1998,
including passengers who had only their baggage
searched.

Better Targeting of Airline Passengers for
Personal Searches Could Produce Better Results
     Inspectors select passengers for further
examination on the basis of Customs' policies and
procedures and their professional judgment and
experience.  Of the 102,000 arriving passengers
subjected to some sort of personal search, we
reported7 that 95 percent were searched by
inspectors for contraband (e.g., illegal drugs) or
hidden weapons by patting the passenger's clothed
body (commonly referred to as a frisk or patdown),
4 percent were strip-searched, and 1 percent were
subjected to an x-ray exam.  About 3 percent of
the passengers frisked or patted down had positive
results (i.e., contraband was found), 23 percent
of the strip-searches were positive, and 31
percent of the x-ray searches were positive.

     Generally, searched passengers of particular
races and gender were more likely than other
passengers to be subjected to more intrusive types
of personal searches (being strip-searched or x-
rayed) after being subjected to frisks or
patdowns.  However, in some cases, those types of
passengers who were more likely to be subjected to
more intrusive personal searches were not as
likely to be found carrying contraband.

     Specifically, White men and women and Black
women were more likely than Black men and Hispanic
men and women to be strip-searched rather than
patted down or frisked, but they were less likely
to be found carrying contraband.  The most
pronounced difference occurred with Black women
who were U.S. citizens.  They were 9 times more
likely than White women who were U.S. citizens to
be x-rayed after being frisked or patted down in
fiscal year 1998.  But, on the basis of the x-ray
results, Black women who were U.S. citizens were
less than half as likely to be found carrying
contraband as White women who were U.S. citizens.

     We recommended that Customs compare the
characteristics of those passengers subjected to
personal searches with the results of those
searches to better target passengers carrying
contraband.

     During the course of our review, Customs
developed new policies and procedures for personal
searches that include new requirements for
supervisory review and approval and procedures
intended to ensure that passengers subjected to
personal searches know their rights.  We
identified management controls, such as training
provided to inspectors and supervisors on
conducting personal searches and more systematic
evaluation of complaints, that Customs uses to
help ensure that inspectors use their search
authority fairly and judiciously.  In conjunction
with improved data on the characteristics of those
passengers subjected to personal searches, these
policies and controls could better safeguard the
rights of U.S. citizens and the traveling public.

     Mr. Chairman, this concludes my prepared
statement.  I will be pleased to answer any
questions you or members of the Subcommittee may
have.

_______________________________
1 U.S. Customs Service: Better Targeting of
Airline Passengers for Personal Searches Could
Produce Better Results (GAO/GGD-00-38, Mar. 17,
2000).
2 Customs Service: Process for Estimating and
Allocating Inspectional Personnel (GAO/GGD-98-107,
Apr. 30, 1998),  Customs Service: Inspectional
Personnel and Workloads (GAO/GGD-98-170, Aug 14,
1998), and Customs Service: Inspectional Personnel
and Workloads (GAO/T-GGD-98-195, Aug. 14, 1998).
3 Government Performance and Results Act of 1993,
P.L. 103-62.
4 A staff year is equal to 2,087 staff hours.
5 U.S. Customs Service: Reasonableness of Costs
for Processing Air and Sea Passengers Cannot Be
Determined  (GAO/AIMD/GGD-00-94R, Feb.  29, 2000).
6 Customs Service Modernization: Serious
Management and Technical Weaknesses Must Be
Corrected (GAO/AIMD-99-41,  Feb. 26, 1999).
7 U.S. Customs Service: Better Targeting of
Airline Passengers for Personal Searches Could
Produce Better Results (GAO/GGD-00-38, Mar. 17,
2000).
*** End of document ***