NARCOTICS INTERDICTION:

United States Customs Service Needed

Better Controls Over

Operation Hard Line Funds

OIG-01-096 September 27, 2001

Office of Inspector General

*******

The Department of the Treasury
Contents

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

Page 1

Audit Report.................................................................................................................................. 2

Results in Brief.............................................................................................................................. 2

Background ................................................................................................................................... 3

Findings and Recommendations ............................................................................................... 5

Finding 1 Improved Controls and Documentation are Needed....................................... 5

Recommendation ................................................................................................. 8

Finding 2 Timely Reviews of Unliquidated Obligations are Needed.............................. 9

Recommendation ................................................................................................. 9

Finding 3 Controls Over Carryover Funds Need Improvement ...................................... 9

Recommendation ...............................................................................................10

Appendices

Appendix 1: Objectives, Scope, and Methodology .......................................................12

Appendix 2: Schedule of Monetary Benefits ..................................................................13

Appendix 3: Management Comments.............................................................................14

Appendix 4: Major Contributors To This Report ............................................................17

Appendix 5: Report Distribution.......................................................................................18

Abbreviations

ACS Automated Commercial System

AIMS Asset Information Management System

ATS Automated Targeting System

BASC Business Anti-Smuggling Coalition

Customs United States Customs Service

FY Fiscal Year

GAO General Accounting Office

NII Non-Intrusive Inspection

OIG Office of Inspector General

OMB Office of Management and Budget

POE Ports of Entry

SPS Strategic Problem Solving
OIG Audit

Report

The Department of the Treasury

Office of Inspector General

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

Page 2

September 27, 2001

Robert C. Bonner

Commissioner

U.S. Customs Service

During fiscal years 1995 through 1998, Congress provided the United 

States Customs Service (Customs) with $155.3 million to support 

Operation Hard Line, a long-term enforcement strategy. This strategy 

involved intensified inspections, improved port facilities, and increased 

use of technology in drug interdiction efforts. Funds provided were noyear funds originating from several sources, with certain amounts 

earmarked by Congress for specific items.

This audit was performed to determine if fund controls were adequate 

to ensure that Operation Hard Line funds were used as planned. The 

audit scope focused on Operation Hard Line activities from FY 1995 

through FY 1998. The fieldwork was performed at Customs 

Headquarters In Washington, D.C. A more detailed description of our 

objective, scope, and methodology is provided as Appendix 1.

Results in Brief

Our review of Operation Hard Line funding disclosed that 

$155.3 million in no year funds had been provided from several 

sources, with certain amounts earmarked by Congress for specific 

items. Congress designated these funds without fiscal year limitation 

because the appropriations can be used for large acquisitions that 

require long procurement lead times, or for unique operations that 

transcend fiscal years.

Our review showed that Hard Line funds needed improved controls to 

better track initiatives and ensure they were allocated and spent in 

accordance with the initial intent of their appropriations. For example,
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

Page 3

Hard Line initiatives, funded from the Violent Crime Reduction Trust 

Fund (Crime Bill) were commingled with other enforcement initiatives 

also funded from the bill. This made it difficult, if not impossible, to 

separately track the obligations and expenditures of these initiatives. 

In addition, better documentation of the required monthly and quarterly 

reports, and justifications for the $13.8 million allocated to the 

Commissioner’s Reserve were needed. More timely reviews of 

unliquidated obligations 1 were also needed to deobligate funds and 

make them available sooner for other narcotic interdiction needs. As a 

result, Hard Line funds may not have been used in the most effective 

manner, and were more vulnerable to fraud, waste, and abuse.

We made three recommendations to improve fund controls and ensure 

that periodic reviews are properly documented along with the purpose 

of holding unallocated funds in the Commissioner's Reserve Account.

Customs concurred with our recommendations and provided 

comments concerning additional on-going actions and a number of 

steps taken to address the issues identified during the review. 

Customs response to our draft report is provided in Appendix 3.

Background

As the principal border agency that ensures all goods and persons 

entering the United States comply with laws, Customs has a 

fundamental role to play in the national narcotics strategy. Customs 

pursues this enforcement mission through a multi-pronged strategy of 

interdictions, investigations, intelligence gathering, and industry 

partnerships. During FY 1995, Customs developed and initiated 

Operation Hard Line, a long-term strategy to disrupt and deter 

narcotics smuggling via passenger vehicles and cargo at southwest 

border ports of entry (POEs). The second phase of Operation Hard 

Line (also referred to as Hard Line II) began in March 1996. This effort 

concentrated on high-risk areas along the southern tier, which includes 

Florida, the Gulf of Mexico, the Caribbean and Puerto Rico.

To support these Hard Line enforcement efforts, Congress 

appropriated over $155 million during fiscal years 1995 through 1998. 

The Hard Line strategy involved intensified inspections, improved port 

 

1

 Unliquidated obligations - matching expenditure is not posted.
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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facilities, and increased use of technology in drug interdiction efforts. 

Hard Line initiatives at the ports included enhanced pre-primary 

inspections, performing more secondary inspections, and conducting 

more intensive cargo searches. Customs dedicated additional 

resources to targeting high risk cargo for examinations by: using the 

ACS Cargo Selectivity database; forming Intelligence Collection 

Analysis Teams; supporting the domestic Business Anti-Smuggling 

Coalitions (BASC)2; implementing the Automated Targeting System 

(ATS); and installing concrete barriers to manage traffic flow. In 

addition, Hard Line promoted “Strategic Problem Solving” (SPS) by 

relying on internal experts at each port to develop and test creative 

new ways to prevent drug smuggling.

The following chart identifies the source of these funds and shows the 

related obligations and expenditures along with the amounts allocated 

to the FY 1999 spending plan, and the Commissioner’s Reserve.

 

2 Customs partnership with U.S. businesses along the southern border of the U.S.
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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OPERATION HARD LINE FUNDING (MILLIONS)

INITIAL FUNDS OBLIGATED FUNDS UNOBLIGATED FUNDS

Initial Funding

Source

Amount

Obligations Expenditures Unliquidated 

Obligations 

At 09/30/98

FY 99

Spending 

Plan

Commissioner’

s

Reserve

FY 95

Rescission Bill

$13.2 $12.3 $10.5 $1.8 $.3 $.6

FY 96

Crime Bill

25.7 21.8 20.4 1.4 3.8 .1

FY 97

H.L. (102)

65.0 54.2 47.0 7.2 10.5 .3

FY 97

Gateway (103)

28.0 22.3 18.4 3.9 1.2 4.5

FY 98

Crime Bill H.L.

& Gateway

23.4 11.3 9.3 2.0 3.8 8.3

Total

$155.3 $121.9 $105.6 $16.3 $19.6 $13.8

Findings and Recommendations

Finding 1 Improved Controls and Documentation are Needed

Improved Controls are Needed to Track Initiatives

Operation Hard Line funds needed improved monitoring and controls 

to ensure they were being spent as originally intended. We found the 

Customs Asset Information Management System (AIMS) could track 

Hard Line funds when the funding that year was used specifically for 

Hard Line and no other initiatives. However, when sources of funding, 

such as the Crime Bill, were used for several initiatives, AIMS tracked 

the overall fund activities, but not by specific initiatives. When this 

occurred, control was lost over individual initiatives such as Hard Line, 

and the way earmarked funds were spent. In addition, when Hard Line 
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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funds were carried over from their initial to subsequent years, similar 

control problems existed. Hard Line funds from different 

appropriations were combined with other funding initiatives, and 

thereby lost their identity.

The AIMS Detailed Budget Status Reports (7041A) worked well, 

monitoring and tracking Hard Line fund balances and their related 

obligations and expenditures, when a fund was used exclusively for 

Hard Line transactions. Good examples of this were the $65 million 

appropriated in FY 1997 and tracked in Hard Line Fund 102, and the 

$28 million also appropriated in FY 1997 and tracked in Hard Line II 

(Gateway) Fund 103.

However, AIMS did not function well in tracking Hard Line when 

funding sources such as the Crime Bill were also used for various 

other initiatives. This occurred because AIMS status reports did not 

monitor and track these initiatives individually, but combined them 

under a single fund, not distinguishing between Hard Line and other 

initiative activities. For example, total funds provided under the 

FY 1998 Crime Bill were $60.6 million, but only $23.4 million were 

earmarked for Hard Line activities. The other $37.2 million were 

intended for various other initiatives including vehicle replacement, the 

redeployment of agents and inspectors to high threat drug zones, and 

vehicle and container inspection systems. Activities for all of these 

initiatives were tracked by AIMS as Crime Bill Fund 180 transactions. 

This made it very difficult to identify which transactions were using 

Hard Line funds, and whether they were being spent as intended.

To obtain an estimate on how much of the Crime Bill funds were spent 

on Hard Line, Customs budget personnel performed a detailed 

analysis of suballottee obligations and expenditures. Their analysis 

showed that at the end of FY 1998, $12.2 million of the FY 1998 Crime 

Bill funding remained, including $9.7 million for technology, and 

$2.5 million for anti-smuggling inspectors. In addition, $3.8 million in 

FY 1996 Crime Bill funding still remained, including $200,000 for 

technology and $3.6 million for personnel costs. The combined 

carryover funds from above that were intended for Hard Line use 

totaled $16 million, including $9.9 million for technology and 

$6.1 million for additional personnel costs.
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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According to Customs budget personnel, approximately $8.4 million of 

the above $9.9 million in Hard Line technology funds is in the 

Commissioner’s Reserve pending allocation for x-ray equipment. 

However budget personnel could not provide proper support and 

documentation for the reserve funds. The FY 1999 Spending Plan 

Proposal for Crime Bill Carryover Funds also did not contain any 

provision for the $6.1 million initially intended for additional personnel 

costs.

Documentation of Periodic Review Reports Needs Improvement

Customs budget personnel stated that controls over Operation Hard 

Line funding include preparation of comprehensive quarterly reviews 

and monthly fund status reports. We were also told that for multi-year 

accounts such as Hard Line, an annual analysis of year-end balances 

is also prepared, together with proposed spending plans for the 

continuation of approved activities for the following fiscal year. When 

prepared timely, these reports should provide valuable management 

insight for making decisions to ensure Hard Line funds are properly 

spent. We found that the required annual analysis and spending plans 

were prepared for Operation Hard Line, but the performance of 

quarterly reviews were not documented, and only 4 out of the last 12 

monthly progress reports, reflecting amounts obligated and committed, 

could be provided.

Unallocated Funds Need Improved Documentation

Our review of the Commissioner’s Reserve for Operation Hard Line 

showed that funds totaling $13.8 million are not being allocated timely 

to authorized spending plans, and the purpose of holding these funds 

was not adequately documented to ensure they would be used within 

the intent of their initial appropriation.

The Operation Hard Line reserve was comprised of funds carried over 

from previous appropriations, going back to FY 1995. Customs budget 

personnel explained that $4.5 million, for the purchase of a Puerto Rico 

Sea Container x-ray system, was being held in reserve until the Office 

of Information Technology completed a study to evaluate the systems 

feasibility. In addition, $8.4 million for Non-Intrusive Inspection (NII) 

x-ray equipment is awaiting an approved spending plan. The 

remaining $900,000 in funding was from prior year deobligations. 
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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However, a more timely disposition of Hard Line reserve funds is 

needed along with supporting documentation to ensure that the use of 

funds is consistent with the original intent of the appropriation.

Recommendation

1. The Assistant Commissioner, Office of Finance, should ensure that 

funds earmarked for specific items, including reserve funds, are 

properly monitored and controlled and that carryover funds are 

allocated to spending plans in a timely fashion. All required 

analyses of initiative funding should also be properly performed and 

documented.

Management Comment. Customs concurred and has instituted a 

quarterly report on the status of approved initiatives, including 

carryover funds, to ensure that funds are allocated and obligated in 

a timely fashion. The next update to the Customs Budget Manual 

will include improved reporting and tracking guidelines.

Customs also stated that the accounting structure within AIMS 

allows for tracking of activities at the lowest possible level. In 

addition, since a large portion of initiative funding was for 

procurement of technology that typically takes more than one fiscal 

year to obligate, Customs maintains a five-year technology plan 

that is regularly updated. Customs uses that reserve suballotment 

as an administrative methodology for keeping track of funds 

pending their allocation to other suballotments. This reserve is not 

used as a contingency fund.

OIG Comment. We consider this recommendation to have a 

satisfactory management decision with final action pending revision 

of the Customs Budget Manual. We recognize that AIMS is 

capable of tracking funds as long as funding is not commingled with 

other initiatives as was the case with the FY 1998 Crime Bill, where 

a portion of the total funds provided was earmarked by Congress 

for specific Hard Line initiatives. The fact that a large portion of 

initiative funds was for long term procurement actions and that 

these funds were held in the Commissioner's Reserve Account 

exemplifies the need for proper documentation and tracking to 

ensure that funds are spent for their intended purpose.
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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Finding 2 Timely Reviews of Unliquidated Obligations are

Needed

A more timely review of Hard Line unliquidated obligations is needed to 

deobligate funds and make them available sooner for other narcotic 

interdiction efforts. For example, at the end of FY 1998, Hard Line 

unliquidated obligations totaled $16.3 million. A memorandum from 

the Assistant Commissioner, Office of Finance, dated March 22, 2000, 

has addressed this issue, and according to Customs Budget 

personnel, Hard Line unliquidated obligations have since been reduced 

by $7.8 million as of December 2000.

A review of the remaining $8.5 million for potential deobligations could 

represent a potential source of funds to be used for other enforcement 

efforts. Since deobligated no-year funds are available for reobligation3

it is important that Customs ensure that unliquidated obligations 

continue to be more timely reviewed. See Appendix 2 for discussion of 

potential monetary benefits.

Recommendation

1. The Assistant Commissioner, Office of Finance, should continue to 

ensure the analysis of unliquidated obligations are performed 

timely, including a specific review of the remaining $8.5 million Hard 

Line unliquidated obligations.

Management Comment. Customs concurred and instituted 

guidelines and procedures to ensure that analysis of unliquidated 

obligations are reviewed in a timely fashion.

OIG Comment. We agree with Customs actions to date and 

continued timely review of unliquidated obligations, including the 

$8.5 million attributed to Hard Line, should satisfactorily address 

this issue.

Finding 3 Controls Over Carryover Funds Need Improvement

Our review of Customs spending plans for Crime Bill funds disclosed 

that funds from different appropriation years and funding sources were 

being commingled. This increased the risk that funds for special 

 

3 GAO/OGC-91-5 Appropriations Law pages 5-7.
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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initiatives such as Hard Line would not be spent within the intent of 

their original appropriations. For example, the FY 1999 Spending Plan 

Proposal combined the FY 1996 and FY 1998 Crime Bills along with 

the FY 1998 Interagency Agreement carryover funds. This resulted in 

a balance of $21.2 million Customs said was available for various 

enforcement initiatives.

SPENDING PLAN PROPOSAL

VIOLENT CRIME REDUCTION TRUST FUND

CRIME BILL FUND 180 ($000)

Sources of Funds, Expenditures, and Remaining Balance (000)

FY 1996 Hard Line (Crime Bill) $25,690

FY 1998 (Crime Bill)4 60,648

FY 1998 Interagency Agreement 10,890

Total: $97,228

Obligated in FY 1996 $(11,352)

Obligated in FY 1997 ( 9.232)

Obligated in FY 1998 (55,419)

Total: $(76,003)

Available Balance for FY 1999 $21,225

The initiatives planned for these funds included non-intrusive 

technology, anti-smuggling training, Strategic Problem Solving, license 

plate readers and Operation Meathook. However, the plans did not 

specifically account for the $16 million (discussed in Finding 1) in Hard 

Line funds, carried over as part of the $21.2 million above, including 

$6.1 million initially intended for additional Hard Line personnel costs.

Recommendation

1. The Assistant Commissioner, Office of Finance, should ensure that 

there is improved tracking of carryover funds and they have 

sufficient supporting documentation to verify funds are being spent 

within the intent of their initial appropriation.

 

4 $23.4 of the $60.6 million in Crime Bill funding was earmarked for Operation Hard Line.
United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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Management Comment. Customs concurred. Corrective actions 

to improve the tracking of carryover funds and ensure sufficient 

supporting documentation is maintained are discussed in the 

response to Finding 1.

OIG Comment. We consider this recommendation to have a 

satisfactory management decision with final action pending revision 

of the Customs Budget Manual.

******

Please be advised that we are recording potential monetary savings 

from funds put to better use totaling $8.5 million in the Inventory, 

Tracking and Closure system (ITC) for our recommendation relating to 

more timely review of unliquidated obligations. This recommendation 

is identified in Appendix 2 of our report. We will also include the 

potential savings from funds put to better use in the OIG Semiannual 

Report to the Congress. Customs management is responsible for 

recording the actual amount of funds put to better use as a result of the 

audit in the ITC.

We appreciate the courtesies and cooperation provided to our staff 

during the audit. If you have any questions, please contact me at 

(713) 706-4611 or a member of your staff may contact Kenneth W. 

Coleman, Audit Manager, at (713) 706-4611. Major contributors to this 

report are listed in Appendix 4.

George W. Tabb

Regional Inspector General for Audit
Appendix 1

Objectives, Scope and Methodology

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

Page 12

The objective of this audit was to determine if fund controls were adequate to 

ensure that Hard Line funds were used as planned. The audit scope focused 

on activities from FY 1995 through FY 1998. The fieldwork for this audit was 

performed at Customs Headquarters in Washington, DC.

To accomplish our objective, we:

• Obtained applicable policies and procedures and reviewed documentation 

on the funding process.

• Interviewed Customs headquarters officials and knowledgeable personnel 

responsible for Hard Line activities

• Reviewed applicable Treasury Appropriation Acts, justifications, and 

language.

• Documented Customs budget formulation and allocation of funds process, 

and reviewed financial plans and fund distribution documents.

• Reviewed Hard Line obligations and expenditures to include staffing and 

equipment acquisitions, and review of the five-year technology plan.

We conducted the audit between April 1999 through October 2000 in 

accordance with generally accepted government auditing standards.
Appendix 2

Schedule of Monetary Benefits

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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A recommendation that funds be put to better use is a 

recommendation that funds could be used more efficiently if 

management took actions to implement and complete the 

recommendation. The following potential monetary savings from funds 

put to better use will be recorded in the Inventory, Tracking and 

Closure system (ITC) and included in the OIG Semiannual Report to 

the Congress.

Potential Funds

Recommendation Number Put to Better Use

Finding 2 - Recommendation 1 $8.5 million

The potential savings represents unliquidated obligations which, if 

reviewed on a more timely basis, may be deobligated and made 

available for other narcotic interdiction efforts.

It is Customs management’s responsibility to record the actual amount 

of funds put to better use as a result of its implementation of the 

recommendation in the ITC.
Appendix 3

Management Comments

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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Appendix 3

Management Comments

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

Page 15
Appendix 3

Management Comments

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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Appendix 4

Major Contributors To This Report

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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George W. Tabb, Regional Inspector General for Audit

Southern Region

Kenneth W. Coleman, Audit Manager

Robert F. Edwards, Auditor-In-Charge

Clara J. Veal, Auditor
Appendix 5

Report Distribution

United States Customs Service Needed Better Control Over Operation 

Hard Line Funds (OIG 01-096)

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The Department of the Treasury

Office of Strategic Planning and Evaluations

Office of Accounting and Internal Control

Office of Budget

U.S. Customs Service

Commissioner of Customs

Assistant Commissioner, Office of Finance

Director, Office of Planning and Evaluations

Office of Management and Budget

OIG Budget Examiner