U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

 Inspections of Firearms 

 Dealers by the 

 Bureau of Alcohol, Tobacco, 

 Firearms and Explosives 

 

 Report Number I-2004-005 

July 2004 
EXECUTIVE DIGEST 

The Office of the Inspector General (OIG) assessed the effectiveness 

of the Bureau of Alcohol, Tobacco, Firearms and Explosives’ (ATF) 

program for inspecting Federal Firearms Licensees (FFLs) to ensure that 

they are complying with federal firearms laws and regulations. We 

reviewed the frequency and quality of the ATF’s different types of FFL 

inspections; how the ATF manages its Inspector resources; how the ATF 

selects FFLs for inspection; and the regulatory enforcement actions taken 

by the ATF against FFLs who violate federal firearms laws. 

The Gun Control Act of 1968 (Act) established the ATF’s FFL 

inspection program “for ensuring compliance with the record keeping 

requirements” of the Act.1 ATF Inspectors conduct “application 

inspections” on applicants for FFLs and “compliance inspections” on 

existing license-holders. Application inspections are conducted to ensure 

that applicants are familiar with the Gun Control Act and other federal 

firearms laws.2 Compliance inspections are conducted to ensure that 

FFLs are obeying these laws. Specifically, FFLs must account for all 

firearms that they have bought and sold, and report all multiple 

handgun sales and firearms thefts to the ATF. If the ATF finds 

violations, it is empowered to take adverse actions including issuing 

warning letters, directing FFLs to attend warning conferences, revoking 

the FFLs’ licenses, and, potentially, referring the matter to ATF Special

Agents for criminal enforcement. As of March 2004, the ATF had limited 

authority to suspend an FFL’s license, and no authority to fine FFLs. 

RESULTS IN BRIEF 

We found that the ATF’s inspection program is not fully effective 

for ensuring that FFLs comply with federal firearms laws because 

inspections are infrequent and of inconsistent quality, and follow-up 

inspections and adverse actions have been sporadic. Specifically, the 

ATF does not conduct in-person inspections on all applicants before 

licensing them to sell guns, and ATF compliance inspections of active 

dealers, including large-scale retailers, are infrequent and vary in quality. 

Even when numerous or serious violations were found, the ATF did not 

uniformly take adverse actions, refer FFLs for investigation, or conduct 

timely follow-up inspections. 

 1 The Gun Control Act of 1968, Public Law 90-618. Title 18 U.S.C. Chapter 44.

U.S. Department of Justice i

Office of the Inspector General 

2 The National Firearms Act, Title 26 U.S.C. Chapter 53; The Arms Export

Control Act of 1976, Title 22 U.S.C. § 2778. 

Evaluation and Inspections Division
 We also found wide variations in the ATF inspection program’s 

productivity and implementation among the ATF Field Divisions that led 

us to conclude that inspection procedures should be streamlined and 

standardized. Although the ATF faces significant shortfalls in resources, 

it must ensure that available Inspector resources are used effectively and 

efficiently to ensure that FFLs comply with federal firearms laws. The 

ATF has begun to implement changes to improve the consistency with 

which it conducts follow-up inspections and takes adverse actions. 

However, our review concluded that the ATF still needs to implement 

consistent inspection procedures to identify and address problem FFLs. 

The ATF Does Not Conduct In-Person Application Inspections on All 

New FFLs to Verify Applicant Information and Ensure They 

Understand Firearms Laws 

Application inspections are critical for ensuring compliance with 

federal firearms laws. These inspections enable the ATF to verify that 

applicants are eligible for federal firearms licenses and also provide the 

new dealers an opportunity to discuss issues related to firearms laws 

with ATF Inspectors. Further, if an FFL violates federal firearms laws 

after having received an application inspection, it is easier for the ATF to 

meet the legal standard of demonstrating that the violation was “willful.”3 

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Office of the Inspector General 

 

In fiscal year (FY) 2002, the ATF issued 7,977 licenses to new 

firearms businesses and 7,382 licenses to firearms collectors, and 

conducted 8,123 application inspections.4 Upon examining the ATF’s 

firearms license database, we found that most (95 percent) of the 

inspections were of businesses, not collectors, which indicated that the 

ATF inspected the preponderance of new firearms retailers in FY 2002. 

However, our interviews and survey of ATF Headquarters and Field 

Division personnel found that many of those application inspections 

consisted only of a telephone call rather than an in-person visit. ATF 

Headquarters and Field Division staff told us that telephonic application 

inspections were not as comprehensive as in-person inspections, but the 

ATF staff said that they did not have enough resources to conduct all 

3 In the context of the Gun Control Act, willfulness is the intentional disregard 

of, or indifference to, legal obligations. Repeat violations (especially where there was

notification of prior violations) or large numbers of violations can demonstrate 

willfulness. Sometimes one egregious violation, such as selling a gun to a 

non-prohibited person when the FFL knows that the gun is actually for a prohibited

person (“straw purchase”), can demonstrate willfulness. 

4 A collector’s license enables individuals to make interstate sales and 

purchases of firearms classified by the ATF as curios and relics to facilitate a personal 

firearms collection. ATF officials told us that they do not place a high priority on

inspecting new firearms collectors. 

Evaluation and Inspections Division
inspections in person. Subsequent to the initiation of this review, in an 

October 8, 2003, memorandum to ATF Field Divisions, the ATF Assistant 

Director for Firearms, Explosives, and Arson issued revised guidance for 

conducting application inspections. The memorandum stated that the 

ATF’s goal is to inspect all new FFL applicants on-site to ensure that they 

understand federal firearms laws before issuing them a federal firearms 

license, beginning with applicants in 14 selected cities. Although the 

new guidance is a step in the right direction, the ATF still does not 

comprehensively inspect all new applicants in person. 

The ATF Does Not Regularly Conduct Compliance Inspections on 

Active FFLs, Including Large-Scale Retailers 

We found that most FFLs are inspected infrequently or not at all. 

According to the former ATF Director, the agency’s goal is to inspect each 

FFL at least once every three years to ensure that they are complying 

with federal firearms laws. However, due in part to resource shortfalls, 

the ATF is currently unable to achieve that goal. ATF workload data 

show that the ATF conducted 4,581 FFL compliance inspections in 

FY 2002, or about 4.5 percent of the approximately 104,000 FFLs 

nationwide. At that rate, it would take the ATF more than 22 years to 

inspect all FFLs. 

Our review of the inspection history for 100 randomly selected 

FFLs also showed that the ATF did not conduct regular compliance 

inspections. Of the 100 FFLs, 23 had never been inspected; 22 had 

received only an application inspection; 29 had received at least one 

compliance inspection; and 26 FFLs had received only a license renewal 

inspection. Even for those FFLs that had been inspected, the records 

showed that many of the inspections occurred years ago. For example, 

one FFL cited in 1985 for selling a rifle to a minor and for numerous 

record-keeping violations had never been re-inspected. 

The ATF Does Not Identify and Inspect All FFLs that Exhibit 

Established Indicators of Potential Violations or Gun Trafficking 

“Crime gun” trace data enables the ATF to identify FFLs that may 

be violating federal firearms laws or FFLs at which firearms trafficking 

may be occurring.5 Although the ATF focuses its inspections on those 

FFLs that exhibit most severely the established indicators of trafficking 

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Office of the Inspector General 

 5 The ATF defines a “crime gun” as any firearm that is “illegally possessed, used 

in a crime, or suspected by law enforcement officials” of having been used during the 

commission of a crime. The ATF National Tracing Center traces crime guns recovered 

by law enforcement agencies to determine where they were originally sold by an FFL.

Evaluation and Inspections Division
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Office of the Inspector General 

Evaluation and Inspections Division 

(Ue.g.U, sales of many handguns to one person), it does not identify all FFLs 

that exhibit those indicators. Instead, the ATF manipulates the criteria it 

uses to target FFLs for inspections so that it only identifies as many such 

FFLs as it has the resources to inspect. Therefore, the ATF has not 

applied its established indicators of potential trafficking to objectively 

identify the full universe of potential traffickers. 

In December 2003, the ATF began a special project to identify 

common characteristics of FFLs that pose a greater risk to public safety, 

so that the general level of compliance within the industry can be 

estimated and that compliance inspections can be better directed at 

those FFLs where it is most likely that violations may have occurred. 

Nonetheless, until the ATF objectively identifies the full universe of FFLs 

that exhibit established trafficking characteristics, it cannot identify the 

resources it needs to effectively address FFLs that are likely to be 

committing violations, or accurately report to the Attorney General, 

Congress, and the public on the scope of the potential trafficking 

problem at FFLs. 

Implementation of FFL Inspections by Field Divisions Is 

Inconsistent 

The conduct of FFL inspections varied greatly among the ATF Field 

Divisions. The average time that each of the 23 ATF Field Divisions 

spent conducting each application inspection in FY 2002 ranged from 

6.2 hours per inspection to as much as 25.5 hours per inspection. The 

average time spent to conduct each compliance inspection ranged from 

24.5 hours to as much as 90 hours per inspection. ATF Headquarters 

officials stated that the variance in average inspection times among the 

23 Field Divisions occurred because of the discretion that Inspectors 

have in conducting compliance inspections and because some Field 

Divisions had more inexperienced Inspectors on staff, which reduced 

productivity. 

We reviewed the ATF’s guidance for inspections and found that it 

does allow Inspectors great latitude to modify significant portions of the 

inspections. For example: 

• To determine whether an FFL’s record-keeping system is 

accurate, ATF Inspectors may either conduct a full inventory 

during a compliance inspection or sample the FFL’s inventory. 

The ATF inventory worksheet used during inspections provides 

no guidance to ensure that a minimum valid sample is taken. 
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Office of the Inspector General 

Evaluation and Inspections Division 

• The ATF worksheet for examining sales records does not specify 

how many records to review. Our interviews with Inspectors in 

Field Divisions found varying approaches. For example, in the 

Miami Field Division, Inspectors said that they reviewed six 

months of records, while Inspectors at the Seattle Field Division 

said that they examined the records for one year. The 

Inspectors also examined the records differently. Of the 18 

Inspectors we interviewed, 14 said that they only examine the 

forms to see if they were properly filled out, while 4 indicated 

that they also look for indications that a purchaser may be part 

of a firearms trafficking ring or acting as a straw purchaser for 

someone else. 

We also examined the numbers of inexperienced Inspectors on 

staff and compared the percentage of inexperienced staff to the average 

inspection times for each Field Division, but we found no correlation. 

Rather, our review of application inspection data found that average 

inspection times were related to disparities in staffing levels and the 

number of FFLs located in the Divisions. Field Division Inspector staff 

ranged from a high of 35 Inspectors to a low of 9 Inspectors. Likewise, 

the number of FFLs in each Field Division ranged from 1,172 to 8,194. 

However, the ATF had not distributed its Inspector resources among the 

Field Divisions to match the distribution of FFLs, resulting in significant 

workload imbalances. As a result, the average time that each Field 

Division spent on application inspections decreased as the number of 

FFLs per available Inspector increased. 

We also examined several performance indicators to see if the 

inspection variations had an impact on outcomes, such as violations 

found and criminal referrals. We found little correlation between the 

amount of time that Field Divisions spent inspecting and the number of 

adverse actions (such as revoking an FFL’s license) that the Field 

Divisions took or the number of times the Field Divisions identified and 

referred suspected criminal activity for investigation. We also found 

significant variances in productivity among the ATF Field Divisions’ 

inspections. For example, our analysis of the ATF’s FY 2002 workload 

and performance data found: 

• The number of inspections conducted per Inspector each year 

ranged from 12.7 (Miami Field Division) to 46.5 (Kansas City 

Field Division). 

• The percentage of the inspections conducted by Field Divisions 

that identified violations varied from just 4.5 percent (Kansas 

City Field Division) to 41.5 percent (Dallas Field Division). 
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Office of the Inspector General 

Evaluation and Inspections Division 

• On compliance inspections in which violations were discovered, 

the average number of violation instances found ranged from 

15.9 (Nashville Field Division) to 178.2 (Chicago Field Division). 

• The average time that the Field Divisions took to find each 

violation instance ranged from 47 minutes per violation 

instance (Dallas Field Division) to over 7 hours per violation 

instance (Los Angeles Field Division). 

Our review of FFL inspection files also found that even when FFL 

compliance inspections identify significant violations of federal firearms 

laws by the FFLs or by gun purchasers, these violations are not always 

reported to ATF Special Agents for investigation. We identified several 

cases in which indications of potential criminal violations, including gun 

trafficking, were identified but not referred for investigation. The FFLs 

were subsequently investigated after the illegal activity was discovered 

through other means. For example, one FFL was inspected in October 

2002, and during that compliance inspection the Inspector found 40 

firearms not entered into the FFL’s inventory records, missing sales 

records, and sales to out-of-state residents – all strong indicators of gun 

trafficking. However, the Inspector did not report the findings through 

ATF management channels to ATF Special Agents for investigation. 

Subsequent to the inspection, information from a confidential informant 

led to an investigation, and in December 2003, ATF Special Agents 

arrested the dealer for firearms trafficking. 

The ATF Acts Infrequently to Revoke Federal Firearms Licenses, and 

the Process is Not Timely 

In FY 2002, 1,934 of the inspections that the ATF conducted 

uncovered violations. Inspectors found an average of almost 70 

violations on each of these 1,934 inspections. In FY 2003, the ATF found 

violations on 1,812 inspections, with an average of over 80 violations 

each. However, the ATF issued only 30 Notices of Revocation in FY 2002 

and 54 Notices of Revocation in FY 2003. In addition to initiating few 

revocation actions, the process for revoking the licenses of FFLs that 

violated federal firearms laws, or clearing the FFL, is lengthy.TP

6PT The ATF 

provided us with case-tracking data for 50 closed denial and revocation 

cases completed in FY 2001 and FY 2002. We determined that the 

 

TP

6PT Notices of Revocation are not final. Of the 30 Notices in FY 2002, 25 FFLs 

requested a hearing and 3 of those avoided revocation. (FY 2003 data was unavailable.) 

The ATF also can effectively revoke an FFL’s license by denying his or her request for 

license renewal, and in FY 2001, the ATF denied 28 requests for renewal. 
processing of these 50 cases averaged 379 days from the date that the 

Inspector recommended revocation to the date that the case was closed. 

According to ATF officials, the lengthy duration of revocation 

proceedings was due to the number of ATF officials involved in the eightstep process (e.g., Area Supervisors, Directors of Industry Operations 

(DIOs), Division Counsels, and Hearing Officers) and delayed support 

from ATF lawyers. The ATF’s case tracking data did not include internal 

tracking dates, but Assistant Chief Counsels and Division Counsels we 

interviewed acknowledged delays in denial and revocation proceedings. 

They stated that the delays were due, in part, to their heavy caseloads 

and a need for better documentation of violations from ATF Inspectors. 

We also noted that, in some cases, delays occurred due to a lack of legal 

staff within the Field Division. Some Field Divisions without staff 

lawyers were required to obtain support directly from their regional 

Assistant Chief Counsel’s Office.7 

In May 2003, subsequent to the initiation of our review, the ATF 

issued guidelines to ensure more consistent and timely initiation and 

processing of adverse actions. We found that, after the ATF issued the 

guidelines, the number of FFL revocation hearings rose from 25 in 

FY 2002 to 87 in FY 2003. The ATF also denied FFL requests to renew 

their licenses or issued Notices of Revocation 59 times during the first 

quarter of FY 2004. Most of these cases had yet to be finalized as of 

March 2004. 

The May 2003 guidelines begin to address the problems that we 

noted with the ATF’s past failure to consistently follow up and take 

action when violations are found. Specifically, the policy directs that all 

FFLs that were issued warning letters or that were directed to attend 

warning conferences must be scheduled for a follow-up “recall” 

inspection in the following year, and that adverse actions are to escalate 

for repeat offenses. The policy also establishes a time frame for part of 

the adverse action process by directing Field Divisions to act on 

recommendations for adverse action within 90 days after receiving the 

inspection report. 

 

U.S. Department of Justice vii

Office of the Inspector General 

Evaluation and Inspections Division

7 The ATF has five Assistant Chief Counsel Offices, located in San Francisco, 

Chicago, Dallas, Atlanta, and New York/Philadelphia. The northeast regional office is 

currently operating in Philadelphia due to the September 11, 2001, destruction of the 

ATF’s New York offices, which were located at the World Trade Center. 
FFL Inspections Must Be Streamlined and Standardized 

With the May 2003 guidelines, the ATF began to improve the 

consistency and timeliness of adverse actions (including warning letters, 

warning conferences, and revocation), but the ATF needs to further 

improve the consistency and quality of FFL inspections. The current 

variability in the Field Divisions’ inspection implementation must be 

addressed to ensure that FFLs subject to adverse actions are treated 

consistently. Requiring specific adverse actions for specific numbers of 

violations in the absence of standardized inspection procedures and 

sampling criteria will result in dissimilar treatment of FFLs in different 

Field Divisions. As discussed previously, the ATF’s guidance on 

conducting inspections does not ensure consistent examinations of FFLs’ 

compliance with gun laws. 

Areas in which the inspection process could be improved include: 

standardizing procedures to require reviews of firearms inventories and 

sales records to establish a statistically valid sample needed to verify the 

effectiveness of the FFL’s inventory management and record-keeping 

systems; standardizing and automating inspections paperwork and 

providing laptop computers to enable Inspectors to prepare reports onsite; extending the inspection cycle for FFLs with no significant violations 

so that limited resources can be directed toward noncompliant dealers; 

and establishing guidance to ensure that Inspectors consistently identify 

and report indications of firearms trafficking for investigation. 

Improving the efficiency of the inspection process through 

standardization also could reduce the need for additional staff and the 

time spent at FFLs. In an April 2003 report to Congress, the former ATF 

Director stated that to fully implement the ATF’s mission to enforce 

federal firearms laws, the ATF would need 1,235 Inspectors dedicated to 

conducting FFL inspections.8 That projection appears to include an 

assumed 27 percent increase in the average length of inspections over 

the historical average of 49.4 hours that we identified.9 If the staffing 

requirement was calculated using the ATF’s actual historical inspection 

average of about 50 hours, the ATF would need a total of only 984 

Inspectors to accomplish firearms inspections on a triennial basis. 

Moreover, rather than increasing inspection times, our analysis shows 

U.S. Department of Justice viii

Office of the Inspector General 

 8 On March 24, 2004, the current Acting ATF Director reiterated the report’s 

figures in testimony before the House Committee on Appropriations, Subcommittee on 

Commerce, Justice, and State, the Judiciary, and Related Agencies. 

9 This average includes both application and compliance inspections, as well as 

all other time (e.g., leave, training, etc.) that must be considered when projecting 

staffing needs. 

Evaluation and Inspections Division
that implementing a streamlined yet statistically valid inspection regimen 

could reduce the average inspection time and the ATF could therefore 

reduce the number of additional Inspectors needed to accomplish FFL 

compliance inspections every three years. For example, by reducing the 

average inspection time to 40 hours, the ATF would reduce the number 

of Inspectors needed to conduct FFL compliance inspections on a 

triennial basis from 1,235 to 788 Inspectors. 

Increasing the efficiency of the inspection process also is needed 

because the demand on ATF Inspectors to perform duties related to 

explosives is increasing. In November 2002, the Safe Explosives Act 

imposed new requirements that increased the number of explosives 

licensees and directed the ATF to conduct on-site inspections of 

explosives licensees at least once every three years. The additional 

explosives workload already has reduced the ATF’s ability to inspect 

FFLs. Our review of inspections data for the first five months of FY 2004 

found a precipitous decrease in the number of compliance inspections. 

From October 2003 through February 2004, the ATF completed just 

1,113 FFL compliance inspections. At that pace, the ATF would 

complete fewer than 2,700 FFL compliance inspections during FY 2004 – 

less than half the number that the agency reported that it completed in 

FY 2003 and less than 2.6 percent of the FFL population. 

The ATF Does Not Consistently Report Inspection Performance 

In response to our requests for inspections and workload data, the 

ATF queried its N-Spect, Federal Licensing System (FLS), and Standard 

Time and Attendance System (STATS) electronic databases.10 During our 

examination of the performance and productivity of the ATF’s FFL 

inspections program, we identified significant discrepancies between the 

systems with regard to the number and type of inspections conducted 

and the hours spent conducting the inspections. Further, we found that 

data contained in the N-Spect database contained significant errors. For 

example, while preparing responses to our data requests, ATF officials

determined that several hundred inspections entered as compliance 

inspections were actually application inspections. In addition, the data 

in the systems differed significantly from the data the ATF included in 

published reports. We discussed these inconsistencies with ATF 

Headquarters officials, and they gave two reasons for the inconsistencies. 

They stated that there were differences in how the queries of the N-Spect 

electronic database were constructed by different ATF analysts, and that 

U.S. Department of Justice ix

Office of the Inspector General 

 10 N-Spect tracks direct time related to FFL inspections, FLS tracks information 

related to FFL licensees, and the STATS timekeeping system tracks direct and indirect

hours for payroll purposes. 

Evaluation and Inspections Division
Field Division staff did not use the correct project codes because the 

codes are “confusing.” 

To improve the future tracking of inspection data, in October 2003 

the ATF implemented a new version of N-Spect that requires Field 

Division staff to use pull-down menus that are inspection-specific (e.g., 

“Application Inspection”). Although the enhancements to the N-Spect 

database will increase the reliability of the data in the system, the ATF 

must nonetheless adopt a standard approach for querying the N-Spect 

electronic database to ensure that requests for the same data will elicit 

comparable results. If the ATF does not adopt a standard method for 

querying and extracting historical data, it cannot consistently report 

accurate performance data. 

 

New Restriction on Retention of Gun Purchaser Data Will Reduce 

the ATF’s Ability to Detect Fraudulent Background Checks 

Prior to selling a gun, an FFL must determine if the potential 

purchaser is prohibited from owning a gun by querying the Federal 

Bureau of Investigation’s (FBI) National Instant Criminal Background 

Check System (NICS) directly through the FBI or through a designated 

state agency. For each query, the FBI’s NICS currently retains for 90 

days whether or not the sale was approved and information on the 

purchaser. However, beginning in July 2004 all purchaser information 

on NICS queries that do not result in a denial will no longer be kept for 

90 days, but will be destroyed within 24 hours of the official NICS 

response to the FFL.11 To comply with this requirement, the FBI has 

stated that it intends to expunge purchaser information for approved 

sales from NICS records overnight. For these approved sales, the FBI will 

retain for 90 days only the NICS Transaction Number (NTN), the license 

number of the FFL that contacted NICS, and the date that the NICS 

query was made. After 90 days, the FBI will retain only the NTN and the 

date that the number was issued. 

For most FFLs, NICS is a valuable tool that enables them to 

quickly determine whether a potential customer is prohibited from 

buying firearms. However, a small number of corrupt gun dealers may 

attempt to hide transfers to prohibited persons by falsifying NICS 

information, such as by listing the prohibited buyer on the sales record 

but calling in to the FBI the name of a person with a clean record. 

 

U.S. Department of Justice x

Office of the Inspector General 

11 The Fiscal Year 2004 Consolidated Appropriations Bill (Public Law 108-199) 

states that the Department of Justice cannot retain “identifying information” related to 

sales of firearms to non-prohibited persons for more than 24 hours. However, all 

information related to calls for which potential sales are denied by NICS will be retained 

indefinitely. 

Evaluation and Inspections Division
Currently, the ATF rechecks recent sales records with NICS to verify the 

information that the FFLs submitted. The ATF reported that it has not 

found any NICS violations involving the falsification of purchaser 

information through these reviews, but officials said the checks serve as 

a deterrent. However, the reduced retention period for approved 

purchaser and FFL information will limit the ATF’s ability to detect 

certain fraudulent NICS checks through FFL inspections, since the ATF 

will no longer be able to verify the information that the dealers submitted 

by rechecking sales records at the FFL. 

CONCLUSIONS 

Our review found the ATF’s FFL inspection program is too limited 

and inconsistent to ensure that FFLs comply with federal firearms laws. 

In FY 2002, the ATF inspected only 4.5 percent of the approximately 

104,000 FFLs to ensure they were complying with federal firearms laws. 

Although we recognize that the ATF’s resources are limited, we concluded 

that the ATF’s lack of standardized inspection procedures results in 

inconsistent inspections of FFLs and significant variation in the 

implementation of the inspection program by Field Divisions. The most 

recent performance data available show that ATF’s Field Divisions took 

from 24.5 hours to as much as 90 hours per compliance inspection. 

Further, we found little or no correlation between longer inspection times 

and outcomes such as criminal referrals and adverse actions taken. We 

concluded that the ATF needs a more standardized and efficient 

inspection regimen. 

Because the ATF does not conduct regular inspections of all FFLs, 

it cannot effectively monitor the overall level of FFL compliance with 

federal firearms laws. In December 2003, the ATF directed Field 

Divisions to conduct Random Sample Compliance Inspections. Using 

data from those inspections, the ATF planned to “be able to project the 

overall level of compliance by” gun dealers, pawnbrokers, and 

collectors.12 While the project to estimate the overall level of compliance 

with laws is needed to assess the challenge facing the ATF, it cannot take 

the place of regular compliance inspections for deterring and identifying 

noncompliance with gun laws. 

To ensure that all FFLs are treated consistently, and that the FFL 

inspection program is as efficient as possible to maximize the number of 

inspections conducted annually, a national ATF policy should require 

U.S. Department of Justice xi

Office of the Inspector General 

 12 Memorandum, Assistant Director for Firearms, Explosives, and Arson to All 

Special Agents In Charge, December 8, 2003. ATF officials told us that the

memorandum was not distributed to the Field Divisions until January 2004.

Evaluation and Inspections Division
that inspections be conducted in a uniform manner, that inspections 

procedures are limited to the steps needed to accomplish a valid review, 

and that violations are processed in a uniform and appropriate manner. 

A consistent and timely inspection process is essential for identifying and 

addressing scofflaw dealers and for reducing the availability of illegal 

firearms to criminals. 

RECOMMENDATIONS 

We recommend that the ATF: 

1. Develop a standard, streamlined inspection process that 

includes in-person inspections of all FFL applicants; more 

efficient inventory and records reviews; automated inspection 

reporting; and consistent examination of indicators of firearms 

trafficking. 

2. Conduct a pilot project to test the streamlined inspection 

procedures and establish appropriate time standards for 

conducting these inspections. 

3. Revise the staffing requirement report using the time standards 

to reflect the number of Inspectors needed to conduct 

compliance inspections on a triennial basis, or on an alternative 

schedule based on the FFL’s compliance history. 

4. Develop alternatives for better aligning Inspector resources with 

the distribution of FFLs, such as by redrawing Field Division 

boundaries, realigning personnel, or other methods. 

5. Update the inspection tracking system to accurately segregate 

and report on Inspector time spent preparing for inspections, in 

travel, on-site at FFLs, and conducting other administrative 

duties. 

6. Prepare quarterly reports on the productivity and results 

achieved by each Field Division. 

7. Direct the National Licensing Center to develop an adverse 

action tracking system to monitor the progress and timeliness 

of FFL denials and revocations from the time an Inspector 

makes a recommendation until the proceedings are finalized. 

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Office of the Inspector General 

Evaluation and Inspections Division
8. Continue coordinating with the Department of Justice, Office of 

Legislative Affairs, to gain the authority to suspend or impose 

civil penalties on FFLs that violate federal firearms laws. 

9. To improve the comprehensiveness of crime gun tracing by law 

enforcement agencies: 

a. Coordinate with the Office of Justice Programs to determine 

the feasibility of using discretionary grant funding to support 

crime gun tracing. 

b. Develop a model for more accurately identifying potential 

firearms trafficking through the analysis of an FFL’s firearms 

sales volume and the number of firearms traced to the FFL. 

U.S. Department of Justice xiii

Office of the Inspector General 

Evaluation and Inspections Division
TABLE OF CONTENTS 

Background......................................................................................... 1 

Purpose, Scope and Methodology ..................................................... 14 

 

Results of the Review........................................................................ 17 

The ATF Does Not Conduct In-Person Application Inspections on 

All New FFLs ...................................................................................... 17

The ATF Does Not Regularly Conduct Compliance Inspections 

on Active FFLs, Including Large-Scale Retailers .................................. 20

ATF Does Not Identify and Inspect All FFLs That Exhibited Indicators 

of Potential Violations or Gun Trafficking........................................... 23

Gun Tracing Has Significant Shortcomings That Limit Its Use for 

Identifying FFLs That Should Be Inspected ........................................ 24

ATF’s Field Divisions Implement FFL Inspections Inconsistently......... 28

Suspected Criminal Violations Are Not Always Referred 

for Investigation ................................................................................ 37

ATF Acts Infrequently to Revoke Federal Firearms Licenses 

and the Process is Not Timely ............................................................ 39

New ATF Guidelines Begins to Address Inconsistent and 

Untimely Adverse Actions .................................................................. 43

By Streamlining and Standardizing Inspections, the ATF Could 

Dramatically Improve the FFL Inspection Program............................. 45

ATF Does Not Consistently Report Inspection Performance ................ 49

New Restriction on Retention of Gun Purchaser Data Will Hinder 

the ATF’s Ability to Detect Fraudulent Background Checks................ 51

Conclusions ..................................................................................... 54 

Recommendations ........................................................................... 56

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division
Appendix I: ATF Form 4473 ........................................................... 58 

Appendix II: Area Supervisor Survey .............................................. 60 

Appendix III: ATF Comments on the Draft Report......................... 66 

Appendix IV: OIG Analysis of the ATF’s Comments................ ....... 85 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division
BACKGROUND 

The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) 

enforces federal firearms laws and regulations, including issuing licenses 

and overseeing Federal Firearms Licensees (FFLs) and most explosives 

licensees and permittees. The ATF enforces federal firearms laws, in 

part, by conducting regulatory inspections of FFLs. These inspections 

examine whether FFLs are keeping proper records and are taking proper 

steps to avoid selling firearms to prohibited persons (see inset). 

FFL Licensing and Operational 

Requirements Individuals Prohibited From 

Purchasing Firearms

Individuals prohibited by federal law from 

possessing a firearm include anyone who: 

1. has been convicted of a crime punishable

by more than one year in prison; 

2. is a fugitive from justice;

3. unlawfully uses controlled substances; 

4. has been adjudicated as mentally 

defective;

5. is an illegal alien, or an alien admitted to 

the United States under a nonimmigrant

visa; 

6. has been dishonorably discharged from 

the Armed Forces;

7. has renounced his or her American 

citizenship;

8. is a subject of a court order that restrains

the person from harassing, stalking, or 

threatening an intimate partner; or

9. has been convicted of a misdemeanor 

crime of domestic violence. 

Individuals under indictment for a crime

punishable by more than one year of prison are 

prohibited from receiving a firearm, but may 

lawfully possess a firearm they obtained before

being indicted. 

Source: Title 18 U.S.C. Chapter 44

To obtain a license for 

making or selling firearms, 

applicants must be at least 21 

years old and not prohibited from 

possessing firearms. Applicants 

are required to notify the chief 

officer of their local law 

enforcement agency (LEA) that 

they intend to apply for a license, 

and must submit a photograph 

and a full set of fingerprints with 

their applications, as well as a 

statement certifying that their 

business is in compliance with all 

state and local laws (including 

zoning laws). Application 

examiners at the ATF National 

Licensing Center (NLC) in Atlanta, 

Georgia, determine the eligibility 

of applicants for Federal Firearms 

Licenses.13 Fees for federal 

firearms dealer licenses are $200 

for the first three years and $90 

for each three-year renewal period. 

 

U.S. Department of Justice 1

Office of the Inspector General 

13 The NLC maintains the Federal Licensing System (FLS) database and is the

official repository of firearms and explosives inspection reports. Certain information 

from inspection reports is captured in the FLS, including dates of inspections and past 

regulatory enforcement actions taken against FFLs. The NLC also oversees the ATF’s 

Hearing Officer program for conducting adverse action hearings involving FFLs. 

Evaluation and Inspections Division
As of December 2003, there were approximately 104,300 FFLs in the 

United States, including approximately 65,700 retailers.14

Each year, FFLs conduct more than 8.5 million firearms sales.15 

To reduce the availability of firearms to criminals, FFLs are required to 

verify that potential customers are not prohibited from possessing a 

firearm and to verify that customers are residents of the state in which 

the FFL is located. FFLs must verify the identity of potential customers 

by examining a government-issued identification document, such as a 

driver’s license, and have the customer complete a Form 4473, Firearms 

Transaction Record, which captures data related to the purchaser and 

firearm(s) purchased (see Appendix I). The FFLs also contact the Federal 

Bureau of Investigation (FBI) or a statewide LEA to request that the 

National Instant Criminal Background Check System (NICS) be queried 

to confirm that the potential customers are not prohibited from 

purchasing firearms.16 Most NICS queries result in an immediate 

response to the FFL regarding purchaser eligibility. In cases where an 

immediate response is not given, FFLs are allowed to complete the 

transaction after three business days if NICS is unable to complete the 

check within that time. If the purchaser is later determined to be 

prohibited from possessing a gun, the ATF seeks to remove the gun from 

the purchaser’s possession.17 

Federal law requires that FFLs maintain completed Forms 4473, as 

well as a log of all firearms that they have acquired and sold, known as 

an Acquisition and Disposition Book (A&D Book). The A&D Book must 

U.S. Department of Justice 2

Office of the Inspector General 

 14 Firearms retailers are issued either Type 1 (storefront retailer) or Type 2 

(pawnshop) federal firearms licenses. Other types of FFLs include manufacturers and 

importers of firearms or ammunition, ammunition dealers, and collectors of curios or 

relics. Largely as a result of increases in license fees and the ATF’s requirement that all 

FFLs comply with state and local zoning laws, the FFL population has decreased from a 

high of more than 286,000 in March 2000.

15 “Federal Bureau of Investigation National Instant Criminal Background

Check System 2001/2002 Operational Report,” FBI Publication, May 2003. 

16 The Brady Handgun Violence Prevention Act, Public Law 103-159, Title 18 

U.S.C. § 922(s). The NICS, operated by the FBI, was created to facilitate the required 

background checks. FFLs can also query NICS via the Internet, through the FBI's NICS

E-Check system. 

 

17 ATF Special Agents attempt to remove the firearm from the prohibited

person’s possession by informing the purchaser of his or her “prohibited status” and 

offering options for them to surrender the firearm. Options include returning the

firearm to the FFL that sold it, transferring the firearm to a non-prohibited third party, 

or surrendering the firearm to an LEA. 

Evaluation and Inspections Division
contain information including a description of the firearm, the name and 

address of the person from whom the firearm was acquired and, once 

sold, the name and address of the purchaser and the date the gun was 

sold.18 FFLs also are required to report sales of multiple handguns to the 

same purchaser.19 Combined, these record-keeping requirements are 

intended to deter the illegal transfer of firearms to prohibited persons. 

The records kept by FFLs also enable the ATF to trace firearms 

recovered by LEAs to learn when those firearms were purchased and by 

whom. According to the ATF, less than 5 percent of firearms are used in 

violent crimes by the person who originally purchased the gun from an 

FFL. Guns used in violent crime are generally acquired through a 

secondary market of traffickers and “straw purchasers” (individuals that 

buy firearms for prohibited individuals).20 Nonetheless, tracing is a 

significant investigative tool because it can provide investigators leads to 

the subsequent purchaser(s) of the firearm. 

The ATF’s FFL Inspection Program 

The ATF’s FFL inspection program uses a cadre of Inspectors to 

verify that FFLs are complying with federal firearms laws and that 

tracing data provided by FFLs are accurate and timely. The Inspectors 

do not have the authority to arrest individuals, do not carry firearms, 

and do not conduct criminal or undercover investigations. Before the 

enactment of the Homeland Security Act of 2002, the ATF had 567 

Inspectors.21 As directed by the Homeland Security Act, in February 

2003 the tax and regulatory responsibilities of the ATF were split, and 

most regulatory functions were transferred from the Department of the 

U.S. Department of Justice 3

Office of the Inspector General 

 18 If a firearm is obtained from another FFL, the FFL receiving the firearm can 

enter the other licensee’s FFL number instead of the name and address of the previous

owner. Sales must be recorded in the A&D Book within seven days from the time the 

Form 4473 is completed.

19 According to Title 18 U.S.C. § 923(g), an FFL must submit a “Report of 

Multiple Sale or Other Disposition of Pistols and Revolvers,” to the ATF if an individual

purchases more than one handgun within a period of five consecutive business days. 

20 An unlicensed individual may sell a firearm to an unlicensed resident of his 

or her State, if the buyer is not prohibited by law from receiving or possessing a firearm, 

or to a licensee in any State (Title 18 U.S.C. § 922). 

21 Testimony of ATF Director Bradley Buckles to the Senate Committee on the 

Judiciary, June 11, 2002. 

Evaluation and Inspections Division
U.S. Department of Justice 4

Office of the Inspector General 

Evaluation and Inspections Division 

Figure 1: Field Division Organization Chart 

 

Treasury to the Department of Justice.TP

22PT The new title of the agency 

within the Department of Justice became the Bureau of Alcohol, 

Tobacco, Firearms and Explosives. As of August 2003, the ATF had 498 

Inspectors. Of the 498 Inspectors, approximately 420 were assigned to 

Industry Operations groups located throughout the ATF’s 23 Field 

Divisions. The remaining Inspectors were assigned to the ATF 

Headquarters and various management positions. 

A typical ATF Field Division structure included a Special Agent In 

Charge to oversee the operations of the office, a Director of Industry 

Operations (DIO), and two or three Area Offices, which were managed by 

an Area Supervisor. Most 

Field Divisions also had 

at least one Senior 

Operations Inspector to 

assist with large-scale 

FFL inspections 

(Figure 1). 

To implement the 

FFL inspection program, 

ATF Inspectors conduct 

four different types of 

inspections: 

• Application 

inspections

verify that an 

applicant for a 

federal firearms 

license is eligible 

for a license and 

agrees to follow 

federal laws 

related to buying and selling firearms. These inspections may 

be conducted either over the telephone or in-person. The 

Inspectors interview the individual applying for the license and, 

 

TP

22PT The Act created the Alcohol and Tobacco Tax and Trade Bureau (TTB) within 

the Department of the Treasury to administer and enforce existing federal laws and tax 

code provisions related to alcohol and tobacco products. According to the ATF, about 

60 Inspectors and 19 attorneys accepted positions at the TTB. As a result of a 

Memorandum of Agreement between the ATF and the TTB, an additional 40 Inspectors 

were detailed from the ATF to the TTB for seven months, from March through 

September 2003. 

Source: ATF Field Operations Directorate. 
U.S. Department of Justice 5

Office of the Inspector General 

Evaluation and Inspections Division 

during in-person inspections, also interview store employees. 

According to ATF Headquarters officials, the ATF focuses on 

conducting application inspections on new businesses and 

generally does not inspect new collectors.TP

 23PT

• Compliance inspections examine whether an FFL is complying 

with federal firearms laws, including ensuring that Forms 4473 

(Firearms Transaction Record) and A&D Books are maintained 

accurately. Except in very limited circumstances, the ATF is 

prohibited by law from inspecting an FFL more than once a 

year.TP

24PT 

• Renewal inspections verify the accuracy of renewal application 

information and determine if an FFL’s license should be 

renewed. The ATF categorizes all renewal inspections as 

compliance inspections for performance measurement 

purposes, although they are generally less rigorous than other 

compliance inspections. 

• Limited purpose inspections are narrowly scoped inspections 

conducted for a specific purpose. For example, an Inspector 

may visit a store to review and approve an FFL’s new inventory 

software or to examine Forms 4473 for a particular firearm 

used in a crime. The ATF categorizes all limited purpose 

inspections as compliance inspections for performance 

measurement purposes. 

According to the ATF’s published reports and draft reports 

provided to the OIG, Inspectors conducted 5,497 application inspections 

during fiscal year FY 2001, 7,229 application inspections in FY 2002, 

and 8,422 application inspections in FY 2003. The ATF has also 

reported that Inspectors conducted 5,016 compliance inspections in 

FY 2001, 5,802 compliance inspections in FY 2002, and 6,481 

compliance inspections in FY 2003 (Figure 2).TP

 25PT

 

TP

23PT A collector’s license enables individuals to make interstate sales and 

purchases of firearms classified by the ATF as curios and relics to facilitate a personal 

firearms collection. 

TP

24PT Firearms Owners Protection Act of 1986, Public Law 99-308, Title 18 U.S.C. 

Chapter 44. 

TP

25PT As described in the results section of this report, inspection data in the ATF’s 

inspection tracking database do not support these published numbers. According to 

the inspections database, ATF Inspectors conducted 5,729 application inspections and 

4,035 compliance inspections in FY 2001; 8,123 application inspections and (cont.) 
F i g u r e 2 : R e p o r t e d FFL I n s p e c t i o n T o t a l s

F Y 2001 t o F Y 2003

5 , 016

8 , 422

7 , 229

5 , 497

6 , 481

5 , 802

0

2 , 000

4 , 000

6 , 000

8 , 000

10, 000

12, 000

14, 000

16, 000

2001 2002 2003

F i s cal Y ear

Total

C o m p lia n c e , R e n e w a l ,

a n d L i m it e d Pu r p o s e

I n s p e c t i o n s

A p p lic a t i o n

I n s p e c t i o n s

Source: Firearms in Commerce in the United States 2001/2002, ATF 2003 Performance and Accountability

Report, ATF Firearms Programs Division. 

The ATF’s Regulatory Enforcement Actions 

When the ATF finds that an FFL has violated the Gun Control Act 

or its implementing regulations, it may take one of several actions.26 For 

minor infractions (e.g., missing ZIP code on a Form 4473), the FFL may 

be given a Report of Violations, which notifies the FFL of violations that 

should be corrected. For more serious infractions, the FFL may be sent a 

 

4,581 compliance inspections in FY 2002; and 8,043 application inspections and 5,887 

compliance inspections in FY 2003, rather than the previously reported totals.

U.S. Department of Justice 6

Office of the Inspector General 

26 In the context of the Gun Control Act, willfulness is the intentional disregard 

of, or plain indifference to, legal obligations (Title 18 U.S.C. § 924). It can be

demonstrated through repeat violations (especially where there was notification of prior 

violations) or large numbers of violations. Sometimes one egregious violation, such as a 

straw sale to a prohibited person, can demonstrate willfulness (ATF B 5370.1 p.2). 

Evaluation and Inspections Division
warning letter, or it may be directed to attend a warning conference. At a 

warning conference, an FFL is notified that it must correct its practices 

or lose its license. For severe or repeat violations deemed willful, the ATF 

may revoke or deny renewal of the FFL’s license. 

FFL Education Efforts

In addition to regulatory 

enforcement, the ATF educates FFLs and

others on federal firearms laws through 

seminars and programs. In FY 2002,

the ATF conducted 183 “commodity

seminars” for FFLs, LEAs, and the

public. At many of these seminars, the

ATF supplied FFLs with the “Don’t Lie

For the Other Guy” packet prepared by 

the National Shooting Sports

Foundation. The packet includes a 

poster, pamphlet, and a videotape to

help FFLs identify firearms traffickers. 

As of October 2003, approximately 

23,000 FFLs had received the packet.

The revocation process begins when an ATF Inspector recommends 

revocation because of severe or repeated violations. If the Area 

Supervisor approves the Inspector’s recommendation, the inspection 

report and supporting documentation are 

submitted to the DIO. After consulting with 

the Division Counsel, the DIO can issue an 

Initial Notice of Revocation. If an Initial 

Notice of Revocation is issued, the FFL has 

15 days to appeal the proposed revocation 

and request a hearing. Revocation hearings 

are conducted in the field by ATF Inspectors 

who are specially trained to act as Hearing 

Officers. As of September 1, 2003, 

23 Inspectors served as Hearing Officers as 

a collateral duty to their regular tasks and 

11 additional Inspectors had completed 

training to become Hearing Officers. 

Hearing Officers are assigned from Field 

Divisions other than the Divisions 

proposing the revocation. At the hearing, the Hearing Officer examines 

the facts and hears testimony from the ATF and the FFL. After the 

hearing, the Hearing Officer prepares a report of findings and 

recommendations for the DIO. 

After receiving the Hearing Officer’s report, the DIO can allow the 

FFL to retain his license, or issue a Final Notice of Revocation. If a Final 

Notice of Revocation is issued, the FFL has 60 days to appeal the 

revocation to U.S. District Court. If the FFL appeals, the ATF routinely 

submits a Motion for Summary Judgment asking the Court to uphold the 

agency’s determination. 

In FY 2002, Inspectors conducted 25 revocation hearings. Of 

those, 22 resulted in the revocation of the FFL’s license. The number of 

revocation hearings increased to 87 during FY 2003.27 

Other than issuing warning letters, holding warning conferences, 

and revoking licenses, the ATF has few enforcement options. As of 

 

U.S. Department of Justice 7

Office of the Inspector General 

27 As of March 1, 2004, most of these cases were still pending. 

Evaluation and Inspections Division
U.S. Department of Justice 8

Office of the Inspector General 

Evaluation and Inspections Division 

March 2004, the ATF had very limited authority to impose fines and 

suspend an FFL’s license.TP

28PT This limited authority can occur only under 

a specific circumstance where an FFL failed to conduct a NICS check 

and, had the check been conducted, it would have discovered that the 

customer was a prohibited person. As an alternative to revoking 

licenses, as of March 2004 the ATF’s General Counsel was seeking, 

through the Department of Justice Office of Legislative Affairs, the 

authority to suspend or fine FFLs who violate firearms laws. 

 

The ATF Firearms Tracing Program 

In 1994, the ATF consolidated its tracing activities at the National 

Tracing Center (NTC) in Falling Waters, West Virginia. The NTC traces 

the purchase histories of “crime guns” recovered by federal, state, local, 

and international LEAs.TP

29PT The ATF defines a “crime gun” as any firearm 

that is “illegally possessed, used in a crime, or suspected by law 

enforcement officials” of having been used during the commission of a 

crime. Crime gun tracing data can identify potential firearms trafficking 

and unlawful business practices by FFLs. The ATF has the following 

tracing-based indicators of firearms trafficking: 

• UShort Time-to-CrimeU. The recovery of a crime gun within 2 to 3 

years after its initial purchase is considered a short time-tocrime and a significant trafficking indicator. According to the 

ATF, about one-third of crime guns were recovered within 

3 years of their first retail purchase. The short time from retail 

sale to use in a crime “suggests illegal diversion or criminal 

intent associated with the retail purchase from the FFL.”TP

30PT 

• UMultiple Sales of HandgunsU. According to the ATF, 20 percent 

of all handguns traced in 2000 had been originally purchased 

as part of a multiple handgun sale. FFLs are required to report 

multiple handgun sales to the NTC. 

 

TP

28PT Title T18 U.S.C. § 922 states “Tthe Attorney General may, after notice and 

opportunity for a hearing, suspend for not more than 6 months or revoke any license 

issued to the licensee under SHTection 923TH, and may impose on the licensee a civil fine of 

not more than $5,000.” 

TP

29PT International trace requests are received directly from foreign law 

enforcement agencies via fax or through electronic transmission from ATF Country 

Attaché offices in Colombia, Mexico, and Canada. From January 1, 2003, to 

March 31, 2003, NTC traced 8,108 firearms for foreign governments. 

TP

30PT “Crime Gun Trace Reports (2000),” ATF, July 2002. 
U.S. Department of Justice 9

Office of the Inspector General 

Evaluation and Inspections Division 

 In requesting a trace of a crime gun, an LEA supplies the ATF with 

information including the make, model, serial number, and other 

identifying characteristics of the gun and the circumstances of its 

recovery.TP

31PT Using that information, an ATF analyst contacts the 

manufacturer of the firearm to determine which FFL purchased the gun. 

The analyst then contacts the FFL identified by the manufacturer to 

obtain information on the retail purchaser from the appropriate 

Form 4473 and A&D Book entry. FFLs are required by law to respond to 

firearms trace requests from the ATF within 24 hours.TP

32PT According to the 

NTC Director, the NTC performed 232,272 firearms traces in FY 2001, 

240,651 firearms traces in FY 2002, and 280,947 firearms traces in 

FY 2003.TP

33PT The NTC defines a successful trace as one in which the initial 

retail purchaser of the crime gun is identified. According to the NTC 

Director, 50 to 60 percent of traces requested in FY 2003 succeeded. 

Trace data can be categorized to identify those guns that are most 

often used in crime. For example, in 2000 the Smith & Wesson 

.38 caliber revolver was the most frequently traced firearm recovered by 

LEAs.TP

34PT Using trace information, the NTC offers several analytical 

products to LEAs, such as: 

 

• statistical analyses to identify indicators of firearms trafficking; 

• data on potential violations of regulations, such as unreported 

multiple sales of handguns, stolen firearms, and firearms with 

obliterated serial numbers; and 

 

TP

31PT Each firearm made in or imported to the United States must possess a serial 

number “which may not be readily removed, obliterated, or altered” and must be unique 

to each firearms manufacturer or importer. 

TP

32PT Title 18 U.S.C. § 923(g)(7). 

TP

33PT The Youth Crime Gun Interdiction Initiative (YCGII) program, currently 

operating in 60 cities, is the ATF’s major initiative to encourage LEAs to trace recovered 

firearms. The program has been successful at increasing the number of firearms trace 

requests submitted to the ATF by LEAs participating in the program. To join the YCGII 

program, LEAs must sign a Memorandum of Understanding (MOU) with the ATF in 

which the LEAs agree to make comprehensive firearms tracing a “primary goal and 

objective” of their agencies. The ATF funds FFL inspections in these cities through 

YCGII appropriations. 

TP

34PT “Crime Gun Trace Reports (2000),” ATF, July 2002. 
U.S. Department of Justice 10

Office of the Inspector General 

Evaluation and Inspections Division 

• data on firearms transaction records received from FFLs that 

have ceased business operations.TP

35PT 

UDemand Letter ProgramsU. Because some FFLs either ignored trace 

data requests or were unable to provide NTC analysts with purchaser 

information from Forms 4473 and their A&D Books, the ATF initiated the 

Demand Letter I Program in February 2000. The Demand Letter I 

Program covers FFLs deemed “Uncooperative” by NTC officials because 

they failed to provide the ATF with purchaser information. FFLs deemed 

“Uncooperative” are required to submit all Forms 4473 for the previous 

three years and to continue to submit these Forms on a monthly basis 

until the ATF determines that they are cooperating. Forty-one FFLs were 

originally placed in this category. As of April 2004, no FFLs were 

designated as uncooperative. 

Also in February 2000, the ATF initiated the Demand Letter II 

Program to address FFLs with frequent short time-to-crime traces. The 

Demand Letter II Program requires FFLs with 15 or more traces of guns 

within 3 years of initial purchase to submit information quarterly on 

previously owned firearms acquired from non-FFLs. Originally, 430 FFLs 

were placed in this category.TP

36PT As of April 2004, 271 FFLs were in this 

category. The actual “Demand Letter” sent to FFLs states that if the 

FFLs do not respond to the NTC’s requests for firearms tracing 

information, the FFLs’ licenses could be revoked. The NTC forwards lists 

of FFLs subjected to either Demand Letter program to ATF Field 

Divisions on an annual basis. 

UFirearms Trafficking AnalysisU. The ATF’s Crime Gun Analysis 

Branch (CGAB), co-located with the NTC in West Virginia, analyzes data 

from crime gun traces, multiple sales, and firearms thefts, and provides 

firearms trafficking analysis to Inspectors, Special Agents, and LEAs. 

The CGAB uses crime gun data maintained by the NTC to focus on 

specific U.S. geographic areas in which firearms trace patterns indicate 

firearms trafficking.TP

37PT For example, CGAB analyzes tracing data to 

determine the geographic areas where crime guns were recovered, a 

 

TP

35PT By law, FFLs are required to provide their firearms transaction records to 

NTC when they go out of business (Title 18 U.S.C. § 923(g)(4)). The NTC is the only 

federal repository for this data. 

TP

36PT Originally, FFLs with ten or more short time-to-crime traces were included in 

this category. 

TP

37PT The CGAB is a unit of the Intelligence Programs Division, which is under the 

Office of Strategic Intelligence and Information. 
process known as geo-mapping. This information is shared with LEAs, 

to enable them to better focus their law enforcement activities. 

The CGAB also develops numerous statistical and informational 

products. For example, “master queries” of all crime guns traced 

nationwide (grouped by county) can be used to identify FFLs that should 

be inspected. The “NTC Weekly Queries of FTS Data,” disseminated to all 

users of the CGAB’s electronic database, shows “firearms trafficking 

indicators,” such as firearms purchased as part of a multiple sale. The 

CGAB also develops investigative leads that are researched and 

forwarded to the appropriate ATF Field Division, and it provides 

information and support to promote the tracing of all recovered crime 

guns by LEAs across the United States. Finally, the CGAB monitors and 

forwards to ATF agents information on theft reports, firearms traces, and 

multiple sale transactions from FFLs that are under investigation. 

In FY 2002, CGAB provided firearms tracing data for 1,639 FFLs 

and completed 46 geo-mapping projects for ATF Field Divisions (see 

Figure 3 on page 13). The CGAB also researched and forwarded 138 

referrals to ATF Field Divisions for potential investigations based on 

accumulated firearms tracing data, and was given authority over ATF’s 

program to “raise” obliterated serial numbers on recovered firearms.38 

Regional Crime Gun Centers. In 1996, the ATF began to establish 

Regional Crime Gun Centers (RCGC) in cities in which gun violence 

presented a significant public risk and high amounts of crime guns were 

recovered. Before the establishment of the RCGCs, the NTC’s ability to 

provide crime gun analysis for these areas and the rest of the country 

was, according to the NTC Director, “limited” compared to the microanalysis conducted at RCGCs. The NTC now oversees RCGCs in 

Chicago, Los Angeles, New York, and Washington, D.C.39 The RCGCs are 

organizationally part of the local ATF Field Division and serve as a liaison 

and local analysis unit for crime gun tracing for local LEAs. 

Disclaimer on the use of firearms tracing data: Section 630 of the 

Fiscal Year 2004 Consolidated Appropriations Act mandates that the ATF 

and all federal government agencies which use trace data in a report 

clearly state the shortcomings of trace data, as follows: 

 38 “CGAB Performance Indicators,” FY 2002. 

U.S. Department of Justice 11

Office of the Inspector General 

39 We visited RCGCs in Chicago and Los Angeles during our fieldwork. At a 

third field site, in Miami, ATF personnel told us that the Miami Field Division is 

establishing a “gun intelligence center” similar to a RCGC. 

Evaluation and Inspections Division
Firearm traces are designed to assist law enforcement 

authorities in conducting investigations by tracking the sale 

and possession of specific firearms. Law enforcement 

agencies may request firearms traces for any reason, and 

those reasons are not necessarily reported to the federal

government. Not all firearms used in crime are traced and

not all firearms traced are used in crime. Firearms selected

for tracing are not chosen for purposes of determining which 

types, makes or models of firearms are used for illicit

purposes. The firearms selected do not constitute a random

sample and should not be considered representative of the 

larger universe of all firearms used by criminals, or any 

subset of that universe. Firearms are normally traced to the 

first retail seller, and sources reported for firearms traced do 

not necessarily represent the sources or methods by which 

firearms in general are acquired for use in crime. 

U.S. Department of Justice 12

Office of the Inspector General 

Evaluation and Inspections Division
Figure 3: Sample ATF Gun Recovery Geo-Map 

Source: ATF Southern California Regional Crime Gun Center. 

U.S. Department of Justice 13

Office of the Inspector General 

Evaluation and Inspections Division
PURPOSE, SCOPE, AND METHODOLOGY 

Purpose 

The Office of the Inspector General (OIG) conducted this review to 

assess the effectiveness of the ATF’s program for inspecting FFLs and to 

examine how this program assists in enforcing federal firearms laws. 

Scope 

The scope of this review included examining histories for firearms 

retailers categorized either as Type 1 or Type 2 dealers. We did not 

review inspection histories of FFLs issued other license types, such as 

those issued licenses for producing or importing firearms and 

ammunition, or collectors of curios or relics. We also reviewed inspection 

histories for FFLs whose licenses were revoked or are in the process of 

being revoked. Inspection histories included application information, 

inspection worksheets, and Inspector reports, as well as reports and 

memoranda related to any regulatory action taken by the ATF against the 

FFL. However, we reviewed the impact of all license types on inspection 

activities, including workload and inspection outcomes. 

The ATF provided us with access to the two electronic information 

systems containing licensee information, inspection information, and 

reports – the Federal Licensing System (FLS) and N-Spect. To assist in

our assessment of how ATF officials target which FFLs to inspect, the 

ATF also provided us with access to two electronic information systems 

containing information on firearms tracing – the Firearms Tracing 

System (FTS), and Online LEAD. 

Methodology 

Interviews. We conducted in-person and telephone interviews with 

personnel from ATF Headquarters, ATF Field Divisions, United States 

Attorneys’ Offices, law enforcement agencies (LEAs), firearms retailers, 

and advocacy groups. Specifically, we interviewed individuals from ATF’s 

Firearms, Explosives and Arson Directorate, Field Operations 

Directorate; Office of Inspections; Office of the Chief Counsel; and 

National Tracing Center. We spoke with Assistant United States 

Attorneys (AUSAs) assigned to prosecute firearms-related offenses and to 

Project Safe Neighborhood Coordinators, who are the AUSAs who 

coordinate most firearms-related prosecutions. We spoke with law 

enforcement officials assigned to firearms-related cases, and to those 

U.S. Department of Justice 14

Office of the Inspector General 

Evaluation and Inspections Division
responsible for submitting crime gun trace requests. We spoke with a 

statistician who has worked with National Tracing Center data. We also 

interviewed a California Department of Justice official responsible for 

overseeing that state’s firearms licensee inspections program.40

We spoke with three firearms retailers; representatives from 

Taurus International, a firearms manufacturer; and a representative 

from the National Association of Firearms Retailers. We also interviewed 

officials from two advocacy groups – the National Rifle Association and 

the Brady Center to Prevent Gun Violence. 

Field Site Visits. As part of our fieldwork, we interviewed 

personnel and reviewed FFL inspection files at four of the ATF’s 23 Field 

Division offices – Miami, Chicago, Los Angeles, and Seattle.41 We chose 

these sites based on their geographic location, size, local crime trends, 

and distribution of firearms inspection work. While at these locations, 

we also interviewed local law enforcement officials and AUSAs to discuss 

criminal prosecutions of FFLs and related issues. We reviewed 100 

randomly selected inspection files to determine when the FFL was issued 

a license to sell firearms, the frequency of ATF inspections, the extent 

and intensity of those inspections, violations detected during those 

inspections, and actions by ATF against the FFL.42 We also reviewed FFL 

files for which the ATF revoked or was in the process of revoking the 

FFL’s license. We also observed one FFL compliance inspection. 

Data. We relied on ATF electronic databases for information on 

FFLs, inspections, Inspector work hours, and firearms tracing data, but 

we noted discrepancies in the data, as detailed in the results section of 

this report. After discussing the data discrepancies with ATF 

Headquarters officials, we concluded that the N-Spect data were the most 

accurate information for examining the numbers of inspections 

conducted and the direct work hours expended for compliance and 

applications inspections. However, the Standard Time and Attendance 

System (STATS) database was the only data source available that 

included all staff time. We therefore used this database to analyze 

 40 California, which issues its own state firearms licenses, is one of the few

states with its own licensee inspection program. 

41 We also visited the Field Division in Washington, D.C., to test our 

methodology and data collection instruments. 

U.S. Department of Justice 15

Office of the Inspector General 

42 We used Microsoft Excel to generate random numbers associated with FFL 

numbers for the Field Divisions we visited. We used FLS to generate these FFL 

numbers based on our inspection criteria. 

Evaluation and Inspections Division
staffing requirements.43 We also examined the N-Spect data to 

determine whether the variances affected our findings and confirmed 

that the variances in inspection productivity and implementation 

remained regardless of which data run we used. We used FLS to 

determine FFL licensing histories and N-Spect to analyze Inspector 

assignments and reports. We used information from the STATS and 

N-Spect to examine Inspector workload. We used FTS to determine trace 

histories of firearms sold by FFLs, and Online LEAD to review potential 

firearms trafficking patterns.

We also collected and analyzed prosecution data from the 

Executive Office for United States Attorneys; ATF budget requests from 

FY 2002 through FY 2005; internal ATF memoranda; ATF annual and 

periodic reports; transcripts of congressional testimony by ATF officials; 

judicial decisions; General Accounting Office reports on NICS; a 

Congressional Research Service report on the potential of terrorist access 

to firearms; a University of California, Los Angeles, study; and 

Department of the Treasury Office of the Inspector General reports on the 

ATF’s FFL and explosives inspection programs. Finally, we reviewed the 

laws and regulations applicable to the ATF’s oversight of FFLs. 

Area Supervisor Survey. We conducted an e-mail survey of Area 

Supervisors – those ATF personnel who assign FFL inspections and 

approve inspection reports – to determine their views on ATF’s FFL 

inspection program, “crime gun” tracing, and Inspector resources (see 

Appendix II). Forty-five of 50 Area Supervisors replied by e-mail or fax, a 

response rate of 90 percent. 

 

U.S. Department of Justice 16

Office of the Inspector General 

43 We also used the STATS data for examining staffing needs, since that was the

data that the ATF relied on to prepare the Inspector Staffing Requirements for the Bureau

of Alcohol, Tobacco, Firearms and Explosives report for the Justice Management Division

and Congress. 

Evaluation and Inspections Division
RESULTS OF THE REVIEW 

The ATF’s FFL inspection program is not as effective 

as it should be for ensuring public safety by quickly 

identifying and revoking the licenses of FFLs that 

violate federal firearms laws. The ATF does not

inspect all applicants in person before licensing them

to become firearms dealers, compliance inspections of

FFLs (including large-scale retailers) were infrequent, 

and we found wide variations in productivity and 

program implementation among the ATF’s Field 

Divisions. Moreover, the ATF does not identify and 

conduct compliance inspections on all FFLs that 

exhibit indicators of gun trafficking. Finally, even 

when numerous or serious violations were found, the 

ATF did not consistently take adverse actions, refer 

FFLs for investigation, or conduct timely follow-up 

inspections. We concluded that the ATF should

streamline and standardize its FFL inspection 

procedures to improve the effectiveness of the FFL 

inspection program for ensuring that FFLs comply 

with federal firearms laws. 

The ATF Does Not Conduct In-Person Application Inspections on All 

New FFLs to Verify Applicant Information and Ensure That They 

Understand Firearms Laws 

According to ATF Field Operations Directorate officials, application 

inspections are critical for ensuring compliance with federal firearms 

laws.44 Application inspections not only enable the ATF to better ensure 

that the applicant is eligible for a federal firearms license, but also 

provide the new dealer an opportunity to ask ATF Inspectors questions 

and discuss with them issues related to firearms laws. Further, the ATF 

officials said that if an FFL violates federal firearms laws after having 

received an application inspection, it is easier for the ATF to meet the 

legal standard of demonstrating that the violations were “willful” in order 

to take adverse action. 

 

U.S. Department of Justice 17

Office of the Inspector General 

44 When an individual applies for a license to become a firearms dealer, the ATF 

has 60 days after the completed application is received by the NLC to either issue a 

license or deny the application (Title 18 U.S.C. § 923(d)(2)). 

Evaluation and Inspections Division
According to the ATF’s N-Spect database, which tracks inspections 

activity, the ATF conducted 8,123 application inspections in fiscal year 

(FY) 2002. According to the ATF’s FLS database, which tracks all 

firearms licenses issued by the NLC, there were 15,359 newly licensed 

FFLs in FY 2002.45 Of that number, 7,977 were licenses issued for 

firearms businesses and 7,382 were issued to firearms collectors. By 

examining the “inspection date” field included in the FLS record for each 

FFL, we found that most (95 percent) of the FFLs that were inspected 

were businesses, not collectors.46 Therefore, the data available to us 

indicates that in FY 2002 the ATF inspected the preponderance of new 

firearms retailers. 

However, our interviews and survey of ATF Headquarters and Field 

Division personnel found that many of those application inspections 

consisted only of a telephone call rather than an in-person visit. Ten of 

the 45 Area Supervisors we surveyed (22 percent) said that, because of 

limited Inspector resources, they directed Inspectors to perform at least 

some application inspections by telephone. One Area Supervisor stated 

that he assigned telephone application inspections because some 

applicants were located as far as 400 miles from his Area Office. He said 

that, in those cases, he tries to schedule an in-person compliance 

inspection for the following year, but cannot guarantee that it will occur. 

ATF Headquarters officials, DIOs, Area Supervisors, and Inspectors 

told us that application inspections conducted by telephone are not as 

comprehensive as in-person inspections. For example, one important 

action Inspectors take during in-person inspections is to interview 

individuals who will work for the FFL. When application inspections are 

conducted by telephone, the Inspectors do not routinely interview store 

employees. 

Subsequent to the initiation of this review, in an October 8, 2003, 

memorandum to ATF Field Divisions, the ATF Assistant Director for 

Firearms, Explosives, and Arson issued new guidance on application 

inspections. The new guidance stated that the ATF’s goal is to inspect all 

U.S. Department of Justice 18

Office of the Inspector General 

 45 This includes all FFLs, including holders of the Type 3 collector license. A 

collector’s license enables individuals to make interstate sales and purchases of 

firearms classified by the ATF as curios and relics to facilitate a personal firearms 

collection. ATF officials told us that they do not place a high priority on inspecting new 

firearms collectors. 

46 The inspection date field was blank in 70 percent of the records, because no

inspection was done, the inspection report had not been forwarded by the Field 

Division, or the report information had not been entered by the NLC. However, of the 

4,722 records that had inspection dates, 4,493 (95 percent) were businesses.

Evaluation and Inspections Division
new FFL applicants to ensure that they understand federal firearms laws 

before issuing them a federal firearms license. The memorandum 

established as an initial milestone that “Inspectors should ensure that all 

new applicants receive onsite inspections” at 14 select cities (emphasis in 

original).47 

After receiving a draft of this report, the ATF attempted to more 

precisely determine the number of inspections conducted by telephone. 

Although in 2002 the N-Spect system did not capture the method by 

which an inspection was conducted, ATF’s Field Management Staff 

attempted to estimate the number of application inspections conducted 

by telephone by querying the database to identify application inspections 

with words such as “telephone” or “phone” in a “Special Instructions” 

data field. The results of that query indicated that about 4 percent of 

application inspection records had such remarks. However, because 

there was no direction to the field to ensure consistent entry of 

inspection methods, and because words such as “telephone” could be 

entered for reasons other than to specify the inspection method, we 

found these results unreliable. 

Although the new goal established in the October 8, 2003, 

memorandum is a step in the right direction, the ATF still does not 

comprehensively inspect all new applicants in person. Therefore, it 

cannot verify the accuracy of the information that each applicant 

provided to the NLC to become an FFL. Further, foregoing an in-person 

inspection means that the applicants’ opportunity to ask questions of 

ATF Inspectors is limited. While FFLs should understand and follow the 

law, ATF personnel said that if an FFL fails to comply with federal 

firearms laws, the lack of an application inspection makes it harder for 

the ATF to meet the legal standard of proving that the violation was 

“willful” in order to take adverse action. 

 

U.S. Department of Justice 19

Office of the Inspector General 

47 After receiving a draft of this report, the ATF attempted to more precisely 

determine the number of inspections conducted by telephone. Although in 2002 the 

N-Spect system did not capture the method by which an inspection was conducted, 

ATF’s Field Management Staff attempted to estimate the number of application

inspections conducted by telephone by querying the database to identify application 

inspections with words such as “telephone” or “phone” in a “Special Instructions” data 

field. The results of that query indicated that about 4 percent of application inspection 

records had such remarks. However, because there was no direction to the field to 

ensure consistent entry of inspection methods, and because words such as “telephone” 

could be entered for reasons other than to specify the inspection method, we found 

these results unreliable. 

Evaluation and Inspections Division
U.S. Department of Justice 20

Office of the Inspector General 

Evaluation and Inspections Division 

The ATF Does Not Regularly Conduct Compliance Inspections on 

Active FFLs, Including Large-Scale Retailers 

According to the ATF Director, for the ATF to ensure compliance 

with federal firearms laws, FFLs should receive a compliance inspection 

at least once every three years. However, the ATF is currently unable to 

even begin to meet that goal. We found that most FFLs are inspected 

infrequently or not at all. ATF workload data show that the ATF 

conducted 4,581 FFL compliance inspections in FY 2002, or 

about 4.5 percent of the approximately 104,000 FFLs nationwide.TP

48PT At 

that rate, it would take the ATF more than 22 years to inspect all FFLs. 

We reviewed inspection history files for a sample of 100 FFLs that 

had been in business for an average of 11.2 years, and verified that they 

did not receive regular compliance inspections (Figure 4).TP

49PT Specifically: 

• In 23 cases, the records showed that the ATF had never 

conducted a full compliance, application, or renewal inspection 

on the FFL.TP

50PT On average, the FFLs that had never been 

inspected had been selling firearms for 8.6 years. 

• In 22 cases, the ATF had conducted an application inspection, 

but had conducted no further inspections of the FFL. On 

average, these FFLs had been selling firearms for 5.1 years. 

• In 29 cases, the ATF had conducted at least one compliance 

inspection on the FFL. Among those 29 cases were 9 cases in 

which the ATF conducted additional follow-up compliance 

inspections, including 2 in which the ATF later conducted a 

third compliance inspection. These compliance inspections 

occurred, on average, about once every 9.2 years. On average, 

the FFLs had been selling firearms for 14.8 years. 

• In 26 cases, the ATF had never conducted a compliance 

inspection at the FFL, but had conducted at least one renewal 

 

TP

48PT For the purposes of our review, we relied upon FY 2002 data for ATF 

Inspector workload activities. 

TP

49PT Due to limitations in the NLC database of FFL information, we could only 

determine dates for when the ATF issued a federal firearms license for 87 of the FFLs in 

our sample. The “average time in business” was calculated using these FFLs’ records. 

TP

50PT At some of these FFLs, limited purpose inspections had been conducted, but 

no full compliance, application, or renewal inspections were conducted. 
inspection. These renewal inspections occurred, on average, 

about once every 6.9 years. On average, these FFLs had been 

selling firearms for 15.1 years. 

Figure 4: FFL Inspection File Review Analysis

23%

22%

29%

26%

No record of inspection

Application inspection

only

At least one compliance

inspection

At least one renewal

inspection, but no

compliance inspection

Source: ATF inspection history files 

Large-scale retailers sell a higher volume of guns than small 

dealers. Despite the potential for large numbers of improper sales, we 

found that large-scale retailers also are not inspected on a routine basis. 

Our sample showed that the ATF conducted compliance inspections on 

large-scale national and regional chain retailers such as Wal-Mart, 

Sports Authority, or Big 5 (a sporting goods chain with 293 stores 

throughout 10 western states) with about the same infrequency as small 

dealers. The five Area Supervisors we interviewed told us that they avoid 

selecting large FFLs for compliance inspections because the large volume 

of records makes the inspections more difficult and time-consuming. 

U.S. Department of Justice 21

Office of the Inspector General 

Evaluation and Inspections Division
U.S. Department of Justice 22

Office of the Inspector General 

Evaluation and Inspections Division 

The nine large-scale retailers in our sample were inspected about once 

every 9.9 years, versus once every 9.2 years for the overall sample.TP

51PT 

Further, we found that the 9 large-scale retailers included in our 

sample were only slightly more likely to have been subjected to a 

compliance inspection than the average FFL, with 33 percent (3 of 9) 

having received at least one compliance inspection, versus 29 percent of 

FFLs overall.TP

52PT Of the nine large-scale retailers we reviewed: 

• One had not been inspected since receiving its license in 1985. 

• Four had received only an application inspection. 

• One had received a renewal inspection in 1995, the first since 

receiving a firearms license in 1973, and had not been 

inspected since 1995. 

• Three had received at least one compliance inspection, 

including: 

o A sporting goods retailer that was last inspected in 1986. 

According to the inspection report on the 1986 limited 

purpose inspection the Inspector spent only four hours at 

the store, a very short amount of time for an inspection. 

o A retailer cited in 1977 for selling ammunition to a minor 

and for having inventory discrepancies. In 1985, during the 

FFL’s next inspection, the FFL was cited for selling a rifle to 

a minor and for numerous Form 4473 violations. The FFL 

had not been inspected since 1985. 

o A retailer cited in 2000 for at least one unreported multiple 

handgun sale and, on seven occasions, not certifying the 

residency of aliens who purchased firearms. No follow-up 

inspection had been done. 

 

TP

51PT Other FFLs in our sample that received compliance inspections included gun 

shops, pawnshops, gunsmiths, movie industry members, and small-scale FFLs 

operating out of their homes. 

TP

52PT We concluded that more large-scale retailers had been inspected at least once 

despite having less frequent inspections because they averaged a longer time in 

business than other retailers in our sample. 
Because the ATF does not conduct regular inspections of FFLs, the 

ATF cannot effectively monitor the overall level of FFL compliance with 

federal firearms laws and regulations. In December 2003, the ATF 

initiated a program to conduct special Random Sample Compliance 

Inspections to develop a risk model for the FFL inspection program. 

Using data from those inspections, the ATF planned to “be able to project 

the overall level of compliance by” gun dealers, pawnbrokers, and 

collectors.53 While the project to estimate the overall level of compliance 

with laws is needed to identify the challenges facing the ATF, it cannot 

take the place of regular compliance inspections for deterring and 

identifying noncompliance with gun laws. 

The ATF Does Not Identify and Inspect All FFLs That Exhibited 

Indicators of Potential Violations or Gun Trafficking 

The ATF has not identified all FFLs that exhibit characteristics of 

violations or firearms trafficking in order to properly manage its range of 

enforcement activities, as well as to inform the Attorney General, 

Congress, and the public of the scope of the potential trafficking problem 

at FFLs. Gun dealers are selected for compliance inspections either by 

ATF Headquarters (under the Focused Inspection, Demand Letter, or 

other programs) or by the 23 ATF Field Divisions. Under the Focused 

Inspection Program, the ATF Firearms Programs Division selects FFLs for 

mandatory compliance inspections by the Field Divisions. The Chief of 

the Firearms Program Division told us that the ATF and the NTC 

generally applied two principal criteria to select the FFLs: data on sales 

practices by FFLs, such as volume and multiple handgun sales; and 

time-to-crime for guns traced to that FFL.54 In FY 2002, ATF 

Headquarters assigned Focused Inspections on about 350 FFLs, or about 

16 per Field Division. 

Although the ATF’s criteria for selecting FFLs for Focused 

Inspections targeted those FFLs that most significantly exhibited the 

established indicators of trafficking (i.e., multiple sales and short timeto-crime), the ATF did not identify or inspect all FFLs that exhibited 

 53 Memorandum, Assistant Director for Firearms, Explosives, and Arson, to All 

Special Agents In Charge, December 8, 2003. ATF officials told us that the

memorandum was distributed to the Field Divisions in January 2004.

U.S. Department of Justice 23

Office of the Inspector General 

54 In October 2003, the ATF established new criteria for selecting FFLs for 

future Focused Inspections: 1) FFLs sent a Demand Letter in FY 2002 or FY 2003; 2)

FFLs in cities with a high crime rate and multiple sales meeting certain criteria during 

calendar years 2001 and 2002; 3) FFLs in high-crime cities that have not been

inspected in the previous 10 years; and 4) FFLs that have had a firearm traced to them 

within the first year of the issuance of their license. 

Evaluation and Inspections Division
indicators of trafficking. Instead, the NTC Director told us that the ATF 

established a numerical goal for Focused Inspections based on the 

resources available, and then changed the criteria to limit the number of 

FFLs identified to that number (350 in FY 2002). Therefore, the number 

of FFLs that exhibited indicators of trafficking and therefore should have 

been inspected was more than the 350 identified. 

 

Gun Tracing Has Significant Shortcomings That Limit Its Use For 

Identifying FFLs That Should Be Inspected 

Our review found that the crime gun trace data relied upon by the 

ATF to target inspections has significant limitations that reduce its 

effectiveness for identifying FFLs likely to be involved in firearms 

trafficking. Along with other information, firearms trace data can assist 

the ATF in identifying those FFLs that may be violating federal firearms 

laws and should be inspected. Although a trace does not in itself prove 

that an FFL is involved in gun trafficking, a high number of short timeto-crime sales and other patterns can indicate that an inspection is 

warranted. In FYs 2001, 2002, and 2003, LEAs submitted an average of 

a quarter million trace requests to the ATF each year. Table 1 shows the 

trace requests submitted by the 60 YCGII cities and other LEAs. 

Table 1: Trace Requests Submitted to the ATF

Fiscal 

Year 

Total Firearms

Trace Requests 

Non-YCGII 

trace requests YCGII trace requests 

2001 232,272 133,962 (58%) 98,310 (42%) 

2002 240,651 144,300 (60%) 96,351 (40%) 

2003 280,947 (not available) (not available)

Source: National Tracing Center

U.S. Department of Justice 24

Office of the Inspector General 

As an indicator of whether the ATF overall used that data to direct 

its resources at FFLs that should be inspected, we examined whether the 

Field Divisions that had more gun traces in FY 2001 conducted more 

compliance inspections in FY 2002. The ATF was unable to provide data 

on traces to FFLs in each Field Division, but was able to provide us with 

the number of traces submitted by LEAs in each Field Division. ATF data 

shows that the preponderance of crime guns are recovered in the same 

geographic area in which they were originally sold by an FFL. Therefore, 

although we recognized limitations in the data, we expected that, if trace 

data were being used to target inspections at those FFLs that exhibited 

indicators of firearms trafficking, then higher numbers of trace requests 

would lead to more inspections in a Field Division. However, we found 

Evaluation and Inspections Division
little correlation between the number of traces and the number of 

compliance inspections conducted the next year (Figure 5). This result 

indicated that the ATF overall did not focus its resources to conduct 

more inspections in those Field Divisions that had more crime guns 

traced. 

Figure 5: Comparison of Trace Requests to Inspections

0

5000

10000

15000

20000

25000

Louisville

Kansas City

St. Paul

Boston

New Orleans

Seattle

Philadelphia

Baltimore

Charlotte

Atlanta

Los Angeles

San Francisco

Dallas

Washington

Phoenix

Columbus

Houston

Detroit

New York

Nashville

Chicago

FY01 Trace

Requests

-

100

200

300

400

500

600

FY02 Compliance

Inspections

FY01 Trace Requests FY02 Compliance Inspections

Note: The ATF could not dissagregate trace data for the Miami and Tampa Field Divisions.

 Source: National Tracing Center and Firearms Programs Division Data

Although the ATF does not appear to be systematically conducting 

more inspections in Field Divisions with more gun traces, the Field 

Divisions may still use tracing data to select FFLs for those inspections 

that are not directed by Headquarters. For example, Area Supervisors, 

who determine FFL inspection assignments for their Area Offices, told us 

that they use trace data such as time-to-crime of two years or less, 

firearms with obliterated serial numbers, and multiple sales of handguns 

to target inspections. 

There are limitations to more extensive use of trace data to target 

inspections. In response to our survey and in interviews, ATF 

U.S. Department of Justice 25

Office of the Inspector General 

Evaluation and Inspections Division
Inspectors, Area Supervisors, and NTC management explained that 

tracing data is not fully useful for identifying potential problem FFLs. 

There are three limitations that reduce the utility of tracing data for 

targeting inspections. First, all LEAs do not trace all crime guns. 

Consequently, trace data are skewed toward dealers located in and 

around cities that participate in the YCGII program. As shown in Table 1 

on page 24, about 40 percent of trace requests originate from the 60 

YCGII cities, even though only about 15.5 percent of the U.S. population 

lives in those cities.55 Therefore, FFLs located in areas where the LEAs 

do not comprehensively trace crime guns are less likely to have guns 

traced to them. A Deputy Assistant Director told us that, because of this 

data limitation, at least three firearms “trafficking corridors” (i.e., routes 

along which guns from an area with lax firearms laws are illegally 

transported to an area with stringent firearms laws) are not picked up by 

tracing data. 

Second, because trace data are not controlled for dealer sales 

volume, an elevated number of traces is not always evidence that an FFL 

is involved in firearms trafficking. Large-scale FFLs may have more guns 

traced to them simply because they sell more guns than smaller FFLs. 

As described to us by ATF Inspectors, a hypothetical FFL selling 40 guns 

a year of which 8 are subsequently traced as crime guns would be a 

much greater concern than a dealer selling 2,000 guns of which 15 are 

subsequently traced. However, the ATF’s current database does not 

include sales volume, and therefore the ATF cannot easily use trace data 

to identify FFLs that have a high number of traces for their sales volume. 

Consequently, the smaller dealer in the example above would be less 

likely to be identified for inspection through tracing, despite the fact that 

20 percent of the guns it sold became crime guns. 

Third, tracing follows a particular firearm’s trail from the 

manufacturer, through the FFL, to the initial purchaser of the firearm. 

As an Area Supervisor stated, a firearm may have been purchased later 

by another FFL (such as a pawnshop), “possibly two or three times, 

before it is actually involved in a crime and traced. The subsequent FFLs 

do not appear in the trace report.” 

Although correcting all of the above limitations would be difficult, 

more LEAs could be induced to comprehensively trace firearms if such 

tracing were made a condition of relevant Department of Justice grants. 

The ATF also could collect sales volume information (but not any 

 

U.S. Department of Justice 26

Office of the Inspector General 

55 “Population Estimates for Cities and Towns,” U.S. Census Bureau. 

Population data was current as of July 1, 2002.

Evaluation and Inspections Division
personal information) during FFL inspections and enter that data into 

the NTC database. 

A recent study indicated that some gun dealers are willing to sell 

guns to prohibited persons. The need to better identify the potential 

universe of dealers involved in gun trafficking and focus inspections on 

those dealers was highlighted in a 2003 study by the University of 

California, Los Angeles, School of Public Health. That independent study 

found that up to 20 percent of gun dealers exhibited a willingness to help 

likely prohibited persons obtain guns through straw purchases.56 The 

study used an independent telephone survey to test whether randomly 

selected FFLs were willing to sell a handgun, regardless of the intended 

recipient of the firearm. A total of 120 FFLs were surveyed. Of those, 

87.5 percent said that they would sell a handgun to someone when the 

caller stated that the handgun was for his or herself, and 72.5 percent 

said that they would sell a handgun to someone when the caller stated 

that the handgun was intended to be a gift, both situations in which the 

sale would be legal. However, 52.5 percent also said that they would sell 

a handgun to the caller when told the gun was for a boyfriend or 

girlfriend “who needs it,” a situation in which the FFL should have 

questioned the legality of the sale. 

To address concerns that the FFLs may have been “playing along” 

with the interviewers, 20 additional calls were made after the initial 

study was completed. In these calls, the interviewer opened with “My 

girl/boyfriend needs me to buy her/him a handgun because s/he isn’t 

allowed to.” In 16 of the 20 calls, the dealers correctly informed the 

callers that they would not sell a firearm to them. However, four agreed 

to sell a handgun, even though they appeared to recognize that the sale 

would be illegal. Some even offered advice on avoiding the restrictions, 

stating for example: 

1. “What you do with it is your business. Legally you’d be 

responsible for it, you’re more than welcome to buy one. You 

can’t transfer it to him—I assume he’s been turned down”; 

2. “As long as you have no record, you can come down here and 

pick one up and put it in your name”; 

 

U.S. Department of Justice 27

Office of the Inspector General 

56 Although federal law allows individuals to purchase a firearm as a legitimate

gift, it is unlawful to knowingly transfer a firearm to an individual known to be

prohibited from possessing a gun. It also is unlawful for an FFL to knowingly 

participate in such a straw purchase. 

Evaluation and Inspections Division
3. “You can do whatever you want after you walk out the door”; 

and

4. Clerk: “She can’t come in, pick one out and you buy it. That’s 

against the law.” Interviewer: “I’d come, just me.” Clerk: “I’d 

have no problem with that.” 57

In December 2003 the ATF’s Firearms Programs Division randomly 

selected 760 FFLs for compliance inspections to identify FFL business 

characteristics that could be used to more effectively target FFLs for 

compliance inspections. By analyzing FFL business characteristics, such 

as number of employees and types of firearms sold, the ATF plans on 

developing a “risk model” based on the types and levels of firearms 

violations found at the selected FFLs.58 According to the ATF, the “risk 

model” will identify those FFLs most likely to be violating federal firearms 

laws. According to the Chief of the Firearms Programs Division, the ATF 

may, in the future, modify the FFL Renewal Application form to capture 

those factors identified by the risk model. 

In sum, we disagree with the ATF’s practice of limiting its 

identification of potential traffickers to the number that can be addressed 

within available resources. Unless the ATF identifies the full universe of 

FFLs exhibiting indications of firearms trafficking, it is unable to properly 

manage its range of enforcement activities, or inform the Attorney 

General, Congress, and the public of the scope of the potential trafficking 

problem at FFLs. 

 

ATF’s Field Divisions Implement FFL Inspections Inconsistently 

During our review of FFL inspection files, we found that the 

process and amount of time spent conducting application and 

compliance inspections varied greatly among the ATF Field Divisions. 

For the 8,123 application inspections and 4,581 compliance inspections 

conducted by the ATF in FY 2002, the application inspections took an 

average of 11.8 hours and the compliance inspections took an average of 

35.3 hours each. However, we found considerable variation in the 

average inspection time among the ATF’s 23 Field Divisions. Time and 

workload data from the ATF’s N-Spect database showed that the average 

time that Field Divisions spent conducting each application inspection 

U.S. Department of Justice 28

Office of the Inspector General 

 57 Buying a Handgun for Someone Else, Injury Prevention 2003; 9:147-150, with

permission from the BMJ Publishing Group.

58 We note that the Random Sample Compliance Inspection worksheets do not 

include information related to the FFLs’ firearms tracing histories. 

Evaluation and Inspections Division
U.S. Department of Justice 29

Office of the Inspector General 

Evaluation and Inspections Division 

ranged from 6.2 hours in the Kansas City Field Division to 25.5 hours in 

the Miami Field Division. For compliance inspections, the average 

inspection length ranged from 24.5 hours per inspection in the Nashville 

Field Division to 90.0 hours in the Washington Field Division. According 

to ATF Headquarters officials, the variance was due to Inspectors’ 

discretion in determining the appropriate amount of time to spend 

examining FFL records. ATF officials also told us that inspection times 

were affected by the number of inexperienced Inspectors in the Field 

Divisions. 

Our review of the ATF’s Inspector Handbook confirmed that 

Inspectors have the latitude to abbreviate significant portions of a 

compliance inspection.TP

59PT According to the Inspector Handbook, 

Inspectors must complete 11 worksheets totaling 23 pages during an 

inspection. Although the Work Program and worksheets provide 

extensive direction for data collection, Inspectors are allowed to reduce 

specific inspection steps. For example: 

• The worksheets give ATF Inspectors the discretion to either 

conduct a full inventory (Ui.e.U, a physical count) of the firearms in 

stock during a compliance inspection, or to sample the FFL’s 

inventory to determine whether the number of “open” A&D Book 

entries matches the number of firearms at the FFL’s place of 

business. The worksheet provides no guidance to ensure that a 

valid sample is taken, or how many discrepancies can be found 

before a full inventory is required.TP

60PT

• The ATF inspection worksheet for examining Form 4473 sales 

records gives the Inspector the option to conduct a sample 

review and contains a space for the Inspector to explain the 

method used to determine how the sample was taken. In our 

discussions with Inspectors, we found that they did not use a 

statistical method for determining the number of Forms 4473 to 

examine. Instead, most Inspectors told us that they examined 

either a pre-determined number of Forms, or examined Forms 

 

TP

59PT The ATF also issues supplemental instructions annually to guide the conduct 

of the limited number of Focused Inspections directed by Headquarters. In FY 2003, 

Inspectors were to count all guns in stock and compare that number to the total 

number of entries in the FFL’s A&D book for which the “disposition” column was blank. 

If those numbers matched, the Inspector was to conduct a limited inventory verification. 

If discrepancies were found, a full inventory verification was required. 

TP

60PT ATF Inspection Worksheet 2 – Inventory. The worksheet asks, “Full count of 

inventory taken?” and provides a space for the Inspector to answer Yes or No. The 

worksheet notes, “If no count was taken, state why in findings.” 
from a specific time frame. For example, in the Miami Field 

Division, Inspectors said that they were required by their Area 

Supervisor to review six months of Forms 4473, while 

Inspectors at the Seattle Field Division said that they were told 

by their Area Supervisor to examine one year’s worth of records. 

Case Study: Gun Dealer Avoided 

Restrictions on Sales To Prohibited Persons

 In June 2002, an ATF inspection was 

conducted at an FFL in the Seattle Field 

Division based on information from Special 

Agents at another Field Division. The 

inspection found that the FFL had been

illegally conducting business at Nevada gun 

shows in violation of the Gun Control Act. The

FFL admitted to inspectors that he had illegally

transferred 52 firearms at the gun shows, and 

that he altered his A&D Book to hide the sales. 

Furthermore, the FFL admitted to having

worked with two out-of-state gun show dealers 

to allow for firearms sales to be conducted

without NICS checks. The FFL told inspectors 

this was done “because [the FFL] needed the

money for...family.” As a result of the

inspection, the ATF revoked the FFL’s license. 

Source: ATF case files

Our discussions with Inspectors during our site visits also 

confirmed that Inspectors vary in the depth of their reviews. For 

example, all 18 Inspectors we interviewed said that they review Forms 

4473 as part of the inspection process, but 14 said that they only 

examine the forms to see if they were filled out properly – not for 

indications that a purchaser may be part of a firearms trafficking ring or 

acting as a straw purchaser for 

someone else (e.g., purchasing 

patterns, similarities in 

purchasers’ addresses). These 14 

Inspectors said that they do not 

review Forms 4473 for firearms 

trafficking indicators because it 

was not a required part of the 

ATF’s inspection process. 

Although our interviews and 

review of the ATF’s Inspector 

Handbook confirmed that 

Inspectors and their supervisors 

have the discretion to vary the 

extent of inspections, we also 

analyzed ATF performance data to 

identify any other factors that 

could be causing the disparity 

between Field Divisions. Our 

analysis of ATF data regarding application inspections found that the 

average time spent conducting application inspections was clearly 

correlated to the Field Divisions’ staffing levels and the number of FFLs 

located in the Divisions. ATF data showed that Field Division staffing 

ranged from a high of 35 Inspectors in the San Francisco Field Division 

to a low of 9 Inspectors in the Baltimore Field Division. The number of 

FFLs in each Field Division ranged from 8,194 FFLs in the Kansas City 

Field Division to 1,172 FFLs in the Miami Field Division. However, the 

ATF had not distributed its Inspector resources among the Field 

Divisions to match the distribution of FFLs, resulting in significant 

workload imbalances among the Field Divisions. As shown in Figure 6, 

U.S. Department of Justice 30

Office of the Inspector General 

Evaluation and Inspections Division
the Field Division that had higher numbers of FFLs to oversee with each 

Inspector spent less time conducting each application inspection. 

Figure 6: Comparison of Length of Application

Inspections to FFLs per Inspector

-

50

100

150

200

250

300

350

400

450

500

Miami

San Francisco

Los Angeles

New York

Louisville

Atlanta

Tampa

Chicago

Washington

Dallas

Columbus

Nashville

Philadelphia

Baltimore

New Orleans

Detroit

Charlotte

Houston

SeattleBoston

Phoenix

St. Paul

Kansas City

FFLs per Inspector

-

5.0

10.0

15.0

20.0

25.0

30.0

Average Direct

Hours Per

Application

Inspection

FFLs per Inspector Average Direct Hours Per Application Inspection

We also examined the ATF’s explanation that compliance 

inspection times were affected by the number of inexperienced Inspectors 

assigned to each Field Division.61 As explained by ATF officials, 

inexperienced Inspectors receive on-the-job training from more 

experienced Inspectors. During that time, they observe or are observed 

by the experienced Inspector. Since inexperienced Inspectors are not 

fully productive, the average inspection time for Field Divisions with 

more inexperienced Inspectors could be higher. However, as shown in 

Figure 7, we found there was no correlation between the average time 

that a Field Division took to conduct compliance inspections and the 

percentage of inexperienced Inspectors among the Field Division’s staff. 

Source: ATF workload and performance data

 

U.S. Department of Justice 31

Office of the Inspector General 

61 Trainee Inspectors start at grade 5 on the General Schedule (GS). During 

their first two years, while at the GS-5 and GS-7 levels, trainees accompany senior 

Inspectors to observe and assist. 

Evaluation and Inspections Division
Figure 7: Impact of Inexperienced Inspectors on

Average Compliance Inspection Hours

-

10

20

30

40

50

60

70

80

90

100

Nashville 

Chicago

Baltimore

Philadelphia

San Francisco

Seattle

Dallas

Atlanta 

Washington

Houston

Los Angeles

Boston

Tampa

New York

Detroit

Columbus

Charlotte

Kansas City

Louisville

Miami

St.Paul

New Orleans

Phoenix

Average Hours per

Compliance 

Inspection

0%

5%

10%

15%

20%

25%

30%

35%

Percentage of

Inexperienced

Inspectors 

Average Hours Per Compliance Inspection Percentage of Inexperienced Inspectors

Source: ATF workload and performance data

We also examined several performance indicators to see if the 

differing inspection times were related to outcomes, such as violations 

found and criminal referrals. As shown in Figure 8, we found that Field 

Divisions with longer average compliance inspection times found more 

instances of violations on each inspection. However, it was unclear 

whether the longer inspection times resulted from the need to document 

more violations, or if the greater number of violation instances found 

resulted from longer inspections. 

U.S. Department of Justice 32

Office of the Inspector General 

Evaluation and Inspections Division
Figure 8: Comparison of Average Hours and Average Violation

Instances for Compliance Inspections

0

10

20

30

40

50

60

70

80

90

100

Nashville 

New Orleans

Houston

New York

Phoenix

Chicago

San Francisco

Tampa

Los Angeles

Detroit

Kansas City

St.Paul

Louisville

Baltimore

Charlotte

Boston

Columbus

Seattle

Dallas

Atlanta 

Philadelphia

Miami

Washington

Average Hours Per Compliance Inspection

Average Violation Instances Per Compliance Inspection

Source: ATF workload and performance data

To examine whether the variation in average inspection times was 

due to some Field Divisions taking more time to document 

noncompliance by FFLs in order to pursue adverse actions, we analyzed 

whether Field Divisions that took longer to conduct compliance 

inspections in FY 2002 also took more adverse actions. We found that 

Field Divisions that had longer average inspection times took slightly 

fewer adverse actions than Field Divisions that took less time to conduct 

inspections. Figure 9 shows the average inspection time and number of 

adverse actions taken for each ATF Field Division. 

U.S. Department of Justice 33

Office of the Inspector General 

Evaluation and Inspections Division
U.S. Department of Justice 34

Office of the Inspector General 

Evaluation and Inspections Division 

Figure 9: Comparison of Average Compliance Inspection

Time to Adverse Actions, FY 2002

0

10

20

30

40

50

60

70

80

90

100

Nashville

New Orleans

Houston

New York

PhoenixChicago

San Francisco

Tampa

Los Angeles

Detroit

Kansas City

St. Paul

LouisvilleBaltimore

Charlotte

Boston

Columbus

Seattle

Dallas

Atlanta

Philadelphia

Miami

Washington

Adverse 

Actions/Hours

Warning Letter (FY02)

Warning Conference (FY02)

Revocation (FY02)

Average Direct Hours per Compliance Inspection

Our analysis of the ATF Field Divisions’ inspection efforts and 

outcomes also uncovered significant variances in inspection productivity. 

For example, our analysis of the ATF’s FY 2002 workload and 

performance data found such variances as: 

• The number of inspections conducted per Inspector each year 

ranged from 12.7 (Miami Field Division) to 46.5 (Kansas City 

Field Division). 

• The percentage of the inspections conducted by each Field 

Division that identified violations varied from 4.5 percent 

(Kansas City Field Division) to 41.5 percent (Dallas Field 

Division). 

• On inspections where violations were discovered, the average 

number of instances of violations found on each inspection 

ranged from 15.9 (Nashville Field Division) to 178.2 (Chicago 

Field Division). 

Source: ATF workload and performance data 
U.S. Department of Justice 35

Office of the Inspector General 

Evaluation and Inspections Division 

• The average time that Field Divisions took to find each violation 

ranged from 47 minutes per violation (Dallas Field Division) to 

over 7 hours per violation (Los Angeles Field Division). 

Inspection hours, violations, and adverse actions taken in FY 2002 are 

summarized by Field Division in Table 2, on the next page. 

The variability in FFL inspections between ATF Field Divisions 

indicates that inspections are not being conducted according to 

standardized inspection procedures. Moreover, the excessive variability 

allowed inefficient and ineffective operations to persist. The ATF’s failure 

to use the limited available Inspector resources efficiently also reduced 

its capability to carry out regular inspections of all FFLs, which, in turn, 

reduced the effectiveness of the ATF’s FFL inspection program for 

ensuring FFLs comply with federal firearms laws. Further, the lack of 

standardization resulted in inconsistent treatment of FFLs in Field 

Divisions. 

We believe that a standardized inspection approach is needed to 

ensure that FFLs in all Field Divisions are inspected using consistent 

inspection procedures and sampling criteria. Adopting a standardized 

inspection process designed to use the minimum review necessary to 

effectively gauge FFLs adherence to gun laws also would increase the 

efficiency of the FFL inspection program, and better enable the ATF to 

provide uniform, regular inspection coverage of the FFL population. An 

increase in inspection efficiency also would reduce the overall time that 

Inspectors spend at the FFLs’ place of business. 
U.S. Department of Justice 

Office of the Inspector General Evaluation and Inspections Division

Table 2 - Inspector Hours, Productivity, Violation Instances Found, and Adverse Actions Take

Field Division

Inspectors 

FFLs perInspector 

FFLs Within Field 

Division

Total Insector Hours (Np

Spectta)Da

Application Inspections 

Compliance Inspections

Inspections per Inspector 

Average Hours per 

Application Inspection 

Average Hours per 

Compliance Inspection 

Inspections with

Violations 

% of Insections Finding p

Vsiolation

Violations Instances 

Found 

Violation Instances per

Inspection

Atlanta 20 145 2,892 8,925 300 86 19 9.5 70.6 57 15% 7549 132.4 

Baltimore 9 203 1,823 6,306 131 107 26 15.7 39.7 52 22% 6665 128.2 

Boston 17 352 5,977 7,998 271 106 22 13.2 41.8 34 9% 2345 69.0 

Charlotte 18 239 4,295 13,326 417 208 35 11.5 40.9 114 18% 8901 78.1 

Chicago 23 157 3,601 9,429 315 151 20 16.0 29.0 34 7% 6058 178.2 

Columbus 34 191 6,496 17,212 472 268 22 11.3 44.4 140 19% 9517 68.0 

Dallas 30 186 5,581 15,951 249 255 17 14.7 48.2 209 41% 20239 96.8 

Detroit 18 235 4,237 11,410 362 228 33 11.0 32.5 109 18% 9051 83.0 

Houston 16 251 4,019 7,013 277 169 28 9.5 25.9 52 12% 2457 47.3 

Kansas City 18 455 8,194 7,889 737 100 47 6.2 32.9 38 5% 3650 96.1 

Los Angeles 24 116 2,790 7,040 176 136 13 15.6 31.6 28 9% 995 35.5 

Louisville 25 131 3,287 17,629 373 320 28 13.9 38.9 131 19% 8634 65.9 

Miami 15 78 1,172 6,679 157 33 13 25.5 81.0 11 6% 1315 119.5 

Nashville 23 192 4,408 16,881 275 565 37 11.2 24.4 222 26% 3537 15.9 

New Orleans 21 225 4,724 15,912 483 385 41 12.4 25.8 170 20% 11017 64.8 

New York 33 116 3,838 15,660 359 375 22 14.8 27.6 84 11% 4477 53.3 

Philadelphia 27 193 5,207 11,013 434 62 18 14.1 79.0 23 5% 2082 90.5 

Phoenix 15 423 6,341 7,449 373 144 34 9.3 27.7 46 9% 1384 30.1 

San Francisco 35 109 3,815 17,099 359 387 21 14.7 30.5 125 17% 8005 64.0 

Seattle 21 309 6,498 7,577 538 85 30 7.0 44.6 31 5% 4261 137.5 

St.Paul 17 453 7,709 10,780 451 172 37 10.1 36.2 97 16% 4565 47.1 

Tampa 22 150 3,297 10,718 399 185 27 12.6 30.7 90 15% 5055 56.2 

Washington 17 176 2,995 7,828 215 54 16 13.8 90.0 37 14% 3073 83.1 

498 103,196 257,723 8,123 4,581 11.8 35.3 1,934 134,832 69.7 

Note: FFL and Inspector data are as of 08/01/03, other data are totals for FY 2002. 
Suspected Criminal Violations Are Not Always Referred for 

Investigation 

In addition to documenting regulatory violations, the FFL 

inspection program also identifies indications of potential criminal 

activity. Paradoxically, we found that Field Divisions that took longer to 

conduct inspections made slightly fewer referrals of suspected criminal 

activity (Figure 10). To analyze this result, we examined the total 

number of inspections completed by each Field Division and found that 

Field Divisions that took longer to conduct inspections completed fewer 

inspections. Further, the data showed that the number of inspections 

completed was correlated to the number of referrals made, and that 

taking longer to conduct an inspection made it no more likely that 

suspected criminal activity would be found and referred. Therefore, Field 

Divisions that took longer to conduct inspections completed fewer 

inspections and made fewer criminal referrals. 

Figure 10: Comparison of Average Compliance Inspection

Time to Criminal Referrals, FY 2002

0

20

40

60

80

100

120

140

Nashville

New Orleans

Houston

New York

Phoenix

Chicago

San Francisco

Tampa

Los Angeles

Detroit

Kansas City

St. Paul

Louisville

Baltimore

Charlotte

Boston

Columbus

Seattle

Dallas

Atlanta

Philadelphia

Miami

Washington

Average 

Hours/Referrals

Average Direct Hours per Compliance Inspection Criminal Referrals FY02

Source: ATF Field Management Staff and ATF Firearms Programs Division

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

37
In addition, we found evidence that the coordination between ATF 

Inspectors and ATF Special Agents could be improved. During our 

review, we determined that even when FFL compliance inspections 

identify significant violations of federal firearms laws by the FFLs or by 

gun purchasers, the violations are often not reported to ATF Special 

Agents for investigation. In our interviews, 12 of 18 Inspectors said that 

they rarely refer information gathered during FFL inspections to Special 

Agents because they did not believe that Special Agents would follow-up 

on the information. The other six Inspectors told us that they made one 

or two referrals per year to Special Agents. 

We identified several cases where indications of potential criminal 

violations by FFLs, including gun trafficking, were identified but not 

referred for investigation. These FFLs were subsequently investigated 

after the illegal activity was discovered through other means. For 

example, Inspectors conducted compliance inspections in March 2000 

and October 2002 on an FFL located in the southern United States. The 

2000 inspection was based, in part, on information from a state LEA. 

During the 2002 compliance inspection, the Inspector found 40 firearms 

not entered into the FFL’s A&D Book, several missing Forms 4473, and 

sales to out-of-state residents – all strong indicators of gun trafficking. 

Despite these findings, the FFL was not reported to Special Agents for 

investigation. Then, subsequent to the inspections, information from a 

confidential informant led to an investigation of this FFL. In December 

2003, ATF Special Agents arrested the FFL for trafficking firearms. 

Further, the latest data available indicate that investigations are 

not frequently initiated as a result of information provided by ATF 

Inspectors. In FY 2002 and FY 2003 respectively, Inspectors made 951 

and 823 referrals of potential criminal activity identified during 

compliance inspections, an average of two per field-level Inspector. 

According to the ATF’s Following the Gun report, published in 2000, of 

the 1,530 firearms trafficking investigations conducted from July 1996 to 

December 1998, just 43 - less than 3 percent - were initiated based on 

information found during inspections (see Table 3 on next page). Our 

survey of 45 Area Supervisors also found that few inspections result from 

information referred to Inspectors by ATF Special Agents. Most Area 

Supervisors (71.1 percent) said that they assigned five or fewer 

inspections each year based on information from Special Agents. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

38

In December 2002, the ATF attempted to improve coordination 

between Inspectors and Special Agents by creating 23 Special 

Intelligence Inspector (SII) positions (one in each Field Division). The SIIs 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division 

39

are responsible for collecting and disseminating information gathered by 

Inspectors and Special Agents between the two groups. As of November 

2003, only 7 of the 23 authorized SII positions had been filled. Although 

ATF Headquarters officials said that they plan to fill the positions, as of 

March 2004 no deadline had been set. 

The ATF Acts Infrequently to Revoke Federal Firearms Licenses, and 

the Process is Not Timely 

We found that the ATF rarely revokes federal firearms licenses. In 

FY 2002, the 1,934 FFL inspections that found violations found an 

average of almost 70 violations each (for a total of 134,832 violations). In 

FY 2003, the 1,812 inspections that found violations found an average of 

over 80 violations each (for a total of 149,396 violations). However, in 

those years, the ATF issued Initial Notices of Revocation to only 30 and 

54 FFLs, respectively.TP

62PT In addition to issuing a Notice of Revocation 

after a compliance inspection, the ATF also can effectively revoke an 

FFL’s license by denying its request for license renewal. If an FFL’s 

license expires during the course of revocation proceedings, the ATF’s 

 

TP

62PT Notices of Revocation are not final. Of the 30 Notices in FY 2002, 25 FFLs 

requested a hearing and 3 of those avoided revocation. (The FY 2003 data was 

unavailable as of March 2004.) 

Table 3: Reasons Cited for ATF Firearms Trafficking Investigations 

(July 1996 to December 1998) 

Reason 

Times 

Cited 

Percent of 

Investigations* 

Referral from state, local, or federal agency 409 26.7% 

Confidential informant 352 23.0% 

Crime gun tracing analysis 296 19.3% 

Review of multiple sales forms 205 13.4% 

FFL reported suspicious activity 139 9.1% 

Developed from another ATF investigation 127 8.3% 

FFL reports burglary/theft/robbery to ATF 115 7.5% 

ATF initiated investigation of suspicious activity 

 (Ue.g.U, gun show task force, etc.) 81 5.3% 

→ ATF inspection of FFL 43 2.8% 

Tip by citizen or anonymous source 37 2.4% 

Other 9 0.6% 

* Some of the 1,530 investigations cited more than one reason. Therefore, the “Percent of 

Investigations” exceeds 100 percent. 

Source: “Following the Gun,” ATF Publication (June 2000).
action is formally categorized as a denial of a renewal request – not as a 

revocation. In FY 2001, the ATF denied 28 requests for renewal.63 

During our review, ATF officials told us that, before May 2003, the 

decision on whether to take adverse action (i.e., to revoke or deny 

renewal of an FFL’s license) was left to the discretion of the Inspector, 

Area Supervisor, and the DIO of each of the 23 Field Divisions. However, 

in May 2003, subsequent to the initiation of our review, the ATF created 

guidelines for the Field Divisions to follow when determining whether or 

not to initiate an adverse action. When asked about the impact of these 

new guidelines, ATF personnel in the four Field Divisions we visited told 

us that they expected the guidelines to lead to an increase in the total 

number of license revocations. We found that after the ATF issued the 

adverse action guidelines, the number of FFL revocation hearings rose to 

87 during FY 2003, and 59 Initial Notices of Revocation were issued and 

renewals denied during the first quarter of FY 2004 alone. As of March 

2004, most of these cases have not been finalized. 

The process for revoking or denying renewal of a federal firearms 

license is not timely. The ATF provided specific case tracking data for 50 

closed denials and revocations completed in FY 2001 and FY 2002.64 

The processing of these 50 cases averaged 379 days from the date that 

the Inspector recommended revocation or denial to the date that the case 

was closed by the NLC. We determined that the length of denial and 

revocation proceedings was due, in part, to the number of ATF officials

involved (see Figure 11 on page 42). At least five ATF officials participate 

in these proceedings and each official reviews and approves the FFL 

inspection case file seriatim. A formal ATF Notice of Revocation is issued 

only after all of the officials have approved the action. Because the ATF 

has limited suspension and fining authority, FFLs remain in business 

during the adjudication of renewal denials and revocations. 

During our interviews, DIOs and some Area Supervisors stated 

that most delays in the eight-step process occurred at the Division 

 63 ATF officials also told us that FFLs sometimes withdraw their renewal 

applications after being told that they may be denied. In FY 2001, 489 FFLs withdrew 

their applications, but ATF did not track how many withdrew after being told they

would be denied versus withdrawals for other reasons. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

40

64 The ATF provided partial data for an additional 37 cases that we did not

include because the data were inadequate to enable us to determine the case processing

time. For example, for 33 cases the NLC did not have dates for when the initial Notice

of Revocation or Denial was sent to the FFL. 
Counsel level as the ATF waited for Division Counsel to draft a Notice of 

Revocation for the FFL. We were unable to evaluate that perception from 

the case tracking data that ATF could provide, because it did not include 

the dates that the cases were processed by individual Field Division 

offices. However, Assistant Chief Counsels and Division Counsels we 

interviewed acknowledged delays in denial and revocation proceedings, 

which they stated were due, in part, to their heavy caseloads. They also 

stated that the quality of the initial compliance inspection report was a 

factor, as not all cases they received adequately detailed that the FFL 

“knowingly and willfully” violated federal firearms laws. This caused 

further delay while the Division Counsels obtained clarifying information 

from the Inspectors to ensure that the cases met legal standards. 

We also noted that in some cases delays occurred due to a lack of 

legal staff within the Field Divisions. Although in 1999 the ATF 

established a standard Field Division structure that would include two 

staff attorneys, two of the Field Divisions we visited (Washington, D.C. 

Field Division, Seattle Field Division) had no attorneys on staff. When 

those Field Divisions needed legal assistance, they obtained it directly 

from their regional Assistant Chief Counsel’s Office. For example, at the 

Washington, D.C., Field Division, the DIO told us that he sent revocation 

and denial cases to the Assistant Chief Counsel’s Office located in 

Philadelphia.65 In one case, he said, it took four months to prepare an 

Initial Notice of Revocation for his signature. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

41

 65 The Assistant Chief Counsel’s Offices are located in San Francisco, Chicago, 

Dallas, Atlanta, and New York/Philadelphia. The northeast regional office is currently 

operating in Philadelphia due to the September 11, 2001, destruction of the ATF’s New 

York offices, which were located at the World Trade Center. 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division 

42

Case Study: FFL Remains in Business More 

Than Two Years After Inspector Recommends

Revoking License 

Based on an October 2001 compliance 

inspection, an ATF Inspector recommended 

revoking the license of a Georgia FFL operating 

as a pawnbroker. During the inspection, the 

Inspector determined, among other findings, that

the FFL: 

• Sold 51 firearms without first obtaining 

proper identification from the purchasers; 

• Failed to complete a Report of Multiple Sale 

on three occasions; 

• Transferred at least one firearm to an outof-state resident; and 

• “Aided and abetted a prohibited person in 

obtaining a firearm” on four occasions by 

transferring firearms to individuals other 

than those who had originally pawned the 

firearms to him without performing the 

proper background check. 

The DIO issued an initial Notice of 

Revocation on May 6, 2002. The FFL appealed, 

and a hearing was scheduled for November 2002.

The NLC rescheduled the hearing for February 

2003 at the FFL’s request. At that hearing, the 

FFL blamed the violations on human error as 

well as a computer program he used to maintain 

his records. The Hearing Officer’s completed 

report, which included a recommendation to 

approve the FFL’s license, was issued to the DIO 

on March 31, 2003. The DIO issued a final 

Notice of Revocation on June 13, 2003. The FFL 

waited until August 12, 2003 – the maximum 

allowable time – to appeal the DIO’s decision to 

U.S. District Court, where the case remained as 

of March 2004. Both sides have until June 1, 

2004 to file motions in the case, according to a 

December 2003 order. Throughout these 

proceedings, the FFL has remained in business. 

[U.S. District Court, Middle District of Georgia; 

Case #03-CV-267.] 

Figure 11: FFL Denial or Revocation Process 

Compliance inspection reveals federal 

firearms violations. Inspector 

recommends revoking FFL’s license. 

Area Supervisor approves 

recommendation for revocation. 

DIO approves recommendation for 

revocation. 

Division Counsel writes initial Notice 

of Revocation for issuance to the FFL 

by DIO. FFL has 15 days to appeal 

revocation and request a hearing. 

FFL has 60 days to appeal revocation 

to U.S. District Court. 

Division Counsel writes final Notice of 

Revocation for issuance by DIO. 

Hearing Officer issues report of 

findings and recommendations to DIO.

DIO schedules hearing to be attended 

by Hearing Officer, FFL, FFL’s counsel,

Inspector who conducted compliance 

inspection, and Division Counsel. 

NLC officials assign Inspector to serve 

as Hearing Officer. 

If an FFL files an appeal, Division 

Counsel, in consultation with an 

AUSA, submits Motion for Summary 

Judgment on behalf of the ATF. 
We also found indications of limited communication between Field 

Division staff and Division Counsels. For example, we were told that 

Inspectors, Area Supervisors, and DIOs, usually do not seek advice from 

Division Counsels on inspections of FFLs found to have violated federal 

firearms laws until they request a Notice of Revocation or Denial. 

Furthermore, Division Counsels told us that they are not routinely 

notified when Warning Conferences are scheduled between FFLs and 

DIOs. One Assistant Chief Counsel told us that he believes that the ATF 

would benefit if Division Counsels had the opportunity to participate in 

such proceedings in case, later on, a Notice of Revocation is issued to the 

FFL. 

New ATF Guidelines Begin to Address Inconsistent and Untimely 

Adverse Actions 

In May 2003, the ATF took the initial steps toward standardizing 

adverse actions by issuing guidelines that were intended to ensure that 

Field Division personnel make more consistent and appropriate 

determinations on adverse actions (such as warning letters, warning 

conferences, and revocations) when FFLs are found to have violated 

federal firearms laws. The guidelines established standards for 

minimum adverse actions to be taken when violations are found. 

Although Field Divisions can deviate from the policy if they determine 

that the facts warrant another action, any deviation on inspections 

violations for which the standard action is revocation must be reviewed 

by Headquarters. 

The guidelines specify that FFLs that commit minor non-repetitive, 

non-willful violations that do not affect the lawfulness of a gun transfer, 

such as minor omissions or format errors, should receive warning letters 

or reports of violations. FFLs committing more serious violations that do 

not rise to the level of revocation, such as failing to record an acquisition 

within a specified time frame or failing to report multiple sales, should 

receive warning conferences. When FFLs commit the most serious 

violations, such as having more than a threshold number of guns 

missing from their inventory, the Field Division should begin the process 

of revoking or denying the renewal of the FFL’s license. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

43

The guidelines also address some of the problems we noted with 

the ATF’s past failure to follow-up and take action when violations were 

found. For example, they address the frequent failure to routinely reinspect FFLs found to have committed serious violations by directing that 

all FFLs that receive warning letters or warning conferences must be 
scheduled for a follow-up “recall” inspection in the following year. The 

guidelines also begin to address the lack of adverse actions taken against 

repeat violators by directing that adverse actions must escalate for repeat 

offenses. For example, an FFL that was issued a warning letter or 

directed to attend a warning conference for a violation cannot be given 

the same penalty if a subsequent inspection discovers further violations. 

Instead, the penalty must escalate to a warning conference (from a 

warning letter) or to revocation. The guidelines also establish a time 

frame for part of the adverse action process by directing DIOs to act on 

adverse action recommendations within 90 days after receiving the 

inspection report. 

In addition to addressing the adverse action process, the guidelines 

also address part of the inspection process by requiring that follow-up 

inspections on FFLs that had unresolved inventory discrepancies include 

a full inventory, unless the DIO approves a statistical sample instead. 

Conducting a full inventory identifies all the guns that the FFL may have 

lost, and it brings the FFL’s inventory records up-to-date. The FFL then 

formally reports any missing guns to the NTC as lost or stolen. The 

reporting of lost and stolen guns provides some benefit should one of 

those guns be recovered and traced, since it saves the NTC from 

contacting the manufacturer and dealer before the NTC knows that the 

gun was lost from a specific FFL’s inventory. A full inventory may also 

identify more instances of violations to support potential adverse actions. 

However, for the purpose of verifying that FFLs are complying with 

the requirement to maintain an accurate inventory, a policy of 

conducting full inventories in lieu of valid statistical samples may not be 

the most effective use of ATF resources. Conducting full inventories at 

larger gun dealers can be very time consuming. Moreover, once an 

inspection identifies discrepancies sufficient to document that an FFL’s 

inventory system is deficient, completing a full inventory provides only 

incremental instances of missing guns. We would not disagree that there 

are cases, often related to an investigation, where a full inventory is 

desirable – cases like the Bull’s Eye Shooter Supply.66 However, 

maintaining an accurate inventory remains the responsibility of the FFL. 

Given the limited resources available to the ATF to conduct gun shop 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

44

 66 The Bull’s Eye Shooter Supply in Washington State was the FFL that lost the 

Bushmaster sniper rifle used in a series of murders across the country in 2002 for

which John Allen Muhammad and Lee Boyd Malvo were subsequently convicted. 

Subsequent inspections found that the store could not account for several hundred 

guns, including assault weapons. 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division 

45

inspections, restricting inventories to the minimum sample needed to 

provide a statistically valid check on the accuracy of the FFL’s recordkeeping system would reduce the length of inspections and enable the 

ATF to provide better coverage of FFLs. 

By Streamlining and Standardizing Inspections, the ATF Could 

Dramatically Improve the FFL Inspection Program 

We found that there is a critical need for the ATF to improve the 

efficiency and effectiveness of the FFL inspection program and ensure 

that FFLs are inspected using consistent inspection procedures and 

sampling criteria regardless of their geographic location. With the 

May 2003 guidelines, the ATF began to improve the consistency and 

timeliness of adverse actions, as well as to address the critical need to reinspect FFLs that committed violations. However, the current variability 

in the Field Divisions’ inspection procedures must be addressed to 

ensure that adverse actions taken under the May 2003 guidelines treat 

FFLs consistently. Requiring defined adverse actions for specific 

numbers of violation instances in the absence of standardized inspection 

procedures and sampling criteria will result in dissimilar treatment of 

FFLs in different Field Divisions. As discussed previously, the ATF’s 

guidance on conducting inspections does not ensure consistent 

examinations of FFLs’ compliance with gun laws. 

We observed several areas in which the inspection process could 

be improved through standardization, such as: 

• Standardizing inventory procedures to conduct the minimum 

sample needed (based on the number of guns in the FFL’s 

stock) to provide a statistically valid check on the effectiveness 

of the FFL’s inventory management and record-keeping 

systems. 

• Standardizing the review procedures for Forms 4473 to provide 

for the minimum sample needed to provide a statistically valid 

check (based on the number of guns sold by the FFL) on 

whether the FFL is completing the Forms as required. 

• Standardizing and automating inspections paperwork and 

providing laptop computers to enable Inspectors to prepare 

inspection reports on-site. Currently ATF Inspectors must 

complete 11 worksheets containing 115 steps and totaling 23 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division 

46

pages while on-site. Application inspection paperwork 

comprises 32 steps for the inspection and 56 steps for an 

acknowledgement of laws. The Inspectors must then transcribe 

their handwritten notes from the worksheets into the ATF’s 

N-Spect database upon returning to their Area Office. 

• Extending the inspection cycle for FFLs with no significant 

violations. Under the May 2003 guidelines, FFLs found to have 

committed violations must be scheduled by the ATF Field 

Division for a follow-up inspection in the following year. 

Extending that approach, a model standardized inspection 

procedure could allow Field Divisions to extend the inspection 

cycle for FFLs that have no significant violations beyond three 

years, so that available resources can be directed toward 

noncompliant dealers. 

• Establish guidance to ensure that Inspectors consistently look 

for known indications of firearms trafficking and, when found, 

report the findings to the ATF’s Criminal Enforcement Division. 

UImproving the efficiency of the inspection process would also 

reduce the need for additional staffU. Adopting a standardized inspection 

process designed to use the minimum review necessary to effectively 

gauge FFLs’ adherence to gun laws will increase the efficiency of the FFL 

inspection program. This will reduce both the need for additional 

Inspector staffing and the burden that inspections place on FFLs. In an 

April 2003 report to Congress, the ATF Director stated that, to fully 

implement the ATF’s mission to regulate and enforce federal firearms and 

explosives laws, the ATF would need 1,775 Inspectors, an increase of 

1,277 Inspectors from current staffing levels.TP

67PT Of the 1,775 Inspectors, 

1,235 would be dedicated to conducting FFL compliance inspections in 

order to inspect all FFLs on a triennial basis. The Director based this 

figure, in part, on projections of FFL application and compliance 

inspections, as well as inspections initiated to support criminal 

investigations. Our review of FY 2002 ATF work hour data shows that it 

dedicated 628,117 staff hours (the equivalent of 302 staff years at 2,080 

hours per year) to FFL inspections. The requested increase to 1,235 

Inspectors would require 933 new Inspectors, and would more than 

 

TP

67PT Inspector Staffing Requirement for the Bureau of Alcohol, Tobacco, Firearms and 

Explosives, April 15, 2003. 
quadruple the Inspector workforce dedicated to inspecting FFLs.68 In the 

Department’s FY 2005 Budget Request, it recommended funding 126 

new Inspector positions for the ATF. 

We examined the ATF’s calculations and question whether it needs 

as many Inspectors as stated. The ATF projection was calculated using 

an overall average inspection time of 62.7 hours per inspection (Table 4, 

on the next page). However, according to the ATF’s FY 2002 data, the 

overall average inspection time was only 49.4 hours (628,117 inspection 

hours divided by 12,704 total inspections). The ATF request therefore 

appears to include an assumed 27 percent increase in the average length 

of inspections. 

Calculating the staffing requirement using the ATF’s actual 

historical inspection average of about 50 hours per inspection indicates 

that the ATF should need a total of only 984 Inspectors (682 new 

Inspectors) to accomplish inspections on a triennial basis. Moreover, as 

previously discussed, our analysis found wide variations in inspection 

implementation and productivity among the ATF Field Divisions. By 

standardizing and streamlining its inspection process the ATF could 

reduce the average inspection time from the current 49.4 hours, which 

would further reduce the number of additional Inspectors that needed to 

accomplish FFL compliance inspections on a triennial basis.69 For 

example, by reducing the overall average inspection time to 40 hours per 

inspection, the ATF should be able to implement a triennial FFL 

compliance inspection program with 788 Inspectors (Table 4). 

Increasing the efficiency of the inspection process also is needed 

because the demands on ATF Inspectors to perform duties related to 

explosives licensees are increasing. Immediately after the terrorist 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

47

 68 FY 2002 work hour data was the latest available during our review. The work

hours used in this section do not match the work hours discussed previously because

they include not only time spent directly conducting inspections, but all time in an 

Inspector’s work year, such as leave, training, sick days. This additional time must be

considered when calculating staffing requirements. 

69 We noted that the ATF was exploring other ways to reduce the demands on

Inspectors, including a December 2003 proposal to hire former Inspectors to serve as 

Hearing Officers and a Flexiplace Pilot Program. The Flexiplace Pilot reduced the 

requirement for 23 Inspectors from 15 Field Divisions to work from ATF Area Offices, 

allowing more inspections of geographically remote FFLs. An August 2003 

Headquarters review of the program concluded that it improved the performance of the 

Inspectors who participated. As of January 2004, the ATF had not expanded the

program.
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Office of the Inspector General 

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48

Table 4: ATF STAFFING REQUEST CALCULATIONS 

Activity 

Number of 

Inspections 

Hours per 

Inspection* Total Hours 

Inspector FTE @ 

2080 Hours 

Non-YCGII FFL Compliance Inspections 22,889 66 1,510,674 726.3 

YCGII FFL Compliance Inspections 11,444 80 915,520 440.2 

Support Criminal Investigations 631 73 46,063 22.1 

Firearms Applications 6,000 16 96,000 46.2 

 Total 40,964 62.7 2,568,257 1234.7 

• ATF staffing calculations include indirect time 

OIG RECALCULATION: ATF STAFFING AT 50 HOURS PER INSPECTION 

Non-YCGII FFL Compliance Inspections 22,889 51.5 1,178,784 566.7 

YCGII FFL Compliance Inspections 11,444 63.5 726,752 349.4 

Support Criminal Investigations 631 73 46,063 22.1 

Firearms Applications 6,000 16 96,000 46.2 

Total 40,964 50 2,047,599 984.4 

OIG RECALCULATION: ATF STAFFING AT 40 HOURS PER INSPECTION 

Non-YCGII FFL Compliance Inspections 22,889 40 915,560 440.2 

YCGII FFL Compliance Inspections 11,444 50.8 581,360 279.5 

Support Criminal Investigations 631 73 46,063 22.1 

Firearms Applications 6,000 16 96,000 46.2 

Total 40,964 40 1,638,983 788 

attacks of September 11, 2001, the ATF initiated a policy of investigating 

all incidents of theft or loss of explosives materials, and conducting 

compliance inspections on all explosives license holders within 50 miles 

of major metropolitan areas. This meant that the ATF had to inspect 

7,459 of 9,400 explosives license holders. In November 2002, the Safe 

Explosives Act (SEA) imposed new licensing requirements that increased 

the number of explosives licensees, and mandated that the ATF conduct 

on-site inspections of explosives licensees and permit holders at least 

once every three years. 

The additional explosives work is already reducing ATF’s ability to 

inspect FFLs. The Chief of Staff of the ATF’s Firearms, Explosives and 

Arson Directorate confirmed that Inspector resources have been diverted 

to explosives work by Area Supervisors to meet the SEA’s inspection 

requirements. As a result, she said, the ATF plans to re-examine 

Inspectors’ firearms work because ATF Headquarters officials are 

“worried” that FFLs are not being inspected. Our review of preliminary 

data for FY 2004 inspections work confirmed these concerns. 
Preliminary data for early FY 2004 indicated that there has been a 

precipitous decrease in the number of FFL inspections. Through the first 

five months of FY 2004, the ATF completed 1,113 FFL compliance 

inspections. At that pace, the agency will complete less than 2,700 FFL 

compliance inspections during FY 2004. That is less than half the 

number that the agency reported that it completed in FY 2003, and less 

than 2.6 percent of the FFL population. For example, the Kansas City 

Field Division, which oversees the most FFLs of any Field Division (with 

8,194 FFLs) completed only 21 FFL compliance inspections in the first 

five months of FY 2004. 

Reducing the time spent at FFLs’ places of business. The time that 

ATF Inspectors spend on-site at FFLs cannot be calculated definitively. 

Although the ATF’s inspection hour tracking system shows that the ATF 

spent a total of 257,723 hours conducting FFL inspections in FY 2002, it 

does not allow the time spent on travel and other inspection related 

actions performed away from FFL locations to be segregated from the 

total inspection hours. Nonetheless, any increase in inspection efficiency 

would reduce the overall time spent conducting reviews on-site at the 

FFLs, and minimize any potential interruption of the FFLs’ business 

operations. 

ATF Does Not Consistently Report Inspection Performance 

In response to our requests for inspections and workload data 

(such as the number of compliance and application inspections 

conducted and the Inspector work hours associated with completing 

these inspections during FY 2002), the ATF queried its N-Spect, FLS, and 

Standard Time and Attendance System (STATS) electronic databases. 

N-Spect tracks direct time related to FFL inspections, FLS tracks 

information related to FFL licensees, and the STATS timekeeping system 

tracks direct and indirect hours for payroll purposes. During our 

examination of the performance and productivity of the ATF’s FFL 

inspections program, we identified significant discrepancies between the 

systems with regard to the number and type of inspections conducted 

and the hours spent conducting the inspections. In addition, the data in 

the systems regarding the number of inspections done differed 

significantly from what the ATF included in published reports. Finally, 

data contained in the N-Spect database contained significant errors: after 

extracting data to respond to our requests, ATF officials determined that 

several hundred inspections entered as compliance inspections were 

actually application inspections. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

49
Table 5 contains examples of inconsistent data related to the ATF’s 

FY 2002 ATF’s FFL inspections program that the ATF provided to OIG 

and reported publicly. 

Table 5: Inconsistent N-Spect Totals of FY 2002 FFL Inspection Activities

Data Source FY 2002 Totals Inspection Type 

N-Spect data provided to the

OIG in May 2003

12,522 Total Inspections (the ATF 

claimed data could not be

broken down by inspection 

type) 

Revised N-Spect data 

provided to the OIG in 

February 2004 

7,665 

5,039 

12,704 

Application Inspections

Compliance Inspections

Total Inspections 

Revised N-Spect data 

adjusted to correct miscoded 

inspections provided to the

OIG Team on May 20, 2004

8,123 

4,581 

12,704 

Application Inspections

Compliance Inspections

Total Inspections 

FLS Licensee Inspection

Data 

4,722 FY 2002 new licensees 

with “inspection date” 

indicating that an 

application inspection was 

conducted 

ATF Snapshot 2003 “Approximately 6,000” Compliance Inspections

ATF Performance and

Accountability Report 2002 

“Eleven percent” of all FFLs 

were inspected. 

11% of 104,300 FFLs is

equivalent to 11,473 

inspections 

Total Inspections 

In addition to FY 2002 data discrepancies, current data from ATF’s 

N-Spect database shows that the ATF conducted 5,729 application 

inspections and 4,035 compliance inspections in FY 2001, as well as 

8,043 application inspections and 5,887 compliance inspections in 

FY 2003. Previously, the ATF had published reports and provided draft 

reports to the OIG indicating that it conducted more inspections: 5,497 

application inspections and 5,016 compliance inspections in FY 2001 

and 8,422 application inspections and 6,481 compliance inspections in 

FY 2003. 

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Office of the Inspector General 

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50
We discussed these substantial inconsistencies with ATF 

Headquarters officials. They explained that the inconsistencies were due 

to differences in how the queries of the N-Spect electronic database were 

constructed by different ATF analysts. For instance, according to the 

ATF Deputy Assistant Director for Field Operations, the ATF report on 

FY 2002 activities (ATF Snapshot 2003) reported a higher number of 

inspections completed because it aggregated all Inspector activities to 

determine the number of compliance inspections conducted by ATF 

Inspectors, and included limited purpose inspections as well as activities 

unrelated to FFL compliance inspections. Another reason for the 

discrepancies related to the project codes used to identify types of 

inspections. According to ATF Headquarters officials, Area Supervisors 

do not always use the correct project codes when assigning inspections 

because the codes are “confusing.” For our review, ATF Headquarters 

officials had to query an N-Spect “Special Instructions” data field for 

“firearms application inspection” and “firearms compliance inspection” 

rather than the appropriate project code in order to more accurately 

determine inspection totals. 

The ATF has taken steps to ensure that inspection totals are 

accurately measured. In October 2003, the ATF released a new version 

of N-Spect that requires Area Supervisors to use pull-down menus that 

are inspection-specific (e.g., “Application Inspection”). Moreover, 

although the enhancements to the N-Spect database will increase the 

reliability of the data in the system, the ATF must adopt a standard 

approach for querying the N-Spect electronic database and ensure that 

queries are stored for future use so that subsequent requests for the 

same data will elicit comparable results. If the ATF does not adopt a 

standard method for querying and extracting historical data, it cannot 

consistently report accurate performance data. 

 

New Restriction on Retention of Gun Purchaser Data will Hinder the 

ATF’s Ability to Detect Fraudulent Background Checks 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

51

As discussed in the Background section, prior to transferring a 

firearm to an unlicensed individual, an FFL must complete a check of the 

National Instant Criminal Background Check System (NICS) to determine 

if the potential purchaser is prohibited from owning a gun. For each 

query, the NICS currently collects information on whether or not the 

purchase was allowed to proceed, and retains information on the 

potential purchaser for 90 days. The FBI assigns each query a unique 

NICS Transaction Number (NTN), which FFLs are required to enter onto 

the corresponding Form 4473. 
For the majority of dealers, NICS is a valuable tool that enables 

them to quickly determine whether a potential customer is prohibited 

from purchasing a firearm. However, some gun dealers could attempt to 

hide transfers to prohibited persons by falsifying NICS information. To 

deter fraud and detect FFLs that may be providing false information to 

pass a NICS check in order to facilitate a sale to a prohibited person, 

during FFL compliance inspections ATF Inspectors verify that the 

information submitted to NICS matches the information on the Form 

4473. The Inspectors copy information on selected Forms 4473 from the 

past 90 days and check with the FBI to ensure that the information on 

the Form 4473 matches the information that the FFL provided at the 

time of the sale. If discrepancies are found, it may indicate than an FFL 

submitted false information to NICS in order to receive an NTN 

associated with a background check for a non-prohibited person. The

ATF reported that it has not found any NICS violations involving the 

falsification of purchaser information through the Forms 4473 review.70

However, the ability of ATF Inspectors to conduct this Form 4473 

review was affected when the FY 2004 appropriations act reduced the 

time that the FBI can retain information submitted by FFLs during the 

NICS check.71 Beginning in July 2004, all purchaser information (e.g., 

name, address, date of birth) on NICS queries for which firearms sales 

are approved will no longer be kept for 90 days; it must be destroyed 

within 24 hours of the official NICS response to the FFL.72 For approved 

sales, the FBI can retain for 90 days the NTN, the license number of the 

FFL that contacted NICS, and the date that the NICS query was made. 

 70 Gun Control: Potential Effects of Next-Day Destruction of NICS Background

Check Records, General Accounting Office, Report GAO-02-653, July 2002, 16-18. ATF 

Headquarters officials said, however, that they believe FFLs are aware of the ATF’s 

procedures for inspecting Forms 4473 and are thereby deterred from supplying NICS

with false purchaser information. The officials noted that the vast majority of 

discrepancies identified during FFL inspections occur because of clerical errors made by 

FFLs or Inspectors, such as FFL errors in recording purchaser information onto Forms 

4473 or Inspector errors in copying information onto worksheets. 

71 The Fiscal Year 2004 Consolidated Appropriations Bill (Public Law 108-199) 

states that DOJ cannot retain “identifying information” related to sales of firearms to

non-prohibited persons for more than 24 hours. All information related to calls for 

which potential sales are denied by NICS will still be retained indefinitely. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

52

72 As of March 2004, NICS officials plan on purging purchaser information every 

night, at midnight (EST). Therefore, purchaser information related to a firearm bought 

at 5 p.m. will be purged seven hours later. 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division 

53

After 90 days, the FBI may retain only the NTN and the date that the 

number was issued. 

In 2002, ATF Headquarters officials suggested that the ATF’s FFL 

compliance inspections program would not be affected by a “Next Day 

Destruction” provision.TP

73PT Instead of submitting information copied from 

Forms 4473 to NICS, ATF Headquarters officials said that Inspectors 

could “recheck” the eligibility of purchasers by requesting that the FBI 

rerun selected NICS checks taken from FFL records during compliance 

inspections. However, while resubmitting Form 4473 information to 

NICS will determine whether the purchaser would be approved on the 

date of the recheck, it does not enable the ATF to effectively detect that 

the FFL supplied inaccurate information to NICS. There are reasons 

other than FFL fraud for a prior approved purchase to fail during a 

recheck. For instance, the purchaser may have become ineligible only 

since the sale, or the FBI NICS operator on the original query may have 

transposed letters or numbers resulting in an erroneous approval. Given 

these and other possible explanations, the lack of information in NICS 

will make it much more difficult for the ATF to prove that FFLs supplied 

false information initially. 

Moreover, the shortened retention time will make it much easier 

for corrupt FFLs to avoid detection. We identified at least two potential 

ways that the new restriction would make it easier for corrupt FFLs to 

falsify the NICS check to hide a knowing transfer of a gun to a prohibited 

person. 

• An FFL may enter correct information from the prohibited 

person on the Form 4473, but relay information for a person 

with a known “clean” record to the FBI for the NICS check. 

After July 2004, the ATF will have only 24 hours to detect this 

by cross-checking purchaser information in the FFL’s records 

with NICS records. 

• An FFL may falsify the date of the sale. Three factors make 

this tactic even safer for corrupt FFLs with only a 24-hour 

retention time – the fact that blank Forms 4473 are not serially 

numbered, A&D books are kept sequentially by the date that 

the FFL receives the guns (so disposition dates are not expected 

to be sequential), and after 90 days the NICS will retain only the 

 

TP

73PT Gun Control: Potential Effects of Next-Day Destruction of NICS Background 

Check Records. General Accounting Office, Report GAO-02-653, July 2002. 
issue date for NTNs on approved transfers. To safely backdate a 

sale, a corrupt FFL needs only a good NTN that was issued to 

another FFL on a known date over 90 days before.74 As long as 

the date on the Form 4473 and the “disposition date” in the 

A&D book match the date that the NTN was issued – and the 

dealer does not make the mistake of “selling” a gun on a date 

before it was received – the fraud will be exceedingly difficult to 

detect. 

Given the new restriction on retaining NICS data, after July 2004 

an ATF Inspector arriving on-site could only check the information on 

Forms 4473 filled out by the FFL that day. Therefore, the likelihood of 

encountering a falsified NICS check would be remote. 

CONCLUSIONS 

We concluded that the ATF’s FFL inspection program did not 

consistently ensure that FFLs comply with federal firearms laws. The 

lack of standardized inspection procedures resulted in inconsistent 

inspections of FFLs and significant variation in the implementation of the 

inspection program by Field Divisions. Our review of N-Spect 

performance data found that ATF’s Field Divisions took an average of 

35.3 hours to conduct FFL inspections to detect noncompliance with 

federal firearms laws, and one Division took only 24.5 hours on average 

to conduct its compliance inspections. We found no operational reasons 

why some Field Divisions averaged much longer, up to 90 hours, to 

conduct compliance inspections. In fact, we found little or no correlation 

between inspection times and enforcement activities, such as referrals of 

suspected criminal activity and adverse actions taken. Further, our 

finding that the Field Divisions varied significantly in such productivity 

measures as number of inspections finding violations and number of 

inspections done by each Inspector argues strongly for implementation of 

a more standardized and efficient inspection regimen. 

Because the ATF does not conduct regular inspections of FFLs and 

lacks adequate resources to meet agency goals, it cannot effectively 

monitor the overall level of FFL compliance with federal firearms laws. In 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

54

 74 Using an NTN from another FFL limits the possibility that the fraud may be

detected through the chance discovery of the same NTN twice in the FFL’s records. 

Because NICS will delete which FFL an NTN was issued to, and FFLs are inspected

independently, even where one individual holds multiple FFLs for different business 

locations, it will be very unlikely that such reuse of NTNs will be discovered. 
December 2003, the ATF initiated a program to conduct special Random 

Sample Compliance Inspections to develop a risk model for the FFL 

inspection program. Using data from those inspections, the ATF planned 

to “be able to project the overall level of compliance by” gun dealers, 

pawnbrokers, and collectors.75 While the project to estimate the overall 

level of compliance with laws is needed to estimate the challenges facing 

the ATF, it does not take the place of regular compliance inspections for 

deterring and identifying noncompliance with gun laws. 

To ensure that all FFLs are treated consistently, and that the FFL 

inspection program is as efficient as possible, the ATF needs to 

implement a policy to ensure that inspections are conducted in a 

uniform manner, that inspections procedures are limited to the 

minimum steps needed to accomplish a valid review, and that violations 

are processed in a uniform and appropriate manner. A consistent and 

timely inspection process is essential for identifying and addressing 

scofflaw dealers and reducing the availability of illegal firearms to 

criminals. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

55

 75 Memorandum, Assistant Director for Firearms, Explosives, and Arson to All 

Special Agents In Charge, December 8, 2003. ATF officials told us that the

memorandum was not distributed to the Field Divisions until January 2004.
RECOMMENDATIONS 

We recommend that the ATF: 

1. Develop a standard, streamlined inspection process that 

includes in-person inspections of all FFL applicants; more 

efficient inventory and records reviews; automated inspection 

reporting; and consistent examination of indicators of firearms 

trafficking. 

2. Conduct a pilot project to test the streamlined inspection 

procedures and establish appropriate time standards for 

conducting these inspections. 

3. Revise the staffing requirement report using the time standards 

to reflect the number of Inspectors needed to conduct 

compliance inspections on a triennial basis, or on an alternative 

schedule based on the FFL’s compliance history. 

4. Develop alternatives for better aligning Inspector resources with 

the distribution of FFLs, such as by redrawing Field Division 

boundaries, realigning personnel, or other methods. 

5. Update the inspection tracking system to accurately segregate 

and report on Inspector time spent preparing for inspections, in 

travel, on-site at FFLs, and conducting other administrative 

duties. 

6. Prepare quarterly reports on the productivity and results 

achieved by each Field Division. 

7. Direct the National Licensing Center to develop an adverse 

action tracking system to monitor the progress and timeliness 

of FFL denials and revocations from the time an Inspector 

makes a recommendation until the proceedings are finalized. 

8. Continue coordinating with the Department of Justice, Office of 

Legislative Affairs, to gain the authority to suspend or impose 

civil penalties on FFLs that violate federal firearms laws. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

56
9. To improve the comprehensiveness of crime gun tracing by law 

enforcement agencies: 

a. Coordinate with the Office of Justice Programs to determine 

the feasibility of using discretionary grant funding to support 

crime gun tracing. 

b. Develop a model for more accurately identifying potential 

firearms trafficking through the analysis of an FFL’s firearms 

sales volume and the number of firearms traced to the FFL. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

57
Appendix I: ATF Form 4473 (Page 1) 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

58
Appendix I: ATF Form 4473 (Page 2) 

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Office of the Inspector General 

Evaluation and Inspections Division

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Appendix II: Area Supervisor Survey 

U.S. Department of Justice 

Office of the Inspector General 

Area Supervisor Survey

Purpose: This survey is being conducted by the U.S. Department of

Justice, Office of the Inspector General (OIG). The OIG is evaluating the

effectiveness of the Federal Firearms Licensee (FFL) inspection programs

implemented by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). 

Note: Please be advised that any information collected from this survey

will not be attributed to individual Area Supervisors. 

 

Directions: This survey should take approximately 10 minutes to

complete. Click on the gray areas to complete your responses. Please complete

and return to the OIG via email or fax by October 24, 2003. The fax number is

provided at the end of the survey. If you have any questions concerning this

survey, please call OIG Inspector , at . 

Please return your completed survey by October 24, 2003.

Name: 

Field Division: 

Telephone Number: 

Inspector Staffing 

Please limit your responses to your Group and Satellite Office staff 

only – not to the entire Field Division. 

1. How many Inspectors are currently assigned to your Group? 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

60
2. In your opinion, is your Group staffed so that your Inspectors 

can adequately inspect the Federal Firearms Licensees and 

explosives permitees in your Area? 

 Yes No 

[If Yes, please skip to Question 4.] 

3. How many additional Inspectors would need to be assigned to 

your Group so that your Inspectors could adequately inspect 

the Federal Firearms Licensees and explosives permitees in 

your Area? 

 

4. How many of your Inspectors also serve as Adverse Action 

Hearing Officers, if any? 

 

5. How many Special Operations Inspectors are assigned to your 

Group, if any? 

 

Federal Firearms Licensees 

Please limit your answers in this section to your Group, as well 

as any Satellite Offices assigned to your group. 

6. On average, how many new FFL applications are processed for 

your Area Office each month by the National Licensing Center? 

 

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7. How many new FFL applicant inspections do you assign to your 

staff? 

 All Some (As Needed) None 

[If None, skip to Question 9] 
8. How are new FFL applicant inspections conducted? 

 By Phone In Person Both 

9. To the best of your knowledge, how many FFL inspection 

assignments in your Group were pre-determined by ATF 

Headquarters, in fiscal year 2003? 

 

10. How many inspections pre-determined by ATF Headquarters do 

you plan to assign in fiscal year 2004? 

 

11. Are any of these 2004 inspections carry-overs from 2003? 

 Yes. No. 

12. To the best of your knowledge, how many FFL inspection 

assignments in your Group were pre-determined by the 

National Tracing Center, in fiscal year 2003? Please specify, 

according to inspection type. 

 Focused Inspections. 

 Demand Letter Inspections. 

 Other NTC-assigned Inspections. 

13. How many inspections pre-determined by the National Tracing 

Center do you plan to assign in fiscal year 2004? 

 

14. Are any of these 2004 inspections carry-overs from 2003? 

 Yes. No. 

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15. To the best of your knowledge, how many FFL inspection 

assignments in your Group were based on information referred 

from ATF Special Agents, in fiscal year 2003? 

 None 1 to 5 6 to 10 10+ 

Explosives Permittees 

Please limit your answers in this section to your Group, as well 

as any Satellite Offices assigned to your group. 

16. How many explosives inspections do you plan to assign in fiscal 

year 2004? 

 

17. What impact has the Safe Explosives Act had on your Group’s 

ability to inspect FFLs? (Please describe.) 

 

Federal Firearms Licensee Inspections 

Please limit your answers in this section to your Group, as well 

as any Satellite Offices assigned to your Group. 

18. On average, how many work hours should a New Application 

Inspection take an Inspector to complete, including travel time 

and writing the report? 

 Hours.

19. Please rate the effectiveness of the National Tracing Center data 

in determining which FFLs should be inspected in your area. 

 Very Effective 

 Somewhat Effective 

 Somewhat Ineffective 

 Very Ineffective 

 Not Applicable 

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20. Why is the National Tracing Center data effective or ineffective 

in determining which FFLs should be inspected in your area, 

and how might this be improved? (Please describe.) 

 

21. Please rate the effectiveness to which the list of mandatory 

inspections, provided by ATF Headquarters, adequately and 

fully identify those FFLs that should be inspected, based on 

indications that the FFL is violating Federal firearms laws? 

 Very Effective 

 Somewhat Effective 

 Somewhat Ineffective 

 Very Ineffective 

 Not Applicable 

 22. Why is the ATF Headquarters data effective or ineffective in 

determining which FFLs should be inspected in your area, and 

how might this be improved? (Please describe.) 

 

23. If enacted in your Group, please rate the effectiveness of the 

Flexiplace Program, as it would relate to your Inspectors 

conducting FFL inspections? (Flexiplace is a program under 

which employees are permitted to perform all or a portion of 

their duties at a Flexiplace work telecommuting center.) 

 Very Effective 

 Somewhat Effective 

 Somewhat Ineffective 

 Very Ineffective 

 Not Applicable 

Submitting this survey 

You may submit this survey by email or fax. 

Please return by October 24, 2003. 

Email: To email this survey: 

1. Save your completed survey as a new MS-Word document. 

2. Hit ‘reply’ to the original OIG email. 

3. Attach survey to ‘reply’ email before sending. 

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Office of the Inspector General 

Evaluation and Inspections Division

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Fax: To fax this survey, please print out your completed survey and fax it to: 

(xxx) xxx-xxxx. (Surveys completed by hand will also be accepted.) 

Please address your fax cover sheet to: Office of the Inspector 

General, Attention: Inspector xxxxxxxxxxxxxxxxxxxxxxx.

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

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APPENDIX III: ATF COMMENTS ON THE DRAFT REPORT

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APPENDIX IV: OIG ANALYSIS OF THE ATF’S 

COMMENTS 

 On June 4, 2004, the Office of the Inspector General (OIG) 

sent copies of a draft of this report to the Bureau of Alcohol, Tobacco, 

Firearms and Explosives (ATF) with a request for written comments. 

The ATF responded to us in a memorandum dated June 29, 2004. 

The ATF fully concurred with seven of our nine recommendations. 

The ATF did not concur with our recommendation on updating its 

inspection tracking system to more accurately segregate and report on all 

Inspector time spent on inspections. Instead, the ATF offered an 

alternative solution for updating N-SPECT, explaining that an update to 

the overall system, N-FOCIS, would accomplish what we recommended. 

The ATF also conditionally concurred with the recommendation on 

developing a model to more accurately identify potential firearms 

trafficking, although it suggested that implementing the recommendation 

would be difficult. The ATF also provided general comments on the 

findings contained in the draft report. Our analysis of the ATF’s 

comments on the recommendations and findings in the draft report 

follows. 

THE ATF’S RESPONSE TO RECOMMENDATIONS 

URecommendation 1U: Develop a standard, streamlined 

inspection process that includes in-person inspections of all Federal 

Firearms Licensee (FFL) applicants; more efficient inventory and 

records reviews; automated inspection reporting; and consistent 

examination of indicators of firearms trafficking. 

Status: Resolved – Open 

Summary of the ATF’s Response: The ATF concurred with 

our recommendation and stated that it is taking a series of steps to 

implement it, including: 

• In-person application inspections are now required in 14 

metropolitan areas, and ATF also is increasing the number of 

in-person application inspections conducted nationwide. 
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Office of the Inspector General 

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• A memorandum titled “Guidelines for Conducting Federal 

Firearms Licensee Compliance Inspections” was issued in June 

2004 to clarify a number of inspection process issues such as 

the methods for verifying FFL inventories, record review periods, 

and ATF Form 4473 reviews. 

• The ATF is reevaluating all work plans and workpapers to 

eliminate tasks that are not critical to a final inspection report. 

• An ATF working group is developing a work plan for Focused 

Compliance Inspections. The working group’s initial milestone 

is to provide comments to ATF management by October 1, 

2004. 

• The Inspector Handbook is being updated to provide better 

guidance to Inspectors on conducting inspections. 

In response to our recommendation that the ATF automate 

its inspection procedures, the ATF stated that Inspectors have 

laptop computers at their disposal, but that many FFLs object to 

the use of these computers during inspections. The ATF stated 

that these FFLs are concerned that the laptop computers might be 

used to create a registry of firearms and firearms owners, 

something the ATF is prohibited by law from doing. 

The OIG’s Analysis: The ATF’s proposed actions are 

responsive to the recommendation. By October 31, 2004, please 

provide copies of or status reports on the following: 

• The “Guidelines for Conducting Federal Firearms Licensee 

Compliance Inspections,” June 2004, 

• The names of the 14 metropolitan locales that now require 

in-person application inspections, 

• The new inspection reporting procedures that are under 

development, 

• The Focused Inspection Work Plan that is under 

development, and 

• The updated Inspector Handbook. 
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Office of the Inspector General 

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The ATF’s comment on the use of laptops is not responsive to the 

recommendation to automate inspection reporting. We are not 

persuaded that FFLs should be allowed to determine how the ATF 

conducts its inspections. The fear ascribed to some FFLs is 

groundless. Creating an effective national firearms registry would 

require information on all gun sales by all FFLs – a logistical 

impossibility for the ATF. The ATF’s current practice of taking 

handwritten notes while onsite at an FFL and later transcribing the 

information into a computer is no more or less likely to facilitate 

the hypothetical national firearms registry than is entering 

inspection information directly into a computer while onsite. 

Rather, we believe that educating FFLs on the implausibility of 

their concern, as well as the potential benefits of quicker 

inspections and more accurate inspection records for the FFL, 

could help overcome such objections. Therefore, we request that 

the ATF reconsider this response and also identify steps to improve 

the automation of the inspection process. 

Recommendation 2: Conduct a pilot project to test the streamlined 

inspection procedures and establish appropriate time standards for 

conducting these inspections. 

Status: Resolved – Open 

Summary of the ATF’s Response: The ATF concurred with this 

recommendation and stated that it was developing streamlined, 

standardized inspection procedures, which it planned to test in 

several divisions in a pilot project during Fiscal Year 2005. 

The OIG’s Analysis: The ATF’s proposed action is responsive to 

the recommendation. By October 31, 2004, please provide us with 

the streamlined inspection procedures that will be used in the pilot 

project, as well as the planned start and completion dates, and 

locations, for the pilot project. 

Recommendation 3: Revise the staffing requirement report using 

the time standards to reflect the number of Inspectors needed to 

conduct compliance inspections on a triennial basis or on an 

alternative schedule based on the FFL’s compliance history.

Status: Resolved – Open
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Summary of the ATF’s Response: The ATF concurred with our 

recommendation and stated that it created a working group to 

develop a workload model. A completion date for the effort has not 

yet been established, but a status report from the working group 

was due by late June 2004 to the Assistant Director (Field 

Operations). Further, in its response to Recommendation 4, the 

ATF stated that it has contracted with an academic researcher to 

develop recommendations to improve performance measures to 

help the ATF maximize its existing resources. 

The OIG’s Analysis: The ATF’s proposed action is responsive to 

the recommendation. By October 31, 2004, please provide us with 

copies of the status reports submitted by the working group, the 

schedule for the completion of the workload model, any revised 

staffing requirement reports, and copies of the recommendations of 

the academic researcher for improving the utilization of existing 

resources. 

URecommendation 4U: Develop alternatives for better aligning 

Inspector resources with the distribution of FFLs, such as by 

redrawing Field Division boundaries, realigning personnel, or other 

methods. 

Status: Resolved – Open 

Summary of the ATF’s Response: The ATF responded that the 

rationale for how Inspectors were allocated to its Field Divisions 

was based on its former alcohol and tobacco oversight 

responsibilities (which are now assigned to the Department of the 

Treasury), as well as its explosives inspections activities. The ATF 

recently began consolidating its Director of Industry Operations 

(DIO) positions so that they are better aligned with its FFL and 

explosives inspection workload. Also, using the new workload 

model for Inspector staffing developed in response to 

Recommendation 3, the ATF will evaluate the need to reassign 

Inspectors to better align resources with the distribution of FFLs 

and explosives licensees. 

The OIG’s Analysis: The ATF’s proposed action is responsive to 

the recommendation. By October 31, 2004, please provide us with 

a schedule for completing the assessment of the alignment of 

Inspector resources with the FFL population and any analyses of 

the current and planned distribution of resources. 
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URecommendation 5U: Update the inspection tracking system to 

accurately segregate and report on Inspector time spent 

preparing for inspections, in travel, onsite at FFLs, and 

conducting other administrative duties. 

Status: Unresolved – Open

Summary of the ATF’s Response: The ATF did not concur with 

the recommendation, stating that because it “does not believe it is 

necessary to categorize Inspector work time by function (Ue.g.U, travel 

time v. preparation time)” to ensure that Inspectors are operating 

efficiently. The ATF stated that it believes its current case 

management system, N-FOCIS, uses project codes to accurately 

account for “all administrative costs associated with ATF’s 

mission.” The ATF stated that it has upgraded its N-FOCIS system 

[which includes the N-Spect FFL inspection database] to segregate 

inspection activities by type (Ui.e.U, application inspections versus 

compliance inspections) to “provide for better categorization of 

inspector workloads.” 

The OIG Analysis: The ATF’s comments and alternative actions 

are not responsive to the recommendation to update the tracking 

system to segregate and report on Inspector time. From the 

description of the recent upgrades to the N-FOCIS system provided 

by the ATF, it appears that the ATF will be better able to track data 

on each type of inspection and how it was conducted. However, 

from the information provided, it appears that the ATF will still be 

unable to quantify Inspector time spent onsite, in travel, and 

accomplishing other administrative and non-inspection related 

activities. 

However, a system that does not track all categories of Inspector 

time is inadequate for ensuring that activities are conducted 

efficiently. In our review, we found that only 41 percent of ATF 

Inspectors’ firearms-related work time is spent directly on 

inspection activities (including traveling to and from the FFL’s 

place of business). Fifty-nine percent of the Inspectors’ time was 

spent on activities not directly related to inspections, such as 

training, answering telephone inquiries from FFLs, or other 

administrative tasks. Implementing a tracking system that can 

measure the time spent on all of these activities – not just data 

related to the specific type of inspection assignment – is essential 

to developing and implementing an effective workload model and to 
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redistributing resources to match the workload, actions which the 

with

tor

,

4,

tion

tor

Recommendation 6

ATF stated in its response to Recommendations 3 and 4 that it 

plans to undertake in FY 2005. 

To develop a workload model for aligning Inspector resources

regulatory needs, the ATF must be able to segregate and analyze 

all Inspector time, not just time spent directly on conducting 

inspections. If the ATF does not categorize and measure Inspec

work time by function, it will be difficult to establish appropriate 

performance goals, account for the variability among its divisions

or accurately report its productivity. 

Please reconsider this response and provide us by August 3, 200

whether the ATF will create a plan for updating the inspec

tracking system to accurately segregate and report on all Inspec

time or, in the alternative, how the ATF plans to develop a 

comprehensive workload model without such information. 

: Prepare quarterly reports on the productivity 

esponse: The ATF stated that to 

address this recommendation, it created the position of Assistant 

m

. The 

ATF also established the Case Management Branch within the 

proposed action is responsive to

e recommendation. By October 31, 2004, please provide us with

and results achieved by each Field Division. 

 Status: Resolved – Open

Summary of the ATF’s R

Director (Field Operations) to better manage the ATF’s regulatory 

enforcement efforts in the field. One of the first tasks of the 

Assistant Director was the creation of a quarterly reporting syste

on inspection productivity and results by each Field Division

Field Operations Directorate for tracking and evaluating industry

operations and criminal enforcement activities, conducting case 

comparisons, and making appropriate recommendations. 

The OIG’s Analysis: The ATF’s

th

copies of the quarterly reports, as well as any annual compendium

or other productivity analyses for FY 2004. 
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Office of the Inspector General 

Evaluation and Inspections Division

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Recommendation 7: Direct the National Licensing Center to 

imeliness of FFL denials and revocations from the time an

ctor makes a recommendation until the proceedings are

zed.

Status: Resolved – Open 

Summary of the ATF’s Response: The ATF c

develop an adverse action tracking system to monitor the progress 

and t

Inspe

finali

oncurred with this

recommendation and tasked the Division Chief, Firearms and 

s to expand the tracking system to incorporate more

indicators of case progress. 

ve to

of the functional description of the planned adverse action

tracking system and a copy of the master schedule for the 

ntation of the system.

Explosives Services, with developing and monitoring an improved

adverse action tracking system for denials and revocations of 

licenses. The ATF also intends to route an electronic version of 

monthly tracking reports to all Division Counsels and DIOs to 

better advise them of how many adverse actions are pending in 

their divisions and how long each case is taking to resolve. The 

ATF also plan

The OIG’s Analysis: The ATF’s proposed action is responsi

the recommendation. By August 3, 2004, please provide us with a

copy

development and impleme

Recommendation 8: Continue coordinating with the 

tment of Justice, Office of Legislative Affairs, to gain the

l firearms laws.

Status: Resolved – Open 

Summary of the ATF’s Response: The ATF has indicate

that it will continue to work with the Department of J

of Legislative Affairs on obtaining regulatory options such as 

license suspensions and the authority to issue civil penalties in 

lieu of license revocation. T

Depar

authority to suspend or impose civil penalties on FFLs that violate 

federa

d

ustice’s Office

he ATF also clarified that it can impose 

fines in one limited circumstance, when an FFL fails to conduct a 

ase provide us

National Instant Criminal Background Check System (NICS) check

and that NICS check would have resulted in a denial of the sale. 

The OIG’s Analysis: The OIG considers this 

recommendation resolved. By October 31, 2004, ple
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Evaluation and Inspections Division

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to

but

described above.

with updates as to how the ATF is coordinating with the Office of 

Legislative Affairs. We made two minor changes in the report

make it clearer that the ATF has no general fining authority

can impose a fine in the limited circumstance

Recommendation 9: To improve the comprehensiveness of

rime gun tracing by law enforcement agencies:

deter

suppo

o trace crime guns.

pies

firearms trafficking through the analysis of an FFL’s firearms sales 

volum

Status: Resolved – Open 

asis.

tted

c

a. Coordinate with the Office of Justice Programs to 

mine the feasibility of using discretionary grant funding to

rt crime gun tracing.

Status: Resolved – Open 

Summary of the ATF’s Response: The ATF’s stated that it 

concurred with the recommendation and planned to initiate 

discussions with other Department entities on the feasibility of 

using discretionary grant funding to support local police 

departments that want t

The OIG’s Analysis: The ATF’s proposed action is 

responsive to the recommendation. By October 31, 2004, please 

provide us with the dates of meetings held or planned and co

of minutes or other documentation of the topics discussed and the 

decisions made at the meetings. 

b. Develop a model for more accurately identifying potential 

e and the number of firearms traced to the FFL.

Summary of the ATF’s Response: The ATF conditionally 

concurred with this recommendation, but stated that retail sales

volumes are not captured for each FFL dealer on a yearly b

Further, the ATF stated that the number of NICS checks submi

by each FFL is not a reliable indicator of sales because purchasers

can acquire more than one firearm on a single NICS check and

certain limited types of sales are exempt from a NICS check.

However, the ATF proposed incorporating the sales data reported

by FFL dealers applying to renew their licenses as a method to 

identify for inspection those FFLs with the highest ratios of traces

to reported sales over a 3-year period. 
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ur review found that the ATF’s 

urrent compliance inspection procedures do not include steps to

e

on the draft report’s findings. In this section, we summarize the ATF’s 

comm

t information and

nsure that they understand firearms laws.

The ATF’s Comment: The ATF agreed that in-person 

s

FINDI s

on act

that it cannot

conduct annual compliance inspections of all FFLs due to the large 

number of licensees (more than 104,000) and the small number of 

Inspectors (420). Instead, the ATF stated that it works to focus its 

compliance inspections [Focused Inspection Program] on those 

FFLs with a history of non-compliance and those FFLs with 

The OIG’s Analysis: The ATF’s proposed action is responsive to

the recommendation. However, o

c

verify the renewal data submitted by the FFLs. We accept the 

ATF’s proposed action, but request that the ATF modify its 

proposal to include adding steps to compliance inspections to

verify the renewal data against actual FFL Acquisition and 

Disposition Book sales totals. By October 31, 2004, please provid

us with the implementation plan for comparing FFL trace data and

reported sales volume. 

ATF COMMENTS ON REPORT FINDINGS 

In addition to addressing the recommendations, the ATF remarked 

ents and provide our analysis of its planned actions.

FINDING: The ATF does not conduct in-person application 

inspections on all new FFLs to verify applican

e

application inspections are critical for ensuring that licensee

understand and obey federal firearms laws. The ATF stated that it

is taking steps to conduct in-person application inspections 

nationwide and noted that under its June 2004 policy, all 

applicants who do not receive an in-person application inspection 

must be scheduled for an in-person compliance inspection during 

the first year after they are issued a federal firearms license. 

The OIG’s Analysis: We agree with the ATF’s comments 

and planned course of action. 

NG: The ATF does not regularly conduct compliance inspection

ive FFLs, including large-scale retailers.

The ATF’s Comment: The ATF stated
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

94

d.

e it from being selected for inspection.”

 We agree with the ATF’s statement 

that it cannot conduct annual compliance inspections on all FFLs 

e

d

Ls

re

DIOs described these inspections as 

“priorities,” but stated that they do not complete all assigned 

espect

FLs that

mment: The ATF disagreed with our finding 

nd stated that it “does identify all FFLs that exhibit indicators of

otent king based on trace data

vailable.” However, the acknowledged that it “limit[s] inspection

requir

business practices that indicate signs of potential firearms 

trafficking. The ATF stated that many large-scale FFLs fall into 

one of these categories, thereby requiring that they be inspecte

According to the ATF, “the fact that an FFL is large does not 

exclud

The OIG’s Analysis:

with its current resources, and we did not suggest that the ATF 

attempt to do so in the report. To the contrary, we accepted th

ATF’s stated goal of conducting a compliance inspection on every 

FFL at least once every three years. With additional staffing an

better utilization of its existing personnel, we believe that goal is

attainable. In regard to the ATF’s statement that large-scale FF

are often inspected under its Focused Inspection Program and a

not exempt from inspection, we note that although the ATF 

described these inspections as “mandatory,” our interviews with 

DIOs found otherwise. Two

Focused Inspections, including those of large-scale FFLs, because

of competing demands. Further, the report did not state that large 

FFLs were exempt from inspection, but showed that they were 

statistically treated about the same as all other FFLs with r

to infrequent inspections. 

FINDING: The ATF does not identify and inspect all F

exhibited indicators of potential violations or gun trafficking. 

The ATF’s Co

a

p ial violations or gun traffic

a

ements based on our available Inspector resources.” The 

ATF also stated that it plans to analyze other factors that should 

be utilized to determine which FFLs should be inspected. 

The OIG’s Analysis: During our inspection, we did not find 

that the ATF ever compiled a list of all FFLs that exhibited 

trafficking indicators (e.g., multiple traces, short time-to-crime 

traces). Instead, in describing how FFLs are identified for Focused

spections, staff of the National Tracing Center (NTC) stated that 

they manipulated the query parameters by limiting the FFLs 

In

identified to a pre-selected number. That pre-selected number 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

95

r

ll of the FFLs could be inspected with existing resources.

d

iolations or of

rearm trafficking.

it

that should be inspected.

e ATF agreed that gun tracing has 

eaknesses” and stated that it plans to address shortcomings

identi

w

at the

ated that crime 

n tracing patterns vary by region. The ATF also clarified that the 

NTC was moved to Martinsburg, West Virginia, in 1994 but stated 

We do not agree with the ATF’s 

rgument that the existence of national trafficking patterns

n would not

ecessarily mean that more inspections should be conducted in

at D guns may have originally been

sold by FFLs in other Divisions. Therefore, any inspections would 

the

e

erns

(350 in FY 2002) was based on the projected availability of 

Inspector resources. The ATF made no attempt to determine an 

unacceptable level of trafficking indicators for FFLs and then 

identify all FFLs that exceeded that level without regard to whethe

a

Therefore, we maintain our finding that the ATF has not identifie

all FFLs that exhibited indicators of potential v

fi

FINDING: Gun tracing has significant shortcomings that lim

its use for identifying FFLs

The ATF’s Comment: Th

“w

fied in our report by implementing Recommendation 9. The 

ATF disagreed with our comparison of traces submitted by la

enforcement agencies within a Field Division to the number of 

inspections conducted in that Field Division and stated th

comparison is “not especially useful.” The ATF st

gu

that the ATF had conducted tracing before the NTC relocated. 

The OIG’s Analysis: We believe that our comparison of 

trace data to inspections is useful.

a

negates the use of data on traces submitted in each Division to 

analyze the ATF’s resource management.76 The ATF argues that 

the fact that more traces were submitted in a Divisio

n

th ivision because the traced

have occurred in those Divisions, not in the Divisions where

traces were submitted. 

However, the ATF’s own analysis of crime gun recoveries 

(contained in its report Crime Gun Trace Reports 2000) found that 

48 percent of crime guns were recovered within 25 miles of wher

they were originally sold. In contrast, national trafficking patt

 76 The ATF was unable to provide us with consolidated data on the number of

aced to FFLs in each Division, and instead provided the number of traces 

ted by law enforcement agencies, by Field Division

guns tr

submit .
(i.e., guns recovered more than 250 miles from where they were 

s

ce

each Division shows whether, on a

ational level, trace data were used to direct resources toward

me guns originated.

ur analysis showed little or no ATF-wide correlation between the 

tional level

dicates that the ATF is not managing its resources to conduct 

.

Divisions use trace data

target inspections within the Division. We agree that this is a

positiv

er of

the

he ATF’s gun tracing program 

perations were consolidated, not established, in 1994.

ent inspections

inconsistently. 

purchased) accounted for more than 30 percent of crime guns 

traced in only 9 cities (including cities that ban handguns, such a

New York City, Washington, D.C., and Chicago). Those data 

indicate that the preponderance of guns recovered in a Division

was of local origin. Therefore, we concluded that data on tra

submissions could be used to approximate the distribution of 

crime gun traced to FFLs in the ATF’s Field Divisions. 

Comparing the number of trace requests to the number of 

inspections conducted in

n

inspecting FFLs in Divisions where more cri

O

number of crime guns submitted to the ATF for tracing in a Field 

Division and the number of compliance inspections conducted in

that Field Division. The lack of any correlation on a na

in

more inspections in Divisions where more crime guns originated

The ATF also stated that some Field

to

e use of trace data, and we note in the report that the

Divisions can and are using the data internally. However, the 

internal use of trace data by Divisions does not negate our primary 

finding that there is little or no correlation between the numb

traces and the number of inspections ATF-wide. Likewise,

ATF’s statement that some localities have few local guns traced 

(which we found was due to restrictions on handgun sales in the 

locality) does not negate our primary finding. 

Regarding the ATF’s comments on the NTC move to

Martinsburg, we clarified that t

o

FINDING: ATF Field Divisions implem

The ATF’s Comment: The ATF stated that it has been 

working on standardizing and streamlining the present procedures

for conducting inspections. 

U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

96
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

97

itly

e

d to

FINDI

referr

s

firearms licenses, and the process is not timely. New ATF policy 

begin

g

al firearms licenses and noted that we

id not find a specific case in which the ATF should have taken 

take

dverse action against an FFL.” The ATF stated that the report

should note that not all violations of federal firearms laws warrant 

e so

nted

Ls

The OIG’s Analysis: Although the ATF did not explic

state whether it agrees with our finding, the ATF’s planned cours

of action will address the problems we reported with varying 

inspection implementation by ATF Field Divisions and will lea

more consistent inspections across the agency.

NG: Suspected criminal violations are not always

ed for investigation.

The ATF’s Comment: The ATF stated that its June 2004 

policy reminds Inspectors to initiate referrals to ATF Special Agent

when inspections reveal potential trafficking indicators. 

The OIG’s Analysis: If followed, we agree that the ATF’s 

new policy will address our finding and lead to more consistent 

referrals of suspected trafficking. 

FINDING: The ATF acts infrequently to revoke federal 

s to address inconsistent and untimely adverse actions.

The ATF’s Comment: The ATF disagreed with our findin

that, prior to its new policy, the ATF acted “improperly” by 

infrequently revoking feder

d

such action against an FFL. The ATF stated that our report “fails 

to note the critical components that comprise the decision to

a

revocation of the FFL’s license. Further, the ATF stated that the 

legal standard is “willfulness,” and many violations “may b

inadvertent that they cannot satisfy the legal standard.” In 

addition, the ATF noted that many applicants and licensees 

withdraw their requests for a federal firearms license rather than 

face revocation. 

The OIG’s Analysis: We did not identify any FFLs that the 

ATF allowed to stay in business when revocation was warra

because, as our report made clear, we did not re-inspect any FF

during our review. Instead, we examined the ATF’s overall 

processes. 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

98

ly” by

r

ducted

ield

evocations because, despite the 51,314

iolations – which ATF Inspectors spent more than 108,000 hours 

If that were

orrect, we would question such an expenditure of resources to

find a

ns,

in

eral

revoked the licenses of FFLs that were willfully violating federal 

firearm

of

e

ATF could dramatically improve the FFL inspection program. 

guidelines, which address deficiencies that the ATF identified as 

Our report did not state that the ATF acted “improper

failing to revoke FFL licenses in the past. However, the ATF’s own

actions indicate that its past practices were inadequate. In ou

review, we found that 11 of the ATF’s 23 Field Divisions took no 

revocation actions in FY 2002. Those 11 Field Divisions con

a total of 1,936 compliance inspections that found 51,314 violation

instances. To accept the ATF’s logic would mean that those F

Divisions initiated no r

v

to find and document – the ATF found no case that indicated a 

pattern of willful disregard for federal firearms laws.

c

nd document minor infractions. We would also question the

ATF’s process for selecting FFLs to inspect in those Field Divisio

since it failed to make effective use of established indicators of 

trafficking to identify those FFLs among the 46,775 FFLs located

these Field Divisions that were likely to be willfully violating fed

firearms laws. We believe such FFLs existed in those 11 Field 

Divisions. [During our review, we also noted news reports of 

corrupt FFLs being arrested in Miami, Los Angeles, and Phoenix.] 

The ATF’s argument that, in the past, it always properly 

s laws is also contradicted by the substantial rise in

revocations since the ATF issued revised adverse action guidelines.

In the first quarter of FY 2004, the ATF issued Initial Notices

Revocation or denied renewal to 59 FFLs. If that rate continues,

the ATF will revoke the licenses of almost eight times as many 

FFLs in FY 2004 as it did in FY 2002. Given the above, we do not

find persuasive the ATF’s argument that in the past it revoked th

licenses of all FFLs that violated federal firearms laws. 

FINDING: By streamlining and standardizing inspections, the

The ATF’s Comment: The ATF stated that it began 

addressing “deficiencies” in its inspection program prior to the 

initiation of our review and stated that it will closely monitor its 

Inspectors to ensure that they are following the June 2004 

well as those we identified in our report. 
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

99

our

The OIG’s Analysis: We believe that the ATF’s June 2004

guidelines and the planned actions described in its response to

recommendations will be effective for responding to the need we 

identified for the ATF to improve the FFL inspection program.
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

100

FINDI

perfor

ators and stated

that modifications and upgrades to its electronic databases will 

he OIG’s Analysis: We believe that the ATF’s planned 

course of action will lead to more accurate and consistent reporting 

FINDING: New restrictions on retention of gun purchaser data 

will hinder

check

The ATF’s Comment: The ATF stated that a new restriction 

’s

btain 90 days of FFL-specific NICS information from the Federal

Burea

Ln

e ATF 

ted to NICS was the same as the information that

the Inspector submits for the recheck. If the recheck finds that a 

sale w

NG: The ATF does not consistently report inspection

mance.

The ATF’s Comment: The ATF stated that it is committed 

to ensuring the integrity of its performance indic

help ensure consistent reporting of inspection performance.

T

of its inspection activities. 

the ATF’s ability to detect fraudulent background

s.

placed on data maintained by NICS does not hinder the ATF

ability to “ensure FFLs do not abuse the NICS system.” The ATF

stated that it is developing a procedure to allow Inspectors to

o

u of Investigation (FBI), which oversees NICS, prior to

inspecting FFLs. The ATF stated that this information gives

Inspectors the “ability to conduct NICS rechecks to ensure FFLs 

did not provide NICS with false information.” 

The OIG’s Analysis: On the basis of the information 

provided by the ATF, we continue to believe that the new 

restriction on NICS information will reduce the ATF’s ability to 

detect fraudulent NICS checks through an examination of FFL 

records. Even if ATF Inspectors are supplied with 90 days of FF

specific NICS data from the FBI, all purchaser information o

approved sales will be deleted within 24 hours. Therefore, th

can only assume that the purchaser information that was 

originally submit

as allowed to a prohibited person, the ATF will have no way 

of determining from the FFLs’ records whether the approval was 

due to an incorrect response from the NICS operator (i.e., the 

result of FBI error) or if it occurred because the FFL supplie

incorrect pur

d

chaser information to NICS.
U.S. Department of Justice 

Office of the Inspector General 

Evaluation and Inspections Division

101

.

g

Moreover, the ATF will have no way of determining the cause

of an incorrect NICS response once 90 days have elapsed because, 

after that time, the FBI also deletes the remaining FFL-specific 

information associated with approved NICS transaction numbers

We agree that conducting a recheck could potentially identify that 

a prohibited person obtained a gun. However, we continue to 

believe that the new NICS restriction will hinder the ability of the 

ATF to detect fraudulent NICS background checks by examinin

FFL records during compliance inspections.