Report to Congressional Committees

United States General Accounting Office

GAO

June 2001 CUSTOMS SERVICE

The Self-Inspection

Program Shows

Promise but Remains

a Work in Progress

GAO-01-676
Page i GAO-01-676 Customs Self-Inspection Program Implementation

Letter 1

Appendix I Comments From the Customs Service 20

Appendix II GAO Contacts and Staff Acknowledgments 21

Figure

Figure 1: MID Completed and Scheduled On-Site Verification and

Validation Inspections 5

Abbreviations

CEO Canine Enforcement Officer

CMC Customs Management Center

LAX Los Angeles International Airport

MID Management Inspections Division

OFO Office of Field Operations

OI Office of Investigations

RA Resident Agent

RAIC Resident Agent-in-Charge

SAIC Special Agent-in-Charge

SIP Self-Inspection Program

SIRS Self-Inspection Reporting System

Contents
Page 1 GAO-01-676 Customs Self-Inspection Program Implementation

June 1, 2001

The Honorable Charles E. Grassley

Chairman

Committee on Finance

United States Senate

The Honorable Bill Thomas

Chairman

Committee on Ways and Means

House of Representatives

The Honorable Philip M. Crane

Chairman

Subcommittee on Trade

Committee on Ways and Means

House of Representatives

Various governmental and private sector organizations use a selfinspection program (SIP) as a mechanism to provide management

oversight of programs and processes to build accountability and to foster

integrity throughout their organizations. Because of the U.S. Customs

Service’s diverse responsibilities and geographic dispersion, the former

Commissioner wanted such a program for Customs that placed primary

responsibility for reviewing operations and identifying corrective actions

on the managers and supervisors overseeing the activities. As its name

denotes, SIP emphasizes self-assessment by managers and supervisors

responsible for the activity, rather than an assessment performed by

outsiders. Under Customs’ program, the Management Inspections Division

(MID) was to independently verify and validate the self-inspections.

We reported to you last year about Customs’ SIP design, the first of two

issues that we agreed with your offices to address.1

 This report focuses on

the second issue, program implementation and discusses (1) SIP’s use as a

mechanism for oversight and accountability, (2) problems relating to SIP

implementation, and (3) improvements and refinements underway to

enhance the value of the program.

 1 Customs Service: Information on the Design of the Self-Inspection Program

(GAO/GGD-00-151, June 23, 2000).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-676 Customs Self-Inspection Program Implementation

Our visits to eight Customs entities and review of 127 MID verification and

validation inspection reports showed that SIP is a useful mechanism for

managers to identify and correct problems at the local level and to obtain

more control over activities that they oversee. Local self-inspections and

MID verification and validation inspections discovered several areas of

vulnerability in Customs’ activities, including weak controls over imprest

fund,2

 seized property, and collections and deposits activities, and helped

prompt corrective action at the local level. In addition, at every entity we

visited managers and supervisors told us that the program has made a

positive contribution to oversight and accountability.

These positive conditions notwithstanding, our review also disclosed

several problems relating to SIP implementation. For example, MID

reported that about 23 percent of the SIP worksheets that they reviewed

had no or insufficient documentation to support managers’ conclusions

that activities were being performed properly; 16 percent of the

worksheets had questions incorrectly answered.3

 MID attributed these

problems to a lack of detailed instructions on how to complete worksheets

and inadequate worksheet review by responsible officials. Our review

found incomplete documentation to support the majority of worksheet

results at three of the eight entities that we visited and a lack of key

internal control questions on the worksheets. In addition, more than half

of the 54 managers and supervisors we interviewed told us that

• SIP has been very paperwork-intensive, burdensome, and timeconsuming;

 2

An imprest fund is a fixed-cash or petty cash fund in the form of currency or coin. The

funds are charged against a government appropriation by a federal government agency

official and advanced to an authorized cashier. The fund may be revolving, replenished to

the level of a fixed amount as spent or used, or stationary such as a change-making fund.

See Department of the Treasury, Financial Management Service, Manual of Procedures and

Instructions for Cashiers, p. 19 (March 2000).

3

Self-inspection worksheets are designed to evaluate financial vulnerability and corruption,

mission performance and resource utilization, and internal/external relationships. During

self-inspections, managers and supervisors are to complete worksheets for all areas under

their control. This involves assessing their operations and answering questions on the

worksheets as “yes,” “no,” or “N/A” (“No Activity” or “Never Applies”). They are to then rate

their areas of responsibility as either “acceptable” or “needs improvement.”

Results in Brief
Page 3 GAO-01-676 Customs Self-Inspection Program Implementation

• too much time was being spent on low-risk activities, such as internal

and external relations;4

 and

• reporting requirements for some low-risk activities were too frequent.

Customs is taking steps to correct these deficiencies. For example, key

internal control questions are being incorporated into the worksheets, and

the time spent self-inspecting low-risk activities is being reduced. In

addition to addressing deficiencies, Customs plans to have its automated

Self-Inspection Reporting System (SIRS) fully implemented in early 2002,

which should allow for monitoring the status of the self-inspections,

tracking corrective actions, and identifying trends nationwide. However,

another program deficiency still needs corrective action. Not all

worksheet guidance and instructions are sufficient or clear enough to

ensure accurate and complete self-inspection results. This report contains

a recommendation to the Acting Commissioner of Customs concerning

actions needed to clarify self-inspection worksheet guidance. Customs

will shortly be implementing an action plan to fully address our

recommendation.

The U.S. Customs Service has a diverse mission spanning a large

geographic area. Customs’ responsibilities include (1) collecting revenue

from imports and enforcing Customs and other U.S. laws and regulations,

(2) preventing the smuggling of drugs into the United States, and (3)

overseeing export compliance and money-laundering issues. At the close

of fiscal year 2000, Customs had a permanent workforce of about 20,000

employees. These employees carry out Customs’ mission at its

headquarters, 20 Customs Management Centers (CMC), 20 Special Agentin-Charge (SAIC) offices, 301 U.S. ports of entry, 5 Strategic Trade Centers,

and over 25 international offices. Customs processed over 23 million

import entries, with a value of $1.17 trillion; 140 million conveyances; 5

 and

489 million land, sea, and air passengers in fiscal year 2000.

Every manager and supervisor is responsible for conducting a selfinspection of the activities, such as entry processing, that they oversee,

 4

The internal relations worksheet covers how Customs’ managers communicate and

interact with subordinates. The external relations worksheet covers how Customs’

personnel communicate and interact with other agencies such as the Immigration and

Naturalization Service.

5

Conveyances include aircraft, trucks, trains, passenger vehicles, and ocean vessels.

Background

Principal Features of SIP
Page 4 GAO-01-676 Customs Self-Inspection Program Implementation

using uniform self-inspection worksheets. The worksheets are used to

evaluate the key internal control points in a particular program or process,

assess mission/program accomplishments, and better define priorities and

identify areas needing improvement. Customs’ entities are to conduct selfinspections every 6 months, which are referred to as self-inspection cycles.

At the time of our review, four self-inspection cycles had been completed,

with the fifth cycle due to start in July 2001.

Self-inspection results, including problems identified and potential

corrective actions, are to be funneled up the chain of command. For

example, worksheet results addressing port activities are to be certified by

approving officials at the ports of entry. The officials are to send results to

the CMC, which in turn sends the results to the cognizant assistant

commissioner at Customs headquarters. The assistant commissioners are

to report SIP results to MID after ensuring that self-inspection worksheets

have been completed, are accurate, and have been analyzed; key issues

have been identified; corrective actions have been determined; and

timeframes for completing corrective actions have been established.

MID is responsible for monitoring and directing SIP worksheet

development and managing the program. In addition, MID is to conduct

independent verification and validation inspections of the completed selfinspection worksheets to ensure that they are correct and accurate. MID’s

inspections are more in-depth for certain areas than the local selfinspection reviews in order to verify that all problems in those areas have

been found.

MID performs its verification and validation inspections with a staff of 65

professionals, located at headquarters and at seven field offices around the

country. MID also supplements its staff by detailing managers and

supervisors from other entities to help conduct the inspections. In addition

to managing SIP, MID’s staff devotes about 30 percent of their time to

auditing funds involved in undercover operations. Figure 1 shows that MID

has inspected or is scheduled to inspect, more than half of Customs’

entities by June 30, 2001. In particular, MID has inspected or is scheduled

to inspect 19 of the 20 CMCs, 17 of the 20 SAICs, and several of its

subordinate entities, including ports of entry, Resident Agent-in-Charge

(RAIC) offices, and Resident Agent (RA) offices.
Page 5 GAO-01-676 Customs Self-Inspection Program Implementation

Figure 1: MID Completed and Scheduled On-Site Verification and Validation

Inspections

a

Includes Internal Affairs Special and Regional Agent in Charge, air and marine branches, Customs’

attaches, field laboratories, preclearance ports, strategic trade centers, regulatory audit, and

headquarters divisions.

Source: U.S. Customs Service’s Management Inspections Division.

To identify (1) SIP’s usefulness as a mechanism for oversight and

accountability and (2) problems relating to SIP implementation, we

interviewed officials from several Customs’ organizations, including MID,

which oversees SIP and is within the Office of Internal Affairs. In addition

to MID, during our review, we interviewed officials from the Office of

Field Operations (OFO), which oversees CMCs and ports of entry, and the

Office of Investigations (OI), which oversees SAICs, RAICs, and RAs,

because these are geographically dispersed components with the

responsibility for completing a large number of self-inspection

worksheets. Also, we judgmentally selected seven ports of entry and one

Scope and

Methodology
Page 6 GAO-01-676 Customs Self-Inspection Program Implementation

SAIC office from these components for field visits6 and accompanied MID

on inspections of four of the entities. We also visited the CMCs affiliated

with the two San Diego ports of entry and Los Angeles International

Airport (LAX). At the ports of entry and SAIC office, we interviewed

supervisors and managers responsible for implementing SIP at the local

level. We also reviewed relevant agency documents, including nationwide

results of several self-inspection cycles, self-inspection results at the field

entities visited, and the results of MID verification and validation

inspections.

We reviewed MID verification and validation inspection reports for 144

Customs’ entities. We summarized the results of these reports using

spreadsheets, detailing the number of areas MID reviewed, the number of

documentation errors MID identified, the number of self-inspections with

questions answered incorrectly, and MID’s assessments and observations

of SIP implementation. Because we could not glean such specific

information from reports for 17 of these entities, these reports were not

included in our analysis. MID’s results from inspections of 127 entities and

over 2,000 self-inspection worksheets were used in our analysis. Because

the MID reports did not follow a consistent format and it was often

difficult to extract the appropriate information, we used the reports only

to validate overall assessments given by MID. Because the entities

inspected were judgmentally selected by MID, the findings from these

reports and our analysis of these reports may not be representative of the

entire Customs Service.

To identify improvements and refinements that could enhance the value of

the program, we worked closely with directors, managers, and supervisors

at selected Customs sites. We also interviewed MID, OFO, and OI officials

to obtain their views and plans for improving and refining the program. In

addition, we reviewed MID documentation concerning changes and

refinements to the program.

We performed our work between June 2000 and April 2001 in accordance

with generally accepted government auditing standards. We provided the

Customs Service with a draft of this report. Customs’ written comments

 6

 The ports selected were John Fitzgerald Kennedy International Airport, LAX, Miami

International Airport, land border ports of Detroit, Mich., Laredo, Tex., San Ysidro and Otay

Mesa near San Diego, Calif., and the San Francisco SAIC.
Page 7 GAO-01-676 Customs Self-Inspection Program Implementation

are discussed in our agency comments section and are included as

appendix I to this report.

Our visits to eight Customs’ entities and review of 127 MID verification and

validation inspection reports found SIP to be a useful mechanism for

managers and supervisors to identify and correct problems at the local

level and to obtain more control over activities they oversee. During selfinspections, the entities uncovered areas of vulnerability and identified

numerous areas needing improvement in their local operations. The MID

also identified areas needing improvement through their verification and

validation inspections. The managers and supervisors we talked with said

that SIP had made a positive contribution to oversight and accountability

and to improving their operations.

SIP has been a useful mechanism for identifying and correcting problems.

The Customs’ entities that we visited had uncovered numerous areas of

vulnerability in their local operations as a result of self-inspections. For

example, all eight entities had identified weak controls over seized

property and were implementing corrective actions. Corrective actions

included developing evidence and sign-in logs for property rooms and

vaults and improving processes for transferring seized property to secure

vaults in a timely manner. In addition, at one port of entry we visited,

Customs officials discovered problems in the imprest fund as a result of a

self-inspection. According to the port director, the self-inspection raised

questions about a cashier’s handling of the fund, which led to a

determination that the cashier had embezzled $1,000 from the fund.

According to an OFO report, CMCs and ports of entry identified

approximately 3,000 items needing improvement with corresponding

corrective actions nationwide during the second SIP cycle. The OFO SIP

Program Coordinator tracks the status of the corrective actions for issues

that occur at many ports. Financial management, trade programs,

passenger processing (including personal searches), and fines, penalties,

and forfeitures (including seized property) were the areas identified most

frequently as needing improvement.

In addition, all the entities we visited had identified numerous areas

needing improvement and had implemented a number of corrective

actions. For example, one port of entry identified 37 areas needing

improvement out of 54 they inspected during the second SIP cycle. Of the

37 areas, corrective actions for 31 had been completed at the time of our

SIP Shows Promise as

a Useful Mechanism

for Oversight and

Accountability

Self-Inspections

Uncovered Vulnerable

Areas Needing

Improvement
Page 8 GAO-01-676 Customs Self-Inspection Program Implementation

visit; the rest were in process. During the third SIP cycle, the port

identified 27 different areas needing improvement out of 64 inspected. Of

the 27 areas, corrective actions for 23 had been completed by the time of

our visit; the rest were in process.

In addition to problems uncovered through local level self-inspections,

MID verification and validation inspections identified additional areas

needing improvement. For example, at one port of entry, MID inspectors

found late filing of travel vouchers, security checks not being conducted,

and personal search facilities having privacy and safety shortcomings. In

response, MID made numerous recommendations to port management for

corrective actions. MID officials explained that the recommendations were

based on problems identified during their inspection that the port should

have found during its self-inspection or MID found in areas it reviews but

are not addressed by the self-inspection worksheets. MID officials further

explained that while on-site at a port of entry or other entity, they conduct

more in-depth reviews that go beyond the scope of the worksheet

questions. These in-depth reviews have been targeted toward higher-risk

areas, such as airport security programs, and may lead to worksheet

revisions where warranted.

MID also conducts follow-up activities to ensure that its recommendations

have been completed. MID generally sends a follow-up memorandum to

the applicable entity about 6 months after the inspection to determine the

status of the corrective actions taken in response to the recommendations.

The entity then provides MID with a letter stating the status of the

corrective action(s) and provides supporting documentation. After

receiving this letter, MID may close out the recommendation, require more

documentation, or visit the entity to obtain more documentation. For

example, during the second and third SIP cycles, MID made a total of 65

recommendations to improve imprest fund management. At the time of

our review, 17 of the 65 recommendations had been implemented and

were closed out. Forty-one recommendations were pending; MID sent out

follow-up memorandums to determine the status of the pending

recommendations but had not received responses at the time of our

review. MID officials told us that it was too soon to send out follow-up

memorandums on the remaining seven recommendations.

MID Identified Areas

Needing Improvement
Page 9 GAO-01-676 Customs Self-Inspection Program Implementation

Managers and supervisors at every port of entry and SAIC office we visited

told us that SIP was useful as a mechanism for oversight and

accountability and that it had contributed to improving their operations.

They said that they had uncovered and corrected problems they would not

have discovered had they not performed the self-inspections.

For example, one port director said that SIP highlighted problem areas in

the port’s operations and brought them to the attention of managers and

supervisors more effectively than had Customs’ prior management

inspection program. Under one component of the prior program, teams of

officers from areas such as passenger processing would inspect different

areas such as fines, penalties, and forfeitures. Because these teams did not

work in the areas being inspected, they generally had limited knowledge

and expertise of the activities they were inspecting. With this limited

knowledge, they were often unable to verify the information they were

given or investigate any problems in the activities further.

In contrast, under SIP, supervisors inspect their own activities and their

immediate superiors review the results. According to this port director,

SIP helps supervisors maintain accountability for their area of

responsibility because it requires them to “back-up” the results of their

self-inspection with supporting documentation. The next level of local

management is to certify that the results are correct and, should MID

inspect their area of responsibility, managers and supervisors will be

asked to explain how they determined worksheet answers. Many

supervisors told us that these different levels of review helped give the

process integrity.

Managers and supervisors also said that self-inspections assisted them in

uncovering and correcting problems that they would have otherwise not

known about, and that SIP helps to keep them informed and current on

Customs’ policies and directives. For example, at one entity, purchase

cardholders were not locking up their purchase cards as required, but

were carrying them in their wallets. The cardholders reported that they

were not aware of the requirement to keep the cards secured, but because

of SIP, they now lock up the cards.

Notwithstanding the positive aspects of the program, several problems

have surfaced during SIP implementation. During its verification and

validation inspections, MID found insufficient supporting documentation

for some worksheet answers and inaccurate reporting of some selfinspection results. Largely due to these findings, MID was also concerned

Managers and Supervisors

Believed SIP to Be Useful

as an Oversight

Mechanism

Several Problems

Have Surfaced During

SIP Implementation
Page 10 GAO-01-676 Customs Self-Inspection Program Implementation

that some officials may not have conducted adequate reviews of

completed self-inspection worksheets before certifying them as accurate.

We also found insufficient documentation to support worksheet answers

and questions answered incorrectly to some extent at the entities that we

visited. In addition to problems with worksheet completion and accuracy,

many of the managers and supervisors we interviewed believed the

program to be burdensome and time-consuming.

MID inspections and our analysis of MID inspection reports identified

problems concerning insufficient documentation to support worksheet

answers and incorrectly answered questions. According to the results of

inspections conducted since January 2000, MID reported finding

insufficient supporting documentation on 23 percent of the worksheets

reviewed and questions answered incorrectly on 16 percent of the

worksheets. Results from our review of MID inspection reports were

consistent with MID’s assessment.

Insufficient documentation and inaccurate worksheet results indicated to

MID inspectors that approving officials may not have sufficiently reviewed

completed worksheets in order to certify their accuracy. MID inspectors

explained that by signing worksheet certifications, approving officials,

such as port directors, are indicating that they reviewed the self-inspection

and that they agree that the results are accurate. However, MID inspectors

believed that if support for answers was not indicated on the worksheets,

it was not clear how the officials could have determined that the results

were accurate. In effect, MID inspectors believed that some approving

officials might be “rubber-stamping” self-inspection results.

According to MID inspection reports, problems at some entities with

insufficient supporting documentation and inaccurate worksheet answers

resulted, in part, from a lack of detailed guidance and instructions on how

to complete and review worksheets and determine appropriate sample

sizes. Many managers and supervisors that we interviewed agreed with

MID’s assessment and believed that more guidance and more specific

instructions were necessary to answer some worksheet questions.

Specifically, they mentioned having difficulty determining the proper

supporting documentation for answers to some questions, the appropriate

universe from which to draw a sample, and the appropriate sample size.

We also found worksheets lacking supporting documentation and with

incorrect answers, to some extent, at all the entities that we visited. At

three of the eight Customs entities that we visited, the majority of the

Worksheet Answers Lack

Adequate Support and SelfInspection Results

Inaccurately Reported
Page 11 GAO-01-676 Customs Self-Inspection Program Implementation

worksheets we analyzed either lacked supporting documentation or had

incorrectly answered questions. We found instances of managers and

supervisors having difficulty determining (1) proper support for worksheet

answers, (2) appropriate sampling universe and timeframes, and (3)

appropriate sample sizes.

For example, at one entity we visited with MID inspectors, a purchase

cardholder answered “yes” to a worksheet question asking whether the

monthly purchase card statements were reconciled within 10 days after

their receipt. While it is a requirement to provide supporting

documentation for worksheet answers, the purchase cardholder did not

indicate that any records, reports, or other documents were reviewed to

support the answer. During their inspection, MID accessed a report that

showed some purchase card statements had not been reconciled within

the prescribed timeframe. According to the MID inspector, the report

should have been reviewed when answering the question and a copy

included with the self-inspection worksheet as supporting documentation.

The purchase cardholder explained that he was unaware of this report

and, lacking documentation, had answered the question based on what he

remembered. As a result, MID inspectors concluded that incorrect results

had been funneled up the chain of command. Purchase cardholders at two

of the other three entities we visited with MID also said that they were

unaware of this reconciliation report.

We also found supervisors having difficulty determining the appropriate

sampling universe and timeframes. For example, at one entity we visited, a

MID inspector found that a supervisor completing the collections and

deposits worksheet had sampled supporting documents from only 1 month

in the 6-month reporting period. The MID inspector explained that this

was not representative of the activity in the review period. The supervisor

explained that he had received no training or guidance on how to conduct

the self-inspection and only had instructions on the worksheet for

guidance. We reviewed the self-inspection worksheet and found that the

instructions read “Review at least 10 documents randomly selected from

the day’s deposit and collection documents.” The instructions do not

explain that the sample of documents should be from every month or

describe how the documents should be representative of the entire

reporting period. At another port of entry, we found that supervisors had

sampled collection and deposit activity from only 1 day in the 6-month

reporting period, which appeared to be consistent with the limited

instructions referenced above.
Page 12 GAO-01-676 Customs Self-Inspection Program Implementation

In addition, we found examples of difficulties in determining appropriate

sample sizes. For example, questions on one worksheet ask about controls

over narcotic training aids for canines. The worksheet did not contain

specific instructions or guidance about how to support answers to these

questions. At one entity we visited, the supervisor who completed the

worksheet used control documents from one canine enforcement officer’s

(CEO) file as supporting documentation for the worksheet answers. We

interviewed the supervisor and found that there were 16 CEOs at the port

of entry in possession of narcotic training aids, although only one file had

been reviewed for the self-inspection. The supervisor said that no

guidance or instructions had been provided on how many files needed to

be reviewed to support the worksheet answers, so the supervisor

randomly picked one file to answer the worksheet questions.

At another port of entry, the supervisor who completed the canine

narcotics training aid worksheet indicated that without guidance on how

to determine the sample size, the local CMC instructed that a 5-percent

sample should be taken. The supervisor drew a 5-percent sample of CEOs

in possession of narcotic training aids, which resulted in only 2 out of 53

files being included in the self-inspection.

At six of the eight entities we visited, more than half of the 54 managers

and supervisors we interviewed said that SIP can be paperwork-intensive,

burdensome, and time-consuming. In particular, some self-inspection

worksheets have more questions than others, from only 1 to 15 questions,

and some worksheets require extensive research to determine and support

worksheet answers. For example, a supervisory import specialist we

interviewed explained that to answer one worksheet question, a data

query of over 120,000 records had to be retrieved before a sample could be

taken. According to the supervisor, other questions on this worksheet

required similar efforts, taking several days to gather the information.

Although other worksheets may not require such extensive research,

neither MID nor any of the entities we visited tracked the amount of time

required to complete various self-inspections. Consequently, we were

unable to determine the actual time burden of the program or to what

extent completing self-inspection worksheets may impact primary job

duties.

About three-quarters of the managers and supervisors who told us that SIP

was time-consuming and burdensome said that too much time was being

spent on low-risk activities, such as internal and external relations, and

reporting requirements for low-risk activities were too frequent. At several

Many Managers and

Supervisors Believed SIP

to Be Burdensome and

Time-Consuming
Page 13 GAO-01-676 Customs Self-Inspection Program Implementation

of the entities we visited, managers and supervisors said that Customs

needed to prioritize the activities covered by the worksheets and focus on

high-risk activities such as collections and deposits and seized narcotics.

One port director said that based on the port’s activities, the areas of

collections and deposits of cash/checks and seized currency should be the

two highest priorities under the port’s self-inspection. These are risky

areas that could be vulnerable to abuse, making them good candidates for

continuous scrutiny under SIP. The port director also believed that other

areas are not as important and should receive less scrutiny during the SIP

cycles. As discussed later in this report, MID is taking action to address

these concerns.

Based on feedback MID received from our review, its own inspections,

and comments from managers and supervisors, several improvements and

refinements to SIP are being implemented. These include (1) adding key

internal control questions to worksheets, (2) reducing the time spent selfinspecting low-risk activities, (3) standardizing MID’s verification and

validation inspection reporting format, and (4) developing and

implementing a computerized self-inspection reporting system.

During our review, we found that some key internal control concepts were

not being addressed by self-inspection questions. According to the

Comptroller General’s Standards for Internal Control in the Federal

Government (Nov. 1999), a key factor in helping federal managers improve

accountability and minimize operational problems to better achieve

agencies’ missions and program results is to implement appropriate

internal control. Internal control is a series of actions and activities that

occur throughout an entity’s operations and on an ongoing basis as part of

its infrastructure to help managers run the entity and achieve their aims.

An organization’s internal control provides reasonable assurance that its

operations are effective and efficient, its financial reporting is reliable, and

it is in compliance with applicable laws and regulations. Management sets

the objectives, puts the control mechanisms and activities in place, and

monitors and evaluates the control.

Not all self-inspection worksheet questions, however, fully address the

concepts in the internal control standards. On the imprest fund worksheet,

for example, we found a question that read: “If there is no separation of

duties for a cashier who performs other procurement/change making

functions, does management perform any extra reviews?” This question,

SIP Improvements

and Refinements Are

Underway

Key Internal Control

Questions Being

Incorporated Into

Worksheets
Page 14 GAO-01-676 Customs Self-Inspection Program Implementation

however, was not specific enough to address the segregation of duties

internal control activity.

The Comptroller General’s internal control activity states that:

“Key duties and responsibilities need to be divided or segregated among different people to

reduce the risk of error or fraud. This should include separating the responsibilities for

authorizing transactions, processing and recording them, reviewing the transactions, and

handling any related assets. No one individual should control all key aspects of a

transaction or event.”

We believed that the question on the imprest fund worksheet should be

revised to address the fundamental concept by specifically asking whether

key duties and responsibilities were segregated among different people in

the imprest fund area. We also noted that the worksheet for the purchase

card program did not have a question about segregation of duties.

In addition, we noticed that a key internal control question had been

removed from the third cycle imprest fund worksheet. The question was

whether quarterly unannounced cash counts were being conducted. This

pertains to the Comptroller General’s internal control activity on

safeguarding vulnerable assets:

“An agency must establish physical control to secure and safeguard vulnerable assets.

Examples include security for and limited access to assets such as cash, securities,

inventories, and equipment which might be vulnerable to risk of loss or unauthorized use.

Such assets should be periodically counted and compared to control records.”

We discussed our internal control concerns with the MID Director at

Customs headquarters, who added the question on unannounced cash

counts back into the imprest fund worksheet for the fourth SIP cycle, and

began a reassessment of all SIP worksheets to ensure that questions cover

basic internal controls.

As a result of our discussion and the MID Director’s reassessment, MID

issued worksheet revision guidelines that describe and outline internal

control concepts that must be in place for a federal agency to have

assurance that it is running efficiently and effectively. In all, MID’s

guidance outlines 10 key internal control concepts to consider when

revising the worksheet questions. For example, as we suggested in the

imprest fund example noted above, MID’s guidance for including

segregation of duties worksheet questions essentially states:
Page 15 GAO-01-676 Customs Self-Inspection Program Implementation

Key duties and responsibilities are divided to reduce the risk of error or mismanagement.

No one individual should control all key aspects of a transaction or event. Examples of

programs requiring key functions to be separated include procurement (approving,

purchasing, and receiving), imprest fund (cashier and approver), and collections and

deposits (preparer, verifier and receiver); and

Individuals who account for assets are not the same as those that have custody of the

assets. Preventing this assures that individuals who record assets can not misappropriate

the asset and conceal its whereabouts in the inventory records.

MID left the implementation of the revision to the discretion of each

assistant commissioner and said that for the revised worksheets to be

available for the January 2002 SIP cycle; the worksheets should be

completed by October 2001. We were concerned about the lengthy

implementation timeframe, but after discussing the issue with program

manager representatives of the OFO and OI Assistant Commissioners, we

were assured that work on the revisions was well underway. In fact, both

the OFO and OI program managers told us that their goal is to complete

the revised worksheets in May 2001 so that they can be used for the next

SIP cycle beginning in July 2001.

In these instances of key internal control questions missing from

worksheets whose programs could be subject to financial vulnerability

and corruption, we worked closely with MID officials to correct the

deficiencies. Because the officials were very responsive to our concerns

and took corrective action during this engagement, we will not be making

a recommendation on this issue in this report.

A second area where improvements are being made is by reducing the

time spent self-inspecting low-risk activities. To help reduce the SIP

paperwork burden and time requirements, Customs’ activities are being

prioritized for self-inspection based on risk level. Many worksheets

covering activities considered to be low-risk are to be completed on an

annual, instead of semiannual basis. Worksheets covering activities that

are vulnerable to fraud and abuse, however, are being retained for

semiannual completion. For example, OFO began prioritizing its activities

and associated worksheets after the first SIP cycle because they found

that it was too burdensome to complete all the worksheets during one

cycle. According to the OFO Acting SIP Program Coordinator, worksheets

covering high-risk areas such as money, narcotics, or seized property,

were retained on a semiannual cycle. OFO placed low-risk activities on an

annual cycle, an example being customer service operations. In all, OFO

Reducing the Time Spent

Self-Inspecting Low-Risk

Activities
Page 16 GAO-01-676 Customs Self-Inspection Program Implementation

placed the majority of their worksheets—52 out of 78—on an annual,

instead of semiannual cycle.

OI began prioritizing its activities and worksheets by risk level for the

fourth SIP cycle that began in January 2001 for field offices such as SAICs

because they have the most worksheets to complete. Like OFO, OI placed

activities considered low-risk on an annual, instead of semiannual cycle;

an example would be whether a threat analysis has been conducted to

determine the potential for fraud investigations. Similar to OFO, the OI SIP

Program Coordinator said that worksheets covering high-risk areas such

as money, narcotics, seized property, and other sensitive areas were

retained on a semiannual cycle. In all, OI placed the majority of its

worksheets—16 out of 22—on an annual, instead of semiannual cycle.

A third area where MID is making improvements is in the way it reports

inspection results. MID is to prepare a management inspection report after

each inspection it performs at Customs entities. The report is used to

document the identification and correction of management and

operational deficiencies and contains various sections such as executive

digest, national issues, and SIP verification summaries. Our review of MID

inspection reports showed a wide range of reporting formats as well as

inconsistent information included in the various report sections. For

example, while accompanying MID inspectors to various ports of entry, we

asked three MID field directors where in their subsequent reports they

would place shortcomings they might find with worksheet questions. Each

field director gave us a different section of the report where they would

report the findings.

MID identified the problem and has recently developed a draft standard

operating procedure and format for its verification and validation

inspection reports. After consultation with its field directors, MID will

finalize the report format, which is to standardize identification of national

issues, recommendations, and best practices sections. According to the

MID Director, standardizing MID inspection reports should make it much

easier to track national trends and subsequent corrective actions, as well

as to identify and disseminate best practices among the various Customs’

entities.

MID Is Revising its

Inspection Report Format
Page 17 GAO-01-676 Customs Self-Inspection Program Implementation

A final area where progress is being made is developing and implementing

a computerized self-inspection reporting system, SIRS. SIRS should make

it easier to record and analyze SIP data and track nationwide trends and

corrective actions. An important part of the system is operational but the

remaining components are under software development or have not yet

entered the development process. With the completion of the first

component, the results of each SIP worksheet, including corrective

actions and certifications, may be entered into SIRS via a personal

computer. However, the SIRS component that will allow analyses of SIP

data to identify regional, national, and systemic issues is currently being

developed with an expected rollout date in August 2001.

The final SIRS component, which is not yet under development, is

intended to allow MID to track whether corrective actions from MID

inspection reports have been taken. MID officials told us that they are

unsure when this final component will be available, but they believe it will

be early in 2002. Completion of all SIRS components is critical to achieving

the full potential of SIP in identifying overall problems and trends and

institutionalizing solutions, according to the MID officials.

SIP is a work in progress; a program under continuous change and

refinement. Although many managers recognized that SIP enables them to

obtain more control over the activities that they oversee, many also view it

as somewhat burdensome and time-consuming. These and other

implementation concerns have been identified and addressed as SIP enters

its third full year of operation and completes its fourth self-inspection

cycle. Several projects are underway which should contribute to a more

streamlined, effective, and less burdensome program. Until SIRS is fully

implemented, however, it will be difficult to determine the full extent of

the program’s impact on identifying problems and trends and

institutionalizing corrective actions.

One primary benefit of self-inspection is that as activities are reviewed and

results certified as accurate, management should have confidence that

problems are being identified and corrected at the local level. This is not

the case, however, if worksheet guidance is insufficient and instructions

are unclear. Because of inadequate guidance, inaccurate and incomplete

self-inspection results can and do occur, reducing the credibility of the

program. More can be done to ensure that all worksheets contain

complete and clear guidance and instructions for making determinations

such as sampling sizes and timeframes. Clarifying and refining all

worksheet guidance and instructions will not only assist managers and

An Automated Self

Inspection Reporting

System Is Being

Implemented

Conclusions
Page 18 GAO-01-676 Customs Self-Inspection Program Implementation

supervisors in conducting self-inspections, but will also provide approving

officials and MID inspectors with a clear set of criteria for determining

whether self-inspections were done correctly and completely. This could

go a long way toward ensuring that the self-inspection program meets its

goals of building accountability and fostering integrity throughout the

agency.

To help improve SIP, we recommend that the Acting Commissioner of

Customs direct the Management Inspections Division Director to review

all worksheets and provide clear guidance for

• proper documentation to support worksheet answers and

• determining the universe of activity to include in the self-inspection

and the appropriate sample size, if required.

We requested comments on a draft of this report from the Acting

Commissioner of Customs or his designee. On May 22, 2001, the Director,

Office of Planning, provided us with written comments, which are

reprinted in appendix I. The Director said that most of Customs’ concerns

relating to the report had been addressed through discussions with our

audit team during the engagement. The Director also said that Customs

will shortly be implementing an action plan to fully address our

recommendation.

We will send copies of this report to Senator Max Baucus, Ranking

Member of the Senate Committee on Finance; Representative Charles

Rangel, Ranking Minority Member of the House Ways and Means

Committee; and Representative Sander Levin, Ranking Minority Member

of the House Ways and Means Subcommittee on Trade. In addition, we are

providing copies to the Honorable Paul H. O’Neill, the Secretary of the

Treasury; Charles W. Winwood, the Acting Commissioner of Customs; and

other interested parties. Copies of this report also will be made available

to others upon request. This report will also be available on GAO’s

homepage at http://www.gao.gov.

Recommendation for

Executive Action

Agency Comments
Page 19 GAO-01-676 Customs Self-Inspection Program Implementation

The major contributors to this report are acknowledged in appendix II. If

you or your staff have any questions about the information in this report,

please contact me on (202) 512-8777 or Darryl W. Dutton on (213) 830-

1000.

Richard M. Stana

Director, Justice Issues
Appendix I: Comments From the U.S. Customs

Service

Page 20 GAO-01-676 Customs Self-Inspection Program Implementation

Appendix I: Comments From the U.S.

Customs Service
Appendix II: GAO Contacts and Staff

Acknowledgments

Page 21 GAO-01-676 Customs Self-Inspection Program Implementation

Richard M. Stana, (202) 512-8777

Darryl W. Dutton, (213) 830-1000

Cheryl L. Gordon

Samuel S. Van Wagner

Andrew J. Von Ah

Michele C. Fejfar

Bethany L. Letiecq

Appendix II: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(264463)

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