International Remittances: Different Estimation Methodologies Produce Different Results
Published: 2006-03-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Remittances are the personal funds that the foreign born send to their home countries. In recent years, estimated remittances have grown dramatically, and policy makers have increased their attention to these flows. Organizations use various methodologies to estimate remittance flows, which result in a range of estimates. In 2004, the Group of Eight (G8) leaders emphasized the need for improved statistical data on remittances. In light of the growing volume of remittances and the differences in estimates, GAO examined (1) the methodology that the Bureau of Economic Analysis (BEA) uses to develop the official U.S. estimate, (2) methodologies that other countries and multilateral organizations use to estimate remittances, and (3) international efforts to improve the collection and reporting of remittance data.
section_title: What GAO Found
paragraphs: BEA uses a model to estimate remittances from the United States and, although the methodology has some strengths, the accuracy of BEA's estimate is uncertain for several reasons. BEA estimated remittances for 2003 at $28.2 billion; its model used data on the number of foreign-born residents, their income, the proportion of income that is remitted, and other demographic data. The strengths of BEA's methodology are that, in theory, it estimates remittances sent through formal and informal channels. It also is low-cost because it uses existing data on the foreign born. However, BEA's methodology was limited by the quality and timeliness of the data, particularly on the portion of income likely to be remitted. BEA revised its model in 2005 to use new data sources, but the accuracy of its estimates depends on the accuracy of its assumptions regarding the remitting behavior of the foreign born and other factors. Some central banks and the Inter-American Development Bank (IDB) use different methodologies to provide estimates of remittances from the United States that vary significantly. For example, Mexico's central bank estimates remittances primarily by collecting data from money transmitters. The IDB used a variety of sources, such as surveys of remittance senders and receivers, and information from remittance transfer companies and central banks, to estimate remittances from the United States to Latin America to be $30.6 billion in 2003. We aggregated BEA's data to estimate remittances to this region to be $17.9 billion. BEA is an active participant in recent international efforts to improve remittance statistics. The World Bank and others established a remittances working group in 2005, which delegated tasks to other international groups to (1) clarify the definition of remittances and (2) provide guidance on how to collect and estimate remittances. BEA participated in the first group, which recommended a new definition of remittances. The second group will have its first meeting in June 2006.

section_title: Letter
paragraphs: The United States is the largest remittance-sending country in the world,  with a majority of funds sent to Latin America and the Caribbean, and  substantial amounts sent to Asia and Africa. In recent years, remittances  have received growing attention from policy makers in both developed and  developing countries because these flows serve as an important financial  source for some countries. According to the World Bank, remittances  received by developing countries were estimated to have been $167 billion  in 2005, up 73 percent from 2001; however, given that the extent of  unrecorded flows through formal and informal channels is unknown,  actual remittance flows may be much higher. World Bank data show that  remittance growth has outpaced private capital flows and official  development assistance over the last decade. When combined with official  U.S. development assistance, these flows significantly increase the  percentage of U.S. gross national income sent to developing countries.
In 2004, the Group of Eight (G8) leaders emphasized the importance of  remittances and the need for improved statistical data on them. In the  United States, some agencies have also expressed a need for improved  remittance estimates. For example, the Department of the Treasury  (Treasury) conducts bilateral outreach programs, and Treasury officials  believe improved remittance statistics could help it better target its  program to improve the financial infrastructure in countries that receive a  large amount of remittances from the United States. In 2004, the Federal  Reserve established a mechanism to facilitate the provision of low-cost  remittances to Mexico through its automated clearinghouse; improved  remittance statistics could help it identify other countries that could  benefit from its low-cost remittance product.
Different organizations use various methods to estimate remittance flows,  which result in a range of estimates. In light of the volume of remittances  and the differences in estimates, you asked us to review the methodologies  used to estimate remittances from the United States. Specifically, we  examined (1) the methodology that the Department of Commerce’s  (Commerce) Bureau of Economic Analysis (BEA) uses to develop the  official U.S. estimates of remittances from the United States, (2)  methodologies other countries and multilateral institutions use to estimate  remittances from the United States, and (3) international efforts to improve  the collection and reporting of remittance data. In addition, we recently  issued a report that focused on remittance products, costs, and consumer  disclosures for remittances sent from the United States to other countries.
To address these objectives, we met with officials at BEA and the U.S.  Census Bureau. We also reviewed documentation that described BEA’s  methodology prior to 2005 and obtained documentation from BEA  describing their revised methodology, which was implemented in July 2005.  We met with officials from the Inter-American Development Bank (IDB),  the Inter-American Dialogue, and the Mexican and Philippine central banks  to obtain their estimates on remittances from the United States. We also  obtained descriptions of the methodologies they used to estimate  remittances, the reasons for using these methodologies, and the potential  advantages and disadvantages of their use. We primarily report data for  2003 because that is a time period for which BEA has statistically reliable  data and because data for more recent time periods are preliminary. As a  matter of consistency we use this period to report on the other entities as  well. We do, however, report more recent data when available. We met with  officials from BEA, Treasury, the Department of State, the U.S. Agency for  International Development, the International Monetary Fund (IMF), the  World Bank, and IDB to obtain information on international efforts to  improve remittance estimates. Appendix I provides additional details on  our scope and methodology. We conducted our work from December 2004  to March 2006 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: Remittances have become an important source of financial flows to  developing regions and have been resilient in the face of economic  downturns. These funds can be used for various purposes, including basic  consumption, housing, education, and small business formation; they can  also promote financial development in cash-based economies. Because of  the importance of these flows to many developing countries, in recent  years, countries that send remittances and receive remittances, along with  international organizations, have expressed increasing interest in  understanding immigrants’ remittance practices.
According to the 2000 Census, the 1990s saw the largest increase in the  foreign-born population that entered the United States, compared with any  other 10-year period. IMF figures show that in 2004, immigrants in the  United States sent over $29.9 billion in remittances, more than any other  country. Saudi Arabia was the second largest remittance-sending country;  however, as shown in figure 1, the volume of remittances from Saudi Arabia  has been falling since 1994, while that from the United States has been  steadily increasing.
For some countries, remittances constitute the single largest source of  foreign currency and can often rival direct foreign investment in amounts.  World Bank data show that for selected countries remittances exceed the  flows of official development assistance and foreign direct investment and  are relatively large compared to exports and gross national income— particularly for the Dominican Republic and the Philippines (see table 1).
Remittances are also very important for those households that receive  them. Table 2 shows the minimum wage per month for several developing  countries as well as our computation of the 2003 per capita remittances  from the United States per month. As can be seen from this table,  remittances received by households on a monthly basis tend to  substantially exceed the monthly minimum wage for these countries. For  example, per capita, remittances to households in the Philippines are  almost five times the monthly minimum wage a Filipino worker would  make in the retail and service sector.
The IMF collects and publishes official estimates of remittances sent from  its member countries, including the United States, as part of its balance of  payments statistics. The IMF currently reports the sums of “workers’  remittances” and “compensation of employees” as the best measure of total  personal remittances. According to IMF, “workers’ remittances” are  transfers by migrants who are employed in countries other than their birth  countries and are considered residents there; “compensation of  employees” is made up of wages, salaries, and other benefits earned by  individuals in economies other than those in which they are residents, for  work performed or paid for by residents of those economies. As a result,  compensation of employees applies only to individuals away from their  place of origin for less than a year.
In the United States, no U.S. government agency tracks the flow of  remittances through the payment system. Because of its role in compiling  balance of payments statistics, BEA provides to the IMF official estimates  of U.S. remittance inflows and outflows. BEA publishes remittance  estimates in a different manner than reported in the IMF’s balance of  payment statistics. BEA includes estimates of remittances by the foreign- born population residing in the United States to households abroad in the  published item called “private remittances and other transfers.” This  category is broader than the international definition of remittances, as it  also includes payments or receipts of nongovernmental U.S. entities and  foreign entities. Also, BEA publishes its estimates of “private remittances  and other transfers” in its tables of international transactions accounts,  defining it as the difference between transfers to and transfers from the  United States. However, BEA provides to the IMF an estimate of  remittances that flow from the United States to the world based on its  underlying country-by-country tabulations. Until this year, BEA only  provided this estimate to the IMF. For the first time, BEA published the  estimate it provided to the IMF, as well as revised estimates back to 1991, in  the July 2005 Survey of Current Business.
The majority of remittances from the United States flow to Latin America,  which includes Mexico, Central America, South America, and the  Caribbean (see fig. 2). A large amount also flows to Asia, including the  Philippines.
There are many obstacles to accurately estimating remittances. First, many  transactions may go through unregulated informal channels from which  information cannot be garnered for inclusion in official estimates. While  there are no official estimates, some experts believe that a large amount of  remittances flow through this system, with market observers estimating  that informal flows can range from 50 percent to 250 percent of recorded  remittance flows. Second, countries do not always report remittance  estimates or do not report them according to commonly held IMF  definitions, which exclude transfers by the foreign born who have been in- country for less than one year. Variations in data compilation procedures  occur partially due to different interpretations of definitions and  classifications. In most cases, however, data weaknesses and omissions are  due to difficulties in obtaining the necessary data. For example, the World  Bank and other international organizations have indicated that developing  countries with large remittance inflows often have a relatively weak  capacity and limited resources, even though remittances are a large item in  their balance of payments statistics. Countries with large remittance  outflows often give lower priority to improvements in remittance statistics  because they are a relatively small item in their balance of payments  statistics, according to the World Bank and other international  organizations.
section_title: BEA Uses a Model to Estimate Remittances Sent from the United States, but the Accuracy of BEA’s Estimate Is Uncertain for Several Reasons
paragraphs: BEA uses a model to estimate remittances (which it calls “personal  transfers”) from the United States. Although BEA’s methodology has some  strengths, the accuracy of BEA’s estimate is uncertain for a number of  reasons. BEA estimated that remittances from the United States in 2003  were $28.2 billion. To arrive at this estimate, BEA used a model that  estimates remittances based on demographic information on the foreign  born, such as their total number, income, and the percentage of income  they remitted. In 2005, BEA revised its model for estimating remittances  and incorporated more current Census Bureau data on the size and  demographic characteristics of the foreign-born population of the United  States; however, the model is limited particularly by lack of current data on  the proportion of income immigrants were likely to remit and the  assumptions BEA makes about its data. In addition, BEA uses the more  current census data in a way that may double-count some immigrants.
subsections: section_title: BEA’s Methodology Relies on Existing Data and BEA’s Assumptions to Estimate Remittances
paragraphs: Prior to 2005, to derive its annual estimate of remittances sent from the  United States, BEA developed a model comprised of three factors—the  number of the foreign born, their family income, and the proportion of  income remitted. The count of the foreign born, their income, and other  demographic characteristics were obtained from information aggregated  annually from U.S. Bureau of the Census surveys. These data were arrayed  by length of residency in the United States and family types linked to  marital status (e.g., married foreign head of households, native-born  married to foreign-born spouse, and unmarried individuals). The remitter  was assumed to be the household head. BEA extrapolated the foreign-born  population derived from the 1990 Decennial Census using indicators,  including the Census Bureau’s annual Current Population Survey (CPS).
To estimate the proportion of income immigrants were likely to remit, BEA  relied on the 1989 Legalized Population Survey (LPS1) and the 1992  Legalized Population Follow-Up Survey (LPS2), which were conducted as a  result of the Immigration Reform and Control Act of 1986 (IRCA). BEA  then combined the information obtained from LPS1 and LPS2 with  demographic and income information obtained from the CPS to arrive at  the total amount of remittances sent from the United States. For a more  detailed description of BEA’s methodology for estimating remittances, see  appendix II.
In 2005, BEA made several revisions to its methodology to include more  recent census data, and recent studies on the foreign born and their  remitting behaviors. First, BEA incorporated data on the foreign-born  population and their income from the 2000 Census and the American  Community Survey (ACS), which is available annually, unlike decennial  census data, and thus requires less extrapolation of population and income  trends. According to BEA, these data will enable a better breakdown of  the foreign-born population by all relevant characteristics on an annual  basis. The ACS data on the number and income of the adult foreign-born  population are arrayed by their gender, duration of stay, presence or  absence of children, and per capita income of recipient countries and  proximity to the United States. BEA then used its own judgment to  determine the percentage of the adult foreign-born population that remits  and the probability of remitting from information gathered from various  academic studies published between 1995 and 2004, as well as LPS1 and  LPS2, which BEA used in its earlier model. BEA revised its estimates back  to 1991 using this new approach, which resulted in an increase in estimated  remittances for all years. Figure 3 shows the data that are included in BEA’s  model and how the remittance estimate is calculated.
In most cases, BEA provides only a global estimate of remittances and does  not publish remittance statistics about remittances from the United States  to individual countries. BEA stated that some data elements are not  available for some time periods or geographic areas, so it must undertake a  variety of methods to fill the data gaps in order to produce the underlying  tabulations needed for an aggregate estimate for the world. BEA cautions  that disaggregating its estimate for the world is error-prone and expresses  confidence only in its aggregate estimate. Further, according to BEA, in  moving from the global estimate to increasingly smaller geographic areas  or countries, the average errors in the underlying tabulations increase.  When it estimates remittances for selected regions, it publishes them on a  net (inflows minus outflows) basis.
section_title: The Accuracy of BEA’s Remittances Estimates Is Affected by the Quality of the Data and the Assumptions Used in the Methodology
paragraphs: BEA’s approach has several strengths: in theory, it captures both formal and  informal channels of sending remittances. It is also low-cost because it  relies on available data and not on eliciting data from a foreign-born  population that may not have an incentive to provide accurate data.  However, the accuracy of BEA’s estimate is affected by the quality of the  data available to BEA. A critical component of the methodology relies on  information about the remitting behavior (e.g., amount, frequency) of the  foreign born. Prior to 2005, the primary data available to BEA were the 1989  LPS1 and the 1992 LPS2; however, these surveys may not have been  appropriate for use in estimating remittances of all the foreign born  because they sampled a population participating in a special legalization  program primarily aimed at Latin American immigrants. The LPS1 and  LPS2 excluded undocumented aliens, temporary residents who did not  wish (or were not eligible) for legal status, and legal immigrants who  became legalized through processes other than IRCA. The survey design  did not provide a way to more extensively sample immigrant groups more  likely to remit than others (e.g. the foreign born with less than 10 years of  residence in the United States). In addition, recent census data show that  some basic demographic characteristics of the foreign born have changed  significantly since the LPS1 and LPS2 surveys were done.
BEA’s revisions to its methodology recognize these changes in the foreign  born population. In its revision, BEA reviewed a number of academic  studies to update the findings of the LPS1 and LPS2 and published the  sources in the July 2005 Survey of Current Business, however, the  estimates on the proportion of income remitted cannot be directly tracked  to these source documents. Although this approach is more transparent  than the prior approach of relying primarily on LPS1 and LPS2, BEA’s  estimate is still affected by its “judgment” of how it incorporates  information from the academic studies it is now using, and the assumptions  it makes in its model. For example, two of BEA’s assumptions are that the  proportion of income remitted is higher for U.S. residents from developing  countries than developed countries, and that the percentage of the foreign  born that remit is the same for all countries and only varies based on how  long they have been in the United States. Our analysis suggests that the  final BEA estimates of remittances are affected by these assumptions. We  used a statistical technique that repeatedly and randomly samples from  underlying data to obtain the range for 90 percent of possible estimates and  determined this to be between $17.3 billion and $35.9 billion. See appendix  III for the analysis we used to determine these ranges.
section_title: BEA’s Revised Methodology Includes Remittances Sent by Some of the Foreign Born Who Have Been in the United States for Less Than One Year
paragraphs: Remittance estimation in the balance of payments framework generally  separates remitters by their length of residency in host countries. All  remittances are presumably sent by the foreign born who have been in the  host country for greater than one year, while those that are in a country for  less than a year are presumed to be temporary, earning only compensation.  For this reason, some experts compile remittances as the sum of (1) the  remittances sent by those in country greater than a year and (2) the  compensation for those in-country for less than a year. In its description of  its revised methodology, BEA states that it excludes transfers by the  foreign born who have been in the United States for less than 1 year from  its measure of remittances; however, BEA uses a U.S.-residency-duration  grouping of 0-5 years in its personal remittances calculation. It thus  includes both employees who are in the United States for less than or equal  to 1 year, and migrants who are in the United States for more than a year, in  its estimates of personal remittances. Our analysis determined that BEA’s  estimates of remittances are therefore potentially overstated by up to $377  million because they include estimates for approximately 467,000 foreign- born individuals who were in their first year of residency in the United  States, according to 2003 ACS data.
section_title: Other Entities Use Different Estimation Methodologies Resulting in a Range of Remittance Estimates
paragraphs: Some central banks and IDB use a variety of methodologies and data  sources to estimate remittances. The central banks of Mexico and the  Philippines, two of the major recipients of remittances from the United  States, track funds coming into their countries. The IDB, a multilateral  organization that provides financing for economic, social, and institutional  development projects for Latin America and the Caribbean, estimates  remittances on a regional basis—primarily through the use of surveys. The  remittance estimates produced by these methodologies vary from each  other and from BEA’s estimates, thus further illustrating the dependency of  estimates on their methods and data.
subsections: section_title: Central Banks of Mexico and the Philippines Track Remittance Flows into Their Countries
paragraphs: The Central Bank of Mexico, known as the Banco de México (Banxico),  tracks remittance flows to Mexico with the help of a regulatory reporting  requirement on money transmitters. Since 2003, Mexico’s methodology for  estimating remittances has required firms that receive remittances to  report the amount of money received and the number of transactions  conducted between the United States and Mexico on a monthly basis. A  Banxico official stated that the firms’ systems that channel the information  to Banxico are designed to transfer money from person to person and that  the firms make the determination if a transaction is a person-to-person  transfer. He stated that these systems are not efficient enough for  commercial transactions; the likelihood that other types of transactions  may be getting into the systems is negligible because the systems that have  been developed are designed for personal remittances. The Banxico official  stated that Banxico is confident in its estimates because it believes the vast  majority of firms (about 90 percent) are reporting and, while some  transactions that are not personal remittances may be getting through, this  is a very small portion. To track remittances through informal channels  such as couriers, at the U.S.-Mexico border Banxico conducts a survey of  Mexicans returning to visit relatives. The survey asks questions about  funds and goods they are bringing to relatives. However, these individuals,  according to the Banxico official, are often reluctant to answer these  questions.
The Philippine government has established a formal program whereby it  registers and tracks its resident Overseas Filipino Workers (OFW). This  program provides data to the government on the type of employment these  workers obtain as well as their salaries. The Philippine central bank,  known as the Bangko Sentral ng Pilipinas (BSP), estimates remittances  channeled into banks, which are already net of living expenses of these  workers. However, BSP officials caution that the country source data are  not truly reflective of remittances coming from a country, particularly from  the United States, because most remittance centers for OFWs (e.g., Saudi  Arabia, Japan, and Taiwan) send funds through correspondent banks in the  United States, which then send the funds to banks in the Philippines. The  BSP only captures the most immediate source of OFWs’ funds coming into  the Philippines, primarily U.S. correspondent banks. Thus, this  methodology overstates the funds being remitted from the United States to  the Philippines because it includes funds from other countries, not just  from Filipino workers in the United States.
The BSP also recently revised its methodology to track remittances that  flow outside of banks using results of the Survey of Overseas Filipinos.
Specifically, these remittances are funds sent by OFWs through friends and  relatives, or amounts brought in by OFWs when they return home. This  revision caused the BSP to increase its overall estimate of remittances into  the Philippines by $1.7 billion (20 percent) in 2004. BSP officials stated that  they are in the process of updating prior years’ figures.
The primary advantages of these tracking methodologies are that they  capture actual or projected remittance flows, as well as rapid or sudden  changes in the characteristics of remitters—such as the average amount  remitted or the frequency of remitting. However, these methods are limited  in their ability to capture remittances sent through the informal sector and  to distinguish between personal remittances and other types of personal  business transactions when money transfer operators and banks do not  correctly code the remittance transactions.
section_title: The IDB Uses a Variety of Sources to Estimate Remittances Flows to Latin America and the Caribbean
paragraphs: Since the year 2000, the Multilateral Investment Fund (MIF) of the IDB has  been studying the issue of remittances and their impact on the  development of the Latin American and Caribbean region. In addition to  using its own researchers, MIF’s methodology uses remittance information  collected by other researchers. The IDB remittance estimates for selected  Latin American and Caribbean countries are obtained from a combination  of sources consisting of estimates from selected central banks of recipient  member countries judged to have reasonable remittance estimates,  transaction information from remittance transfer companies to selected  countries, and information obtained from surveys of remittance senders in  the United States and remittance recipients in Latin American and  Caribbean countries. IDB officials stated that they compare the remittance  estimates that they derive from their surveys of remittance recipients in  Latin America and the Caribbean with the estimates from the central banks  of these countries. These officials also stated that these surveys have  allowed them to estimate remittances these countries have received from  the United States. According to IDB officials, for countries for which they  have not conducted an in-country survey, they use data collected from  establishments that facilitate money transfers to each country. These  officials indicated that data were obtained from a sample of 45 money- transfer businesses involving approximately 14 countries. The amount and  frequency of the average remittance sent by residents from the survey  countries was used to estimate the total remittance outflow to each  country, according to IDB officials. They also indicated that MIF staff work  with the researchers to reconcile the various estimates and arrive at  country-specific estimates they believe are fairly accurate. For a more  detailed description of IDB’s methodology, see appendix IV.
The advantage of using this method to estimate remittances is that the  information is obtained from establishments that have a vested interest in  maintaining accurate data on the amount and volume of remittances.  However, estimates relying on reporting of information from remittance  providers in the formal financial sector—such as money transfer  operators—cannot account for remittances sent through the informal  sector (e.g., by couriers or hawalas). In addition, they may not be able to  distinguish between personal remittances and other types of personal  business transactions if the money transfer operators and banks do not  code the remittance transactions correctly. Although the consumer surveys  IDB used to derive its estimates collect information directly from  remittance senders and receivers, such surveys are difficult to administer  because remittance senders may be reluctant to participate in the surveys  due to language barriers, legal status, and lack of experience with  institutions that administer surveys. IDB officials also stated that surveys  only reach individuals with telephones. In addition, with these surveys  there often is a discrepancy between the amount of funds remittance  senders claim to send and the amount remittance recipients claim to  receive. Finally, these surveys can be more costly due to the need to hire  experienced survey firms with bilingual staff.
section_title: Remittance Estimates Made by These Entities Vary
paragraphs: The central banks of Mexico and the Philippines, the IDB, and BEA use  different methodologies to estimate remittances, resulting in a range of  estimates. For example, in 2003, the Mexican central bank estimated that  Mexico received about $13.4 billion in remittances from the United States  and the IDB estimated that Mexico received almost $12.9 billion in  remittances from the United States. In 2003, BEA estimated the amount of  remittances from the United States to Mexico at $8.9 billion. In terms of  remittances from the United States to Latin America and the Caribbean, in  2003, the IDB estimated this to be $30.1 billion. Although BEA does not  publish remittance estimates by region, we aggregated BEA’s country-by- country tabulations to estimate remittances to Latin America and the  Caribbean, and found this to be $17.9 billion.
We found that the reasons for the large discrepancies in the IDB and BEA’s  estimates for Latin America and the Caribbean were primarily due to  differences in population size, the percentage of persons that remit, and the  average remittance amount per year each used. Our analysis of BEA  estimates of remittances from the United States in 2003 to 21 countries for  which IDB also makes estimates show that BEA assumes that 54 percent of  the foreign born population remits an average of $2,076 per year as shown  in table 3. BEA assumes that the percentage of adult foreign born that  remit varies by duration of stay and the absence or presence of children in  the household. To determine the $2,076 that is, on average, remitted per  year, we used information from BEA's underlying tabulations and  calculated the average remittance per person for the 21 countries. BEA  assumes that the percent of income remitted varies by the presence or  absence of children, the type of countries of birth (according to economic  development), and proximity to the United States. In contrast, based on our  analysis of IDB’s survey results, 70 percent of percent of adult foreign-born  Hispanics remit and on average, they remit $3,024 per year, as shown in  table 3.
section_title: BEA Is Involved in International Efforts to Improve the Collection and Reporting of Remittance Information
paragraphs: BEA is involved in international efforts that began in January 2005 to try  and improve upon the collection and reporting of remittance data;  however, it is too early to tell how successful these initiatives will be.  Currently, remittance data are incomplete and cannot be reconciled  because of inconsistency in the various institutions’ methods of collecting  and reporting remittance data. Recognizing the importance of remittances  and the need for improved data, the governments of the G8 at the Sea  Island Summit in 2004 called for the establishment of a working group to  improve remittance statistics. BEA is an active member of an international  group supporting this effort, which recommended an agreed upon  definition of remittances. In June 2006, a new group will also start an effort  to improve guidance on collecting and reporting remittance data. BEA  expects to be invited to serve on this group.
subsections: section_title: International Estimates of Remittances Are Incomplete and Do Not Reconcile
paragraphs: The international estimates of remittances vary by the methods used and  the coverage, quality, and reliability of the data, making comparisons of  such estimates difficult. In principle, the combined inflows and outflows  for all countries should equal zero—as the outflows from one country or  international organization become the inflows of another. However, many  countries do not provide information on both remittance inflows and  outflows, resulting in global remittance figures that do not reconcile.  Figure 4 shows the remittance inflows (credits) and outflows (debits) from  1990 through 2003. If global remittance figures reconciled, the lines in this  figure would be the same. However, as can be seen from the figure, while  the lines were fairly close prior to 1998, since then they have diverged with  countries showing remittance inflows (primarily developing countries)  larger than remittance outflows (primarily developed countries).
The IMF accepts member countries’ estimates of remittances at their face  value because, according to IMF officials, all methods of estimating  remittances have their weaknesses. According to IMF officials, the choice  of methodology is primarily related to the availability of resources. IMF  officials indicated that they were not aware of any country that has  institutionalized household surveys to generate remittance data.  Remittance estimates submitted by IMF member countries do not reveal  the methodologies used for the estimates. However, according to IMF  officials, most countries report their remittances as residuals of existing  data; others simply do not report remittances.
section_title: International Working Group Was Established in 2005 to Improve Remittance Data
paragraphs: In 2004, at the annual G8 meeting in Sea Island, Georgia, leaders of the G8  countries recognized the important role remittances play and called upon  international financial institutions such as the World Bank and the IMF to  lead a global effort to improve remittance statistics. As a result, the World  Bank, IMF, and the United Nations formed the International Working Group  on Improving Data on Remittances. This group delegated the tasks of  clarifying concepts and definitions on remittances and addressing  compilation issues to other groups. The working group met in January 2005  and included BEA and representatives from key remittance-sending  countries, one key remittance-receiving country, and the Organization for  Economic Cooperation and Development.
The working group’s first objective was to clarify the definition of  remittances. The group agreed that the United Nations Technical Subgroup  on the Movement of Natural Persons (TSG), of which BEA is a member,  should be the forum to discuss improvements in concepts and definitions  for remittances. The TSG recommended, among other things, that the  “workers’ remittances” item in the balance of payments be replaced with a  new component called “personal transfers,” which would include all  current transfers (in cash or in kind) sent or received by resident  households to or from nonresident households. This new component  would not be based on employment or migration status and would resolve  the inconsistencies associated with “workers’ remittances.” This new  definition was discussed at the June 2005 meeting of the IMF Committee on Balance of Payments Statistics. BEA officials stated that they have begun  using this new definition; however, it will be included in the publication of  the revised Balance of Payments Manual, which is scheduled to be  completed in 2008.
The second objective of the working group was to improve guidance on  collecting and compiling remittance statistics, including the use of  household surveys, if needed. The working group agreed that it would be  useful to form a core group of compilers to review methods and develop  more detailed guidance for compiling remittances data. Eurostat, the  statistical office of the European Communities, offered to host the first  meeting in June 2006 in Luxembourg, thereby creating the “Luxembourg  Group,” which includes the World Bank and IMF’s statistics department.  The Luxembourg Group will review, among other things, the extent to  which household survey data can be used to improve balance of payment  statistics. BEA expects to be invited to serve on this group. According to  the IMF, the prerequisite to the group’s success is the commitment of  national compilers to share their methodologies. The progress of this group  will be reviewed by the IMF Committee on Balance of Payments Statistics,  of which BEA is a member. No date has been set for this group to complete  its work.
In the meantime, the international working group will coordinate with a  recent project conducted by the Center for Latin America Monetary Studies  to improve central bank remittance reporting and procedures. This project  is supported by the MIF. The final report of the working group is to be  presented by the end of September 2006, so that initial work of the  Luxembourg Group can be incorporated.
section_title: Observations
paragraphs: In recent years, remittances have received growing attention from policy  makers because major industrial countries began to understand the  magnitude and importance of these flows to developing countries. By their  nature, remittance flows are difficult to measure. Some remittances move  through informal channels that official data often cannot easily or reliably  measure. Countries define remittances differently and use various  methodologies to estimate them; it is therefore not surprising that  estimates vary widely.
Although there are international efforts in which BEA participates to  improve remittance statistics, two issues suggest the challenges facing  these efforts. First, current remittance data are incomplete globally and  cannot be easily reconciled because of the inconsistency in the methods of  collecting and reporting remittance data. Second, for source countries,  remittances constitute a small share of their overall economy—thus there  may not be enough incentives for these countries to improve their  remittance estimates. For recipient countries, remittances constitute a  larger share of the economy; but these countries lack the resources to  improve their statistics. International efforts to improve remittance  statistics have begun recently, and it is too soon to tell whether these  efforts will improve the accuracy of remittance statistics.
In the United States, remittance estimates are important for agencies such  as Treasury and the Federal Reserve; more accurate remittance estimates  could help them better target their financial infrastructure and automated- clearinghouse remittances programs. With better data on remittances, the  U.S. government could make better decisions about how much (and what  kind) of development assistance to provide, and U.S. companies could  make better decisions regarding foreign direct investment. As remittance  flows from the United States continue to grow, U.S. policy makers may  want to explore options for improving the accuracy of U.S. remittance  statistics—such as conducting a new survey to determine the remitting  behavior of U.S. immigrants, or adding specific questions to current  government surveys to obtain better information.
section_title: Agency Comments and Our Evaluation
paragraphs: The Departments of Commerce and the Treasury provided written  comments on the draft report, which are reproduced in appendixes V and  VI, respectively. Commerce also provided technical comments, which we  incorporated into the report as appropriate.
Treasury concurred with our observations, especially on the need for more  accurate remittance data to provide policy makers with the information  necessary to improve their decision-making process. Commerce concurred  with most of our observations. Specifically, they concurred that estimates  of remittances from the United States derived by BEA and those of foreign  governments and international organizations differ substantially and that  there are several methodological reasons for these differences. Commerce  also concurred that more accurate estimates would enable users of  remittance data to make better informed decisions.
Commerce, however, stated its view that BEA’s estimates are lower than  most of the others we discuss because we compare BEA’s estimate of  personal gifts to foreign residents (personal transfers) with much broader  estimates of remittances, which include compensation paid to foreign  workers who are temporarily employed in the United States. Commerce  believes that a substantial portion of the differences between BEA’s  estimates and those of other government or international organizations is  accounted for by this definitional difference. Contrary to Commerce’s view,  compensation paid to foreign workers temporarily employed in the United  States was not included in the remittances estimates with which we  compared BEA’s personal transfers estimates. We therefore do not believe  that the differences among the estimates we discuss in our report are due  to this definitional difference. Commerce further stated that some  countries may overestimate their receipts of remittances from the United  States because remittances may be channeled through banks in the United  States from remitters not living in the United States. Of the countries we  discuss in this report, we found this only to be true for the Philippines and,  for this reason, we do not compare BEA’s remittances estimate to that of  the central bank of the Philippines. As we discuss in our report, efforts are  underway to improve remittance statistics, which may help make estimates  more comparable in the future.
We are sending copies of this report to the Department of Commerce,  Treasury, the Chairman and Ranking Minority Member of the House  Committee on Financial Services, and other interested congressional  committees. We will also make copies available to others on request. In  addition, this report will be available at no cost on our Web site at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please contact  me at (202) 512-2717 or jonesy@gao.gov. Contact points for our offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VII.
section_title: Objectives, Scope, and Methodology
paragraphs: Our reporting objectives were to examine (1) the methodology the Bureau  of Economic Analysis (BEA) uses to develop the official U.S. estimates on  the volume of remittances from the United States, (2) methodologies used  by other countries and multilateral institutions to estimate remittances  from the United States, and (3) international efforts to improve the  collection and reporting of remittance data.
To understand the methodology BEA used to derive its estimate of  remittances from the United States, we met several times with BEA  officials responsible for developing the estimate. They provided us with the  2003 estimate on the total volume of remittances from the United States to  the rest of the world—and explained how they provide this number to the  International Monetary Fund (IMF)—so that the U.S. figures can be  presented in the IMF’s balance of payments statistics. We also obtained  documentation describing BEA’s methodology before 2005, including BEA’s  Survey of Current Business and other written documentation. BEA  officials provided us with examples of the various data used in their model  to calculate their remittance estimate. In addition, we provided BEA with  numerous follow-up questions about their methodology, and they provided  us with written responses. To understand BEA’s revised methodology, we  obtained relevant documentation from BEA and provided follow-up  questions to BEA. We also met with the U.S. Census Bureau to understand  the data underlying BEA’s methodology for estimating remittances. To  understand how we evaluated the statistical reliability of BEA’s estimate for  2003, see appendix III. We interviewed remittance experts from the IMF,  World Bank, Inter-American Development Bank (IDB), and academia to  obtain their views on BEA’s (and alternative) methodologies.
To understand the methodologies used by other countries and multilateral  institutions to estimate U.S. remittances to specific countries and regions,  we met with officials from the IDB and their external consultant, the Asian  Development Bank, the African Development Bank, as well as the Mexican  and Philippine Central Banks. The IDB provided remittance estimates from  the United States to specific countries in Latin America, the Caribbean, and  to the region as a whole. The Asian and African Development Bank do not  provide estimates for their respective regions. The Central Bank of Mexico  provided estimates of remittances received by Mexico from the United  States, while the Central Bank of the Philippines provided estimates of  remittances received by the Philippines from the United States. In meetings  with these entities, we obtained an understanding of the methodologies  used to estimate remittances, the reasons for using these methodologies,  and their strengths and potential limitations. We also obtained a report that  described IDB’s methodology. Further, we obtained government  regulations from Mexico and the Philippines to understand what financial  institutions are required to report to Central Banks so that they can  estimate remittances. To compare remittance estimates obtained from the  Mexican Central Bank and IDB with those of BEA, we obtained BEA’s 2003  estimates of remittances to specific countries. BEA officials cautioned us  that the estimates to specific countries are less reliable than their overall  remittance estimate and stated that these numbers should not be  considered BEA estimates to specific countries.
Given our understanding that remittance estimates vary for a number of  reasons and that international efforts are under way to improve remittance  statistics, it was not possible for us to cross check the estimates of  remittances from the United States against any accurate known amount.  Because of this, for the purposes of this report, we focused on  understanding the methodologies used by BEA, IDB, and the Central Banks  of Mexico and the Philippines, to estimate remittance from the United  States. We also focused on understanding the strengths and limitations of  the methodologies of the BEA and the other entities to obtain a better  understanding of the reasonableness of their approaches to estimating  remittances. We presented BEA’s estimates and the estimates of IDB and  the Central Bank of Mexico to show the range of estimates generated from  different methodologies, rather than as a statement of their being precise  measurements of remittances. We chose not to present the Central Bank of  the Philippine’s estimate of remittances because central bank officials  stated that their current methodology could not be used to report on  remittances solely received from the United States.
To obtain a global perspective on international efforts to improve the  collection and reporting of remittances, we met with officials from the IMF,  World Bank, IDB, Asian Development Bank, African Development Bank,  and experts in the field of remittances. We reviewed IMF documents on  remittances as they are discussed in the balance of payments framework  and reviewed IMF balance of payments statistics to get a sense for which  countries regularly report on remittances. We obtained limited  documentation (e.g., minutes from meetings) on international efforts to  improve the collection and reporting of remittances. BEA and the U.S.  Department of the Treasury (Treasury) also provided us with descriptions  of these international efforts and identified the U.S. government officials  that participate in these international bodies.
Our work was performed in San Francisco, California; and Washington,  D.C., from December 2004 to March 2006 in accordance with generally  accepted government auditing standards.
section_title: BEA’s Methodology for Estimating Remittances
paragraphs: BEA’s model to estimate remittances combines data on the number of the  adult foreign-born population living in the United States, the percentage of  the adult foreign-born population that remits, the income of the adult  foreign-born population, and the percentage of income that is remitted by  the adult foreign-born population. BEA first multiplies the foreign-born  population, arrayed by selected demographic characteristics, by the  percentage of the foreign-born population that remits to obtain the  population of remitters. BEA then multiplies the average per capita income  of the foreign-born population by the percentage of income remitted by  those who remit to obtain per capita remittances. Finally, BEA multiplies  per capita remittances by the population of remitters to obtain total  personal transfers.
BEA obtains estimates on the adult foreign-born population by place of  birth and their average income from the American Community Survey  (ACS), arranged by duration of stay in the United States, gender, and  presence of children in the household. BEA obtains estimates of the  percentage of the adult foreign-born population that send remittances to  their country of origin from various academic studies, in addition to the  1989 Legalized Population Survey (LPS1) and the 1992 Legalized  Population Follow-Up Survey (LPS2); however, the estimates it uses cannot  be directly tracked to these source documents. BEA obtains these  proportions by making assumptions based on its judgment. BEA assumes  that the place of birth of the adult foreign-born population does not affect  the likelihood of remitting but that it does affect the percentage of income  remitted. BEA also assumes that, once the presence of children in the  household and the duration of stay are accounted for, men and women are  equally likely to remit. In effect, only the presence of children in the  household and the duration of stay determines the percentage of the adult  foreign-born population that remit to their countries of birth under these  assumptions, as shown in figure 5.
To determine the percentage of income that the adult foreign-born  population remits, BEA makes assumptions about the development status  and proximity of the country of origin of the adult foreign-born population,  along with the presence of children in the U.S. household. BEA groups  countries of origin into four categories indicating their propensity to send  remittances and representing highest-remitting, high-remitting, medium- remitting, and low-remitting countries of birth. The highest-remitting  countries are closest to the United States, while other developing countries  are either high-remitting or middle-remitting, depending on their  development status. Low-remitting countries are generally developed  economies. Figure 6 shows that the percentage of income remitted varies  by the presence of children and country groupings. Although average  incomes are lower for women than for men, BEA assumes that the  percentage of income remitted does not vary by gender. Furthermore, BEA  assumes the duration of stay is negatively associated with likelihood to  remit—but that it has no effect on the percentage remitted. Also, BEA  assumes that there are no variations in the portion remitted for countries  designated as low remitting.
Table 4 shows the application of BEA’s methodology in estimating  remittances from the United States in 2003. As can be seen from table 4,  estimated total remittances are $28 billion. Also, as can be seen in table 4,  in 2003, the Latin America and Caribbean region was the largest recipient  region of remittances from the United States. Remittances to Asia and  Africa represented approximately 24 percent and 4 percent of the total for  the United States, respectively.
subsections: section_title: BEA’s Estimate of Remittances Includes Remittances from Some of the Foreign Born Who Have Been in the United States for Less Than One Year
paragraphs: BEA’s revised methodology uses a U.S. residency duration of 0-5 years as its  first category. This means that it includes both the foreign-born population,  who are in the United States for less than or equal to 1 year, and those who  are in the United States for more than a year. The definition of  “remittances” is the portion of income sent as remittances by those who  have resided in the United States for more than one year, thus excluding  the foreign-born population residing in the United States for less than one  year. BEA’s estimate of remittances is in effect overstated, because it  includes the foreign-born population that has resided in the United States  for less than a year. In contrast, “compensation of employees” is the wages  and salaries earned by individuals in economies other than those in which  they are residents. As a result, compensation of employees, which applies  only to individuals away from their place of origin for less than a year, may  be double counted. Furthermore, the inclusion of the foreign born who  have resided in the United States for less than one year would overstate  estimates of total remittances (personal remittances and compensation of  employees) as some portion of the compensation of employees would be  double counted. BEA officials stated that their objective is to estimate  remittances for individuals who have been in the United States for more  than one year and those who have been in the United States for less than a  year but intend to stay for more than a year. They stated that the ACS  surveyed only individuals who indicated the United States is their “usual  place of residence,” which may exclude temporary residents, i.e., those  who have been in the United States for less than a year.
ACS documents show that individuals are surveyed at their “current  residence” and that one of the goals of the ACS is to identify whether  individuals are residing at the “current residence” or their “usual place of  residence.” Thus, the ACS does not exclude individuals for which the  United States is not their “usual place of residence.” The ACS manual on  residency rules states that the term “current residence” is unique to the  ACS; most other surveys, including the decennial census, use “usual  residence,” as defined as the place where a person lives and sleeps most of  the time or considers to be his or her usual residence. ACS defines current  residence as one place of residence at any point in time, but this residence  does not have to be the same place throughout the year. The criteria used  to determine a person’s current residence is based upon a “2-month rule”  stating that (1) if a person is staying in a sample unit at the time of the  survey contact and is staying there for more than 2 months, he or she is a  current resident of the unit; (2) if a person who usually lives in the unit is  away for more than 2 months at the time of the survey, he or she is not a  current resident of the unit; and (3) if anyone is staying in the unit at the  time of contact who has no other place where they usually stay longer than 2 months, he or she is a current resident of the unit regardless of how long  he or she is staying there.
We recalculated BEA’s estimates of 2003 remittances excluding the foreign  born who have resided in the United States for less than a year. This  calculation resulted in a reduction of $377 million in BEA’s 2003 estimate  for remittances from the United States (see table 5).
section_title: Analysis of the Sensitivity of BEA’s Estimate to Judgmentally Determined Variables on the Remitting Behavior of the Foreign Born
paragraphs: BEA publishes single-value estimates of remittances to the rest of the  world by foreign-born U.S. residents. To evaluate the statistical reliability of  the estimate for 2003, we derived the estimate’s probable range and its  corresponding breakdown into regional estimates. To accomplish this, we  obtained details of the BEA’s underlying tabulations of remittances by  country. We replicated the BEA methodology to obtain BEA’s estimate for  the world and for each country in its underlying tabulation. In particular,  we used BEA’s underlying tabulation and included additional information  (e.g., the standard deviation and the shape of the distribution of each data  series) from the sources that BEA primarily used to arrive at its estimate.  We calculated the respective standard deviations of the values that BEA  uses for the propensity to remit and the percentage of the foreign born that  remit.
BEA uses a variety of sources to estimate the propensity of the foreign born  to remit and the percentage of the foreign born that remit. However, BEA  stated that the values chosen cannot be linked to any specific source. BEA  primarily used the LPS, a survey mandated by the Immigration Reform and  Control Act of 1986 to estimate the portion of income that the foreign born  in the United States were likely to remit; thus, we also relied on this data.  We assumed that the distribution around the means of the variables used in  the BEA methodology were lognormal to satisfy (1) the nonnegativity of  the values used and (2) a desired bell-shaped distribution for the estimates.  We converted the BEA estimation process from one that relied solely on  the averages of the variables underlying the BEA methodology to one that  accounts for the variation around the mean and its distribution. We used a  Monte Carlo statistical technique—a technique that repeatedly and  randomly samples from the underlying data—to obtain a range of possible  values for each estimate due to the uncertainty in BEA’s judgmentally  determined variables on the foreign born propensities to remit and  percentage of the foreign born that remit.
Table 6 shows the regional breakdown of BEA’s 2003 estimate and the  statistically derived range for these estimates. In table 6, we show in the  column labeled “BEA point estimate”—the regional components of BEA’s  global estimate in 2003—obtained by aggregating the underlying country- by-country tabulations. We also show in the following two columns the  range of estimates obtained by our uncertainty analysis, assuming that this  uncertainty is only due to BEA’s judgmentally determined variables. In  table 6, BEA reported $28 billion in total remittances from the United  States for 2003; however, we estimate that the range for 90 percent of the  remittance estimates from the United States would be between $17.3 and  $35.9 billion.
section_title: IDB Remittance Estimation Methodology
paragraphs: To estimate remittances from the United States to Latin America in 2003,  the IDB contracted researchers to survey Latin Americans aged 18 years or  older and living in the United States. These researchers queried Latin  American immigrants living in various states of the United States about  their remittance experiences. The survey interviewed 3,802 households in  37 states and the District of Columbia from January through April 2004.  The survey showed that 61 percent of Latin Americans send remittances to  their countries of origin, sending an average of $240 approximately 12.6  times per year. IDB extrapolated the results of the survey to the total  population of adult Latin American immigrants in the United States— estimated at 16.9 million in 2003—and estimated remittances from the  United States to Latin America to be $30.1 billion for that year. Figure 7  provides a diagram of the methodology IDB used to arrive at the $30.1  billion estimate. According to IDB, the estimate captured remittance flows  through the formal and informal sectors. The IDB also used the survey to  estimate remittances from each of the 37 states and the District of  Columbia. To obtain the state-by-state remittance estimates, the IDB  obtained estimates for the average amount remitted and the number of  times sent in one year by the Latin American immigrant population in each  state and the percentage of the Latin American immigrant population in  each state that sends remittances.
The IDB remittance estimates for selected Latin American and Caribbean  countries are obtained from a combination of sources consisting of  estimates from selected central banks of recipient member countries  judged to have reasonable remittance estimates, transaction information  from remittance transfer companies to selected countries, and from  information obtained from researchers’ surveys of remittance senders in  the United States and remittance recipients in Latin American and  Caribbean countries. According to IDB officials, for countries where no in- country survey has been conducted, data from establishments facilitating  money transfers to each country was used. These officials indicated that  data were obtained from a sample of 45 money transfer businesses to  approximately 14 countries. The amount and frequency of the average  remittance sent by residents from the survey countries was used to  estimate the total remittance outflow to each country, according to IDB  officials. They also indicated that Multilateral Investment Fund (MIF) staff  work with the researchers to reconcile the various estimates and arrive at  country-specific estimates. Table 7 shows the IDB estimate of remittances  that 21 Latin American and Caribbean countries received in total in 2003,  and from the United States the same year.
As indicated earlier, the IDB and BEA used different methodologies to  estimate remittances, resulting in a range of estimates. While, in most  cases, BEA provides only a global estimate of remittances and not bilateral  estimates, BEA provided us with country-by-country tabulations that  enabled us to construct estimates for the same 21 countries that IDB  provided estimates for in 2003. As shown in table 8, IDB and BEA’s  estimates vary; IDB’s estimates in general tend to be higher than estimates  from BEA’s underlying country tables. However, for Guyana, Panama, and  Trinidad and Tobago, BEA’s estimates are higher. The last column  computes the difference between the estimates for each country as a  percentage of the average of the estimates. The average percentage  difference is 72 percent, with a low of 7 percent for Jamaica and a high of  168 percent for Brazil.
section_title: Comments from the Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce’s  March 10, 2006, letter.
subsections: section_title: GAO’s Comments
paragraphs: 1. BEA commented on the Highlights page that the IDB estimates differ  from BEA’s estimates because the IDB estimate includes “net  compensation” of foreign workers and the BEA estimate does not. BEA  also commented that data provided by foreign central banks and  financial establishments are sometimes overstated because U.S.  correspondent banks are used in transmitting funds for senders not  living in the United States. We disagree with BEA on these points. This  “net compensation” of foreign workers is a new concept that was just  proposed by the Technical Subgroup on the Movement of Natural  Persons (TSG) in June 2005, and we are not aware of any remittances  estimates for 2003 that use this definition. Further, IDB never stated  that any of the funds accounted for in their estimates came through  U.S. correspondent banks for workers who were not located in the  United States. This was true for the Philippines, which we noted in the  report. BEA also commented that IDB’s estimates are substantially  derived from data reported from central banks and private money  transfer establishments. BEA is correct on the latter point and we have  corrected the Highlights page to be consistent with the letter and  reflect that IDB uses a variety of sources in making its remittances  estimates. 2. BEA suggested that we place Mexico in North America or create a  separate bar in our graphic in the Highlights page for Mexico. In this  report, we used the United Nations’ Standard Country and Area Codes  Classification, which places Mexico in Central America. 3. BEA commented that to develop an estimate that corresponds to our  definition of remittances, we should have used BEA’s estimates of  personal transfers and compensation of employees, net of their  expenditures. However, we make it clear in footnote 6 that we are  focusing only on personal transfers and that we call these remittances  for the purpose of this report.  4. BEA states that it has confirmed with the Bank of Mexico that Mexico’s  estimates of remittances include net compensation of migrant Mexican  workers in the United States. BEA states that if we added BEA’s net  compensation of employees figure to its estimate of personal transfers,  the two figures for 2003 would be closer. As stated above, this new  definition was proposed in June 2005, and, to our knowledge, the  Mexican central bank has not published 2003 figures for “net  compensation” of employees. The Mexican central bank figures for  2003 as reported by the IMF in its balance of payments statistics are  almost $13.4 billion for workers’ remittances, which we use in our  report, and $1.5 billion in compensation of employees. The $12.9 billion  estimate BEA attributes in its comments to the Mexican central bank is  the IDB’s estimate.  5. BEA commented that the data used in our analysis of the potential  effects of BEA’s judgmentally determined values in its remittance  estimating methodology are unclear, as are the particulars of our  modeling technique. As we stated, we replicated BEA’s methodology  using its underlying tabulation of remittances by country and included  additional information from the sources that BEA primarily used to  arrive at its estimate. BEA further stated that there is a very small  probability that the BEA estimate would be near the end points of the  intervals and suggested that we use the midpoint of the intervals  instead. As explained in appendix III, the purpose of our analysis was to  show the effect of BEA’s judgmentally determined values on its  estimate $28.03 billion in 2003. Using a range illustrates the uncertainty  in BEA’s estimate. BEA also commented on our use of the lognormal  distribution for the percentage of income remitted and the percentage  of the adult foreign born population that remit. We chose the lognormal  distribution because it satisfied the requirements that both of these  variables were nonnegative and distributed in a bell-shaped curve. 6. BEA commented that we left the impression that BEA’s estimates of  personal transfers contain a double count of $377 million and that any  double count that may exist probably involves the compensation of  employees, not the personal transfers account. We modified the text of  our report to reflect that BEA’s personal transfers are therefore  potentially overstated by up to $377 million because BEA’s estimate  includes remittances sent by some of the foreign born who have been in  the United States for less than one year. 7. Commerce reiterated its concerns about our comparison between  BEA’s estimates and those of other organizations. Commerce restated  its view that the methods used by the Mexican central bank and others  capture both remittances and compensation of employees and further  stated that BEA’s estimates for personal transfers and compensation of  employees should be summed when making these comparisons to  other organizations. However, none of the organizations with which we  compare BEA’s estimates indicated that their methods captured  compensation of employees, therefore, we believe our comparisons are  appropriate. 8. BEA states that the TSG now recommends that “personal transfers”  also include capital transfers. This is incorrect. The paper BOPCOM- 05/9 states that the TSG agreed to define “personal transfers” as  consisting of all current transfers in cash or in kind.  9. BEA disagreed with our statement that remittance data cannot be  reconciled and stated that, because reconciliation projects are resource  intensive and difficult, BEA must choose the statistical items it  reconciles with which trading partners. We concur that reconciliation  cannot be done easily. However, our observations were on  reconciliation of remittance data on a global level, not between  individual countries, as shown in figure 4. The global discrepancy has  grown in recent years.
section_title: Comments from the Department of the Treasury
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, Barbara I. Keller, Assistant  Director; Gezu Bekele; Tania Calhoun; Lynn Cothern; William R. Chatlos;  Bruce L. Kutnick; James M. McDermott; Marc M. Molino; José R. Peña; and  Rachel Seid made key contributions to this report.