Summary

Because of widespread material internal control and accounting system weaknesses, the U.S. Customs Service has little guarantee that the objectives of the Federal Managers' Financial Integrity Act have been achieved and its self-assessments have not yielded vital information that top management needs to control costs and improve operations. Under the act, agencies are required to disclose annually the condition of their internal control and accounting systems. Customs is one of 10 pilot agencies required to prepare financial statements and have them audited by June 30, 1993. Although Customs reported many material weaknesses, it did not identify, disclose, and correct serious deficiencies in its internal control and accounting systems. GAO found major weakness in five areas: seized property, revenue, budget, fixed assets, and procurement. Continual top management involvement is essential to strengthening Customs operations and accurately reporting material weaknesses to the Secretary of the Treasury.

GAO found that: (1) Customs' fiscal year (FY) 1992 assurance letter overstated the effectiveness of its internal control and accounting systems; (2) Customs did not disclose the full extent of its material weaknesses in its FY 1992 assurance letter; (3) Customs' inventory records were incomplete and inaccurate and included seizures and forfeitures that occurred in another fiscal year; (4) Customs made net adjustments to its FY 1992 seizures that amounted to about $281 million, but it did not provide support for these adjustments; (5) Customs does not have adequate controls to ensure that merchandise entering the United States is identified and the proper duties are assessed; (6) Customs does not properly account for the receipt of goods and services; (7) Customs' self-assessment process does not adequately identify internal control and accounting system weaknesses because staff do not have sufficient guidance and training, review tools are inadequate, and management oversight over the review process is ineffective; and (8) planned corrective actions will not likely eliminate material weaknesses because Customs has not addressed the fundamental causes of the weaknesses.