Financial Management

Customs Did Not Adequately Account For or Control Its Accounts Receivable Gao ID: AIMD-94-5 November 8, 1993

Congress, other federal decisionmakers, and the public have been receiving inaccurate information on the amount of duties, taxes, user fees, and fines and penalties owed to the federal government or the amount that the U.S. Customs Service will be able to collect. Customs' reported gross accounts receivable was unreliable largely because it included unsubstantiated and erroneous claims and omitted some valid receivables. Some accounts receivable were recorded at a gross amount, while others were recorded at a net amount--that is, gross receivables adjusted by an allowance for uncollectible status. In addition, Customs' methodology for estimating the collectibility of its accounts receivable was incorrect. GAO estimates that $358 million, or nearly 90 percent, of the valid receivables in its sample as of June 1992 was uncollectible. Moreover, Customs did not effectively prevent or minimize delinquent accounts receivable. Customs' collection efforts were hampered by missing documentation needed to sustain claims against importers and sureties and a failure to sanction some delinquent importers. Customs' inability to generate reliable information on its accounts receivable could harm both its own collections as well as financial reporting accuracy.

GAO found that: (1) Customs' reported accounts receivable balance is inaccurate and unreliable; (2) Customs lacks adequate policies and procedures and accounting systems for recording and reporting receivables; (3) the lack of supervisory review and system deficiencies contribute to Customs' erroneous accounts receivables balance; (4) Customs' methodology for estimating the collectibility of individual and group accounts requires consideration of historic, current, and forecast data on the debtors' ability to pay; (5) Customs' collectibility methodology is unreliable; (6) delinquent accounts receivable have resulted from deficient management practices; (7) Customs' operational barriers have inhibited debt collection; and (8) large differences exist between the amount of fines and penalties assessed and mitigated.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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