oversight

U.S. Customs Service: Oversight Issues

Published by the Government Accountability Office on 1997-05-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                            United States General Accounting Office

GAO                         Testimony
                            Before the Subcommittee on Trade, Committee on Ways
                            and Means, House of Representatives




For Release on Delivery
Expected at 2:00 p.m. EDT
Thursday, May 15, 1997
                            U.S. CUSTOMS SERVICE

                            Oversight Issues
                            Statement of Norman J. Rabkin
                            Director, Administration of Justice Issues
                            General Government Division




GAO/T-GGD-97-107
Summary

U.S. Customs Service: Oversight Issues


               One of the oldest federal agencies, the U.S. Customs Service collects
               revenues in excess of $23 billion annually while processing an estimated
               14 million import entries and 450 million people through 301 ports of entry
               into the U.S. In recent years, GAO has reported to the Subcommittee on
               three issues that are the subject of today’s oversight hearings: drug
               interdiction, labor-management relations, and overtime pay.

               GAO’s September 1996 report on Customs’ drug interdiction efforts
               identified and described the key elements, resources, costs, and
               performance measures of Customs’ national drug interdiction program as
               well as those of its investigative offices and selected ports in the Miami
               and San Diego areas. It noted that Customs’ challenges included how to
               (1) effectively interdict drugs and enforce trade laws while facilitating
               border crossings and (2) develop performance measures that gauge the
               effectiveness of its drug interdiction activities.

               GAO’s   March 1997 testimony discussed labor-management activities within
               Customs. In June 1994, Customs and the National Treasury Employees
               Union (NTEU) entered into a partnership agreement that established 19
               goals, set up a National Partnership Council, and stated that NTEU will
               participate in agency meetings that affect the workforce. GAO’s limited
               work revealed that most of the Customs managers and NTEU chapter
               presidents GAO interviewed characterized their relationship as better while
               first-line supervisors’ views were more evenly distributed from “much
               better” to “much worse.” Customs did not have any plans for an evaluation
               of the impact of the partnership approach on its mission and GAO
               concluded that since the partnership was almost 3 years old, it was not too
               soon for Customs to develop a formal plan for evaluating it.

               In 1991, GAO reported that overtime pay to Customs inspectors had
               increased from about $57 million in fiscal year 1985 to about $103 million
               in fiscal year 1990. GAO concluded that an important cause was Customs’
               focus on ensuring that inspectors did not exceed the $25,000 cap instituted
               by Congress in 1983 and its disregard of the individual overtime
               assignments that build to the cap. GAO also concluded that original
               overtime provisions hindered efficient management and that the special
               payments were premised on conditions that no longer existed. GAO
               recommended that (1) overtime pay be more directly linked to actual
               hours worked and (2) overtime be used more efficiently. The 1993
               Customs Officers Pay Reform Amendments (COPRA) were intended to more
               closely match earnings to hours worked. However, the Treasury Inspector
               General (IG) reported in September 1996 that although COPRA reduced



               Page 1                                                     GAO/T-GGD-97-107
Summary
U.S. Customs Service: Oversight Issues




direct spending associated with overtime pay, it caused a significant
increase in the costs associated with night differential pay in fiscal years
1995 and 1996. In addition, the IG pointed out that annually inspectors file
and win grievances if they are not allowed to work because they are close
to the $25,000 cap.




Page 2                                                       GAO/T-GGD-97-107
Statement

U.S. Customs Service: Oversight Issues


                    Mr. Chairman and Members of the Subcommittee:

                    I am pleased to be here today at this Customs oversight hearing to discuss
                    work we have done for this Subcommittee addressing Customs’ drug
                    interdiction efforts, labor-management partnership concept, and issues
                    related to inspectional overtime. Our testimony is based primarily on
                    products we have issued on each of these subjects since 1991.

                    Created in 1789, the U.S. Customs Service is one of the federal
                    government’s oldest agencies. Although its original mission was to collect
                    revenue, Customs’ mission has expanded to include ensuring that all
                    goods and persons entering and exiting the United States do so in
                    accordance with all U.S. laws and regulations. Moreover, a major goal of
                    Customs is to prevent the smuggling of drugs into the country by creating
                    an effective drug interdiction, intelligence, and investigation capability
                    that disrupts and dismantles smuggling organizations.

                    As of January 1997, Customs performed its mission with a workforce of
                    about 19,500 personnel at its headquarters, 20 Customs Management
                    Centers, 20 Special Agent-in-Charge (SAC) offices, and 301 ports of entry
                    around the country. Customs collects revenues in excess of $23 billion
                    annually while processing the estimated 14 million import entries and
                    450 million people who enter the country each year.


                    In September 1996, we issued a report to this Subcommittee on the drug
Drug Interdiction   interdiction efforts of the Customs Service.1 As one of the more than 50
                    federal agencies involved in the War on Drugs, Customs is responsible for
                    stopping the flow of illegal drugs across the nation’s borders. In addition
                    to routine inspections to search passengers, cargo, and conveyances for
                    illegal drugs moving through U.S. ports, Customs’ drug interdiction
                    program includes investigations and other activities unique to specific
                    ports.

                    Our report identified and described the key elements, resources, costs,
                    and performance measures of Customs’ national drug interdiction
                    program, as well as those of its investigative offices and selected ports in
                    the Miami and San Diego areas.




                    1
                      Customs Service: Drug Interdiction Efforts (GAO/GGD-96-189BR, Sept. 26, 1996). The data in this
                    section were current as of September 1996, unless otherwise indicated.



                    Page 3                                                                          GAO/T-GGD-97-107
Statement
U.S. Customs Service: Oversight Issues




Customs has two key organizational elements in its drug interdiction
program. First, the Office of Field Operations has over 6,600 inspectors
and 527 canine enforcement officers who perform inspections at the 301
air, land, and sea ports around the country. Inspectors use an array of
technology in their search for drugs, such as an X-ray system for trucks
and trailers, X-ray machines for containerized cargo, and fiber-optic
scopes to examine gas tanks and other enclosed spaces. Inspectors also
target persons, cargo, and conveyances for examination using manifest
reviews and databases such as the Treasury Enforcement
Communications System, which contains information on suspected
smugglers.

Second, the Office of Investigations has about 2,500 special agents, about
half of whom are authorized to react to and investigate drug seizures at
ports and develop cases that implicate drug smuggling operations.
Investigations also is responsible for about 1,100 personnel in aviation,
marine, and intelligence units, which support the drug interdiction
mission. The aviation unit supports foreign interdiction operations,
interdicts and apprehends air smugglers, and supports other Customs and
federal, state, and local law enforcement efforts. Marine units interdict,
investigate, and apprehend violators that smuggle drugs into the United
States via commercial and pleasure vessels. To assist in performing these
missions, the aviation and marine units have 78 vessels, 77 airplanes, and
39 helicopters. The intelligence unit supports Customs’ management and
all field elements; this involves developing assessments of drug smuggling
threats for various parts of the country. For example, threat assessments
of the Southwest border led, in part, to the Customs Commissioner’s
support for creating a major national initiative, Operation Hard Line,2 for
the Southwest border.

Customs reported to the Office of National Drug Control Policy that its
combined budget for drug interdiction and investigations averaged about
$575 million for fiscal years 1990 to 1996. In fiscal year 1995, its drug
interdiction budget was about 38 percent and its drug investigations
budget was about 3 percent of the federal drug control budget.

Customs has traditionally measured the output from its drug interdiction
effort by the resulting number of seizures, arrests, indictments, and
convictions. For example, in fiscal year 1995, Customs reported about

2
 First implemented on the Southwest border, Operation Hard Line emphasizes intensified inspections,
improved facilities, and the use of technology to detect drug smuggling. It has been expanded beyond
the Southwest border to the southern tier of the United States, including the Caribbean and Puerto
Rico, with enhanced air and marine enforcement.



Page 4                                                                         GAO/T-GGD-97-107
Statement
U.S. Customs Service: Oversight Issues




2,200 cocaine seizures, about 900 heroin seizures, and about 10,000
marijuana seizures—these seizures accounted for over 50 percent of all
drugs seized by federal agencies. It also reported participating in the
seizure of an additional 13 percent of the total drugs seized.

These traditional measures, however, track activity, not outcome or
effectiveness. Customs has sought to develop nontraditional measures for
use in assessing the effectiveness of its drug strategy initiative. For
example, Customs is testing a program designed to estimate the number of
drug smugglers entering the ports, thus providing it with a baseline from
which to measure how effective its inspectors have been at targeting drug
smugglers at the ports. At the time of our report, the program was
implemented at major air and land border ports.

Our September 1996 report also described drug interdiction activities at
major ports in the Miami and San Diego areas. It provided information on
the ports, estimates of the resources Customs had invested in drug
interdiction and investigation activities there, and traditional measures of
its success. In addition, we described a special cargo entry program at the
Otay Mesa, California cargo port. The program, called Line Release, was
designed to expedite the release and tracking of low-risk, high-volume
shipments. Under the Line Release program, Customs is to prescreen
manufacturers, importers, brokers, and shippers in an attempt to ensure
they are low risk for drug smuggling; Line Release participants are
required to pass five intensive examinations and meet a minimum
requirement of 50 shipments per year. Although the program has been
criticized for allowing trucks to enter the United States from Mexico
without inspection, our work showed that vehicles participating in the
Line Release program were subject to the same special enforcement
operations as non-Line Release vehicles, and were inspected more
frequently through these operations than were non-Line Release vehicles.

Finally, our report discussed the challenges Customs was facing in its drug
interdiction mission. First, we pointed out that Customs’ major challenge
was to effectively carry out its drug interdiction and trade enforcement
missions while facilitating the flow of persons and cargo across the
borders. Customs has to perform these missions despite continuous and
extensive threats from drug smugglers along the border.

Second, because its financial information systems are not designed to
account for costs by mission component, Customs has to estimate the
amount it is spending for drug interdiction overall. This reduces Customs’



Page 5                                                      GAO/T-GGD-97-107
                      Statement
                      U.S. Customs Service: Oversight Issues




                      ability to determine whether allocation of additional resources at specific
                      ports or in a specific region has produced commensurate benefits.
                      Customs officials told us that they were developing mission- and
                      performance-based budgets, in accordance with Department of the
                      Treasury directives, that would enable them to determine with greater
                      reliability the costs of drug interdiction activities throughout Customs.

                      Third, Customs—like other law enforcement agencies engaged in the fight
                      against drug smuggling—has attempted to develop performance measures.
                      Traditional output measures do not allow officials to gauge the
                      effectiveness of drug interdiction activities. Even the new, nontraditional
                      measures being developed may not allow Customs to assess, over time,
                      whether increased efforts are producing better outcomes.


                      In March 1997, I testified before this Subcommittee on labor-management
Labor-Management      activities within Customs.3 The Subcommittee had asked us to review,
Partnership Concept   among other topics, the history of union activity at Customs and the effect
                      that the partnership agreement between Customs and the National
                      Treasury Employees Union (NTEU), the exclusive representative of
                      Customs’ bargaining unit employees,4 had on Customs’ ability to establish
                      and achieve its mission-related goals. At the time of that hearing, we had
                      performed preliminary work at Customs headquarters, 5 Customs
                      Management Centers, 11 ports of entry around the country, the NTEU
                      national office, and 7 local NTEU chapters.5

                      Executive Order 12871, October 1, 1993, required the head of each federal
                      agency to create labor-management councils to help involve employees
                      and their unions as full partners. These partnership councils are to identify
                      problems and craft solutions to better serve the agency’s customers and
                      accomplish its mission. In June 1994, the Customs Service and NTEU
                      entered into a partnership agreement that established 19 goals, set up a
                      National Partnership Council, and stated that NTEU will participate in
                      agency operational meetings that affect the workforce. In February 1997,
                      Customs and NTEU implemented a new national contract.


                      3
                       U.S. Customs Service: Varied Reaction to the Labor-Management Partnership Concept
                      (GAO/T-GGD-97-54, Mar. 11, 1997).
                      4
                       As of January 1997, approximately 11,200 of the 19,500 Customs personnel were eligible to join NTEU,
                      and about 7,200 had done so.
                      5
                       Because the testimony satisfied the Subcommittee’s interests at that time, we have not conducted
                      further work on this issue.



                      Page 6                                                                          GAO/T-GGD-97-107
                  Statement
                  U.S. Customs Service: Oversight Issues




                  Our limited work revealed a variety of opinions regarding Customs-NTEU
                  relations since the implementation of the executive order. Most of the
                  Customs managers we interviewed characterized their relationship with
                  NTEU chapters as better. Most of the NTEU chapter presidents we spoke
                  with also said the relationship was better. The views of the Customs
                  first-line supervisors we interviewed were more evenly distributed from
                  “much better” to “much worse.”

                  Customs managers and supervisors and NTEU representatives provided
                  similar comments about the advantages of the partnership concept, citing
                  faster problem resolution, improved communications, and mutual
                  involvement in decisions. However, comments on disadvantages revealed
                  no clearly shared views. For example, managers and supervisors generally
                  stated that all issues must be bargained with the union before any action
                  can be taken, while NTEU officials generally indicated that managers want
                  to choose when they include NTEU in making decisions and when they do
                  not.

                  Customs’ partnership agreement with NTEU and Executive Order 12871 call
                  for evaluating the progress of and improvements in the agency’s
                  performance resulting from the partnership concept. To a limited extent,
                  Customs had begun that effort. However, at the time of our testimony,
                  these efforts had not set the groundwork for the kind of comprehensive
                  evaluation envisioned by the Executive Order and partnership agreement.
                  In our work at Customs’ headquarters and several field locations, we did
                  not see any plans for an evaluation of the impact of the partnership
                  approach on Customs’ mission.

                  We pointed out in our testimony that cultural changes such as those
                  promised by the partnership concept do not occur quickly. The
                  Commissioner of Customs told us that he expected it to take at least 5
                  years for the new relationship to become Customs’ normal operating
                  environment. Nevertheless, given that Customs and NTEU had been in this
                  new relationship for almost 3 years, we concluded that it was not too soon
                  for Customs to develop a formal plan for the evaluation of progress and
                  improvements in organizational performance resulting from this
                  labor-management partnership.


                  In the Act of February 13, 1911, Congress enacted overtime pay provisions
Overtime Issues   for Customs inspectors. Sunday work was to be compensated at the rate
                  of 2 days’ regular pay; on holidays, the rate was to be the total of 2 days’



                  Page 7                                                      GAO/T-GGD-97-107
Statement
U.S. Customs Service: Oversight Issues




pay plus the hourly rate for the period of time worked on the holiday. No
minimum period of work was required to qualify for the
premium—overtime—pay. Thus, inspectors could have worked as little as
1 minute and received 2 days’ pay for Sunday work. For overtime work at
other times during a week, the minimum compensation was 4 to 12 hours’
pay, depending on whether the inspector worked late, came in early, or
was called back to work. In 1983, Congress set a cap of $25,000 on the
amount of individual overtime earnings. With the enactment of the
Consolidated Omnibus Budget Reconciliation Act of 1985, Customs began
charging user fees for processing passengers and cargo; the revenue from
these fees paid for Customs’ overtime and premium pay.

In 1991,6 we reported to this Subcommittee that overtime pay to Customs
inspectors had increased from about $57 million in fiscal year 1985 to
about $103 million in fiscal year 1990. We concluded that an important
contributing cause of this growth was Customs’ focus on ensuring that
inspectors did not exceed the $25,000 cap and its disregard of the
individual overtime assignments that build to the cap. We found internal
control weaknesses that resulted in errors in preparing overtime
documentation, certifying payments, and entering data in the overtime
system. We also concluded that the 1911 Act provisions hindered the
efficient management of overtime and that the special payments were
premised on conditions that no longer existed. Although we believed that
inspectors should be paid extra for working overtime, we recommended
that (1) the 1911 Act be amended so that inspector overtime pay would be
more directly linked to actual hours worked and (2) Customs management
focus on achieving a more efficient use of overtime.

Based in part on our findings, the Customs Officers Pay Reform
Amendments (COPRA), Section 13811 of the Omnibus Budget
Reconciliation Act of 1993, established the overtime and premium pay
system for Customs officers performing inspectional services. The intent
behind changing the 1911 Act was to more closely match earnings to hours
worked, thereby reducing overtime costs. It was expected that the changes
made by COPRA would result in overtime savings of $12 million in both
fiscal years 1994 and 1995, and a total of $52 million for the 5-year period
ending with fiscal year 1998.7 However, in September 1996 the Treasury
Inspector General (IG) reported that although COPRA reduced direct
spending associated with Customs officers’ overtime pay, it caused a


6
 Customs Service: 1911 Act Governing Overtime Is Outdated (GAO/GGD-91-96, June 14, 1991).
7
 See House Report 103-111, May 25, 1993.



Page 8                                                                       GAO/T-GGD-97-107
           Statement
           U.S. Customs Service: Oversight Issues




           significant increase in the costs associated with night differential pay.8 The
           IG reported a net increase in overtime pay of $8.9 million in fiscal year
           1995.9

           Further, the IG pointed out that future night differential pay to Custom
           officers will be even higher. On December 9, 1995, an arbitrator ruled
           favorably on a grievance filed by NTEU that protested Customs’ refusal to
           pay night differential to Customs officers who were on sick or annual
           leave for 8 hours or longer. The ruling required Customs to pay employees
           who would ordinarily receive COPRA night differential when at work but
           who did not receive it when on leave since January 1, 1994. Customs
           estimated that it paid over $1 million in premium pay for work not
           performed as a result of that ruling. Customs’ appropriation act for fiscal
           year 1997 prohibits this practice for that fiscal year, but this prohibition
           expires at the end of fiscal year 1997.

           The IG report also pointed out that the pay cap has caused additional
           increases in administrative costs for Customs. Annually, inspectors (and
           canine enforcement officers) file grievances because they are not allowed
           to work overtime assignments if they are close to the $25,000 cap.
           According to a Customs official, most port management stop those
           Customs officers who are approaching the cap (usually those who had
           earned about $24,500) from working any more overtime. This work was
           performed by other Customs officers who were not at the cap. The IG
           reported that in fiscal year 1994 over $100,000 in settlements were paid as
           a result of these overtime cap grievances.


           Mr. Chairman, this completes my statement. I would be pleased to answer
           any questions.




           8
            Night differential pay depends on the regularly scheduled hours of the Customs officer. If the majority
           of the officer’s hours are between 3 p.m. and midnight, compensation equals the basic hourly rate plus
           premium pay of 15 percent of the hourly rate. If the majority of the hours are between 11 p.m. and 8
           a.m., compensation equals the basic hourly rate plus premium pay of 20 percent of the hourly rate.
           9
             Customs Officer Pay Reform Amendments (COPRA), Office of Inspector General, Department of the
           Treasury, OIG-96-094 (Sept. 13, 1996). Customs reported that this amount increased to $9.5 million in
           fiscal year 1996.


(264438)   Page 9                                                                            GAO/T-GGD-97-107
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