DTIC ADA267343: Financial Management: INS Lacks Accountability and Controls Over It's Resources

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GA O
United States
General Accounting Office
Washington, D.C. 20548
Accounting and Financial
Management Division
B-240722
January 24, 1991
The Honorable Richard L. Thornburgh
The Attorney General
Dear Mr. Attorney General:
This report presents the results of our review of the financial management environment of
the Immigration and Naturalization Service (INS). This review is part of GAO'S overall effort to
assess the effectiveness of INS' management.
This report contains recommendations to you. The head of a federal agency is required by
31 U.S.C. 720 to submit a written statement on actions taken on these recommendations to
the Senate Committee on Governmental Affairs and the House Committee on Government
Operations not later than 60 days after the date of this letter and to the House and Senate
Committees on Appropriations with the agency's first request for appropriations made more
than 60 days after the date of this letter.
We are sending copies of this report to the Director, Office of Management and Budget;
Secretary, Department of the Treasury; Commissioner, Immigration and Naturalization
Service; and interested congressional committees. Copies will be available to others upon
request.
Sincerely yours, Accesion For
NTIS CRA&I
DTIC TAB
Unannounced
Justification
Donald H. Chapin By
Assistant Comptroller General Distribution
Availability Codes
Avail and or
Dfst Special
Executive Summary
Purpose Over 40 years ago, with the passage of the Budget and Accounting Act
of 1950, the Congress required that each agency head establish and
maintain adequate systems of accounting and internal control. The act is
aimed at strengthening management controls and accounting systems.
Nevertheless, decades later, the Immigration and Naturalization Service
(INS) continues to be faced with serious and long-standing financial man-
agement problems. While various reforms are being considered and
other efforts are underway, more urgent and decisive actions are needed
to deal effectively with INS' financial management problems.
GAO made this review to identify the specific actions INS needs to take to
ir,,prove its financial management operations. This report supplements
the larger GAO review that assessed the overall effectiveness of INS'
management.
Background
INS is part of the Department of Justice. It is responsible for adminis-
tering the immigration and naturalization laws relating to the admission,
exclusion, deportation, and naturalization of aliens. In the last decade,
INS' budget has more than tripled from about $349 million to over
$1 billion. The money used to finance INS comes from (1) appropriated
funds and (2) fee revenue.
INS accounting operations are decentralized and performed by (1) the
Headquarters Accounting Section, which performs the accounting func-
tion for headquarters and the 3 overseas district offices and (2) 4
regional offices, which perform the accounting function for 33 U.S. dis-
trict offices and 21 border patrol sectors.
Results in Brief INS does not have fiscal accountability over its resources. Its outmoded
accounting system, weak internal controls, and lack of management
emphasis on financial management have contributed to this situation.
INS could lose millions of dollars in revenue because accurate and reli-
able financial information is not available to effectively bill, collect, or
litigate amounts owed the government. Further, its primary accounting
system coniains incomplete and inaccurate financial data. These weak-
nesses have existed for many years and have not been corrected.
Solving INS' financial management problems will require strong manage-
ment commitment and leadership that must be sustained across suc-
ceeding administrations.
Page 2 GAO/AFMD-91-20 INS Financial Management
Executive Summary
Principal Findings
Limited Controls Over INS does not have the systems or procedures in place to ensure that hun-
Revenue and Debt dreds of millions of dollars in revenue and debts are collected, accounted
Collection for, controlled, and deposited. For example, one staff member is solely
responsible for controlling, collecting, and forecasting over $100 million
in immigration user fees. Further, INS has not initiated any reviews of its
user fee collection agents to ensure that amounts remitted are accurate.
Millions of dollars in debts owed the government are uncollected
because of inaccurate data and the lack of adequate records. For
example, an INS memorandum dated October 1989 indicated that an
insurance company owed INS about $6 million in breached surety bonds
but proposed a settlement of $1 million because (1) INS' financial data
are suspect and have proven in the past to be wrong, (2) the financial
system is antiquated and unreliable, and (3) the alien files were incom-
plete. Although INS has acknowledged the seriousness of its debt man-
agement problems, it has made limited progress in correcting them.
District managers are not held accountable for debt collection activities,
and some managers believed that debt collection activities were not part
of their duties because funds collected are not returned to INS.
Also, in fiscal year 1989, INS lost over $460,000 as a result of checks
returned for insufficient funds. Because of the lack of coordination
between the regional offices and the district offices, INS district offices
processed applications for aliens who did not pay the required fees. In
another case, GAO found that in one district office an average of $42,000
in cash was deposited by mail each day. Subsequently, INS reported that
29 of its field offices were mailing cash deposits as of July 1990. Depos-
iting cash through the mail increases the government's risk of loss and is
not a sound businesslike practice.
Over the past 7 years, INS has faced difficulty in implementing a viable
debt collection system. As recently as July 1990, INS could not imple-
ment an agencywide debt management system because INS' regional
offices had become decentralized under the former Acting Commissioner
and did not follow headquarters directives.
Page 3 GAO/AFMIID1-.0 INS Financial Management
Executive Summary
Financial Management INS' primary accounting system does not provide complete and accurate
Systems Do Not Meet INS' financial information on the results of its program and administrative
StewardshiD Needs operations. For fiscal year 1989, there were differences amounting to
$94 million between the balances recorded in the INS primary accounting
system and the financial reports submitted to the Department of the
Treasury. As a result, INS does not know the total amount of funds it has
available. In addition, managers are not receiving the financial manage-
ment information needed to adequately control funds and evaluate pro-
gram operations.
For example, near the end of fiscal year 1989, INS' top management had
difficulty in obtaining accurate data on expenditures. As a result, man-
agement could not accurately determine INS' financial condition. In June
1989, INS' Acting Commissioner projected a deficit for the fiscal year
ranging from $5 million to $52 million. Audited financial statements
could be a beneficial tool for INS' top management in determining the
reliability of INS' financial data. INS has recognized that its primary
accounting system is obsolete and has major shortcomings; it acknowl-
edged that the system cannot efficiently meet management's needs. To
correct its system's problems, INS is in the process of converting to Jus-
tice's Financial Management Information System. However, a system
feasibility study was not made to determine if the system was capable of
meeting INS' financial management needs.
INS' FMFIA Reports Have INS has not reported all of its material weaknesses to the President and
Not Been Accurate the Congress as required by the Federal Managers' Financial Integrity
Act (FMFIA) of 1982. INS has had serious, long-standing problems with
debt collection, and, in 1988, GAO recommended that they be reported as
material weaknesses. However, INS has not identified these long-
standing problems as material weaknesses in its FMFiA reports. Further,
INS has not routinely included its field activities in the reviews of its
internal control and accounting systems. As a result, its evaluations
were limited to the headquarters offices. Without adequate disclosure,
the President, the Congress, and the public will not be aware of INS'
serious problems and the efforts needed to correct them.
Recommendations
GAO is recommending that the Attorney General direct the Commissioner
of INS to appoint an Associate Commissioner for Financial Management.
The designation of a senior manager for financial management at INS is
ini liie witlh the concepts embodied in the Chief Financial Officers Act of
1990. Once appointed, the Associate Commissioner should act to develop
Page 4 GAO/AFMD-91-20 INS Financial Management
Executive Sununary
a viable accounting system, improve controls over revenue and debt col-
lection activities, and strengthen reporting under the Financial Integrity
Act. Further, in GAO'S report on the overall effectiveness of INS' manage-
ment, it recommended that the Attorney General, in consultation with
the Director of the Office of Management and Budget, establish a group
of experts to work with the INS Commissioner to improve INS' financial
management and budget system. These efforts, in conjunction with the
appointment of an Associate Commissioner for Financial Management,
will provide the foundation needed to improve INS' overall financial
leadership.
Agency Comments
GAO requested official comments on a draft of this report from the
Department of Justice. In a letter, Justice stated that it would not be in a
position to comment on the report's specific findings and recommenda-
tions until its newly established management group has reported to the
Attorney General.
Page 5 GAO/AFMD-91.20 INS Financial Manaement
Contents
Executive Summary
2
Chapter 1
8
Introduction INS' Financial Management Structure 9
Objectives, Scope, and Methodology 10
Chapter 2
12
Limited Controls Over Federal Policy for Establishing Fees and Collecting Debts 12
Controls Over Fee Collection Are Weak 13
Revenue and Debt
INS' Debt Collection Efforts Are Hampered by Poor Data 16
Collection Have
Conclusions 20
Resulted in Significant 20
Recommendations
Losses
Chapter 3
22
Financial Management Financial Management System Requirements 22
Systems Do Not Meet
INS' Financial Management Problems Have Been 22
Previously Reported
INS' Stewardship
Poor Financial Data Impair INS' Ability to Manage 23
Needs Efforts to Enhance INS' Accounting System Are 27
Questionable
INS' FMFIA Reports Have Not Been Accurate 28
INS Lacks Financial Leadership 30
Conclusions 31
Recommendations 32
Appendix I
34
Major Contributors to
This Report
Table
Table 3.1: Unexpended Appropriation Fund Balances and 25
Fee Account Balances as of September 30, 1989
Figure
Figure 1.1: INS Budget Authority for Fiscal Years 1980 to 8
1990
Page 6 GAO/AFKD-91-20 INS Financal Management
Contents
Abbreviations
FMFIA Federal Managers' Financial Integrity Act
OIG office of inspector general
INS Immigration and Naturalization Service
OMB Office of Management and Budget
Page 7 GAO/AFMD41-20 INS Finncial Management
Chapter 1
Introduction
As part of our management review at the Immigration and Naturaliza-
tion Service (INS), we assessed the agency's management and control
over its financial operations. This report discusses INS' accountability
over revenue and debt collection and its financial management systems.
INS is a component of the Department of Justice. INS has both a public
service mission and an enforcement mission. It is responsible for facili-
tating the entry of legal aliens and preventing the illegal entry of aliens
into the United States. Specifically, INS determines the admissibility of
aliens into the United States; adjudicates requests of aliens for benefits;
guards against illegal entry into the United States; investigates, appre-
hends, and removes aliens in violation of the law from this country; and
examines the applications of aliens wishing to become citizens.
INS had about $1.1 billion in total resources for fiscal year 1990. This
amount includes about $840 million in appropriated funds and about
t260 million from three fee accounts-immigration user fee, immigra-
tion legalization fee, and immigration examinations fee. As shown in
figure 1.1, INS' budget has more than tripled since fiscal year 1980.
Figure 1.1: INS Budget Autht rity for
Fiscal Years 1980 to 1990 1200 Dolr In-
NUo0
1960 1901 1962 1963 1964 195 19W6 1967 1966 1910 1190
Fils!a yar
Note: Immigration user fees and legalization fees were instituted in October 1986 and November 1986.
respectively. The examinations fee account was established inO ctober 1988,
Source: Department of Justice Management Division.
Page 8 GAO/AFMD-91-20 INS Financial Management
Chapter 1
Introduction
INS' Financial
The Associate Commissioner for Management provides advice and
guidance on financial management to the INS Commissioner. The Asso-
Structure
"Management ciate Commissioner is also responsible for directing and coordinating
financial management matters. INS' Comptroller assists the Associate
Commissioner in fulfilling his or her duties and responsibilities.
Specifically, the Comptroller is responsible for the overall formulation
and execution of the INS budget. The Comptroller also manages INS'
financial management systems, maintains supporting accounting and
fiscal records, and develops and provides systems for (1) allocating staff
positions and ft.nds and (2) restricting obligations and outlays.
INS accounting operations are decentralized and performed by (1) the
Headquarters Accounting Section, which performs the accounting func-
tion for headquarters and the 3 overseas district offices and (2) 4
regional offices (eastern, northern, southern, and western), which per-
form the accounting function for 33 U.S. district offices and 21 border
patrol sectors. Except for the overseas district offices, the U.S. district
offices and border patrol sectors report directly to regional offices.
Each INS operating office and field activity is responsible for carrying
out its own financial management functions. These include accounting
for and controlling INS resources and assessing its financial management
systems for conformance with the Comptroller General's accounting
principles, standards, and related requirements., In addition, the Federal
Managers' Financial Integrity Act2 also focuses on the need to
strengthen accounting and internal control systems.
INS reported in its fisca' year 1989 Financial Integrity Act report that its
financial management structure consists of 15 systems. These systems
are used to (1) record and control appropriated funds and other finan-
cial resources, (2) record financial information on the financial results of
IGAO's Policy and Procedures Manual for Guidance of Federal Agencies contains the principles, stan-
dards, and related requirements to be observed by federal agencies. Specifically, Title 2, appendix I,
prescribes accounting principles and standards. Titles 4, 5, 6, and 7 specify requirements governing
claims; transportation; pay, leave, and allowances; and fiscal procedures, respectively. Also, agency
accounting systems must comply with the Comptroller General's internal control and accounting
system standards, as prescribed in appendixes II and III of Title 2 of the manual, respectively, as well
as requirements set forth in the Treasury Financial Manual and Office of Management and Budget
circulars.
2The Federal Managers' Financial Integrity Act of 1982 (31 U.S.C. 3512(b) and (c)) gives agency
management the primary responsibility for maintaining adequate systems of internal control and
accounting. The act requires agency heads to report annually to the President and the Congress on
the status of these systems, and it holds managers responsible for correcting identified deficiencies.
Page 9 GAO/AFMD41-20 INS Financial Management