DHS OIG Still Finds Weak Financial Controls for TCM (Part V)

(TCM is a primary method by which CBP measures risk in the areas of trade compliance (laws and regulations) and revenue collection. CBP has relied on the TCM program to provide an objective status of trade compliance on an annual basis since 1995. TCM was previously referred to as Entry Summary Compliance Measurement (ESCM).)

This is Part V, the final part of a multi-part series of summaries of this report and provides an overview of the report's findings regarding CBP's FY 2010 significant deficiency¹ in the TCM process.

TCM Weaknesses due to Inadequate ACE Reporting Tools, Incomplete Guidelines

The report states that the current version of the Automated Commercial Environment (ACE)² does not provide TCM Coordinators at the ports or Headquarters with the appropriate reporting tools to monitor TCM hits. Guidance issued to TCM Coordinators for FY 2010 did not provide for adequate, timely, and efficient oversight of TCM hits. Policies and procedures were not developed and/or implemented for the entire fiscal year to ensure the reliability and accuracy of TCM input results.

Incomplete guidelines may lead ports to inadequately monitor the TCM process throughout the fiscal year, resulting in a lack of appropriate review of TCM entries. With inadequate oversight of the TCM data, CBP may have an inaccurately projected revenue gap. Additionally, CBP may incorrectly evaluate the effectiveness of its control environment over the collections of duties, taxes, and fees.

TCM Weaknesses Listed by Auditors in FY 2010

The auditors detailed the following internal control weaknesses related to TCM:

Ineffective, Inconsistent TCM Monitoring at 11 Ports

TCM Coordinators and Headquarters did not have the tools necessary to effectively monitor the TCM program at the port and national level throughout the fiscal year. Through corroborative inquiry at eleven statistically selected ports of entry, the auditors noted an inconsistent use of data queries and reports by the TCM Coordinators to monitor TCM at the ports. Specifically:

CMATS, CAPPS unavailable --The Compliance Measurement Accuracy and Tracking System (CMATS) tool was unavailable for use by the TCM Coordinators for FY 2010. CMATS operated off the Customs Automated Port Profile (CAPPS) database and was utilized prior to FY 2010 as a tool to identify data quality errors or anomalies. Per the Entry Summary Compliance Measurement Policy Memo (FY10), issued in September 2009, CMATS and CAPPS were required to be used by the ports until several months after the switch from ACS to ACE². Per discussion with CBP, CMATS and CAPPS were unavailable for use by ports for the entire FY 2010.

Inconsistent monthly maintenance reports --Until the implementation of ACE in February 2010², a number of “maintenance” reports were available to the ports on a monthly basis. However, not all ports were aware of or used the “maintenance” reports and TCM Coordinators did not have a standard method of monitoring TCM. Additionally, these reports did not provide Headquarters with timely and efficient review of anomalous and non-anomalous entries, nor the reliability and accuracy of TCM entries.

Limited guidance during ACE reporting problems --Once the TCM program switched from ACS to ACE in February 2010, the expected reporting functionality of ACE did not function properly, and therefore, impeded the ability of Headquarters and TCM Coordinators to pull reports that would provide adequate monitoring of TCM. Limited guidance was given to the ports on how to monitor TCM until the reporting functionality in ACE could be improved. In the fourth quarter of the fiscal year, Headquarters distributed a database to the ports, which provided both Headquarters and the ports with an effective tool to analyze and monitor TCM hits.

No Comprehensive TCM Data Review for FY 2009 or FY 2010

In FY 2008, guidance from the Commercial Targeting and Enforcement Directorate suspended the requirement for TCM Coordinators at the ports to perform random reviews of non-anomalous lines due to an error in the programming of the CMATS tool. This suspension was not replaced by any other data query or tool in FY 2009 or in FY 2010 with the implementation of ACE, thus a comprehensive data quality review has not been fully implemented.

Only 2 Recommendations from Auditors

The auditors recommended that CBP take the following actions:

1. Continue distribution of the monthly TCM database to the ports which satisfies the requirements for TCM Coordinator and Headquarters oversight of the TCM process at the port level.
2. Continue the development of reporting functionalities in ACE to replace the manual TCM databases distributed to the ports.

¹A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

²In February 2010, the Automated Commercial System (ACS) was replaced by the Automated Targeting System (ATS) as the targeting platform and ACE as the findings platform for all ACE and ACS entries. This change affected all future entries, whether filed in ACE or ACS. All determinations for reviews on entry summaries filed are recorded in the Validation Activity (VA) tool in ACE.

(KPMG audited the consolidated balance sheets of CBP; it also considered CBP's internal controls over financial reporting and tested CBP's compliance with certain provisions of applicable laws, regulations, and contracts agreements that could have a direct and material effect on these consolidated financial statements.)

(See ITT's Online Archives or 04/14/11, 04/15/11, 04/18/11, and 04/20/11 news, 11041401, [11041522], 11041823, and 11041928, for Parts I-IV of BP's summary of this report.

See ITT's Online Archives or 01/31/11 news, 11013129, for BP overview of CBP's year-end FY 2010 import trade trends report, including CBP's use of TCM.

See ITT's Online Archives or 01/28/10 news, 10012815, for BP summary of CBP's overview of its TCM program.

See ITT’s Online Archives or 03/11/10 news, 10031115, for BP overview of the FY 2009 OIG Report.)

(OIG-11-61, dated 03/25/11)