Auditors: CBP unable to detect excessive custom refunds in fiscal 2009

Customs and Border Protection was unable to prevent itself from issuing excessive custom duty refunds during the last fiscal year due to inherent limitations and lack of controls in certain information technology systems.

Auditing firm KPMG found the material weakness--which also includes an inability to prevent and correct excessive refunds--during a review of CBP internal controls over financial reporting during fiscal 2009. The Homeland Security Department inspector general released the audit to the public Sept. 1 in redacted form.

U.S. firms are entitled to a customs duty refund, known as "drawback claim," under some circumstances, such as when they export products made with imported merchandise. The customs duty paid when that imported merchandise entered the United States can be the subject of a drawback claim. The penalty for submitting a false drawback claim ranges from a written notice to a fine constituting the amount of the entire false claim, plus restitution.

The amount of redaction done to the KPMG audit makes it impossible to state which information technology system is responsible for the material weakness.

However, the key systems subject to review by KPMG auditors for the report include the Automated Commercial System and the Automated Commercial Environment.

The latter, a web-based portal, is replacing the former, a mainframe-based system. A 2009 review of ACE by the DHS chief information officer found the program has encountered challenges since its initiation in 2001. Among them has been a shifting baseline and significant delays; the review states that as planned, ACE cannot be completed within budget.

The KPMG audit also reviewed the Seized Assets and Cases Tracking System (SEACATS) and CBP's financial management system, which is SAP R/3.

In CBP's official response to the audit, Charles Armstrong, CBP CIO, said he agrees with KPMG's findings.

For more:
- download the redacted audit, OIG-10-109 (.pdf)
- read the November 2009 DHS CIO assessment of ACE (.pdf)

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