METHODOLOGY FOR SELECTING SURETY BOND SAMPLE
INS uses its Deportable Alien Control System (DACS) to track the cases of aliens subject to deportation. The information available in DACS includes bond data and call-up dates for review of files. Call-up dates are inserted by district office staff to remind them to periodically review the case files to monitor aliens' deportation status and take any necessary action.
To test district handling of surety bonds, the inspection team reviewed a random sample of bonds for aliens in four district offices, New York, Los Angeles, Miami, and San Francisco. We selected the sample from a specially designed print-out of DACS data as of June 13, 1996, requested from INS Headquarters.
The print-out listed surety bonds for aliens in two of ten DACS categories. The two categories included the cases that we determined would most likely include aliens who had received final orders of deportation and were in the process of being removed. Additionally, the print-out included only those cases for which the call-up dates were over six months old but did not fall within the period of our prior inspection. We selected cases for which the call-up dates were over six months old because this group would be most likely to include bonds that INS no longer had the authority to declare breached and collected on. Specifically, the DACS cases we sampled were category 2 (cases under adjudication) and 3 (cases with an administrative final order of deportation) with call-up dates after January 1, 1992, and before January 1, 1996. Further, as far as the automated data allowed, we excluded bonds for certain surety companies that had reached settlement agreements with INS, which nullified the value of their bonds.
FOLLOW-UP ON RECOMMENDATIONS - OIG INSPECTION REPORT I-92-25
The following recommendations were contained in our report number I-92-25. Also listed below are INS' responses to the recommendations and relevant findings from our current follow-up inspection.
1. RECOMMENDATION: Instruct and require field personnel to take timely actions to demand the appearance of aliens, declare bonds breached, and bill and collect for breached surety bonds.
INS' RESPONSE: Issued new instructions and directed field personnel to take timely actions. In addition, a critical element was added to the performance workplans of district directors that stated, "Ensures that effective immigration bond management and control is maintained and administered in accordance with INS policy and procedures so that the District/Sector achieves 90-95 percent compliance with standards." The 90-95 percent compliance rate was needed to achieve an excellent rating.
FOLLOW-UP FINDINGS: New instructions and directions were issued, but field personnel did not always take timely actions. In fact we estimate that, in the districts we visited, surety bonds worth over $750,000 were lost due to untimely action. Other breach actions were delayed an average of more than 6 months at district offices.
2. RECOMMENDATION: Review the conditions of the Immigration Bond (Form I-352) and revise as necessary to make the obligor responsible for ensuring the appearance of subject aliens not only before an immigration officer but also at all hearings, including EOIR hearings, upon demand by INS or EOIR.
INS' RESPONSE: Form I-352 has been revised.
FOLLOW-UP FINDINGS: Form I-352 has been revised.
3. RECOMMENDATION: Explore, with the Director, EOIR, options for improving the process for issuing notices to obligors to produce aliens before immigration officers at EOIR hearings. We had found that EOIR did not notify obligors to produce aliens when it issued notices to aliens to appear for hearings, resulting in the need for INS to make subsequent demands upon obligors to produce aliens before breaching delivery bonds.
INS' RESPONSE: Discussed process with EOIR.
FOLLOW-UP FINDINGS: Improvements had not been made for issuing notices to obligors. The New York District Office was the only office we visited where notifications of hearings were sent to obligors. In that office the notices were sent from the Office of the District Counsel.
4. RECOMMENDATION: Ensure the district offices have developed procedures that adequately control bonds. We suggest that the procedures in the Los Angeles District Office be considered for those offices that have experienced problems with controlling bonds.
INS' RESPONSE: New instructions were issued.
FOLLOW-UP FINDINGS: Headquarters INS Detention and Deportation Programs Office issued new instructions for district offices to follow. Of the two district offices previously visited, New York had appreciably improved controls while the controls in Los Angeles, which had previously been excellent, had declined. Controls at the other offices visited were adequate.
5. RECOMMENDATION: Link the several steps in the bond breaching process through computer automation, and design the planned Bond Management Information System to automatically generate required notices within predetermined time periods, starting with the breach-causing event and ending with the bill.
INS' RESPONSE: INS managers planned to have the system operating by January 1994.
FOLLOW-UP FINDINGS: Only a portion of the system was operating by January 1997. Hardware for district offices was purchased, but the initial software contractor for the project did not perform to requirements and the contract was terminated. Another contractor is developing the district office portion of the software.
6. RECOMMENDATION: Establish time frames and require district offices to forward appeals of bond breaches to the Administrative Appeals Unit within the allotted time.
INS' RESPONSE: New instructions were issued and a time frame was established.
FOLLOW-UP FINDINGS: New instructions were issued and a time frame of 30 days was established. However, based on our review, we estimated that it was still taking the four district offices an average of 133 days before they forwarded the appeals to the Administrative Appeals Office.
7. RECOMMENDATION: Establish time frames and require the AdministrativeAppeals Unit to adjudicate appeals of bond breaches within the allotted time.
INS' RESPONSE: The Administrative Appeals Office established a time frame of 90 days to adjudicate breached bond appeals.
FOLLOW-UP FINDINGS: A time frame of 90 days had been established, but the Administrative Appeals Unit of the Administrative Appeals Office was taking 6 to 21 months to adjudicate breached bond appeals.
8. RECOMMENDATION: Direct each Regional Accounting Office to establish a billing cycle for surety bonds that will ensure that surety companies are billed for breached bonds within the time period specified in the Treasury Financial Manual.
INS' RESPONSE: The INS Assistant Commissioner of Finance notified the Assistant Regional Commissioners, Budget and Accounting, of the need to comply with billing time frames stated in the Treasury Financial Manual.
FOLLOW-UP FINDINGS: We found that neither administrative center had complied with this requirement. We do not attribute the $1.5 million backlog of bills on hand to their failure to establish billing cycles, however. The delays in billing were primarily due to equipment problems with the old bond accounting system. The old equipment failed before adequate software was created for the new system serviced by new equipment. The Burlington Administrative Center had established a billing cycle before the old system crashed that was five to ten days longer than the Treasury manual requires, but this cycle was an improvement over the prior inspection. The Twin Cities Administrative Center had billed only three times during the first 6 months of FY 1996.
9. RECOMMENDATION: Direct Regional Accounting Offices to issue bills regardless of whether copies of bonds and powers of attorney are on hand in the regional office.
INS' RESPONSE: District offices were notified to send copies of bonds and powers of attorney to the Northern Regional Accounting Office.
FOLLOW-UP FINDINGS: The inspection team did not find the same conditions at the Twin Cities Administrative Center as the team found in 1992. All breach actions on hand had corresponding copies of bond documents and powers of attorney.
10. RECOMMENDATION: Direct the Eastern Region Accounting Office to complete their follow-up on outstanding breach numbers to ensure that all are accounted for or otherwise properly canceled.
INS' RESPONSE: INS replied that this deficiency had been corrected.
FOLLOW-UP FINDINGS: This deficiency had been corrected. All outstanding breach numbers had been followed-up with appropriate action taken to complete the action and bill or cancel the breach.
11. RECOMMENDATION: Direct supervisors in the Eastern Region Accounting Office to routinely review the breach number log to ensure that district offices are notified when breach actions are not received timely.
INS' RESPONSE: INS concurred with the recommendation and responded that the logs were being reviewed and district offices notified as appropriate.
FOLLOW-UP FINDINGS: Personnel of the Burlington Administrative Center were routinely reviewing the breach number log and contacting district offices when necessary.
12. RECOMMENDATION: Direct supervisors in the Northern Regional Accounting Office to periodically review the bond control log to ensure that all districts are forwarding copies of surety bond documents to that office.
INS' RESPONSE: INS concurred with the recommendation and responded that corrective action had been taken.
FOLLOW-UP FINDINGS: All districts were forwarding copies of surety bond documents to the Twin Cities Administrative Center.
13. RECOMMENDATION: Debt collection attorneys report uncollected accounts to either United States Attorneys or the Department's Civil Division, as appropriate, within certain prescribed time frames.
INS' RESPONSE: The INS General Counsel issued a directive which established a time frame of 1 year to notify the appropriate Department of Justice component or report the reasons for not referring the account to the INS Associate General Counsel, Commercial Law Division.
FOLLOW-UP FINDINGS: Delinquent accounts that were not in dispute were being referred to appropriate officials within 1 year or less.
14. RECOMMENDATION: Surety companies with delinquent debts are reported to the Department of the Treasury as soon as the debts are identified as non-performing.
INS' RESPONSE: The INS General Counsel issued a letter that directed regional counsels to report delinquent bills to the Department of the Treasury as soon as the validity and accuracy of the bill was confirmed.
FOLLOW-UP FINDINGS: Delinquent bills were being reported to the Department of the Treasury.
15. RECOMMENDATION: INS cease accepting bonds from surety company agents who write bonds that lead to delinquent accounts accumulating beyond specified dollar amounts or remaining delinquent for specified periods of time.
INS' RESPONSE: The INS General Counsel replied that this issue would be
discussed with officials of the Department of the Treasury and Federal Bureau of
FOLLOW-UP FINDINGS: INS has notified some surety companies of its intention to cease doing business because of delinquent accounts. INS also has recently changed the bond contract, Form I-352, to make the agent as well as the surety company responsible for debt incurred by breach of the bond. This will allow INS to terminate business with agents for delinquent debts.
16. RECOMMENDATION: Delinquent accounts are referred to commercial credit bureaus in accordance with the Office of Management and Budget Circular A-129.
INS' RESPONSE: INS responded that delinquent accounts would be referred to commercial credit bureaus when the Bond Management Information System (BMIS) is implemented at regional level.
FOLLOW-UP FINDINGS: The BMIS has been implemented at the administrative centers (regional level), but commercial credit bureaus are not being notified of delinquent accounts. The Director, Debt Collection and Cash Management Branch, INS Office of Finance told us that accounts would not be referred to credit bureaus until the accuracy of the accounts could be ensured.
17. RECOMMENDATION: Accounts that are written off are reported to IRS as prescribed by the Office of Management and Budget Circular A-129.
INS' RESPONSE: INS replied in a memorandum dated April 24, 1997, that enhancements to the Debt Collection System had been completed in order to provide the system with the capability to track written-off accounts. Further, the appropriate IRS Forms 1099 were forwarded to debtors by the mandated date of January 31, 1997.
FOLLOW-UP FINDINGS: INS did not have the capability to report written-off accounts to the IRS before the end of FY 1996. Due to enhancements to the accounting system, it now has this capability and has reported some written-off debts. However, most accounts written off in FY 1996 were not reported to IRS by the February 28, 1997, cut-off date for issuing Forms 1099.
18. RECOMMENDATION: Ensure that the accounting systems under present development: accrue interest; account for penalties and handling charges; and interact with the Financial Accounting and Control System so that all due and legal charges are recorded in official records.
INS' RESPONSE: The Debt Collection System (DCOS) has been implemented as of May 1994 and interest, penalty, and handling charges are being calculated and recorded.
FOLLOW-UP FINDINGS: The DCOS has been implemented and is recording interest, penalty, and handling charges. It interfaces with the Financial Accounting and Control System so that all legal charges are recorded in the primary accounting system and reported to the Department of the Treasury as required.
19. RECOMMENDATION: Ensure that accounts receivable are established based on settlement agreements and that payments received are recorded against these accounts.
INS' RESPONSE: INS proposed to formulate a standard settlement agreement but did not address the receivables issue. The OIG intended that once a settlement is finalized, resulting installment payments, if any, should be established in accounting records as accounts receivable.
FOLLOW-UP FINDINGS: As of the end of 1996, INS had not established any installment payments, resulting from settlements, as receivables. As the last installment payment due INS was received in November 1996, none were outstanding as of our follow-up field work. However, procedures had not been issued to provide that future installment payments will be treated as receivables in accounting records.
20. RECOMMENDATION: Determine if funds due from past settlement agreements have been received.
INS' RESPONSE: INS hired a contractor to determine if all funds had been received. The contractor was unable to account for over $7 million. However, since the issuance of the contractor's report, INS has received confirmation that all funds were received.
FOLLOW-UP FINDINGS: As of the close of 1996, all installment payments resulting from settlements discussed in our 1993 report had been confirmed as received by a component of the U.S. Government.
21. RECOMMENDATION: Ensure that appropriate collection action is completed for any settlement agreements that have not been satisfied.
INS' RESPONSE: All settlement agreements were satisfied.
FOLLOW-UP FINDINGS: All settlement agreements were satisfied.