The Office of the Inspector General (OIG), Audit Division, has completed an audit of the Immigration and Naturalization Service (INS) Fee Accounts. The purpose of this audit was to assess the methodology used in forecasting fee account revenue that was generated from immigration-related services and benefits provided to the public. The INS' estimation of fee receipts is necessary because budget and expenditure decisions are made based on the predicted availability of fee revenue and appropriated funds. The fee accounts are special fund receipt accounts whose end of the year balance can be carried over from one fiscal year to the next, unlike one-year appropriations. Since fee revenue can be carried over into the next fiscal period, each fee's remaining fund balance is included with estimated future revenue in projecting the total resources available for INS use. We reviewed four categories of assessed fees: User Fees, Examinations Fees, Legalization Fees, and Land Border Fees. Annual fee receipts ranged from $390 million in FY 1991 to $532 million in FY 1994.

Our audit objectives were to: (1) assess INS' current methodology for forecasting fee related revenue, and (2) identify improvements in forecasting the fee revenue. Our objectives did not include reviewing the accuracy and timeliness of fees remitted by carriers, which was covered in our Report Number 94-22, Immigration and Naturalization Service Collection of Carrier Fees.

The INS is making progress in improving budget estimating methods. INS staff were able to estimate annual User Fee revenue within approximately 10 percent of actual receipts from FY 1992 to FY 1994. Most recently, INS began using a working group to improve accuracy for the growing Examinations Fee Account. This is an excellent idea that should be expanded to the other fee accounts, regardless of the initial method used to calculate estimates. Although we found no significant deficiencies, we found several areas where INS could improve its methodologies. In brief, these areas were:

Each revenue forecasting method should be validated and documents maintained.

Forecasts should be made on an accrual basis, not a cash accounting basis.

An appropriate forecast method should be developed for the Land Border Fees.

Working group minutes should be documented timely and in enough detail to recall why adjustments were made.



The Immigration and Naturalization Service (INS) has both a public service mission and an enforcement mission. It is responsible for facilitating the entry of legal aliens and preventing the entry of illegal 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, apprehends, and removes aliens in violation of the law from this country; and examines the applications of aliens wishing to become citizens.

The INS receives its financial resources from appropriated funds, the Breached Bond/Detention Fund, and four categories of assessed fees: User Fees, Examinations Fees, Legalization Fees, and Land Border Fees. The four fee accounts were established separately to serve as depositories for fees generated from immigration-related services and benefits which are provided to the public (see Appendix II for additional background information). INS programs partially funded by the fee accounts include: Inspections, Detention and Deportation, Adjudications and Naturalization, Data and Communications Systems, International Affairs, and Information and Records Management.

Budget and expenditure decisions are made on the basis of revenue projections and appropriated funds. The fee accounts, unlike the one-year appropriation, are special fund receipt accounts whose end of the year balances can be carried over from one fiscal year to the next. At the end of every fiscal year, these account balances are included along with estimated revenues in determining the total projected resources available for the next fiscal year. In FY 1993 and FY 1994, approximately 35 and 33 percent, respectively, of INS' total obligations were funded by the fee accounts and the Breached Bond/Detention Fund. FY 1995 financial information was not available when this report was prepared.

The federal budget process consists of three major phases that occur over a 2 year cycle. The phases are: (1) budget formulation, (2) Congressional review and approval, and (3) budget execution. Administration policy, revenue and economic projections, and other policy related factors are considered by the Office of Management and Budget (OMB) in deciding upon the budget request presented in the President's budget. The estimate of fee account receipts is prepared primarily for the budget formulation phase. The approved budget includes program, financing, and object classification schedules that detail actual obligations for the prior fiscal year, estimated obligations for the current fiscal year, and planned obligations for the budget year.

Budget documents for the fee accounts detail: (1) prior year actual collections, (2) current year estimated collections, and (3) the budget year projected collections. For the purposes of this audit, current year estimated collections are referred to as a "1 year forecast," and the budget year planned collections are referred to as a "2 year forecast."

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The FY 1996 budget information was taken from the "Budget of the United States Government, Fiscal Year 1996" and contains the Budget Message of the President which presents the President's budget proposals.

During the last 5 years, an increasing portion of INS' total resources was contributed by fee account revenue and the Breached Bond Fund. Funding from nonappropriated sources grew from about 21 percent to 32 percent. The adjacent chart also illustrates INS' total resource growth from FY 1991 to FY 1996, increasing from about $1 billion to $2 billion.

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Nearly all fee account revenue during the period FY 1991 through FY 1995 was provided by Examinations and User Fee collections. The Legalization and Land Border Fees seem small in comparison, but INS has projected that the Land Border Fee Account will grow substantially over the next few years if Congress agrees to extend the program beyond September 30, 1996. The adjacent chart illustrates the proportion of each fee account to the total fee revenue, by fiscal year.