Notes to Combined Financial Statements
For the fiscal year ended September 30, 1996
Note 1. Summary of Significant Accounting Policies
(a) Basis of Presentation
These financial statements have been prepared to report the combined financial position and results of operations of the Immigration and Naturalization Service (INS), as required by the Government Management Reform Act of 1994, Public Law 103-356, 108, Statute 3515. These statements have been prepared from the books and records of INS in accordance with the form and content for entity financial statements specified by the Office of Management and Budget (OMB) Bulletin 94-01, Form and Content of Agency Financial Statements, dated November 16, 1993, and INS accounting policies which are summarized in this note. However, as a component of the Department of Justice (DOJ), INS received a waiver with respect to certain provisions of the OMB Bulletin 94-01 and accordingly did not prepare the Statement of Cash Flows and the Statement of Budgetary Resources and Actual Expenses. These statements are, therefore, different from the financial reports prepared for INS pursuant to OMB directives that are used to monitor and control the use of budgetary resources.
(b) Reporting Entity
INS has a dual mission of providing a service to the public and the enforcement of certain immigration laws. INS is responsible for facilitating the entry of legally admissible persons into the United States and preventing the unlawful entry and employment of those persons ineligible for admission. Specifically, INS adjudicates requests for benefits under the Immigration and Nationality Act of 1952 (INA); apprehends, detains and removes aliens who unlawfully enter into the United States (U.S.); determines eligibility for naturalization; and naturalizes those aliens who desire to become U.S. citizens.
To support its mission, INS receives financial resources from the following:
Salaries and Expense Appropriation (S&E), Federal Account (Fed. Acct.) Symbols 15_1217, 15x1217 and 15x1218 are INS's annual and multi-year appropriations provided by Congress to fund various INS activities.
Immigration User Fee Account (IUFA), Fed. Acct. Symbol 15X5087 was established in fiscal year (FY)_1987, in accordance with the 1986 Omnibus Appropriation Bill, Public Law (P.L.) 99-591. The Act, as amended by P.L. 103-121, authorizes the Attorney General to deposit $6 fees collected, INA Section 271 and Section 273 fines revenue, billable 1931 Act overtime revenue and liquidated damages revenue into a separate account.
Immigration Examinations Fee Account (IEFA), Fed. Acct. Symbol 15X5088 was established in FY 1989 in accordance with the 1989 Department of Justice Appropriation Act, P.L. 100-459. The Act authorizes the Attorney General to deposit fees collected into a separate account. Fees are collected for the adjudication of various applications for immigration, nationality and citizenship benefits and naturalization.
Immigration Legalization Fee Account (ILFA), Fed. Acct. Symbol 15X5086 was established in FY 1987 in accordance with P.L. 99-603, the Immigration Reform and Control Act of 1986. The Act authorizes INS to charge fees in connection with the filing of applications for the adjustment of unlawful status to temporary residence status and then to permanent residence status. The Attorney General is authorized to deposit fees collected into a separate account. In accordance with the Act, funds in the ILFA are used to reimburse appropriations for obligations incurred in connection with processing applications filed under the Act.
Land Border Inspection Fee Account (LBIFA), Fed. Acct. Symbol 15X5089 was established in FY 1991 in accordance with the FY 1991 Department of Justice Appropriations Act, P.L. 101-515. The Act and its extensions authorize the Attorney General to establish, by regulation, pilot projects under which fees may be charged, collected, and deposited into a separate account for inspection services provided at one or more land border ports-of-entry on the northern border of the U.S. and the southern border of California.
Breached Bonds/Detention Fund (BBDF), Fed. Acct. Symbol 15X5126 was established in FY 1993 in accordance with the FY 1993 Department of Justice Appropriations Act, P.L. 102-395. The Act authorizes the Attorney General to establish a separate account into which is deposited, as offsetting receipts, all breached cash and surety bonds.
Violent Crime Reduction Trust Fund (VCRTF), Fed. Acct. Symbols 1558597, 1568597, 15X8597, and 15X8598 was established in FY 1995 in accordance with the FY 1994 Violent Crime Control and Law Enforcement Act, Public Law 103-322, 108 Stat. 1796. The Act contains specific appropriations for existing INS programs to strengthen border control, expedite the removal of criminal aliens and provide comprehensive asylum reform. The Trust fund also contains Border Control Modernization.
Border Construction Appropriation (BCA), Fed. Act. Symbol 15x5129 was established in FY 1995 in accordance with the FY 1994 Violent Crime Control and Law Enforcement Act, Public Law 103-322, 108 Stat. 1796. The Act contains specific appropriations for INS programs to construct and renovate facilities related to border control and detention.
(c) Basis of Accounting
Transactions are recorded on an accrual basis and a budgetary basis of accounting. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds.
P.L. 99-591, P.L. 100-459, P.L. 99-603, and P.L. 101-515 provided the Attorney General with the authority to charge and collect certain fees, fines, liquidated damages, and 1931 Act overtime, and deposit such monies in several separate U.S. Treasury Accounts. All budgets are approved annually by the Congress. OMB provides the authority to incur obligations through the apportionment process. The funds in the various accounts are used to reimburse the S&E appropriations for obligations incurred on their behalf.
(d) Accounting Principles and Standards
Until all the Statements of Federal Financial Accounting Standards, which will constitute generally accepted accounting principles for the Federal Government, become effective, the following hierarchy constitutes an other comprehensive basis of accounting and was used to prepare these financial statements:
- Statements of Federal Financial Accounting Standards which are in effect.
- The form and content requirements included in OMB Bulletin 94-01.
- Accounting standards contained in agency accounting policy, procedures manuals, and/or related guidance as of March 29, 1991.
- Accounting principles published by authoritative standard setting bodies and other authoritative sources (1) in the absence of other guidance in the first three parts of this hierarchy, and (2) if the use of such accounting standards improve the meaningfulness of these financial statements.
(e) Revenues and Other Financing Sources
INS receives the majority of the funding needed to support its programs through appropriations. INS receives both annual and multi-year appropriations that may be used, within statutory limits, for operating and capital expenditures. Additional amounts are obtained through fees for services and reimbursement for services.
Appropriations are recognized as revenues at the time the related program or administrative expenses are incurred. Appropriations expended for property, plant and equipment are recognized as revenue and depreciation expense over the estimated useful life of the asset.
Fee Account revenues are generated through the performance of various services, such as inspecting commercial aircraft and sea vessel passengers and the processing of various applications. Monies collected are deposited into established accounts with the U.S. Treasury to reimburse appropriations for obligations incurred during the year. Revenues also include any billings generated in the current year that have not been collected. On occasion, the $6 immigration user fee (which is deposited into the IUFA) is not remitted in a timely manner and is, therefore, subject to the Debt Collection Act of 1982. Interest, penalty, and handling charges under this Act are not available to the INS and must be transferred to the General Fund of the U.S. Treasury.
(f) Funds with the U.S. Treasury and Cash
INS does not, for the most part, maintain cash in commercial bank accounts. Certain receipts, however, are processed by commercial banks for deposit to individual accounts maintained at the U.S. Treasury for the Fee Accounts. Other cash receipts and all disbursements are processed by the U.S. Treasury as directed by authorized INS certifying officers. Cash is receipts that have been received by INS prior to year end but have not been deposited to the U.S. Treasury by year end. Non-entity cash is not available for INS use.
(g) Notes Receivable/ Interest Receivable
All notes receivable arise from IUFA remitters that have been placed on specific payment plans. The carrying amounts of notes receivable represent principal only and do not reflect interest associated with repayment. Interest, penalties, and/or handling charges associated with these notes are not available to the IUFA and must be transferred to the General Fund of the U.S. Treasury. The interest receivable is reflected on the Statement of Financial Position as a non-entity asset.
(h) Accounts Receivable
"Accounts receivable - intragovernmental" includes amounts due from other federal agencies for reimbursable work such as investigative services.
"Accounts receivable - governmental" consists principally of amounts due from commercial air and sea vessel carriers for Immigration User Fees and fines.
"Non-entity accounts receivable" consists of amounts due from entities other than federal agencies for interest and penalties and fines which are to be transferred to Treasury when collected and thus are not available for INS use.
The cost of supplies, preferred access vehicle windshield decals, and other sensitive items under inventory control are expensed at the time of purchase.
(j) Property and Equipment
INS owns some of the land and buildings in which it operates. Other land, buildings, and certain equipment in which INS operates are provided by the General Services Administration (GSA), which charges INS a rental rate that approximates the commercial rental rates for similar properties. INS allocates a portion of the GSA rent to the various funding sources.
Acquisitions of $25,000 and over are capitalized and depreciated based on historical cost using the straight-line method over the estimated useful lives of the assets which, for most equipment, range from 5 to 40 years. Equipment with an acquisition cost of less than $25,000 is expensed when purchased.
(k) Interest Receivable / Payable
These accounts represent interest from IUFA remitters who are on defined payment plans, interest collected from debtors not yet transferred to the U.S. Treasury and interest earned on cash bonds held in trust for aliens. Interest receivable is offset by a related payable because these funds are not available for use by INS.
(l) Travel Advances
This amount includes the current balance of travel advances issued to federal employees in advance of official travel. Amounts issued are limited to meals and incidental expenses to be incurred by the employees during official travel.
Liabilities represent the amount of monies or other resources that are likely to be paid as the result of a transaction or event that has already occurred. However, no liability can be paid by INS absent proper budget authority. Liabilities for which an appropriation has not been enacted are therefore classified as unfunded liabilities and there is no certainty that the appropriations will be enacted. Also, liabilities arising from other than contracts can be abrogated by the Government, acting in its sovereign capacity.
(n) Deferred Revenue
Deferred revenue for IEFA represents monies received to process applications for which the application process was not complete at year end. Deferred revenue for LBIFA represents the unexpired portion of decals issued. Deferred revenue for the S&E represents funds received from the Bureau of Prisons for the building of border patrol and detention facilities.
(o) Cash and Treasury Bonds Held in Trust / Securities on Deposit
Section 293 of the Immigration and Nationality Act, 8 U.S.C. 1363, requires that the cash and U.S. Treasury bonds or notes taken as security on an immigration bond be deposited in the U.S. Treasury in trust for the obligor of the bond and bear interest payable at a rate determined by the Secretary of the U.S. Treasury. These bonds are held in trust for the obligor until the bond is either cancelled or breached by INS. Therefore, the funds related to these bonds are not available for INS use.
(p) Accrued Employee Annual, Sick and Other Leave
The accrued employee annual leave liability is adjusted at the end of the reporting period for the value of annual leave earnings exceeding the value of annual leave usage at current pay rates. Sick leave and other types of nonvested leave are expensed as taken. To the extent current authority is not available to fund annual leave earned but not taken, funding may be obtained from future authority.
(q) Interest on Late Payments
Pursuant to the Prompt Payment Act, 31 U.S.C. § 3901-3907, Federal agencies must pay interest on payments for goods or services made to business concerns after the due date. The due date is generally 30 days after receipt of a proper invoice or acceptance of the goods or services.
(r) Income Taxes
INS, as part of a federal department, is not subject to federal, state, or local taxes.
(s) Retirement Plan
With few exceptions, employees hired before January 1, 1984, are covered by the Civil Service Retirement System (CSRS) and employees hired after that date are covered by the Federal Employees Retirement System (FERS).
For employees covered by the CSRS, INS contributes 7 percent of the employee's gross pay for normal retirement or 7 ½ percent for hazardous duty retirement. For employees covered by the FERS, INS contributes approximately 13 percent. For employees hired since December 31, 1983, INS also contributes the employer's share for Social Security. All employees are eligible to contribute to the Federal Thrift Savings Plan (TSP). For those employees covered by the FERS, a TSP is automatically established, and INS is required to contribute an additional 1 percent of gross pay to this plan and match employee contributions up to an additional 4 percent of gross pay. No matching contributions are made to the TSPs established by the CSRS employees.
The INS financial statements do not report CSRS or FERS assets, accumulated plan benefits, or unfunded liabilities, if any, which may be applicable to INS employees and funded by INS. Such reporting is the responsibility of the Office of Personnel Management.
(t) Actuarial Liabilities
The Federal Employees' Compensation Act (FECA) provides income and medical cost protection to covered Federal civilian employees injured on the job, employees who have incurred a work-related occupational disease, and beneficiaries of employees whose death is attributable to a job-related injury or occupational disease. Claims incurred for benefits for INS employees under FECA are administered by the Department of Labor (DOL) and are ultimately paid by INS. The future workers' compensation liability has two components, (1) unpaid billings, and (2) an amount of estimated unbilled claims. The unbilled claims are estimated by applying actuarial procedures. The DOL calculates the liability of the Federal Government for future compensation benefits, which includes the expected liability for death, disability, medical, and miscellaneous costs for approved compensation costs. The liability was determined using the paid-losses extrapolation method calculated over the next 23-year period. This method utilizes historical benefit payment patterns related to a specific incurred period to predict the ultimate payments related to that period. The projected annual benefit payments was discounted to present value. The resulting Federal Government liability was then allocated to DOJ. Based on the information provided by DOJ, the INS liability is estimated to approximately $146,858,000 at September 30, 1996. The actuarial liability is recorded for reporting purposes only. This liability constitutes an extended future estimate of cost which will not be obligated against budgetary resources until the FY in which the cost is actually billed to INS.
(u) Comparative Data
Comparative data for the prior year have not been presented because this is the first year for which financial statements have been prepared for INS. In future years, comparative data will be presented in order to provide an understanding of changes in the financial position and operations of INS.
Note 2. Fund Balance with the U.S. Treasury
The Fund Balance with the U.S. Treasury reported in the financial statements represents the unexpended cash balance in the accounts of INS for all INS Treasury Symbols at September 30, 1996.
Differences between INS books and records and INS's balance with U.S. Treasury result from cash in transit, errors and post closing adjustments. The differences amount to $199,674,479. Restricted funds are for the cash bonds held in trust.
Note 3. Accounts Receivable
The entity and non-entity accounts receivable balances as of September 30, 1996 were:
|Entity Accounts Receivable|
|Less: Allowance for Doubtful Accounts||0|
|Less: Allowance for Doubtful Accounts||(22,770,272)|
|Total Entity Accounts Receivable, Net||$82,390,573|
|Non-Entity Accounts Receivable|
|Less: Allowance for Doubtful Accounts||(6,653,308)|
INS does not establish an allowance for doubtful accounts for any intragovernmental accounts receivable because these accounts are considered fully collectible. The allowance for doubtful accounts for governmental receivables is determined by applying varying percentages to all accounts less than 365 days old and reserving 100 percent of all accounts greater than 365 days old. Bad debt expense for fiscal year 1996 was $4,254,539.
Note 4. Property, Plant and Equipment
Property, Plant and Equipment balances as of September 30, 1996 were:
|Construction in Progress||12,301,291||0||12,301,291|
Property, plant and equipment consists of land, buildings, structures, facilities, ADP software, vehicles, aircraft, radio equipment, office equipment and other equipment. Items are generally depreciated using the straight line method. Service lives range from 5 to 40 years.
Note 5. Net Position
The Net Position for INS as of September 30, 1996, was comprised of the following components.
|Trust Funds||Appropriated Funds||Other Funds||Total|
|Cumulative Results of Operations||0||0||229,761,187||229,761,187|
|Less: Future Funding Requirements||(10,771,380)||(214,902,189)||(82,897,428)||(308,570,997)|
The trust funds are comprised of the Federal account symbols FAS for VCRTF. Appropriated funds include FAS 15_1217. Other funds are comprised of the FAS 15X1217; 15X1218; 15X5087; 15X5088; 15X5089; 15X5086; 15X5126; and 15X5129.
Note 6. Future Funding Requirements
Future funding requirements are funding needs that will be met by future
appropriations. For INS, future funding requirements include accrued leave, actuarial
liabilities and contingent liabilities. All amounts are current except for the actuarial
liability of $146,858,699. Unfunded expenses include future benefit costs - actuarial
liabilities, and accrued annual leave and contingent liabilities for the year presented.
Leave and actuarial expenses are included in the Statement of Operations and Changes in
Net Position as Future Benefit Costs. Contingent liabilities are included on the Accrued
Contingencies line. The following is a summary of the unfunded liabilities as of September
|Liabilities Not Covered By Budgetary Resources:|
|Unfunded Annual Leave||$65,794,153|
|Total Liabilities Not Covered By Budgetary Resources||$308,570,997|
|Unfunded Expenses For The Year Ending September 30, 1996:|
Note 7. Expenses by Program
Expenses by program, for the year ending September 30, 1996, were as follows.
|Detention and Deportation||310,325,505|
|Adjudications and Naturalization||261,596,087|
|Data and Communications||191,648,625|
|Information and Records Management||119,438,971|
|Construction and Engineering||41,079,225|
|Management and Administration||158,709,941|
Note 8. Non-Operating Changes
Changes in the net position other than excess of revenues over total expenses were as
follows at September 30, 1996.
|Increase in Unexpended Appropriations||$244,566,081|
|Decrease in Capital Investment||(90,281)|
|Net Non-Operating Change||$244,475,800|
Note 9. Transfers to Treasury
In FY 1996, $8,000,000 was transferred from the INS Breached Bond/Detention Fund to the General Fund of the U.S. Treasury, Federal Account Symbol 151030. This transfer was made on September 30, 1996. Also, fines and interest collected in the amount of $6,263,258 were transferred to the General Fund.
Note 10. Non-entity Assets and Related Liabilities
Non-entity assets are assets that are held and managed by INS but are not available to
finance INS operations. Non-entity assets and related liabilities as of September 30,
1996, consist of the following:
|Fund Balance with Treasury||$127,026,073|
|Accounts Receivable, Net||3,198,258|
|Securities on Deposit||862,000|
|Interest on Notes Receivable||318,869|
|Cash - related to Bonds||442,250|
|Cash - related to Accounts Receivable||54,368|
|Total Non-entity Assets||$131,901,818|
|Interest Payable on Notes Receivable||$ 318,869|
|Interest Payable on U.S. Treasury Bonds||539,392|
|Fines and Interest Payable to U.S. Treasury||3,252,626|
|Cash, Securities and U.S. Treasury Bonds Held||127,790,931|
|Total Related Liabilities||$131,901,818|
Note 11. Contingent liabilities
INS is party to various administrative proceedings, legal actions, and claims brought by or against it. Management, the Office of General Counsel, the Procurement Office, the Human Resource Office and the Equal Employment Opportunity Office have determined that it is probable that some of these proceedings and actions will result in the incurrence of liabilities, and the amounts are reasonably estimable. These proceedings and actions, including the $65,000,000 in employee overtime pay claims and $17,500,000 in remediation costs discussed below, total $ 95,918,145 and were recorded in the financial statements as of September 30, 1996.
In fiscal years 1997 through 2000 INS estimates that they will pay $65,000,000 for claims related to unpaid overtime pay of 1,800 criminal investigators and other employees.
In fiscal year 1995 INS initiated the Fuel in Storage Tanks (FIST)/ 5 program to bring all INS storage tanks into compliance with the updated Environmental Protection Agency (EPA) requirements and to quantify costs that will be required to be expended over the compliance period to clean up contaminated sites. INS has identified forty-one projects requiring remediation funding over the next five years. Seventeen projects were started during fiscal years 1995 and 1996. INS has estimated the remediation costs at $21,500,000 of which $17,500,000 is expected to be funded by the Border Construction appropriation over the next four years. The $17,500,000 has been accrued as contingent liability at September 30, 1996. The remaining $4,000,000 has been either expended or established as an accrued liability in the Salaries and Expense appropriation as of September 30, 1996.