Audit Report 97-17

The Immigration and Naturalization Service (INS) collects an immigration user fee from international passengers traveling into the United States. This fee is primarily used to fund inspection and detention services at air and sea ports-of-entry. For FY 1996, approximately $347 million was collected in immigration user fees.

We determined that the U.S. Treasury could have realized annualized1 enhanced revenues of at least $1 million from interest savings if immigration user fee collections had been remitted to INS on a monthly basis rather than a quarterly basis in FY 1995 and 1996. Furthermore, if the immigration user fee collections had been remitted to INS on a monthly basis, INS would have been able to more quickly identify collectors (air or sea carriers) experiencing financial difficulties in order to reduce the amount of user fees required to be recovered through the bankruptcy courts.

The U.S. Customs Service (Customs) and the Animal and Plant Health Inspection Service of the U.S. Department of Agriculture (APHIS) also collect passenger user fees which are similar to the immigration user fee. For FY 1996, approximately $444 million was collected in Customs and APHIS user fees. If Customs and APHIS user fees had also been remitted on a monthly basis rather than a quarterly basis in FY 1995 and 1996, the U.S. Treasury could have additionally realized annualized enhanced revenues of at least $1.4 million from interest savings.

The quarterly remittance schedule for the immigration user fee is mandated in Section 286 of the Immigration and Nationality Act of 1952 (8 U.S.C. 1356), which contains the authority for the collection of the user fee. U.S. Treasury cash management guidelines would normally require a more aggressive collection of these fees.

The details of our work are contained in the Findings and Recommendations section of the report. Our audit scope and methodology are contained in Appendix I.

Section 286 of the Immigration and Nationality Act (INA) provides that the Attorney General charge and collect $6 per individual for the immigration inspection of each passenger arriving at a port of entry in the United States aboard a commercial aircraft or commercial vessel, or for the preinspection of a passenger in a place outside of the United States prior to such arrival in the United States. Limited categories of individuals are exempt from the immigration user fee.

The immigration user fee was established in 1986 by Public Laws 99-500 and 99-591, which amended Section 286 of the INA (8 U.S.C. 1356). The regulations governing the immigration user fee are codified in 8 C.F.R. § 286. The purpose of the immigration user fee is generally to provide funds for:

Each entity that issues a document or ticket to an individual for transportation by a commercial vessel or commercial aircraft into the United States collects the $6 fee from that individual at the time the document or ticket is issued. The collector remits the user fee to the INS within 31 days after the close of the calendar quarter in which the user fee was collected. However, the fourth quarter payment for collections from airline passengers in July and August are due September 20 and collections in September through December are due January 31. For purposes of this audit report, "collector" includes air or sea carriers, travel agents, tour wholesalers, or other entities that collect immigration user fees and remit them to INS.

Both Customs and APHIS have a similar type of passenger user fee that is charged for services performed for passengers traveling into the United States. The Customs user fee is currently $6.50 and the APHIS user fee is currently $1.45. Beginning October 1, 1997, the Customs user fee is to be reduced to $5. The regulations governing the collection and remittance of the Customs and APHIS user fees are generally the same as the regulations governing the immigration user fee, except for the fourth quarter payment for collections from airline passengers.

The passengers required to pay the three user fees are generally the same, although there are some differences in the types of passengers exempt from paying each fee. For example, the APHIS user fee applies to commercial aircraft passengers only and does not apply to passengers traveling from Canada into the United States. The regulations governing the Customs and APHIS user fees are codified in 19 C.F.R. § 24.22 (g) and 7 C.F.R. § 354.3, respectively.

The immigration user fee is collected at the time the ticket or travel document is issued and is remitted to the INS within 31 days after the close of the calendar quarter in which the fee was collected, except for the fourth quarter payment for collections from airline passengers. The remittance schedule is essentially on a quarterly basis, and will be referred to as such for purposes of this audit report. Table 1 shows the current remittance schedule2 and the longest and shortest number of days the immigration user fee is held until it is remitted to INS.

User Fee Collected	Remittance due to INS	Number of Days User Fee Held
01/01 -- 03/31	05/01	120 to 31 days
04/01 -- 06/30	07/31	121 to 31 days
07/01 -- 08/31	09/20	81 to 20 days
09/01 -- 12/31	01/31	152 to 31 days

Although the quarterly remittance schedule for immigration user fees is mandated by law, it differs from other federal government cash management practices. Cash collection initiatives over the past 10 years have stressed the importance of federal agencies aggressively collecting federal funds. The U.S. Treasury's cash management guidelines provide that invoices should be prepared and mailed within 5 business days after goods have been shipped or services rendered, and payment is due 30 days from the date of the invoice, unless otherwise provided by law. In addition, depending on the amount of the tax liability, federal income tax withholdings could be required to be remitted by the end of the next banking day by the employer. Federal income tax withholdings are similar to immigration user fees in that a third party (employers) collect funds on behalf of the government. However, remittances for income tax withholdings by employers are normally remitted to the federal government on a quicker schedule than for immigration user fees.

If the immigration user fees were remitted more quickly, for example, on a monthly basis, then the INS would have access to these funds sooner. In addition, INS would be able to more promptly identify collectors that are delinquent in remitting the immigration user fee. INS staff have indicated that collectors are not required to maintain the immigration user fee collections in a separate escrow account. Rather, some collectors co-mingle immigration user fee funds with their own operating funds to supplement their operational revenues. As a result, in the past, when some of these collectors filed for bankruptcy, INS was required to recover the immigration user fee collections through the bankruptcy courts. In addition, INS has had to develop payment plans for some collectors who had not been remitting user fee collections timely. According to INS staff, both of these situations can take years to resolve and involve an extensive amount of staff time and effort. If user fees were also required to be maintained in a separate escrow account, federal funds could be better protected.

In one bankruptcy case, INS was required to recover immigration user fee collections of approximately $755,000 through the bankruptcy court. However, since the Department of Justice (DOJ) litigated this matter on behalf of INS, INS did not receive $23,000 of immigration user fees. The DOJ offsets a three percent collection fee against civil monies it recovers through litigation on behalf of federal agencies or entities to support improvements in debt collection.

If the immigration user fee had been remitted on a monthly basis rather than a quarterly basis, the U.S. Treasury could have realized annualized enhanced revenues of at least $1 million from interest savings for FY 1995 and 1996. If the Customs and APHIS user fees had also been remitted on a monthly basis rather than a quarterly basis, the U.S. Treasury could have also realized annualized enhanced revenues of at least $1.4 million from interest savings. Appendix I provides a more detailed explanation of the methodology and data we used to calculate these figures. As explained in Appendix I,there were different sources of data on passenger statistics that could have been used to calculate estimated user fee collections on a monthly basis for FY 1995 and 1996. We elected to use the Department of Transportation's (DOT) "T-100" data. T-100 data is received on a monthly basis by DOT directly from air carriers on the number of international flights into the United States and the number of passengers on these flights.

In our judgment, a monthly remittance schedule would not cause significant, additional administrative burdens on the collectors. However, INS may want to consider waiving a monthly remittance requirement for collectors who collect immaterial amounts of user fees. In a prior OIG audit report3, we noted that the collectors reviewed had daily, weekly, monthly, and quarterly reports supporting immigration user fee collections. Furthermore, 8 C.F.R. §286.2 (b) provides that each collector whose monthly collections in any month exceeds $50,000 shall submit to INS a summary statement showing the amount of user fees collected for that month. This statement is due on the last business day of the following month. Thus, some collectors are already reporting user fee collections on a monthly basis, although the user fees are not required to be remitted until the quarterly due date.

INS agrees and will initiate the recommended changes to the immigration user fee legislation.

Resolved, based on INS' agreement with the recommendation. Please provide us documentation of the actions taken to initiate the recommended changes to the immigration user fee legislation.

INS agrees and will attempt to coordinate with Customs and APHIS on initiating the recommended legislative change to the immigration user fee legislation.

Resolved, based on INS' agreement with the recommendation. Please provide us documentation of INS' coordination with Customs and APHIS on initiating the recommended legislative change to the immigration user fee legislation.

INS agrees and will attempt to establish the recommended task force with Customs and APHIS.

Resolved, based on INS' agreement with the recommendation. Please provide us with documentation of the establishment of the task force with Customs and APHIS.

Our audit was conducted as a follow up to cash management issues identified in prior fees-related audit work. The purpose of this audit was to determine whether immigration user fee collection practices could be enhanced to maximize the resources available to INS. We conducted our audit in accordance with Government Auditing Standards issued by the Comptroller General of the United States, and accordingly, included such tests of the financial records and other auditing procedures as were considered necessary to accomplish our objective. However, we may not be considered by others to be completely independent of INS as required by the standards, because INS has reimbursed us for work that pertained to INS fee-supported programs. The Office of Management and Budget and the Department of Justice (including the OIG, INS, and the JMD) disagree with INS funding our work and are attempting to have the funds appropriated directly to the OIG. In FY 1996 and 1997, the OIG received $5 million for fee-related audits, investigations, and inspections. The dollar amount funded approximately 14 percent of the total OIG staff positions. Nonetheless, we consider ourselves independent and do not believe that our reimbursement arrangements with INS have had any effect with regard to our conduct of this audit.

We reviewed applicable federal laws and regulations, as well as INS policies and procedures, pertaining to the immigration user fee. We also reviewed laws and regulations governing Customs and APHIS, which both collect a similar passenger user fee. We reviewed immigration user fee collections for FY 1995 and 1996, and interviewed INS staff in the Offices of Finance and Budget. The work was performed at the INS headquarters office in Washington, D.C. Our audit did not include testing of the internal controls over the collection and remittance of the immigration user fee or testing of compliance with laws and regulations pertaining to the immigration user fee.

In order to calculate the interest savings of remitting the immigration user fee on a monthly basis rather than a quarterly basis, we estimated the monthly user fee collections for FY 1995 and 1996 using the DOT's T-100 database. T-100 data is received on a monthly basis by DOT directly from air carriers on the number of international flights into the United States and the number of passengers on these flights. We did not use immigration user fee collections remitted to the INS for the two fiscal years because we could not always determine in which month the collections occurred, and further, these remittances sometimes contained prior years' collections.

We also considered other sources of data to use in estimating user fee collections: INS' Performance Analysis System (PAS) data and I-92 and International Air Transport Association (IATA) data. PAS data includes the number of all airport inspections performed by INS inspectors, including inspections of passengers exempt from the user fee. I-92 data is completed by INS inspectors and documents the number of passengers by citizenship for all international flights landing in and departing from the United States, except international flights to and from Canada. Statistics on passenger travel into the United States from Canada were supplied by IATA and were added to the I-92 data to complete the universe of international passengers in our consideration of the I-92 data. At the time of our review, I-92 data was not available for FY 1996.

Table 2 compares our estimates of immigration user fee collections based on the different data sources with user fee collections remitted to INS for FY 1995 and 1996. Based on our analysis, we concluded that the T-100 data was sufficiently reliable for us to base our calculations on and was also the most conservative estimate of user fee collections4. In addition, in a prior audit,5 we concluded there was a reasonably close correlation between T-100 data and immigration user fee deposits over a 4 year period.

Immigration User Fee Collections
Fiscal Year	Received by INS	Estimates
Fiscal Year	Received by INS	T-100	PAS	I-92/IATA
1995	$298,505,108	$305,931,534	$366,382,554	$328,452,180
1996	$347,141,434	$303,000,378	$395,445,492	N/A
Total	$645,646,542	$608,931,912	$761,828,046	N/A

There are several differences between passengers included in T-100 data and passengers required to pay the immigration user fee, some of which are listed below. In addition, T-100 data is based on actual travel dates, not the month in which the transportation ticket was sold and the user fee collected.

In order to calculate the interest savings if the immigration user fees were remitted on a monthly basis rather than a quarterly basis for FY 1995 and 1996, we used the current value of funds rate published by the U.S. Treasury. The rate was 3 percent for the period January 1, 1994 to June 30, 1995, and 5 percent for the period July 1, 1995 to December 31, 1996. On a monthly remittance schedule, we hypothesized that user fee collections would be remitted to INS at the end of the month following the month in which the user fees were collected.

Using the T-100 data in the same manner as for the immigration user fee, we also calculated the interest savings if both the Customs and APHIS user fees were remitted on a monthly basis rather than a quarterly basis for FY 1995 and 1996. We believe the use of the T-100 data also provides a close estimate of the combined Customs and APHIS user fee collections.

Annualized Enhanced Revenues 6	Amount	Page
Interest savings if the immigration user fee collections had been remitted on a monthly basis rather than a quarterly basis in FY 1995 and 1996.	$1 million	4
Interest savings if the Customs and APHIS user fee collections had been remitted on a monthly basis rather than a quarterly basis in FY 1995 and 1996.	$1.4 million	4

1 "Annualized" means the average savings each year over a 2 year period, which would minimize any aberrations in any year's data that was used for the interest savings calculation.

2 This remittance schedule is for the immigration user fee collections from airline passengers, rather than from sea vessel passengers. The remittance schedule for user fee collections from sea vessel passengers follows a strict calendar quarter. Because user fee collections from airline passengers comprise over 95 percent of the total user fee collections, we used the remittance schedule for user fee collections from airline passengers in all audit calculations involving the immigration user fee.

3 Audit Report on Immigration and Naturalization Service Collection of Immigration User Fees, 89-2, December 1988.

4 During this audit we did not perform detailed testing of the reliability of the T-100 data. Because the preciseness of T-100 data is not of paramount importance in estimating user fee collections and interest savings, we believe the conclusions and recommendations in this report are valid.

5 Immigration and Naturalization Service Forecasting for Fee Accounts, 96-13, June 1996.

6 Enhanced Revenue is defined as future annual revenues that can be obtained from management action on audit recommendations. Examples include, but are not limited to, (1) establishing new fees, (2) increasing existing fees, (3) collection of current fees or debts owed, or (4) improving the value of assets prior to their sale.