Major concerns have been raised about the possible non-payment of millions of dollars in taxes and duties to the Customs and Excise Department, following an audit of its computerised customs management system.
In his 2022 report, Auditor General Leigh Trotman noted that an audit of the Automated Systems for Customs Data (ASYCUDA) World application was done for the January 1, 2021, to March 31, 2022 period to determine the effectiveness and efficiency of the controls within the application as they related to information processing and security.
During that audit, it was discovered that there were at least 36 vehicles recorded in ASYCUDA as being held in private warehouses, but a review of the records of the Barbados Licensing Authority revealed that those vehicles were actually registered to individuals or companies.
“This would indicate that they are no longer being held in private warehouses. There was no documentation submitted to Customs to support the removal of these vehicles, hence there was no record of duties being paid,” said Trotman, without naming the warehouses.
“Taxes and duties payable on these vehicles were $1,249,214. This is in contravention of Section 160 of the Customs Act, CAP. 66. Failure to identify discrepancies in private warehouse entries can result in contravention of the law and loss of revenue. This occurrence should therefore be minimised.”
In its response, the Customs Department said it has recognised deficiencies in the processes for managing warehouses and, in this regard, “discussions were held with the International Monetary Fund (IMF) to assess the various operational issues and make recommendations for the way forward”.
“A number of recommendations were made with the view of ensuring compliance of warehouse operators. Recommendations relevant to this issue of vehicles not duty paid include conducting hot audits; implementing a time period of three years for the operation of warehouses with a renewal option; terminate warehouse approvals at a given date with the provision of a new approval process six months before termination; implementing new maximum limits for goods stored in warehouses; implementing audits according to risks; and aggressively pursuing the collection of debt,” it added.
The department said implementation of those recommendations would ensure that noncompliant activities are identified at an early stage and timely remedial action taken.
The audit also revealed that there was no record in ASYCUDA World to indicate that $35,009.66 in declarations were paid for two items of cargo which exited the Customs shed that is managed by Barbados Port Inc, and which were released to the respective consignees.
“Instances such as these circumvent Section 104 of the Customs Act, CAP. 66 and can result in a loss of revenue,” Trotman pointed out.
In response, the Customs Department promised that it would be investigated “and appropriate action will be taken”.
The audit also identified several deficiencies in the ASYCUDA World application. Trotman said that while a number of system components were operating effectively, improvements to other areas were required to “ensure that the application is optimised to continue its pivotal role in supporting Customs’ operations”.
Among the concerns was that approximately 65 per cent of employees from a sample selected did not have signed privacy agreements on their personnel files as required; and six retired officers and 16 former employees of Customs working with other agencies continued to have active user accounts within ASYCUDA World after their date of retirement or transfer.
Trotman also said the rules relating to passwords used to sign into the application were “weak”, making Customs vulnerable to attacks and breaches.
It was also observed that several vehicles imported by the same company were all declared with the same chassis and engine numbers recorded. Additionally, he said, there were instances in which the code for vehicles valued under $55 000 was entered on declarations for vehicles valued at over $55 000.
Acknowledging that some officers did not have signed confidentiality reports, the Customs Department said a comprehensive review would be done and “the defaulters sign accordingly”. It noted that all new recruits entering the department from 2021 have signed the agreement.
In relation to the retired employees who were still active in the system, the department said immediate action had been taken to remove the identified names and a further review would be done to ensure the system is cleansed of former employees.
It also indicated that it had started the process of implementing new password requirements.
The Customs Department said the finding of duplicated vehicle engine numbers and other related information indicate limitations to input validation and this would be an area in which the department will receive assistance from the United Nations Conference on Trade and Development (UNCTAD).
The audit also found that the $941 million in revenue collections recorded in ASYCUDA World for the financial year 2021-2022, differed by $16.4 million when compared to the information in Government’s accounting system.
“The update of Government’s accounting system relating to the revenue collections recorded in ASYCUDA is done manually and this increases the risk of errors being made. Automated updates would reduce the probability of errors,” said Trotman.