Industry News: OIG Report Faults ATF’s Management of NFRTR Database
By Robert M. Hausman
A newly-issued report, “The Bureau of Alcohol, Tobacco, Firearms and Explosives’ National Firearms Registration and Transfer Record,” dated June 2007, issued by the U.S. Department of Justice Office of the Inspector General (OIG) Evaluation and Inspection Division, highlights a number of areas where the NFA Branch needs to make improvements, particularly in the areas of management of personnel and recordkeeping issues with the National Firearms Registration and Transfer Record (NFRTR). The report also praised the Branch for areas in which it has already made efficiency improvements, particularly in regard to the processing of forms submitted by industry and individuals.
The OIG found that since 2004, the NFA Branch has “improved significantly” the timeliness of both processing NFA weapons applications and responding to customer inquiries. However, continuing management and technical deficiencies contribute to inaccuracies in the NFRTR database.
NFRTR Inaccuracies
The OIG found, for example, that NFA Branch staff do not process applications or enter data into the NFRTR in a consistent manner, which leads to errors in records and inconsistent decisions on NFA weapons applications. In addition, the NFA Branch has a backlog of record discrepancies between the NFRTR and inventories of federal firearms licensees that were identified during ATF compliance inspections. Further, the NFRTR’s software programming is flawed (by ATF’s own admission) and causes technical problems for those working in the database.
“The lack of consistency in procedures and the backlog in reconciling discrepancies, combined with the technical issues, result in errors in the records, reports and queries produced from the NFRTR,” the OIG wrote. “These errors affect the NFRTR’s reliability as a regulatory tool when it is used during compliance inspections of federal firearms licensees.” However, the OIG said it did not find evidence that individual weapons owners or federal firearms licensees had been sanctioned or criminally prosecuted because of errors in the database.
The NFA Branch Chief (Ken Houchens) told the OIG that he has recently initiated several actions to reduce errors in the NFRTR, such as hiring additional staff, improving communications and training of staff members, and revising a procedures manual. Additionally, both the NFABranch Chief and the Assistant Director of the Office of Enforcement Programs and Services both stated that lack of funding precluded other significant actions such as correcting and upgrading the programming for the NFRTR and implementing online submissions of applications.
Timeliness Improvements
The OIG found that the NFA Branch has decreased the amount of time it takes to process NFA weapons applications and improved responsiveness to customer inquiries. Between 2004 and 2006, the average processing time for all eight types of NFA weapons applications decreased collectively from 30 days to 8 days. (The eight types of NFA weapons applications are: Form 5320.20, Application to Transport Interstate or to Temporarily Export Certain NFA Firearms; Form 1, Application to Make and Register a Firearm; Form 2, Notice of Firearms Manufactured or Imported; Form 3, Application for Tax-Exempt Transfer of Firearm and Registration to Special Occupational Taxpayer; Form 4, Application for Tax-Paid Transfer and Registration of a Firearm; Form 5, Application for Tax-Exempt Transfer and Registration of a Firearm; Form 9, Application and Permit for Permanent Exportation of a Firearm; and Form 10, Application for Registration of Firearms Acquired by Certain Government entities.)
In the same time period, the average processing time for the four types of applications used by individual weapons owners (Forms 1 and 4) and NFA weapons dealers (Forms 3 and 5) for registering and transferring NFA weapons decreased collectively from 39 days to 10 days. Specifically, processing time for Form 1 decreased from 99 days to 28 days; for Form 4, from 81 days to 9 days; for Form 3, from 30 days to 4 days; and for Form 5, 30 days to 9 days. The NFA Branch Chief attributed the improved processing times to the hiring of more contractor Data Entry Clerks, who enter data from the paper forms into the NFRTR, thereby freeing other staff to focus on reviewing the content of the applications.
To further improve customer service, the NFA Branch established a working relationship with the National Firearms Act Trade and Collectors Association (NFATCA), which represents NFA weapons dealers, manufacturers, importers, and owners. To build that relationship, the NFA Branch hosted a meeting with members of the NFATCA executive board in 2006 to demonstrate Branch operations and discuss NFA and NFRTR issues. The NFA Branch and the NFATCA also collaborated to write a handbook on the NFA and the weapons registration process, which ATF has made available on its website. However, the OIG found that the ATF website’s generally poor structure makes it difficult to navigate or locate relevant information and is a potential barrier to the electronic handbook’s use. The NFATCA has since announced it will offer printed copies of the handbook for sale at cost. Contact them at their website address: www.NFATCA.org for details.
Background
On June 26, 1934, the U.S. Congress passed the National Firearms Act (NFA) to limit the availability of machine guns, short barreled shotguns and rifles, firearm sound suppressors and other similar arms often used by criminals during the Prohibition Era. The NFA imposed a tax on the manufacture, import, and distribution of NFA arms not under the control of the U.S. government. The Bureau of ATF collects the taxes and maintains NFA arm possession records in a central registry - an electronic database called the National Firearms Registration and Transfer Record (NFRTR), which contains records on almost 2 million arms. ATF’s NFA Branch (under the Firearms and Explosives Services Division, Office of Enforcement Programs and Services) maintains the NFRTR and processes all applications to make, manufacture, import, register, and transfer NFA arms.
Congress expanded the scope of the NFA through the Gun Control Act (GCA) of 1968 to include destructive devices (bombs, incendiary devices such as flash bang grenades, and arms with a bore of greater than one-half inch), frames and receivers that can convert a semiautomatic arm into an automatic arm, and other concealable arms. The GCA restricts registrations of NFA arms only to makers (unlicensed individuals who usually make one arm at a time for individual use), manufacturers and importers. Further, the GCA called for a 30-day amnesty period ending December 1, 1968, where anyone possessing an NFA arm could register it without consequence. Any NFA arm not registered during the amnesty is considered contraband and cannot be registered.
On May 19, 1986, Congress passed the Firearms Owners’ Protection Act to prohibit possession of machine guns that were not legally possessed prior to its enactment. Thus, newly made machine guns were to be available only to the U.S. government and law enforcement entities.
NFA arms and their possessors must be registered with the NFRTR, and whenever possession is transferred (through sale, rental, gift, or bequest) the registration must be updated. A possessor is required to retain the approved NFA weapons application form as proof of a weapon’s registration and make it available to ATF upon request (26 U.S.C. § 5841 [e]). Manufacturers, importers, and makers of NFA weapons also are required to register each newly made, manufactured or imported arm.
The (OIG) examined ATF’s effectiveness in maintaining the records of registrations and transfers of NFA arms in the NFRTR. The OIG conducted the review in response to requests from members of Congress who had received letters from citizens expressing concern about the accuracy and completeness of the NFRTR. These citizens asserted that errors in the NFRTR and errors in decisions by NFA Branch employees left NFA weapons possessors vulnerable to unjust convictions for violating the NFA.
Inconsistent Data Entry
Due to inadequate standard operating procedures, training and communications, NFA Branch staff members do not process applications or enter data uniformly into the NFRTR. The staff’s variations in completing these tasks results in errors in NFRTR records, reports and queries as well as inconsistent decisions on NFA weapons registration and transfer applications, the OIG found.
The NFA Branch does not provide staff with a comprehensive standard operating procedures manual. The NFA Branch Chief inherited an undated manual of standard operating procedures when he assumed his position in 2005. The manual was under revision at the time of the OIG’s review, but the NFA Branch Chief said he has not had enough staff to complete the revision.
Specifically, none of the staff members the OIG investigators interviewed had ever received a copy of this manual as a resource to help them perform their duties. Instead, the procedural memorandums and directives provided to NFA Branch staff as guidance were usually specific to one issue and did not cover the basic information needed to process applications and enter data into the NFRTR.
NFA Branch staff also stated that they did not have adequate written direction on how to enter data such as abbreviations in the NFRTR, how to maintain application files, how often to contact applicants with pending applications, the proper method for fixing or working around NFRTR technical flaws, and who has the responsibility for correcting errors in NFRTR records. Therefore, staff members relied on each other or on managers to verbally explain what they believed the procedures were for processing applications and navigating the NFRTR database.
Additionally, the OIG said training for new NFA Branch staff members is ad hoc and not uniform. Staff members said that due to inadequate training, it was difficult to become familiar with the NFRTR and navigate easily through the database, a vital skill needed to process applications and conduct record checks. Staff also said inadequate training hampered their ability to learn about the NFA and the process for registering and transferring NFA weapons. Supervisors’ inadequate training led to variations in their direction and inconsistent decisions about approving or disapproving NFA weapons registration and transfer applications.
The OIG also found that the NFA Branch did not hold regular staff meetings so that the staff would stay current on changes in NFA weapons regulations. However, in March 2007, after the fieldwork for the OIG review was completed, the NFA Branch Section Chiefs began conducting monthly staff meetings to improve the flow of information within the Branch.
Backlog of NFRTR Errors
The NFA Branch is not promptly correcting discrepancies between the NFRTR records and licensee inventories, the OIG says. The NFA Branch is responsible for addressing the errors and discrepancies, identified by Industry Operators Investigators (IOIs) during compliance inspections of licensees. However, there are no established guidelines for the Branch on reconciling the errors within a certain amount of time, and as of March 2007 the Branch had a backlog of 61 discrepancy reports to reconcile. This means that some corrections to records do not get made before a licensee receives their next inspection, which could be 3 years later. At the time of the OIG’s review, one staff member was working part-time on the backlog. About one of four discrepancies could not be resolved without research by NFA Branch staff.
In a survey taken of IOIs by the OIG, 46.5% (139 of 299) reported that they found a discrepancy between the NFRTR inventory report and a licensee’s inventory “always” or “most of the time.” Further, 44.4% (133 of 299) said that the discrepancy was due to an error in the NFRTR “always” or “most of the time.” In comparison, none said that the error was “always” on the part of the licensee, and only 2% (6 of 299) said that the error was on the part of the licensee “most of the time.”
While licensees worry that discrepancies could result in their investigation by ATF Special Agents for violations of the NFA and GCA, IOIs told the OIG they only refer cases involving discrepancies to Special Agents when the discrepancy cannot be resolved or when there is a suspicion ofa deliberate violation of law. Between the years 2000 and 2006, only 15 federal firearms licensees were charged criminally for violating the NFA. In 2006, ATF conducted 7,292 compliance inspections and issued 12,176 violations. Of that total, less than 1% (53) was for NFA violations. In 2006, ATF issued an average of 1.7 violations per inspection, but only 0.007 NFA violations per inspection.
The OIG review could not identify any instances in which an NFRTR error resulted in inappropriate seizure of an NFA weapon or in appropriate criminal consequences to an individual weapons owner or FFL-holder. The OIG further asked the NFATCA for examples of its members’ weapons being inappropriately seized due to inaccuracies in the NFRTR, and none were received in response.
While the OIG could not find instances of wrongful seizure or prosecution of individuals or licensees based on ATF errors, it did note two examples (one provided the NFATCA and the other by ATF):
- 1. The NFA Branch incorrectly approved the sale (transfer) of a machine gun from a law enforcement agency to a federal firearms licensee. The licensee subsequently tried to sell (transfer) the weapon to another licensee. However, the NFA Branch discovered its original error and subsequently disapproved both the first and second transactions. The licensee was not allowed to retain possession of the machine gun, and the law enforcement agency did not have the funds to return the $10,000 paid by the licensee for the arm.
- 2. An NFA Branch Examiner processed an application to transfer an NFA weapon from a licensee to another licensee. The seller had purchased the arm from a police department that had, in turn, purchased the weapon ten years before from an importer. The Examiner who handled the original transaction should have stamped the approved application form “restricted” as only holders of certain licenses could possess and transfer the arm. Because the first application form was never stamped, the licensee did not know that he could only resell the weapon to certain license holders. The NFA Branch had to disapprove the licensee’s application to sell the weapon.
ATF Enforcement Actions
In 2006, ATF seized 3,030 NFA weapons, including 1,280 machine guns, 550 sawed-off shotguns and rifles, 571 silencers, 415 destructive devices, and 214 devices categorized as any other weapons. These totals included unregistered NFA weapons seized during criminal investigations as well as registered and unregistered NFA weapons seized as a result of compliance inspections of licensees.
In the OIG-conducted survey, IOIs were asked how many times in the past year they had referred a licensee to an ATF Special Agent based on a discrepancy between the NFRTR inventory report and the licensee’s inventory. Of the 298 IOIs who responded, 91% said they had made no referrals, 7% had made one referral, 1.6% had made 2 and less than 1% had made 3. IOIs interviewed emphasized they only refer cases when an NFA weapons registration in the NFRTR cannot be established after discussion with the licensee, the NFA Branch, and extensive searches of the NFRTR, or when they suspect deliberate criminal activity involving NFA weapons.
In fact, the OIG found that few licensees were criminally charged with NFA violations. Between 2000 and 2006, only 15 licensees were charged with violating 26 U.S.C. Chapter 53, the chapter of the Internal Revenue Code that includes the NFA. This represents only 6.5% of the total number of licensees (230) criminally charged with any violation.
NFRTR Database
As of November 2006, the NFRTR contained registrations for 1,906,786 weapons. The total number of weapons included 1,186,138 destructive devices (including 918,517 flash bang grenades), 391,532 machine guns, 150,364 silencers, 95,699 short barreled shotguns, 33,518 short barreled rifles, 48,443 weapons categorized as any other weapons, and 1,082 “unknown” devices or weapons not classified in the other categories (this includes older weapons or devices registered with ATF before the NFRTR was automated that are not clearly identified or do not fit in any other category of weapon).
On a percentage basis, the weapons in the NFRTR as of November 2006 break down into: 62.2% destructive devices, 20.5% machine guns, 7.9% silencers, 5% short barreled shotguns, 1.8% short barreled shotguns, 2.5% any other weapon and 0.1% unknown.
Each record in the NFRTR contains the make, model, and serial number of the weapon, the date of its registration, and the name and address of the person entitled to possess the weapon. For weapons registered prior to 1983, the NFRTR contains record entries of the three most recent transactions. After 1983, the records contain all transactions. Another database linked to the NFRTR database contains electronic images of the related applications forms for both pre- and post- 1983 registered weapons.
The reason for this is that when the NFRTR was automated in 1983, the NFA Branch chose to focus on entering all transaction information for newly registered weapons, so NFA Branch staff entered only the three most recent records for each NFA weapon registered prior to 1983. A full transaction history of the pre-1983 weapon is available in the imaging database, which contains scanned copies of original application forms. All transactions of an NFA weapon registered after 1983 are entered into the NFRTR.
ATF Database Flawed
The NFRTR’s programming has not been modified since 1997 when ATF converted the original 1983 electronic database to an Oracle platform. Several NFA Branch personnel described the NFRTR programming as obsolete and identified flaws: (1) older NFRTR records with empty data fields can improperly exclude the records from search results, (2) the NFRTR can erroneously generate two separate records for one weapon, (3) the system lacks controls to prevent inconsistent data entry, (4) the system lists incorrect owners of NFA weapons on queries and reports, and (5) when multiple weapons are registered on a single form, a change entered in the NFRTR for one weapon incorrectly applies thechange to all the weapons listed on that form.
One IOI, in making a comment about the need to update the NFRTR computer system, said, (ATF should) “...stop operating like a third world Department of Motor Vehicles office.” For the last five years, ATF would not make system enhancements to the NFRTR as ATF planned to integrate many of the databases of its National Tracing Center, Firearms and Explosives Imports Branch, and NFA Branch through the Firearms Integrated Technology (FIT) project. ATF received budget allocations for FIT in fiscal years 2001 and 2002. However it reallocated the funds to another mission which exhausted the funding by 2004. ATF’s subsequent funding requests for FIT have not been successful. During 2006, the NFA Branch processed and entered 402,151 NFA weapons applications forms into the NFRTR.
As of March 2007, the NFA Branch had a staff of 20 ATF personnel and 12 contractors. The NFA Branch is authorized to have a complement of sixteen Examiners, eight Specialists, one Special Occupational Tax (SOT) Specialist, and one Information Technology Specialist. As of March 2007, it had only ten Examiners, four Specialists, one SOT Specialist, and one Information Technology Specialist.
Not All NFA Staff on “Same Page”
One Examiner interviewed by the OIG stated that, due to poor training, not all staff members are “on the same page” on how they approach their work and applications may be processed incorrectly. He cited an instance in which an Examiner needed to know whether a state allowed a certain type of NFA weapon, and rather than researching the current state law or regulation, the Examiner simply queried the NFRTR to view a similar transaction in that state that had been approved in the past. State laws and regulations may change since a previous transaction the OIG pointed out in its report, but that Examiners are not kept current on these changes and are not trained to research the laws and regulations appropriately, instead of following old transactions.
Members of industry have long complained that the same question on the regulations posed to NFA staff will bring different responses, depending on who is asked. The OIG research bore this out as it noted that “inadequate training could affect the direction given to NFA Branch staff as well as information provided to the ATF field offices.”
For example, the lack of training on NFA-related state laws and regulations affected the guidance from Section Chiefs to Examiners. Further, an IOI survey respondent commented, “We can call (the) NFA (Branch) and speak to different people (on the same issue) and get different answers. This has happened more than a few times in the past.”
The Section Chiefs are usually selected from the Examiner pool and do not receive additional training, either supervisory or NFA-related. “They receive the same ad hoc training as other NFA Branch staff, and the quality of the information received during the training is not standard,” the OIG noted.
“Because new staff members receive different training from different people who also were not formally trained, the quality of the training in terms of topics covered and accuracy of information is insufficient,” the OIG reasoned. “Incomplete and inaccurate training leads to errors in the NFRTR and in decisions based on the NFRTR. Moreover, variations in direction based on inadequate training could produce inconsistent approvals or disapprovals of NFA weapons applications.”
One of the NFATCA representatives who maintains a federal license for NFA weapons estimated for the OIG that during his compliance inspections the NFRTR inventory reports were 25 to 30% inaccurate. He added that NFA licensees fear compliance inspections because the NFRTR is inaccurate, not because their inventory records are inaccurate. Another NFATCA representative said that NFA licensees “should not be afraid of compliance inspections because their records are probably better than ATF’s.”
Multiple Registrations Linked
NFA Branch staff noted that the NFRTR does not always indicate the correct owner of weapons on queries and reports. The NFA Branch Program Manager stated to the OIG that this problem was identified almost immediately after the new NFRTR system was deployed in 1997, but the information technology staff was unable to correct the problem and ATF did not pursue resolution.
When multiple NFA weapons are registered or transferred on the same form they are initially linked by their NFRTR-generated control number. This control number is based on the form and not the weapon and applies to the records of all weapons registered on that form. The link between weapons registered on the same NFA weapon application is broken only after weapons have been transferred to new owners two subsequent times. The weapons would then have their own NFRTR-generated control numbers. This programming flaw is most evident when a transfer of a weapon is canceled by the applicant and that weapon’s preceding transaction involved multiple weapons registered or transferred on the same form. If no action is taken to correct the record to show the true current owner, all NFRTR queries and reports will incorrectly list the transferee from the canceled transaction as the current owner. However, when an NFA Branch staff member manually fixes the record that show the correct owner of the weapon, the NFRTR will apply that change to all the weapons on the form, which are still linked by the same control number. Since it takes a significant amount of time and effort to ensure that only the relevant weapon on that record is changed, Examiners often do not fixvsuch records, the OIG said.
Non-Completion of Vital Projects
ATF has initiated, but not completed due to budget constraints, two projects that the OIG said would improve the accuracy of the NFRTR and increase the efficiency of the NFA Branch. The first involves scanning all NFA weapons transfer and registration applications since 1934 into digital files in a database and establishing an indexing system to search this new database. The second project, titled e-Forms, is creating an electronic filing system for individual weapons owners and federal firearms licensees to submit NFA weapons applications online.
The OIG found that ATF has a oneyear backlog worth of NFA weapons applications to image and index. In 2005, the NFA Branch had four contractors working on imaging and indexing, and the backlog was only 6months. In June 2006, budget cuts forced ATF to reduce the number of contractors to two, which has increased the backlog significantly.
ATF has not completed the e-Forms project it initiated in 2004. The capability for individuals and industry to submit applications online would reduce data entry errors by NFA Branch personnel, detect errors on applicant’s registration and transfer forms before entry into the NFRTR, and allow importers and manufacturers to check the status of forms they submit electronically for processing.
In fiscal year 2002, ATF received funding for the e-Forms project and developed the requirements document for an electronic filing system and a prototype of the system. By 2006, a prototype of the system was demonstrated to the industry. However, due to budget constraints, ATF suspended the project before the system was finalized and implemented. ATF estimated that it needed just under $14 million to complete the e-Forms system and to operate it for the first two years and that $200,000 would be needed to operate it each year thereafter.
Recommendations
To help improve the processing of NFA applications and reduce errors in the NFRTR, the OIG recommended that ATF:
- Improve the ATF website by making it easier to find NFA information, such as frequently asked questions, applications forms and instructions, NFA Branch contact information, and the NFA Handbook.
- Develop and disseminate to all NFA Branch staff a comprehensive standard operating procedures manual that includes all NFA weapons application processes, NFRTR processes and data entry codes and abbreviations.
- Develop uniform and structured training for staff members that includes standard operating procedures and hands-on experience with the NFRTR. Ensure that all NFA Branch staff members attend the training and that the staff trainers are themselves properly trained. Provide training for the Section Chiefs on supervisory techniques.
- Establish regular and recurring methods of communication to NFA Branch staff.
- Resolve discrepancies between the NFRTR and inventories of federal firearms licensees in a timely manner.
- Develop and implement an action plan to fix technical programming flaws and errors in the NFRTR.
- Develop and implement an action plan for eliminating the backlog of imaging and indexing forms for the imaging database.
- Develop and implement an action plan for completing the e-Forms project.
The OIG concluded that since 2004, the NFA Branch has reduced the overall average processing time by more than two-thirds for the most used forms and has improved its responsiveness to customer service inquiries and requests for information; however it has much more work to do to improve its operations.
The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. He also offers FFL-mailing lists to firms interested in direct marketing efforts to the industry. He may be reached at: FirearmsB@aol.com.
This article first appeared in Small Arms Review V11N3 (December 2007) |
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