Collecting Revenue on U.S. E-Cigarette Imports

Types of e-cigarettes and e-cigarette partsOver the last decade, the use of traditional cigarettes in the United States has declined, while the use of electronic cigarettes (e-cigarettes) has grown rapidly. We’ve previously reported that the federal government could not specifically track e-cigarette imports. However, U.S. Customs and Border Protection began doing so on January 1, 2016, and we analyzed the first full year of data.

Today’s WatchBlog explores what we found.

E-cigarette parts

An e-cigarette device typically contains a battery, a heating element, and a cartridge or tank that can be empty or filled with liquid.

Types of e-cigarettes and e-cigarette parts

Heating elements and cartridges can be imported separately, as can e-cigarette liquid—which can contain nicotine in different concentrations or have no nicotine at all.

Value of imports

The value of U.S. e-cigarette imports totaled about $342 million in 2016—and brought in about $9 million in tariff revenue. E-cigarette devices accounted for nearly 60% of the value of these imports ($204 million), parts for nearly 32% ($108 million), and liquid for about 9% ($30 million).

We also found that importers brought in much greater quantities of e-cigarette liquid (about 480,000 kilograms) with higher nicotine content than liquid with lower nicotine content (about 111,000 kilograms).

Country of origin

Finally, although e-cigarettes were imported from 41 countries into the United States in 2016, imports from China accounted for about 91 percent of these imports by value.

To find out more, check out our report on U.S. e-cigarette imports in 2016.

Table 2: Customs Value of U.S. E-cigarette Imports by Country of Origin in 2016

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Improving Federal Administration of Programs that Serve the American Indian Population

High Risk MedallionFor nearly a decade, we’ve reported that federal agencies have ineffectively administered Indian health care, education, and energy resource development programs. This year we added the agencies responsible for these programs to our High Risk List—which discuss the federal agencies and programs most vulnerable to fraud, waste, abuse, and mismanagement.

Today’s WatchBlog discusses federal administration of Indian health care services, education programs, and development of Indian energy resources. Watch our video, and read on for more.

Ensuring the health of American Indians

The life expectancy of American Indians born today is 4.4 years shorter than other Americans in the United States. What’s worse is that many of the conditions preceding these deaths—such as diabetes and the flu—could be prevented by timely access to quality health care.

The Indian Health Service is charged with providing health care services to tribes and their members—and does so either through government-operated hospitals and clinics, or by funding services provided in other facilities. However, we continue to find that IHS struggles to provide quality health care, due in part to inadequate oversight, insufficient workforce planning, and aging infrastructure and equipment.

For example, in 2016 we found that there were over 1,550 vacancies for health care professionals—doctors, nurses, dentists, and more—throughout the IHS health care system, affecting its ability to provide primary care to tribes and their members. The quality of health care was also hampered by outdated medical and telecommunications equipment, such as analog mammography machines and telephones with an insufficient number of lines for scheduling patient appointments.

Ensuring safe schools and high quality education for Native youth

The federal government invests over $1 billion annually in Bureau of Indian Education schools. Yet students enrolled in these schools lag behind American Indian students in public schools in reading and math, and only about 53% graduate from high school, according to the Bureau of Indian Education.

photo of a tag reading "Failed Inspection"Why? We identified long-standing problems that have hampered efforts to improve BIE schools over the years. For example, in 2014 we reported that BIE lacked robust systems to ensure that its schools used federal funds to educate students. As a result, we found several instances of misused funds, including $1.7 million for one school that was improperly transferred to off-shore accounts.

In 2016, we also reported that deteriorating facilities and equipment led to unsafe conditions at BIE schools. At one school, we found seven boilers that failed inspection because of safety hazards, such as elevated levels of carbon monoxide. Though they endangered students, most of the boilers were not repaired until 8 months after inspection.

Energy resource development on American Indian lands

Some Indian tribes hold plentiful energy resources—such as oil and natural gas found in shale as well as wind and solar—and developing these resources could help them improve the economy and well-being of their communities. However, tribes face difficulties capitalizing on these resources due to, among other things, complicated regulations and federal mismanagement of resources held in trust.

Figure 1: Location of Shale Plays and Basins and Tribal Boundaries in the Continental United States

Development of many of these resources requires approval from the Bureau of Indian Affairs. Over the past 3 years, we have reported on long-running federal mismanagement of Indian energy resources. In 2015, we reported that BIA was short-staffed, and had weak oversight of its review and approval process associated with the development of energy resources—resulting in long approval times, missed opportunities, and lost revenue for tribes.

Additionally, in 2016, we found that multiple agencies were not following best practices for collaborating on initiatives to help Indian tribes achieve their energy goals.

As you might imagine, we’ve made dozens of recommendations over the years aimed at improving federal services to Indian tribes and their members. Check out our full list here, and learn more in this year’s High Risk List.

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Keeping the F-35 Fighter Flying

Photo of an F-35 in flight against a blue skyThe stealthy F-35 aircraft, also known as the Joint Strike Fighter, is slated to replace several different types of aircraft in the U.S. fleet. Three variations of the plane—one that can take off vertically, one suited to aircraft carriers, and one designed for regular runways—are heading to the Marine Corps, Navy, and Air Force, respectively. Plans call for the U.S. to buy 2,456 of them.

It is a gargantuan investment and the nation’s most costly weapon system. For sustainment alone—repairs, maintenance, etc.—the cost estimate tops $1 trillion to keep the aircraft flying through its projected 60-year lifespan.

With F-35 aircraft development nearing completion and the Department of Defense preparing to ramp up production, DOD’s ability to sustain the F-35 is of critical concern. Doing so requires a capable supply chain.

Today’s WatchBlog explores our report on DOD’s efforts to sustain the growing F-35 fleet.

Sustainment Efforts Already Falling Short and Grounding Aircraft

DOD and its international partners have more than 250 F-35 aircraft in their possession and plan to triple the fleet in the next 4 years. But DOD is already facing sustainment challenges that are degrading the fleet’s readiness for action, including:

  • A 6-year delay in establishing F-35 part repair capabilities at military depots, resulting in long repair times;
  • Parts shortages that kept aircraft from flying about 22% of the time from January through  August 7, 2017;
  • The inability to conduct all required maintenance during initial planned F-35 shipboard deployments.

As this graphic shows, average repair times have not matched program objectives.

Figure 1: Average Time for Depot-level Repair of an F-35 Part as Compared with the Objective

These challenges are largely due to insufficient planning and funding by DOD. DOD is taking steps to address these challenges, but without improved planning, it may not be able to sustain the rapidly expanding fleet.

Estimated Costs Have Increased

Although DOD has taken actions to reduce estimated sustainment costs, they have still gone up. The estimated sustainment costs for the life of the F-35 have increased by 24% since 2012, partially due to an increase in projected flying hours and an increase in the aircraft’s lifespan from 56 to 60 years.

Figure 9: Increase in F-35 Joint Program Office Life-Cycle Operating and Support Cost Estimates since 2012, in Then-Year Dollars, in Billions

Lack of Communication Muddles the Services’ Understanding of Sustainment Costs

A prerequisite for getting a grip on sustainment cost increases is understanding the sustainment costs, and visibility is limited in this area.

The F-35 program office is responsible for getting the aircraft built and ensuring that it will meet the needs of the services in terms of capabilities and sustainment. It approves sustainment requirements submitted by the services, hires contractors, and informs the services of the contract costs. However, the office and the services are not communicating as well as they should be.

As a result, the military services do not fully understand what they are paying for. They report unexplained cost increases and difficulty matching their sustainment requirements to the actual contracts.

Without improving communication about the costs the services are being charged, the services may struggle to effectively budget for F-35 sustainment. We recommended that DOD take steps to improve communication with the services and provide more information about how the F-35 sustainment costs they are being charged relate to the capabilities received.

DOD Risks Entering Into F-35 Performance-Based Contracts Too Early

DOD is testing out performance-based sustainment contracts with the prime contractor for the F-35 and plans to switch entirely to this kind of contract in 2020. DOD administration has directed greater use of performance-based logistics agreements as a way to decrease costs and increase contractor performance.

However, DOD could find itself overpaying the contractor while not receiving the expected level of support for the F-35. A performance-based agreement with the prime contractor has potential to produce cost savings, but we highlighted several reasons why DOD may not be ready to enter into these multi-year contracts for the F-35 by 2020.

  • DOD has not achieved desired aircraft performance under pilot agreements.
  • DOD may not be using appropriate metrics to incentivize the contractor.
  • DOD does not know enough about the costs and technical characteristics of the aircraft.

We recommended that DOD re-examine its metrics and ensure that it has sufficient knowledge of costs and technical characteristics before entering into performance-based contracts.

Check out our report to learn more about F-35 sustainment and all 4 recommendations we made to DOD.

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It’s Official—GAO Is a Great Place to Work!

Once again, GAO has been named one of the Best Places to Work in the Federal Government. We held our rank as the 2nd best place to work among midsize federal agencies in 2017, and even improved our score from last year.

In addition, we were again No. 1 for our support of diversity for midsize agencies—the third year in a row that our scores went up for this category. Continue reading

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How Much Does Crime Cost?

justiceBurglary, murder, identity theft—all crimes have costs for victims and society. The Department of Justice reported that federal, state, and local governments spent more than $280 billion in 2012 on criminal justice, including police protection, the court system, and prisons.

However, there are many other costs that researchers consider when estimating the total cost of crime in the United States. These can include tangible costs like replacing damaged property, and intangible costs like victims’ pain and suffering.

Today’s WatchBlog takes a look at our recent report on how researchers calculate these costs—and why these costs matter. Continue reading

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How Much Is That Doggie in the Cabin?

photo of airport towerIf you’re one of the millions flying this holiday season, you may be wondering whether you’ll have to pay fees for services that aren’t included in your ticket price. Want to bring Fido? There’s a fee for that. Want to bring a carry-on and get a cup of coffee? There may be new fees for that.

Today’s WatchBlog explores airlines’ new fees for optional services and what the Department of Transportation is doing to protect consumers. Continue reading

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GAO’s 2017 Performance and Accountability Report—More than $73 Billion in Financial Benefits

cover of 2017 reportIt’s that time of year again, the time we like to share the results of our work with you, the taxpayer. This year our audit work produced over $73 billion in financial benefits. In other words, for every $1 Congress invested in us, we returned $128.

And we don’t just work to save you money—we also aim to improve government effectiveness. This year, we recommended more than 1,200 ways that the federal government could improve programs and operations. How? Among other things, our reports prompted federal agencies to: Continue reading

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The Health and Welfare of the Nation’s Children (podcast & infographic)

thumbnail of infographicThe long-term success of the nation depends in large part on how well families and society care for children. Our recent report looked at more than 20 indicators to get a picture of the state of children’s well-being. We found that while the U.S. has improved in some categories such as health insurance and high school graduation rates, some subgroups continue to fare worse than others. For example, Black, Hispanic, and poor students’ estimated average reading and math scores are worse than those of their White and non-poor peers. And Hispanic children have the lowest rates of insurance. Continue reading

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The DATA Act – Working Towards Federal Spending Transparency

Government thumbnail imageThe Digital Accountability and Transparency Act of 2014 requires federal agencies to prepare and submit standardized, accurate information about the roughly $3.7 trillion they spend each year. The Office of Management and Budget and the Department of the Treasury are required to help facilitate such reporting, and make it available to the public. We’ve reported on the challenges—and successes—related to these efforts over the past several years. Continue reading

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Sorting Out the Federal Government: Creating an Inventory of Programs Using Information Architecture

information managementHave you ever bought shoes online? Did you search for hiking boots? In mud brown? Size 10? The database you used likely allowed you to search for a specific color, size, style, and other features. It may have given you a wide variety of shoes to choose from that matched the characteristics you were looking for.

When it comes to information about federal programs, though, there is no way to do a similar search—although there is a requirement that executive agencies develop such an inventory. Today’s WatchBlog post explores our recent review of one approach to developing a useful inventory of federal programs. Continue reading

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