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Best Practices in Firearm Serial Number Recording

As the fourth step in our Serial Number Management process, firearm serial number recording should largely be addressed through the best practices discussed in serial number reservation, application, and tracking. Thus, we will use this final installment to highlight methodologies that strengthen the overall Serial Number Management approach.

As you likely know, compliance is owned by everyone in the organization. However, the ultimate responsibility falls to the Responsible Person(s) (“RP”) named on the license. From a recordkeeping perspective, we can assimilate the RP’s role to that of a certifying officer and their responsibilities to make assertions about the quality of information contained in the financial statements. That is, the information should be: (C)omplete, (A)ccurate, (T)imely and well monitored.

Completeness

Completeness means ensuring that every serial number subject to a regulated activity (i.e., transfers, destruction) is:

• included in a transaction; and
• that the transaction is completed (i.e., posted to the records).

For example, if 9 of 10 serial numbers are entered before the lunch bell, it is advisable the controls exist to ensure that the 10^th number gets recorded without fail. More often than not, these risks arise in highly paper driven environments that do not have external validations over the transaction count (e.g., validation via an ASN).

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Accuracy

Accuracy pertains to the quality of the data entered into a firearms transaction and recorded in the book. For example, it is critical that the serial numbers are accurate as well as the related acquisition and disposition data. This would include, amongst other things:

• Acquisition and disposition date
• Acquired From information which usually stems from a Vendor Master file if not pertaining to the original manufacturing acquisition; and
• Disposed To information stemming from the Customer Master file if not pertaining to an inventory loss, scrap or change in form.

Timeliness

The regulations also provide requirements for the timeliness of administrative entry into the record keeping systems. For example, and with the exception of Type 01 dealer receipts, acquisitions should be recorded within a seven day period. And, imports should be recorded within 15 days of the date of release from US Customs and as of the Customs release date into the United States. Maintaining an internal control structure that drives timeliness of entry is important. It is common to see larger FFLs use visual queues to identify the aged period of a physical receipt to increase the likelihood of meeting the 7-day requirement. We recommend that readers consult the regulations to learn more about the proper time periods based on the FFL type and transaction type.

Monitoring

Our capstone recommendation in the Serial Number Management process is the concept of Monitoring. Throughout our four-part series we’ve talked about best practice processes, technology and controls for ensuring that Serial Numbers are properly reserved, applied, tracked and recorded. However, mistakes happen.

Much like inventory-laden companies outside of our industry, licensees can significantly benefit from a periodic, bi-directional “Book to Physical “ process, or so it is named in the accounting community. Firearm companies have an obligation to themselves to monitor the accuracy of their inventory balance through the same means but have an added burden to ensure that serialized assets reconcile properly to their Bound Book (or “A&D Book). Depending on the nature of your control environment you might consider quarterly inventories, semi-annual inventories or an annual inventory combined with a cycle counting process. Regardless of the frequency and method, monitoring controls such as the Serial Number Inventory play a vital role in maintaining accurate records and serialized traceability.

More Articles on FFL ATF Record Keeping Including ATF e4473, NFA Forms and Electronic Bound Books 

• ATF Ruling 2017-1
• Making Corrections on ATF Form 4473 and ATF eForm 4473
• ATF Form 4473 Firearm Transaction Record Revised
• Three Most Common Mistakes Found On a Form 4473
• 7 of 10 Compliance Violations Occur on ATF 4473
• Spending a Little Time with the ATF 4473
• How Does trump Affect Marijuana Firearms and the ATF Form 4473
• ATF Form 4473 and the Prohibited Persons List
• ATF Announces Release of Updated eForm 4473
• FBI Nics Announced Enhanced Customer Service

By Jon Rydberg
CEO, Orchid Advisors

Orchid Advisors assists firearms manufacturers, distributors and retailers in achieving compliance and operational excellence through education, technology, software and consulting solutions that reduce risk, cut costs, and provide expert guidance to make our client’s business more successful and efficient.