United States Government Accountability Office

GAO Report to the Ranking Member, 

Committee on Oversight and 

Government Reform, House of 

Representatives 

FEDERAL 

RETIREMENT 

THRIFT 

INVESTMENT BOARD

Due Diligence Over 

Administrative 

Expenses Should 

Continue and Be 

Broadened 

May 2007 

 

GAO-07-541 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 2007

FEDERAL RETIREMENT THRIFT 

INVESTMENT BOARD 

Due Diligence Over Administrative 

Expenses Should Continue and Be 

Broadened 

Highlights of GAO-07-541, a report to the 

Ranking Member, Committee on 

Oversight and Government Reform, 

House of Representatives

The Federal Retirement Thrift 

Investment Board (FRTIB) is 

charged with managing the Thrift

Savings Plan (TSP)—a key 

component of retirement savings

for many federal employees—in the 

interest of its participants and 

beneficiaries. As part of a broader

request on oversight of FRTIB, 

GAO reviewed (1) the

administrative expenses of FRTIB 

and key components of these 

expenses, (2) whether the 

administrative expenses of FRTIB 

are the result of practices 

consistent with federal regulations

and similar functions at other

agencies, and (3) FRTIB’s current

method of benchmarking 

administrative expenses. GAO

reviewed FRTIB’s budgets, audited 

financial statements, a 

benchmarking study, and written

responses to questions that GAO 

submitted. GAO also reviewed the

regulations that guide FRTIB’s 

spending. 

What GAO Recommends

GAO recommends that the board 

members direct the Executive 

Director to continue exercising due

diligence by identifying 

opportunities for continued cost

savings, specifically in the areas of

rent and travel. GAO also 

recommends that FRTIB expand its 

benchmarking practices to

comparable individual activities. 

FRTIB partially concurred with our 

recommendations. 

FRTIB’s administrative expenses ranged from a peak of $101 million in fiscal

year 2000 to $83 million estimated for fiscal year 2006. Only the 2001 

administrative expenses were lower, reflecting the termination of a key

contract. In real terms, FRTIB’s administrative expenses in 2006 were at a 7-

year low. Throughout this period more than half of FRTIB’s administrative 

expenses went towards purchasing services from outside entities—private 

contractors and other government agencies. The next largest share of 

FRTIB’s budget was for miscellaneous expenses, such as printing and 

information technology. Additional administrative expenses were spent on 

compensation of FRTIB’s 65 employees, rent, and travel. 

Total Administrative Expenses of FRTIB, Fiscal Years 2000-2006

0

20

40

60

80

100

120

Services purchased from

private contractors

Services purchased from

other government agencies

Miscellaneous expenses

Compensation

Rent

2000 2001 2002 2003 2004 2005 2006

Current year dollars in millions

Fiscal year

Source: GAO analysis of FRTIB data.

Note: Travel expenses—which have been between .10 and .24 percent of expenses—are not 

included in the graph above because they are too small to be visually apparent. 

FRTIB has established practices that are consistent with federal 

regulations—for acquisition, compensation, and travel. There are some

areas, however, that suggest opportunities for future savings. The amount 

FRTIB pays per square foot is consistent with average rental rates that the 

General Services Administration (GSA) cites for nearby available properties. 

However, FRTIB rents more space per employee than GSA would 

recommend. Given recent downsizing, FRTIB has begun looking into 

consolidating its office space. Additionally, opportunities exist to reduce the 

travel expenses of TSP board members traveling to Washington, D.C. 

FRTIB’s current method of benchmarking TSP participants’ investment fees 

against those charged by 401(k) plans is a very important measure for 

participants—and the TSP compares favorably on this measure. However, 

looking only at an aggregate measure provides insufficient information to 

judge whether individual activities are being conducted either to achieve the 

best performance or in the most efficient manner. Benchmarking by 

individual activity permits an organization to compare its performance with 

standards or “best in class” in a specific activity. 

www.gao.gov/cgi-bin/getrpt?GAO-07-541.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Susan J. Irving 

at (202) 512-9142 or irvings@gao.gov. 
Contents 

Letter 1

Results in Brief 2

Background 4

Overview of Individual Categories of Expenses and Comparison of 

Expenses Against Other Agencies and Federal Regulations 10 

Miscellaneous Expenses 14 

FRTIB’s Current Practice of Benchmarking Against the Cost of 

Participating in Private Sector 401(k) Plans Offers a Limited 

Means of Evaluating Administrative Expenses 20 

Conclusions 21

Recommendations for Executive Action 22 

Agency Comments and Our Evaluation 22 

Appendix I Objectives, Scope, and Methodology 25 

Appendix II Comments from the Federal Retirement Thrift 

Investment Board 27 

Appendix III GAO Contact and Staff Acknowledgments 35 

Figures 

Figure 1: Total Administrative Expenses of FRTIB, Fiscal Years 

2000-2006 8

Figure 2: Expense Categories Used in This Report 9 

Figure 3: Administration Expenses in FRTIB’s Budget, Fiscal Year 

2006 10

Figure 4: Services Purchased from Private Contractors and Other 

Federal Agencies, Fiscal Years 2000-2006 11 

Figure 5: Miscellaneous Expenses, Fiscal Years 2000-2006 14 

Figure 6: Compensation, Fiscal Years 2000-2006 16 

Figure 7: Rent, Fiscal Years 2000-2006 17 

Figure 8: Travel Expenses, Fiscal Years 2000-2006 19 

Page i GAO-07-541 Federal Retirement Thrift Investment Board
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Page ii GAO-07-541 Federal Retirement Thrift Investment Board
United States Government Accountability Office

Washington, DC 20548 

May 14, 2007

The Honorable Tom Davis 

Ranking Member 

Committee on Oversight and Government Reform 

House of Representatives 

The Thrift Savings Plan (TSP)—created in 1986—is a key component of 

the Federal Employees’ Retirement System (FERS). TSP holds about $200 

billion in retirement assets for more than three and a half million 

participants.1

 It is managed by the Federal Retirement Thrift Investment 

Board (FRTIB), an independent agency in the executive branch governed

by five Presidentially appointed board members. Similar to private sector

401(k) pension plans, TSP allows federal employees to contribute a 

portion of their current compensation through payroll deductions and 

invest among a menu of options. 

As part of a broader request on the oversight of FRTIB, you asked that we 

examine the administrative expenses of FRTIB. Specifically, we reviewed 

(1) the administrative expenses of FRTIB and the key components of these 

expenses, (2) whether the administrative expenses are the result of 

practices consistent with applicable federal regulations, and (3) FRTIB’s 

current method of benchmarking administrative expenses. 

To identify the administrative expenses of FRTIB, we reviewed the 

President’s budget, FRTIB’s audited financial statements, FRTIB’s budget

documents from board meeting notes and FRTIB’s written responses to 

questions we submitted.2

 To analyze the components of administrative 

expenses, we used the projections contained in FRTIB’s annual budget 

documents.3

 FRTIB officials confirmed that these projections were 

analogous to what appears in budget documents for other agencies as 

“actuals.” For the purposes of this review, and consistent with how FRTIB 

 1

 Asset and participant numbers are as of November 2006. 

2

 The numbers we use from FRTIB’s budget documents were prepared late in the fiscal 

year, which ends September 30. 

3

 Since the financial statements do not disaggregate data sufficiently for our purposes, we 

were not able to use them. We used projections because the board does not report actual 

expenses in its budget documents after the fiscal year is complete. 

Page 1 GAO-07-541 Federal Retirement Thrift Investment Board
presented its budget to the board members for approval, we considered all 

expenses other than investment expenses to be administrative. We used 

budget object classifications to categorize FRTIB’s administrative 

expenses.4

 These categories can broadly fit into six groups: services 

purchased from private contractors, services purchased from government 

agencies, miscellaneous expenses, compensation, rental of space, and 

travel. There is some overlap in the descriptions. For example, the 

mission-related telephone service for the call centers should fall under 

services purchased from private contractors rather than miscellaneous 

expenses. However, because FRTIB budget data aggregate these expenses 

with charges such as postage and other miscellaneous expenses, we were 

unable to isolate the specific portion related to telephone services. To 

judge whether the administrative expenses of FRTIB are the result of 

practices consistent with federal regulations, we identified the regulations 

that guide FRTIB’s expenses for activities, such as acquisition, and 

reviewed the Department of Labor’s audits of FRTIB. To analyze FRTIB’s 

current benchmarking practices, we reviewed a benchmarking study cited

by FRTIB, notes from board meetings, and our relevant related work. We 

conducted our work in Washington, D.C. between October 2006 and May 

2007 in accordance with generally accepted government auditing 

standards. Appendix I describes the scope and methodology of our work 

in greater detail. 

FRTIB’s administrative expenses ranged from a peak of $101 million in 

fiscal year 2000 to $83 million estimated for fiscal year 2006. During this 

time period, only the fiscal year 2001 administrative expenses were lower 

than the 2006 estimated expenses, and that reflected the termination of a 

contract with American Management Systems to develop a record-keeping 

system. However, in real terms, FRTIB’s administrative expenses in 2006 

were at a 7-year low. Throughout this period more than half of FRTIB’s 

administrative expenses went towards purchasing services from outside 

entities—private contractors and other government agencies. This was 

followed by miscellaneous expenses, compensation, rent, and travel. 

Results in Brief 

For its administrative activities, FRTIB has established practices that are 

consistent with federal regulations. However, it has opportunities to 

 4

 Budget object classifications are uniform classifications identifying the obligations of the

federal government by the types of goods or services purchased (such as personnel 

compensation, supplies and materials, and equipment) without regard to the agency 

involved or the purpose of the programs for which they are used. 

Page 2 GAO-07-541 Federal Retirement Thrift Investment Board
continue exercising due diligence. FRTIB is bound by federal regulations

that govern acquisition, compensation, and travel. There are some areas, 

however, that suggest opportunities for future cost savings. The amount 

that FRTIB pays per square foot for rent is consistent with average rates 

that the General Services Administration (GSA) cites for nearby available 

properties. However, FRTIB rents more space per employee than GSA 

recommends. This is in part a reflection of the personnel downsizing that 

has occurred in recent years. Consistent with good management practices, 

FRTIB has indicated that it will be looking into the possibility of 

consolidating its space in 2007. Additionally, telecommunications provide

opportunities to reduce the travel expenses of board members traveling to

Washington, D.C. for monthly meetings. 

FRTIB’s current method of benchmarking TSP participants’ investment 

fees against those charged by 401(k) plans offers incomplete information 

to assess administrative expenses. The investment fee is very important 

for the participants—and the TSP compares favorably on this measure. 

However, looking only at an aggregate measure—whether the investment 

fee or the total administrative costs—provides insufficient information to 

judge whether individual activities, such as purchased call center services 

from private contractors, are being conducted either to achieve the best 

performance or in the most efficient manner. Benchmarking by individual 

activity permits an organization to compare the performance of its 

individual processes/activities—and the way those processes/activities are

conducted—with either standards or “best in class” in a specific activity. 

Benchmarking provides a feedback mechanism for continuous 

improvement. 

To ensure that the FRTIB continues to operate as efficiently as possible, 

we recommend that the board direct the Executive Director to continue 

monitoring both the square footage and the cost per square foot of office 

space in the future to ensure that it is appropriate for its needs. In 

addition, FRTIB should consider expanding its use of telecommunications 

for its monthly board meetings, as appropriate. Finally, to provide the 

board with the most complete and relevant information with which to 

assess the expenses and performance of administrative functions of 

FRTIB, we recommend that the board direct the Executive Director to 

move beyond the comparison of participant costs against those for other 

401(k) plans to benchmarking cost and performance of individual 

activities—either against similar activities elsewhere or against validated

criteria or standards, such as federal regulations.

Page 3 GAO-07-541 Federal Retirement Thrift Investment Board
In comments on a draft of this report, FRTIB partially concurred with our 

findings and recommendations. While they agreed in concept with our 

recommendations, they stated that in-person board meetings are an 

extremely important aspect of fulfilling their fiduciary responsibilities and 

that the minimal travel costs associated with this decision were far 

outweighed by the benefits derived from in-person meetings. Our report 

acknowledges that in-person meetings are valuable and may be important 

for some discussions. Our recommendation merely states that FRTIB 

should consider expanding its use of telecommunications as appropriate. 

FRTIB also concurred in concept with the use of benchmarking costs in 

appropriate situations. However, it noted that rather than separately 

benchmarking each component of its overall costs, it relies on the 

competitive procurement process to obtain outstanding performance for 

TSP participants at competitive rates. FRTIB’s comments reflect a 

misunderstanding of our point. Our report does not suggest that the 

competitive bidding process be abandoned—we concur that it helps 

assure good performance at competitive costs. Nor do we dispute that 

FRTIB’s processes have led to outstanding performance for TSP 

participants at competitive costs. Nonetheless, benchmarking is widely 

accepted in the private sector and in much of the public sector as a “best 

practice” in evaluating performance of specific activities. It offers a way to 

compare a specific function or activity to the same or similar one in other 

businesses or agencies. The essence of benchmarking is the process of 

identifying the highest standards of excellence for products, services, or 

processes, and then making the improvement necessary to reach those 

standards—commonly known as best practices. We have developed a 

body of work—best practice reviews—that provides guidance to help 

public sector organizations become world-class. 

Written comments from FRTIB are included and addressed in appendix II. 

We have incorporated changes as a result of FRTIB’s comments, as 

appropriate.

The Federal Employees’ Retirement System Act of 1986 (FERSA)5

 created

the Thrift Savings Plan (TSP), a retirement savings plan similar to private- Background 

 5

 Pub. L. No. 99-335, 100 Stat. 514 (June 6, 1986). For details on defined contribution plans, 

see GAO, Federal Pensions: DOL Oversight and Thrift Savings Plan Accountability, 

GAO-03-400 (Washington, D.C.: Apr. 23, 2003). 

Page 4 GAO-07-541 Federal Retirement Thrift Investment Board
sector 401(k) plans, as a key component of the Federal Employees’ 

Retirement System (FERS) for federal workers. Membership is open to 

federal and postal employees, members of Congress and their staff, 

members of the uniformed services, and members of the judicial branch. 

Participants are eligible for deferred federal (and in certain cases, state) 

income taxes on employee contributions and earnings. For employees 

covered by FERS, agencies make contributions to employees’ TSP 

accounts. Agencies automatically contribute 1 percent of an employee’s 

salary during each pay period to the TSP. Agency contributions for any 

employee who remains employed by the federal government until “vested” 

become part of that employee’s retirement savings.6

 Some employees are 

vested after 2 years of service; all other employees are vested at the end of

3 years of service. Agencies also match FERS employee contributions to 

the TSP up to a total of 5 percent of the employee’s basic pay. As of 

November 2006, FRTIB managed about $200 billion in assets for 3.5 

million participants and beneficiaries.7

FRTIB—which administers the TSP—is an independent agency in the 

executive branch. As of the close of fiscal year 2006, FRTIB employed 

about 65 people. Some functions—such as enrollment and training of 

participants—are handled by other federal agencies rather than FRTIB. 

These other agencies’ payroll and personnel offices act as the points of 

contact for TSP participants; these offices may assist with enrollment and 

alteration of contribution percentages. Additionally, the Office of 

Personnel Management has established a training program for retirement 

counselors of federal agencies. FRTIB is overseen by five Presidentially 

appointed board members and is charged with establishing policies for the 

investment and management of TSP funds and with creating 

administrative policies for the TSP. 

FRTIB’s administrative expenses are funded by (1) forfeited agency 

contributions and (2) assessments against net earnings of the Thrift 

Savings Fund. The 1 percent automatic agency contribution for FERS 

 6

 Only employees who are “vested” are entitled to keep the contributions that an agency 

has made on their behalf. In other words only agency automatic contributions are affected 

by vesting; the participant is always vested in his or her matching contributions. 

7

 The investment options in the TSP are the G fund, a government securities fund; the F

Fund, a fixed income securities fund; the C Fund, a common stock investment fund; the S 

Fund, a small capitalization stock investment fund; the I Fund, an international investment 

fund; and the L Funds, a series of five life-cycle funds. The L Funds are not separate funds;

they merely consist of asset allocation mechanisms of the existing five TSP funds. 

Page 5 GAO-07-541 Federal Retirement Thrift Investment Board
employees who leave before vesting are forfeited to the TSP. To finance 

the remainder of the FRTIB’s administrative expenses, FRTIB assesses 

fees against the net earnings of the Thrift Savings Fund. FRTIB is required 

by law to use the forfeited funds before assessing fees against the net 

earnings of the Thrift Savings Fund.8

 In both 2004 and 2005 these forfeited

agency contributions covered about 13 to15 percent of administrative 

expenses; assessments against net earnings of the Thrift Savings Fund 

were set at a level to cover the remaining 85 to 87 percent. 

Outside contractors manage all investment funds other than the G fund. 

FRTIB has contracted with Barclays Global Investors (Barclays) to 

manage the F, C, S, and I funds. The L funds—which were introduced in 

August 2005—were designed by another private company, Mercer 

Investment Consulting. Consistent with generally accepted accounting 

principles, FRTIB’s financial statements list these investment expenses as 

adjustments to investment income; they are not included in the line item 

for administrative expenses. 

The cost to participate in a retirement fund is measured as an expense 

ratio of the total administrative expenses charged to a fund during a 

specific time period, divided by that fund’s average balance for that 

specific time period.9

 According to a 2005/2006 Deloitte Consulting 401(k) 

benchmarking survey, the average expense ratio for 401(k) plans was 75 

basis points.10 In comparison, FRTIB charged participants only 4 basis 

points in fiscal year 2006. 

According to FRTIB, it reviews its administrative expenses regularly 

through a variety of means. First, an independent entity audits

administrative expenses as part of a larger financial audit of FRTIB. 

Second, the Department of Labor examines administrative expenses as 

part of its periodic FRTIB Administrative Staff review, which it conducts 

approximately once every 3 years. Third, as required by statute, board 

members prepare and submit to the President and Congress an annual 

 8

 5 U.S.C. §§ 8432(g), 8437(d). 

9

 This expense ratio is expressed in basis points, which are equal to .01 percent of the cost. 

10 Deloitte Consulting, LLP, Annual 401(k) Benchmarking Survey, 2005/2006 Edition. 

Available at: 

http://www.deloitte.com/dtt/article/0%2C1002%2Ccid%25253D124276%2C00.html (Accessed 

Feb. 20, 2007). 

Page 6 GAO-07-541 Federal Retirement Thrift Investment Board
budget.11 Fourth, each month since 2003, FRTIB has provided monthly 

reports to the Executive Director for review. Lastly, according to FRTIB, it 

contracts for all major TSP administrative services. Because the maximum 

contract length is 5 years, every major activity undergoes review and 

competition at a minimum of every 5 years. 

FRTIB’s administrative expenses ranged from a peak of $101 million in 

fiscal year 2000 to $83 million estimated for fiscal year 2006. During this 

time period, only the fiscal year 2001 administrative expenses were lower 

than the 2006 expenses, and that reflected the termination of a contract 

with American Management Systems to develop a record-keeping system, 

which will be discussed in more detail below. However, in real terms, 

FRTIB’s administrative expenses in 2006 were at a 7-year low. (See fig. 1 

below). 

Trends and 

Composition of 

Administrative 

Expenses 

 11 5 U.S.C. § 8472(i). 

Page 7 GAO-07-541 Federal Retirement Thrift Investment Board
Figure 1: Total Administrative Expenses of FRTIB, Fiscal Years 2000-2006 

Current year dollars in millions

Fiscal year

Source: GAO analysis of FRTIB data.

0

20

40

60

80

100

120

Services purchased from

private contractors

Services purchased from

other government agencies

Miscellaneous expenses

Compensation

Rent

2000 2001 2002 2003 2004 2005 2006

Note: Travel expenses—which have been between .10 percent and .24 percent of administrative 

expenses from fiscal years 2000 through 2006—are not included in the graph above because they

are too small to be visually apparent. Investment fees paid to Barclays and Mercer Investment 

Consulting are not included in this graph because generally accepted accounting principles require 

these expenses to be offset against investment income and therefore are not classified as 

administrative expenses for financial reporting purposes. 

There is no standard governmentwide definition of administrative 

expenses. For the purposes of this review, and consistent with how FRTIB 

presented its budget to the board for approval, we considered all expenses 

other than investment expenses to be administrative. 

FRTIB purchases most of its administrative services from outside entities. 

Until 2005 these were purchased primarily from government agencies—99 

percent of which were record-keeping and call center services provided by

the National Finance Center. During fiscal years 2005 and 2006 the 

National Finance Center terminated its contracts with FRTIB, which began 

Page 8 GAO-07-541 Federal Retirement Thrift Investment Board
purchasing these services from a private contractor. The only remaining 

major services purchased from another government agency are personnel 

and payroll services provided by the U.S. Department of the Interior. 

As discussed before, we used budget object classifications to categorize 

FRTIB’s administrative expenses into six broad groups.12 Figures 2 and 3 

describe the categories and show the breakout of these expenses in fiscal 

year 2006. 

Figure 2: Expense Categories Used in This Report 

• Services purchased from private contractors is comprised of the object classes 

of consultants and commercial contracts. Some of the services that FRTIB 

purchases through contracts are record-keeping and services provided for data and 

call centers. This does not include fees paid to manage investment accounts. 

• Services purchased from other government agencies is comprised of the object 

classes of NFC and other government services. Some of these services are payroll 

and personnel services provided by the Department of the Interior. 

• Miscellaneous expenses is comprised of the object classes of communications, 

utilities, and miscellaneous charges; printing; supplies and materials; transportation

of things; and furniture and equipment. The subcategory of communications, 

utilities, and miscellaneous charges is primarily comprised of postage, delivery 

charges, and telephone service, according to FRTIB. We included mission-related

telephone service for call centers in this category instead of services purchased from 

private contractors because the aggregated data provided by FRTIB did not permit 

us to isolate these charges from other miscellaneous expenses. 

• Compensation is comprised of full and part-time staff salaries, as well as benefits. 

• Rent is solely comprised of FRTIB’s rental payments. 

• Travel is comprised of FRTIB staff and TSP board travel. 

Source: GAO analysis.

 12 As discussed earlier, we used budget data because FRTIB’s financial statements did not

disaggregate data sufficiently for our purposes. Budget object classifications are uniform 

classifications identifying the obligations of the federal government by the types of goods 

or services purchased (such as personnel compensation, supplies and materials, and

equipment) without regard to the agency involved or the purpose of the programs for

which they are used. 

Page 9 GAO-07-541 Federal Retirement Thrift Investment Board
Figure 3: Administration Expenses in FRTIB’s Budget, Fiscal Year 2006 

Total=$83 million

Other administrative

expe

nses

Serv

ci es purc

hased from outside entities

Source: GAO analysis of FRTIB data.

54%

12%

19%

12%

0.24%

Travel 

3%

Rent 

Services purchased from 

private contractors

Services purchased from other 

government agencies

Compensation

Miscellaneous expenses

For its administrative activities, FRTIB has established practices that are 

consistent with federal regulations. However, it has opportunities to 

achieve cost savings. To purchase services and goods, FRTIB is required 

to follow the Federal Acquisition Regulation (FAR) and employee 

compensation is governed by federal pay schedules. For travel, FRTIB is 

bound by federal travel regulations. However, this is one place where 

opportunities may exist to reduce travel expenses by holding monthly 

board member meetings by teleconference where appropriate. FRTIB 

leases its own space directly rather than going through GSA. Although the 

cost per square foot for its headquarters is comparable to average rates 

that GSA cites for nearby available properties, the amount of space FRTIB 

rents is greater per employee than GSA recommends.13

Overview of 

Individual Categories 

of Expenses and 

Comparison of 

Expenses Against 

Other Agencies and 

Federal Regulations 

 13 To be consistent with the budget documents, we used current year dollars throughout the

report. We confirmed that the analysis and conclusions would not change if dollars were 

adjusted for inflation. 

Page 10 GAO-07-541 Federal Retirement Thrift Investment Board
The amount that FRTIB spends purchasing services from other entities is 

at a 7-year low.14 (See fig. 4 below.) 

Services Purchased from 

Private Contractors and 

Other Federal Agencies 

Figure 4: Services Purchased from Private Contractors and Other Federal Agencies, 

Fiscal Years 2000-2006 

0 20 40 60 80 100

Services purchased from other government agencies

Services purchased from private contractors

2006

2005

2004

2003

2002

2001

2000

Fiscal year

Current year dollars in millions

Source: GAO analysis of FRTIB data.

FRTIB terminates a contract

with a private firm.

FRTIB contract with the National 

Finance Center is terminated; 

FRTIB hires a private contractor.

Since most administrative services are purchased from outside entities, it 

is not surprising that declines in spending on services purchased from 

 14 The “services purchased from other entities” category includes two subcategories: 

private contractors and services purchased from other government agencies. Private 

contractors is comprised of the object classes of consultants and commercial contracts. 

Some of the services that FRTIB purchases through contracts are record-keeping and 

services provided for data and call centers. This does not include fees paid to manage

investment accounts. Services purchased from other government agencies is comprised of 

the object classes of National Finance Center and other government services. Some of

these services are payroll and personnel services provided by the Department of the

Interior. 

Page 11 GAO-07-541 Federal Retirement Thrift Investment Board
outside entities—both private contractors and other federal agencies—

parallel the declines in administrative expenses during the same period.

Although most administrative services are purchased from outside 

entities, the allocation between private contractors and federal agencies 

has changed over time. As figure 3 shows, from fiscal year 2000 through 

fiscal year 2004 FRTIB spent more money purchasing services from other 

government agencies than from private contractors. In shifting the 

acquisition of call center services from the National Finance Center to a 

private contractor in 2005, the balance was reversed. In 2006, the National 

Finance Center terminated all remaining services that it was providing to 

FRTIB. With the termination of the National Finance Center contracts, the 

only remaining major services purchased from another government 

agency were payroll and personnel services provided by the U.S. 

Department of the Interior. 

Another change within FRTIB’s expenses for services purchased from 

private contractors occurred in 2001. In 2001, FRTIB terminated a contract

with American Management Systems, Inc., a private sector firm hired to 

design, develop, and implement a record-keeping system for the TSP that 

would provide daily investment updates.15 FRTIB then hired Materials, 

Communication & Computers, Inc. to complete the work that American 

Management Systems was unable to complete. 

Although we did not review the reasonableness of FRTIB’s individual 

contracts, we reviewed its process for acquiring goods and services. 

Overall, it follows a process that seeks to assure reasonable expenses. 

First, FRTIB is subject to the FAR—which governs acquisition activities. 

Second, FRTIB has one contract specialist and one purchasing agent on 

staff to ensure that acquisition occurs according to statute and regulation.

Additionally, other staff are responsible for management and oversight of 

the individual contracts. For example, the agency’s Chief Information 

Officer is responsible for managing a record-keeping contract and the 

Director of the Office of Participant Services is responsible for managing 

the two call center contracts. Each of these individuals monitors contracts 

 15 For more information about FRTIB’s termination of the American Management Systems 

contract, see GAO, Thrift Savings Plan: Delayed Allocation of Failed System Development 

Costs to Participant Accounts, GAO-03-827R (Washington, D.C.: July 22, 2003). 

Page 12 GAO-07-541 Federal Retirement Thrift Investment Board
through site visits and remotely.16 FRTIB plans to send agency directors for 

additional monitoring site visits in 2007. The travel expenses for these 

monitoring visits are included under travel and discussed later in this 

report. 

The Department of Labor provides additional oversight of FRTIB’s 

contracts through its periodic audits. In 2005, the Department of Labor 

reported that FRTIB had reexamined service providers to find ways to 

increase services while decreasing costs. For example, FRTIB found that it 

could cut expenses in half by transferring information technology 

operations from the National Finance Center to SI International, a private 

contractor. The Department of Labor reviewed one call center in August 

2006 and, according to FRTIB, the department is also planning to review 

another call center service contract in 2007. 

 16 For more information about call center monitoring, see GAO, Federal Contact Centers: 

Mechanism for Sharing Metrics and Oversight Practices along with Improved Data 

Needed, GAO-06-270 (Washington, D.C.: Feb. 8, 2006). 

Page 13 GAO-07-541 Federal Retirement Thrift Investment Board
In the years since 2003, a variety of factors have led to increased 

miscellaneous expenses.17 Miscellaneous (See fig. 5 below.) 

Expensess 

Figure 5: Miscellaneous Expenses, Fiscal Years 2000-2006 

Fiscal year

Current year dollars in millions

Source: GAO analysis of FRTIB data.

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006

In fiscal year 2004, miscellaneous expenses jumped to about $14 million, in 

part because FRTIB updated aging software and hardware. Second, in

fiscal year 2005 FRTIB’s printing expenses increased from about $1 million 

to about $11 million. FRTIB told us that this was a one-time extra expense 

to print information about a series of new TSP funds, the Lifecycle (L) 

funds. Lastly, in fiscal year 2006, FRTIB projected a ninefold increase from

about $1 million to about $9 million in expenses for communications. This 

 17 The miscellaneous expenses category is comprised of the object classes of 

communications, utilities, and miscellaneous charges; printing; supplies and materials; 

transportation of things; and furniture and equipment, many of which are purchased from 

outside entities. The subcategory of communications, utilities, and miscellaneous charges 

is primarily comprised of postage, delivery charges, and telephone service, according to

FRTIB. There is some overlap in the descriptions. For example, the mission-related 

telephone service for the call centers should fall under services purchased from private 

contractors rather than miscellaneous expenses. However, because FRTIB budget data 

aggregate these expenses with charges such as postage and other miscellaneous expenses, 

we were unable to isolate the specific portion related to telephone services. 

Page 14 GAO-07-541 Federal Retirement Thrift Investment Board
was to pay for providing information to TSP plan participants about new 

passwords and account numbers to replace the use of Social Security 

numbers in the system. FRTIB also said that this spike would permit 

increased communications about the L funds. Although overall 

miscellaneous expenses began to decrease in 2006, it is unclear if 

expenses will continue to decrease or remain elevated. 

Although we did not review FRTIB’s individual contracts, it is required to

follow the same regulations as other federal agencies regarding 

acquisition. As discussed above, FRTIB is required to follow the FAR and

is routinely audited by the Department of Labor.

18 Also, FRTIB has the 

ability to purchase goods through GSA. Although GSA does not guarantee 

the lowest price possible, use of GSA’s Federal Acquisition Service 

ensures that the prices paid by FRTIB are reasonable and generally 

consistent with the prices paid by other agencies.

19

 18 In a 2003 audit of FRTIB’s procurement practices, the Department of Labor had no 

recommendations about ways to improve procurement practices and controls for 

compliance with FERSA’s fiduciary and prohibited transaction practices. 

19 For more discussion about the prices of the Federal Acquisition Service, please refer to

GAO, Contract Management: Opportunities to Improve Pricing of GSA Multiple Award

Schedules Contracts, GAO-05-229 (Washington, D.C.: Feb. 11, 2005). 

Page 15 GAO-07-541 Federal Retirement Thrift Investment Board
FRTIB’s compensation expenses have been relatively stable over the past 

7 years. (See fig. 6 below.) 20

Compensation 

Figure 6: Compensation, Fiscal Years 2000-2006 

Fiscal year

Current year dollars in millions

Source: GAO analysis of FRTIB data.

0

4

8

12

2000 2001 2002 2003 2004 2005 2006

Attrition at FRTIB caused

compensation costs to fall

slightly in 2005.

Note: Compensation includes salaries and benefits.

FRTIB compensates employees according to federal pay schedules. 

Currently, FRTIB employs about 65 staff members, the majority of whom 

are paid according to the General Schedule. About 28 percent of these 

employees are compensated at or below the GS-11 level. Accordingly, to 

the extent that the composition of FRTIB’s staff is appropriate, 

compensation costs appear reasonable. The Executive Director is 

compensated according to level three of the Executive Schedule.21

Additionally, 7 staff members are part of the Senior Executive Service.22

These Senior Executive Service positions are all approved by the Office of

Personnel Management. Each of the 5 board members—who are not 

 20 The compensation category includes salary and benefits. 

21 5 U.S.C. §5314. 

22 FRTIB had an additional five open senior executive positions available as of September

2006. 

Page 16 GAO-07-541 Federal Retirement Thrift Investment Board
otherwise officers or employees of the federal government—are 

compensated at the daily rate of basic pay for level IV of the Executive 

Schedule for each day the board member is engaged in performing a 

function for FRTIB.23

Rent FRTIB’s total rent expenses remained relatively constant until fiscal year 

2005.

24 (See fig. 7 below.) Rent expenses dropped in 2005 and increased 

again in 2006 coinciding with the lease of an emergency facility. 

Figure 7: Rent, Fiscal Years 2000-2006 

Fiscal year

Current year dollars in millions

Source: GAO analysis of FRTIB data.

0

1

2

3

2000 2001 2002 2003 2004 2005 2006

The majority of FRTIB’s rental expenses are associated with renting a 

headquarters office in Washington, D.C. FRTIB rents its own office space,

which means it does not need to go through GSA. However, GSA rents 

space on behalf of many federal agencies and thus has a rich database of

local rent prices. Accordingly, we compared the amount that FRTIB pays 

 23 5 U.S.C. § 8476(d)(1). 

24 The rent category is solely comprised of rental payments. 

Page 17 GAO-07-541 Federal Retirement Thrift Investment Board
per square foot in fiscal year 2007 with the average rates that GSA cited for 

nearby available properties. At $28 per square foot in 2007, the per square

foot rental rate—which includes operating expenses such as utilities, 

building security, maintenance, and cleaning—is in line with average

market rates for nearby available properties with comparable square 

footage. 

Currently, FRTIB rents more than 47,000 square feet. At its present staff 

size, FRTIB rents more space per person than GSA would recommend. 

Based on FRTIB’s mission, a GSA official told us that FRTIB’s space needs 

are likely similar to a model that proposes 368 rentable square feet per 

person. At its current staffing level of 65 employees, FRTIB’s headquarters 

provides more than 670 square feet per person, about 300 square feet more 

per person than GSA would recommend. This calculation, however, is 

somewhat misleading because of the recent personnel downsizing at 

FRTIB. In the 7 years covered by our review, employment at FRTIB 

peaked at 111 staff members. Yet, even at its peak staffing, FRTIB rented 

about 430 square feet per person, about 60 square feet more per person 

than GSA would recommend. In light of recent declines in staff numbers, 

and consistent with good management practices, at a September 2006 

board meeting FRTIB staff indicated that they would look into

consolidating space at the headquarters location.

Page 18 GAO-07-541 Federal Retirement Thrift Investment Board
Over the past 7 fiscal years, travel expenses varied considerably, ranging 

in current year dollars from a low of about $80,000 in fiscal year 2001 to a 

high of about $255,000 in fiscal year 2003.25 In fiscal year 2006 travel 

expenses fell slightly above the middle of this range at about $200,000. 

(See fig. 8.) 

Travel 

Figure 8: Travel Expenses, Fiscal Years 2000-2006 

Fiscal year

Current year dollars in thousands

Source: GAO analysis of FRTIB data.

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006

FRTIB travel is governed by federal travel regulations. The fiscal year 2006

travel we examined was consistent with these regulations and appears 

reasonable given federal daily allowances for lodging, meals, and 

incidental expenses and current cost trends for common carriers.26

The largest portion of fiscal year 2006 travel was for contract oversight, 

about 38 percent of which was associated with the one-time expense of 

transitioning the call center from the National Finance Center to a new 

 25 The travel category contains travel expenses for FRTIB staff and the five board members. 

26 FRTIB governs travel by board members and employees under FRTIB Directive 10D and 

in accordance with Federal Travel Regulations (FTR). 5 U.S.C. §5701-5760, 41 C.F.R. Ch. 

301-304. 

Page 19 GAO-07-541 Federal Retirement Thrift Investment Board
contractor, SI International. Although about 20 percent of FRTIB’s trips 

were to other federal agencies to conduct training and make 

presentations, since the host agency often paid for these trips, they 

accounted for only about 5 percent of travel expenses. 

In fiscal year 2006, FRTIB spent about $27,000 to bring board members to 

Washington, D.C.27 These expenses are associated with travel from 

locations as disparate as Alaska and New York, and require, in general, a 2-

night stay in Washington, D.C. Although FRTIB reports that it has not 

issued any first or business class tickets to any employee, it has on 

occasion issued a first or business class ticket to a board member traveling 

from Alaska when coach fares were not available. Although the law 

requires monthly meetings, and the practice has generally been to meet in 

person, on occasion members of the board have participated in these 

meetings by telephone—some more than others. Meetings that occur 

through telecommunications rather than in person save money for FRTIB 

and sometimes may be appropriate.

FRTIB’s current method of benchmarking its costs by comparing the fees

assessed to TSP participants against the fees assessed to participants in 

private 401(k) plans provides important but incomplete information about 

its administrative costs and efficiency. This measure is very important for 

participants—and the TSP compares favorably on this measure. It does 

not, however, provide a complete picture of administrative expenses or 

sufficient information for oversight of administrative activities.28

Looking only at an aggregate measure—whether the investment fee or the 

total administrative costs—provides insufficient information to judge 

whether individual activities are being conducted either to achieve the 

best performance or in the most efficient manner. Disaggregating FRTIB’s 

activities and benchmarking those individual activities against similar ones 

elsewhere would provide the board a better picture of the performance 

and efficiency of these activities. Although no other federal agency 

performs the same mission as FRTIB, the individual activities it performs 

to fulfill that mission can be found in other agencies and outside 

FRTIB’s Current 

Practice of 

Benchmarking 

Against the Cost of 

Participating in 

Private Sector 401(k) 

Plans Offers a Limited 

Means of Evaluating 

Administrative 

Expenses 

 27 FERSA states that the board “shall meet—(1) not less than once during each month; and 

(2) at additional times at the call of the Chairman.” 5 U.S.C. 8476(a). 

28 Private sector 401(k) plans report the amount charged to the investor for participation in

the investment fund; for most plans this is not a measure of administrative expenses. 

Page 20 GAO-07-541 Federal Retirement Thrift Investment Board
government. For example, other agencies—such as the Centers for 

Disease Control and Prevention and GSA—purchase call center services 

from private contractors. Benchmarking by individual activity permits an 

organization to compare the performance of its individual 

processes/activities—and the way those processes/activities are 

conducted—with either standards or “best in class” in a specific activity. 

Benchmarking provides a feedback mechanism for continuous 

improvement.29

FRTIB’s falling administrative expenses appear to reflect an overall 

commitment to manage the TSP in the interest of the participants and 

beneficiaries of TSP. Consistent with this commitment FRTIB is looking 

into consolidating its office space. We also note that on occasion board 

members have elected to participate in the monthly meetings by

telephone. The use of telecommunications has increased throughout both 

government and the private sector. Although in-person meetings are 

valuable and may be important for some discussions, increasing the use of

telecommunications for monthly meetings could further reduce expenses. 

For example, if the board found it appropriate to meet monthly by 

teleconference and quarterly in person, travel costs would be reduced. 

Conclusions 

Since FRTIB follows practices that seek to constrain expenses within 

federally regulated parameters, its success in maintaining low expenses is 

not surprising. In fact, FRTIB’s fiscal year 2006 administrative expenses 

were near a 7-year low. Moving beyond comparing costs charged to TSP 

participants with costs charged by other 401(k) plans to benchmarking the 

cost and performance of individual activities would be consistent with a 

commitment to continuous improvement and being alert to opportunities 

to further improve performance and/or reduce costs. It would also assist 

the board as it seeks to assure that the TSP is managed in the interest of its 

participants and beneficiaries. 

 29 For a discussion and examples of benchmarking by administrative function, see GAO, 

Managing for Results: Critical Actions for Measuring Performance, 

GAO/T-GGD/AIMD-95-187 (Washington, D.C.: June 20, 1995); Public-Private Partnerships: 

Key Elements of Federal Building and Facility Partnerships, GAO/GGD-99-23 

(Washington, D.C.: Feb. 3, 1999); Management Reform: Agency Initial Efforts to

Restructure Personnel Operations, GAO/GGD-98-93 (Washington, D.C.: July 13, 1998). 

Page 21 GAO-07-541 Federal Retirement Thrift Investment Board
To ensure that FRTIB continues to operate as efficiently as possible, we 

recommend that the board direct the Executive Director to continue 

monitoring both the square footage and cost per square foot of office 

space in the future to ensure that it is appropriate for its needs. In 

addition, FRTIB should consider expanding its use of telecommunications 

for its monthly board members’ meetings, as appropriate. 

To provide the board with the most complete and relevant information 

with which to assess the expenses and performance of administrative 

functions of FRTIB, we recommend that the board direct the Executive 

Director to move beyond the comparison of participant costs against those 

for other 401(k) plans to benchmarking cost and performance of 

individual activities—either against similar activities elsewhere or against 

validated criteria or standards, such as federal regulations. 

In comments on a draft of this report, FRTIB partially concurred with our 

findings and recommendations. While they agreed in concept with our 

recommendations, they stated that in-person board meetings are an 

extremely important aspect of fulfilling their fiduciary responsibilities and 

that the minimal travel costs associated with this decision were far 

outweighed by the benefits derived from in-person meetings. However, 

consistent with FRTIB’s commitment to managing the TSP in the interest 

of participants and beneficiaries of TSP, we note that use of 

telecommunications offers opportunities to further reduce expenses. Our 

report acknowledges that in-person meetings are valuable and may be 

important for some discussions. Our recommendation merely states that 

FRTIB should consider expanding its use of telecommunications as 

appropriate. With respect to its square footage, FRTIB said it would 

continue to monitor and assess its office space needs and related costs in

relation to projected staffing levels. 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

FRTIB also concurred in concept with the use of benchmarking costs in 

appropriate situations. However, it noted that rather than separately 

benchmarking each component of its overall costs, it relies on the 

competitive procurement process to obtain outstanding performance for 

TSP participants at competitive rates. FRTIB’s comments reflect a 

misunderstanding of our point. The report does not suggest that 

benchmarking would lead to changes in contracts during the contract 

period. Nor does our report suggest that the competitive bidding process 

be abandoned—we concur that it helps assure good performance at 

competitive costs. Nor do we dispute that FRTIB’s processes have led to 

outstanding performance for TSP participants at competitive costs. To the

Page 22 GAO-07-541 Federal Retirement Thrift Investment Board
contrary, companies and agencies that are viewed as leaders in their 

operations use benchmarking. 

Benchmarking is widely accepted in the private sector and in much of the 

public sector as a “best practice” in evaluating performance of specific 

activities. It offers a way to compare a specific function or activity to the

same or similar one in other businesses or agencies. The essence of 

benchmarking is the process of identifying the highest standards of 

excellence for products, services, or processes, and then making the 

improvement necessary to reach those standards—commonly known as 

best practices. We have developed a body of work—best practice 

reviews—that provides guidance to help public sector organizations 

become world-class. 

Such benchmarking of best practices could be helpful to FRTIB. For 

example, as the term of a contract for call center operations nears 

completion and FRTIB considers the design of the successor contract, it 

could look at the scope or services, performance measures used and 

performance attained, and costs of other excellent call centers in 

developing the criteria for that next contract. 

In addition to these key comments, FRTIB provided technical comments. 

The full written comments from FRTIB are included and addressed in 

appendix II. We have incorporated changes as a result of these comments, 

as appropriate. 

As agreed with your office, unless you publicly announce the contents of

this report earlier, we plan no further distribution of it until 30 days from 

the date of this letter. At that time, we will send copies of this report to the 

Executive Director of FRTIB and interested congressional committees. 

This report will also be available at no charge on the GAO Web site at 

http://www.gao.gov. 

Page 23 GAO-07-541 Federal Retirement Thrift Investment Board
Please contact me on (202) 512-9142 if you or your staff have any 

questions about this report. Contact points for our Office of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Other contacts and staff acknowledgments are listed in appendix III. 

Sincerely yours, 

Susan J. Irving 

Director, Federal Budget Analysis 

Strategic Issues 

Page 24 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

To identify the administrative expenses of the Federal Retirement Thrift 

Investment Board (FRTIB) we reviewed the President’s budget, FRTIB’s 

audited financial statements, FRTIB’s budget documents from meeting 

notes of the board members, and FRTIB’s written responses to our 

questions. To analyze the components of administrative expenses, we used 

the projections contained in the board members’ annual budget 

documents. The numbers we used from FRTIB’s budget documents were 

prepared late in the fiscal year, which ends September 30. FRTIB officials 

confirmed that the projections were analogous to what appears in budget 

documents for other agencies as “actuals.” We reviewed FRTIB’s audited 

financial statements for information about FRTIB’s financial contractual

commitments. The administrative expenses listed in the financial 

statements were not disaggregated sufficiently for our purposes. As a 

result, they did not provide the detail that we needed for our analysis. To

be consistent with the budget documents, we used current year dollars 

throughout the report. We confirmed that the analysis and conclusions 

would not change if dollars were adjusted for inflation. 

To judge whether the administrative expenses of FRTIB are the result of 

practices consistent with federal regulations, we identified the regulations 

that guide FRTIB’s expenses for activities such as compensating 

employees. To analyze the applicability of the Federal Acquisition 

Regulation (FAR) to FRTIB’s acquisition activities, we reviewed statutory 

requirements and court cases. We also reviewed GAO guidance for 

assessing the acquisition function at federal agencies.1

 To compare the 

rent that FRTIB pays for its headquarters office with the amount that other 

federal agencies would pay for downtown office spaces we reviewed 

FRTIB’s current lease. We then compared the parameters of the lease with 

a database of properties from the General Services Administration (GSA). 

Because GSA rents office space for other agencies, it has access to a rich 

database of available properties and current rents. To review the 

compensation of FRTIB staff members, we analyzed the Office of 

Personnel and Management’s Central Personnel Data File, a file of all 

personnel actions in the federal government. This allowed us to identify 

the pay plans that FRTIB uses to compensate employees, the positions 

held by FRTIB staff, as well as actual staffing levels for the time period 

covered by our analysis. To analyze travel expenses, we compared the 

travel records that FRTIB gave to us for fiscal year 2006 to expected travel 

 1

 GAO, Framework for Assessing the Acquisition Function at Federal Agencies, 

GAO-05-218G (Washington, D.C.: September 2005). 

Page 25 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix I: Objectives, Scope, and 

Methodology 

expenses for locations given standard per diem rates and negotiated air 

fares. We also reviewed FRTIB’s responses to questions we submitted. 

To analyze FRTIB’s current benchmarking practices, we reviewed a 

benchmarking study cited by FRTIB,2 notes from the board members’ 

meetings, relevant GAO work, and FRTIB responses to questions we 

submitted. 

We conducted our work in Washington, D.C., between October 2006 and 

May 2007 in accordance with generally accepted government auditing 

standards. 

 2

 We reviewed a benchmarking study from Deloitte Consulting, Inc. that compares the basis 

points charged by various 401(k) plans. 

Page 26 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal Appendix II: Comments from the Federal Retirement Thrift Investment Board 

Retirement Thrift Investment Board 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

See comment 1. 

Page 27 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

See comment 2. 

See comment 3. 

Page 28 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

See comment 4. 

Page 29 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

See comment 5. 

See comment 6. 

See comment 7. 

See comment 8. 

See comment 9. 

See comment 10. 

Now on pps. 5 and 6. 

See comment 11. 

Now on p. 10. 

Page 30 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

See comment 12. 

Now on p. 8. 

See comment 13. 

See comment 14. 

Now on pps. 8 and 9. 

See comment 15. 

See comment 16. 

See comment 17. 

Now on p. 13. 

Page 31 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

1. Our report states that FRTIB leases its own space directly rather than 

going through GSA—we did not indicate nor imply that FRTIB is 

required to use GSA for leasing services. 

GAO Comments 

2. Our report acknowledges that in-person meetings are valuable and 

may be important for some discussions. However, consistent with 

FRTIB’s commitment to managing the TSP in the interest of

participants and beneficiaries of TSP, we note that use of 

telecommunications offers opportunities to further reduce expenses. 

Our recommendation states merely that FRTIB should consider 

expanding its use of telecommunications as appropriate. 

3. The FRTIB’s comments on our benchmarking recommendation reflect 

a misunderstanding of our point. Our report notes that benchmarking 

should go beyond a comparison of TSP’s investment fees (cost to 

participants) with those of other 401(k) plans. It does not suggest that 

benchmarking would lead to changes in contracts during the contract 

period. Nor does our report suggest that the competitive bidding 

process be abandoned—we concur that it helps assure good 

performance at competitive costs. Further, we do not dispute that the 

FRTIB’s processes have led to outstanding performance for TSP 

participants at competitive costs. Nor should the mention of call 

centers as one example of an activity in which other agencies also 

engage be read as a criticism of FRTIB’s call center operations. To the 

contrary, companies and agencies that are viewed as leaders in their 

operations use benchmarking. 

Benchmarking is widely accepted in the private sector and in much of 

the public sector as a “best practice” in evaluating performance of 

specific activities. It offers a way to compare a specific function or 

activity to the same or similar one in other businesses or agencies. The 

essence of benchmarking is the process of identifying the highest 

standards of excellence for products, services, or processes, and then 

making the improvement necessary to reach those standards—

commonly known as best practices. We have developed a body of 

work—best practice reviews—that provides guidance to help public 

sector organizations become world-class. 

Such benchmarking of best practices could be helpful to FRTIB. For 

example, as the term of a contract for call center operations nears 

completion and the FRTIB considers the design of the successor 

contract, it could look at the scope or services, performance measures 

used and performance attained, and costs of other excellent call 

centers in developing the criteria for that next contract. 

Page 32 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

4. Our report states that looking only at investment fees offers an

incomplete picture of administrative expenses and that looking at total 

administrative expenses in the aggregate provides incomplete 

information for judging whether individual activities are being 

conducted in the most efficient matter. We did not discuss or opine on 

FRTIB’s disclosure of administrative expenses. 

5. Our report notes that benchmarking should go beyond a comparison of 

TSP’s investment fees (cost to participants) with those of other 401(k) 

plans. It does not suggest that it is FRTIB’s responsibility to ensure 

that private sector 401(k) plans adopt similar levels of public 

disclosure. 

6. See comment 3. 

7. We agree that telephone services for the call centers are missionrelated services. However, because budget data provided by the FRTIB 

aggregates such expenses with charges such as postage and other 

miscellaneous expenses, we were unable to separate these expenses 

from others in this category. Nonetheless, we have clarified the report 

to indicate that expenses associated with telephone service for call 

centers, although mission-related, were included under miscellaneous 

expenses. 

8. We revised the report text as suggested. 

9. We revised the report text as suggested. 

10. We revised the report text as suggested. 

11. We disagree with FRTIB’s comment that it is not subject to the federal 

procurement rules. First, FRTIB is an executive agency under 41 U.S.C. 

§ 405(a) and thus subject to the FAR. Moreover, we are unaware of 

any, and FRTIB has not identified any, express exclusion for FRTIB. 

Second, FRTIB cites as support a 1987 internal memo that states “One 

of the most important criteria applied by the courts and agencies, in 

determining the applicability of acquisition regulations is the source of 

funds being expended.” The memo concludes that FRTIB does not pay 

its administrative expenses with appropriated funds. In a 2002 contract 

dispute with one of its contractors, the United States Court of Federal 

Claims rejected each one of FRTIB’s arguments that its administrative 

Page 33 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix II: Comments from the Federal 

Retirement Thrift Investment Board 

expenses are not payable out of appropriated funds.1 Since the FAR 

applies to acquisitions by contract with appropriated funds, and the 

FRTIB has not addressed the court’s ruling, we stand by the position 

that FRTIB is subject to the FAR. 

12. We revised the report text as suggested. 

13. We revised the report text as suggested. 

14. See comment 12. 

15. We revised the report text as suggested. 

16. See comment 7. 

17. Clarified text to indicate it is a call center service contract. 

 1

American Management Systems v. United States, 53 Fed. Cl. 525, 529 (2002). 

Page 34 GAO-07-541 Federal Retirement Thrift Investment Board
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 35 GAO-07-541

Appendix III: GAO Contact and Staff 

Acknowledgments 

Susan J. Irving, (202) 512-9142 or irvings@gao.gov

In addition to the contact named above, Carol Henn, Mallory Barg Bulman, 

John P. Stradling, and Farahnaaz H. Khakoo made significant 

contributions to this report. Barbara D. Bovbjerg, Tamara E. Cross, Lara 

Lee Laufer, Ramona L. Burton, Matthew J. Saradjian, Patrick G. Bernard, 

Michael R. Volpe, Adam Vodraska, Andrew J. Stephens, Richard S. 

Krashevski, Gregory H. Wilmoth, Donald R. Neff, William T. Woods, and 

Ruth DeVan also provided key assistance. 

Federal Retirement Thrift Investment Board

GAO Contact 

Acknowledgments 

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