REVOLVING FUNDS

Additional Pricing and 

Performance 

Information for FAA 

and Treasury Funds 

Could Enhance 

Agency Decisions on 

Shared Services

Report to the Chairman, Committee on 

the Budget, House of Representatives

May 2016

GAO-16-477

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-16-477, a report to the 

Chairman, Committee on the Budget, House 

of Representatives

May 2016

REVOLVING FUNDS

Additional Pricing and Performance Information for 

FAA and Treasury Funds Could Enhance Agency 

Decisions on Shared Services

Why GAO Did This Study

Moving to shared services, where 

services that multiple agencies need 

are consolidated within a smaller 

number of agencies, can save the 

federal government billions of dollars 

as well as reduce duplicative efforts, 

decrease systems upgrades, and free 

up resources for mission-critical 

activities. Shared services may be 

financed through intragovernmental 

revolving funds. GAO was asked to 

evaluate the management of select 

revolving funds. This report assesses

(1) how two agencies manage select 

funds that finance shared services; and 

(2) how these agencies manage 

unexpended balances in select funds. 

GAO selected two funds for this 

review—the FAA ASFF and Treasury 

TFF—based on their roles as federal 

shared service providers and use of 

unexpended balances. Using GAO’s 

work on management of revolving 

funds and unexpended balances as 

criteria, GAO analyzed agency 

documentation on managing the funds

and budget and financial data, and 

interviewed FAA and Treasury officials 

as well as select customer agencies of 

the funds.

What GAO Recommends

To help support efforts to expand 

shared services and improve the 

management of the funds, GAO is 

making three recommendations to

Treasury and FAA to enhance the

availability of pricing and performance 

information, as well as documentation 

of operating reserve policies of the 

selected funds. Treasury and FAA 

concurred with all of GAO’s 

recommendations. 

What GAO Found

The Federal Aviation Administration (FAA) and the Department of the Treasury

(Treasury) have policies and procedures for effectively managing the 

Administrative Services Franchise Fund (ASFF) and the Treasury Franchise 

Fund (TFF)—the two revolving funds that GAO reviewed. 

FAA and Treasury Management of the Selected Funds

Clear roles and 

responsibilities

The roles and responsibilities for managing and overseeing the 

funds are clearly documented in FAA and Treasury policies and 

are segregated across a number of entities, which can help 

minimize the risk of error in fund management.

Processes for customer 

input

FAA and Treasury obtain input and address needs of customers 

through various mechanisms—such as annual forums and 

informal site visits—to help prioritize customer demands and use 

resources efficiently.

Cost recovery of the 

funds, including clear 

pricing information

The funds operate on a self-sufficient basis, recovering all 

operation expenses over the last six years. FAA and Treasury 

share the funds’ pricing information with customers in various 

ways, such as through price sheets with costs for services.

Measure performance FAA and Treasury have strategic goals with supporting metrics 

for the funds to help measure performance and whether fund 

activities support overall goals. However, the TFF’s performance 

metrics do not encompass the majority of services for one of its 

lines of business. Treasury officials stated they plan to revise 

this line of business’ metrics to include all services by fiscal year 

2018.

Source: GAO. | GAO-16-477

FAA and Treasury share pricing and performance information with the respective 

funds’ customers. However, they do not make this information available to 

potential customers for most of the funds’ lines of business because component

agencies within the agencies purchase most of the services and the customized 

nature of the services. On the other hand, agency officials recognized the 

increasing external demand for some lines of business, such as Treasury’s 

information technology services given cyberattacks on agencies. As more 

agencies consider transitioning to shared service providers, making pricing and 

performance information publicly available can help them determine the most 

efficient method for obtaining services. 

FAA and Treasury have processes for effectively managing unexpended 

balances in the funds, including for identifying factors that affect balances, 

estimating future needs of the funds, and managing the funds’ operating 

reserves. FAA and Treasury have documentation that provides some guidance 

for effectively managing the funds’ reserves and believe this documentation to be 

sufficient. However, these documents do not include key processes they follow

for managing the reserves, such as how FAA calculates the reserve for the next 

year. Given the centrality of the reserve to the effective management of the 

funds, written documentation of these processes is essential to ensure 

consistency in implementation over time and through transitions in leadership.

View GAO-16-477. For more information, 

contact Heather Krause, 202-512-6806, and 

KrauseH@gao.gov
Page i GAO-16-477 Revolving Funds

Letter 1

Background 5

FAA and Treasury Have Policies and Procedures for Effectively 

Managing the Funds, but Could Enhance Pricing Transparency 

and Performance Measurement 10

FAA and Treasury Have Processes for Managing Unexpended 

Balances, but Could Improve Documentation of Operating 

Reserve Policies 24

Conclusions 32

Recommendations for Executive Action 33

Agency Comments and Our Evaluation 34

Appendix I Objectives, Scope, and Methodology 36

Appendix II Comments from the Department of Transportation 42

Appendix III GAO Contact and Acknowledgments 43

Tables

Table 1: Administrative Services Franchise Fund (ASFF) and 

Treasury Franchise Fund (TFF) Recovered Costs From 

FY 2010 through FY 2015 14

Table 2: Administrative Services Franchise Fund Unexpended 

Balance, End of FY 2010-FY 2015 27

Table 3: Treasury Franchise Fund Unexpended Balance, End of 

FY 2010-FY 2015 28

Table 4: Unexpended Balance Ratio for Intragovernmental 

Revolving Funds Supporting Shared Services for 

Financial Management 37

Table 5: Selected Administrative Services Franchise Fund and 

Treasury Franchise Fund Customers Interviewed 40

Contents
Page ii GAO-16-477 Revolving Funds

Figures

Figure 1: Overview of Federal Aviation Administration’s (FAA) 

Administrative Services Franchise Fund Structure and 

Lines of Business 7

Figure 2: Overview of the Treasury Franchise Fund’s Structure 

and Lines of Business 8

Abbreviations

ARC Administrative Resource Center

ARC Admin Administrative Resource Center Administrative Services

ARC IT Administrative Resource Center Information Technology 

Services 

ASFF Administrative Services Franchise Fund

CAP Cross-Agency Priority

DOT Department of Transportation

ESC Enterprise Services Center

FAA Federal Aviation Administration

FSSP federal shared service provider 

HUD Department of Housing and Urban Development

IRF intragovernmental revolving fund

OMB Office of Management and Budget

SSP Shared Services Programs

TFF Treasury Franchise Fund

Treasury Department of the Treasury

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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necessary if you wish to reproduce this material separately.
Page 1 GAO-16-477 Revolving Funds

441 G St. N.W.

Washington, DC 20548

May 10, 2016

The Honorable Tom Price

Chairman

Committee on the Budget

House of Representatives

Dear Mr. Chairman:

Moving to shared services, where services that multiple agencies need 

are consolidated within a smaller number of agencies, can save the 

federal government billions of dollars as well as reduce duplicative efforts, 

decrease systems upgrades, and free up resources for mission-critical 

activities. For example, in 2015, the Partnership for Public Service 

reported that the estimated cost savings from moving the federal 

government to shared services could range from about $25 billion to $56 

billion over the next 10 years.1 The President’s fiscal year 2015 budget 

made strategically expanding shared services to improve performance 

and efficiency across the federal government a Cross-Agency Priority 

(CAP) goal of the administration to be achieved over a 4-year time 

frame.2 Shared services may be financed or supported through 

intragovernmental revolving funds (IRF), which include working capital 

funds and franchise funds.3 IRFs finance business-like activities within 

and between federal agencies through amounts received by the fund.

 1

The Partnership for Public Service, Building a Shared Service Marketplace: 

Recommendations from the Shared Services Roundtable (Washington, D.C.: March 

2015).

2

CAP goals are long-term, outcome-oriented federal priority goals that OMB in 

coordination with federal agencies develops every 4 years for a limited number of 

crosscutting policy and management improvement areas. For our work on CAP goals, see 

GAO, Managing for Results: Implementation of GPRA Modernization Act Has Yielded 

Mixed Progress in Addressing Pressing Governance Challenges, GAO-15-819

(Washington, D.C.: Sept. 30, 2015).

3

Working capital funds are a form of IRF that generally finance the centralized provision of 

common services within an agency. Franchise funds are a type of IRF designed to 

compete with similar funds of other agencies to provide common administrative services, 

such as accounting, financial management, and human resources management. 

Letter
Page 2 GAO-16-477 Revolving Funds

You asked us to assess the management of select IRFs, including the 

unexpended balances in the funds. This report assesses: (1) how two 

federal agencies manage select IRFs that finance shared services; and 

(2) how these agencies manage unexpended balances in select IRFs.4

To assess the management of select IRFs, including unexpended 

balances, we selected the Federal Aviation Administration’s (FAA) 

Administrative Services Franchise Fund (ASFF) and the Department of 

the Treasury’s (Treasury) Treasury Franchise Fund (TFF), as case 

studies using the following criteria:

• IRFs that support a financial management federal shared service 

provider that contributes to the administration’s shared services CAP 

goal; and

• the highest average ratio of the funds’ unexpended balance to the 

total budgetary resources available (unexpended balance ratio).

While recognizing that an unexpended balance is necessary in IRFs since 

interagency agreements can cross fiscal years, our prior work has found 

that a high unexpended balance in working capital funds (a type of IRF) 

may indicate poor workload planning. This could lead to the inefficient use 

of agency resources and missed opportunities to use those funds for 

other needs.5 Because we used the average unexpended balance ratio 

as an indicator for potential management issues at IRFs, we focused on 

the IRFs with the highest unexpended balance ratios. Of the five IRFs

that support the financial management federal shared service providers 

(FSSP) designated by the Office of Management and Budget (OMB) to 

contribute to the shared services CAP goal, the ASFF and the TFF had 

the highest average unexpended balance ratio from fiscal years 2010 

through 2014. Appendix I provides more information about our 

methodology for selecting the ASFF and the TFF.

 4

An unexpended balance in an IRF consists of two parts: obligated balances and 

unobligated balances. Obligated balances are the amounts in an IRF for which funds have 

been obligated against an order placed with the IRF, but have not been fully liquidated. 

Unobligated balances are the amounts in an IRF that are either earned and legally 

available for obligation, or unearned advances that have not been obligated by the agency 

to fulfill the order. 

5

See, for example, GAO, Navy Working Capital Fund: Management Action Needed to 

Improve Reliability of the Naval Air Warfare Center’s Reported Carryover Amounts, 

GAO-07-643 (Washington, D.C.: Jun. 26, 2007). 
Page 3 GAO-16-477 Revolving Funds

We assessed the management of the ASFF and the TFF against our 

framework for effective IRF management, which is described in the text 

box below.6 We shared these operating principles with FAA and Treasury 

prior to our review.

Intragovernmental Revolving Funds Key Operating Principles

In 2011, we identified four key operating principles that offer a framework to effectively manage intragovernmental revolving funds 

(IRF). IRFs provide agencies with an opportunity to operate more efficiently by consolidating services and creating incentives for

customers and managers to exercise cost control and economic restraint. Given the fiscal pressures facing the federal government, 

consolidating operations could potentially achieve cost savings and help agencies provide more efficient and effective services. 

Agencies can maximize the potential of these opportunities by following four key IRF operating principles.

• Clearly delineate roles and responsibilities: Appropriate delineation of roles and responsibilities promotes a clear 

understanding of who will be held accountable for specific tasks or duties such as authorizing and reviewing transactions, 

implementing controls over fund management, and helping ensure that related responsibilities are coordinated. 

• Build in flexibility to obtain customer input and meet customer needs: Opportunities for customers to provide input about 

fund services, or voice concerns about needs, in a timely manner enable agencies to regularly assess whether customer needs 

are being met or have changed. This also enables agencies to prioritize customer demands and use resources most effectively, 

enabling them to adjust capacity to correspond to changes in the level of services demanded.

• Ensure self-sufficiency by recovering the agency’s actual costs: Transparent and equitable pricing methodologies allow 

agencies to ensure that rates charged recover agencies’ actual costs and reflect customers’ service usage. If customers 

understand how rates are determined or changed including the assumptions used, customers can better anticipate potential 

changes to those assumptions, identify their effect on costs, and incorporate that information into budget plans.

• Measure performance: Performance measures that are aligned with strategic goals can be used to evaluate whether, and if so 

how, fund activities are contributing to the achievement of goals. A management review process comparing expected to actual 

performance allows agencies to review progress towards goals and potentially identify ways to improve performance.

Source: GAO-12-56. | GAO-16-477

Note: In addition to recovering their expense of operations, franchise funds can recover an amount for 

a reasonable operating reserve and up to 4 percent of annual operating income as a reserve for 

capital improvements.

To assess the management of each fund against these key operating 

principles, we reviewed the authorizing legislation and statutory 

authorities, charters and organizational charts, and budget documents 

and financial statements from fiscal years 2010 through 2015. We also 

analyzed the funds’ interagency agreements with customers, as well as 

 6

GAO, Intragovernmental Revolving Funds: Commerce Departmental and Census 

Working Capital Funds Should Better Reflect Key Operating Principles, GAO-12-56

(Washington, D.C.: Nov. 18, 2011). 
Page 4 GAO-16-477 Revolving Funds

various pricing documents to understand how both funds share pricing 

information with customers and make pricing information publicly 

available. In addition, we reviewed various documents related to the 

funds’ performance, including performance metrics, performance and 

accountability reports, and customer satisfaction surveys. We used our 

work on customer service metrics and performance information to make 

judgments on the agencies’ management of the funds.7 We also met with 

FAA and Treasury budget and finance officials to learn about their roles 

and responsibilities for managing the ASFF and the TFF. As part of 

assessing customer input and needs, we interviewed a sample of ASFF 

and TFF customers to obtain their perspectives on services they 

received, billing and payment methods, and communication with the 

funds’ managers. See appendix I for more information about our 

methodology for selecting customers.

To assess how federal agencies manage unexpended balances in select 

IRFs, for both the ASFF and the TFF, we used our key questions for 

assessing balances in federal budget accounts, which are described in 

the text box below, as criteria.8 We shared these key questions with FAA 

and Treasury prior to our review.

Evaluating Unexpended Balances: A Framework for Understanding

In 2013, we identified the following questions for agencies and decision makers to consider when evaluating unexpended balances in 

federal budget accounts. Findings based on these questions can provide managers with important information about financial 

challenges and opportunities which may exist; in turn, this information may help guide more effective account and program 

management.

• What mission and goals is the account or program supporting?

• What are the sources and fiscal characteristics of the funding?

• What factors affect the size or composition of the unexpended balances?

• How does the agency estimate and manage unexpended balances?

Source: GAO-13-798. | GAO-16-477

 7

GAO, Managing for Results: Selected Agencies Need to Take Additional Efforts to 

Improve Customer Service, GAO-15-84 (Washington, D.C.: Oct. 24, 2014).

8

GAO, Budget Issues: Key Questions to Consider When Evaluating Balances in Federal 

Accounts, GAO-13-798 (Washington, D.C.: Sept. 30, 2013). 
Page 5 GAO-16-477 Revolving Funds

To assess the management of unexpended balances in FAA’s ASFF and 

Treasury’s TFF against these key questions, we analyzed budget 

documents from fiscal years 2010 through 2015 to identify trends and 

patterns in the unexpended balances. We found the budget data to be 

sufficiently reliable for the purpose of analyzing the composition of the 

unexpended balances in the funds.9 Also, because the funds’

unexpended balances include several components, such as reserves, we 

asked FAA and Treasury officials to provide disaggregated amounts for 

the respective fund’s unexpended balances. In addition, we also reviewed 

FAA and Treasury policies for managing reserves in the ASFF and the 

TFF. We interviewed FAA and Treasury budget and finance officials to 

learn about how they manage unexpended balances in the selected IRFs.

We conducted this performance audit from April 2015 to May 2016 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. Appendix I contains additional 

details on our objectives, scope, and methodology.

In 1994, Congress authorized the creation of one type of IRF as a pilot—

franchise funds. These funds foster competition among agencies in the 

area of providing common support services on a fee-for-service basis to 

increase efficiency at reduced cost.10 IRFs do not generally receive an 

annual appropriation from Congress. Rather, they are accounts that may 

receive reimbursements and advances from other federal accounts. In 

addition, IRFs may accept fees collected from nonfederal sources for the 

 9

To assess the reliability of FAA and Treasury data showing unexpended balances in the 

ASFF and the TFF respectively, we compared the data in OMB MAX to amounts 

published in the President’s budget. We also held discussions with FAA and Treasury 

officials to determine how they calculate the amount of the unexpended balances in the 

ASFF and the TFF, respectively. 

10The Federal Financial Reform Act of 1994 authorized OMB to designate six franchise 

fund pilots. Pub. L. 103-356, title IV, § 403, 103 Stat. 3414 (Oct. 13, 1994). 

Background

Congress Authorized FAA 

and Treasury Franchise 

Funds to Finance the 

Provision of Shared 

Services
Page 6 GAO-16-477 Revolving Funds

sale of government products or services. A key feature of franchise funds 

is the ability to retain up to 4 percent of annual operating income as a 

reserve for capital improvements.

In 1996, FAA’s ASFF was established to provide goods and services to 

customer agencies on a fee-for-service basis.11 In fiscal year 2015, the 

ASFF collected $441 million to finance six lines of business that provide a 

range of services to customers.12 In fiscal year 2015, 40 percent of the 

ASFF customers were internal to the Department of Transportation 

(DOT), comprising about 77 percent of the customer payments. Figure 1 

provides an overview of the ASFF’s structure, services provided to 

customers, and examples of customer agencies.

 11Department of Transportation and Related Agencies Appropriations Act, 1997, Pub. L. 

104-205, 110 Stat. 2958 (Sept. 30, 1996). 

12For the purpose of this report, we define a line of business as an organization financed 

by an agency’s IRF that provides services to customers inside of the agency, outside of 

the agency, or both. These include, for example, the ASFF’s Aircraft Maintenance and 

Engineering Group line of business and the TFF’s Shared Services Programs line of 

business. We consider a franchise fund to include all lines of business financed by the 

fund. 
Page 7 GAO-16-477 Revolving Funds

Figure 1: Overview of Federal Aviation Administration’s (FAA) Administrative Services Franchise Fund Structure and Lines of 

Business

In 1994, Treasury’s TFF was established to provide customer agencies 

with administrative and information technology support services on a fully 

cost recoverable, fee-for-service basis.13 In fiscal year 2015, the TFF 

collected about $542 million to finance three lines of business that provide 

a range of services to customers. In fiscal year 2015, about 30 percent of 

customers were internal to Treasury, comprising about 80 percent of 

customer payments. Figure 2 provides an overview of the TFF’s structure, 

services provided to customers, and examples of customer agencies.

 13The TFF was one of six pilot programs authorized pursuant to the Federal Financial 

Reform Act of 1994. Pub. L. 103-356, title IV, § 403, 103 Stat. 3414 (Oct. 13, 1994). The 

Federal Financial Reform Act contained a sunset provision, which was extended on three 

occasions for Treasury’s pilot program before the Consolidated Appropriations Act, 2005 

granted the Treasury Franchise Fund permanent status. Pub. L. 108-447, title II, § 219, 

118 Stat. 3242 (Dec. 8, 2004). 
Page 8 GAO-16-477 Revolving Funds

Figure 2: Overview of the Treasury Franchise Fund’s Structure and Lines of Business

Beginning in March 2013, the administration began implementing several 

initiatives to promote the use of shared services across the federal 

government. FAA’s ASFF and Treasury’s TFF support some of those 

initiatives.

• Federal Shared Service Providers (FSSP): In March 2013, OMB 

issued a memorandum that directed federal agencies to consider 

migrating to FSSPs when analyzing alternatives for modernizing their 

financial systems.14 To facilitate the transition to shared financial 

systems, OMB and Treasury’s Office of Financial Innovation and 

Transformation—an office responsible for helping agencies become 

more efficient and transparent in federal financial management—

designated four FSSPs for financial management:

 14OMB, Improving Financial Systems Through Shared Services, M-13-08 (Washington, 

D.C.: Mar. 25, 2013). The Department of the Interior’s Interior Business Center receives 

financing through two IRFs, the Working Capital Fund and the Interior Franchise Fund. 

Therefore, there are a total of five IRFs that finance the four FSSPs for financial 

management. 

ASFF and TFF Support 

Initiatives to Promote 

Shared Services 

Government-wide
Page 9 GAO-16-477 Revolving Funds

• Treasury’s Administrative Resource Center (ARC) (a TFF line of 

business),

• the Department of the Interior’s Interior Business Center,

• the FAA’s Enterprise Services Center (ESC) (an ASFF line of 

business), and

• the Department of Agriculture’s National Finance Center.

According to OMB, agencies that receive financial management 

services from a FSSP will be able to adopt the accounting standards 

listed in the DATA Act more rapidly and at lower costs.15

Example of an Agency Moving to a Federal Shared Service Provider

In 2014, the Department of Housing and Urban Development (HUD) began transitioning services to the Treasury Franchise Fund’s

(TFF) Administrative Resource Center Administrative Services (ARC Admin) line of business in a phased approach. As of the 

beginning of fiscal year 2016, HUD has completed three of four phases by transitioning travel, time and attendance, and finance and 

acquisition services to the ARC Admin line of business. HUD officials told us that the last phase to migrate grant and loan programs is 

pending due to the complexity surrounding HUD’s 68 grant programs and approximately 20 information technology systems and 

ongoing discussions regarding whether or not to migrate these to a shared services provider.

Source: GAO analysis of HUD data. | GAO-16-477

• Shared Services and Benchmark/Improve Mission-Support 

Operations Cross-Agency Priority Goals: The President’s fiscal 

year 2015 budget, released in March 2014, introduced two CAP goals 

focused on improving efficiencies in administrative functions across 

the government. The shared services CAP goal is focused on 

strategically expanding high-quality, high-value shared services to 

improve performance and efficiency across government. The 

administration made completing the migration to shared financial 

management systems the top priority of the shared services CAP goal 

focusing on agencies where the business case for modernizing 

internal systems is not the best solution based on agencies’ needs, 

risk, and cost, compared to purchasing services from a FSSP. While 

the CAP goal has a four-year timeframe, OMB staff said that moving 

federal agencies to shared services will likely span future 

administrations.

The benchmark CAP goal is focused on improving administrative 

efficiency and increasing the adoption of effective management 

practices by (1) establishing cost and quality benchmarks of mission-

 15The DATA Act, enacted in May 2014, requires federal agencies to adopt governmentwide financial data standards. Pub. L. No. 113-101, 128 Stat. 1146 (May 9, 2014). 
Page 10 GAO-16-477 Revolving Funds

support operations and (2) giving agency decision-makers better data 

to compare options, allocate resources, and improve processes. In 

May 2015, Treasury’s Office of Financial Innovation and 

Transformation updated the Federal Financial Management Services 

Catalog, which included placeholders for estimated prices and price 

ranges for the services offered by the financial management FSSPs. 

Treasury expects to complete another update of the catalog in the 

third quarter of 2016, which is intended to include standardized pricing 

and metrics for the FSSPs supporting financial management. As of 

the fourth quarter of fiscal year 2015, OMB was working with federal 

agencies to enhance the pricing transparency for the financial 

management FSSPs and develop and refine metrics for 

benchmarking the cost and quality of government-wide shared 

services.

• Shared Services Governance Structure: In October 2015, the 

Unified Shared Services Management office was created within the 

General Services Administration to help integrate agencies with 

shared service providers such as the ASFF’s ESC and the TFF’s 

ARC, improve shared services delivery, and increase agency 

adoption of shared services. Working with the Unified Shared 

Services Management office, OMB is leading a cross-governmental 

Shared Services Governance Board that is to serve as a decisionmaking body for government-wide shared services initiatives. 

Representatives from FAA and Treasury serve on the governance 

board given that ESC and ARC are both financial management 

FSSPs. OMB staff said this Board held its first meeting in November 

2015 and plans to meet monthly.

FAA and Treasury 

Have Policies and 

Procedures for 

Effectively Managing 

the Funds, but Could 

Enhance Pricing 

Transparency and 

Performance 

Measurement
Page 11 GAO-16-477 Revolving Funds

The roles and responsibilities for managing and overseeing aspects of the 

ASFF and the TFF are clearly documented and segregated across a 

number of entities and offices, which can help minimize the risk of error in 

fund management.

• FAA’s ASFF: FAA’s ASFF Charter describes the structure and 

operating framework for the ASFF and assigns various responsibilities 

for oversight and management of the fund. The charter notes that the 

Franchise Fund Management Council—comprised of FAA and 

Department of Transportation officials—is responsible for strategic 

management and oversight of the ASFF. The council monitors its 

strategic performance and decides on any changes to the ASFF’s 

operations, such as reviewing and approving business and strategic 

plans. Moreover, the charter also noted that the FAA Mike Monroney 

Aeronautical Center’s Office of Budget and Performance (ASFF’s 

program management office) monitors the ASFF’s organizational 

performance and the financial position of the fund. It reviews 

performance monthly and provides a quarterly report to the ASFF 

Director. Semi-annual reports are provided to the FAA Franchise 

Fund Management Council. This office also prepares budgetary 

information and coordinates line of business agreements to ensure 

terms are in accordance with laws and guidance. The ASFF received 

an unqualified audit opinion in fiscal year 2015, meaning that its 

financial statements and controls are in accordance with U.S. 

generally accepted accounting principles.

• Treasury’s TFF: Treasury’s TFF Charter defines the TFF’s purpose, 

management structure, and reporting procedures. The charter notes 

that Treasury’s Assistant Secretary for Management is responsible for 

overall oversight and policy setting, including creating and maintaining 

Treasury-wide policies and rules related to the TFF’s legislative 

authority. The Office of the Deputy Chief Financial Officer and Shared 

Services Division support the corporate management and oversight of 

the TFF. Additionally, Treasury has processes in place to safeguard 

financial information, ensure the accuracy of financial management 

functions, and maintain compliance with relevant federal 

requirements. For example, the TFF’s accounting system is audited 

annually to test the suitability of the design and operating 

effectiveness of its controls, in accordance with generally accepted 

government auditing standards. The TFF received an unqualified 

audit opinion in fiscal year 2015, meaning that its financial statements 

and controls are in accordance with U.S. generally accepted 

accounting principles.

ASFF and TFF 

Documentation Clearly 

Delineates Roles and 

Responsibilities
Page 12 GAO-16-477 Revolving Funds

All ASFF and TFF customers we interviewed told us they have a clear 

understanding of whom to contact with questions about various topics, 

such as billing. For example, Nuclear Regulatory Commission officials 

described their weekly communication with FAA officials as effective, with 

these officials responding to inquiries and providing reliable support. HUD 

officials noted that they communicate with Treasury officials through daily 

phone calls and e-mails. They described Treasury officials as being very 

responsive. Moreover, HUD officials stated that they have clear lines of 

communication and know exactly who in Treasury to contact to resolve 

any issues that arise with the TFF’s services provided to HUD.

FAA and Treasury outreach to ASFF and TFF customers, respectively, 

through multiple formal and informal communication channels. 

Established channels of communication give customer agencies 

opportunities to provide input about services in a timely manner. This 

enables service providers, such as the ASFF’s ESC, to regularly assess 

whether customer needs are being met or have changed. This also 

enables service providers to prioritize customer demands and use 

resources efficiently. For example, both agencies survey customers and 

hold annual forums for fund customer agencies to provide information on 

fund operations and address topics of interest, such as pricing and costs 

of the programs. FAA and Treasury also have telephone conversations

and conduct informal site visits with customers to discuss such topics as 

service and performance, adequacy of customer support, pricing 

information, and modifications to interagency agreements—the contract 

between the fund and the customer agency outlining the cost and level of 

services to be provided.

FAA and Treasury have strategies for adjusting the ASFF’s and TFF’s 

resource levels, respectively, to respond to changes in customers’

demand for the funds’ services. For example, FAA officials told us that the 

lines of business manage changes in customer demand for the ASFF’s 

services through the employment of contractors, reassigning ASFF’s fulltime equivalent staff as needed, and leveraging the operating reserve 

(which we discuss in more detail later in this report).16 Similarly, Treasury 

officials told us that when considering accepting new customers for TFF, 

 16The operating reserve is a portion of the unobligated balances that FAA and Treasury 

use to smooth out fluctuations in revenue and costs due to business-cycle instability.

FAA and Treasury Have 

Processes to Obtain Input 

and Address Needs of

ASFF and TFF Customers
Page 13 GAO-16-477 Revolving Funds

they evaluate the effect and seek to mitigate any negative impacts on the 

level of service provided to current customers. For example, Treasury 

officials said they did not accept additional large customer agencies when 

HUD became a new customer of the Administrative Resource Center 

Administrative Services (ARC Admin) line of business in 2014 given the 

level of effort required to transition HUD to Treasury services. 

Additionally, there was no overall change in the level of service provided 

to customers with regard to ARC Admin’s quarterly metrics since HUD 

started receiving services in fiscal year 2014 despite the increase in 

demand from HUD. For example, Treasury met ARC Admin’s target of 

having an average human resources help desk call abandonment rate of 

less than five percent in fiscal years 2013, 2014, and 2015, respectively. 

Similarly, Treasury met ARC Admin’s target to pay 95 percent of 

purchase card payments within four business days from statement 

approval in fiscal years 2013, 2014, and 2015, respectively.

For fiscal years 2010 through 2015, both the ASFF and the TFF had a 

positive total net income, meaning that total revenues were greater than 

total costs. The laws authorizing the ASFF and the TFF require that the 

funds recover all expenses of operations. As shown in table 1, both funds 

experienced years of positive and negative net income over that period. 

This is expected given that the ASFF and the TFF are intended to operate 

on a break-even basis over the long term. 

FAA and Treasury 

Recovered Fund Costs, 

but Potential Customers’

Access to Pricing 

Information Could Be 

Enhanced for Most Lines 

of Business

FAA and Treasury Recovered 

ASFF and TFF Operating 

Costs, Respectively, Over the 

Last 6 Fiscal Years
Page 14 GAO-16-477 Revolving Funds

Table 1: Administrative Services Franchise Fund (ASFF) and Treasury Franchise Fund (TFF) Recovered Costs From FY 2010 

through FY 2015

(Dollars in millions)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total

ASFF

Net Income $2.2 -$0.5 $13.4 $7.9 $31.5 -$15.1 $39.3

TFF

Net Income $13.0 $4.6 $4.9 -$11.8 $74.8 -$0.3 $85.2

Source: GAO analysis of ASFF and TFF financial statements. | GAO-16-477

Both funds’ net income during that period was affected by various factors.

• FAA’s ASFF: FAA officials told us that $32 million of the ASFF’s 

$39.3 million increase in net income was due to an accounting 

adjustment within the ESC line of business to capitalize the costs of 

an upgrade to the financial management system (DELPHI). The result 

of this adjustment was a decrease in $32 million of expenses within 

fiscal year 2014. With capitalization, these expenses will be 

recognized over the next 7 years as depreciation occurs. FAA officials 

told us that when this depreciation expense is factored in, the ASFF’s 

net income from fiscal years 2010 through 2015 is approximately $7 

million.

From fiscal years 2014 to 2015, the decrease in $46 million in net 

income is due to changes in operating costs and revenue. According 

to FAA officials, operating costs increased by $66 million in fiscal year 

2015 due to the reclassification of $32 million of DELPHI expenses, 

approximately $25 million in additional expenses to provide service to 

the Department of Labor (a new customer for the ESC line of 

business) and other new demand from customers, and a $10 million 

increase in the ASFF’s capital reserve.17 FAA officials said that these 

operating cost increases were offset by about a $25 million increase 

in the ASFF’s revenue between fiscal years 2014 and 2015 due to 

increased demand from the Department of Labor.

• Treasury’s TFF: Treasury officials stated that the reason for the 

$86.6 million increase in TFF’s net income from fiscal years 2013 to 

 17The capital reserve is a portion of the unobligated balances designated by the ASFF for 

capital improvements and acquisitions.
Page 15 GAO-16-477 Revolving Funds

2014 was the transfer of the Treasury Working Capital Fund programs 

into the TFF in October 2013. As part of the transfer, Treasury 

renamed the Treasury Working Capital Fund programs as the Shared 

Services Programs (SSP) line of business. According to Treasury 

officials, the programs from the Treasury Working Capital Fund had 

previously operated on an advance payment billing model. During 

fiscal year 2014, all advance payments tied to outstanding obligations 

from the Treasury Working Capital Fund were transferred into the TFF 

and were recorded as revenue for the TFF. This led to an increase in 

the TFF’s net income that year. According to Treasury officials, this 

transfer of programs and resulting change in the billing model was 

fully vetted to all transferred customers before the transfer occurred, 

which allowed customers time to prepare for the changes in their 

accounting systems.

FAA and Treasury set fund prices for each customer based on cost 

drivers, such as the amount of goods or services that a customer uses, 

and overhead.18

• Cost drivers: Both FAA and Treasury use cost drivers to help set 

prices by allocating service costs to each customer based on their 

respective portion of the total cost drivers for the services provided 

within the lines of business. For example, the ASFF’s FAA Leadership 

and Learning Institute line of business uses the number of instructor 

hours needed to provide the customers’ level of requested training as 

the cost driver for its executive managerial training program. Similarly, 

for example, the TFF’s SSP line of business uses the number of 

accounts as one of the cost drivers for its human resources services 

provided through the HR Connect service.19

• Overhead: For the ASFF, FAA charges all customers an ASFF 

overhead cost and an individual line of business overhead cost for 

each service a customer uses. Non-DOT customers are also charged 

an FAA corporate overhead cost. According to FAA officials, the 

ASFF overhead costs cover program management, quality and cost 

 18According to Treasury’s Federal Financial Management Services Catalog, a cost driver 

is any factor that causes a change in the price of a service. 

19HR Connect is a human resources system that managers and employees can use to 

perform a wide array of transactions at various stages of an employee’s life cycle, such as 

hiring, promoting, transferring, and separating.
Page 16 GAO-16-477 Revolving Funds

savings initiatives, and program enhancements. FAA officials noted 

that the line of business overhead cost covers the line of business’s 

management costs. The FAA corporate overhead cost represents the 

costs incurred by FAA headquarters in activities related to the 

oversight of the fund. These overhead charges are included in 

detailed cost documents that FAA officials said are provided to 

customers.

For TFF, Treasury incorporates overhead costs into prices for each 

line of business’s services. For example, existing customers of the 

SSP line of business are charged an overhead fee based on the total 

amount of services included in the previous year’s interagency 

agreement, excluding overhead charges from the prior year. New 

customers of the SSP line of business are charged a 4 percent 

overhead fee for the first year of receiving services. This overhead 

charge covers support costs, such as space, physical security, legal 

services, accounting, budget formulation, and audits.

Both funds’ pricing information is reviewed by their respective oversight 

bodies. For Treasury’s TFF, the Shared Services Council reviews the 

TFF’s pricing and cost information as part of its meetings, which occur at 

least semi-annually.20 For FAA’s ASFF, the Fund Director, who is 

responsible for the financial and business operation of the fund, 

coordinates with the fund’s service activity managers on the ASFF’s cost 

studies and pricing structure.

Both FAA’s ASFF and Treasury’s TFF share pricing information with the 

respective funds’ customers in various ways, but FAA does not make this 

information accessible to potential future customers for any of the ASFF’s 

lines of business. In addition, Treasury does not make this information 

available to potential customers for the Administrative Resource Center 

Information Technology Services (ARC IT) and SSP lines of business. 

Franchise funds were created to establish a market for providing common 

services to increase efficiency at reduced cost. The Congressional 

Research Service has noted that transparent prices are key to efficient 

markets and that greater price transparency, such as accessibly posted 

 20The Shared Services Council is composed of the Treasury Assistant Secretary for 

Management—who is also the Chief Financial Officer—(Chair), Fiscal Assistant Secretary 

(Co-chair), and Treasury Bureau Deputy Commissioners or Directors. The Shared 

Services Council is an advisory body for all TFF programs that accounts for customer 

perspectives in operating decisions.

FAA and Treasury Could 

Enhance Potential Customers’

Access to Pricing Information 

for Most Lines of Business
Page 17 GAO-16-477 Revolving Funds

prices, might lead to more efficient outcomes at lower prices.21 If 

consumers can obtain price information easily, they better understand the 

pricing for the services offered by the providers and potentially compare 

costs and different choices.

• FAA’s ASFF: FAA officials share pricing information with the ASFF’s 

customers in several ways. For example, each customer’s 

interagency agreement includes, among other information, pricing of 

all services requested. Also, an FAA official stated that one line of 

business presents ASFF pricing information to customers at an 

annual customer forum as well as through ongoing communications. 

According to FAA officials, additional pricing information is specific to 

each line of business because each line of business has a tailored 

cost model based on the cost drivers specific to their service offerings.

While the ASFF’s ESC line of business does not currently make its 

pricing information publicly available, the ESC Director stated that 

because ESC services a number of customers across the federal 

government, it plans to make financial management pricing 

information accessible to the public, including potential customers in 

the future, through Treasury’s Federal Financial Management 

Services Catalog and the timeline set by Treasury. As part of its 

initiative to share standardized pricing information for the FSSPs, 

Treasury has reported that ESC’s pricing information for financial 

management services will be included in the next update of the 

Federal Financial Management Services Catalog in the third quarter 

of 2016. However, financial management is just one of the seven 

service lines offered by the ESC line of business. The ESC line of 

business also provides customer agencies with information 

technology services, which is an area that the leaders of the shared 

services CAP goal plan to target in the future.

For the other ASFF lines of business, according to FAA officials, there 

is currently limited demand for sharing prices publicly given the 

customized nature of the services provided to customers and many of 

the customers for the ASFF lines of business are internal to DOT. For 

example, for its FAA Logistics Center line of business, FAA officials 

 21Congressional Research Service, Does Price Transparency Improve Market Efficiency? 

Implications of Empirical Evidence in Other Markets for the Health Sector, RL341041

(Washington, D.C.: Apr. 29, 2008).
Page 18 GAO-16-477 Revolving Funds

stated that the center provides specialized radar surveillance 

installation and repair to a limited number of customers. Additionally, 

for its FAA Leadership and Learning Institute line of business, officials 

said they provide managerial training on air traffic control issues that 

is specific to FAA needs. Officials said for these lines of business 

providing specialized services, they may consider making pricing 

information publicly available if the number of agencies demanding 

those services increases.

• Treasury’s TFF: Treasury officials share pricing information with the 

TFF’s customers through various channels, such as one-on-one 

meetings, phone calls, and an annual pricing forum. For example, one 

Treasury customer we interviewed described understanding that the 

cost for an executive training program was based on the number of 

executives in the agency. Additionally, each TFF line of business 

provides customers with documents explaining the pricing 

methodology for various services. For example, the ARC Admin line 

of business provides customers with a detailed price sheet that shows 

the overall direct and overhead costs for each program, such as the 

help desk within the travel service line, as well as customer-specific 

costs. In August 2015, Treasury began posting the price sheet for the 

ARC Admin line of business to its external website to improve overall 

transparency and help current and potential customers understand all 

components of the pricing methodology to further inform customers’

business decisions.

For the SSP line of business, Treasury officials said they have been 

working over the last several years to improve the transparency of the 

pricing methodology and overall costs. In fiscal year 2014, Treasury 

developed a SharePoint website where all customers internal to

Treasury for the SSP line of business can access their interagency 

agreement, pricing methodologies, billing information, and program 

contacts. Beginning with the fiscal year 2016 billing cycle, Treasury 

began sharing with all SSP line of business customers—including 

those external to Treasury—a tool where customers can view costs 

for each service, including labor and non-labor costs, as well as 

infrastructure updates. In TFF’s fiscal year 2016 customer satisfaction 

survey of the SSP line of business conducted in October 2015, almost

half of the respondents said the fiscal year 2016 billing statements 

generated from this new tool provide much more detailed information 

than past years and that this detail helps improve the transparency of 

the SSP line of business. 
Page 19 GAO-16-477 Revolving Funds

Treasury officials said the expansion of non-Treasury customers for 

the SSP line of business is a current initiative for the TFF. Officials 

said that the new pricing tool shared with all customers at the 

beginning of fiscal year 2016 is a step in the right direction for publicly 

sharing the pricing information. According to these officials, the 

Treasury Shared Services Division has been working with Treasury’s 

Chief Information Office to establish a Treasury network that will allow 

all non-Treasury agencies the ability to access the SSP line of 

business website. This on-going effort, which is expected to be 

completed over the next few years, is to help market Treasury shared 

services and expand the customer base.

The TFF’s ARC Admin line of business, which as a financial 

management FSSP supporting the shared services CAP goal 

provides services to customers across the federal government, makes 

its pricing information publicly available to potential customers. 

However, Treasury officials explained that they do not make prices 

publicly available to potential customers for the ARC IT line of 

business because, in fiscal year 2015, about 93 percent of its revenue 

came from customers at the Bureau of Fiscal Service within Treasury, 

which receives a detailed price invoice. In addition, Treasury officials 

stated that the ARC IT line of business has been cautious about 

making IT service pricing available to the public due to the sensitivity, 

complexity, and security of this type of information. However, a 

Treasury official noted that there has been a recent increase in the 

number of agencies outside of Treasury wanting to purchase services 

from the ARC IT line of business as a result of cyberattacks on federal 

agencies. While services by the ARC IT line of business are unique 

for each customer with different potential prices, a Treasury official 

said making the service unit costs (e.g., the hourly rate for software 

engineering services) publicly available is something they could do 

going forward.

Making pricing information publicly available can help future customers 

understand the pricing of the service providers and potentially compare 

costs and services of the providers. Currently, potential customers of 

most lines of business within the ASFF and the TFF can only understand 

a price estimate or a range of available prices by entering into

negotiations with individual lines of business. In addition, once a customer 

begins to buy services from the funds, there may be significant upfront 

implementation costs that may make it difficult to justify discontinuing 

services in the near term if a customer wants to change service providers. 

As mentioned earlier, in May 2015, Treasury’s Office of Financial 
Page 20 GAO-16-477 Revolving Funds

Innovation and Transformation updated and posted on its website the 

Federal Financial Management Services Catalog to include placeholders 

for estimated prices and price ranges for the services offered by the 

financial management FSSPs, including Treasury’s ARC and FAA’s ESC 

line of business. According to Treasury’s Office of Financial Innovation 

and Transformation, making pricing information publicly available—even 

ranges of price estimates—can help current and potential customer 

agencies understand the factors contributing to the shared service 

providers’ prices. It also can help customers get a sense for the rough 

order of magnitude estimates of potential prices for if they were to buy the 

services from a FSSP. Ultimately, current and potential customer 

agencies can use publicly available pricing information to better 

understand pricing information and potentially compare services across 

service providers.

FAA and Treasury have strategic goals with supporting metrics for the 

ASFF and TFF, respectively, to help measure performance of the fund 

and whether fund activities support overall goals. However, both funds 

could further improve their performance measurement efforts by FAA 

making its metrics publicly available and Treasury further developing 

performance metrics for one line of business.

• FAA’s ASFF: FAA has five strategic goals for the ASFF with 

performance metrics that help measure the performance of the fund’s 

services provided. For example, for the ASFF strategic goals to “inject 

competition and market forces into government and customer 

satisfaction” and “increase customer orientation by creating a buyer 

seller relationship”, FAA has supporting metrics, such as the 

percentage of travel payments completed within 8 days, number of 

defective parts per 1,000, and customer wait time for services. FAA 

met 17 of 21 of the ASFF’s targets for its fiscal year 2015 

performance metrics. For example, for the ESC line of business, FAA 

set a goal to make greater than 95 percent of travel payments in eight

days and made over 99 percent of such payments within that 

timeframe. Similarly, for the FAA Logistics Center line of business, 

FAA set a goal to have 3.8 shipping defects per 1,000 parts and had 

2.3 shipping defects per 1,000 parts.

FAA officials use the metrics to monitor the efficiency of an ASFF line 

of business, and periodically adjust the metrics to ensure that they 

remain ambitious. For example, FAA revised the target for the 

Acquisition Services’ line of business cost-to-award procurements 

metric of less than 2.5 percent of the procurement, which was met 

FAA and Treasury 

Measure Fund 

Performance, but Most of 

FAA’s Metrics Are Not 

Publicly Available and One 

TFF Line of Business Has 

Limited Performance 

Metrics
Page 21 GAO-16-477 Revolving Funds

during the prior fiscal year, to less than 1.75 percent of the 

procurement to help encourage further efficiency. FAA officials said 

ASFF management reviews the metrics monthly, shares the metrics 

quarterly with the ASFF director, and briefs the FAA Franchise Fund 

Management Council semiannually on the metrics.

According to FAA officials, the lines of business make the metrics 

available to customers when discussing the interagency agreements 

for the services provided by that line of business. Specifically, officials 

said providing the customers with the metrics for measuring the 

quality of the services provided by that line of business helps them 

understand how the fund is performing. For example, FAA officials 

stated that the FAA Leadership and Learning Institute line of business 

reports its performance, such as overall course satisfaction, monthly 

to FAA—which officials noted is its only customer due to the 

specialized nature of its air traffic control training. Additionally, the 

ESC line of business provides monthly reports to customers 

containing performance metrics.

However, FAA does not make the ASFF’s goals and performance 

metrics publicly available to potential customers with the exception of 

some metrics by the ESC line of business. The ESC’s metrics for the 

DELPHI financial management system are available on FAA’s 

external website. As part of OMB’s initiative to standardize and share 

the performance metrics of the financial management FSSPs, the 

metrics for the ESC line of business will be publicly available in the 

future through updates of Treasury’s Federal Financial Management 

Services Catalog. The ESC line of business though is just one part of 

the ASFF.

For the other ASFF lines of business, FAA officials said in general, the 

lines of business offer highly specialized services to a limited 

customer base and there is not the external demand for the metrics to 

be publicly available. However, we have reported that agencies 

should make metrics that measure the services provided to customers 

available because without such easily available information, potential 

customers may not know what to expect, when to expect it, or from 

whom.22 For example, potential customers who might consider using 

 22GAO-15-84.
Page 22 GAO-16-477 Revolving Funds

the FAA Logistics Center line of business, which services the 

Department of Defense, Coast Guard, and Customs and Border 

Protection, among other agencies, may want to understand how well it 

has performed on its metric regarding the number of shipping defects 

per parts ordered. Communicating this information to the public in a 

way that is useful and readily available to customers is important in 

enabling the public to hold government accountable and to inform 

customer decision making. Because FAA does not publicly report the 

ASFF’s performance toward its goals and metrics, potential customers 

are unable to fully understand how the fund is performing. It is 

important for franchise funds such as the ASFF to provide competition 

into the market for providing common administrative services. Also, a 

well-functioning market requires transparent information about the 

funds’ performance.

• Treasury’s TFF: Treasury has six strategic goals for the TFF that 

align with Treasury’s overall strategic goals for the department to 

“fairly and effectively reform and modernize federal financial 

management, accounting, and tax system” and “create a 21st-century 

approach to government by improving efficiency, effectiveness, and 

customer interaction” and performance metrics to help oversee the 

performance of the fund. For example, for the TFF strategic goal to 

“continue to assess and report TFF’s performance and provide timely 

feedback to customers”, Treasury has supporting metrics, such as the 

response time to resolve non-critical issues/help desk tickets within 

10-15 business days and percent of incidents resolved on time. 

Treasury makes the goals and metrics publicly available each year in 

the TFF’s congressional budget justification, which is posted on 

Treasury’s website for customers and the public to access. According 

to the TFF’s fiscal year 2017 budget justification, Treasury met 12 of 

17 of the TFF’s targets for the fiscal year 2015 performance metrics. 

For example, for the ARC Admin line of business, Treasury set a 

target to resolve 50 percent of help desk inquiries related to its 

financial management system (Oracle) on the first call and achieved a 

57 percent resolution of such inquiries on the first call. For one of the 

metrics not met, Treasury said although the SSP line of business 

achieved 84 percent customer satisfaction with its HR Connect 

Service—compared to its target of 90 percent customer satisfaction—

it plans to continue to improve and strives to maintain the level of 

satisfaction as customer expectations are increasing.

Treasury officials said that they report the performance metrics 

quarterly to OMB and use the metrics to track the performance of 

each line of business throughout the year. According to Treasury 
Page 23 GAO-16-477 Revolving Funds

officials, Treasury management reviews the TFF’s metrics each 

quarter to ensure that they provide relevant information to help 

monitor and identify opportunities to improve services provided. For 

example, Treasury officials said they monitor the direct costs of 

providing services for the ARC Admin line of business, such as the 

direct cost per system user of TFF’s financial management system 

(Oracle). Further, Treasury adjusts the metrics each year to help 

ensure the services provided are being accurately measured. For 

example, for fiscal year 2014, Treasury added ten new metrics for 

each service line within the ARC Admin line of business to help 

measure and report on performance of each service line in isolation 

rather than as a blended organizational measure.

While Treasury tracks and publicly reports on various metrics for the 

TFF, these performance measures do not capture the majority of the 

services provided to the customers served by the SSP line of 

business and are limited primarily to human resources services 

provided through the HR Connect Service. The SSP line of business 

also provides telecommunications, cybersecurity, and information 

technology services to customers. Having performance metrics that 

measure programs within the fund can help the agency evaluate 

whether, and if so how, fund activities are contributing to the 

achievement of its strategic goals.23 When asked about the limited 

scope of these performance metrics, Treasury officials stated that 

they are currently revising SSP’s performance metrics to be more 

inclusive of all the services provided instead of just human resources

and customer satisfaction. Officials told us that since the SSP line of 

business has only been part of the TFF since fiscal year 2014, they 

have not yet performed the benchmarking analysis necessary to 

develop a more complete set of performance metrics. Officials stated 

that this is an ongoing effort and any revisions to the metrics would 

likely be included in the fiscal year 2018 TFF congressional budget 

justification. However, Treasury officials do not have a plan with clear 

dates and milestones for completing the benchmarking analysis and 

revising the metrics within this timeframe. Without a more complete 

set of performance measures, Treasury officials managing the SSP 

line of business and customers do not have complete information on

how the various programs are performing to determine what aspects 

 23GAO-12-56.
Page 24 GAO-16-477 Revolving Funds

of the programs need improvement or in the case of the customers, 

whether to continue buying services from that provider.

As intragovernmental revolving funds operating on a fee-for-service basis, 

FAA and Treasury maintain unexpended balances in the ASFF and the 

TFF, respectively. This ensures that the funds can operate on a selfsufficient basis without annual appropriations and that the agencies can 

continue to provide services to customers.24 Having these balances is 

essential to the agencies achieving the funds’ missions and goals to 

provide services to customers.

 24An unexpended balance in an IRF consists of two parts: obligated balances and 

unobligated balances. Obligated balances are the amounts in an IRF for which funds have 

been obligated against an order placed with the IRF, but have not been fully liquidated. 

Unobligated balances are the amounts in an IRF that are either earned and legally 

available for obligation, or unearned advances that have not been obligated by the agency 

to fulfill the order.

FAA and Treasury 

Have Processes for 

Managing 

Unexpended 

Balances, but Could 

Improve 

Documentation of 

Operating Reserve 

Policies

FAA’s and Treasury’s 

Unexpended Balances 

Support Maintaining SelfSufficiency and Providing 

Continuous Services for 

the Funds
Page 25 GAO-16-477 Revolving Funds

One part of the unexpended balances that FAA and Treasury use to 

support the mission and goals of both funds is the reserves. The 

authorizing legislation for both the ASFF and TFF provide the agencies 

the authority to retain a reasonable operating reserve, as determined by 

the FAA Administrator or Treasury Secretary, respectively. This can be 

used to financially support ongoing operations in the funds. For example, 

FAA uses operating reserve funding to smooth out unexpected 

fluctuations in demand due to business-cycle activity. In addition, both 

funds can retain up to 4 percent of the total annual income from the funds’

operations for capital improvements, such as infrastructure, equipment 

replacement, and upgrades. For both funds, these reserve funds are 

without fiscal year limitations and are retained until expended.

FAA and Treasury officials have processes in place for the ASFF and 

TFF, respectively, to ensure that customers’ orders are filled in a timely 

manner, and advance payments from customers are timely obligated or 

returned to customers. Customers’ advance payments to FAA’s ASFF 

retain the period of availability from their original appropriation and are

earned as ASFF works on the customer order. Once earned, those 

amounts are available to ASFF without fiscal year limitation. Since 

Treasury’s TFF operates only on a reimbursable basis, those amounts 

provided by the customer are retained by the TFF and are available 

without fiscal year limitation.25

• FAA’s ASFF: According to FAA officials, one way the FAA ensures a 

customer’s funds are used in accordance with fiscal limitations is by 

having the FAA accounting office and the ASFF lines of business 

track obligations for projects that span fiscal years. The accounting 

office informs the lines of business at least 6 months prior to the 

cancellation date of the customer’s funds that those funds should be 

liquidated before being cancelled.26 FAA acknowledges there may be 

instances where they do not liquidate all of a customer’s advance 

funds because service levels were less than estimated or costs were 

 25For further discussion about the treatment of customer advances in revolving funds, see 

GAO, Intragovernmental Revolving Funds: NIST’s Interagency Agreements and Workload 

Require Management Attention, GAO-11-41 (Washington, D.C.: Oct. 20, 2010). 

26On September 30th of the fifth fiscal year after the period of availability for obligation of a 

fixed appropriation account ends, the account is closed and any remaining balance in the 

account is canceled. 31 U.S.C. § 1552.

Key Questions for Evaluating Unexpended 

Balances 

What mission and goals is the account or 

program supporting?

Understanding the mission activities, goals, 

and programs a fund supports provides 

information about whether a program needs to 

maintain an unexpended balance to operate 

smoothly, what size balance is appropriate, 

and whether opportunities for savings exist.

Source: GAO-13-798. | GAO-16-477

FAA and Treasury Have 

Processes for Ensuring 

Customers’ Funds Are 

Used in Accordance with 

Fiscal Limitations

Key Questions for Evaluating Unexpended 

Balances

What are the sources and fiscal 

characteristics of the funding?

The sources and fiscal limitations of the 

funding influence what opportunities may exist 

for budgetary savings in a revolving fund.

Source: GAO-13-798. | GAO-16-477
Page 26 GAO-16-477 Revolving Funds

lower than anticipated. In those cases, FAA officials told us that the 

line of business will have a discussion with the customer agency—

usually well in advance of the customer’s appropriation closing—

about returning the excess funds to the customer. For example, FAA 

returned about $126,000 to the Nuclear Regulatory Commission in 

November 2014 that was left over at the end of a completed project.

• Treasury’s TFF: Treasury also has mechanisms for ensuring that 

customers’ funds are used in accordance with fiscal limitations. For 

example, all TFF interagency agreements list the accounting closing 

date of the customers’ funds, since customers pay for their services 

with one-year, multi-year, and no-year funds. The TFF’s interagency 

agreements also include a tracking number so that fund managers 

and customer agency budget and finance staff can track the funds in 

their applicable financial systems. Treasury officials said they approve 

and record obligations on a real-time basis and review obligated 

balances quarterly in the accounting system. TFF interagency 

agreements are an annual fixed fee structure with an equal portion 

billed monthly (e.g., 1/12th).

Many factors can influence the size and composition of the unexpended 

balances in FAA’s ASFF and Treasury’s TFF. The rate at which both 

funds incur and liquidate obligations can vary with the nature of the 

activity. For example, if FAA or Treasury officials add new customers to 

the respective funds, the fund may incur greater obligations. As a result, 

the obligated portion of the unexpended balances may increase in the 

fiscal year in which new customers were added.

An unexpended balance in an IRF consists of two parts: obligated 

balances and unobligated balances. Obligated balances are the amounts 

in an IRF for which funds have been obligated (i.e., a definite commitment 

by the IRF establishing a legal liability for the payment for goods and 

services ordered or received) against an order placed with the IRF, but 

have not been fully liquidated. Unobligated balances are the amounts in 

an IRF that are either earned and legally available for obligation, or 

unearned advances that have not been obligated by the agency to fulfill 

the order.

For ASFF, FAA officials said the ASFF’s obligated balances consist of 

amounts obligated, but not yet expended to fulfill a customer’s order by 

providing the good or service to the customer. The ASFF’s unobligated 

balances consist of the (1) unearned revenue received as advance 

payments from customers to the fund before the fund performs the 

FAA and Treasury 

Identified Factors That 

Affected the Size or 

Composition of the 

Balances

Key Questions for Evaluating Unexpended 

Balances

What factors affect the size or composition of 

the unexpended balance?

It is important to consider which factors 

affecting unexpended balances are within the 

agency’s control and which are not. The rate 

at which obligations are incurred and 

subsequently liquidated in a fiscal year can 

vary with the nature of the activity. 

Understanding what drives this “spendout 

rate” provides information on the size of the 

unobligated portion of the balance versus the 

obligated portion; this in turn provides insight 

into the composition of the unexpended 

balance as a whole. 

Source: GAO-13-798. | GAO-16-477
Page 27 GAO-16-477 Revolving Funds

service, and (2) earned revenue resulting from customer payments after 

the fund performs the service. This earned revenue remains in the fund to 

execute future orders, or as a statutorily-authorized reserve, until 

expended. The size of the ASFF’s unexpended balance from fiscal years 

2010 through 2015 is shown in table 2. In fiscal year 2014, the ASFF’s 

unexpended balance increased by 36 percent from $267 million to $363 

million. 

Table 2: Administrative Services Franchise Fund Unexpended Balance, End of FY 2010-FY 2015

Source: GAO analysis of OMB MAX and Federal Aviation Administration data. | GAO-16-477

Note: Numbers may not total due to rounding.

a

FAA records advance payments from customers as an unfilled customer order in the financial 

system.

b

FAA considers all undelivered customer orders to be obligated and part of the obligated balance. As 

FAA begins to incur obligations as it performs services for customers, FAA transitions the advance 

funding received and recorded as unfilled customer orders to earned revenue by performing goods 

and services. The activities required to provide the goods and services become undelivered customer 

orders by creating obligations in the financial system. The negative value for the undelivered 

customer orders represents this transition from unobligated to obligated funds.

c

FAA also includes in the unobligated balance an amount for supply chain reserve to account for 

proprietary and budgetary accounting and their timing differences in the recognition of the cost of 

inventory purchases.

FAA officials said that many factors influenced the increase in the size of 

the ASFF’s unexpended balance from fiscal years 2013 to 2014. For the 

unobligated portion, FAA officials attributed part of the increase to a $60 

million increase in demand for services from one of its customer 

agencies—the Department of Homeland Security’s Customs and Border 

Protection. For the obligated portion, FAA officials attributed part of the 

increase in obligations to increased requests for travel and data analysis 

services from the Office of Personnel Management, Equal Employment 

Opportunity Commission, and Department of Labor.

(Dollars in millions)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Obligated Balance $164 $129 $162 $146 $177 $173

Unobligated Balance:

Unfilled Customer Ordersa $218 $163 $159 $163 $239 $248

Undelivered Customer Ordersb -$147 -$93 -$119 -$118 -$134 -$130

Capital Reserve $38 $36 $48 $48 $43 $33

Operating Reserve $22 $22 $22 $22 $22 $21

Supply Chainc $0 $0 $0 $8 $17 $13

$131 $129 $111 $122 $188 $185

Unexpended Balance $294 $257 $272 $267 $363 $358
Page 28 GAO-16-477 Revolving Funds

For TFF, unobligated balances are the amounts that are earned and 

legally available for obligation, and obligated balances are the amounts 

for which the TFF’s funds have been obligated to fulfill an order, but have 

not been fully liquidated. The size of the TFF’s unexpended balance was 

relatively stable from fiscal years 2010 through 2013. However, in fiscal 

year 2014, it increased by 131 percent from $101 million to $233 million, 

as shown in table 3 below. 

Table 3: Treasury Franchise Fund Unexpended Balance, End of FY 2010-FY 2015

Source: GAO analysis of OMB MAX data. | GAO-16-477

Note: For the TFF, the unobligated balance directly corresponds to the amount in the reserve; no 

distinction is made between an operating reserve and a capital reserve.

Treasury officials stated that the increase in the size of the TFF’s 

unexpended balance from fiscal years 2013 to 2014 was caused by the 

merger of the SSP line of business, formerly part of Treasury’s Working 

Capital Fund programs, into the TFF in fiscal year 2014. Prior to being 

transferred to the TFF, the SSP line of business operated on an advance 

payment model (as compared to the TFF which operates on a fee-forservice basis). During fiscal year 2014, all advance payments from former 

Working Capital Fund customers tied to outstanding obligations were 

transferred into the TFF. Going forward, a Treasury official said he 

expects the unexpended balances in the TFF to remain steady or even 

increase to help with future needs of the fund. This includes a planned 

telecommunications project over the next 5 years.

(Dollars in millions)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Obligated Balance $17 $23 $48 $3 $85 $102

Unobligated Balance $71 $72 $65 $98 $148 $159

Unexpended Balance $88 $95 $113 $101 $233 $261
Page 29 GAO-16-477 Revolving Funds

FAA and Treasury have processes to effectively estimate and manage 

the balances in the ASFF and TFF, respectively. Agency management 

and estimation of unexpended balances helps ensure that any amounts 

carried over into the next year, in general, meet the amount the agency 

estimated is necessary to continue activities. As part of their unobligated 

balances, both agencies have reserves that they maintain to help manage 

planned and unplanned changes in customer demand and to fund and 

execute capital improvements.

According to an FAA official, FAA manages the capital and operating 

reserves at the overall fund level and by line of business. ASFF’s program 

management office, through input from each ASFF line of business, 

monitors the individual operating reserve and capital reserve levels each 

month by line of business. FAA officials said activity within each line of 

business dictates how each of the reserve levels change. By managing 

the reserves at the overall fund level, according to an FAA official, the 

individual lines of business for the ASFF have the flexibility to run their 

reserves in the negative at any point during the year in extraordinary 

situations, such as late payments from customers (for example, as 

occurred due to the fiscal year 2013 sequestration), as long as the total 

amount of the overall reserve is non-negative. For example, the operating 

reserve for the ESC line of business was negative by almost $1.2 million 

in January 2015 due to a lag in receipt of customer payments, although 

the ASFF’s operating reserve had a positive balance of about $16.2 

million at that time. The ESC’s operating reserve recovered to a positive 

balance of about $2.9 million by March 2015. An FAA official stated that 

they monitor the operating reserve closely to ensure that negative 

reserves only happen for short periods of time.

For the TFF, a Treasury official said they have an annual review process 

for calculating the operating reserve requirements for the following four 

categories of the reserve: (1) cash flow; (2) business risk; (3) 

insurance/reconstitution; and (4) investments (see text box). Each line of 

business calculates the required amount for the operating reserve needs 

along these categories using the prior year’s reserve amounts as a guide. 

Treasury then compares the calculated requirement to the projected 

balance to determine any differences—estimated surplus or deficit. 

Treasury management uses these results to help make pricing 

adjustments for customers that are intended to reduce the estimated 

surplus or deficit.

FAA and Treasury 

Estimate and Manage 

Unexpended Balances, 

but Could Improve 

Documentation of 

Operating Reserve 

Policies

Key Questions for Evaluating Unexpended 

Balances

How does the agency estimate and manage 

unexpended balances?

Understanding an agency’s processes for 

estimating and managing unexpended 

balances that carryover into the next fiscal 

year provides information to assess how 

effectively agencies anticipate program needs 

and ensure the most efficient use of 

resources.

Source: GAO-13-798. | GAO-16-477
Page 30 GAO-16-477 Revolving Funds

The Treasury Franchise Fund’s (TFF) Four Reserve Categories

• Cash Flow: This balance is equivalent to 30 days of each line of business’ estimated annual expenditures. The TFF’s lines of 

business do not receive advance payments from customers for services. Therefore, each line of business uses the reserve to pay 

for its operations and services until it receives offsetting collections from customers. Treasury officials stated that customers 

typically make their first payments to the TFF in late October of each fiscal year. 

• Business Risk: The TFF’s lines of business can access an amount of the reserve up to 10 percent of their estimated annual 

expenditures to cover unexpected losses in revenues or increases in expenditures, as a result of fluctuations in customer demand 

and the business cycle. 

• Insurance/Reconstitution: The TFF’s lines of business can access a portion of the reserve equal to $5,000 for each of their full 

time equivalent employees to cover lost, stolen, or damaged assets. 

• Investments: A portion of the reserve is maintained for investments to be made by each line of business. This includes any major 

purchases or improvement of equipment or systems. The TFF’s lines of business budget for these major investments up to 5 

years in advance. The amount of these gross investments included in the reserve calculation reduces by 20 percent each year 

beyond the year of execution. 

Source: GAO analysis of Treasury data. | GAO-16-477

While FAA and Treasury have processes to help them effectively manage 

unexpended balances in the respective funds, FAA’s and Treasury’s 

guidance for managing the operating reserves in the ASFF and TFF, 

respectively, does not include key policies—processes and steps—that 

officials are following to manage the operating reserves. We have 

previously reported on the importance of agencies establishing an 

operating reserve policy and relevant guidance and protocols to 

strengthen the transparency and communication of agency operations.27

We have also reported on the importance of agency management 

internally communicating the necessary quality information, such as 

through written communication to help achieve the agency’s objectives. 

Maintaining written policies and procedures can help ensure that 

adequate internal controls are in place to address risks and enforce 

management directives.28

 27GAO, Patent and Trademark Office: New User Fee Design Presents Opportunities to 

Build on Transparency and Communication Process, GAO-12-514R (Washington, D.C.: 

Apr. 25, 2012).

28GAO, Standards for Internal Control in the Federal Government, GAO-14-704G

(Washington, D.C.: Sept. 10, 2014).

FAA and Treasury Could 

Improve Documentation of 

Policies for Managing the 

Funds’ Operating Reserves
Page 31 GAO-16-477 Revolving Funds

• FAA’s ASFF: According to FAA officials, the guidance for managing 

the ASFF’s reserve is contained in two documents: its authorizing 

legislation and guidance from the FAA Administrator in a 2003 policy 

letter. The authorizing legislation provides general guidance on how 

ASFF’s operating reserve is to be managed. In particular, the 

legislation states that ASFF will charge sufficient rates to maintain a 

reasonable operating reserve, as determined by the FAA 

Administrator. The 2003 policy letter from the FAA Administrator 

provided authorization to increase the operating reserve limit from $1 

million, which was set in 1997 when the fund was established, to an 

overall balance not to exceed 4 percent of ASFF’s highest annual 

revenue. This annual level is determined on a line of business level 

rather than at the fund level. According to FAA officials, in general, the 

highest year’s offsetting collections to date for most lines of business 

occurred in fiscal year 2010, with the ESC line of business 

recognizing a higher level for fiscal year 2014. As a result, the 

operating reserve limit for fiscal year 2015 is $21.9 million.

FAA officials stated that they do not have a separate policy 

documenting how the operating reserve is to be managed because 

ASFF’s authorizing legislation and the FAA Administrator’s guidance 

provides sufficient explanation regarding the use and administration of 

the operating reserve. However, while FAA has processes to help 

effectively manage ASFF’s operating reserve, FAA’s written guidance 

does not include key policies that FAA officials told us they use to 

manage the ASFF’s reserves. For example, the documents do not 

describe the role of the Franchise Fund Management Council, the 

decision of FAA to manage the reserve at the fund level instead of the 

individual line of business, or the methodology each line of business 

uses to calculate the amount of operating and capital reserves it will 

need in a given fiscal year. Although an FAA official told us that the 

FAA Franchise Fund Management Council approved the proposal to 

manage the ASFF’s reserve at the fund level, this decision was not 

documented in policies. Written documentation of the process for 

managing operating reserves is essential to continue and help ensure 

consistency in implementation over time.

• Treasury’s TFF: The guidance for managing and calculating the 

TFF’s operating reserve is contained in three documents: (1) TFF’s 

authorizing legislation, (2) the TFF Charter, and (3) the guidance on 

the four categories of the operating reserve. The legislation provides 

the Treasury Secretary with general authority for the TFF to maintain 

a reasonable amount of funds in the operating reserve. It also outlines 

the appropriate uses of the operating reserve fund, such as capital 
Page 32 GAO-16-477 Revolving Funds

equipment acquisitions and the implementation and improvement of 

support systems. The TFF charter delegates the authorizing 

legislation provision for the Treasury Secretary to the Treasury 

Assistant Secretary for Management. The guidance on the four 

categories of the reserve outlines four appropriate uses for the 

reserve, as discussed earlier, and provides general guidance on how 

to calculate each component. Treasury considers the maximum 

amount that can be maintained in the reserve to be 4 percent of 

annual cash inflows plus the amount estimated based on operating 

reserve requirement calculations. According to a Treasury official, 

these calculations are reviewed by the Financial Management 

Oversight Committee and Shared Services Council, and approved by 

Treasury’s Deputy Chief Financial Officer each year during the budget 

approval process.

As discussed earlier, Treasury officials have an annual process of 

determining the required amounts within the operating reserve that 

considers factors influencing the size of the reserves and the 

forecasted changes in the fund with supporting documents outlining 

the four categories of the reserve, and spreadsheets showing 

calculations for the required amounts. Officials believe that this 

process and the existing guidance on calculating the components of 

the operating reserve are sufficient for managing the operating 

reserve. While Treasury’s process for managing the TFF’s operating 

reserve and existing guidance has helped Treasury to effectively 

manage the reserve, the steps in the annual operating review process 

are not fully documented in agency guidance. Written documentation 

of the process for managing operating reserves provides a means to 

retain organizational knowledge, which can help ensure consistency 

in implementation over time.29

Intragovernmental revolving funds provide federal agencies with an 

opportunity to operate more efficiently by consolidating and providing 

services. Congress’ creation of franchise funds, such as FAA’s ASFF and 

Treasury’s TFF, and the administration’s establishment of the shared 

services CAP goal both strive to enhance the efficiency of government 

through a competitive market for common administrative services. This 

injection of competition into core services provides incentives for 

 29GAO-14-704G.

Conclusions
Page 33 GAO-16-477 Revolving Funds

customer agencies and fund managers to reduce costs and maximize the 

benefits of shared services.

It is important for FAA and Treasury to focus on the management of the 

revolving funds. These funds help finance the delivery of the services to 

the customer agencies. In several areas, FAA and Treasury have policies 

and procedures for effectively managing the ASFF and the TFF, 

respectively. For example, the roles and responsibilities for managing and 

overseeing both funds are clearly documented in agency policies and are 

segregated across a number of entities, which can help minimize the risk 

of error in fund management. Also, FAA and Treasury have recovered all 

expenses of operations for the ASFF and the TFF, respectively over the 

last six fiscal years, which is important given that the funds are intended 

to operate on a break-even basis over the long term. However, as part of 

managing the funds and to support agencies’ decisions on shared 

services, additional performance and pricing information for the funds 

needs to be available to, both, current and potential customers. This will 

help them understand the prices and determine the services they could 

receive for their payments and be able to understand how the fund is 

performing against its goals and metrics.

Additionally, FAA and Treasury have processes that help them to 

effectively manage the operating reserves in the respective funds, but 

they are not fully documented. Written policies should be in place to 

ensure the mitigation of risk and that adequate consideration is given to 

factors influencing the operating reserve requirements given the centrality 

of the operating reserve to the effective management of 

intragovernmental revolving funds. Moreover, written documentation of 

these processes is essential to ensure consistency in implementation 

over time and through transitions in leadership.

To help enhance efforts to expand shared services and improve the 

management of the Administrative Services Franchise Fund (ASFF), we 

recommend that the Secretary of Transportation direct the FAA 

Administrator to take the following three actions:

1. Make pricing information, such as ranges of prices, for the ASFF’s 

lines of business publicly available, as appropriate, to help potential 

customers and agency decision makers understand prices and 

different choices of services.

Recommendations for 

Executive Action
Page 34 GAO-16-477 Revolving Funds

2. Make the ASFF’s strategic goals and performance metrics publicly 

available to help potential customers and agency decision makers 

understand how the fund is performing on the services provided.

3. Develop an operating reserve policy that documents all existing 

review processes that relate to management of the ASFF’s operating 

reserves. These documented policies should include information on 

how fund managers are to assess the operating reserves, including 

guidelines to evaluate, use, and maintain the operating reserves over 

time.

To help enhance efforts to expand shared services and improve the 

management of the Treasury Franchise Fund (TFF), we recommend that 

the Secretary of the Treasury take the following three actions:

1. Make pricing information, such as ranges of prices, for the ARC IT 

and SSP lines of business publicly available, as appropriate, to help 

potential customers and agency decision makers understand prices 

and different choices of services.

2. Develop a more complete set of performance metrics for the TFF’s 

SSP line of business to help managers of the SSP line of business, 

current and potential customers, and agency decision makers monitor 

and oversee how the fund is performing on the services provided.

3. Develop an operating reserve policy that documents all existing 

review processes that relate to management of the TFF’s operating 

reserves. These documented policies should include information on 

how fund managers are to assess the operating reserves, including 

guidelines to evaluate, use, and maintain the operating reserves over 

time.

We provided a draft of this report for review and comment to the 

Secretaries of Homeland Security, Housing and Urban Development,

Transportation, and the Treasury; the Chairmen of the Merit Systems 

Protection Board and the Nuclear Regulatory Commission; the Director of 

the Office of Management and Budget; and the Assistant Attorney 

General for Administration at the Department of Justice. 

Treasury and DOT provided comments on the draft report. Treasury 

provided written comments via e-mail as well as technical comments that 

were incorporated into the draft, as appropriate. DOT provided formal 

written comments which are reproduced in appendix II. Both Treasury 

and DOT concurred with all of our recommendations.

Agency Comments 

and Our Evaluation
Page 35 GAO-16-477 Revolving Funds

The Departments of Homeland Security, Housing and Urban 

Development, and Justice, as well as the Merit Systems Protection 

Board, the Nuclear Regulatory Commission, and the Office of 

Management and Budget had no comments on the draft report. 

We are sending copies of this report to the appropriate congressional 

committees; the Secretaries of Homeland Security, Housing and Urban 

Development, the Treasury, and Transportation; the Chairmen of the 

Merit Systems Protection Board, and the Nuclear Regulatory 

Commission; the Director of the Office of Management and Budget; the 

Assistant Attorney General for Administration at the Department of 

Justice; and other interested parties. In addition, the report is available at 

no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

Heather Krause at (202) 512-6806 or krauseh@gao.gov. Contact points 

for our Office of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who made major contributions to 

this report are listed in appendix III.

Sincerely yours,

Heather Krause

Acting Director, Strategic Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 36 GAO-16-477 Revolving Funds

Our objectives were to assess: (1) how two agencies manage select 

intragovernmental revolving funds (IRF) that finance shared services; and 

(2) how these agencies manage unexpended balances in select IRFs.1

To assess the management of select IRFs including unexpended 

balances, we selected the Federal Aviation Administration’s (FAA) 

Administrative Services Franchise Fund (ASFF) and the Department of 

the Treasury’s (Treasury) Treasury Franchise Fund (TFF), as case 

studies using the following criteria:

• IRFs that support a financial management federal shared service 

provider that contributes to the administration’s shared services 

Cross-Agency Priority (CAP) goal; and

• the highest average ratio of the funds’ unexpended balance to the 

total budgetary resources available (unexpended balance ratio).

To identify illustrative case studies we used a non-probability selection 

process based on queries of the Office of Management and Budget 

(OMB) MAX database.2 Through this process we identified a total of 176 

IRFs that were operating as of fiscal year 2015. There were five IRFs that 

supported one of the financial management federal shared service 

providers (FSSP) designated by OMB to contribute to the shared services 

CAP goal. While recognizing that an unexpended balance is necessary in 

IRFs since interagency agreements can cross fiscal years, our prior work 

has found that a high unexpended balance in working capital funds (a 

type of IRF) may indicate poor workload planning. This could lead to the 

inefficient use of agency resources and missed opportunities to use those 

funds for other needs.3 For this reason we elected to use the unexpended 

 1

An unexpended balance in an IRF consists of two parts: obligated balances and 

unobligated balances. Obligated balances are the amounts in an IRF for which funds have 

been obligated against an order placed with the IRF, but have not been fully liquidated. 

Unobligated balances are the amounts in an IRF that are either earned and legally 

available for obligation, or unearned advances that have not been obligated by the agency 

to fulfill the order. 

2

OMB MAX database is a computer system used to collect and process most of the 

information required for preparing the budget. OMB uses MAX to collect, validate, 

analyze, model, collaborate with agencies on, and publish information relating to its 

government-wide management and budgeting activities. 

3

See, for example, GAO, Navy Working Capital Fund: Management Action needed to 

Improve Reliability of the Naval Air Warfare Center’s Reported Carryover Amounts, 

GAO-07-643 (Washington, D.C.: Jun. 26, 2007). 

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 37 GAO-16-477 Revolving Funds

balance ratio as the selection criteria among the five IRFs that support

shared services for financial management. Because we used the average 

unexpended balance ratio as an indicator for potential management 

issues at IRFs, we focused on the IRFs with the highest unexpended 

balance ratios from fiscal years 2010 through 2014—the ASFF and the 

TFF. See table 4 below. We found the data to be sufficiently reliable for 

the purpose of selecting case studies.4

Table 4: Unexpended Balance Ratio for Intragovernmental Revolving Funds Supporting Shared Services for Financial 

Management

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Average

Federal Aviation 

Administration, Administrative 

Services Franchise Fund 43.6% 45.2% 45.4% 46.9% 56.9% 47.7%

Department of the Treasury, 

Treasury Franchise Fund 36.1% 37.4% 33.9% 26.7% 37.9% 34.6%

Department of the Interior, 

Interior Franchise Fund 32.7% 29.7% 21.3% 25.4% 26.2% 27.2%

Department of the Interior, 

Working Capital Fund 16.4% 23.1% 19.0% 16.7% 18.7% 18.8%

U.S. Department of 

Agriculture, Working Capital 

Fund 14.5% 9.2% 14.4% 14.7% 18.2% 14.3%

Source: GAO analysis of OMB MAX data. | GAO-16-477

To address our first objective, we assessed the management of the ASFF 

and the TFF against our framework for effective IRF management. This is 

described in the text box below.5 We shared these operating principles 

with FAA and Treasury prior to our detailed review.

 4

To determine the reliability of the data, the team cross-checked a selection of the MAX 

data against the numbers reported in the corresponding President’s Budget Appendices. 

Data reported in MAX and the Budget Appendix are subject to rigorous review and checks 

through OMB to help ensure consistency of the data. Accordingly, such data were 

considered reliable for the purpose of this report. 

5

GAO, Intragovernmental Revolving Funds: Commerce Departmental and Census 

Working Capital Funds Should Better Reflect Key Operating Principles, GAO-12-56

(Washington, D.C.: Nov. 18, 2011). 
Appendix I: Objectives, Scope, and 

Methodology

Page 38 GAO-16-477 Revolving Funds

Intragovernmental Revolving Funds Key Operating Principles

In 2011, we identified four key operating principles that offer a framework to effectively manage intragovernmental revolving funds 

(IRF). IRFs provide agencies with an opportunity to operate more efficiently by consolidating services and creating incentives for

customers and managers to exercise cost control and economic restraint. Given the fiscal pressures facing the federal government, 

consolidating operations could potentially achieve cost savings and help agencies provide more efficient and effective services. 

Agencies can maximize the potential of these opportunities by following four key IRF operating principles.

• Clearly delineate roles and responsibilities: Appropriate delineation of roles and responsibilities promotes a clear 

understanding of who will be held accountable for specific tasks or duties such as authorizing and reviewing transactions, 

implementing controls over fund management, and helping ensure that related responsibilities are coordinated. 

• Build in flexibility to obtain customer input and meet customer needs: Opportunities for customers to provide input about 

fund services, or voice concerns about needs, in a timely manner enable agencies to regularly assess whether customer needs 

are being met or have changed. This also enables agencies to prioritize customer demands and use resources most effectively, 

enabling them to adjust capacity to correspond to changes in the level of services demanded.

• Ensure self-sufficiency by recovering the agency’s actual costs: Transparent and equitable pricing methodologies allow 

agencies to ensure that rates charged recover agencies’ actual costs and reflect customers’ service usage. If customers 

understand how rates are determined or changed including the assumptions used, customers can better anticipate potential 

changes to those assumptions, identify their effect on costs, and incorporate that information into budget plans.

• Measure performance: Performance measures that are aligned with strategic goals can be used to evaluate whether, and if so 

how, fund activities are contributing to the achievement of goals. A management review process comparing expected to actual 

performance allows agencies to review progress towards goals and potentially identify ways to improve performance.

Source: GAO-12-56. | GAO-16-477

Note: In addition to recovering their expense of operations, franchise funds can recover an amount for 

a reasonable operating reserve and up to 4 percent of annual operating income as a reserve for 

capital improvements.

To assess the management of each fund against these key operating 

principles, we reviewed the authorizing legislation and statutory 

authorities, charters and organizational charts, and budget documents 

and financial statements from fiscal years 2010 through 2015. We also 

analyzed the funds’ interagency agreements with customers, as well as 

various pricing documents, to understand how both funds share pricing 

information with customers and make pricing information publicly 

available. In addition, we reviewed various documents related to the 

funds’ performance, including performance metrics, performance and 

accountability reports, and customer satisfaction surveys. We used our 

work on customer service metrics and performance information to make 
Appendix I: Objectives, Scope, and 

Methodology

Page 39 GAO-16-477 Revolving Funds

judgments on the agencies’ management of the funds.6 We also met with 

FAA and Treasury budget and finance officials to learn about their roles 

and responsibilities for managing the ASFF and the TFF.

As part of assessing the funds’ efforts to obtain customers’ input and 

needs, we interviewed a sample of ASFF and TFF customers to obtain 

their perspectives on services they received, billing and payment 

methods, and communication with the funds’ managers (see table 5 

below). Our criteria for selecting customer agencies was to ensure a 

diversity of perspectives, attain views representative of the customer 

base, and to have customers with experience of a wide-range of franchise 

fund management practices and supported services. For both funds, we 

selected (1) the two customers that paid the most into the respective 

funds in fiscal year 2014, (2) one customer that paid an average or 

median amount into the respective funds in fiscal year 2014 compared to 

other customers, and (3) one customer (randomly selected) that 

purchased services for the first time in fiscal year 2015.7 FAA and 

Treasury provided data showing the amount customers paid into the 

ASFF and the TFF, respectively in fiscal year 2014 and customer lists for 

fiscal year 2015. We found the data to be sufficiently reliable for the 

purpose of selecting customer agencies to interview.8

 6

GAO, Managing for Results: Selected Agencies Need to Take Additional Efforts to 

Improve Customer Service, GAO-15-84 (Washington, D.C.: Oct. 24, 2014).

7

We selected one internal and one external customer that paid the most into the 

respective funds in fiscal year 2014. For example, for the ASFF, we selected one FAA and 

one non-FAA customer that paid the most into the fund in fiscal year 2014. 

8

To assess the reliability of the FAA and Treasury data showing the amount customers 

paid into the ASFF and the TFF respectively in fiscal year 2014, among other steps, we 

compared the amounts in the data to the amounts in the selected customer’s interagency 

agreements. 
Appendix I: Objectives, Scope, and 

Methodology

Page 40 GAO-16-477 Revolving Funds

Table 5: Selected Administrative Services Franchise Fund and Treasury Franchise Fund Customers Interviewed

Fund Selected Customers

Administrative Services Franchise Fund • Department of Transportation, Federal Aviation Administration Logistics Center

• Department of Homeland Security, Customs and Border Protection

• Department of Transportation, Pipeline and Hazardous Materials Safety 

Administration

• Nuclear Regulatory Commission

Treasury Franchise Fund • Department of the Treasury, Bureau of the Fiscal Service

• Department of Housing and Urban Development

• Merit Systems Protection Board

• Department of Justice, Antitrust Division

Source: GAO. | GAO-16-477

For our second objective, to assess how federal agencies manage 

unexpended balances in select IRFs, for both the ASFF and TFF, we 

used our key questions for assessing balances in federal budget 

accounts, which are described in the text box below, as criteria.9 We 

shared these key questions with FAA and Treasury prior to our detailed 

review.

Evaluating Unexpended Balances: A Framework for Understanding

In 2013, we identified the following questions for agencies and decision makers to consider when evaluating unexpended balances in 

federal budget accounts. Findings based on these questions can provide managers with important information about financial 

challenges and opportunities which may exist; in turn, this information may help guide more effective account and program 

management.

• What mission and goals is the account or program supporting?

• What are the sources and fiscal characteristics of the funding?

• What factors affect the size or composition of the unexpended balances?

• How does the agency estimate and manage unexpended balances?

Source: GAO-13-798. | GAO-16-477

To assess the management of unexpended balances in FAA’s ASFF and 

Treasury’s TFF against these key questions, we analyzed budgets from 

 9

GAO, Budget Issues: Key Questions to Consider When Evaluating Balances in Federal 

Accounts, GAO-13-798 (Washington, D.C.: Sept. 30, 2013). 
Appendix I: Objectives, Scope, and 

Methodology

Page 41 GAO-16-477 Revolving Funds

fiscal years 2010 through 2015 to identify trends and patterns in the 

unexpended balances. We found the budget data to be sufficiently 

reliable for the purpose of analyzing the composition of the unexpended 

balances in the funds.10 We also asked FAA and Treasury officials to 

provide disaggregated amounts for the respective fund’s unexpended 

balances. In addition, we also reviewed FAA and Treasury policies for 

managing reserves in the ASFF and the TFF. We interviewed FAA and 

Treasury budget and finance officials to learn about how they manage 

unexpended balances in the selected IRFs.

We conducted this performance audit from April 2015 to May 2016 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 10To assess the reliability of FAA and Treasury data showing unexpended balances in the 

ASFF and the TFF respectively, we compared the data in OMB MAX to the amounts 

published in the President’s budget. We also held discussions with FAA and Treasury 

officials to determine how they calculate the amount of the unexpended balances in the 

ASFF and the TFF, respectively. 
Appendix II: Comments from the Department 

of Transportation

Page 42 GAO-16-477 Revolving Funds

Appendix II: Comments from the Department 

of Transportation
Appendix III: GAO Contact and 

Acknowledgments

Page 43 GAO-16-477 Revolving Funds

Heather Krause, (202) 512-6806 or krauseh@gao.gov.

In addition to the contact name above, Janice Latimer, Assistant Director; 

Don Kiggins; Michelle Duren; and Justin Snover made major contributions 

to this report. Also contributing to this report were Steven Putansu, 

Michael Grogan, Donna Miller, and Lisette Baylor.

Appendix III: GAO Contact and 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(451147)
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