1 

Treasury Franchise Fund 

 October 1, 2007 – September 30, 2008 

Message from the Commissioner 

I’m proud to provide the fiscal year 2008 annual report of the 

Treasury Franchise Fund (the Fund). Although this has 

been a year of extraordinary change for the Fund, we have 

continued to successfully provide essential shared services 

under the now well-established franchise fund model. 

Treasury entities have been a part of franchising since the 

pilot program was begun in 1996. When the program was 

made permanent in 2005, four Treasury entities offered 

reimbursable services in three separate business lines – 

Financial Management and Administrative Services, 

Assisted Acquisition, and Consulting Services. 

In 2007, an evaluation of organizations and business lines 

within the Fund was conducted to assess compatibility with 

Treasury’s core missions. This evaluation led to decisions to 

discontinue offering two business lines under the Fund, 

resulting in closing one organization, and transitioning two 

organizations to other hosts. These changes strategically 

positioned the Fund to provide Financial Management and 

Administrative Services under a single business entity – 

Public Debt’s Administrative Resource Center (ARC). To 

further this approach, Treasury’s Fiscal Service was 

assigned responsibility for the Fund, and Public Debt given 

responsibility for day-to-day management. Within Public 

Debt, a Franchise Program Manager has been assigned 

program and coordination responsibilities. 

As we settle into our new model, we expect revenues to 

decrease and expenses to increase. In the long run, 

however, we will remain self-sufficient and financially sound 

while strengthening our core services and business model. 

Given the events of the year, this report will focus primarily 

on ARC, including accomplishments, strategic goals, and 

our efforts to realize our vision of providing high-quality 

services to customers, supporting the standards of good 

government, and maintaining a rewarding and values-based 

work environment. 

Van Zeck 

Commissioner of the Public Debt

Treasury Franchise Fund 

at a Glance

The Treasury Franchise Fund is one 

of the government’s leading shared 

services providers. We were 

established as an entrepreneurial 

government enterprise and provide 

common administrative support 

services on a competitive, fully costreimbursable basis. We foster 

innovation in the delivery of 

administrative services enabling our 

customers to focus on what matters 

to them – serving the taxpayer 

through successful completion of 

their missions. 

ARC Service Lines 

We provide the following common 

administrative support services: 

• Financial Management 

• Travel 

• Procurement 

• Human Resources 

• Information Technology 

ARC was designated as a Federal 

Shared Service Provider (SSP) in 

the Financial Management Line of 

Business. Additionally, our Human 

Resources and Identity 

Management service lines are vital 

components of Treasury's Human 

Resources and Public Key 

Infrastructure SSP programs. 

What’s inside: 

 2 - Accomplishments 

 - Customer Satisfaction

 3 - Financial Highlights 

 4 - On the Horizon
 

2 

Accomplishments

In FY 2008, we developed our Franchising Strategic Plan for 

fiscal years 2008 through 2012. It provides direction for our 

franchise program, identifies our operational plans and 

projects, and expands upon our commitment to values-based 

relationships with our customers. During FY 2008, we focused 

on improving our internal operations and customer relations, 

as well as increasing our Identity Management market share. 

Several highlights are discussed below. 

3⁄4 Single Face of Franchising to the Market 

To eliminate duplication of effort and gain efficiency, we 

began consolidating common functions across all Public 

Debt franchise service organizations. The primary areas 

of interest include administrative operations, such as 

interagency contracting and billing, project management, 

and marketing. During FY 2008, we successfully 

consolidated the customer web portal, financial reporting, 

and FY 2009 customer agreements. 

3⁄4 Customer Communication Plan Implemented

As our customer base grew, we recognized the 

importance of reaching out to customers and keeping 

them consistently informed. While our goals and 

objectives are documented in our five-year strategic plan, we also began sending important tactical 

information to customers through a monthly bulletin, as well as posting valuable information on our 

recently redesigned website. We will continue to look for ways to improve communications, and 

ensure that timely and relevant information is consistently provided to all of our customers. 

3⁄4 Customer Implementation Approach Plans Documented and Deployed 

We conducted a cross-organization initiative to improve our standard new customer implementation 

approach by evaluating and documenting several of our service lines. Our goals for this initiative are 

to improve our performance and ensure that potential customers understand our standard approach, 

the roles and responsibilities of each participant, and the overall value to be gained if they choose to 

use our services. This not only enables potential customers to make informed decisions, but also 

sets realistic expectations for all parties. We have found that integrated project, technical, and 

business plans support cost effective, repeatable, and ultimately, low risk implementations. In 

addition to our implementation approaches, we also improved the documentation surrounding 

ongoing operational aspects common to all customers. 

3⁄4 Identity Management - Quickly Becoming Market Leader 

During FY 2008, we successfully implemented and began hosting Public Key Infrastructure (PKI) for 

the Department of Homeland Security (DHS) - marking the third major federal agency customer to 

build and host their PKI with us under Treasury's Shared Service Authority. DHS will use this service 

to issue and manage more than 300,000 credentials. With the addition of DHS, we are currently 

hosting nearly 40 percent of the federal civilian PKI market. Under this program, we also provide 

essential enterprise directory services. In FY 2008, we consolidated the information and credentials 

for all Treasury employees and contractors into one central repository, as well as information on nonTreasury HRConnect users. In total, we provide authentication service for more than 110,000 

HRConnect users. 

Customer Satisfaction

As a competitive business, assessing our 

performance in meeting customers’ 

needs is critical. 

In FY 2008, the Financial Management 

Line of Business (FMLoB) administered 

independent customer satisfaction 

surveys of the four federal shared 

service providers. Our overall 

satisfaction rate was greater than 90%, 

well above the SSP average. 

In addition to the FMLoB survey, we 

piloted a service line specific survey in 

FY 2008. Our Human Resources service 

line was selected for the pilot and also 

received results of over 90% overall 

satisfaction. 

We are using suggestions received from 

the survey to evaluate and improve our 

processes, and plan to continue to seek 

feedback from our customers. 
 

3 

2008 Financial Highlights

The Treasury Franchise Fund reorganization 

resulted in a 56% reduction in revenue and a net 

loss of $17.3 million in FY 2008 (see results of 

operations below). Decreased revenues and 

increased administrative costs due to the 

FedSource shutdown and transfer of Treasury 

Agency Services were the primary drivers of 

these losses, amounting to $22.7 million. This 

was offset by a combined $5.4 million in results of 

operations for ARC and the Federal Consulting 

Group. 

As our balance sheet shows, we have worked 

hard to achieve fiscal responsibility and stability, 

and plan to continue this trend through 

appropriate processes, procedures, and 

governance. We are building a reasonable 

operating reserve to be used for operational 

needs, capital improvements, and to sustain us 

during downturns in business (see balance sheet 

at right). As decisions related to the Fund’s 

organizational structure have been made, the 

operating reserves of the impacted organizations 

are being used to close or transfer those business 

lines. 

As a Federal shared service provider, we realize 

the importance of independent validation of both 

our financial data and our internal controls. We 

also take seriously our responsibility to monitor 

and strengthen the effectiveness of our internal 

control structure. In FY 2008, we received an 

unqualified opinion on our financial statements for 

the 12th consecutive year. We also received an 

unqualified opinion for the sixth consecutive year 

on our Type II SAS-70 audit. We are proud that 

no instances of non-compliance or material 

internal control weaknesses were identified in the 

financial statements or SAS-70 audits. 

In FY 2009, the impact of the Fund’s 

reorganization will continue to be felt. Total 

revenues will again decrease as FedSource is 

closed out and the Federal Consulting Group and 

Treasury Agency Services are completely 

transitioned out of the Fund. We have projected 

and planned for the FedSource business line to 

operate at a net loss again in FY 2009. We plan 

to manage the FedSource operating reserves 

conservatively, and expect that they will be 

sufficient to fund all closeout activities. Our first 

priority, however, is to meet the needs of our 

customers, and minimize the effect of this change 

on our customers and staff. While these 

decisions may appear to be financial setbacks, 

we have chosen to view them instead as 

opportunities to concentrate our efforts and refocus our attention to Treasury’s mission and 

priorities. 

Balance Sheet 

What We Own 

(in thousands) 2008 2007 

Assets $ 73,892 $ 148,948 

 

What We Owe 

(in thousands) 2008 2007 

Intra-Governmental Liabilities $ 1,990 $ 1,308

Liabilities With the Public $ 23,807 $ 82,258

Total Liabilities $ 25,797 $ 83,566 

 

Where We Stand 

(in thousands) 2008 2007 

Invested Capital $ 3,742 $ 3,742 

Results of Operations 44,353 61,639 

Total Operating Reserves $ 48,095 $ 65,381 

Results of Operations 

(in thousands) 2008 2007

Earned Revenue $ 219,808 $500,341 

Imputed Financing Sources 4,174 4,592 

 Total Revenue/Financing Sources $ 223,982 $504,933 

Less: Expenses/Imputed Costs 241,268 498,492 

 Net Results of Operations $ (17,286) $ 6,441 

2008 Consolidated Revenue by Entity 

Federal Consulting 

Group 5%

Administrative 

Resource 

Center 44%

Treasury Agency Services 1%

FedSource 50% 
 

4 

On the Horizon

Improve and Deliver Valuable and Cost Effective Services to Customers 

The decisions to reorganize the Fund provided direction and clarity that we will use to chart our path 

forward. We will use the opportunity to ensure that the services we offer meet the needs of our 

customers today and in the future. In FY 2009, our business leaders will review our service lines 

from a new perspective and develop recommendations for improvements. During the past year, our 

focus was on improving our cost and pricing techniques, organizational structure, and position 

management. While work remains to be done in those areas, our focus this year will be on 

evaluating opportunities for productivity gains through improved processing methods. We will also 

continue to work on improvements to our customer service strategy – consolidating our efforts 

across all franchise business lines and using a proactive approach to customer communication and 

service. 

Transition of IT Hosting and Infrastructure Support to Commercial Service Provider 

In July 2008, we entered into a 10-year fixed-price contract for external hosting services and 

infrastructure support for Oracle E-Business Suite, PRISM, and legacy data storage. This was a 

carefully thought-out decision that we believe brings both immediate and on-going benefits to our 

customers. 

Of significant importance is the opportunity for cost stability and pricing predictability for customers. 

In addition, our ability to offer a certified configuration for all E-Business Suite applications will 

benefit customers through simpler upgrades and patching. Our transition plan will be largely 

transparent to customers – much the way an upgrade occurs today. We will handle all the details 

and will provide all necessary instructions and training, as well as the opportunity to perform user 

acceptance testing, prior to going live. 

Information Systems Security Line of Business - Growing Service Line 

With the intense focus on IT Security, providing highly qualified staff to assist our federal customers 

with a variety of complex, security-related services continues to be an important and growing 

component of our administrative services. Last year, we provided security services to 19 different 

federal agencies through 37 different projects. Services provided include Certification & 

Accreditation, Security Gap Analysis, FISMA Review, Security Testing, Continuous Monitoring, and 

Security Consulting. Through Treasury, we have applied to become a shared services provider 

under the Information Systems Security (ISS) LoB. 

SmartPay 2 - Gearing Up for a New Beginning 

GSA renegotiated the federal commercial charge card-based procurement and payment solutions 

contracts (referred to as SmartPay 2) that require agency implementation in November 2008. To 

ensure a seamless transition for all Franchise customers, ARC led a Department of the Treasury 

technical evaluation team that selected Treasury's new charge card program vendor. In addition, the 

transition team successfully implemented a SmartPay 2 pilot in September and is on target to ensure 

cutover readiness of all customers in FY 2009. 

 

For more information about ARC, go to: 

https://arc.publicdebt.treas.gov/fshome.htm

Administrative Resource Center 

Bureau of the Public Debt 

200 3rd Street Avery 5-I 

Parkersburg, WV 26106