Department of Justice: Working Capital Fund Adheres to Some Key Operating Principles but Could Better Measure Performance and Communicate with Customers
Published: 2012-01-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Justices (Justice) working capital fund is intended to provide increased efficiencies in how the department funds and offers shared servicessuch as payroll, telecommunications, financial services, mail, and publicationsvalued at over $1 billion annually. Ensuring that the working capital fund is managed as efficiently as possible could allow Justice to use saved resources for other departmental priorities. GAO was asked to determine how Justice (1) manages its working capital fund to promote compliance with applicable fiscal laws and key operating principles, (2) communicates shared services rates with customers, (3) measures performance to evaluate whether fund activities are contributing to agency goals, and (4) ensures that its excess unobligated balances are used in accordance with legal authorities and managed so that Justice can make well-informed funding decisions. GAO reviewed statutory authorities, analyzed Justice policies, interviewed budget and finance officials, and conducted focus groups with some shared services customers.
section_title: What GAO Found
paragraphs: The Justice Management Division (JMD), the component responsible for managing the working capital fund, effectively tracks fund functions to ensure adherence to applicable fiscal laws and sound management practices. For example, JMD has well-established policies and procedures for tracking and monitoring the four working capital fund functions so that the fund adheres to authorized purposes. Further, JMD structures its reimbursable agreements with customers to facilitate adherence to the Economy Actthe statutory authority underlying most of JMDs customer orders. JMD also clearly delineates roles and responsibilities, which allows customers to know who to contact with questions and clearly assigns responsibility for obligating and expending funds. Justice also ensures the funds self-sufficiency by recovering total costs for the provided services. These actions are consistent with two of the four key operating principles for working capital funds.Customers noted positive benefits from Justices shared services but seek more information on rate structures and want assurances that fund costs are equitably distributed. For example, customers said they valued the breadth of services offered as well as the experience of fund staff but wanted to better understand the basis for shared services rates and more opportunities to discuss billing concerns and service changes with JMD. Officials expressed surprise at these concerns. They noted that informal information sharing on rates and rate structures happens regularly, but explained that each staff director has his/her own way of communicating with customers and acknowledged that some may be better at providing customer support than others.
JMD does not systematically measure important aspects of shared service provision and working capital fund management. For example, JMD tracks workload measures such as the number of transactions processed, but does not assess customer satisfaction with shared services. It also does not have measures to assess how effectively it manages the fund, such as whether managers are responsive to concerns about shared service rates or billing issuesareas with which customers have expressed concern. Absent a formal mechanism for customers to provide timely and regular feedback, JMD cannot sufficiently assess whether customer needs are met or have changed. JMD also has not assessed its shared services rates to know whether they provide a good value to customers. If available, specific working capital fund-level performance information would allow JMD to regularly compare actual performance with planned or expected performance. Further, a corresponding management review process could help JMD achieve the efficiencies that working capital funds were designed to produce, potentially freeing up resources that could be realigned for other departmental initiatives. Lastly, performance measures aligned with strategic goals can be used to evaluate whether and how working capital fund activities contribute to departmentwide goals and crosscutting initiatives.
Justice has processes to ensure that excess unobligated balances are used in accordance with legal authorities. It also has an established process to make well-informed decisions on how to spend available funds. However, JMD budget officials told us that these balances were unavailable for departmentwide priorities in recent years because they have been used to meet rescissions.
section_title: What GAO Recommends
paragraphs: GAO is making three recommendations to improve the management of the working capital fund, including providing opportunities for two-way substantive communications with customers and developing performance measures for the fund. Justice generally agreed with our findings and recommendations and noted that it will continue to explore ways to address the issues we identified.

section_title: Letter
paragraphs: One way federal agencies can increase their efficiency and reduce costs  is to share services. The Department of Justice’s (Justice) working capital  fund is intended, in part, to provide increased efficiencies and flexibilities  in the funding and provision of centralized, administrative shared  services. These services include, among other things,  telecommunications, financial services, mail, publications, and payroll  valued at over $1 billion annually. Working capital funds and other types  of intragovernmental revolving funds enable agencies to operate more  efficiently by consolidating and providing services used by multiple  organizations within an agency. Ensuring that the working capital fund is  managed as efficiently as possible could allow Justice to use saved  resources for other departmental priorities.
Intragovernmental revolving funds include working capital, franchise, and  other similar types of funds. They are self-supporting and used to conduct  businesslike activities within and between federal agencies. In general,  intragovernmental revolving funds allow agencies to benefit from  economies of scale or take advantage of specialized expertise that the  agency may not have. A market-like atmosphere is intended to create  incentives for customers and fund managers to exercise cost control and  economic restraint.
This report is the third in a series in response to the subcommittee’s  request to review the management of intragovernmental revolving funds,  the shared services they support, and unobligated carryover balances in  those funds. It builds on our work at the National Institute of Standards  and Technology, the Department of Commerce, and the U.S. Census  Bureau. For this report, we were asked to determine (1) how Justice  manages its working capital fund to promote compliance with applicable  fiscal laws and key operating principles, (2) the effectiveness of Justice’s  communications with working capital fund customers and its efforts to  ensure that its shared services rates are equitably distributed, (3) the  effectiveness of Justice’s performance measures in evaluating whether  working capital fund activities are contributing to the achievement of  agency goals, and (4) how Justice ensures that its excess unobligated  balances in the working capital fund and the Assets Forfeiture Fund (AFF)  are used in accordance with legal authorities and managed in a way that  allow Justice to make well-informed agencywide funding decisions.
For the first objective, we reviewed relevant legislation and statutory  authorities that govern Justice’s working capital fund, as well as Justice’s  documented policies and procedures for managing, tracking, and  monitoring funds deposited into the fund. To determine to what extent  Justice adhered to sound management principles, we referred to  guidance on internal controls and cost accounting as well as relevant  Justice Inspector General reports. Additionally, we used recently developed and compiled criteria on key operating principles for working  capital funds. To identify these principles, we reviewed governmentwide  guidance on business operating principles, internal controls, managerial  cost accounting, and performance management. Our prior work on user  fees, franchise funds, performance management, and customer service  also informed the development of these principles. We also met with staff  from the Office of Management and Budget (OMB) to obtain their views,  and they found the principles to be reasonable.
For the second objective, we reviewed Justice’s policies and procedures  for setting and reviewing rates and collecting charges and its process for  communicating with its customers. Additionally, we referred to our prior   We examined the rate-setting  work on federal user fees, as appropriate. process for services provided through the working capital fund; however,  we did not independently verify whether the process resulted in equitable  distribution of costs among customers or in the recovery of total costs.
For the third objective, we reviewed the working capital fund’s customer  feedback mechanisms as well as performance and workload evaluation  tools. Additionally, we reviewed the fund’s performance measures and the  data it collects to assess its performance.
For the fourth objective, we reviewed Justice’s legal authorities as well as  the policies and procedures governing the use of excess unobligated  balances within its working capital fund and AFF. We also reviewed  congressional notifications and budget documents to understand how  these balances have been used.
GAO, Federal User Fees: A Design Guide, GAO-08-386SP (Washington, D.C.: May 29,  2008). customers not on the advisory board. To develop and analyze themes  emerging from our focus groups and interviews, we conducted a content  analysis of participants’ discussions and responses to our questions.
We conducted this performance audit from January 2011 to January 2012  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.
subsections: section_title: Background
subsections: section_title: Justice’s Working Capital Fund Serves Four Functions
paragraphs: JMD has overall responsibility for managing the working capital fund and  AFF. Justice’s working capital fund was created by Congress on   January 2, 1975. The fund is authorized to maintain moneys from four  distinct sources, or functions (see table 1). The first and primary function  of the fund is to finance, on a reimbursable basis, administrative shared  services provided by JMD to other components of the department and  other federal agencies. The second function of the working capital fund is  to collect up to 3 percent of funds collected pursuant to civil debt  collection litigation activities into the fund. A third function of the working  capital fund is to collect up to 4 percent of earnings from its shared  services provision. Finally, the working capital fund’s fourth function is to  capture expired departmental unobligated balances into the working  capital fund’s Unobligated Balance Transfers (UBT) account. Because the  working capital fund is a no-year account, all amounts earned or collected  by the fund are available without fiscal year limitation to be used for  specific authorized purposes. For example, amounts from three of the  four working capital fund functions may be used for capital equipment  investments and financial system improvements.
The largest portion of the working capital fund comes from charges for  centralized administrative and infrastructure support services and  functions collected on a reimbursable basis from Justice components.  The shared services provided by the working capital fund are generally  commercial functions, such as data processing, publications, building  services, financial operations, employee data, telecommunications,  property management, and space management (see working capital fund  services and support in fig. 1).
While most Justice components use the working capital fund to obtain  administrative shared services, there is no statutory requirement that they  do so. For fiscal year 2010, Justice’s largest customers were the U.S.  Attorney’s Office, JMD, the Bureau of Prisons, the Federal Bureau of  Investigation, and the Drug Enforcement Administration (see customers in  fig. 1). Some services are also available to other federal agencies. For  example, the Department of Homeland Security (DHS) was the largest  non-Justice customer of the working capital fund. The working capital  fund received $38 million from DHS in fiscal year 2010 for information  technology services. However, JMD officials told us that DHS is exiting  the working capital fund and its remaining agreements with the fund are  expected to be completed by fiscal year 2013.
To set and review rates for working capital fund services, JMD develops,  in the context of Justice’s budget formulation process, an annual 2-year  operating plan. As a part of developing the operating plans, JMD sets the  rates for its services using one of three strategies.
The “dollar-per-widget” strategy aligns rates with the cost of the  service provided. JMD creates an internal cost schedule of these  services that lists, for example, how much a photocopy or scan job  costs. This strategy is designed to bill customers for the amount of  service actually used.
The pass-through charge strategy is used to set rates for services that  the working capital fund acquires from another provider. Customer  rates are based on costs as determined by the non-Justice service  providers, such as the flexible spending account services provided by  the Office of Personnel Management and rent charges from the  General Services Administration.
The allocation strategy is applied when actual usage is more difficult  to predict, such as for information technology security, e-government  services, and acquisition support. Allocations are determined in  various ways, such as a percentage of full-time equivalents (FTE), a  percentage of budget authority, or a weighted average of both.  Additionally, JMD staff factor in data such as recent cost information  and expected use of a service for the coming year. To calculate the  estimated cost for a specific customer, JMD reviews the customer’s  actual use in prior years and expected use for the upcoming fiscal  year. From that, JMD calculates a percentage to charge customers  that will cover the cost of providing that level of service. All customers  using a service are charged a percentage of total estimated costs  throughout the year.
JMD officials told us that they generally apply the dollar-per-widget and  pass-through charge strategies in setting shared services rates and that  they only use the allocation strategy when the other strategies would not  work well.
section_title: Working Capital Fund Customer Advisory Board
paragraphs: Justice established its eight-member Customer Advisory Board (CAB) in  1994 to improve customer satisfaction with the working capital fund. The  CAB also advises JMD on fund management issues. The eight  components represented on the CAB are the Bureau of Alcohol, Tobacco,  Firearms and Explosives; Bureau of Prisons; Drug Enforcement  Administration; Federal Bureau of Investigation; General Legal Activities;  U.S. Attorneys; U.S. Marshals Service; and Office of Inspector General.
JMD elected these eight components to be members of the CAB because  they were the working capital fund’s largest customers. JMD convenes an  annual meeting with CAB members at the beginning of each fiscal year to  present the updated operating plan and selected purchases for the year.
section_title: Working Capital Fund Key Operating Principles
paragraphs: We have previously identified the following four key operating principles  to guide the management of working capital funds. For further  information about the four key principles and their underlying  components, see figure 2.
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 working capital fund management, and helping ensure  that related responsibilities are coordinated. In addition, this reduces  the risk of mismanaged funds and tasks or functions “falling through  the cracks.” Moreover, it helps customers know who to contact if they  have questions.
Ensure self-sufficiency by recovering the agency’s actual costs:  Transparent and equitable pricing methodologies allow agencies to  ensure that rates charged recover the 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. A management review process can  help to ensure that the methodology is applied consistently over time  and provides a forum to inform customers of decisions and discuss as  needed.
Measure performance: Performance goals and measures are  important management tools applicable to all operations of an agency,  including the program, project, or activity levels. Performance  measures and goals could include targets that assess fund managers’  responsiveness to customer inquiries, the consistency in the  application of the funds’ rate-setting methodology, and the billing error  rates. Performance measures that are aligned with strategic goals can  be used to evaluate whether and, if so, how working capital fund  activities are contributing to the achievement of agency goals. A  management review process comparing expected to actual  performance allows agencies to review progress toward goals and  potentially identify ways to improve performance.
Build in flexibility to obtain customer input and meet customer  needs: Opportunities for customers to provide input about working  capital 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 working capital fund capacity up or down as  business rises or falls.
By incorporating these principles in written guidance, agencies promote  consistent application of management processes and provide a baseline  for agency officials to assess and improve management processes.  Moreover, agencies can use guidance as a training tool for new staff and  as an information tool for customers, program managers, stakeholders,  and reviewers.
section_title: JMD Effectively Tracks Working Capital Fund Moneys in Accordance with Fiscal Law and Aspects of Key Operating Principles
subsections: section_title: JMD Effectively Tracks Working Capital Fund Functions to Ensure Adherence to Authorized Purposes and Applicable Fiscal Laws
paragraphs: JMD has well-established policies and procedures for tracking and  monitoring each of the four working capital fund functions to adhere to  authorized purposes. JMD uses its financial management system, the  Financial Management Information System (FMIS), to track moneys by  project codes to distinguish among the different working capital fund  functions. Additionally, Justice’s written policies direct the head of each  component to maintain a financial accounting system with internal  controls in place to ensure effective management and disbursement of  federal funds. FMIS also supports the departmentwide fund control  system; it is designed to restrict both obligations and expenditures from  each appropriation or fund account to the amount available for obligation  or expenditure.
Since 1984, all working capital fund moneys are identified and tracked  using reimbursement code numbers so that JMD can identify the source  of all funds and monitor obligations established against the working  capital fund’s partitioned subaccounts related to each of the fund’s four  functions. Balances associated with each function are tracked in separate  partitions in the working capital fund and remain available until expended.  This ensures that the funds associated with the four working capital fund  functions are tracked and managed to ensure that they are used in  accordance with its authorities.
JMD structures its reimbursable agreements with customers in a way that  facilitates adherence to the Economy Act—the statutory authority  underlying most of the shared services orders received from customers.
For example, Justice aligns its agreements to coincide with a single fiscal  year and has policies against accepting advanced funds from federal  customers (instead, Justice generally receives reimbursements after  providing shared services). This helps Justice and its customers comply  with the Economy Act’s deobligation requirements and mitigates the risk  of using appropriated funds when they are not legally available.
Justice’s policies also require that JMD establish an accurate and reliable  tracking system to monitor, on an ongoing and consistent basis,  obligations established against reimbursable agreements for billing  purposes. Justice has issued guidance on how JMD should manage  payments to the working capital fund so that those amounts are  accurately recorded and controlled, and ensure that anticipated and  actual reimbursements for goods or services provided are properly  recorded. Further, Justice’s policies govern how JMD controls and  monitors shared services funds and describe the responsibilities of both  the provider and customer. For example, these policies task JMD, in the  role of the service provider, with the responsibility of monitoring  reimbursements anticipated, earned, billed, unbilled, and collected, in  relation to the agreed-upon agreement amount. Customers are  responsible for monitoring the status of reimbursable services performed  but not yet billed to ensure that obligations recorded are sufficient to pay  for the shared services they receive. In responding to a draft of this  report, Justice officials also noted that the service providers convey the  status of the reimbursable agreements to the customers quarterly.
section_title: JMD Adheres to Aspects of Two Key Operating Principles to Manage the Working Capital Fund
paragraphs: To clearly delineate roles and responsibilities, JMD clearly defines key  areas of authority, responsibilities, and roles within the working capital  fund. This allows customers to know who to contact if they have  questions. Justice describes this information in a departmentwide funds  control order. These delineated roles and responsibilities are posted on  the working capital fund web page and are available to both internal and  external customers as well as the general public. Key working capital fund  duties and responsibilities are spread among multiple individuals and  offices. For example:
The Assistant Attorney General for Administration (AAG/A) is the  fund’s general manager and approves all final decisions and major  initiatives affecting customers.
The Deputy Assistant Attorney General, Controller (DAAG-Controller),  is the financial manager of the working capital fund and is responsible  for overseeing budgets.
Staff directors ensure service delivery to customers, develop  operating plans and rate structure, produce customer billings, and are  responsible for day-to-day fund management.
Budget staff review and monitor all working capital fund budgets and  make recommendations about the funding initiatives and rate changes  requested by staff directors.
JMD has also clearly defined the responsibilities for the administrative  control of working capital funds. JMD has established policies and  guidance regarding roles and responsibilities for obligating and expending  funds. Specifically, financial management policies state that the AAG/A is  the department’s Chief Financial Officer with responsibilities that include  direction and oversight of JMD’s financial procedures, practices,  operations, systems, and internal controls. In addition, the component  heads are responsible for accurate, timely, and complete financial data.  These written roles and responsibilities specify how key duties are spread  among multiple individuals and can help customers understand who does  what. The information is also sufficiently detailed to be useful for internal  JMD purposes, such as training and succession planning.
To ensure self-sufficiency by recovering the agency’s actual costs,  another key working capital fund operating principle, JMD generally  charges rates that cover the total cost of providing shared services.bases customer charges on both estimated direct and indirect costs. JMD  estimates direct costs based on historical data trends and the actual costs  of providing that service. JMD uses an overhead allocation methodology  to determine the administrative costs of providing shared services, which   It  are then spread to each shared services account and collected from  customers as part of the overall rate structure.
As part of its annual 2-year operating plan process, JMD ensures that  rates remain aligned with total costs of operations. JMD staff review the  rates by conducting a line-by-line review of each shared services account  to determine how costs will change for the coming year. JMD factors  forecasted revenue and rate changes based on historical and market data  into its shared services rates.
JMD’s strategy is to recover total cost at the fund level. Although JMD’s  goal is for each shared services account to break even, JMD officials said  that some lines of business generate income while others operate at a  loss. For example, officials told us that certain services, such as data  center services, have recovered more than their actual costs while others,  such as the audiovisual and photography services, do not always fully  recover costs. Recovering costs at the fund level results in some amount  of cross subsidization between various services, which can help ensure  that the fund remains solvent.
section_title: Customers Noted Positive Benefits of Shared Services but Need More Information on Rates, Costs, and Billing, and More Opportunities for Substantive, Two- way Communication
subsections: section_title: Customers Noted Some Positive Benefits of the Working Capital Fund’s Shared Services Provision
paragraphs: During our focus groups and interviews, customers said that they find the  working capital fund’s shared services to be valuable. For example,  customers cited the breadth of services offered as well as the experience  and knowledge of shared services staff as key strengths of the fund.  Further, two customers said that they appreciated the convenience and  ease of having these services provided in-house. However, as we will  discuss below, CAB members we spoke with were concerned about their  limited advisory role, and customers in our focus groups were concerned  about how JMD communicates with customers about working capital fund  rates and billing information. These customers wanted more opportunities  for substantive, two-way communication with the working capital fund  staff directors. JMD officials explained that each working capital fund staff  director has his or her own way of communicating and interacting with  customers and acknowledged that some may be better at providing  customer support than others.
section_title: Customers Would Like More Information on Rate Structures and Assurance That Rates Are Equitably Distributed
paragraphs: Customers had different perspectives on whether shared services rates  were fair. Two customers told us that they believe the working capital  fund negotiates the best rates on their behalf, but one of these customers  pointed out that his component lacked information that would ensure the  staff of this. Other customers said that without information proving  otherwise, they assume that they pay more than what it costs for JMD to  provide the service. Customers also noted that they would like more  transparency related to the earnings that JMD generates from rates set  using the allocation strategy and how it affects actual shared services  charges. For example, one customer noted that when determining the  rates for e-mail services—whose rates are determined using the  allocation strategy—basing rates on total FTE counts is less accurate  than basing the rate on the actual number of staff using the service.  Generally, customers indicated that they would have a greater sense of  comfort with shared services rates if they better understood what they  were based on.
JMD officials expressed surprise at these concerns. They said that  information sharing on rates and rate structures happens regularly on an  informal basis and in forums, such as monthly budget officer meetings,  and that information about the shared services rates is available in  various places depending on the service. For example, they said that  some shared services rate information is available on Justice’s intranet  pages and that the cover memos accompanying the reimbursable  agreements for certain services contain substantial amounts of  information about how the rates are set each year. Further, with respect  to e-mail rates, they said that they base the charges on the number of  active e-mail accounts at the end of the prior fiscal year and that they  adopted this allocation strategy in response to customer feedback.  Specifically, officials said that in the past, JMD billed e-mail charges  based on monthly counts of active e-mail accounts but that CAB  members found the variability in billings too difficult to plan for and instead  preferred paying a set monthly charge. JMD officials told us that as a  result, the working capital fund now charge for e-mail services based on  the active number of e-mail accounts at the end of the prior fiscal year,  and that they adjust their counts annually.
Currently, JMD officials directly communicate the basis for shared  services rates only with CAB members at the annual meeting and do not  have a formalized mechanism to do so with customers not on the board.  In response to a question about how non-CAB customers would receive  rate information, JMD officials explained that this information is included  in the operating plan. Further, they said that there is a board member  responsible for sharing relevant portions of the operating plan with all of  the department’s direct reports and other customers. However, JMD  officials did not know whether this process is working as intended. It is  also unclear whether the CAB member with the responsibility for sharing  information with non-CAB members has the necessary knowledge of rate  structures and changes as they apply to other components. 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, they can  better anticipate changes to assumptions, identify their effect on costs,  and incorporate this information into their budget planning.
section_title: Most Customers Want More Opportunities for Substantive, Two-way Communication with JMD
paragraphs: Absent regular opportunities for a substantive two-way exchange of  information, miscommunications such as those described above are  unlikely to be resolved. Most customers we spoke with—both CAB  members and nonmembers—said that they want more opportunities for a  substantive exchange of information with JMD. For example, the majority  of CAB members we met with said that because they historically have not  received information about changes to shared services rates prior to the  annual meeting and feel unprepared to have a substantive discussion  about the operating plan and provide input on other management issues.  JMD officials responded to this by saying that the annual meeting is not  intended to be the only or primary vehicle for engaging their customers.  Rather, they view the CAB meeting as the first step in the  communications process and see the annual board meeting as an  executive-level overview of fund issues for the coming year. They also  said that they have always provided opportunities for and encouraged  feedback and questions about the materials after the meeting, and that  CAB members sometimes provide written and oral responses.
JMD officials said that although staff directors occasionally provide some  component-specific rate information upon request prior to the annual  meeting, they have historically not provided advance copies of the  operating plan, proposed rates, or both for three reasons. First, JMD  officials explained that it is difficult to provide that information early  because of the timing of when the plan is finalized and when the CAB  meetings must occur. JMD officials said that they begin the operating plan  process late in the fiscal year to ensure that updated data are available to  adjust rates for the coming year. At the same time, the meeting needs to  occur early in the fiscal year so that CAB members can approve the  operating plan, which includes updated shared services rates that will be  used to renew reimbursable agreements with customers. Second, officials  were concerned about sharing a draft plan that had not been finalized.  Lastly, JMD officials were concerned that if they provided the information  in advance, CAB members would focus too exclusively on component- specific details and limit the group’s ability to engage in a high-level  discussion about the fund. This year, in response to discussions about  preliminary observations from focus groups conducted as part of our  review, JMD provided CAB members with the operating plan about a  week before the annual meeting. A JMD official said that one member  acknowledged the usefulness of receiving materials in advance. Further,  the JMD official noted that there were fewer questions about the  operating plan than in past years, but could not directly attribute this to  having sent the operating plan out ahead of time.
CAB members also want more substantive two-way communications  during the board meetings. Board members told us that the structure of  the annual CAB meeting does not allow for this type of exchange. They  said that because most of the meeting consists of briefings by JMD, there  is limited opportunity for members to ask questions or provide input on  fund operations. JMD officials told us that one way they solicit the  opinions of CAB members is by asking them to vote on whether certain  large investments should be made in the coming year, though they also  acknowledged that CAB members have not voted on many issues in  recent years. CAB members, however, do not view voting as a means for  substantive input since the votes are on very specific issues that do not  relate to how the working capital fund is managed.
JMD has no formal venue to communicate with non-CAB customers;  however, JMD officials told us that customers have a variety of avenues  to learn more about the shared services they purchase. For example,  JMD staff said that they meet monthly with the executive officers and  budget officers, that they attach cover memos to the reimbursable  agreements that contain information about the rates and services, and  that general information about the shared services and working capital  fund is available on Justice’s intranet site. Nevertheless, customers want  more opportunities to learn about upcoming service enhancements or  changes. JMD officials told us that they have taken steps, such as those  mentioned above, to improve communications with customers and that  they remain committed to doing so. Although communication is clearly a  shared responsibility between the customer and the shared services  provider, effectively communicating with customers involves sharing  relevant analysis and information as well as providing opportunities for  customer input. Agencies that do not communicate effectively with  stakeholders miss opportunities for meaningful feedback that could affect  the outcome of changes in both rates and program implementation.
section_title: JMD Does Not Always Provide Customers with Timely, Clear Billing Information
paragraphs: Customer experiences with getting clear, timely, well-explained bills for  working capital fund services are mixed. On the one hand, a customer  noted that the library service provides clear, detailed, and complete billing  information that is easily accessible online. The customer explained that  such information helped components fulfill their bill-paying and audit  responsibilities. On the other hand, based on our review of customer bills  for other shared services and information gathered during our focus  groups, we found that other shared service accounts do not always  provide enough information for customers to understand the basis for  actual charges or fulfill bill-paying and audit responsibilities.
Our review of billing statements from various shared service accounts  revealed various levels of detail on billing statements. Some bills had  detailed information specifying the basis of every charge; however, one  bill included an account service fee of over $20,000 without any  explanation. Similarly, during our focus groups, finance staff responsible  for paying for the shared services provided noted that billing adjustments  sometimes appear without any explanation. Further, they said that JMD  does not always provide complete billing information in a timely manner,  especially in cases where customers are billed for a different amount than  they had expected to pay at the beginning of the year. This inhibits  customers’ ability to anticipate their actual charges at the end of the year  and undermines their ability to properly account for these costs.  Customers also said that the follow-up necessary to obtain more  information on these charges is time consuming and resource intensive.
Some customers do not receive complete, timely billing information  because customers do not always provide JMD with contact information  for individuals with responsibility for paying bills. Working capital fund  account managers told us that they primarily communicate information  such as rates, projected charges, and periodic reports to the points of  contact listed in the interagency agreements. Customers can identify up  to two customer points of contact in these agreements. However, JMD  officials noted that while customers sometimes include program staff as  the points of contact, finance staff contacts are not always identified.
JMD officials said that they expect the designated points of contact to  pass information along to the right people within the components, as  appropriate. JMD budget officials acknowledged that communication  challenges exist within the components and that the information may not  be getting to the appropriate staff. However, they also noted that it is the  customer’s responsibility to communicate billing information internally with  its finance staff. While this is not an unreasonable expectation, we believe  that helping to ensure that the right information gets to the right people at  the right time is part of providing good customer service.
section_title: JMD Does Not Measure Customer Satisfaction with or the Cost-effectiveness of Its Shared Services
subsections: section_title: JMD Does Not Systematically Assess Customer Satisfaction with Its Shared Services
paragraphs: JMD does not systematically assess customer satisfaction with its  services. A JMD official explained that this is the case because officials  rely on JMD staff directors to gather customer feedback at a frequency  appropriate for their specific services. A working capital fund staff director  we spoke with said that JMD solicited customer input on an informal basis  and had conducted surveys at the customers’ request. The surveys we  reviewed requested customer feedback on measures such as satisfaction  and timeliness of services provided as well as whether improvements are  needed. Absent a formal mechanism for customers to provide regular,  timely feedback about working capital fund services, JMD cannot  sufficiently assess whether customer needs are being met or have  changed. As we have previously reported, establishing performance  measures and goals for shared services is a critical management tool that  can help an agency understand whether each of the working capital fund  services it provides meet customer needs.
section_title: JMD Does Not Measure the Cost-effectiveness of Its Shared Services
paragraphs: JMD has not assessed its shared services to know whether they provide  a good value to customers, and therefore has not shared information  about the cost-effectiveness of its services with customers. In our focus  groups, customers said that although they expect the shared services to  offer them economies of scale—and customers assume that they are in  fact getting a good value—JMD has not provided data that demonstrate  this. Customers explained that having this information is especially  important in light of the tight fiscal conditions they expect to face in the  foreseeable future. In fact, one customer noted that his staff will be  evaluating whether shared services purchased by his component are cost  effective.
Providing information about the cost-effectiveness of shared services  would also help JMD provide better customer service, in keeping with the  President’s efforts to streamline and improve service delivery. Further,  without conducting analysis to ensure that working capital fund services  are a good value, JMD cannot use performance information to improve its  own operations. Lastly, data on the cost-effectiveness of shared  services can help JMD customers meet the determination requirement of  the Economy Act. When ordering services under the Economy Act,  customers—as ordering agencies—must determine that the order is in  the best interest of the government and cannot be procured as  conveniently or inexpensively by contracting directly with the private  sector. Although JMD, as the performing agency, is not required to  provide information to customers to help them make this determination, it  has a business interest in helping other Justice components, which are  the bulk of the working capital fund’s customers, comply with these  requirements.
section_title: JMD Does Not Assess Whether the Working Capital Fund Is Effectively Managed
paragraphs: Performance measures that are aligned with strategic, departmentwide  goals can facilitate assessments on whether working capital fund  activities are contributing to agency goals. JMD tracks and monitors the  performance of its shared services provision on a limited, ad hoc basis.  For example, JMD tracks workload measures, such as the number of  personnel actions completed, number of transactions processed, and  computer processing unit hours available. However, JMD does not have  measures to assess how effectively it manages the fund, such as whether  managers are responsive to customer issues on rates or billing—two  areas with which customers have expressed concern.
A fiscal year 1997 financial audit of the fund tasked account managers  with outlining major objectives and developing performance measures for  the working capital fund. However, JMD officials told us that this had not  been accomplished for all the department’s shared services accounts  before fiscal year 2007, when Justice rolled the financial, performance,  and accountability audits of the working capital fund into Justice’s audit of  the Offices, Boards, and Divisions (OBD). Accordingly, JMD officials told  us that the working capital fund no longer receives its own audited  financial statements; instead Justice develops performance measures for  the OBD, under which the working capital fund audits were consolidated.  This audit approach does not provide JMD with an opportunity to  specifically measure working capital fund-level performance. In its agency  comments, Justice clarified that while the working capital fund is part of a  broader audited financial statement, performance measures are  continually tracked and maintained through the department’s Quarterly  Status Report process during budget execution activities. Nevertheless,  as we noted earlier, the workload measures that are tracked do not  assess whether the fund is effectively managed, which is a key operating  principle for working capital funds.
Since the fund’s creation in 1975, changes in the work environment,  technologies, budget conditions, agency needs, and long-term  efficiencies have had an impact on how JMD provides shared services to  its customers. Therefore, opportunities exist for JMD to evaluate whether  the working capital fund provides shared services efficiently or the  services are aligned with current departmental needs. For example,  customers told us that while they need most services provided by the  working capital fund, JMD has required them to use some services  despite customers’ ability to provide these services themselves.  Specifically, one customer said that although her component had  received appropriations to develop security training, it was required to  purchase the same training from the working capital fund a few years  later. She questioned whether components could have provided this  training more cheaply and effectively than JMD. Another customer said  that although his component owned and preferred its own audio  equipment, it was required to use speakers and microphones provided by  the working capital fund whenever events were held in the main Justice  building. Both customers stated that JMD should assess whether the  working capital fund should continue to provide those services for all  components.
If available, specific working capital fund-level performance information  would allow JMD to regularly compare actual performance with planned  or expected performance. Making adjustments to the fund management  and services, as appropriate, in a corresponding management review  process could help JMD achieve the efficiencies that working capital  funds were designed to produce, potentially freeing up resources that  could be realigned for other departmental initiatives. Further, such a  review could also allow JMD to better reassess functions to ensure that  the working capital fund continues to provide the critical underlying  infrastructure and support that allow other Justice components to perform  their primary functions. Performance measures that are aligned with  strategic goals can be used to evaluate whether and, if so, how working  capital fund activities are contributing to the achievement of agency goals  and departmentwide crosscutting initiatives.
section_title: Justice’s Excess Unobligated Balances Have Been Unavailable for Departmental Priorities in Recent Years
paragraphs: Justice has the authority to capture excess unobligated balances into the  working capital fund and AFF to fund various departmental priorities.  These balances are available until expended. Specifically, the AFF  balance—known as the Super Surplus—may be used for any authorized  law enforcement purpose, while the working capital fund’s Unobligated  Balance Transfers account—known as UBT—may be used for capital  investments or administrative purposes.
According to the AAG/A, who has responsibility for managing these  authorities as Justice’s Chief Financial Officer, the working capital fund  and AFF’s authority to retain and use transferred excess unobligated  balances is a tremendous benefit for the department. He considers these  authorities to be part of a suite of financial tools available to manage  projects to meet Justice priorities.
Excess unobligated balances from accounts across the department can  be transferred into the working capital fund’s UBT. This account consists  of moneys from expired Justice appropriation balances that are not  needed to cover obligations or other adjustments and are about to be  canceled. Excess unobligated balances in AFF can be transferred into  the Super Surplus account. The Super Surplus amounts include prior- year declared excess unobligated balances. The Assets Forfeiture  Management Staff, in conjunction with JMD budget staff, determine the  amounts needed to (1) maintain AFF solvency by covering anticipated  forfeiture-related expenses, (2) ensure a reserve for pending equitable  forfeited assets and third-party payments with partners and victims  (referred to as major sharing reserves), and (3) retain funding to cover  rescissions. Any remaining funds can be declared as excess unobligated  balances and used to increase the Super Surplus balance.
Justice leadership uses a four-step process to make final decisions on  how to use the working capital fund’s UBT and AFF’s Super Surplus.  1.  When excess unobligated balances are available, Justice components  submit requests for funds to JMD. These requests must provide  sufficient justification to allow senior Justice officials to make informed  decisions about the use of these funds.  2.  JMD budget staff consider each funding request in light of the priority  resource needs of the department and the authorized purposes for  which UBT and Super Surplus balances are available. JMD budget  staff present their recommendations to the AAG/A for review and  approval.  3.  The AAG/A, with input from the Attorney General and other  departmental leaders, makes the final decision on how to allocate  these balances.  4.  Before using the excess unobligated balances, JMD notifies OMB and  the House and Senate Appropriations Committees’ Commerce,  Justice, and Science Subcommittees on how much they will use from  the UBT and Super Surplus and for what purpose. While Justice is  only required to notify Congress and OMB of its uses, it generally  waits for approval before using the funds.
In the past, Justice has used the working capital fund UBT to fund general  administrative acquisitions, such as improving Justice’s financial  management system. However, JMD budget officials told us that the UBT  has not been available for departmental priorities in recent years. Since  fiscal year 1995, Justice has used the UBT for rescissions enacted in law  and drawn from the working capital fund. When rescinded amounts were  equal to or greater than the existing UBT balance, those funds were  unavailable for departmental priorities (see table 2).
When AFF Super Surplus balances were available, Justice allocated  funding for various law enforcement purposes as determined by the  Attorney General’s statutory discretion, such as programs targeting  crimes against children. Because rescissions from AFF have been  greater than the existing Super Surplus balance since fiscal year 2008,  the Super Surplus has been unavailable for departmental priorities in  recent years. Further, an amount equal to the prior fiscal year’s rescission  has been designated for return to the AFF Super Surplus the following  fiscal year (see table 3).
section_title: Conclusions
paragraphs: Working capital funds provide agencies with an opportunity to operate  more efficiently by consolidating and providing services. They also create  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 working capital fund operating principles. Specifically, these  principles are to clearly delineate roles and responsibilities, ensure self- sufficiency by recovering the agency’s actual costs, measure  performance, and build in flexibility to obtain customer input and meet  customer needs. JMD effectively tracks working capital fund moneys in  accordance with fiscal law, clearly delineates roles and responsibilities  within the fund, and ensures self-sufficiency by recovering total shared  services costs. Further, customers noted positive benefits from shared  services, including the breadth of services offered, the experience and  knowledge of shared services staff, and the convenience and ease of  having these services provided in-house.
Customers do not always understand the basis for the rates they pay and  lack assurances that fund costs are equitably distributed among  customers. Although JMD established the CAB to improve customer  satisfaction with the working capital fund, board members do not find the  annual meeting—JMD’s primary vehicle for engaging board members  about shared services and their accompanying rates—a useful forum in  which to understand and provide advice on fund management and  operations. Further, JMD does not have a systematic way to  communicate with non-CAB customers, which results in uneven flow and  availability of information among working capital fund customers,  especially regarding the structures of some shared services rates. JMD  officials described various ways that they push information on rates and  services out to their customers but ultimately agreed that some customers  may have better access to this information than others, and said that they  remained committed to continuing to improve communication with  customers. Providing ample opportunity for customers to provide input on  services and voice their concerns about the fund is a key principle for  managing working capital funds. Further, transparent and equitable  pricing methodologies allow agencies to ensure that shared services  rates charged recover agencies’ actual costs and reflect customers’  service usage. If customers understand how rates are determined, they  can better anticipate changes to assumptions, identify their effect on  costs, and incorporate this information into their budget planning.
Customer experiences with getting clear, timely, well-explained bills for  working capital fund services are mixed, and our review of customer bills  for shared services found that some services do not always provide  enough information for the customers to understand the basis for the  charges contained in the bills. As a result, customers’ ability to anticipate  their actual charges at the end of the year and to properly account for  these costs was inhibited. Although customers do not always provide  JMD with points of contact for billing information, we believe that helping  to ensure that the right information gets to the right people at the right  time is part of providing good customer service.
Although JMD tracks and monitors limited performance information for  some shared services, it does not have measures to assess how  effectively it manages the fund, such as whether managers are  responsive to customer inquiries or billing error rates—two areas with  which customers have expressed concern. By establishing performance  measures and goals for working capital fund operations that align with  Justice’s strategic goals, and putting a management review process in  place to track fund performance, JMD would have the necessary tools to  know whether the fund is achieving the efficiencies that intragovernmental  revolving funds were designed to produce. Absent a systematic way to  measure customer satisfaction with shared services as well as fund-level  performance, JMD is missing an opportunity to identify potential  improvements and efficiencies to the services it provides. Further, by  better understanding the fund’s effectiveness, JMD could potentially free  up resources that could be realigned for other departmental priorities.
section_title: Recommendations for Executive Action
paragraphs: To improve the management of the Justice working capital fund, we  recommend that the Attorney General direct the AAG/A to take the  following three actions:  1. Improve opportunities for two-way substantive communication with  shared services customers. This could include developing a means to  discuss customer concerns about working capital fund rates and services;  organizing breakout sessions on specific lines of business, to be attended  by appropriate customer program and finance staff; restructuring the  annual CAB meetings to allow further opportunities for two-way  communication; conducting a periodic survey or listening session with  customers on such topics as their level of satisfaction or potential  changes to service needs; or a combination of these.  2. Help ensure that information on the basis of rates for each shared  services and sufficiently detailed billing information reaches the  appropriate customer staff, especially those in the finance and program  offices. This could include posting relevant portions of the operating plan  with information on the basis of rate structures on Justice’s intranet,  requiring both a program office and finance point of contact to be  provided in each reimbursable agreement, or organizing periodic  dedicated sessions for both program staff and finance customer staff to  discuss issues relevant to them.  3. Develop performance measures to monitor whether all shared services  are provided in an efficient and effective manner. These measures should  support goals that align with Justice priorities and, as the departmental  needs change over time, provide JMD additional assurance that the level  and types of working capital fund services provided support current  departmental goals.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Attorney General for official  review and comment. In his letter, which is reprinted in appendix III, the  Assistant Attorney General for Administration generally agreed with our  findings and recommendations. Specifically, he noted that JMD will  continue to explore ways to address the issues we identified. For the third  recommendation, he noted that while it is possible to enhance oversight  of the working capital fund by formulating and tracking additional  performance measures, such measures would not be necessary to  assure Justice that fund services support the department’s needs. While  we agree that fund services provide critical support to Justice’s mission,  we continue to believe that as the departmental needs change over time,  JMD could provide additional assurance that the level and types of  working capital fund services provided support current agency goals.  Further, we have revised the third recommendation to reflect this. Justice  provided technical comments, which we incorporated as appropriate.
We are sending copies of this report to the Attorney General 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  me at (202) 512-6806 or fantoned@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Major contributors to this report are listed in  appendix IV.
section_title: Appendix I: Other Working Capital Fund Services and Customers
paragraphs: The following tables show the interactive data from figure 1. Table 4  shows working capital fund amounts for services and support for “other  services.” Table 5 shows working capital fund amounts for customers  under “all other customers.”
section_title: Appendix II: Key Operating Principles for Managing Working Capital Funds
paragraphs: Principle  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 working capital fund  management, and helping to ensure that related  responsibilities are coordinated. In addition, this  reduces the risk of mismanaged funds and tasks or  functions “falling through the cracks.” Moreover, it  helps customers know who to contact if they have  questions.
Examples of evidence supporting  principle  Written roles and responsibilities specify  how key duties and responsibilities are  divided across multiple individuals/offices  and are subject to a process of checks  and balances. This should include  separating responsibilities for authorizing  transactions, processing and recording  them, and reviewing the transactions.
Written description of all working capital  fund roles and responsibilities is  available in an accessible format, such  as a fund manual. Discussions with  providers and clients confirm a clear  understanding.
A routine review process exists to ensure  proper execution of transactions and  events.
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. A management review process can  help to ensure that the methodology is applied  consistently over time and provides a forum to  inform customers of decisions and discuss as  needed.
Published price sheets for services are  readily available. Documentation of  pricing formulas supports equitable  distribution of costs.
Pricing methodology and accompanying  process ensure that in aggregate,  charges recover the actual costs of  operations.
Management review process allows fund  managers to receive and incorporate  feedback from customers. Discussions  with customers confirm an understanding  of the charges and that they are viewed  as transparent and equitable.
Performance indicators and metrics for  working capital fund management (not  just for the services provided) are  documented.
Indicators or metrics to measure outputs  and outcomes are aligned with strategic  goals and working capital fund priorities.
Principle  management review process comparing expected to  actual performance allows agencies to review  progress toward goals and potentially identify ways  to improve performance.
Examples of evidence supporting  principle  Working capital fund managers regularly  compare actual performance with  planned or expected results and make  improvements as appropriate. In  addition, performance results are  periodically benchmarked against  standards or “best in class” in a specific  activity.
Build in flexibility to obtain customer input and  meet customer needs  Opportunities for customers to provide input about  working capital 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 working  capital fund capacity up or down as business rises  or falls.
An established forum, routine meetings,  surveys, or a combination of these solicit  information on customer needs and  satisfaction with working capital fund  performance.
Established communication channels  regularly and actively seek information  on changes in customer demand and  assess the resources needed to  accommodate those changes.
Established management review process  allows for trade-off decisions to prioritize  and shift limited resources needed to  accommodate changes in demand  across the organization.
section_title: Appendix III: Comments from the Department of Justice
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Jacqueline M. Nowicki, Assistant  Director, and Shirley Hwang, Analyst-in-Charge, managed this  assignment. Melissa L. King, Catherine H. Myrick, and Keith C. O’Brien  made major contributions to this report. Cynthia Saunders provided  methodological assistance, Felicia Lopez provided legal assistance, and  Donna Miller developed the report’s graphics. Other individuals providing  key advice included Sandra Burrell, Samantha Carter, and Jack Warner.