Budget Issues: Better Fee Design Would Improve Federal Protective Service's and Federal Agencies' Planning and Budgeting for Security
Published: 2011-05-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Federal Protective Service (FPS) is a fee-funded agency in the Department of Homeland Security (DHS) responsible for providing physical security to over 9,000 federal facilities. In 2003 FPS transferred to DHS from the General Services Administration and for the first time was to fully recover its costs. GAO recently reported that stakeholders were concerned about FPS's ability to determine security costs, and the strategies used to address funding challenges had adverse effects on FPS. In this context, Congress directed GAO to evaluate FPS's resource levels. This report (1) analyzes FPS's fee design and proposed alternatives, and (2) examines how FPS's security fees challenge FPS and customer agency budget formulation and execution. GAO reviewed legislation and agency documentation and interviewed FPS and customer agency officials in headquarters and four FPS regions.
section_title: What GAO Found
paragraphs: FPS increased its basic security fee four times in 6 years to try to cover costs (an increase of over 100 percent). FPS has not reviewed its fees to develop an informed, deliberate fee design. GAO has found that timely, substantive fee reviews are especially critical for fee-funded agencies to ensure that fee collections and operating costs remain aligned. FPS is legally required to charge fees that cover its total costs, but it is not required to align specific fees with specific activities. Nevertheless, in its pricing documents FPS describes an alignment between specific fees and specific activities that does not exist. FPS charges a basic security fee based on facility square footage. In addition, FPS charges facilities that have contractor-provided countermeasures, such as guards, the cost of the countermeasure plus an administrative fee that is a percentage of the countermeasure cost. Federal facilities vary in how much they cost to protect, but FPS does not know to what extent some facilities currently subsidize others. This contributes to expectation gaps with and unknown cross-subsidizations among payers. FPS officials said that basic security costs are meant to be "shared evenly" (i.e., based on square footage) among all payers while administrative fees for FPS-recommended or facility-requested countermeasures are meant to both (1) reflect the increased risk inherent to those facilities requiring or requesting additional countermeasures and (2) subsidize the aggregate cost of basic security services. Charging beneficiaries more or less than actual costs may help achieve policy goals, but FPS lacks data to determine whether this occurs as intended. Modifying the current fee structure or funding FPS through a combination of fees and direct appropriations may address equity and cross-subsidization issues and improve transparency to customers, but without detailed activity cost information and a full fee review the relative trade-offs in any particular proposal are unclear. Further, revising the fee structure alone will not address the variations in service levels reported by FPS's customer agencies or the overall level of services FPS is able to provide. The design and implementation of FPS's fees affect agencies' and FPS's ability to budget for and timely implement security measures in multiple ways. First, FPS lacks a method to propose security fee rates prior to submitting its budget request and cannot finalize its rates each year until it receives congressional instructions about its staffing levels in its appropriation act. As a result, agencies annually request security funding without accurate security cost estimates. Second, FPS makes security recommendations to customer agencies based on current threats, but agencies budget for security costs in advance and therefore must reallocate funds to pay for countermeasures for which they had not planned. Although there are no obvious solutions for these and other budget timing disconnects, alternative budget account structures like a reimbursable account or a revolving fund could help mitigate budgeting and timing challenges for FPS and customer agencies without compromising accountability for federal funds.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Secretary of Homeland Security direct the Director of FPS to, among other things, conduct and make available regular fee reviews to improve its fee design, include capital investment costs in its rates, and evaluate its current and alternative funding and budget account structures to mitigate budget timing and other issues. DHS concurred with GAO's recommendations.

section_title: Letter
paragraphs: The Federal Protective Service (FPS) within the Department of Homeland  Security (DHS) is responsible for providing physical security and law  enforcement services to over 9,000 federal facilities. FPS is meant to be  fully funded by the security fees it collects from the agencies it protects.  We have previously reported on a number of funding-related challenges  FPS faces. For example, in 2008 we found that FPS’s fee collections were  insufficient to cover its operational costs, that stakeholders had concerns  about FPS’s ability to determine the costs of providing security services,  and that FPS’s actions to address budgetary challenges had adverse effects  on the agency. More recently, we found that FPS had not explained how it  intended to fund the increase in full-time equivalents (FTEs) called for in  its workforce analysis plan. FPS agreed with our findings and  recommendations, but generally has not yet implemented actions to  address them.
In response to Congress’s mandate in the House Report which  accompanied the DHS fiscal year 2009 Appropriations Act requiring GAO  to evaluate FPS’s resource levels, this report (1) analyzes FPS’s current fee  design and proposed alternatives, and (2) examines how FPS’s security  fees challenge FPS and customer agency budget formulation and  execution.
To meet our objectives we reviewed relevant legislation, regulation,  guidance, agency documents, and prior reports on user fee design and  implementation characteristics. We also interviewed officials responsible  for managing user fees at FPS, the General Services Administration (GSA),  and selected customer agencies at their headquarters and in several  regions. We selected four customer agencies with a large representation in  GSA’s facility inventory (measured by total rental square footage and total  annual rent) and based on prior GAO work on FPS. We selected the  regional locations based on (1) region size (number of FPS-protected  buildings), (2) geographic diversity, and (3) stakeholder input on  successes and challenges faced by regional management. Within the  selected regions, we interviewed FPS officials and customer agency  officials who work with FPS security fees. Specifically, we interviewed  officials from the Department of Health and Human Services (HHS),  Internal Revenue Service (IRS), Social Security Administration (SSA), and  the Department of Homeland Security (DHS) in the National Capital  Region (Washington, D.C.), Southeast Region (Atlanta, Ga.), Rocky  Mountain Region (Denver, Colo.), and Northwest/Arctic Region (Federal  Way/Seattle, Wash.).
Appendix I provides additional details about our scope and methodology.  We conducted this performance audit from May 2009 through April 2011 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: FPS’s Mission
paragraphs: FPS’s mission is protect the buildings, grounds, and property that are  under the control and custody of the GSA, as well as the persons on the  property; to enforce federal laws and regulations; and to investigate  offenses against these buildings and persons. FPS conducts its mission by  providing security services through two types of activities: (1) physical  security activities—conducting facility risk assessments and  recommending countermeasures aimed at preventing incidents at  facilities—and (2) law enforcement activities—patrolling facilities,  responding to incidents, conducting criminal investigations, and exercising  arrest authority.
In 2007, FPS adopted an inspector-based workforce approach to  protecting GSA facilities. Under this approach, FPS eliminated the police  officer position and uses about 752 inspectors and special agents to  oversee its 15,000 contract guards, provide law enforcement services,  conduct building security assessments, and perform other duties as  assigned. According to FPS, its 15,000 contract guards are used primarily  to monitor facilities through fixed post assignments and access control.
FPS’s facility security assessments and the corresponding recommended  security countermeasures, such as contract security guards, security  cameras, bollards, or magnometers, are based on standards set by the  Interagency Security Committee (ISC). The ISC is composed of 49 federal  departments and agencies and is responsible for developing and evaluating  security standards for federal facilities in the United States. The  foundation of the ISC standards is the facility security level (FSL)  determination. FSL determinations, which range from level I (the lowest)  to level V (the highest) are based on criteria including facility size and  population, mission criticality, symbolism, and threat to customer  agencies.
section_title: FPS’s History and Funding
paragraphs: FPS was created in 1971 and was part of the GSA until 2003, when the  Homeland Security Act of 2002 transferred it to DHS’s Immigration and  Custom’s Enforcement (ICE) component. In October 2009 FPS was  transferred within DHS from ICE to the National Protection and Programs  Directorate (NPPD). During the period it was within GSA, FPS was under  the umbrella of the Federal Building Fund (FBF), an intragovernmental  revolving fund that is part of GSA’s Public Building Service, and received  administrative support services from GSA. During this period, GSA did not  know how much it was charging for facility security and, therefore, how  much of the facility security costs it was recovering. GSA officials said the  security costs were funded by an unknown portion of the facility’s  appraised rental rate plus an additional charge of approximately $0.06 per  square foot. GSA officials said this means there is no way to know  whether, and, if so, how much, the security costs were subsidized by other  revenue in the FBF. When FPS transferred to DHS, no portion of GSA’s  rental rate was transferred with FPS. FPS’s fees did not recover its costs  during the transition years from GSA to DHS.
FPS is authorized to charge customer agencies fees for security services  and to use those collections for all agency operations. All of FPS’s  security fees are available to FPS, without fiscal year limitation, for  necessary expenses related to the protection of federally owned and  leased buildings for FPS operations. Currently FPS is a fully fee-funded  organization. Customer agencies use their appropriated funds to pay FPS  security fees, which are credited to FPS as offsetting collections. These  fees are used for FPS’s expenses in providing security services and for  overhead costs and capital investments. Rather than receiving a direct  appropriation each year, FPS receives authority through the appropriation  process to obligate and spend its collected fees. Since 2007 FPS has had  authority to use all of its collections for necessary expenses.
As we will discuss in more detail, FPS charges federal agencies three fees:  (1) a basic security fee, (2) the building-specific administrative fee, and (3)  the security work authorization (SWA) administrative fee. All customer  agencies in GSA-controlled properties pay a basic security fee. Customer  agencies in facilities for which FPS recommends specific countermeasures  pay the building-specific administrative fee, along with the cost of the  countermeasure. Customer agencies that request additional  countermeasures pay the SWA administrative fee, along with the cost of  the countermeasure.
FPS security fees are transferred from customer agencies to FPS’s  expenditure account per interagency agreements. FPS retains all collected  fees, using the basic security fee and the building-specific and SWA  administrative fees to cover its operating costs. FPS passes revenue for the  contract costs associated with building-specific and SWA  countermeasures on to the contractors that provide security equipment or  guard services. Figure 1 illustrates the flow of funding for the three fees.
FPS’s security fees do not neatly fit with a single type of fee or charge, but  aspects of various guidance and criteria may apply, including GAO’s User  Fee Design Guide, OMB Circular A-25, and the Chief Financial Officers  (CFO) Act of 1990.
We developed a User Fee Design Guide that examines the characteristics  of user fees, and factors that contribute to a well-designed fee. The  manner in which fees are set, collected, used, and reviewed may affect  their economic efficiency, equity, revenue adequacy, and administrative  burden. The design guide principles are used in evaluating fees that are  charged to readily identifiable users or beneficiaries of government  services beyond what is normally provided to the general public. A  number of these principles can serve as good practices for FPS to  consider:    Efficiency: Efficiency refers to requiring identifiable beneficiaries to  pay for the costs of services, allowing user fees to simultaneously  constrain demand and reveal the value that beneficiaries place on the  service.
Equity: Equity refers to everyone paying his/her fair share, though the  definition of fair share can have multiple facets. For example, equity  could be based on the beneficiary paying for the cost of the service or  equity could be based on the beneficiaries’ ability to pay.
Revenue adequacy: Revenue adequacy refers to the extent to which  the fee collections cover the intended share of costs. It encompasses  variations in collections over time relative to the cost of the program.  Revenue adequacy also incorporates the concept of revenue stability,  which generally refers to the degree to which short-term fluctuations  in economic activity and other factors affect the level of fee  collections.
Administrative burden: Administrative burden refers to the cost of  administering the fee, including the cost of collection as well as the  compliance burden.
OMB’s Circular A-25 establishes federal policy regarding user fees,  including the scope and types of activities subject to user fees and the  basis upon which the fees are set. It also provides guidance for executive  branch agency implementation of fees and the disposition of collections.  Circulars No. A-25 and No. A-11 both include guidelines to agencies when  determining the amount of user charges to assess.
The CFO Act of 1990 requires an agency’s CFO to review, on a biennial  basis, the fees, royalties, rents, and other charges for services and things of  value and make recommendations on revising those charges to reflect  costs incurred. While the CFO Act generally is applied to fees charged by  government agencies to nongovernmental entities, the act’s provision  requiring biennial review provides a useful leading practice for  intragovernmental fee review.
section_title: Lack of Informed Fee Design Contributes to Expectation Gaps with Stakeholders and Unknown Cross- Subsidizations Among Payers
subsections: section_title: FPS Does Not Have an Informed Fee Design
paragraphs: When FPS was a part of GSA, GSA did not charge customer agencies  security fees to recover the full cost of physical security services.  However, since FPS transferred to DHS in 2003, FPS has been required to  recover its full costs through security fees. FPS’s initial fee rates were  established without a clear understanding of what FPS’s total costs had  been and were likely to be. As a result, FPS did not initially collect enough  in fees to cover its actual costs. Despite a number of security fee increases  and cost-cutting efforts in the 7 years since transferring to DHS, FPS has  not conducted a fee review to develop an informed, deliberate fee design.  FPS officials said they are not required to report on FPS’s security fees as  part of the DHS biennial fee review required by the CFO Act because FPS’s  fees are paid by government payers. However, the CFO Act does not  specify that fees from government payers are excluded from the biennial  reporting requirement. FPS officials said the annual budget formulation  process and resulting budget justification serve as their fee review.  Further, although FPS is required to annually certify that its collections  will be sufficient to maintain a particular FTE level, in 2008 and 2010, the  years FPS certified its collections, it did not provide detail about the  operations or activity costs.
Currently, FPS sets its fee rates for a given year so that its estimated total  collections match the agency’s estimated total operating costs. To do this  FPS first estimates collections from the basic security fee and then adjusts  the building-specific and SWA administrative fees as needed to bridge any  difference. Specifically, (1) FPS estimates the agency’s total operating  costs for the upcoming fiscal year, then (2) estimates how much it will  likely collect in basic security fees. FPS estimates the basic security fee  collections by multiplying the current per-square foot basic security fee  rate by the square footage it protected in the last quarter of the prior year.  To set the building-specific and SWA administrative fee rates, FPS  estimates the total cost of the contractor-provided countermeasures in the  aggregate based on the prior year’s cost. It then determines the percentage  of the total estimated cost of the countermeasures likely to generate  enough in collections to cover any difference between its estimated  operating costs and its estimated basic fee collections. For example, if FPS  estimates it will need $270 million for total agency operating costs and  estimates it will get $220 million in collections from the basic security fee,  FPS sets the building-specific and SWA administrative fee rates at a  percentage rate of the estimated cost of countermeasures that it estimates  will raise an additional $50 million. FPS officials said the current fee- setting methodology is simple and shares FPS’s costs equitably among its  customer agencies in about 9,000 GSA-controlled facilities.
FPS was expected to fully cover its costs for the first time when it moved  to DHS in 2003, but it did not actually do so until 2007. To cover the  difference, FPS raised fee rates, requested additional funds from GSA and  DHS, and imposed cost-cutting efforts (see table 1). We have previously  reported that these cost-cutting efforts—which included restricted hiring  and travel and limiting training and overtime had adverse effects on the  agency, including effects on morale, safety, and increased attrition.
As shown in table 2, to cover its costs FPS has increased its fees four times  from 2004 to 2009. The basic security fee alone has increased more than  100 percent—from $0.30 cents per square foot in fiscal year 2004 to $0.66  cents per square foot in fiscal year 2009. Further, the President’s Fiscal  Year 2012 Budget proposes an additional $0.08 increase in the basic  security fee to $0.74 per square foot (see table 2). In March 2008, FPS  increased the basic security fee in midyear and made the increase  retroactive to the start of fiscal year 2008. As discussed in more detail  later in this report, customer agency officials we spoke with said the  midyear change created serious budgeting challenges. From 2004 to 2010,  FPS’s building-specific and SWA administrative fees have declined from 15  percent in 2007 to 6 percent in 2010, reflecting the collections level needed  (see table 2).
We have previously reported that fee collections should be sufficient to  cover the intended portion of program costs over time and that while  regular, timely, and substantive fee reviews are critical for any agency,  they are especially important for agencies—like FPS—that are mostly or  solely fee funded in order to ensure that fee collections and operating  costs remained aligned. Without conducting a fee review to develop an  informed, deliberate fee design, fee adjustments are arbitrary and are  unlikely to align with actual agency costs.
section_title: FPS Describes an Alignment Between Specific Fees and Specific Activities That Does Not Exist
paragraphs: FPS does not know the cost of providing specific security activities to its  customer agencies, although in its Security Services and Pricing  Provision document, FPS associates specific security activities with  specific security fees—an alignment that does not exist (see table 3). That  is, FPS uses security fee receipts for activities other than those it  associates with a specific fee. For example, FPS charges agencies  administrative fees for the management and oversight of contractor- provided countermeasures, but FPS does not know if those fees recover  the management and oversight costs, nor are they specifically applied to  management and oversight activities for the countermeasures. FPS’s  Security Services and Pricing Provision document was created to  address stakeholder questions about what services FPS was providing. By  law FPS is required to charge fees that cover its total operating expenses,  but it is not required to have specific fees match the cost of specific  activities. FPS officials acknowledged that customer agencies may  assume a tight linkage between the fees and the services, but they noted  they are not required to keep data at this level of detail.
Although FPS is not required to use specific fee collections for specific  security activities, by suggesting an alignment where none exists FPS is  contributing to stakeholder confusion and potential adverse effects on  building security. Officials from several customer agencies we spoke  with said their agencies had procured countermeasures, such as closed  circuit television systems, through private security companies or GSA  rather than through FPS. FPS officials said that this can be problemat ic  because services acquired externally from FPS are frequently incompatib with FPS’s central monitoring system. Officials from FPS’s customer  agencies also described confusion or lack of clarity about the basic  security and contract oversight services they receive in return for the fees they pay. A number of officials from customer agencies told us that they  le  wanted to know the cost of FPS’s services at their facilities. We have  previously reported that effectively communicating with stakeholders may  contribute to an improved understanding about how the fees work and  what activities they fund.
FPS’s current activity based costing (ABC) model cannot break out the  costs of the specific FPS inspector-provided services associated with the  different security fees. Officials told us that this is because an inspector  may conduct multiple types of activities in a single facility visit. For  example, FPS officials said that in one facility visit, a FPS inspector might  conduct oversight of the contract guards and conduct an interview with an  agency to inform the facility security assessment. They said they have an  ABC model to help them better understand their costs but do not yet have  the data on the costs of its activities to populate the model and make  activity cost linkages. FPS expects new systems such as the Risk  Assessment and Management Program (RAMP), when fully implemented,  to provide them with more detailed cost data needed for these kinds of  linkages. We believe, however, that even without RAMP, FPS has data  needed to reasonably estimate certain costs. For example, officials told us  that they have estimates for the percentage of time inspectors spend on  standard activities, such as contract oversight, that could be used to  approximate a large portion of its activity costs.
FPS does not have a detailed understanding of its activity costs, including  information about the cost of providing its security services at federal  facilities of different risk levels, and therefore has difficulty justifying the  rate of the basic security fee to its customers. The Statement of Federal  Financial Accounting Standards Number 4, Managerial Cost Accounting  Concepts and Standards for the Federal Government, establishes  standards for federal agencies to use in reporting the costs of their  products, services, and activities, including providing reliable and timely  information on the full cost of federal programs, their activities, and  outputs. We have found that having accurate cost information—and  understanding the drivers of a program’s cost—allows an organization to  demonstrate its cost-effectiveness and productivity to stakeholders, link  levels of performance with budget expenditures, provide baseline and  trend data for stakeholders to compare performance, and provide a basis  for focusing an organization’s efforts and resources to improve its  performance.
FPS has developed a workforce analysis plan that is under review by the  Secretary of Homeland Security and OMB.  Officials said the model shows  that for FPS to fulfill its mission would require more inspector hours than  current resources would cover. Although staff is the primary cost driver  for FPS, FPS officials did not tell us how the fee structure or rates would  be affected.
section_title: FPS Does Not Include the Costs of Capital Improvements in Its Fee Rates, Contributing to Limited or Delayed Critical Investment in Critical Systems
paragraphs: According to FPS officials, FPS does not include the cost of planned  systemwide capital investments when estimating its costs and setting its  fee rates. As a result, FPS is unable to fund all of its capital investment  priorities. Instead, FPS relies on any carryover balance to pay for the  systemwide investments. Recently, FPS officials said FPS has used its  carryover balance to fund information technology investments, such as  FPS’s RAMP, and operational initiatives, such as overtime associated with  FPS’s Operation Shield Program to measure the effectiveness of FPS  countermeasures. The carryover balance comes from two main sources:  (1) deobligated funds from contracts for building-specific  countermeasures and (2) unspent fee collections from prior years. FPS  officials said that as a normal part of its contract management business  process it deobligates funds from contracts when the actual building- specific countermeasure contract cost is less than the estimated costs FPS  charged to customer agencies. For example, officials said if a contract  guard does not report to his post for 4 hours, FPS’s estimated contract  cost will be higher than the actual contract cost and FPS will deobligate  the unused funds. According to FPS officials, the second source of FPS’s  carryover balance is collections from the basic security fee and the  building-specific and SWA administrative fees that were not spent in the  previous fiscal year. FPS officials told us that its carryover balance has  been about $45 million annually in recent years.
Since FPS’s carryover balance is not large enough to fund all its  systemwide investments, FPS officials said FPS makes investment  decisions annually based on the cost of the various investments and the  availability of carryover funds. As a result, FPS has had to delay certain  critical systemwide capital investments. For example, FPS officials said  they have delayed investment in FPS’s $79.5 million radio program in both  fiscal years 2009 and 2010, which would have provided FPS officers with  radio communication capabilities in many locations across the country  where it is currently unavailable. Upgrading FPS’s communication  infrastructure, which FPS officials described as in urgent need of  replacement, is meant to address potential officer safety issues. Instead,  FPS pays for maintenance on the old system, which FPS described as less  effective and more expensive in the long term. As we have previously  reported, it is inevitable that resource constraints will prevent some  worthwhile capital investments from being undertaken. However,  decisions about whether any particular capital investment is funded  should reflect the priorities of the administration and Congress. Ideally,  those capital investments that are funded will be ones with the highest  returns or that meet the highest priority mission needs, rather than those  that happen to fit the unplanned carryover.
section_title: FPS’s Current Fee Structure Likely Contributes to Unknown Cross-Subsidizations
paragraphs: Despite evidence that customer agencies receive varying levels of basic  security services and therefore do not cost the same amount to protect,  FPS does not know the extent to which some customers are subsidizing  the activities received by other customers. The level—and therefore the  cost—of basic security services FPS provides at each of the 9,000 GSA  facilities for which it is responsible varies depending on the facility’s  security risk level and its proximity to FPS. FPS categorizes buildings in  security levels based on its assessment of the building’s risk and size—but  the basic security fee rate is the same for all facilities even though higher- risk facilities receive more services and cost more to protect. For example,  level I facilities typically face less risk because they are generally small  storefront-type operations or have limited public contact, such as a Social  Security office. A level IV facility may have significant public contact and  may contain high-risk law enforcement and intelligence agencies and  highly sensitive government records. In some cases, there are known cost  variations to providing security services. For example, ISC standards  require facility security assessments—an activity associated with the basic  security fee—every 5 years for lower risk level, and 3 years for higher risk  level facilities. We have previously reported that in some situations FPS  staff are stationed hundreds of miles from buildings under its  responsibility, with many of these buildings rarely receiving services from  FPS staff and relying mostly on local law enforcement agencies for law  enforcement services. However, these customer agencies are charged the  same basic security fee rates as are buildings in major metropolitan areas  where numerous FPS officers and inspectors are stationed and are  available to provide security services. We have previously reported that a  customer in a federally owned building in a remote location did not know  that FPS provided 24-hour alarm-monitoring services, because FPS had  not visited the office in over 2 years.
In our design guide we noted that there are trade-offs involved in deciding  between systemwide and user-specific fees. Effectively setting a fee rate  requires determining how much a program costs and determining how to  assign program costs among different users. Since systemwide fees—or  fees set at an average rate—may be higher or lower than the actual costs  of providing services to those users, they can lead to cross-subsidizations  among users. User-specific fees—or fees based on the cost of providing  the program or service from which that user benefits—ensure that each  user pays for the cost of services actually used. However, there are trade- offs between user-specific and systemwide fees. We have previously  reported that systemwide fees may promote a policy goal such as helping  to support a national system, but user-specific fees may be more desirable  if the fee is seen as a way to support individual entities or locations or if  there is wide variation in the cost of services among users.
FPS officials said the basic security fee and administrative fees were  designed to spread costs among agencies in two ways. First, FPS officials  said their mission—to ensure safety at GSA-controlled federal facilities—is  a national policy goal and therefore the basic security costs are intended  to be shared evenly among the facilities. FPS officials compare the basic  security fee to a local property tax paid to maintain police services.  Second, FPS officials said the building-specific and SWA administrative  fees are designed to reflect the increased risk inherent to facilities  requiring or requesting additional countermeasures and therefore the  administrative fees should subsidize the aggregate cost of basic security  services. As noted, facilities implementing recommended or voluntary  security countermeasures pay the basic security fee, the cost of the  contractor-provided countermeasures, and a 6 percent building-specific or  SWA administrative fee. According to the ISC standards security level III  and IV facilities have nearly all of the countermeasures and therefore also  pay nearly all of FPS’s building-specific and SWA fees.
FPS officials told us their intent is for the administrative fees paid by  facilities with recommended or agency-requested countermeasures to help  fund the basic security costs at higher-risk facilities. FPS officials said they  do this because having security countermeasures reflects an increased  security risk at these facilities, and as a result, these facilities are also  likely to consume more of FPS’s basic security services. In other words,  FPS tries to collect more in building-specific and SWA administrative fees  from agencies with countermeasures than it costs to manage the contracts  for the countermeasures and uses the additional collections for basic  security services at higher-risk facilities. However, because FPS does not  know what it costs to administer these contracts, it does not know  whether the administrative fees are providing the intended subsidy or are  supporting basic security costs as intended. While charging some  beneficiaries more or less than the actual service costs may help achieve a  particular public policy goal, reliably accounting for the costs and benefits  of such a provision is important to ensure that these provisions are  achieving the intended results.
section_title: Alternate Fee Structures Could Address Concerns About Alignment and Cross-Subsidizations
paragraphs: Other security fee structures may address the current equity and cross- subsidizations and improve transparency to customer agencies. However,  without a full fee review it is difficult to understand fully the relative trade- offs in any particular proposal. In addition, revising the funding  mechanisms alone would not address the variations in service levels  reported by FPS’s customer agencies nor the overall level of services FPS  provides at GSA-controlled facilities. Alternatives discussed in past GAO  work and prior legislative proposals—which have not been acted on to  date—regarding FPS’s current security fee design were (1) modifying the  current fully fee-funded structure to better align fees with facility risk  levels and (2) funding FPS through a combination of fees and direct  appropriations.
Modified Fee Structures. Changing the design of the basic fee to reduce  cross-subsidizations could address equity concerns and increase  transparency and acceptance among customer agencies. Two alternative  fee structures discussed were:    Charging customer agencies for the basic security activities based on a  tiered fee system, where facilities in each tier pay fee rates based on  FPS’s average service costs for facilities within the respective tiers.
Charging customer agencies using a two-part basic fee consisting of  (1) a flat rate to cover fixed costs and (2) a risk-level-based fee to  cover average marginal costs associated with facility security risk  level.
Both alternatives aim to link more closely each customer’s fee rates to  average costs associated with their building risk level. We have previously  reported that setting fees in this way—that is, at a rate equal to the  marginal cost of providing services—maximizes economic efficiency by  ensuring resources are allocated to their highest use. However, in part  because it is often difficult to measure marginal cost, fee rates are  sometimes set based on average costs. When the marginal costs of  providing services are measurable but are low compared to the fixed costs  of the program, setting the fee at marginal cost will lead to collections less  than total costs. If a review of FPS’s costs comes to this conclusion, a two- part fee, where all agencies would pay a portion of fixed costs, including  systemwide capital investments, plus an amount that reflected the average  service costs by facility security level, could make sense.
The amount by which an agency’s security costs would change under this  option would depend on the security levels of the buildings in which the  agency is located. Agencies that are more frequently located in facilities  with higher security levels are likely to see their basic security fee rate  increase, while agencies more frequently located in lower security risk  level facilities may see their basic security fee decrease, stay the same, or  increase at a slower rate.
In both alternatives above, revising the basic security fee to reflect the  service cost variation among customer agencies would better align the fee  with the costs of the services received. This would help address concerns  about the fee charged considering the disparity in services that agencies  receive. However, the administrative cost of identifying user-specific costs  may outweigh the benefits. We have previously reported that if a program  has relatively few categories of users and the cost of providing the service  to those groups differs significantly, then user-specific fees might be both  beneficial and feasible. Conversely, if there are numerous different  categories of users or there is a small cost variation among them, the  efficiency gains of a user-specific fee may be overwhelmed by the added  costs of administering a more complicated fee structure. Without a fee  review, it is unclear which type of fee structure is most appropriate for  FPS.
It is important to consider the administrative and collection costs both to  the provider and to the customers when designing a fee. From the  customer agency perspective, a varied fee rate system may complicate  budgeting, space planning, and billing reconciliation. From FPS’s  perspective, a varied fee system would require detailed analysis of activity  costs and incorporating a facility security level component to their billing  system.
Combination of Fees and Direct Appropriations. Proposals to fund  FPS through a combination of fees and direct appropriations could also  reduce cross-subsidizations and increase acceptance among customer  agencies, but it would not address the disparity in the service levels among  facilities that are charged similar fees. Proposals to fund FPS through  direct appropriations would:    Fund FPS’s basic security activities and the administrative costs of  implementing building-specific and SWA countermeasures via a direct  appropriation to FPS and charge agencies only for cost of the actual  countermeasures.
FPS officials said a funding model that includes a direct appropriation to  FPS should provide appropriated funds for all of the agency’s fixed costs  since it is difficult for FPS to predict agency demand for voluntary services  such as additional countermeasures. Because the majority of FPS’s costs  are salary related and must be paid whether or not agencies “purchase”  voluntary services such as SWAs or building-specific security  countermeasures in the amounts for which FPS planned, FPS officials said  funding all of FPS’s FTEs with appropriations would reduce concerns  about revenue adequacy. Receiving an appropriation for their fixed costs  would not eliminate the need for FPS to develop an informed budget  request based on estimated agency needs. Although security-related  missions, like FPS’s, may be less vulnerable to budget cuts, it is important  to note that discretionary appropriation decisions are generally made  annually and should not be assumed to remain at a constant funding  level—especially in the current fiscal environment.
Any model that shifts some FPS funding from fees to direct appropriations  must be viewed through the lens of the overall federal budget. If Congress  desires to keep the total federal investment in facility security at current  levels, a direct appropriation to FPS would mean either (1) an increase in  the homeland security appropriations subcommittee budget allocation and  a corresponding decrease in the allocations for the appropriations  subcommittees responsible for FPS’s customer agencies or (2) shifting  priorities within the homeland security committee’s current budget  allocation and providing resources to FPS in lieu of other homeland  security activities.
Funding FPS with direct appropriations may result in a decline in  interagency payment processing costs. FPS officials said they pay the  ICE’s Burlington Finance Center about $3.1 million annually to support  FPS’s billing process. Officials said the finance center does about 80  percent of the actual processing for FPS transactions. A direct  appropriation to FPS would mean fewer transactions between FPS and  customer agencies since only facilities with recommended or requested  countermeasures would make payments to FPS. Officials said that if it  received a direct appropriation, FPS’s overall budget could be reduced by  the amount it currently spends on the administrative costs associated with  collecting fees.
Funding all or some of FPS’s activities with a direct appropriation may  also increase demand for FPS services. That is, when beneficiaries do not  pay for the cost of services they may seek more of the service than is  economically efficient. If FPS were to receive direct appropriations  based on its current costs, the amount would not cover security costs for  agencies that currently procure security services external from FPS if they  decide to request them from FPS. Based on our updated work, any  analysis meant to inform decisions about the type of funding model that  would best meet FPS’s needs would be incomplete without discussing the  types of funding models discussed in this report—specifically, both (1)  alternative fee structures and (2) a combination of fees and  appropriations.
In 2008 we recommended that FPS evaluate whether its current use of a  fee-based system or an alternative funding mechanism is the most  appropriate manner to fund the agency, and although DHS concurred with  the recommendation, FPS has not begun such an analysis. When we  asked whether FPS had considered the benefits and challenges of other  fee designs, FPS officials said that there were probably other fee designs  that could recover all of FPS’s costs. However, they said that they find the  current fee structure to be simple, straightforward, and efficient, and they  are not convinced that they can improve equity among payers within the  current structure. FPS officials said that having specific options for them  to consider—such as the ones discussed above—would help them  complete this type of analysis.
section_title: Poor Communication with Customer Agencies About the Fees and a Lack of Timely Fee Rate Information Leads to Billing and Budgeting Challenges for Both FPS and Customer Agencies
paragraphs: FPS and customer agencies identified two key issues that lead to billing  and budgeting challenges. First, FPS lacks points of contact in its  customer agencies for budgeting and billing purposes, which leads to  difficulties and delays in resolving billing discrepancies. Second, FPS and  customer agencies described a lack of timely, reliable information  available for the budget formulation process. This makes it difficult for  agencies to, for example, timely implement security countermeasures  meant to address current and emerging security threats. Although there  are no obvious solutions for many of the budget timing disconnects  described below, alternative budget account structures could help mitigate  these challenges without compromising accountability.
subsections: section_title: FPS Lacks Points of Contact for Budget and Billing Purposes
paragraphs: FPS communicates with customer agencies regarding its security fees  through annual fee rate letters, regional conferences, and Facility Security  Committee meetings; nevertheless, FPS reported difficulties determining  the correct customer agency points of contact for the fees. Not all  customer agencies we spoke with budget and pay for their FPS security  fees centrally. Rather, headquarters and regional offices have shared  responsibility for managing FPS security services and fees, making it  difficult for FPS officials to find the appropriate officials with whom to  discuss security charges and billing issues. FPS officials in one region said  they did not have a complete list of all appropriate customer agency  contacts that budget for FPS security fees or pay FPS security bills, who  may work in different agency offices. In a different region FPS officials  said they have trouble identifying their target audience and stakeholders at  customer agencies. Because officials in security offices and in budget or  finance offices have responsibilities regarding FPS services and fees, the  officials involved in determining which services the agency purchases  from FPS may be different than the officials that budget for FPS security  fees or pay FPS security bills. Determining the correct points of contacts  can be so confusing that even customer agency officials themselves  reported difficulties in getting information about FPS services and fees  from their own agencies.
The confusion goes both ways, as customer agency officials at times also  find it difficult to identify appropriate points of contact in FPS, even  though FPS includes a point of contact on its security bills. For example,  CDC officials said that communicating with FPS about billing issues is a  constant challenge because CDC handles billing in CDC headquarters but  FPS determines customer agencies’ security costs and coordinates with  customer agency officials at the regional level. FPS has a different point of  contact for each of its 11 regions and sometimes multiple contacts within a  region. CDC officials said that FPS points of contact vary by facility so  they often do not know whom to contact at FPS with billing questions.  GSA officials said that the FPS staff with whom they work are not always  responsive to problems, which GSA attributed to large workloads.
Some customer agency officials are confused about the roles of GSA and  FPS regarding security fees. GSA officials said that some customer  agencies continue to contact GSA with questions about FPS security bills  even though FPS transferred out of GSA in 2003. FPS officials in one  region also said that customer agencies confuse the roles of FPS and GSA  and they sometimes receive questions from customer agencies on GSA  rent charges and services. FPS officials in another region also said bills  can be confusing to customer agency officials because FPS basic and  building-specific security bills are displayed with GSA rent bills on GSA’s  Rent on the Web system. Complicating matters, FPS officials explained  that FPS refers agencies to GSA for questions on square footage data  because FPS bills for the basic security fee based on square footage from  GSA’s STAR inventory system. FPS and GSA officials said their agencies  need to better educate customers on the different roles of FPS and GSA in  the billing process.
Effectively communicating with stakeholders involves sharing relevant  analysis and information as well as providing opportunities for  stakeholder input; agencies that do not communicate effectively with  stakeholders miss opportunities for meaningful feedback that could affect  the outcome of changes in fees and program implementation. We found  that the quality and quantity of FPS’s communication with stakeholders  varies by region. Officials in some FPS regions said they typically wait for  client agencies to ask questions about the fees rather than taking the  initiative to push information out to them. In other regions there is a  greater focus on outreach efforts. For example, in 2009 and 2010 FPS- National Capital Region (NCR) invited their security points of contact to  an annual security summit to discuss a range of issues, including fees.  Although not all customer agency budget and management officials were  aware of the summits, those that did attend generally found it helpful. For  example, SSA officials who work with FPS security fees said several of  their officials attended the NCR security summit last year and found it  useful. They said FPS explained its procedures, and attendees were able to  ask questions. At FEMA in the NCR, a security official participated in the  summit for 2 years and found it to be beneficial. However, FEMA budget  officials who manage security fees were not informed by either FEMA’s  security officials or by FPS of the summit.
Similarly, although FPS provides an annual letter to customer agency  heads and CFOs regarding fee rates for the upcoming fiscal year, in some  customer agencies the rates were not communicated to the agency  officials who are responsible for budgeting. While customer agencies are  responsible for communicating FPS fee rates within their agency, when all  the necessary officials do not receive information on FPS security fees, it  creates implementation challenges for both FPS and the customer  agencies. We have previously reported that agencies providing services  can segment their customers into groups and provide targeted  communication or services to better meet customer needs. When FPS’s  communication efforts do not reach all of the customer agency officials  working with FPS security fees, important information on rates and  procedures are missed, contributing to operational challenges, such as  overbilling issues, discussed below. FPS has taken steps to improve  communication with customer agencies at the regional level. FPS officials  in two regions said FPS has made efforts to educate all FPS employees on  the security fee rates and the services they cover, so FPS can address  customer agency questions at all levels of the organization and provide  accurate information to its customers. They said these efforts have  reduced the number of questions on their fees from customer agencies.
In some cases, confusion regarding FPS contacts can lead to significant  challenges in resolving billing issues. For example, in 2008 FDA officials  said FPS overbilled FDA $2.1 million because FPS billed for the same  service in both an SWA and the building-specific charge. FDA officials said  it was difficult to locate the appropriate point of contact and they had to  communicate with FPS multiple times over 6 months to resolve the issue.  In another example, HHS headquarters officials discovered a $100,000  error in their bill for one facility. FPS had billed HHS as if it was the sole  tenant in the building because another tenant had vacated. HHS officials  said it took several months to resolve the problem because they found it  difficult to identify someone at FPS who understood the problem and  could issue them a credit. When we spoke with FPS officials about these  issues they told us that it can take 3 to 6 months to credit customer  agencies when they are overbilled because FPS performs an audit of the  account that covers several years and FPS and the customer agency need  to agree on the amount to be credited to the agency. FPS officials also said  they process refunds once a month. Unresolved billing issues lead to  customer agency funds being tied up and not available for other activities.  In times of fiscal constraint this can be especially challenging. Unresolved  billing issues also lead to wasted customer agency resources in the form of  the time spent to resolve the issue and create bad will. FPS has procedures  in place to prevent under- or overbilling customer agencies. FPS NCR  officials said FPS performs a reconciliation process each month to check  for billing errors as well as a monthly post-by-post report card that reports  which contract guard posts are paid by building-specific charges and  which are tenant-specific charges.
section_title: FPS Does Not Have a Practical Way to Provide Rate Information to Customers in Time to Inform Agency Budget Formulation
paragraphs: FPS does not have a process to calculate security fee rates prior to  submitting its budget to OMB and therefore does not have timely  information to provide to customer agencies to inform their budget  formulation process. As a result, customer agencies’ annual budget  submissions to OMB include security funding requests that are not based  on accurate security cost estimates. OMB Circular No. A-11 states that  where possible agencies should include the full cost of a program and  cover all programs and activities in their budget submissions. In the past,  FPS has provided estimates of security fee rates to customer agencies  approximately 9 months after agency budget requests are submitted. For  example, in the fiscal year 2011 budget cycle, agencies submitted their  budget requests to OMB in September 2009 and FPS provided fee rates in  July 2010 (after the budget had gone to Congress). This is because FPS is  on the same budget cycle as its customer agencies.
FPS officials said FPS is working to improve its process to notify  customers of fee rates and security costs. In his fiscal year 2012 budget the  President proposed increasing the basic security fee to $0.74 per square  foot. This is the first time FPS has provided its fee rate for the upcoming  fiscal year in its congressional justification of estimates. FPS officials said  they included the proposed fee rate to allow as much time as possible for  agencies to plan for resources for security fees. While FPS did provide  more notice about a potential fee rate change than in the past, federal  agencies all submit their fiscal year 2012 budget requests to OMB at the  same time. The proposed fee increase is available to Congress for the  appropriations cycle, so Congress does have the opportunity to consider  FPS’s proposed fee rate increase at the same time that it considers  appropriations for FPS’s customer agencies.
section_title: FPS Cannot Finalize Its Fee Rates Until Its Appropriation Is Enacted
paragraphs: While FPS can indicate a fee increase in its budget documents, it cannot  finalize its fee rates for a given fiscal year until DHS’s appropriation is  enacted. This is because FTEs are the largest driver of FPS’s cost and the  DHS Appropriations Act specifies the FTE level at which FPS must  operate. According to FPS officials, if requirements in the DHS  Appropriations Act require more resources than FPS estimated, FPS may  need to increase its fee rates midyear. For example, in March 2008— halfway through the fiscal year—FPS increased its basic security fee to  $0.62 to fund increased FTE levels in the fiscal year 2008 DHS  Appropriations Act.
Mandated changes to FPS’s FTE levels also challenge FPS’s ability to  provide accurate fee rate information to its customer agencies in a timely  manner. Officials said FPS may have to increase its fee rates in the middle  of fiscal year 2011 because the proposed Senate bill for the fiscal year 2011  Homeland Security Appropriation included a requirement for FPS to  increase FPS’s minimum FTEs to 1,348, or 148 FTEs greater than the  current required level on which FPS’s budget estimates were based.  However, under FPS’s final fiscal year 2011 appropriation, FTE levels were  set at 1,250, which is 50 more than the level on which FPS’s budget  estimates were based.  Such changes are not unusual. For example, during  the 111th Congress (2009-2010) two other bills were introduced that would  have required FPS to increase its FTE level. The proposed Federal  Protective Service Improvement and Accountability Act of 2010 included  a provision to increase FPS’s FTEs to 1,350, while the proposed  Supporting Employee Competency and Updating Readiness  Enhancements (SECURE) for Facilities Act of 2010 included a provision  to increase FPS’s FTEs by 350 over a 4-year period.
Unexpected changes in FPS security fees require customer agencies to  make unplanned trade-offs during the fiscal year. Because customer  agencies do not have FPS security fee estimates in time for budget  formulation, they create their own “rules of thumb,” which vary by agency.  Officials from one agency with whom we met said it budgets for a 2-3  percent increase in security fees, while officials from a different agency  said they budget for a 7 percent increase. In the past, customer agency  rules of thumb might not have provided enough room to cover fee  increases in those fiscal years with large increases in fee rates. Since 2004,  the increase in the basic security fee rate has varied from 0 to almost 60  percent (see table 4). We have previously found that changes in FPS’s  security fees—specifically notifications about rate increases late in the  federal budget cycle—have adverse implications for customer agencies;  our current work confirms this is still an issue. While fee rate increases are  relatively small compared to an agency’s overall appropriation, they can  significantly affect an agency’s security budget. When faced with  unanticipated fee increases, customer agencies described unplanned  trade-offs they make. FEMA officials said they do not cut back on security  services at any of their facilities. They ask the budget office to allocate  more funds to their area; if they are not successful they decrease security  funding in other areas, such as employee background investigations or  fingerprinting.
section_title: Customer Agencies Do Not Have Timely Information to Inform Budgeting for Current and Emerging Security Threats
paragraphs: Customer agencies face challenges in funding recommended building- specific countermeasures; that is, measures that are meant to address  current and emerging security threats. FPS officials said that the  recommendations in its facility security assessments are made in response  to security risks present at the time the assessment is made. These costs,  FPS officials told us, can change quickly and unexpectedly depending on  external risks in the environment. Given the budget cycle, however, there  is an inherent mismatch in timing. The budget formulation process for any  given fiscal year begins 2 years prior to the start of that fiscal year. As a  result, to respond timely to current threats, customer agencies must  reallocate funds to countermeasures for which they did not and could not  plan. For example, officials from a facility security committee in Atlanta  said they did not implement a FPS recommendation for security bollards  around the perimeter of the building because of budget timing issues. This  timing issue is not new. In 2009 we reported that the timing of the  assessment process may be inconsistent with customer agencies’ budget  cycles. Similarly, in 2008 we reported on instances in which  recommended security countermeasures were not implemented at some of  the buildings we visited because facility security committee members  were unable to get a funding commitment from their agencies, among  other reasons.
section_title: Alternative Account Structures Could Provide Needed Flexibility to Help Mitigate Budgeting Challenges for FPS and Customer Agencies
paragraphs: There is no obvious solution for the federal budget timing disconnects  described above, but in our prior work reviewing fee-funded agencies, we  have identified various budget account structures that could help mitigate  budgeting and timing challenges for FPS and customer agencies without  compromising accountability for federal funds.
A no-year reimbursable appropriation. If FPS were to receive a no- year reimbursable appropriation account, FPS would receive a direct  annual appropriation based on its estimated total collections that FPS  would later reimburse with its fee collections. If Congress increased  FPS’s FTEs in a given current fiscal year, thereby increasing costs, FPS  would be able to draw on its direct appropriation to cover the resulting  cost increase. It could then inform customer agencies of a fee rate  increase in time for them to build the additional cost into their budget  requests for the next fiscal year. FPS would then reimburse its  appropriation account with its future fee collections from its customer  agencies. The Customs and Border Protection (CBP) uses a  reimbursable account to mitigate funding issues caused by the timing  of certain fee collections. To help manage cash flow issues caused by  quarterly, rather than more frequent, fee collections, CBP initially uses  appropriations to “front” the cost of the agriculture quarantine and  immigration inspections and then reimburses its appropriation account  from the immigration and agriculture user fees collected throughout  the year.,     An intragovernmental revolving fund account. An  intragovernmental revolving fund is an appropriation account  authorized to be credited with collections, including both  reimbursements and advances, from other federal agencies’ accounts  to finance a cycle of businesslike operations. For example, GSA’s real  property activities are financed through the FBF—a revolving fund  that includes rent federal agencies pay for GSA space. With respect to  structural improvements, GSA can provide agencies with the option to  delay payments on amortized costs to allow agencies time to build the  costs into their budgets by fronting the costs from its FBF. A similar  approach could provide FPS with greater ability to assist agencies with  obtaining building-specific countermeasures.
FPS already enjoys access to its fee collections without fiscal year  limitation so a no-year reimbursable account or a revolving fund would not  create accountability concerns in that respect. These types of accounts  would, however, provide FPS with the ability to “front” a fee rate increase  and reduce the pressure of unanticipated fee rate increases on its  customers. In addition, the transparency of any fee increase resulting from  changes would facilitate congressional oversight both of FPS and of the  cost of security at various agencies and buildings.
FPS might also benefit from considering ways other agencies have found  to provide cost information to customer agencies in a more timely manner:    An approved fee-setting methodology. An approved methodology  by which to set fees could allow FPS to set its fee rates in advance of  receiving requirements in its appropriation and therefore better align  with the budget formulation needs of its federal customers. For  example, GSA officials told us that having an approved methodology to  calculate rent estimates allows GSA to provide them to customer  agencies in time to inform budget formulation. FPS officials said that  FPS would need new statutory authority to take this approach.
Estimates of future security costs. FPS’s customer agencies do not  receive timely estimates of future costs, impairing agencies’ ability to  budget for those costs. FPS has data that could help FPS’s customer  agencies with this issue. For example, if customer agencies received  high-level estimates for countermeasure costs—which could be based  on known costs associated with recommended building-specific  countermeasures—they could better develop budget estimates for  unknown future costs. Such information could also help inform  congressional debate about budget priorities and trade-offs. For  example, the Federal Emergency Management Administration (FEMA)  revised its methodology for estimating the cost of disaster response  after we reported that (1) when FEMA excludes costs from  catastrophic disasters in annual funding estimates it prevents decision  makers from receiving a comprehensive view of overall funding claims  and trade-offs, and (2) that especially given the tight resource  constraints facing our nation, annual budget requests for disaster relief  may be improved by including known costs from previous disasters  and some costs associated with catastrophic disasters.
section_title: Conclusions
paragraphs: FPS is responsible for protecting some of the nation’s most critical  facilities and the people who work in and access these locations every day.  Analyzing and understanding the costs of providing these important  security services, including the costs of systemwide capital investments,  are important so that FPS, customer agencies, and Congress have the best  possible information available to them when designing, reviewing, and  overseeing FPS’s fees and operations. Regular, timely, and substantive fee  reviews are critical for any agency, but especially for agencies—like FPS— that are mostly or solely fee funded in order to ensure that fee collections  and operating costs remain aligned. FPS has broad authority to design its  security fees, but the current fee structure has consistently resulted in  total collection amounts less than agency costs, is not well understood or  accepted by customer agencies, and continues to be a topic of  congressional interest and inquiry. In 2008 we recommended FPS evaluate  whether its use of a fee-based system or an alternative funding mechanism  is the most appropriate manner to fund the agency. Although FPS agreed  with this recommendation it has not begun such an analysis. Based on our  updated work, we believe that such an analysis can benefit from the  examination of both (1) alternative fee structures and (2) a combination of  fees and appropriations. Considering the various options in this report—a  redesigned fee structure and funding FPS through a combination of fees  and direct appropriations—can help guide FPS’s analysis and Congress’s  consideration of the trade-offs among a variety of funding mechanisms.
The success of any fee design depends on complete, reliable, timely  information on which to base decisions and on informed trade-offs that  support program goals. Whenever the formulas for assigning costs to  customer agencies change there will be winners and losers. Whether and  how to change FPS’s funding structure—either to develop an alternate fee  structure or a model that includes some amount of direct appropriations— is largely a policy decision. However, without a better understanding of  the costs of FPS’s services, changes to FPS’s funding model are unlikely to  address FPS’s chronic funding gaps or the equity concerns and skepticism  of FPS’s stakeholders.
Further, our analysis shows that in implementing the fee program on a  day-to-day basis, FPS and customer agencies encounter challenges that are  handled by budget and billing officials as well as security officials. We  have previously recommended that FPS collect and maintain a list of  facility designated points of contact for security issues. Unless FPS also  creates a complete and accurate list of security fee budget and billing  contacts in its customer agencies, FPS and its customers will continue to  face budget and billing-related challenges, and the opportunity costs  associated with delays in returning appropriated funds to customer  agencies will persist.
Ideally, security decisions at federal facilities are based on real-time  information about current and emerging threats. However, federal  agencies budget for planned needs—including security needs—about 2  years before the start of each fiscal year. While there is no easy solution  for the mismatch in timing between FPS security costs and the federal  budget formulation process, options such as different account structures  and improved fee estimating procedures could help mitigate these  challenges without compromising accountability over federal funds.
section_title: Recommendations for Executive Action
paragraphs: The Secretary of Homeland Security should direct the Director of the  Federal Protective Service to take the following six actions:    conduct regular reviews of FPS’s security fees and use this information to  inform its fee setting;  include systemwide capital investments when estimating costs and include  them when setting basic security fee rates;    make information on the estimated costs of key activities as well as the  basis for these cost estimates readily available to affected parties to  improve the transparency and credibility—and hence the acceptance by  stakeholders—of the process for setting and using the fees;  in implementing our previous recommendation to evaluate the current fee  structure and determine a method for incorporating facility risk, assess  and report to Congress on:  the current and alternative fee structures, to include the options and  trade-offs discussed in this report, and if appropriate,    options to fund FPS through a combination of fees and direct  appropriations, to include the options and trade-offs discussed in  this report;    evaluate and report to Congress on options to mitigate challenges agencies  face in budgeting for FPS security costs, such as:    an alternative account structure for FPS to increase flexibility,  while retaining or improving accountability and transparency or    an approved process for estimating fee rates; and    work with customer agencies to collect and maintain an accurate list of  points of contact of customer agency officials responsible for budget and  billing activities as well as facility designated points of contact as we  previously recommended.
section_title: Agency Comments & Our Evaluation
paragraphs: We provided a draft of this report to the Secretary of Homeland Security  and the Administrator of the General Services Administration for review.  The General Services Administration had no comments on the report. DHS  provided written comments that are reprinted in appendix II. We also  provided portions of the report to the four FPS customer agencies with  which we met.
In its written comments, the Director of DHS’s GAO/Office Inspector  General Liaison Office concurred with our recommendations and provided  information about steps DHS is taking to address each recommendation.  In responding to our recommendation that the Federal Protective Service  report to Congress on the current and alternative fee structures, to include  the options and trade-offs discussed in this report, DHS said that it has  reviewed the current and alterative methods to calculate basic security  fees in addition to reviewing alternative funding structures and will use  that analysis as a baseline in developing its alternative analysis.  Throughout the course of our audit work we asked FPS to provide us with  any reviews of current and alternative funding structures it had conducted;  FPS did not provide any evidence of having conducted this type of  analysis. As noted in our report, FPS officials told us that it has not begun  such an analysis. When we asked whether FPS had considered the benefits  and challenges of other fee designs, FPS officials said that having specific  options for them to consider—such as the ones discussed in this report— would help them with this type of analysis.
We are sending copies of this report to the Secretary of the Department of  Homeland Security, the Directors of the Federal Protective Service and the  Office of Management and Budget, and the Administrator of the General  Services Administration. We are also sending copies to appropriate  congressional committees, and to the Chairmen and Ranking Members of  other Senate and House committees and subcommittees that have  appropriation, authorization, and oversight responsibilities for FPS. The  report also is available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff members have any questions or wish to discuss the  material in this report further, please contact me at (202) 512-6806 or  irvings@gao.gov. Contact points for our Offices of Congressional Relations  and Public Affairs may be found on the last page of this report. GAO staff  making key contributions to this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to (1) analyze the Federal Protective  Service’s (FPS) current fee design and proposed alternatives, and (2)  examine how FPS’s security fees challenge FPS and customer agency  budget formulation and execution. To meet these objectives, we reviewed  legislation and guidance, agency documents, and literature on user fee  design and implementation characteristics. We also interviewed officials  responsible for managing user fees at FPS, General Services  Administration (GSA), and selected customer agencies at their  headquarters and in several regional locations.
We selected four of FPS’s customer agencies and four regional locations to  illustrate how FPS’s security charges benefit and challenge customer  agencies. We selected customer agencies with a large representation in  GSA’s facility inventory (measured by total rental square footage and total  annual rent) and based on prior GAO work on FPS. From these agencies  we selected: the Department of Health and Human Services, Internal  Revenue Service, Social Security Administration, and the Department of  Homeland Security. We selected the regional locations based on (1) a  range of region size (number of FPS-protected buildings), (2) geographic  diversity, and (3) stakeholder input on successes and challenges faced by  regional management. As a result, we selected the following FPS regions  for site visits: National Capital Region (Washington, D.C.), Southeast  Region (Atlanta, Ga.), Rocky Mountain Region (Denver, Colo.), and  Northwest/Arctic Region (Federal Way/Seattle, Wash.). We interviewed  FPS, GSA, and customer agency officials who are familiar with FPS  security fees at both headquarters and in our selected regions.
We conducted this performance audit from May 2009 through April 2011,  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.
section_title: Appendix II: Comments from the Department of Homeland Security
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the individual above, Jackie Nowicki, Assistant Director;  Chelsa Gurkin; Lauren Gilbertson; Barbara Lancaster; Felicia Lopez; Julie  Matta; and Jenny Shinn made key contributions to this report. Donna  Miller provided the report’s graphics.
section_title: Related GAO Products
paragraphs: Federal User Fees: Additional Analyses and Timely Reviews Could  Improve Immigration and Naturalization User Fee Design and USCIS  Operations. GAO-09-180. Washington, D.C.: January 23, 2009.
Federal User Fees: A Design Guide. GAO-08-386SP. Washington, D.C.: May  28, 2008.
Federal User Fees: Substantive Reviews Needed to Align Port-Related  Fees with the Programs They Support. GAO-08-321. Washington, D.C.:  February 22, 2008.
Federal User Fees: Key Aspects of International Air Passenger  Inspection Fees Should Be Addressed Regardless of Whether Fees Are  Consolidated. GAO-07-1131. Washington, D.C.: September 24, 2007.
Budget Issues: Electronic Processing of Non-IRS Collections Has  Increased but Better Understanding of Cost Structure Is Needed.  GAO-10-11. Washington, D.C.: November 20, 2009.
Homeland Security: Addressing Weaknesses with Facility Security  Committees Would Enhance Protection of Federal Facilities. GAO-10-901.  Washington, D.C.: August 5, 2010.
Homeland Security: Preliminary Observations on the Federal Protective  Service’s Workforce Analysis and Planning Efforts. GAO-10-802R.  Washington, D.C.: June 14, 2010.
Homeland Security: Federal Protective Service’s Contract Guard  Program Requires More Oversight and Reassessment of Use of Contract  Guards. GAO-10-341. Washington, D.C.: April 13, 2010.
Homeland Security: Greater Attention to Key Practices Would Improve  the Federal Protective Service’s Approach to Facility Protection.  GAO-10-142. Washington, D.C.: October 23, 2009.
Homeland Security: Federal Protective Service Should Improve Human  Capital Planning and Better Communicate with Tenants. GAO-09-749.  Washington, D.C.: July 30, 2009.
Homeland Security: The Federal Protective Service Faces Several  Challenges That Hamper Its Ability to Protect Federal Facilities.  GAO-08-683. Washington, D.C. June 11, 2008.
Homeland Security: Transformation Strategy Needed to Address  Challenges Facing the Federal Protective Service. GAO-04-537.  Washington, D.C.: July 14, 2004.