DHS Management: Enhanced Oversight Could Better Ensure Programs Receiving Fees and Other Collections Use Funds Efficiently
Published: 2016-07-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The uncertain budgetary environment highlights the need for DHS to effectively manage and oversee billions of dollars in fees and other collections from users of homeland security program services. Each DHS component is responsible for administering, managing, and reviewing their respective programs to ensure that, consistent with law and policy, rates charged to users of program services are set to collect amounts sufficient to recover program costs and ensure efficient operations, but not in excess of operational needs.
GAO was asked to review DHS's management and oversight of these programs. This report examines the extent to which (1) DHS components receive fees and other collections to recover program costs and manage any differences, as appropriate; (2) DHS components have processes in place to manage unobligated balances; and (3) DHS ensures components review their programs and monitors component action to address any management and operational deficiencies.
GAO analyzed DHS financial information for 38 programs receiving fees and other collections in fiscal year 2014, examined DHS fee reviews and study results, and interviewed agency officials.
section_title: What GAO Found
paragraphs: The Department of Homeland Security (DHS) received $15 billion in fees and other collections across 38 programs in fiscal year 2014 that help fund homeland security functions, such as the screening and inspection of persons and goods entering the United States. Our analysis of DHS collections and cost data showed that 14 of the 38 programs receiving fees and other collections in fiscal year 2014 collected amounts that fully covered identified program costs. Of the remaining 24 programs, collections for 20 programs partially covered identified program costs, and DHS did not provide cost data, or we determined such data may not be reliable, for 4 programs. DHS components have taken action to address the estimated $6 billion difference between collections and identified program costs, with 6 programs comprising about 85 percent of the difference. However, components did not document processes for managing differences and making decisions on how to address the estimated $726 million difference across the 10 remaining programs. Such documentation of processes and decisions could help improve transparency and accountability over cost recovery efforts.
DHS components have processes in place to manage unobligated balances carried over across fiscal years for 25 programs, with such balances totaling $2.6 billion at fiscal year-end 2014. These processes generally focused on ensuring continuity of program operations rather than efficiently using funds. For example, while components established targets for minimum balances for 21 of these 25 programs, none of the components established processes and related maximum targets to manage excessive unobligated carryover balances. Establishing such management processes and targets for minimum and maximum balances would enable components to show that management actions will be sufficient and appropriate to ensure the efficient use of funds—such as the Immigration Examinations Fee Account, which had an approximately $983 million unobligated balance as of fiscal year end 2014, and the User Fee Facility program account for small airports which has an unobligated balance of $14 million that has exceeded 100 percent of total operating costs each year from fiscal year 2010 through fiscal year 2014.
DHS does not ensure that all components review their programs or monitor component actions to address management and operational deficiencies identified in those reviews. GAO found that three of the seven DHS components that have fee or other collection programs did not conduct such reviews for 6 of their programs, and that components had not taken recommended actions to address 9 of 20 deficiencies identified through program reviews as of fiscal year-end 2014. Further, DHS did not report the extent to which components are conducting such reviews or any proposals to address identified management and operational deficiencies. DHS oversight to ensure that components complete these reviews and report the results for all programs would enable Congress and others to receive information necessary to better ensure that fee and other collection programs are operating effectively and efficiently.
section_title: What GAO Recommends
paragraphs: GAO recommends that DHS ensure components document processes for managing differences in collections and costs, establish balance targets, and conduct program reviews and address identified deficiencies. DHS concurred with the recommendations.

section_title: Letter
paragraphs: In fiscal year 2014, the Department of Homeland Security (DHS) received  fees and other collections totaling approximately $15 billion that  contributed to its approximately $60 billion in budget authority available to  execute its mission-critical activities related to preventing terrorism,  securing the nation’s borders, and enforcing and administering  immigration laws, among other things. DHS’s reliance on resources  derived from fees and other collections highlights the need for DHS to  ensure it has processes in place to comprehensively manage and  oversee its portfolio of 38 programs that derive some or all resources  from these sources.
Within DHS, each component is responsible for administering, managing,  and reviewing its portfolio of programs. The Office of the Chief Financial  Officer (OCFO) is responsible for the fiscal management, integrity, and  accountability of the department and, among other things, provides  guidance and oversight for the department’s resource management  systems to ensure that funds necessary to carry out its missions are  obtained, allocated, and expended in accordance with departmental  priorities and relevant laws and policies. As such, the OCFO is  responsible for ensuring that the DHS components administering  programs receiving fees and other collections do so in a manner  consistent with applicable statutory authorities and federal guidance. This  includes providing components with guidance for maintaining appropriate  levels of unobligated balances to ensure programs are resilient to  revenue instability and surges in program activity, and do not overcharge  program users beyond the costs of services provided. Such guidance is  intended to help ensure that balances do not fall so low as to impair the  efficient management of operations or rise too high so as to suggest fee  collections do not align with operational needs. In addition, DHS OCFO  has responsibility for ensuring components provide decision makers and  stakeholders with timely and accurate financial information in order to  inform the budget formulation and regulatory processes.
We have previously reported on DHS’s management and oversight of its  overall resources, as well as management and oversight of resources  derived from specific fees and other collections. For example, DHS  management remains on our high-risk list. We have found that while  DHS’s efforts to strengthen and integrate its management functions have  resulted in it meeting or partially meeting five of GAO’s criteria for removal  from the high-risk list, DHS continues to face challenges in ensuring  strong management practices and effective oversight in meeting its  mission needs, and concluded that progress was needed to mitigate the  risks that management weaknesses posed to mission accomplishment  and the efficient and effective use of the department’s resources. In  regard to management for programs receiving fees or other collections,  we have previously found that changes to the management of collections  can affect the efficiency, equity, and revenue adequacy of, and reduce  administrative burden on, programs. Specifically, we reported in May  2011, that the National Protection and Programs Directorate’s (NPPD)  Federal Protective Service (FPS)—an agency funded primarily by  reimbursable agreements with federal customer agencies for services— did not review its rates to develop an informed, deliberate design, and  that although expenses incurred through the protection of federal facilities  vary, FPS did not know the extent to which some facilities subsidized  others. Additionally, in March 2013 we found that, among other things,  U.S. Customs and Border Protection’s (CBP) share of fee collections from  the Agricultural Quarantine Inspection program (AQI) did not properly  align with its costs of conducting AQI inspection activities, and  recommended that the U.S. Department of Agriculture, in consultation  with CBP, ensure that fee collections are allocated consistent with each  agency’s program costs. Some recommendations addressing the  management challenges we identified have been addressed.  Understanding DHS components’ processes for aligning collections with  identified program costs, estimating and managing unobligated balances  carried over from one fiscal year to another, and DHS OCFO’s process  for overseeing its portfolio of programs receiving fees and other  collections provides valuable insights into how effectively the department  anticipates program needs and ensures the efficient use of its resources  derived from fees and other collections.
You asked us to review the approach DHS uses to manage and oversee  its portfolio of programs receiving fees and other collections to ensure  management and operational challenges are identified and resolved. This  report addresses the extent to which: (1) fees and other collections cover  program costs and DHS components have taken appropriate actions to  manage any differences between program costs and collections; (2) DHS  components have processes in place to manage unobligated carryover  balances, and have taken appropriate actions to ensure the efficient use  of such unobligated carryover balance; and (3) DHS OCFO ensures  components review programs receiving fees and other collections and  monitors component actions to address identified management and  operational deficiencies.
In conducting our work, we identified 38 programs receiving fees and  other collections by interviewing DHS OCFO officials and by reviewing  relevant budget documents for fiscal year 2014—the most recent fiscal  year with complete data at the time we started our review—and DHS  studies and reviews of programs receiving fees and other collections.  We obtained financial information from seven components administering  these 38 programs—including collections, unobligated carryover  balances, and program costs identified for each program from  components’ respective financial accounting systems. To assess the  reliability of these data, we (1) conducted interviews with agency officials  responsible for producing the data; (2) reviewed the extent to which  components have procedures and controls for ensuring that the data  maintained in their financial systems are consistent and accurate; (3)  examined the data for obvious errors and inconsistencies; (4) compared  the data with DHS’s Congressional Budget Justification for fiscal year  2015; and (5) reviewed related GAO reports, DHS biennial fee reviews,  related DHS Inspector General reports, and independent public  accounting firm reports related to these data. In addition, for program  costs identified by the components, we reviewed documentation—such  as past GAO reports and biennial reviews—describing how program  costs are identified, and interviewed knowledgeable component officials  about the limitations of these data. We identified limitations to the cost  data provided by components such as the inability to accurately estimate  and report direct and indirect cost, and note these limitations in the body  of our report. We determined the data were sufficiently reliable for the  purposes of our report to convey the general magnitude of collections,  identified program costs, and unobligated carryover balances.
To determine the extent that program collections recovered identified  costs, and DHS components haven taken appropriate actions to manage  any differences, we first compared amounts DHS collected in fiscal year  2014 to identified program costs for each of the 38 programs. We then  compared our analysis of these differences across programs to those  programs for which DHS and its components had identified a need to  increase cost recovery as documented in DHS biennial fee review  reports, annual agency budget submissions, proposals for legislative or  regulatory change, and discussion with DHS OCFO and component  officials. In addition, we reviewed and assessed available DHS  component documentation of processes and analysis guiding the  rationale for decisions and actions taken to address differences between  collections and program costs, compared to tenets of the DHS Fiscal  years 2014-2018 Strategic Plan, project management guidance, and  Standards for Internal Control in the Federal Government, which provides  guidance to agencies to achieve their mission goals and improve  transparency and accountability. We also interviewed relevant DHS  officials regarding the impacts of differences between collections and  program costs and actions taken to pursue increases in cost recovery for  certain fee and collection programs.
To determine the extent to which DHS components have processes in  place to manage unobligated carryover balances and ensure efficient use  of these funds, we first analyzed the size and composition of any  unobligated balances DHS components carried over from the end of fiscal  year 2014 to the beginning of fiscal year 2015 for each of the 38  programs. We then discussed with DHS component officials the extent  that they had processes in place to manage unobligated carryover  balances, to include targets for minimum unobligated carryover balances  necessary to ensure continuity of operations and targets for maximum  balances to ensure efficient use of resources. To determine the extent  components had managed their programs to targets for minimum  balances, we compared the amount of unobligated carryover balance  from the end of fiscal year 2013 and the amount obligated in the first  quarter of fiscal year 2014 for each program as described in DHS’s  Contingency Plan. Further, as components had not identified maximum  unobligated carryover balance targets for programs, we compared  unobligated carryover balances as of the end of fiscal year 2013 to  identified program costs for fiscal year 2014 and conducted interviews  with DHS component officials to determine the extent carryover balances  may or may not be excessive to operational needs of each program. We  compared component management of unobligated carryover balances  with criteria identified in our past work on evaluating carryover balances  and managing revenue instability (e.g., annual fluctuations in fee  collections).
To determine the extent that DHS OCFO ensures components review  programs and monitors action to address identified management and  operational deficiencies, we analyzed the extent that DHS components  reviewed programs receiving fees and other collections on a biennial  basis and made recommendations to address any identified deficiencies  consistent with the Chief Financial Officers Act of 1990 (CFO Act) and  implementing guidance in Office of Management and Budget (OMB)  Circular A-25. To determine the extent the DHS OCFO reports, as  appropriate, on the results of components’ biennial fee reviews and  resulting proposals, we also reviewed DHS OCFO’s Agency Financial  Report for Fiscal Year 2014 and DHS quarterly reports for programs  receiving fees and other collections. We interviewed DHS OCFO and  relevant component officials regarding the extent DHS components  comply with biennial reporting requirements for each of the 38 programs  receiving fees and other collections, identify any management and  operational deficiencies, and track the implementation status of  recommended actions consistent with Standards for Internal Controls in  the Federal Government. We also interviewed OMB staff to obtain the  agency’s perspective on the extent DHS is compliant with biennial  reporting requirements and takes actions consistent with relevant OMB  policies and guidance. We also reviewed documentation relating to  results of DHS studies of programs receiving fees and other collections  including DHS’s 2012 Fee Structure Review and 2014-2015 User Fee  Winter Study (Winter Study) to determine the extent management  challenges were identified and actions were taken to address these  challenges. In addition, we interviewed DHS OCFO officials regarding the  actions DHS has taken to address management challenges identified as  part of department-wide fee portfolio reviews.
We conducted this performance audit from February 2015 to July 2016 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Authority to Receive and Obligate Fees and Other Collections
paragraphs: The various types of fees and other collections received by federal  agencies are, in general, governed by two authorities—an authority to  charge a fee and an authority to retain and obligate fee collections. An  agency’s authority to charge fees or establish other collections is derived  either from the general statutory authority to assess user charges  pursuant to the Independent Offices Appropriation Act of 1952 (IOAA) or  from a statutory provision authorizing or directing an agency to establish a  particular fee or other collection. IOAA provides that, in general, each  service or thing of value provided by an agency to a person is to be self- sustaining to the extent possible, and provides the head of each agency  with authority to prescribe regulations to establish the charge for a service  or thing of value provided by the agency. Fees assessed under IOAA  must be (1) fair and (2) based on costs to the government, the value of  the service or thing to the recipient, public policy or interest serviced, and  other relevant facts. Without additional statutory authority to retain fee  collections, however, such collections are deposited as miscellaneous  receipts in the U.S. Treasury and are not available to the agency  collecting the fees. OMB Circular A-25 establishes federal policy  regarding fees assessed in accordance with IOAA and provides guidance  for agency implementation of charges and disposition of such  collections. More specifically, agencies must apply the provisions of  OMB Circular A-25 to fees assessed pursuant to IOAA. For fees  assessed pursuant to another statutory authority, OMB Circular A-25  provides guidance to agencies that is intended to be applied only to the  extent permitted by law and to the extent it is not inconsistent with a  controlling statute. In many instances, agencies receive specific  authority through authorizing or appropriations legislation to collect fees  and retain and obligate the collections. Such legislation may establish a  specified rate or amount to be assessed, how the fee is to be calculated,  the method and timing of collection, the authorized purposes for which fee  collections may be used, and the degree of flexibility an agency has to set  and revise fee rates through the regulatory process. Regardless of  whether a fee program is established under the authority of IOAA or some  other statute, we have reported on the benefits agencies could realize by  applying the principles of OMB Circular A-25 to their programs receiving  fees and other collections.
section_title: Roles and Responsibilities
paragraphs: Congress—through the authorization and appropriations processes— oversees DHS funding typically at the account level and may, through  enacted legislation, specify the purpose for which appropriated funds may  be used, restrict the amount or purpose for which the funds can be used,  and require that an agency report on activities conducted at the account  or program level. For each program receiving fees or other collections,  DHS or its components must be provided with authority to (1) conduct the  activity for which the fee or other collection is authorized, (2) collect the  fee or other collection at authorized levels, and (3) obligate and expend  the funds collected. Furthermore, the degree of flexibility a DHS  component has with respect to managing its programs receiving fees and  other collections depends upon the statutory authority upon which the fee  or other collection is based. For example, in cases where a statute  prescribes a specific amount the agency is to charge, component officials  may lack the flexibility to adjust the amount charged through the  regulatory process and instead must submit a legislative proposal seeking  statutory changes if it is determined that circumstances warrant an  adjustment.
DHS OCFO has responsibility to oversee the department’s budget  formulation process in order to ensure, among other things, that DHS  resources from fees and other collections are used and managed in  accordance with applicable laws and policies. To this end, DHS OCFO is  to ensure components comply with the biennial reporting requirements  and other applicable provisions of the CFO Act and OMB Circular A-25.  For example, the CFO Act provides that, among other things, an agency’s  CFO is to review the fees, royalties, rents, and other charges imposed by  the agency for services and things of value it provides on a biennial basis,  and make recommendations on revising those charges to reflect costs  incurred by the agency. In addition, DHS OCFO periodically conducts  department-wide reviews of its portfolio of programs receiving fees and  other collections to identify ways to minimize the effects of increasing  fiscal constraints on DHS’s mission and reduce reliance on annual  appropriations. DHS OCFO has completed two such reviews. In fiscal  year 2012, DHS OCFO conducted a Fee Structure Review that  considered whether opportunities existed to increase flexibility in the  discretionary budget in fiscal years 2014 through 2018 from both existing  programs receiving fees and other collections and prospective new fees.  The study focused on the amount of costs recovered by programs from  collections for activities that are funded jointly by collections and annual  appropriations for fiscal years 2014 through 2018. In March 2015, DHS  completed the 2014-2015 User Fee Winter Study (Winter Study).  According to DHS OCFO officials, this study was initiated as part of the  DHS Secretary’s “Unity of Effort” initiative, and the results of the Winter  Study were expected to inform DHS’s fiscal year 2017 budget formulation  process and educate internal DHS stakeholders on DHS’s portfolio of  programs receiving fees and other collections. According to the Winter  Study Terms of Reference, the purpose of the Winter Study was to  provide DHS with an opportunity to consider broadly the use of user fees  and similar financing alternatives—such as fines and trust funds—across  DHS to examine how the use of these fees and other collections further  key policy objectives and whether there is a need for greater cohesion in  the management, budgeting, and oversight of user fees. Specifically, the  goals of the study were to consider how to (1) best leverage resources  from its fees and other collections across DHS; (2) examine how the use  of fees and other collections further key policy objectives; and (3)  strengthen management, budgeting, and oversight of user fees and other  collections. According to DHS officials, to achieve these goals,  representatives from each DHS component met on an ad hoc basis as  part of the Winter Study working group. More specifically, the Winter  Study sought to identify the current amounts of user fees and other  collections and respective legal authorities, the intended degree of cost  recovery, the history of previous requests for fee adjustments, and best  practices among components. Findings and recommendations from the  Fee Structure Review and Winter Study are discussed later in this report.
DHS components have responsibility for the collection and obligation of  fees and other collections in accordance with applicable laws and  policies. CBP and the Federal Emergency Management Agency (FEMA)  collected more than half of the approximately $15 billion DHS received  from fees and other collections in fiscal year 2014, as shown in figure 1,  with the Transportation Security Administration (TSA), U.S. Citizenship  and Immigration Services (USCIS), and NPPD programs also collecting in  excess of a billion dollars. Appendix I provides details on each of the 38  programs receiving fees and other collections, including general  authorities, amounts collected in fiscal year 2014, and descriptions of the  programs and purposes for which collections may be used.
section_title: Collections for Over One-Third of Programs Fully Covered Identified Costs, but DHS Has Not Consistently Documented Cost Recovery Processes and Decisions
subsections: section_title: Collections for 14 Programs Fully Covered Identified Costs, and Components Cited Actions to Increase Cost Recovery for 10 Additional Programs
paragraphs: Our analysis of DHS collections and cost data showed that 14 of the 38  programs receiving fees and other collections in fiscal year 2014 collected  amounts that fully covered identified program costs. Of the remaining 24  programs, collections for 20 programs partially covered identified program  costs, and DHS did not provide cost data, or we determined such data  may not be reliable, for 4 programs. For the 14 programs with full cost  recovery, collections exceeded identified program costs by approximately  $1.4 billion, and DHS did not rely on annual appropriations to cover any  program costs. The $1.4 billion in collections that exceeded program  costs was maintained in several ways, such as unobligated carryover  balances, maintained in reserve funds, or deposited to the Treasury in  accordance with applicable laws. For the 20 programs that had identified  program costs exceeding collections in fiscal year 2014, costs exceeded  collections by an estimated $6 billion. (See app. II.) A fee or collection  may be assessed at a rate that either partially or fully recovers costs from  the user, or it may be assessed according to some other basis, such as  market value of the benefit provided. If a fee or collection is set at a rate  that does not achieve full-cost recovery, the difference is generally funded  through amounts received in an agency’s annual appropriations acts.  According to component documentation, annual appropriations covered  about 97 percent of the estimated $6 billion difference, unobligated  carryover balances covered about 3 percent of the estimated difference,  and transfers of collections from one fee program to another fee program  covered less than 1 percent of the estimated difference in fiscal year  2014.
For the 4 remaining programs, either DHS component officials cited  reasons they could not provide cost data or we determined such data  may not be reliable. For example, a CBP official stated that CBP’s activity  based costing model does not capture costs for the Harbor Maintenance  Fee, which is administered by another agency, and the Merchandise  Processing Fee, from which CBP deposits collections in the general fund  to offset CBP’s salaries and expenses appropriation. In addition, CBP  does not collect cost or volume data at the level of detail needed to fully  identify the costs associated with the 78 specific fees included under the  Miscellaneous Fees Collections account that collectively constitute less  than 1 percent of CBP’s total collections as reported in its biennial review.  For the fourth remaining program—TSA’s Aviation Security Infrastructure  Fee (Air Carrier Fee)—TSA reported that the statutes governing the Air  Carrier Fee and the Passenger Civil Aviation Security Service Fee specify  that collections from these programs be used to offset the authorized  costs of providing civil aviation security services and, hence, TSA only  tracks the costs of these programs in aggregate.
Of the 20 programs with costs exceeding collections, DHS (or the U.S.  Department of Agriculture for one program) initiated actions intended to  increase cost recovery for 6 fee programs, comprising about 85 percent  of the estimated $6 billion difference in fiscal year 2014. One of the  programs—TSA’s Passenger Civil Aviation Security Service Fee— accounted for nearly 76 percent of the difference. Most recently, DHS  submitted legislative proposals with its fiscal year 2017 budget  submission to increase fees for three programs that support the provision  of civil aviation security services (the Passenger Civil Aviation Security  Service Fee), customs-related inspections (the Consolidated Omnibus  Budget and Reconciliation Act  Fee), and inspection and  detention services at air and sea ports of entry (the Immigration  Inspection User Fee ). DHS reported that the proposals to increase  collections for these programs would accomplish such things as reduce  reliance on annual appropriations, fund additional CBP officers, and  contribute to deficit reduction as a portion of collections would go directly  to the general fund of the Treasury. Additionally, DHS pursued regulatory  adjustments to one program that provides for the registration of  commercial vessels (Coast Guard’s Commercial Vessel Documentation  Fee) and the Department of Agriculture amended the regulation for one  program through which CBP conducts inspectional activities for  international arrival of passengers, conveyances, animals, plants, and  agricultural goods at port of entry (AQI Fee). In addition, at DHS’s  request, OMB authorized a rate adjustment for one program that provides  law enforcement services on federally controlled property (FPS’s Basic  Security and Oversight Fees). See table 1 for the status of actions taken  by DHS or the U.S. Department of Agriculture to increase cost recovery  or contribute to the reduction of the federal deficit for the 6 fee programs  as of April 2016.
DHS components have plans to address cost recovery issues for 4  additional fee programs, according to component officials. Specifically,  TSA has plans to amend regulations to increase fees for two fee  programs—the Security Threat Assessments for Hazmat Drivers, and the  Commercial Aviation and Airport Fee and Other Security Threat  Assessment Fee—as it seeks to harmonize the entire set of TSA’s vetting  and credentialing fees, which includes seven different programs, by fiscal  year 2018, according to TSA officials and documentation. In addition, ICE  officials told us they plan to submit a legislative proposal to increase  spending authority to cover program costs for the Student and Exchange  Visitor Program (SEVP) in fiscal year 2017. According to ICE  documentation, the proposed increase is necessary to fund the costs of  future mission requirements and to invest in modernization initiatives for  the program, among other things. Finally, USCIS issued a proposed rule  to adjust most fees within the Immigration Examinations Fee Account to  address the difference between costs and collections.
section_title: Components Did Not Document Processes and Decisions Used in Managing Differences between Collections and Identified Costs for the Remaining 10 Programs
paragraphs: DHS component officials did not document the analyses and processes  they used to manage differences between identified program costs and  collections for the remaining 10 programs receiving fees and other  collections or document decisions related to cost recovery. For 6 of the 10  programs, component officials had identified deficiencies related to the  difference between program costs and collections and made  recommendations to address them in fee studies and biennial fee  reviews, but did not document the reasons that they did not pursue the  recommended actions. For the remaining 4 programs, component officials  said that they did not document reasons for not addressing the  differences because they did not consider it required or necessary.  Reasons cited for not documenting the processes for managing and  making decisions on how to address the estimated $726 million difference  included that some fees and other collections are set in statute and not  intended to cover full program cost and that some fees and other  collections had other funds available to cover the difference between  identified program costs and collections in fiscal year 2014 (see table 2).
While we were able to determine—through a review of data, DHS fee  studies, biennial fee reviews, and through interviews—why components  decided not to take actions to address differences in collections and  program costs for these 10 programs, components have not documented  the processes, analyses, and resulting decisions in a way that would  enable systematic oversight of these decisions or inform management in  their decision making. For example, CBP officials stated that the  component has an informal decision-making process, with a goal to  prioritize action to increase cost recovery for the three fee programs with  the highest volume of fee collections across its portfolio of fees and other  collections (AQI, COBRA fees, and IUF). However, CBP has not  documented its decision-making process, making it difficult for  stakeholders to determine why action was initiated for some fee and  collection programs and not others such as the Land Border Inspection  Fee, which is a fee that while small relative to the rest of CBP’s fee  program portfolio, comprised nearly 10 percent—or $645 million—of the  difference in identified program costs over collections for the overall DHS  fee program portfolio in fiscal year 2014.
DHS has emphasized the importance of documenting processes and  analysis to inform decision makers and achieve agency goals in the DHS  Fiscal years 2014-2018 Strategic Plan. Specifically, the strategic plan  states that DHS’s Unity of Effort initiative to integrate DHS organizations  can be achieved through documenting processes and analysis to provide  transparency and relevant information to DHS decision makers. Standard  practices for project management also support this practice to better  ensure that programs are operating efficiently and effectively. In  addition, Standards for Internal Control in the Federal Government calls  for agencies to help ensure transparency and accountability over agency  resource decisions by clearly documenting significant events—such as  decisions for addressing differences in collections and program costs—in  a form readily available for examination.
Component officials said that DHS OCFO had not provided requirements  or guidance to document the processes, analyses, and decisions  regarding the management of fee and other collection programs. DHS  OCFO officials said that they do not provide such guidance because they  have delegated fee management and oversight responsibilities to  component officials. Without documentation, transparency is lacking  regarding whether component decisions not to address differences in  program collections and costs are reasonable and appropriate,  particularly where DHS or its components have identified and reported  deficiencies and recommended actions to address them. Further, DHS  OCFO may lack complete information to determine why components  initiated actions for some fee programs set in statute, but not others—or  to assess how decisions for managing individual component program  portfolios align with effective practices for managing the overall DHS  portfolio.
section_title: DHS Processes to Manage Unobligated Carryover Balances Are Intended to Ensure Continuity of Program Operations More Than Efficient Use of Such Balances
subsections: section_title: DHS Components Established and Met Targets for Minimum Unobligated Carryover Balances to Ensure Continuity of Operations for Most Programs
paragraphs: DHS component officials said that they have established targets for a  minimum level of unobligated balance to carry over from one fiscal year to  the next for most programs. Specifically, these officials said that they  established such targets for 21 of 25 programs with unobligated balances  carried over to fiscal year 2014 based on historical trends in collections  and projected program costs. Component officials stated that for most  programs, these targets are set at levels to sustain a program’s  operations for the first quarter of the succeeding fiscal year; with some  components adjusting targets based on differences in administering fees  and other collections, spending authority, and statutory limitations. DHS  component officials did not identify targets for minimum unobligated  carryover balances for the remaining four programs that were funded by  collections from insurance premiums or reimbursable agreements.  Specifically, FEMA officials said that such targets were not necessary for  the National Flood Insurance Fund as FEMA has borrowing authority to  cover the difference between the costs of program operations and  collections from insurance premiums. FPS officials said that they had  not established such targets for its three programs—Basic Security and  Oversight, Building Specific, and Reimbursable Agency Specific— because officials lacked the data and cost models to do so for these  program operations funded by reimbursable agreements between FPS  and other federal agencies. DHS OCFO officials stated that  responsibility for managing unobligated carryover balances is delegated  to components as, according to officials, component management is in  the best position to determine the appropriate amount of unobligated  carryover balance needed to ensure efficient program operations. Our  analysis of DHS OCFO data showed that DHS components carried over  unobligated balances totaling $2.6 billion from fiscal year 2014 to fiscal  year 2015 across the 25 fees and other collections. (See app. III.)
Our analysis comparing amounts of unobligated carryover balances to  agency criteria showed that components generally met minimum targets  set to sustain program operations or relied on other mitigation  strategies. Specifically, our comparison of unobligated carryover  balances from fiscal year 2013 and amounts obligated in the first quarter  of fiscal year 2014 showed that components carried over unobligated  balances sufficient to ensure continuity of operations for 19 of the 21 fee  and other collections programs that had targets for minimum unobligated  carryover balances in place, and CBP officials cited other mitigation  strategies to sustain operations for the remaining two programs.  Unobligated carryover balances for CBP’s COBRA and Land Border  Inspection Fee programs did not cover about 48 percent (approximately  $31 million) and about 70 percent (approximately $5 million), respectively,  of first quarter fiscal year 2014 obligations. However, CBP officials said  that they did not rely on unobligated carryover balances to sustain  operations for these programs as the reimbursable structure of its  COBRA and Land Border Inspection Fees allows CBP to address funding  shortages through the use of CBP’s annual appropriations, as available.
section_title: DHS Components Have Not Established Management Processes to Ensure Efficient Use of Unobligated Carryover Balances
paragraphs: DHS components have taken some steps to manage potential excess  unobligated carryover balances, but have not established targets for the  maximum level of unobligated carryover balance or a process that uses  these targets to ensure efficient use of funds. DHS component officials  had identified actions to manage excess unobligated carryover balances  for seven programs that have grown—or have the potential to grow  beyond levels these officials deemed necessary to ensure efficient  program operations. Component officials cited actions underway to  manage excess unobligated carryover balances by, among other things,  redirecting fee resources, adjusting fee rates, and submitting proposals to  increase spending limits. However, the processes established by DHS  components to manage unobligated carryover balances do not include  reasonable and appropriate targets for these excess balances.
We have previously reported that it is important for agencies to assess  reserves for reasonableness, set clear goals—such as maximum reserve  levels—and clarify how the reserve will be implemented to help ensure  agency accountability and transparency. DHS component officials  stated that targets for maximum unobligated carryover balances have not  been established for their respective programs because the  establishment of such targets is complicated by factors component  officials deemed beyond the agency’s control. They cited factors such as  the level of unobligated balances for some programs being the result of  rates and spending limits set in statute and annual fluctuations in program  users and associated collections. However, actions have been taken in  the past to address some of these factors by submitting legislative  proposals to adjust rates and spending limits, and by developing models  that project fluctuations in program use and collections. DHS OCFO said  that it delegates the responsibility for managing fee and collection  programs, including establishing an appropriate range of unobligated  carryover balance, to the components as they are best positioned to  understand the factors affecting the management of the programs.
We have previously reported that agencies managing fee accounts  should have a robust strategy to estimate and manage a carryover  balance that assesses how effectively agencies anticipate program needs  and ensure the most efficient use of resources. If an agency does not  have a robust strategy in place to manage carryover balances, or is  unable to adequately explain or support the reported carryover balance,  then a more in-depth review is warranted as balances may rise to  unnecessarily high levels, producing potential opportunities for those  funds to be used more efficiently elsewhere. Lacking criteria for  maximum levels of unobligated carryover that should be in place and  documented processes for managing such balances, it is unclear whether  steps taken by components to manage excess balances will be sufficient  to ensure efficient program operations, as highlighted in the following  examples.
subsections: section_title: USCIS’s Immigration Examinations Fee Account (IEFA)
paragraphs: USCIS has not established targets for a maximum unobligated carryover  balance to determine the extent that additional actions may be needed to  reduce or redirect excess amounts included in the approximately $983  million in unobligated carryover balance in its IEFA as of the end of fiscal  year 2014. As shown in figure 2, the $983 million balance was comprised  of approximately $516 million derived from nonpremium processing  collections used to fund program operations related to the processing of  immigration benefit applications while the remaining $467 million was  derived from premium processing collections used primarily to support  USCIS’ Transformation initiative to move from manual to electronic  processing systems.
USCIS has taken actions to manage the growth in the unobligated  carryover balance for the nonpremium processing fee, by using it to fund  the increasing difference between identified program costs and fee  collections. These actions have resulted in nonpremium balances  declining to levels below the minimum target level of $750 million  identified by USCIS to mitigate potential shortfalls in fee collections to  cover program costs, as shown in figure 2. USCIS officials reported that  they are in the process of developing an analytical methodology for  determining an appropriate maximum level of carryover for any year given  the cash flow, deferred revenue, and reserve fund considerations, but  stated that they have been challenged to identify a maximum level  because program funding requirements fluctuate with levels of pending  caseload. In addition, USCIS issued a proposed rule in May 2016 to  address the difference between costs and collections within IEFA,  including most IEFA nonpremium fees.
It is unclear, however, the extent that USCIS action will address the  increasing growth of the premium processing side of IEFA. USCIS  estimated that the unobligated carryover balance for the premium  processing fee could continue to grow to $1.1 billion by fiscal year 2020,  as fee collections are expected to exceed Transformation initiative  funding requirements. Therefore, USCIS reported that it has begun to  reduce the growing balance by expanding the use of these premium fee  collections to fund onetime infrastructure improvements that support  adjudication services other than Transformation, such as its Financial  Systems Modernization project. USCIS estimated in its spending plan that  expanding the use of premium processing fee collections will result in an  unobligated carryover balance for premium processing of about $341  million by the end of fiscal year 2020. However, USCIS has not  established a maximum target for the appropriate amount of unobligated  carryover balance that should be maintained consistent with actions that  could be taken under the spending plan and that ensure efficient use of  funds. According to USCIS officials, the agency is currently implementing  its fiscal year 2016 operating plan that discusses planned uses of  premium processing collections, and is based on its assessment of  projected collections, planned Transformation program requirements, and  other appropriate infrastructure requirements. However, USCIS has not  identified maximum targets for the unobligated carryover balance needed  for both nonpremium processing and premium fees within the IEFA.  Without such targets, USCIS may not be able to determine the extent that  expanding uses for premium processing fee collections is sufficient to  achieve appropriate balance within the premium processing program.
section_title: NPPD/FPS’s Collection Programs
paragraphs: NPPD’s FPS has not established targets to determine the extent that the  approximately $193 million of unobligated carryover balance as of fiscal  year end 2014 was appropriate to fund operations across its three  collection programs. Our analysis of FPS data showed that the  unobligated carryover balance for the Basic Security and Oversight Fees  increased at a greater rate than identified program costs for each of the  three collection programs from fiscal year 2011 through 2014, rising from  a low of about 17 percent of identified program costs in fiscal year 2011 to  a high of about 45 percent in fiscal year 2014. (See fig. 3.)
According to FPS officials, the increase in unobligated carryover balances  across its collection programs can be attributed to hiring delays and  FPS’s decision to maintain spending at fiscal year 2011 levels to help  fund enhance security operations and reserve requirements, such as  surge-related activities and information technology investments that are  going through the acquisition process. FPS reported in its  Congressional Budget Justification for Fiscal Year 2017 that it is working  on a sustainable revenue model whereby collections from other agency  customers sustain the cost requirements of the same year, as reliance on  unobligated carryover balances and recoveries is a short-term fix and not  a sustainable long-term solution. In July 2015, FPS informed its  customer agencies that it will increase the rates for its collection programs  in fiscal year 2017 to, among other things, maintain its capacity to rapidly  surge personnel to protect federal facilities during periods of heightened  vulnerability.
FPS has not determined at what point its unobligated carryover balance  would be insufficient or continue to be in excess of need to address the  projected growth in cost for program operations, surge activities, and  long-term capital investment decisions. FPS officials said they are  evaluating the recommendation made by an independent audit firm to  maintain a minimum of 1 to 2 month operating reserve based on the firm’s  analysis of FPS’s average cash flow; however, FPS has yet to determine  whether this recommendation for the size of the program’s operating  reserve is appropriate to meet its future operating needs given recent  increases in the agency’s surge operations. Without evaluating the impact  of the fee increase on its fee balances and establishing targets for both  minimum and maximum unobligated carryover balances, stakeholders  lack reasonable assurance that FPS is managing its resources to ensure  that its carryover balances do not grow beyond levels necessary ensure  efficient program operations, or fall below levels necessary to ensure  continuity of program operations, meet reserve requirements for potential  surge operations, and make effective capital investment decisions.
section_title: CBP’s User Fee Facility Program
paragraphs: CBP has not established a target for the maximum unobligated carryover  balance necessary for its User Fee Facility program or taken action  necessary to reduce the approximately $14 million balance as of fiscal  year end 2014 within the collection program that, while relatively small,  consistently constituted over 100 percent of the program’s operational  costs each year from fiscal years 2010 through 2014. Our analysis of  CBP data showed that the unobligated carryover balance amounted to  about 160 percent of total identified program costs in fiscal year 2014,  exceeding these program costs by approximately $7 million. Our analysis  further showed that unobligated carryover balances within this fee  program ranged from a high of over $17 million in fiscal year 2013 to a  low of about $15 million in fiscal year 2012. (See fig. 4.)
CBP officials stated that until recently, CBP did not have the  system capacity to bill actual direct and indirect costs incurred at each User Fee Facility  and that the rate charged to small airports may likely be inconsistent with the grade of the  officer providing customs services. Beginning in fiscal year 2013, CBP began charging  user fee facilities 15 percent for indirect costs per OMB recommendation for agencies that  are unable to identify indirect costs.
CBP officials stated that until recently, CBP did not have the system capacity to bill  actual direct and indirect costs incurred at each User Fee Facility and that the rate  charged to small airports may likely be inconsistent with the grade of the officer providing  customs services. Beginning in fiscal year 2013, CBP began charging user fee facilities 15  percent for indirect costs per OMB recommendation for agencies that are unable to  identify indirect costs. indirect costs for customs services, and statutory limitations on how  CBP may use User Fee Facility collections.
CBP has taken some action to address these causes of excess  unobligated carryover balances in the program. In 2012, CBP began  piloting a new module within its financial system that captures actual  salary benefit and overtime costs for each user fee airport facility and bills  actual expenses for reimbursement from the program on a monthly basis.  Moreover, CBP officials said that CBP is in the process of identifying how  existing policy, regulations, and MOAs with small airports need to be  modified to implement the new billing module. CBP officials stated that,  once fully implemented, the pilot system to bill based on actual expenses,  as well as CBP efforts to revise MOAs to adjust charges for about 6 of the  50 facilities served under the User Fee Facility program, may reduce  unobligated carryover balance over time, but did not document analysis  showing a target balance or timeframe for completed action.
CBP also has not taken action to assess other reasons for the excess  unobligated carryover balance in the User Fee Facility program, including  whether rates charged to facilities are too high and should be reduced.  CBP has not commissioned a comprehensive study to analyze small  airport operations, costs, and activities to determine how to better align  the fee with cost, as recommended in its most recent biennial fee review.  Rather, CBP officials stated that CBP will primarily rely on its new billing  system to manage the excess carryover balance associated with the  program. Moreover, CBP has not identified an appropriate maximum level  of unobligated carryover, studied the potential impacts of its efforts to  address the causes of the excess unobligated carryover balance, or  determined the need to take further action to ensure proper fee alignment  and efficient use of funds. Without evaluating the impact of actions taken  to manage excess unobligated carryover balances, or whether additional  actions are needed to align the fee rate with costs charged to the  program, stakeholders lack reasonable assurance that CBP is managing  unobligated carryover balances to ensure they do not continue to rise  beyond levels necessary for efficient program operations.
section_title: DHS Does Not Ensure Components Conduct Program Reviews and Does Not Monitor Components’ Actions to Address Identified Management and Operational Deficiencies
subsections: section_title: DHS Does Not Provide Oversight to Ensure That All Components Review and Report on Programs Receiving Fees and Other Collections
paragraphs: DHS OCFO distributes instructions to components for submitting the  results of biennial reviews of their fee and other collections programs to  DHS, but does not provide oversight to ensure that components conduct  these reviews. Pursuant to the CFO Act and consistent with implementing  guidance in OMB Circular A-25, an agency’s CFO is to review, on a  biennial basis, the fees and other charges imposed by the agency for  services and things of value it provides and make recommendations on  revising the charges to reflect costs incurred in providing such services  and things of value. In addition, federal programs are subject to  Standards for Internal Control in the Federal Government which states  that agencies should ensure that ongoing monitoring occurs during the  course of normal operations to help evaluate program effectiveness.  Our review of DHS and component records showed that while four  components submitted results of reviews conducted for each of their  respective fee and other collections programs, three components did not,  as shown in table 3. Specifically, CBP, NPPD, TSA, and the Coast Guard  reviewed and reported results for all of their collective 30 programs, but  FEMA, ICE, and USCIS did not review 6 of the remaining 8 programs.
FEMA, ICE, and USCIS officials cited three reasons for not conducting  biennial reviews for their programs. Specifically, these officials stated that  biennial review and reporting requirements in the CFO Act do not apply to  programs with rates set in statute, to accounts that are too small relative  to other programs to warrant resources spent on a review, and to  programs that are not structured as traditional user fees.
However, we have previously reported that consistent with OMB Circular  A-25 and statements of OMB staff, agencies should review and report on  any government service provided for which an agency receives revenue  in accordance with the CFO Act, regardless of the relative size of the fee  or whether rates are set in statute or by the agency through regulation.  Further, some DHS components—such as CBP, have conducted biennial  reviews for programs receiving collections that are not traditionally  considered fees or other charges—such as Immigration Enforcement  Fines. Such actions help ensure that decision makers have complete  information about program costs and activities. For example, we have  reported that the CFO Act’s biennial review provisions provide decision  makers with comprehensive information necessary to support robust  deliberations about fee financing.
Absent oversight to ensure that components are conducting regular  comprehensive reviews, agencies and Congress may not be aware of  opportunities to, as appropriate, improve fee design and management  processes and that, if left unaddressed, could contribute to inefficient use  of government resources. For example, TSA officials stated that  information from biennial fee reviews of the Passenger Civil Aviation  Security fee—a fee with a rate set in statute—enabled TSA to inform  congressional stakeholders of an increasing gap between fee collections  and aviation security program costs. Information derived from biennial  fee reviews may similarly inform congressional stakeholders and provide  similar benefits to fee programs, regardless of whether the rate charged is  set in statute. In addition, Coast Guard officials stated that its biennial fee  reviews of the Commercial Vessel Documentation Fee program—a  relatively small fee program collecting fees averaging about $2 million  annually from fiscal years 2010 through 2014—are important because the  Coast Guard is generally authorized to maintain funds for obligation only  during the fiscal year in which they become available (1-year authority)  and thus cannot carryover unobligated balances into subsequent fiscal  years. As such, biennial fee reviews help the Coast Guard to ensure fee  collections are sufficient to cover program costs, and provide information  to relevant stakeholders about the need to adjust fee rates.
Furthermore, we have previously concluded that a regular process of  reviewing fee programs could reveal and help address challenges  identified by agencies in a more timely and systematic manner. For  example, FEMA reported that the Radiological Emergency Preparedness  Program, a program for which FEMA does not conduct biennial fee  reviews because it does not consider the program to be a traditional user  fee, faced challenges accurately estimating costs, resulting in FEMA  refunding nearly $14 million to Radiological Emergency Preparedness  Program users from fiscal year 2013 through 2015. A regular review  may have helped the agency identify the issue sooner and avoid having  to issue refunds. Moreover, without regular comprehensive reviews,  agencies and Congress may miss opportunities to improve fee design  and management processes which, if left unaddressed, could contribute  to inefficient use of government resources.
With regard to reporting, our review of DHS’s CFO Act report—The  Department of Homeland Security’s Agency Financial Report for Fiscal  Year 2014 (Agency Financial Report)—showed that DHS OCFO did not  report the extent to which all components are conducting such reviews or  any proposals to address management and operational deficiencies  identified by components, such as those relating to the adjustment of fee  and other collection rates. OMB Circular A-25 provides that agencies are  to discuss the results of biennial fee reviews and any resulting proposals,  such as adjustments to fee rates, in the annual report submitted pursuant  to the CFO Act. The Agency Financial Report did not include this  information, and instead included a listing of DHS components and some  of the programs they administer that receive fees and other collections.  DHS OCFO officials stated that more detailed information on  components’ biennial fee reviews was included in the quarterly user fee  reports DHS submitted to Congress and referenced in the Agency  Financial Report. In addition, DHS OCFO officials stated that duplicating  this information in the Agency Financial Report would not have provided  additional useful information to decision makers. However, the quarterly  reports did not include information on any proposals to address  management and operational deficiencies, and as of July 2015, DHS was  no longer under direction to submit quarterly user fee reports.
Additionally, our review showed that DHS did not discuss in any of these  reports the six programs receiving fees and other collections for which  reviews were not conducted. Our review of The Agency Financial Report  for fiscal year 2015 also found that the report did not include proposals to  address management and operational deficiencies or other information  from reviews of these programs. DHS OCFO officials stated that the  department has not determined how it will report on the results of biennial  fee reviews and any resulting proposals to adjust fee and other collection  rates in the future, and needs to seek guidance from OMB on how the  department should report on biennial fee reviews in future agency  financial reports. Without transparency of fee program operations  provided in the Agency Financial Report, or by other means, Congress  and other stakeholders lack reasonable assurance that DHS OCFO has  complete information on management and operational deficiencies to  ensure components are making informed decisions regarding the actions  needed to address such deficiencies.
section_title: DHS Does Not Monitor Component Actions to Address Identified Program Management and Operational Deficiencies
paragraphs: DHS OCFO has not established a process to actively monitor the status  of components’ efforts to address the management and operational  deficiencies that have been identified across programs, such as those  deficiencies relating to cost recovery and excess unobligated carryover  balances. According to DHS OCFO officials, the oversight and monitoring  of actions to address identified deficiencies is delegated to components  because components are responsible for administering programs and are  best positioned to understand the statutes governing the programs as  well as the factors—such as changing economic conditions—affecting  program implementation.
However, we found that while components have recommended actions to  address identified management and operational deficiencies, some  components have not taken action to implement these recommended  actions or otherwise addressed longstanding deficiencies. Specifically,  our analysis of biennial fee reviews conducted by components since fiscal  year 2014 showed that components recommended 48 actions for 20  identified deficiencies across 18 programs receiving fees and other  collections. (See app. IV.) Components most often identified deficiencies  related to aligning fee rates to recover a greater share of program costs.  Specifically, 12 of the 20 deficiencies related to recovering greater shares  of program cost through collections by adjusting rates and spending caps  or establishing charges for additional services. Another 5 deficiencies  involved existing rates that may not distribute costs among users in an  equitable manner. Two deficiencies identified challenges related to  managing unobligated carryover balances. The remaining deficiency  identified a difference in program collections and costs that could be  addressed by recognizing other revenue sources, such as available  unobligated carryover balances. However, components have not taken  action to address 9 of these 20 deficiencies. For example, components  have not addressed 5 of the deficiencies related to cost recovery,  resulting in a difference between identified program costs and collections  of around $700 million for the related programs since these deficiencies  were identified in fiscal year 2014. If left unaddressed, these  deficiencies may lead to management and operational challenges, such  as the inequitable distribution and inefficient use of funds.
DHS OCFO identified the need for greater oversight of the DHS fee  portfolio through its Winter Study. Specifically, the Winter Study found  considerable variation across components relating to the development  and budgeting of user fees and other collections, and recommended as  first steps towards greater standardization and coordination (1) the  establishment of a framework for developing fee proposals, and (2) a  department-wide fee governance council comprising Chief Financial  Officers from components responsible for collecting fees and other  collections as well as representatives from DHS OCFO and DHS Office of  General Counsel. In January 2016, DHS formally established the DHS  Fee Governance Council for the purpose of advising and assisting the  DHS OCFO in establishing a consistent program for the financial  management functions, activities, and policies relating to fees across  DHS. Moreover, in accordance with its charter, the Fee Governance  Council is to establish a governance and oversight structure for fees and  other collections across DHS, developing policy guidance on issues such  as, how fees and other collections are established, updated, or changed,  and how regular fee reviews are conducted.
While the establishment of a department-wide fee council is a positive  step, DHS has not determined whether DHS OCFO will use this venue to  issue guidance to components or provide oversight to ensure appropriate  actions are taken to address management and operational deficiencies,  such as those relating to cost recovery and excess carryover. Standards  for Internal Control in the Federal Government state that policies and  procedures should provide reasonable assurance that ongoing monitoring  and evaluation are institutionalized in an agency’s operations, and require  that findings from audits and other reviews are promptly resolved.  Further we have previously reported that evaluating and reporting on  results is a key practice that can assist interagency efforts in identifying  areas for policy and operational improvement. Without oversight of  components’ decision making processes—including tracking and  reporting on the status of recommendations to address deficiencies— DHS cannot provide stakeholders with reasonable assurance that the  agency is actively managing its portfolio of fees and other collections to  mitigate the impact of management and operational deficiencies.  Enhancing DHS’s oversight of its component agencies’ actions to address  identified deficiencies could ensure that deficiencies are addressed in a  timely manner and help DHS determine whether widespread  management challenges are causing deficiencies to not be addressed  and whether additional guidance should be provided to address these  challenges.
section_title: Conclusions
paragraphs: The uncertain budgetary environment highlight the need for DHS and its  components to effectively manage, use, and oversee the approximately  $15 billion in collections by DHS components across 38 homeland  security-related programs. DHS and components have taken steps for  some programs to strengthen management and oversight, such as by  adjusting fees and other collections to cover a higher proportion of  identified program costs, establishing some targets for minimum levels of  unobligated carryover balances, conducting fee reviews, and establishing  a DHS Fee Governance Council. However, opportunities remain for DHS  OCFO and components to improve the transparency and accountability  for management decisions and processes across all programs in the DHS  portfolio. For example, ensuring that for all fee and other collections  programs DHS OCFO and components are (1) documenting decisions  about whether or not to take action, as appropriate, to address  differences between program costs and collections; (2) establishing  targets for appropriate minimum and maximum unobligated carryover  balances; (3) conducting fee reviews; and (4) tracking and reporting the  status of recommended actions would allow the DHS Fee Governance  Council, the DHS OCFO, or others to provide oversight and ensure that  management practices and decisions are appropriate and effective to  ensure continuity of operations and equity in amounts charged to users of  program services. Further, regularly reviewing and reporting the results of  fee and other collections programs to agency heads, OMB, and Congress  could also enhance information available to the annual budget process  and better inform decisions to adjust fees or aspects of program  operations through changes in legislation or regulation.
section_title: Recommendations for Executive Action
paragraphs: To ensure effective management and oversight of DHS programs  receiving fees and other collections, we recommend that the Secretary of  Homeland Security direct the DHS Chief Financial Officer to use some  means, such as the DHS Fee Governance Council, to ensure that  component management take the following actions for each fee and other  collections program that they administer: document the processes and analyses for assessing and, as  appropriate, for managing the difference between program costs and  collections and document resulting decisions; establish processes for managing unobligated carryover balances, to  include targets for minimum and maximum balances for programs that  lack such processes and targets;  conduct reviews to identify any management and operational  deficiencies; and  take action to track and report on management and operational  deficiencies—including reasons supporting any decisions to not  pursue recommended actions—identified in fee reviews or through  other means.
Further we recommend that the Secretary of Homeland Security direct  the DHS Chief Financial Officer to discuss the results of biennial fee  reviews and any resultant proposals in the annual Agency Financial  Report, annual performance report, or other reporting mechanism,  consistent with the CFO Act and OMB Circular A-25.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DHS for review and comment. DHS  provided written comments, which are reproduced in appendix V. In its  comments, DHS concurred with the five recommendations and described  actions under way or planned to address them. DHS also provided  technical comments, which we incorporated as appropriate.
DHS stated that through the DHS Fee Governance Council, chaired by  the Deputy DHS Chief Financial Officer, guidance will be developed and  disseminated to (1) document the processes and analyses for assessing  and, as appropriate, for managing the difference between program costs  and collections and document resulting decisions; (2) establish processes  for managing unobligated carryover balances, to include targets for  minimum and maximum balances for programs that lack such processes  and targets; (3) conduct reviews to identify any management and  operational deficiencies; and (4) take action to track and report on  management and operational deficiencies—including reasons supporting  any decisions to not pursue recommended actions—identified in fee  reviews or through other means. DHS estimated that these actions would  be completed by July 31, 2017. Once guidance is developed and  disseminated to components, components take appropriate actions to  implement this guidance, and tools are developed to measure and assess  changes in fee balances, these actions should address the intent of our  recommendations to ensure effective management of DHS fee programs.
In regard to our second recommendation, however, DHS stated that  GAO’s characterization of DHS components’ planning processes for  managing carryover balances is not entirely accurate.  Specifically, DHS  stated that GAO characterizes these processes as being too heavily  focused on ensuring continuity of program operations rather than efficient  use of funds, when in fact components actively manage carryover  balances to ensure effective use of program funds.  DHS cited as an  example USCIS’ fee account annual operating plan development process  that is used to guide resource deployment to best achieve mission critical  goals.
Our report does not state that DHS components were too heavily focused  on ensuring continuity of operations, only that components placed more  focus in this area than managing efficient use of funds.  In general, we  found that while components had identified minimum balances for most  programs and mitigation strategies for when balances may fall below  these minimums, components had not identified maximum balances and  mitigation strategies for when balances grow above these maximums.  DHS stated that USCIS is taking additional actions to address our second  recommendation by prototyping new tools to measure and assess fee  account carryover balances, cash flow, and changes to fee balances.  DHS estimated that this action would be completed by September 30,  2016.
Regarding our fifth recommendation, that the DHS Chief Financial Officer  discuss the results of biennial fee reviews and any resultant proposals in  the annual Agency Financial Report, annual performance report, or other  reporting mechanism, consistent with the CFO Act and OMB Circular A- 25, DHS concurred, stating that DHS is in the process of developing a  consolidated tracking system for the results of biennial fee reviews and  any resultant proposals. In addition, DHS stated that DHS OCFO’s  Financial Management Division will ensure that the results of biennial fee  reviews and any resultant proposals are discussed in the annual DHS  Agency Financial Report. DHS estimated that these actions would be  completed by July 31, 2017. These actions should address the intent of  the recommendation and better position DHS to ensure the effective  oversight of programs receiving fees and other collections.
We are sending copies of this report to the Secretary of Homeland  Security and the Office of Management and Budget, and appropriate  congressional committees. 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 concerning this report, please  contact me at (213) 830-1011 or vonaha@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 who made significant contributions  to this report are listed in appendix IV.
section_title: Appendix I: Department of Homeland Security (DHS) Programs Receiving Fees and Other Collections in Fiscal Year 2014
paragraphs: In fiscal year 2014, the Department of Homeland Security (DHS) received  fees and other collections totaling approximately $15 billion from 38  programs with an estimated $17 billion in identified program costs. For  these 38 programs, table 4 describes the legal authorities, program  descriptions and financial information in terms of total collections and  identified program costs for fiscal year 2014.
section_title: Appendix II: Department of Homeland Security Programs Receiving Fee and Other Collections with Identified Program Costs Exceeding Collections for FY 2014
paragraphs: Immigration Inspection User Fees (IUF)
Consolidated Omnibus Budget  Reconciliations Act Fee (COBRA)
Agricultural Quarantine Inspection User  Fees   Merchant Mariner Licensing  Documentation Fee  Basic Security and Oversight Fees  Student and Exchange Visitor Program  Fee  Overseas Inspection and Examination  Fee  Commercial Aviation and Airport Fee  and Other Security Threat Assessment  Fees  Enforcement and Removal Operations  Fee  2  reviews, program costs identified by components may include, but are not limited to, the direct and  indirect costs associated with specific activities or tasks, such as administrative costs, salaries and  expenses, and inspection and screening services. We identified limitations to the cost data provided  by components such as the inability to accurately estimate and report direct and indirect cost, and  note these limitations in the body of our report.
section_title: Appendix III: Department of Homeland Security Programs Receiving Fee and Other Collections by Amount of Unobligated Carryover Balance as the of End of FY 2014
paragraphs: Our analysis of DHS data showed that DHS components had unobligated  balances carried over from fiscal year 2014 to the beginning of fiscal year  2015 totaling $2.6 billion across 25 of the 38 programs receiving fees and  other collections, as shown in table 6.
section_title: Appendix IV: Status of Actions Taken by DHS Components to Address Identified Deficiencies and Recommended Actions Reported in Biennial Fee Reviews
paragraphs: DHS components identified 20 deficiencies across 18 programs receiving  fees and other collections and recommended 48 actions across 23  programs in biennial fee reviews conducted in fiscal year 2012 or 2014.  Our analysis showed that DHS components took action to address 11 of  these 20 deficiencies through changes in agency regulation, proposed  changes to legislation, or other actions as shown in table 7.
section_title: Appendix V: Comments from the Department of Homeland Security
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Lacinda “Cindy” Ayers, Assistant  Director, and Michelle Woods, Analyst-in-Charge, managed this review.  Wendy Dye and Jesse Tow made significant contributions to the work.  Dominick Dale, Roshni Dave, Lorraine Ettaro, Eric Hauswirth, James  Kernen, Thomas F. Lombardi, Susan Murphy, Laurel Plume, Amanda  Postiglione, and Amelia Shachoy also contributed to this report.
section_title: Related GAO Products
paragraphs: Department of Homeland Security: Progress Made, but Work Remains in  Strengthening Acquisition and Other Management Functions,  GAO-16-507T. Washington, D.C.: March. 16, 2016.
Federal User Fees: Key Considerations for Designing and Implementing  Regulatory Fees, GAO-15-718. Washington, D.C.: September 16, 2015.
High-Risk Series: An Update, GAO-15-290. Washington, D.C.: February  11, 2015.
Budget Issues: Key Questions to Consider When Evaluating Balances in  Federal Accounts, GAO-13-798. Washington, D.C.: September 30, 2013.
Federal User Fees: Fee Design Options and Implications for Managing  Revenue Instability. GAO-13-820. Washington, D.C.: September 30,  2013.
Agricultural Quarantine Inspection Fees: Major Changes Needed to Align  Fee Revenues with Program Costs. GAO-13-268. Washington, D.C.:  March 1, 2013.
Budget Issues: Better Fee Design Would Improve Federal Protective  Service’s and Federal Agencies’ Planning and Budgeting for Security.  GAO-11-492. Washington, D.C.: May 20, 2011.
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 29, 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.
Results-Oriented Government: Practices That Can Help Enhance and  Sustain Collaboration among Federal Agencies, GAO-06-15. Washington,  D.C.: October 21, 2005.