The Federal Employees’ Retirement System Act of 1986 (FERSA) created the Thrift Savings Plan (TSP), a retirement savings plan similar to private- sector 401(k) plans, as a key component of the Federal Employees’ Retirement System (FERS) for federal workers. Membership is open to federal and postal employees, members of Congress and their staff, members of the uniformed services, and members of the judicial branch. Participants are eligible for deferred federal (and in certain cases, state) income taxes on employee contributions and earnings. For employees covered by FERS, agencies make contributions to employees’ TSP accounts. Agencies automatically contribute 1 percent of an employee’s salary during each pay period to the TSP. Agency contributions for any employee who remains employed by the federal government until “vested” become part of that employee’s retirement savings. Some employees are vested after 2 years of service; all other employees are vested at the end of 3 years of service. Agencies also match FERS employee contributions to the TSP up to a total of 5 percent of the employee’s basic pay. As of November 2006, FRTIB managed about $200 billion in assets for 3.5 million participants and beneficiaries. FRTIB—which administers the TSP—is an independent agency in the executive branch. As of the close of fiscal year 2006, FRTIB employed about 65 people. Some functions—such as enrollment and training of participants—are handled by other federal agencies rather than FRTIB. These other agencies’ payroll and personnel offices act as the points of contact for TSP participants; these offices may assist with enrollment and alteration of contribution percentages. Additionally, the Office of Personnel Management has established a training program for retirement counselors of federal agencies. FRTIB is overseen by five Presidentially appointed board members and is charged with establishing policies for the investment and management of TSP funds and with creating administrative policies for the TSP. FRTIB’s administrative expenses are funded by (1) forfeited agency contributions and (2) assessments against net earnings of the Thrift Savings Fund. The 1 percent automatic agency contribution for FERS employees who leave before vesting are forfeited to the TSP. To finance the remainder of the FRTIB’s administrative expenses, FRTIB assesses fees against the net earnings of the Thrift Savings Fund. FRTIB is required by law to use the forfeited funds before assessing fees against the net earnings of the Thrift Savings Fund. In both 2004 and 2005 these forfeited agency contributions covered about 13 to15 percent of administrative expenses; assessments against net earnings of the Thrift Savings Fund were set at a level to cover the remaining 85 to 87 percent. Outside contractors manage all investment funds other than the G fund. FRTIB has contracted with Barclays Global Investors (Barclays) to manage the F, C, S, and I funds. The L funds—which were introduced in August 2005—were designed by another private company, Mercer Investment Consulting. Consistent with generally accepted accounting principles, FRTIB’s financial statements list these investment expenses as adjustments to investment income; they are not included in the line item for administrative expenses. The cost to participate in a retirement fund is measured as an expense ratio of the total administrative expenses charged to a fund during a specific time period, divided by that fund’s average balance for that specific time period. According to a 2005/2006 Deloitte Consulting 401(k) benchmarking survey, the average expense ratio for 401(k) plans was 75 basis points. In comparison, FRTIB charged participants only 4 basis points in fiscal year 2006. According to FRTIB, it reviews its administrative expenses regularly through a variety of means. First, an independent entity audits administrative expenses as part of a larger financial audit of FRTIB. Second, the Department of Labor examines administrative expenses as part of its periodic FRTIB Administrative Staff review, which it conducts approximately once every 3 years. Third, as required by statute, board members prepare and submit to the President and Congress an annual budget. Fourth, each month since 2003, FRTIB has provided monthly reports to the Executive Director for review. Lastly, according to FRTIB, it contracts for all major TSP administrative services. Because the maximum contract length is 5 years, every major activity undergoes review and competition at a minimum of every 5 years. FRTIB’s administrative expenses ranged from a peak of $101 million in fiscal year 2000 to $83 million estimated for fiscal year 2006. During this time period, only the fiscal year 2001 administrative expenses were lower than the 2006 expenses, and that reflected the termination of a contract with American Management Systems to develop a record-keeping system, which will be discussed in more detail below. However, in real terms, FRTIB’s administrative expenses in 2006 were at a 7-year low. (See fig. 1 below). There is no standard governmentwide definition of administrative expenses. For the purposes of this review, and consistent with how FRTIB presented its budget to the board for approval, we considered all expenses other than investment expenses to be administrative. FRTIB purchases most of its administrative services from outside entities. Until 2005 these were purchased primarily from government agencies—99 percent of which were record-keeping and call center services provided by the National Finance Center. During fiscal years 2005 and 2006 the National Finance Center terminated its contracts with FRTIB, which began purchasing these services from a private contractor. The only remaining major services purchased from another government agency are personnel and payroll services provided by the U.S. Department of the Interior. For its administrative activities, FRTIB has established practices that are consistent with federal regulations. However, it has opportunities to achieve cost savings. To purchase services and goods, FRTIB is required to follow the Federal Acquisition Regulation (FAR) and employee compensation is governed by federal pay schedules. For travel, FRTIB is bound by federal travel regulations. However, this is one place where opportunities may exist to reduce travel expenses by holding monthly board member meetings by teleconference where appropriate. FRTIB leases its own space directly rather than going through GSA. Although the cost per square foot for its headquarters is comparable to average rates that GSA cites for nearby available properties, the amount of space FRTIB rents is greater per employee than GSA recommends. The amount that FRTIB spends purchasing services from other entities is at a 7-year low. (See fig. 4 below.) Since most administrative services are purchased from outside entities, it is not surprising that declines in spending on services purchased from outside entities—both private contractors and other federal agencies— parallel the declines in administrative expenses during the same period. Although most administrative services are purchased from outside entities, the allocation between private contractors and federal agencies has changed over time. As figure 3 shows, from fiscal year 2000 through fiscal year 2004 FRTIB spent more money purchasing services from other government agencies than from private contractors. In shifting the acquisition of call center services from the National Finance Center to a private contractor in 2005, the balance was reversed. In 2006, the National Finance Center terminated all remaining services that it was providing to FRTIB. With the termination of the National Finance Center contracts, the only remaining major services purchased from another government agency were payroll and personnel services provided by the U.S. Department of the Interior. Another change within FRTIB’s expenses for services purchased from private contractors occurred in 2001. In 2001, FRTIB terminated a contract with American Management Systems, Inc., a private sector firm hired to design, develop, and implement a record-keeping system for the TSP that would provide daily investment updates. FRTIB then hired Materials, Communication & Computers, Inc. to complete the work that American Management Systems was unable to complete. Although we did not review the reasonableness of FRTIB’s individual contracts, we reviewed its process for acquiring goods and services. Overall, it follows a process that seeks to assure reasonable expenses. First, FRTIB is subject to the FAR—which governs acquisition activities. Second, FRTIB has one contract specialist and one purchasing agent on staff to ensure that acquisition occurs according to statute and regulation. Additionally, other staff are responsible for management and oversight of the individual contracts. For example, the agency’s Chief Information Officer is responsible for managing a record-keeping contract and the Director of the Office of Participant Services is responsible for managing the two call center contracts. Each of these individuals monitors contracts through site visits and remotely. FRTIB plans to send agency directors for additional monitoring site visits in 2007. The travel expenses for these monitoring visits are included under travel and discussed later in this report. The Department of Labor provides additional oversight of FRTIB’s contracts through its periodic audits. In 2005, the Department of Labor reported that FRTIB had reexamined service providers to find ways to increase services while decreasing costs. For example, FRTIB found that it could cut expenses in half by transferring information technology operations from the National Finance Center to SI International, a private contractor. The Department of Labor reviewed one call center in August 2006 and, according to FRTIB, the department is also planning to review another call center service contract in 2007. In the years since 2003, a variety of factors have led to increased miscellaneous expenses. (See fig. 5 below.) In fiscal year 2004, miscellaneous expenses jumped to about $14 million, in part because FRTIB updated aging software and hardware. Second, in fiscal year 2005 FRTIB’s printing expenses increased from about $1 million to about $11 million. FRTIB told us that this was a one-time extra expense to print information about a series of new TSP funds, the Lifecycle (L) funds. Lastly, in fiscal year 2006, FRTIB projected a ninefold increase from about $1 million to about $9 million in expenses for communications. This was to pay for providing information to TSP plan participants about new passwords and account numbers to replace the use of Social Security numbers in the system. FRTIB also said that this spike would permit increased communications about the L funds. Although overall miscellaneous expenses began to decrease in 2006, it is unclear if expenses will continue to decrease or remain elevated. Although we did not review FRTIB’s individual contracts, it is required to follow the same regulations as other federal agencies regarding acquisition. As discussed above, FRTIB is required to follow the FAR and is routinely audited by the Department of Labor. Also, FRTIB has the ability to purchase goods through GSA. Although GSA does not guarantee the lowest price possible, use of GSA’s Federal Acquisition Service ensures that the prices paid by FRTIB are reasonable and generally consistent with the prices paid by other agencies. FRTIB’s compensation expenses have been relatively stable over the past 7 years. (See fig. 6 below.) FRTIB compensates employees according to federal pay schedules. Currently, FRTIB employs about 65 staff members, the majority of whom are paid according to the General Schedule. About 28 percent of these employees are compensated at or below the GS-11 level. Accordingly, to the extent that the composition of FRTIB’s staff is appropriate, compensation costs appear reasonable. The Executive Director is compensated according to level three of the Executive Schedule. Additionally, 7 staff members are part of the Senior Executive Service. These Senior Executive Service positions are all approved by the Office of Personnel Management. Each of the 5 board members—who are not otherwise officers or employees of the federal government—are compensated at the daily rate of basic pay for level IV of the Executive Schedule for each day the board member is engaged in performing a function for FRTIB. FRTIB’s total rent expenses remained relatively constant until fiscal year 2005. (See fig. 7 below.) Rent expenses dropped in 2005 and increased again in 2006 coinciding with the lease of an emergency facility. The majority of FRTIB’s rental expenses are associated with renting a headquarters office in Washington, D.C. FRTIB rents its own office space, which means it does not need to go through GSA. However, GSA rents space on behalf of many federal agencies and thus has a rich database of local rent prices. Accordingly, we compared the amount that FRTIB pays per square foot in fiscal year 2007 with the average rates that GSA cited for nearby available properties. At $28 per square foot in 2007, the per square foot rental rate—which includes operating expenses such as utilities, building security, maintenance, and cleaning—is in line with average market rates for nearby available properties with comparable square footage. Currently, FRTIB rents more than 47,000 square feet. At its present staff size, FRTIB rents more space per person than GSA would recommend. Based on FRTIB’s mission, a GSA official told us that FRTIB’s space needs are likely similar to a model that proposes 368 rentable square feet per person. At its current staffing level of 65 employees, FRTIB’s headquarters provides more than 670 square feet per person, about 300 square feet more per person than GSA would recommend. This calculation, however, is somewhat misleading because of the recent personnel downsizing at FRTIB. In the 7 years covered by our review, employment at FRTIB peaked at 111 staff members. Yet, even at its peak staffing, FRTIB rented about 430 square feet per person, about 60 square feet more per person than GSA would recommend. In light of recent declines in staff numbers, and consistent with good management practices, at a September 2006 board meeting FRTIB staff indicated that they would look into consolidating space at the headquarters location. Over the past 7 fiscal years, travel expenses varied considerably, ranging in current year dollars from a low of about $80,000 in fiscal year 2001 to a high of about $255,000 in fiscal year 2003. In fiscal year 2006 travel expenses fell slightly above the middle of this range at about $200,000. (See fig. 8.) FRTIB travel is governed by federal travel regulations. The fiscal year 2006 travel we examined was consistent with these regulations and appears reasonable given federal daily allowances for lodging, meals, and incidental expenses and current cost trends for common carriers. The largest portion of fiscal year 2006 travel was for contract oversight, about 38 percent of which was associated with the one-time expense of transitioning the call center from the National Finance Center to a new contractor, SI International. Although about 20 percent of FRTIB’s trips were to other federal agencies to conduct training and make presentations, since the host agency often paid for these trips, they accounted for only about 5 percent of travel expenses. In fiscal year 2006, FRTIB spent about $27,000 to bring board members to Washington, D.C. These expenses are associated with travel from locations as disparate as Alaska and New York, and require, in general, a 2- night stay in Washington, D.C. Although FRTIB reports that it has not issued any first or business class tickets to any employee, it has on occasion issued a first or business class ticket to a board member traveling from Alaska when coach fares were not available. Although the law requires monthly meetings, and the practice has generally been to meet in person, on occasion members of the board have participated in these meetings by telephone—some more than others. Meetings that occur through telecommunications rather than in person save money for FRTIB and sometimes may be appropriate. FRTIB’s current method of benchmarking its costs by comparing the fees assessed to TSP participants against the fees assessed to participants in private 401(k) plans provides important but incomplete information about its administrative costs and efficiency. This measure is very important for participants—and the TSP compares favorably on this measure. It does not, however, provide a complete picture of administrative expenses or sufficient information for oversight of administrative activities. Looking only at an aggregate measure—whether the investment fee or the total administrative costs—provides insufficient information to judge whether individual activities are being conducted either to achieve the best performance or in the most efficient manner. Disaggregating FRTIB’s activities and benchmarking those individual activities against similar ones elsewhere would provide the board a better picture of the performance and efficiency of these activities. Although no other federal agency performs the same mission as FRTIB, the individual activities it performs to fulfill that mission can be found in other agencies and outside government. For example, other agencies—such as the Centers for Disease Control and Prevention and GSA—purchase call center services from private contractors. Benchmarking by individual activity permits an organization to compare the performance of its individual processes/activities—and the way those processes/activities are conducted—with either standards or “best in class” in a specific activity. Benchmarking provides a feedback mechanism for continuous improvement. FRTIB’s falling administrative expenses appear to reflect an overall commitment to manage the TSP in the interest of the participants and beneficiaries of TSP. Consistent with this commitment FRTIB is looking into consolidating its office space. We also note that on occasion board members have elected to participate in the monthly meetings by telephone. The use of telecommunications has increased throughout both government and the private sector. Although in-person meetings are valuable and may be important for some discussions, increasing the use of telecommunications for monthly meetings could further reduce expenses. For example, if the board found it appropriate to meet monthly by teleconference and quarterly in person, travel costs would be reduced. Since FRTIB follows practices that seek to constrain expenses within federally regulated parameters, its success in maintaining low expenses is not surprising. In fact, FRTIB’s fiscal year 2006 administrative expenses were near a 7-year low. Moving beyond comparing costs charged to TSP participants with costs charged by other 401(k) plans to benchmarking the cost and performance of individual activities would be consistent with a commitment to continuous improvement and being alert to opportunities to further improve performance and/or reduce costs. It would also assist the board as it seeks to assure that the TSP is managed in the interest of its participants and beneficiaries. To ensure that FRTIB continues to operate as efficiently as possible, we recommend that the board direct the Executive Director to continue monitoring both the square footage and cost per square foot of office space in the future to ensure that it is appropriate for its needs. In addition, FRTIB should consider expanding its use of telecommunications for its monthly board members’ meetings, as appropriate. To provide the board with the most complete and relevant information with which to assess the expenses and performance of administrative functions of FRTIB, we recommend that the board direct the Executive Director to move beyond the comparison of participant costs against those for other 401(k) plans to benchmarking cost and performance of individual activities—either against similar activities elsewhere or against validated criteria or standards, such as federal regulations. In comments on a draft of this report, FRTIB partially concurred with our findings and recommendations. While they agreed in concept with our recommendations, they stated that in-person board meetings are an extremely important aspect of fulfilling their fiduciary responsibilities and that the minimal travel costs associated with this decision were far outweighed by the benefits derived from in-person meetings. However, consistent with FRTIB’s commitment to managing the TSP in the interest of participants and beneficiaries of TSP, we note that use of telecommunications offers opportunities to further reduce expenses. Our report acknowledges that in-person meetings are valuable and may be important for some discussions. Our recommendation merely states that FRTIB should consider expanding its use of telecommunications as appropriate. With respect to its square footage, FRTIB said it would continue to monitor and assess its office space needs and related costs in relation to projected staffing levels. FRTIB also concurred in concept with the use of benchmarking costs in appropriate situations. However, it noted that rather than separately benchmarking each component of its overall costs, it relies on the competitive procurement process to obtain outstanding performance for TSP participants at competitive rates. FRTIB’s comments reflect a misunderstanding of our point. The report does not suggest that benchmarking would lead to changes in contracts during the contract period. Nor does our report suggest that the competitive bidding process be abandoned—we concur that it helps assure good performance at competitive costs. Nor do we dispute that FRTIB’s processes have led to outstanding performance for TSP participants at competitive costs. To the contrary, companies and agencies that are viewed as leaders in their operations use benchmarking. Benchmarking is widely accepted in the private sector and in much of the public sector as a “best practice” in evaluating performance of specific activities. It offers a way to compare a specific function or activity to the same or similar one in other businesses or agencies. The essence of benchmarking is the process of identifying the highest standards of excellence for products, services, or processes, and then making the improvement necessary to reach those standards—commonly known as best practices. We have developed a body of work—best practice reviews—that provides guidance to help public sector organizations become world-class. Such benchmarking of best practices could be helpful to FRTIB. For example, as the term of a contract for call center operations nears completion and FRTIB considers the design of the successor contract, it could look at the scope or services, performance measures used and performance attained, and costs of other excellent call centers in developing the criteria for that next contract. In addition to these key comments, FRTIB provided technical comments. The full written comments from FRTIB are included and addressed in appendix II. We have incorporated changes as a result of these comments, as appropriate. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this letter. At that time, we will send copies of this report to the Executive Director of FRTIB and interested congressional committees. This report will also be available at no charge on the GAO Web site at http://www.gao.gov. Please contact me on (202) 512-9142 if you or your staff have any questions about this report. Contact points for our Office of Congressional Relations and Public Affairs may be found on the last page of this report. Other contacts and staff acknowledgments are listed in appendix III. To identify the administrative expenses of the Federal Retirement Thrift Investment Board (FRTIB) we reviewed the President’s budget, FRTIB’s audited financial statements, FRTIB’s budget documents from meeting notes of the board members, and FRTIB’s written responses to our questions. To analyze the components of administrative expenses, we used the projections contained in the board members’ annual budget documents. The numbers we used from FRTIB’s budget documents were prepared late in the fiscal year, which ends September 30. FRTIB officials confirmed that the projections were analogous to what appears in budget documents for other agencies as “actuals.” We reviewed FRTIB’s audited financial statements for information about FRTIB’s financial contractual commitments. The administrative expenses listed in the financial statements were not disaggregated sufficiently for our purposes. As a result, they did not provide the detail that we needed for our analysis. To be consistent with the budget documents, we used current year dollars throughout the report. We confirmed that the analysis and conclusions would not change if dollars were adjusted for inflation. To judge whether the administrative expenses of FRTIB are the result of practices consistent with federal regulations, we identified the regulations that guide FRTIB’s expenses for activities such as compensating employees. To analyze the applicability of the Federal Acquisition Regulation (FAR) to FRTIB’s acquisition activities, we reviewed statutory requirements and court cases. We also reviewed GAO guidance for assessing the acquisition function at federal agencies. To compare the rent that FRTIB pays for its headquarters office with the amount that other federal agencies would pay for downtown office spaces we reviewed FRTIB’s current lease. We then compared the parameters of the lease with a database of properties from the General Services Administration (GSA). Because GSA rents office space for other agencies, it has access to a rich database of available properties and current rents. To review the compensation of FRTIB staff members, we analyzed the Office of Personnel and Management’s Central Personnel Data File, a file of all personnel actions in the federal government. This allowed us to identify the pay plans that FRTIB uses to compensate employees, the positions held by FRTIB staff, as well as actual staffing levels for the time period covered by our analysis. To analyze travel expenses, we compared the travel records that FRTIB gave to us for fiscal year 2006 to expected travel expenses for locations given standard per diem rates and negotiated air fares. We also reviewed FRTIB’s responses to questions we submitted. To analyze FRTIB’s current benchmarking practices, we reviewed a benchmarking study cited by FRTIB, notes from the board members’ meetings, relevant GAO work, and FRTIB responses to questions we submitted. We conducted our work in Washington, D.C., between October 2006 and May 2007 in accordance with generally accepted government auditing standards. 1. Our report states that FRTIB leases its own space directly rather than going through GSA—we did not indicate nor imply that FRTIB is required to use GSA for leasing services. 2. Our report acknowledges that in-person meetings are valuable and may be important for some discussions. However, consistent with FRTIB’s commitment to managing the TSP in the interest of participants and beneficiaries of TSP, we note that use of telecommunications offers opportunities to further reduce expenses. Our recommendation states merely that FRTIB should consider expanding its use of telecommunications as appropriate. 3. The FRTIB’s comments on our benchmarking recommendation reflect a misunderstanding of our point. Our report notes that benchmarking should go beyond a comparison of TSP’s investment fees (cost to participants) with those of other 401(k) plans. It does not suggest that benchmarking would lead to changes in contracts during the contract period. Nor does our report suggest that the competitive bidding process be abandoned—we concur that it helps assure good performance at competitive costs. Further, we do not dispute that the FRTIB’s processes have led to outstanding performance for TSP participants at competitive costs. Nor should the mention of call centers as one example of an activity in which other agencies also engage be read as a criticism of FRTIB’s call center operations. To the contrary, companies and agencies that are viewed as leaders in their operations use benchmarking. Benchmarking is widely accepted in the private sector and in much of the public sector as a “best practice” in evaluating performance of specific activities. It offers a way to compare a specific function or activity to the same or similar one in other businesses or agencies. The essence of benchmarking is the process of identifying the highest standards of excellence for products, services, or processes, and then making the improvement necessary to reach those standards— commonly known as best practices. We have developed a body of work—best practice reviews—that provides guidance to help public sector organizations become world-class. Such benchmarking of best practices could be helpful to FRTIB. For example, as the term of a contract for call center operations nears completion and the FRTIB considers the design of the successor contract, it could look at the scope or services, performance measures used and performance attained, and costs of other excellent call centers in developing the criteria for that next contract. 4. Our report states that looking only at investment fees offers an incomplete picture of administrative expenses and that looking at total administrative expenses in the aggregate provides incomplete information for judging whether individual activities are being conducted in the most efficient matter. We did not discuss or opine on FRTIB’s disclosure of administrative expenses. 5. Our report notes that benchmarking should go beyond a comparison of TSP’s investment fees (cost to participants) with those of other 401(k) plans. It does not suggest that it is FRTIB’s responsibility to ensure that private sector 401(k) plans adopt similar levels of public disclosure. 6. See comment 3. 7. We agree that telephone services for the call centers are mission- related services. However, because budget data provided by the FRTIB aggregates such expenses with charges such as postage and other miscellaneous expenses, we were unable to separate these expenses from others in this category. Nonetheless, we have clarified the report to indicate that expenses associated with telephone service for call centers, although mission-related, were included under miscellaneous expenses. 8. We revised the report text as suggested. 9. We revised the report text as suggested. 10. We revised the report text as suggested. 11. We disagree with FRTIB’s comment that it is not subject to the federal procurement rules. First, FRTIB is an executive agency under 41 U.S.C. § 405(a) and thus subject to the FAR. Moreover, we are unaware of any, and FRTIB has not identified any, express exclusion for FRTIB. Second, FRTIB cites as support a 1987 internal memo that states “One of the most important criteria applied by the courts and agencies, in determining the applicability of acquisition regulations is the source of funds being expended.” The memo concludes that FRTIB does not pay its administrative expenses with appropriated funds. In a 2002 contract dispute with one of its contractors, the United States Court of Federal Claims rejected each one of FRTIB’s arguments that its administrative expenses are not payable out of appropriated funds. Since the FAR applies to acquisitions by contract with appropriated funds, and the FRTIB has not addressed the court’s ruling, we stand by the position that FRTIB is subject to the FAR. 12. We revised the report text as suggested. 13. We revised the report text as suggested. 14. See comment 12. 15. We revised the report text as suggested. 16. See comment 7. 17. Clarified text to indicate it is a call center service contract. In addition to the contact named above, Carol Henn, Mallory Barg Bulman, John P. Stradling, and Farahnaaz H. Khakoo made significant contributions to this report. Barbara D. Bovbjerg, Tamara E. Cross, Lara Lee Laufer, Ramona L. Burton, Matthew J. Saradjian, Patrick G. Bernard, Michael R. Volpe, Adam Vodraska, Andrew J. Stephens, Richard S. Krashevski, Gregory H. Wilmoth, Donald R. Neff, William T. Woods, and Ruth DeVan also provided key assistance.

Summary: The Federal Retirement Thrift Investment Board (FRTIB) is charged with managing the Thrift Savings Plan (TSP)--a key component of retirement savings for many federal employees--in the interest of its participants and beneficiaries. As part of a broader request on oversight of FRTIB, GAO reviewed (1) the administrative expenses of FRTIB and key components of these expenses, (2) whether the administrative expenses of FRTIB are the result of practices consistent with federal regulations and similar functions at other agencies, and (3) FRTIB's current method of benchmarking administrative expenses. GAO reviewed FRTIB's budgets, audited financial statements, a benchmarking study, and written responses to questions that GAO submitted. GAO also reviewed the regulations that guide FRTIB's spending. FRTIB's administrative expenses ranged from a peak of $101 million in fiscal year 2000 to $83 million estimated for fiscal year 2006. Only the 2001 administrative expenses were lower, reflecting the termination of a key contract. In real terms, FRTIB's administrative expenses in 2006 were at a 7-year low. Throughout this period more than half of FRTIB's administrative expenses went towards purchasing services from outside entities--private contractors and other government agencies. The next largest share of FRTIB's budget was for miscellaneous expenses, such as printing and information technology. Additional administrative expenses were spent on compensation of FRTIB's 65 employees, rent, and travel. FRTIB has established practices that are consistent with federal regulations--for acquisition, compensation, and travel. There are some areas, however, that suggest opportunities for future savings. The amount FRTIB pays per square foot is consistent with average rental rates that the General Services Administration (GSA) cites for nearby available properties. However, FRTIB rents more space per employee than GSA would recommend. Given recent downsizing, FRTIB has begun looking into consolidating its office space. Additionally, opportunities exist to reduce the travel expenses of TSP board members traveling to Washington, D.C. FRTIB's current method of benchmarking TSP participants' investment fees against those charged by 401(k) plans is a very important measure for participants--and the TSP compares favorably on this measure. However, looking only at an aggregate measure provides insufficient information to judge whether individual activities are being conducted either to achieve the best performance or in the most efficient manner. Benchmarking by individual activity permits an organization to compare its performance with standards or "best in class" in a specific activity.