Budget Issues
Electronic Processing of Non-IRS Collections Has Increased but Better Understanding of Cost Structure Is Needed
GAO-10-11, Nov 20, 2009
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The Department of the Treasury's Financial Management Service (FMS) collections program provides services to agencies to collect, deposit, and account for collections through a variety of methods. Electronic collection methods can reduce government borrowing costs and agency administrative costs, while improving compliance and security. The Government Accountability Office (GAO) was asked to identify (1) the extent to which agencies other than the Internal Revenue Service (IRS) use various collection methods, (2) ways to maximize the benefits of and overcome any barriers to agency use of the various collection methods, and (3) issues that FMS should consider in its plans to improve the efficiency and security of collections. GAO analyzed collections data, plans, and documents from FMS and five case-study agencies in the Departments of the Interior and Commerce that use a variety of collection methods, observed fee collection methods, and interviewed FMS and case-study agency officials. GAO also interviewed selected payer groups for case study agencies.
Over the past 5 years, more than 80 percent of funds collected by agencies other than the Internal Revenue Service (IRS) were collected using fully electronic methods, including wire transfers and credit cards. As shown in the figure below, from fiscal year 2005 through 2009 there was a significant shift from nonelectronic collection methods to partly electronic methods. This shift was largely a result of a growth in electronic check-processing capacity. Moving to electronic collection methods can reduce costs and mitigate risks, such as theft, but the specific circumstances of individual agencies and payers have affected agencies' ability to fully adopt these methods. Use of electronic methods can result in cost savings, increased processing speed and accuracy, and improved security of staff and deposits. Specifically, FMS reports that on average the government saves 78 cents for each electronic transaction. Additionally, case-study agencies and payer groups GAO spoke with reported reduced costs when using electronic collection methods. Despite the advantages, payer characteristics, other agency considerations, and set-up costs or required system changes have limited agencies' adoption of electronic collection methods. Also, agencies may not have enough information to make cost-effective decisions about their choice of collection method. FMS is implementing a plan to improve the efficiency and effectiveness of federal collections, but the plan excludes important cost considerations and does not use all available incentives. Specifically, the plan does not consider the cost differences among different electronic methods or ensure the consistent application of policies on reimbursement for certain services. The FMS plan also does not include a strategy for incorporating key lessons-learned from agency reviews into its guidance and communicating that information to agencies. With such information, agencies not scheduled for review until later years could begin to transition to more efficient methods.
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To strengthen oversight of the costs of collecting federal fees and other receipts, the Secretary of the Treasury should direct the FMS Commissioner to provide each agency with information on FMS's annual costs of processing related to that agency's collections by, for example, providing information on the agency's total collections, by collection method, and FMS's costs by collection method.
Agency Affected: Department of the Treasury
Status: Open
Comments: In October 2010 the Financial Management Service (FMS) informed GAO that the agency plans to implement this recommendation by December 2010 and provided GAO with a copy of their "Plan to Provide Banking Service Costs to Federal Agencies." As of November 2011, we contacted FMS for a status update and are awaiting a reply.
Recommendation: To strengthen oversight of the costs of collecting federal fees and other receipts, the Secretary of the Treasury should direct the FMS Commissioner to revise FMS's Holistic Approach plan to assure that the reviews of agency collections will consider the differences in costs of the various electronic collection methods.
Agency Affected: Department of the Treasury
Status: Closed - Implemented
Comments: As of October 2010, the Financial Management Service (FMS) updated its Holistic Approach Plan to include an analyis and cost evaluation in its reviews of agency collections so that the reviews will consider the differences in costs of the various electronic collection methods.
Recommendation: To strengthen oversight of the costs of collecting federal fees and other receipts, the Secretary of the Treasury should direct the FMS Commissioner to enforce FMS guidance by (a) specifying criteria for determining whether FMS collection services are either ancillary or are lockbox services not providing a net benefit to the Treasury's general account and so should be reimbursed by the agency; and (b) using these criteria during Holistic Approach plan reviews to determine whether each agency should reimburse FMS for services and document that decision.
Agency Affected: Department of the Treasury
Status: Open
Comments: As of October 2010, the Financial Management Service (FMS) had developed a draft policy that specifies criteria for determining whether FMS collection services do not provide a net benefit to the Treasury's general account and therefore should be reimbursed by the agency. FMS intends to finalize this policy and develop an implementation policy strategy to enforce it by December 2010. FMS also revised its Holistic Approach Plan to assist with enforcement of this updated reimbursement policy. As of November 2011 we contacted FMS for a status update and are awaiting a reply.
Recommendation: To strengthen oversight of the costs of collecting federal fees and other receipts, the Secretary of the Treasury should direct the FMS Commissioner to establish a process for updating collections guidance and regulations based on key lessons-learned from its reviews and communicating that information to all agencies so that agencies whose review is scheduled for later years can begin to implement changes.
Agency Affected: Department of the Treasury
Status: Closed - Implemented
Comments: As of October 2010, the Financial Management Service (FMS) updated its Holistic Approach Plan for reviewing agency collections to include its approach to updating collections guidance and regulations based on key lessons-learned and a strategy for communicating with federal agencies during the holistic approach process.
Recommendation: The Secretaries of the Interior and Commerce should include FMS's costs of collection, as available, in analyzing Minerals Management Service, the National Park Service, the United States Geological Survey, the United States Patent and Trademark Office, and the National Oceanic and Atmospheric Administration programs and, as appropriate, the design and level of user fees.
Agency Affected: Department of Commerce
Status: Open
Comments: In a January 20, 2010 letter, the Secretary of Commerce stated that the Department, PTO and NOAA agree with the recommendation and will work with the Financial Management Service (FMS) to determine the cost of collection services FMS provides to each agency. Further, the Patent and Trademark Office (PTO) will record the imputed costs in its financial statements. As of September 2010, PTO was awaiting receipt of cost of collections information from FMS. As of September 2010, the National Oceanic and Atmospheric Administration ( NOAA) planned to updated its NOAA Finance Handbook to add a requirement that FMS costs of collections be included when calculating user fees, unless the fee is exempt from full cost recovery. As a result of discussions with FMS, NOAA determined that there is no other corrective action to take at this time because FMS is not charging the agency for its collection services. As of November 2011 GAO is awaiting a response from FMS regarding their planned implementation of a new policy to notify agencies of the cost of collection services. When we have that information, we will follow-up with the Department of Commerce.
Recommendation: The Secretaries of the Interior and Commerce should include FMS's costs of collection, as available, in analyzing Minerals Management Service, the National Park Service, the United States Geological Survey, the United States Patent and Trademark Office, and the National Oceanic and Atmospheric Administration programs and, as appropriate, the design and level of user fees.
Agency Affected: Department of the Interior
Status: Open
Comments: In a January 27, 2010 letter, the Department of the Interior outlined its action plan for implementing the recommendation. Specifically, the Department will include the costs of the Financial Management Services' collection services in analyzing MMS, NPS, and USGS programs and, as appropriate, the design and level of user fees when that cost information becomes available. As of November 2010, FMS had not yet provided the Department with information on its costs of collections nor charged for those services, and therefore those costs have not been included in the fee structure for MMS, NPS or USGS. As of November 2011 GAO is awaiting a response from FMS regarding their planned implementation of a new policy to notify agencies of the cost of collection services. When we have that information, we will follow-up with the Department of the Interior.