Immigration Application Fees:

Costing Methodology Improvements Would Provide More Reliable Basis for Setting Fees

GAO-09-70: Published: Jan 23, 2009. Publicly Released: Jan 23, 2009.

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The Department of Homeland Security's (DHS) U.S. Citizenship and Immigration Services (USCIS) is responsible for granting or denying immigration benefits to individuals. USCIS charges fees for the millions of immigration applications it receives each year to fund the cost of processing and adjudicating them. In February 2007, USCIS completed a study to determine the full costs of its operations and the level at which application fees should be set to recover those costs. USCIS's new fee schedule increased application fees by a weighted average of 86 percent. Almost 96 percent of USCIS's fiscal year 2008 budget of $2.6 billion was expected to have come from fees. GAO was asked to review the methodology USCIS used in its fee review and controls in place over collection and use of fees. In this report, GAO addresses the consistency of the methodology with federal accounting standards and principles and other guidance, including whether key assumptions and methods were sufficiently justified and documented. The report also addresses internal controls USCIS has in place over the collection and use of fees.

In 2007, USCIS completed a fee review in which USCIS estimated the costs of its immigration application processing and adjudication services and, in accordance with management's objective, set the fees at a level to recover those costs. The methodology USCIS used in its review, however, did not consistently adhere to federal accounting standards and principles and other guidance. While federal accounting standards allow flexibility for agencies to develop managerial cost accounting practices that are suited to their needs, they also provide certain specific guidance based on sound cost accounting concepts. USCIS's methodology, for example, did not include the costs paid by other federal entities on behalf of USCIS. Federal standards and guidance also call for documentation that is sufficient to allow an understanding of and provide justification for the cost assignment processes and data used. USCIS did not adequately document the detailed processes used or sufficiently justify assumptions used in allocating costs to various activities on a prorated basis. As a result, USCIS could not show that its methods provided a reasonable distribution of the costs to the various types of applications. For instance, USCIS allocated $732 million of overhead costs (or 31 percent of total costs)--including information technology operations and maintenance--to offices based on the number of staff full-time equivalents (FTE) in each office. However, USCIS's documentation did not sufficiently justify (1) why cost allocation was used instead of other possible methods or (2) why it did not include about 6,100 contract workers and used only approximately 7,900 FTEs of the total federal FTEs of about 10,400 as the basis for allocation. USCIS also did not adequately justify the equal assignment of activity costs representing 51 percent of total costs to each application type. While such pro rata assignment of costs may be a reasonable method in some circumstances, USCIS did not document its justification for the assumptions made when deciding which costs to allocate on a prorated basis and how those costs should be allocated. Because of these inconsistencies with federal accounting standards and principles and other guidance, USCIS cannot support the reasonableness of cost assignments to the various application types. USCIS has implemented accountability mechanisms to track the use of both regular application fees as well as premium processing fees intended for specific projects. USCIS plans to use its premium processing fee collections to fund its transformation program to make long-term improvements to its business processes and technology. Through its monitoring of fee collection procedures, USCIS has identified some weaknesses at one of its service centers. It has taken actions to strengthen service center controls in the short term, and it is moving all fee receipt functions and the application processing done in preparation for adjudication to lockbox facilities to further strengthen control over collections.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To help make USCIS's costing methodology used for determining application fees consistent with federal accounting standards and principles and to strengthen the reliability of the cost assignments used to set fees, the Secretary of Homeland Security should direct the Director of USCIS to identify the full cost of application processing services whether paid directly by USCIS or by other federal entities for USCIS's benefit, such as the costs of lockbox services paid by Treasury's Financial Management Service (FMS) and certain retirement benefits to be paid to USCIS retirees by OPM (Office of Personnel Management).

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: USCIS agreed with our recommendation. USCIS has substantially addressed our recommendation by identifying the costs paid by other federal entities for USCIS's benefit. In August 2010, USCIS reported that the estimated cost of retirement, health, and life insurance costs to be paid by OPM for USCIS employees is approximately $60.5 million in FY 2010 and $60.7 million in FY 2011. Similarly, USCIS reported that the estimated cost of Treasury's lockbox service is $57 million for FY 2010 and $48.2 million in FY 2011. The total of these estimated inter-entity costs and estimated costs incurred directly by USCIS would approximate the full cost of application processing services.

    Recommendation: To help make USCIS's costing methodology used for determining application fees consistent with federal accounting standards and principles and to strengthen the reliability of the cost assignments used to set fees, the Secretary of Homeland Security should direct the Director of USCIS to consider the full costs to the government when USCIS next reviews and sets application fees and document the rationale for decisions made about including or excluding any types of costs in the fee determination process.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: USCIS agreed with our recommendation. In its "FY 2010/2011 Immigration and Examination Account Fee Review Supporting Documentation with Addendum," USCIS stated that in accordance with Office of Management and Budget (OMB) Circular A-25-and with the approval of OMB- it was excluding the costs of lockbox services paid by Treasury and certain retirement benefits paid by OPM from application fees effective in November 2010 because the additional fee increase would be overly burdensome to applicants. In February 2013, USCIS provided evidence of OMB's approval to exclude these costs. While USCIS did not determine whether recovering these costs would be overly burdensome for applicants that file each type of application, USCIS's general consideration of including these processing costs in its fee structure and obtaining OMB's approval for excluding them from its fee structure, addresses our recommendation.

    Recommendation: To help make USCIS's costing methodology used for determining application fees consistent with federal accounting standards and principles and to strengthen the reliability of the cost assignments used to set fees, the Secretary of Homeland Security should direct the Director of USCIS to determine the costs of providing premium processing services to identify the extent to which the $1,000 premium processing fee would cover associated expedited processing costs and infrastructure improvements.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: USCIS agreed with our recommendation. In its October 2013 ?Premium Cost Analysis and Supporting Documentation? USCIS computed the unit costs for premium versus non-premium applications by recreating its FY 2012/2013 fee reviews activity-based cost model. It found that the cost of providing premium processing service was well below the $1,000 fee. We obtained and reviewed USCIS's analysis. By determining and documenting the costs of its premium processing services, USCIS provided a rationale as to how it provided accelerated processing services to business customers without adversely affecting other fee paying applications.

    Recommendation: To help make USCIS's costing methodology used for determining application fees consistent with federal accounting standards and principles and to strengthen the reliability of the cost assignments used to set fees, the Secretary of Homeland Security should direct the Director of USCIS to document the processes and procedures of the costing methodology in sufficient detail so that the specific procedures used and the data sources and cost assignment methods employed for each step in the process can be understood and replicated.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: USCIS agreed with our recommendation. In the USCIS August 2010 Fee Review, USCIS provided an explanation of the Activity-Based Costing (ABC) process in general, but it did not document the specific processes or procedures it used to assign resources to activities or cost objects. This information did not provide sufficient detail to allow a knowledgeable person to carry out or replicate the procedures. In July 2013, we reiterated our request that USCIS provide documentation explaining USCIS's cost accounting processes and procedures, such as a manual, handbook, or guidebook of applicable accounting operations that provides instructions for procedures and practices to be followed. USCIS officials continue to work toward meeting the intent of this recommendation.

    Recommendation: To better support the reasonableness of USCIS's assumptions and cost assignment methods, the Secretary of Homeland Security should direct the Director of USCIS to analyze current cost allocation methods to evaluate whether direct or cause-and-effect assignment methods that are economically feasible or other allocation bases may offer greater precision.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: USCIS agreed with our recommendation. In the course of its subsequent fee review for fiscal year 2012-2013, USCIS identified opportunities to improve upon its cost assignment methods used in previous fee reviews. For example, it reviewed its allocation of international operations (IO) and microfilm digitization application system (MiDAS) costs and established a cause-and-effect relationship between use of IO and MiDAS resources and related immigration applications.

    Recommendation: To better support the reasonableness of USCIS's assumptions and cost assignment methods, the Secretary of Homeland Security should direct the Director of USCIS to fully document the rationale and any related analysis for using the assumptions and cost assignment methods selected.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: USCIS agreed with our recommendation. In the course of its fee review for fiscal year 2012-2013 USCIS documented 57 proposed methodological changes from its fiscal year 2010-2011 fee review in a "Methodology Assumptions Workbook." The Workbook outlined all of the methodology changes that USCIS considered and the rationale for making the proposed change or retaining the methodology used previously.

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