Budget Issues:

Electronic Processing of Non-IRS Collections Has Increased but Better Understanding of Cost Structure Is Needed

GAO-10-11: Published: Nov 20, 2009. Publicly Released: 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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In November 2011, Financial Management Service (FMS) officials provided GAO with an updated version of its Plan to Provide Banking Service Costs to Federal Agencies, which includes a pilot phase with the five agencies used as case studies in GAO-10-11 and a subsequent enhancement of the FMS Bank Management Service functionality to enable FMS to provide each agency with a monthly or annual banking expenses summary. Initial communications to the five pilot agencies occurred in November 2010 and FMS produced the pilot reports in June 2011. In June 2014, the Bureau of the Fiscal Service (formerly FMS) manually produced fiscal year 2013 Agency Collections Expense Statements (ACES) and distributed them to 16 departments and agencies. The ACES reports capture cost, transaction, and collection data, by collection method for each agency. The ACES information will help agencies plan to set cost-based user fee rates to cover the costs of collections, as appropriate. Plans are in place to automate these reports beginning in fiscal year 2014.

    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

  2. Status: Closed - Implemented

    Comments: As of October 2010, the Financial Management Service (FMS) updated its Holistic Approach Plan to include an analysis 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 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

  3. Status: Closed - Implemented

    Comments: In November 2011, FMS released a new "Policy for Providing Depositary and Other Financial Services to Federal Agencies," which includes criteria for determining when FMS will pay for certain collection and payment services and when a Federal agency will be required to reimburse FMS for the cost of such services. In November, FMS also provided GAO with its "Strategy for Implementing FMS Policy for Providing Depository and Other Financial Services to Federal Agencies," which documents FMS's strategy for the initial and continued implementation of this new policy. FMS also revised its Holistic Approach Plan to assist with enforcement of this updated reimbursement policy.

    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

  4. 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: 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

  5. Status: Closed - Implemented

    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. In June 2011, FMS provided the U.S. Patent and Trademark Office (PTO) National Oceanic and Atmospheric Administration (NOAA) with FMS costs of collection for each agency. In January 2012, the U.S. PTO provided GAO with documentation that PTO has incorporated FMS's costs of collections in its operating expenses and will incorporate them in its fee analysis. As of September 2010, 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. In April 2012, NOAA provided GAO a copy of a policy memorandum it issued on 10/20/2011 which requires that FMS charges be added to NOAA user fees that are designed to recover full costs. NOAA also told GAO that this memo will be incorporated into the Finance Handbook when the Handbook is next updated.

    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

  6. Status: Closed - Implemented

    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. In June 2011, FMS provided the Bureau of Ocean Energy Management (BOEMRE, formerly the Minerals Management Service), the National Park Service (NPS), and the United States Geological Survey (USGS) with FMS costs of collection for each agency. In April 2012, a Department of the Interior official confirmed that the Department now collects and considers imputed FMS costs when analyzing the costs of its programs, but that, because FMS does not charge Interior for the costs, they do not have a mechanism for including those costs in their fees. In October 2012, FMS confirmed that FMS was not reimbursed by BOEMRE, NPS, or USGS for FMS's costs of collections in fiscal years 2010, 2011, or 2012.

    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

 

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