Budget Issues:

Better Fee Design Would Improve Federal Protective Service's and Federal Agencies' Planning and Budgeting for Security

GAO-11-492: Published: May 20, 2011. Publicly Released: May 20, 2011.

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The Federal Protective Service (FPS) is a fee-funded agency in the Department of Homeland Security (DHS) responsible for providing physical security to over 9,000 federal facilities. In 2003 FPS transferred to DHS from the General Services Administration and for the first time was to fully recover its costs. GAO recently reported that stakeholders were concerned about FPS's ability to determine security costs, and the strategies used to address funding challenges had adverse effects on FPS. In this context, Congress directed GAO to evaluate FPS's resource levels. This report (1) analyzes FPS's fee design and proposed alternatives, and (2) examines how FPS's security fees challenge FPS and customer agency budget formulation and execution. GAO reviewed legislation and agency documentation and interviewed FPS and customer agency officials in headquarters and four FPS regions.

FPS increased its basic security fee four times in 6 years to try to cover costs (an increase of over 100 percent). FPS has not reviewed its fees to develop an informed, deliberate fee design. GAO has found that timely, substantive fee reviews are especially critical for fee-funded agencies to ensure that fee collections and operating costs remain aligned. FPS is legally required to charge fees that cover its total costs, but it is not required to align specific fees with specific activities. Nevertheless, in its pricing documents FPS describes an alignment between specific fees and specific activities that does not exist. FPS charges a basic security fee based on facility square footage. In addition, FPS charges facilities that have contractor-provided countermeasures, such as guards, the cost of the countermeasure plus an administrative fee that is a percentage of the countermeasure cost. Federal facilities vary in how much they cost to protect, but FPS does not know to what extent some facilities currently subsidize others. This contributes to expectation gaps with and unknown cross-subsidizations among payers. FPS officials said that basic security costs are meant to be "shared evenly" (i.e., based on square footage) among all payers while administrative fees for FPS-recommended or facility-requested countermeasures are meant to both (1) reflect the increased risk inherent to those facilities requiring or requesting additional countermeasures and (2) subsidize the aggregate cost of basic security services. Charging beneficiaries more or less than actual costs may help achieve policy goals, but FPS lacks data to determine whether this occurs as intended. Modifying the current fee structure or funding FPS through a combination of fees and direct appropriations may address equity and cross-subsidization issues and improve transparency to customers, but without detailed activity cost information and a full fee review the relative trade-offs in any particular proposal are unclear. Further, revising the fee structure alone will not address the variations in service levels reported by FPS's customer agencies or the overall level of services FPS is able to provide. The design and implementation of FPS's fees affect agencies' and FPS's ability to budget for and timely implement security measures in multiple ways. First, FPS lacks a method to propose security fee rates prior to submitting its budget request and cannot finalize its rates each year until it receives congressional instructions about its staffing levels in its appropriation act. As a result, agencies annually request security funding without accurate security cost estimates. Second, FPS makes security recommendations to customer agencies based on current threats, but agencies budget for security costs in advance and therefore must reallocate funds to pay for countermeasures for which they had not planned. Although there are no obvious solutions for these and other budget timing disconnects, alternative budget account structures like a reimbursable account or a revolving fund could help mitigate budgeting and timing challenges for FPS and customer agencies without compromising accountability for federal funds. GAO recommends that the Secretary of Homeland Security direct the Director of FPS to, among other things, conduct and make available regular fee reviews to improve its fee design, include capital investment costs in its rates, and evaluate its current and alternative funding and budget account structures to mitigate budget timing and other issues. DHS concurred with GAO's recommendations.

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: The Secretary of Homeland Security should direct the Director of the Federal Protective Service to evaluate and report to Congress on options to mitigate challenges agencies face in budgeting for FPS security costs, such as: (1) an alternative account structure for FPS to increase flexibility, while retaining or improving accountability and transparency or (2) an approved process for estimating fee rates.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: In July 2013 FPS officials said the agency was working with a contractor to identify and evaluate fee design options, including alternative account structures and various fee rate methodologies. Once the fee methodology has been selected, FPS will develop a formalized process for setting fees. FPS officials said that, in the meantime, they were working with the Department of Homeland Security and the Office of Management and Budget on alternative schedules for approving the fee rates in order to better inform customer agency budget submissions.

    Recommendation: The Secretary of Homeland Security should direct the Director of the Federal Protective Service, in implementing our previous recommendation to evaluate the current fee structure and determine a method for incorporating facility risk, to assess and report to Congress on: (1) the current and alternative fee structures, to include the options and trade-offs discussed in this report, and if appropriate, and (2) options to fund FPS through a combination of fees and direct appropriations, to include the options and trade-offs discussed in this report;

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: In July 2013 FPS officials said the agency had identified and evaluated alteratives within the current fee design and were working with a contractor to identify and evaluate additional options.

    Recommendation: The Secretary of Homeland Security should direct the Director of the Federal Protective Service to make information on the estimated costs of key activities as well as the basis for these cost estimates readily available to affected parties to improve the transparency and credibility--and hence the acceptance by stakeholders--of the process for setting and using the fees.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: In March 2013 FPS completed a draft Activity Based Costing Strategic Communications Plan that outlines the timeframe, information, responsible office, and audience--among other aspects--of communicating how FPS's fees are set, used and reviewed. According to the draft, the plan will be completed and executed in October 2013. FPS officials said the agency also (1) provided information about the fees in memos distributed with monthly bills, (2) conducted to webinars with the General Services Administration (GSA) and (3) provided GSA and FPS account managers with briefings on the current fee structure.

    Recommendation: The Secretary of Homeland Security should direct the Director of the Federal Protective Service to include systemwide capital investments when estimating costs and include them when setting basic security fee rates.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: In July 2013, FPS officials said they had implemented the FPS acquisition review process to evaluate acquisition needs and provide investment oversight throughout the lifecycle to achieve budget goals and objectives. FPS officials said this process informs the activity based costing model used to identify all agency costs and inform fee setting.

    Recommendation: The Secretary of Homeland Security should direct the Director of the Federal Protective Service to conduct regular reviews of FPS's security fees and use this information to inform its fee setting.

    Agency Affected: Department of Homeland Security

    Status: Open

    Comments: In July 2013 FPS officials said the agency had taken actions to begin completing biennial fee reviews. FPS officials provided a July 2012 analysis that included many elements of a biennial fee review and noted ongoing efforts that could inform subsequent reviews. FPS officials said the agency was on track to issue its next fee review in 2014.

    Recommendation: The Secretary of Homeland Security should direct the Director of the Federal Protective Service to work with customer agencies to collect and maintain an accurate list of points of contact of customer agency officials responsible for budget and billing activities as well as facility designated points of contact as we previously recommended.

    Agency Affected: Department of Homeland Security

    Status: Closed - Implemented

    Comments: In July 2013 FPS provided an agency customer billing contact list with the individuals and their contact information for FPS's customer agencies. FPS also updated the information available on their Rent on the Web invoices to show FPS billing contact information to its customer agencies.

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