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Report to the Committee on Government Reform, House of Representatives:

August 2003:

BUDGET ISSUES:

Franchise Fund Pilot Review:

GAO-03-1069:

GAO Highlights:

Highlights of GAO-03-1069, a report to the Committee on Government 
Reform, House of Representatives

Why GAO Did This Study:

Congress is considering the reauthorization of the six franchise fund 
pilots authorized by the Government Reform Act of 1994. These self-
supporting business-like entities were established to provide common 
administrative services on a fully reimbursable basis. The 
authorization for most of the pilots will expire at the end of fiscal 
year 2003. In addition to the suggestion of giving the pilots 
permanent authorization, there has been some discussion in recent 
years of expanding the franchise fund concept so that all departments 
and independent agencies can set up a franchise fund. To provide the 
context to evaluate franchise fund pilots and fully understand 
reauthorization issues, GAO agreed to identify the many funds, called 
intragovernmental revolving funds, that operate with purposes similar 
to that of franchise funds and to analyze their legal authorities to 
determine if franchise funds were somehow unique. In addition, we 
examined the operations and managerial cost accounting processes of 
the franchise fund pilots at the Departments of the Interior and 
Commerce. We determined if they had taken into account the criteria 
suggested by the Office of Management and Budget (OMB), including: (1) 
adhering to OMB/Chief Financial Officers (CFO) Council’s 12 business 
operating principles, (2) accounting for full cost, and (3) conducting 
audits of financial statements at the fund level. 

What GAO Found:

The six franchise fund pilots are part of a group of 34 
intragovernmental revolving (IR) funds that were created to provide 
the common support services required by many federal agencies. In 
general, the legal authorities for these 34 funds are very similar. 
Twelve of the 34 funds—including 5 of the franchise fund pilots—have 
explicit authority to charge for an operating reserve and/or to retain 
a reserve for acquisition of capital equipment and financial 
management improvements. 

The franchise fund pilots at the Departments of Interior and Commerce 
have both (1) taken into account many of the 12 business operating 
principles, (2) designed their cost accounting processes to set fees 
to recover the full cost of operations, and (3) progressed toward 
implementing the main cost accounting standards. The Interior 
Franchise Fund’s (IFF) major business line, GovWorks, provides 
acquisition services and has seen dramatic growth in revenue and 
workload since fiscal year 1997. GovWorks expects continuing growth 
through fiscal year 2007. The IFF has been subject to an audit of its 
financial statements at the franchise fund level through fiscal year 
2002. The Commerce Franchise Fund’s (CFF) only business line, Office 
of Computer Services (OCS), provides information technology 
infrastructure support services and has had a declining revenue and 
customer base. However, OCS expects its revenues to remain stable 
through fiscal year 2005. The CFF was subject to financial audits at 
the franchise fund level for fiscal years 1997 and 1998, and at the 
department level for fiscal years 2001 and 2002. No audits were 
conducted for fiscal years 1999 or 2000. 

Longer-term reauthorization (more than 1 or 2 years) would be helpful 
to the operation of franchise fund pilots, but neither their legal 
authority nor their operation makes franchise funds unique compared to 
other IR funds. A primary attraction to the franchise fund label is 
the explicit ability to retain reserves, and Congress could, and has, 
given this authority to other IR funds. The explicit authority 
provisions granted to franchise fund pilots (and a few other IR funds) 
could be considered case-by-case for individual IR funds. In deciding 
whether to provide these authorities to any individual fund, Congress 
could use the same criteria suggested by OMB for franchise fund 
pilots, including: (1) examining operations against OMB/CFO’s 12 
business operating principles, (2) determining if managerial cost 
accounting processes are in place to account for the full unit costs 
of outputs produced, and (3) considering if annual or periodic 
independent audits are being conducted at the fund level to ensure the 
reliability of the fund’s financial information. Individual case-by-
case authority would also permit Congress to consider and evaluate the 
agency’s commitment and the strength of the IR fund’s leadership, 
which are additional factors that can influence the success of the 
fund. 

www.gao.gov/cgi-bin/getrpt?GAO-03-1069.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Susan J. Irving at 
(202) 512-9142 or irvings@gao.gov.

[End of section]

Contents:

Letter: 

Results in Brief: 

Background: 

Intragovernmental Revolving Funds and Their Legal Authorities: 

Operations of the Franchise Fund Pilots at Interior and Commerce: 

Reauthorization Issues: 

Appendixes:

Appendix I: Franchise Fund Pilot Review: 

Appendix II: 12 Business Operating Principles: 

Appendix III: Authority to Retain Unobligated Balances--Franchise 
Pilots and Comparable IR Funds: 

Letter August 22, 2003:

The Honorable Tom Davis 
Chairman	 
The Honorable Henry A. Waxman 
Ranking Minority Member	 
Committee on Government Reform 
House of Representatives:

In your January 9, 2003, letter you asked us to evaluate the franchise 
fund pilots authorized by the Government Management Reform Act of 1994 
as you consider their reauthorization. To fully understand 
reauthorization issues, we agreed to (1) examine the universe of 
intragovernmental revolving (IR) funds[Footnote 1] (of which franchise 
funds are a type) and their legal authorities and to determine how 
these authorities differ, (2) study the operations of selected 
franchise fund pilots, and (3) identify issues that Congress might 
consider as it contemplates permanent reauthorization of franchise 
funds. On July 11, 2003, we briefed committee staff on the results of 
our work. As agreed with your office, this letter summarizes and 
transmits the information provided in that briefing.

We used budget data to identify IR funds and reviewed the U.S. Code to 
analyze their legal authorities. We selected the franchise fund pilots 
at the Departments of the Interior and Commerce for case studies. We 
determined that GovWorks is the primary component of the Interior 
franchise fund (IFF) and that the Office of Computer Services (OCS) is 
the sole component of the Commerce franchise fund (CFF), and our case-
study work focused on these two entities. We interviewed agency 
officials at the department and franchise fund levels, examined a 
variety of documentation, and did an in-depth review of the managerial 
cost accounting processes at the franchise fund level. During this 
review, we examined work done by other auditors and performed limited 
testing of data reliability but did not conduct audit procedures 
designed to render an opinion on the franchise funds' financial 
information. We obtained comments from GovWorks and OCS on a draft of 
the report relevant to each and incorporated those comments, which were 
technical in nature, where appropriate. Our work was conducted in 
Washington, D.C., from January through July 2003, in accordance with 
generally accepted government auditing standards. (See pages 12 to 
14.):

Results in Brief:

Although longer-term authorization for franchise fund pilots would be 
helpful to the operation of the funds and their clients, neither their 
legal authority nor their operation makes franchise funds unique 
compared to other IR funds. A primary attraction to the franchise fund 
label is the explicit ability to retain 4 percent of total annual 
income, and Congress could, and has, given this authority to other IR 
funds. Since most large agencies already have at least one IR fund, 
allowing all departments and independent agencies to set up franchise 
funds is unnecessary. Instead, the explicit authority provisions 
granted to franchise fund pilots (and a few other IR funds) could be 
considered case-by-case for individual IR funds. In deciding whether to 
provide these authorities, Congress could use the same criteria 
suggested for franchise fund pilots, including: (1) examining 
operations against the 12 business operating principles established by 
the Office of Management and Budget (OMB) and the Chief Financial 
Officers (CFO) Council, (2) determining if managerial cost accounting 
processes are in place to account for the full unit costs of outputs 
produced, and (3) considering if annual or periodic independent audits 
are being conducted at the fund level to ensure the reliability of the 
fund's financial information. Individual case-by-case authority would 
also permit Congress to consider and evaluate the agency's commitment 
and the strength of the IR fund's leadership, which are additional 
factors that can influence the success of the fund. (See pages 47 and 
48.):

Background:

Federal agencies are prohibited by law from transferring funds from one 
agency to another, unless otherwise authorized by law. The Economy Act 
of 1932 authorizes a federal agency to provide goods or services to 
another federal agency and generally provides authority for federal 
agencies to enter into intragovernmental transactions when no other, 
more specific, authority applies. However, the Economy Act restricts 
flexibility by requiring the client agency to deobligate fiscal year 
funds at the end of the period of availability to the extent that these 
funds have not been obligated by the performing agency. In contrast, 
where an interagency agreement is based on specific statutory authority 
other than the Economy Act, an agency is not required to deobligate 
funds at the end of the period of availability. The specific legal 
authorities creating IR funds authorize these funds to enter into 
intragovernmental transactions and provide more flexibility by allowing 
the client agency's fiscal year funds to remain obligated, even after 
the end of the fiscal year, to pay the IR fund for the provision of 
services which meet a legitimate or bona fide need incurred during the 
period of availability of the customer agency's appropriation.[Footnote 
2],[Footnote 3]

The Government Management Reform Act of 1994 authorized OMB to 
designate six franchise fund pilots. These pilots are a type of IR fund 
that were established as self-supporting business-like entities 
providing common administrative services on a fully reimbursable basis. 
Between May 1996 and January 1997, OMB designated pilots at the 
Departments of Commerce, Veterans Affairs (VA), Health and Human 
Services (HHS), the Interior, and the Treasury, and at the 
Environmental Protection Agency (EPA). As criteria for operation, OMB 
and the CFO Council defined 12 business operating principles for the 
franchise fund pilots.[Footnote 4] OMB also stressed the importance of 
accounting for full cost[Footnote 5] and suggested that agencies 
consider the usefulness of audited financial statements at the fund 
level. The six pilots provide a variety of common services, such as 
acquisition management, financial management services, and employee 
assistance programs. They are similar to other business-like entities 
such as the National Finance Center (NFC) at the Department of 
Agriculture and the Federal Systems Integration and Management Center 
(FEDSIM) at the General Services Administration (GSA).

The pilots were originally to expire at the end of fiscal year 1999, 
but the date has been extended three times (the last two times on an 
annual basis). As of August 2003, authorization for most of the pilots 
will expire at the end of fiscal year 2003. The Treasury franchise fund 
is authorized through the end of fiscal year 2004 and the EPA pilot has 
permanent authorization. In addition to suggestions of permanent 
authorization for the pilots, there has been some discussion in recent 
years of expanding the franchise fund concept governmentwide, that is, 
allowing all departments and independent agencies to set up franchise 
funds.

Intragovernmental Revolving Funds and Their Legal Authorities:

We identified 58 IR funds with varying titles and purposes. Most IR 
funds function under the title or label "working capital fund." 
Examples of other labels include revolving funds, supply funds, and 
franchise funds. Most large agencies have at least one IR fund, and 
many have more than one. For example, Interior has a franchise fund 
pilot and four working capital funds. Intragovernmental revolving funds 
were created for a variety of purposes, but most frequently, to provide 
the common support services required by many federal agencies. Examples 
include photocopying, payroll services, information technology 
services, and financial management services. We determined that 34 of 
the 58 IR funds provide common services, while the remaining 24 have 
very specific purposes of providing goods or services to satisfy needs 
unique to their agencies. (See pages 22 and 23.):

The 34 IR funds that provide common services operate under similar 
legal authorities. These authorities generally specify the means of 
initial capitalization and allow both internal entities and external 
agencies to pay the IR funds for services provided, either by 
reimbursement or in advance (some are required to receive payments in 
advance). Intragovernmental revolving funds are generally required to 
charge rates for their services sufficient to recover all operational 
expenses, although over the long term they are not intended to earn 
more than is required to break-even. In fact, the legal authorities for 
IR funds commonly require the return of surplus amounts to the Treasury 
at the end of the fiscal year. However, some receipts may be carried 
over to the next fiscal year as unobligated balances, including amounts 
reserved to cover the costs of annual leave and depreciation. Some 
additional discretion to carry over unobligated balances is provided to 
22 of the 34 IR funds. For example, the head of the agency is allowed 
to determine the level of funding required to meet the needs of 16 of 
the IR funds and 6 IR funds are not specifically required to return 
surpluses to the Treasury. This discretion does not mean that IR funds 
are allowed to operate with continuing surpluses; over the long term, 
they are still required to break-even. The remaining 12 of the 34 
funds--including 5 of the franchise fund pilots--have explicit 
authority to retain additional unobligated balances. By statute, the 12 
funds are authorized to charge for an operating reserve and/or to 
retain a reserve for acquisition of capital equipment and financial 
management improvements. Five of the franchise fund pilots have 
explicit authority for both a "reasonable operating reserve" and "to 
retain up to 4 percent of total annual income for acquisition of 
capital equipment and financial management improvements."[Footnote 6] 
Appendix 3 shows the various authorities by fund. (See pages 24 through 
27.):

Operations of the Franchise Fund Pilots at Interior and Commerce:

During our case studies at the Interior and Commerce franchise fund 
pilots, we found that both have (1) taken into account many of the 12 
business operating principles, (2) designed their cost accounting 
processes to set fees to recover the full cost of operations, and (3) 
progressed toward implementing the five main cost accounting 
standards.[Footnote 7] The IFF's major business line, GovWorks, 
provides acquisition services and has seen dramatic growth in revenue 
and workload since fiscal year 1997. GovWorks projects continuing 
growth through fiscal year 2007. The IFF has been subject to an audit 
of its financial statements at the franchise fund level through fiscal 
year 2002. The CFF's only business line, OCS, provides information 
technology infrastructure support services and has had a declining 
revenue and customer base. However, OCS expects its revenues to remain 
stable through fiscal year 2005. The CFF was subject to financial 
audits at the franchise fund level for fiscal years 1997 and 1998, and 
at the department level for fiscal years 2001 and 2002. No audits were 
conducted for fiscal years 1999 or 2000. (See pages 28 through 35 for 
the IFF and pages 36 through 43 for the CFF.):

Reauthorization Issues:

During the course of our work, we identified several reauthorization 
issues. Franchise fund managers cited the benefits of working under the 
franchise fund label and perceived the ability to retain 4 percent of 
total annual income as a benefit of a franchise fund. However, there is 
not a clear understanding of the relationship between the "4 percent 
retention" provision and the "operating reserve" provision. 
Clarification of the relationship between these two provisions could 
avoid different interpretations. (See pages 44 and 45.):

If franchise funds were to be reauthorized, longer term 
reauthorizations (i.e., more than 1 or 2 years) would be beneficial and 
might provide less uncertainty for current and potential clients than 
do annual reauthorizations. Franchise fund managers mentioned other 
changes that might be helpful. Although the ability to receive payment 
in advance is sometimes advantageous, the requirement for advance 
payment reduces the IR funds' flexibility to work with some clients. 
One franchise fund manager said that additional human capital 
flexibilities, such as in hiring practices, might be beneficial. (See 
page 45.):

If the pilots were not reauthorized, many of the services provided 
would probably continue under other authorities. For example, both 
GovWorks and OCS operated under different authorities prior to becoming 
part of their respective franchise fund pilots. OCS officials told us 
that they would probably continue to operate under the authority of the 
working capital fund if the CFF pilot did not continue. GovWorks would 
seek authorization as a working capital fund so that it would not have 
to operate under the authority of the Economy Act. (See page 46.):

:

As agreed with your office, unless you announce the contents of this 
report earlier, we plan no further distribution until 30 days from the 
date of this letter. At that time, we will provide copies of this 
report to other interested congressional committees and make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions regarding the information in 
this report, please contact me at (202) 512-9142 or Christine Bonham, 
Assistant 
Director, at (202) 512-9576. Key contributors to this review were 
Jennifer A. Ashford, Michael S. LaForge, Bill Wright, Hannah R. Laufe, 
Mark P. Connelly, and Elizabeth Lessman.

Susan J. Irving 
Director, 
Federal Budget Analysis 
Strategic Issues:

Signed by Susan J. Irving: 

[End of section]

Appendixes: 

[End of section]

Appendix I: Franchise Fund Pilot Review:

[See PDF for image]

[End of figure] 

[End of section]

Appendix II: 12 Business Operating Principles:

Operating Principle: 1) Services; OMB Description: The enterprise 
should only provide common administrative support services.

Operating Principle: 2) Organization; OMB Description: The organization 
would have a clearly defined organizational structure including readily 
identifiable delineation of responsibilities and functions and 
separately identifiable units for the purpose of accumulating and 
reporting revenues and costs. The funds of the organization must be 
separate and identifiable and not commingled with another 
organization.

Operating Principle: 3) Competition; OMB Description: The provision of 
services should be on a fully competitive basis. The organization's 
operation should not be "sheltered" or be a monopoly.

Operating Principle: 4) Self-sustaining/; Full Cost Recovery; OMB 
Description: The operation should be self-sustaining. Fees will be 
established to recover the "full costs," as defined by standards issued 
in accordance with FASAB (the Federal Accounting Standards Advisory 
Board).

Operating Principle: 5) Performance Measures; OMB Description: The 
organization must have a comprehensive set of performance measures to 
assess each service that is being offered.

Operating Principle: 6) Benchmarks; OMB Description: Cost and 
performance benchmarks against other "competitors" are maintained and 
evaluated.

Operating Principle: 7) Adjustments to Business; Dynamics; OMB 
Description: The ability to adjust capacity and resources up or down as 
business rises or falls, or as other conditions dictate, if necessary.

Operating Principle: 8) Surge Capacity; OMB Description: Resources to 
provide for "surge" capacity and peak business periods, capital 
investments, and new starts should be available.

Operating Principle: 9) Cessation of Activity; OMB Description: The 
organization should specify that prior to curtailing or eliminating a 
service, the provider will give notice within a reasonable and mutually 
agreed time frame so the customer may obtain services elsewhere. Notice 
will also be given within a reasonable and mutually agreeable timeframe 
to the provider when the customer elects to obtain services elsewhere.

Operating Principle: 10) Voluntary Exit; OMB Description: Customers 
should be able to "exit" and go elsewhere for services after 
appropriate notification to the service provider and be permitted to 
choose other providers to obtain needed service.

Operating Principle: 11) FTE Accountability[A]; OMB Description: Full 
Time Equivalents (FTEs) would be accounted for in a manner consistent 
with the Federal Workforce Restructuring Act and OMB requirements, such 
as Circular A-11.

Operating Principle: 12) Initial Capitalization[A]; OMB Description: 
Capitalization of franchises, administrative service, or other cross-
servicing operations should include the appropriate FTE commensurate 
with the level of effort the operation has committed to perform.

Source: OMB and the CFO Council:

[A] We did not examine these principles in our case study of the 
Interior and Commerce franchise fund pilots.

[End of table]

[End of section]

Appendix III: Authority to Retain Unobligated Balances--Franchise 
Pilots and Comparable IR Funds:

1; Department/ agency: Commerce; Fund name/bureau: Franchise fund, 
Departmental Management; Secretarial discretion to retain unobligated 
balances[A]: No; Explicit authority to retain operating reserve: 
Yes; Explicit authority to retain up to 4% of total annual income: Yes; 
Other explicit authority to retain balances: No.

2; Department/ agency: Interior; Fund name/bureau: Franchise fund, 
Minerals Management Service; Secretarial discretion to retain 
unobligated balances[A]: No; Explicit authority to retain 
operating reserve: Yes; Explicit authority to retain up to 4% of total 
annual income: Yes; Other explicit authority to retain balances: No.

3; Department/ agency: Treasury; Fund name/bureau: Franchise fund, 
Departmental Offices; Secretarial discretion to retain unobligated 
balances[A]: No; Explicit authority to retain operating reserve: 
Yes; Explicit authority to retain up to 4% of total annual income: Yes; 
Other explicit authority to retain balances: No.

4; Department/ agency: VA; Fund name/bureau: Franchise fund, 
Departmental Administration; Secretarial discretion to retain 
unobligated balances[A]: No; Explicit authority to retain 
operating reserve: Yes; Explicit authority to retain up to 4% of total 
annual income: Yes; Other explicit authority to retain balances: No.

5; Department/ agency: EPA; Fund name/bureau: Working capital fund 
(WCF); Secretarial discretion to retain unobligated balances[A]: 
No; Explicit authority to retain operating reserve: Yes; Explicit 
authority to retain up to 4% of total annual income: Yes; Other explicit 
authority to retain balances: No.

6; Department/ agency: Transportation; Fund name/bureau: 
Administrative services franchise fund, FAA; Secretarial discretion to 
retain unobligated balances[A]: No; Explicit authority to retain 
operating reserve: Yes; Explicit authority to retain up to 4% of total 
annual income: Yes; Other explicit authority to retain balances: No.

7; Department/ agency: Commerce; Fund name/bureau: WCF, Census; 
Secretarial discretion to retain unobligated balances[A]: No; 
Explicit authority to retain operating reserve: Yes; Explicit authority 
to retain up to 4% of total annual income: No; Other explicit 
authority to retain balances: No.

8; Department/ agency: Homeland Security; Fund name/bureau: WCF, 
Departmental Management; Secretarial discretion to retain unobligated 
balances[A]: No; Explicit authority to retain operating reserve: 
Yes; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

9; Department/ agency: Justice; Fund name/bureau: WCF, General 
Administration; Secretarial discretion to retain unobligated 
balances[A]: No; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
Yes; Other explicit authority to retain balances: Yes.

10; Department/ agency: CIA; Fund name/bureau: Central services WCF; 
Secretarial discretion to retain unobligated balances[A]: No; 
Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: Yes; Other explicit 
authority to retain balances: No.

11; Department/ agency: Labor; Fund name/bureau: WCF, Departmental 
Management; Secretarial discretion to retain unobligated balances[A]: 
No; Explicit authority to retain operating reserve: No; 
Explicit authority to retain up to 4% of total annual income: No; 
Other explicit authority to retain balances: Yes.

12; Department/ agency: National Archives and Records Administration; 
Fund name/bureau: Records center revolving fund; Secretarial discretion 
to retain unobligated balances[A]: No; Explicit authority to 
retain operating reserve: No; Explicit authority to retain up to 
4% of total annual income: No; Other explicit authority to retain 
balances: Yes.

13; Department/ agency: Agriculture; Fund name/bureau: WCF, Executive 
Operations; Secretarial discretion to retain unobligated balances[A]: 
Yes; Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: No; Other 
explicit authority to retain balances: No.

14; Department/ agency: Commerce; Fund name/bureau: WCF, Departmental 
Management; Secretarial discretion to retain unobligated balances[A]: 
Yes; Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: No; Other 
explicit authority to retain balances: No.

15; Department/ agency: Commerce; Fund name/bureau: WCF, National 
Institute of Standards and Technology; Secretarial discretion to retain 
unobligated balances[A]: Yes; Explicit authority to retain operating 
reserve: No; Explicit authority to retain up to 4% of total annual 
income: No; Other explicit authority to retain balances: No.

16; Department/ agency: Defense--Military; Fund name/bureau: Buildings 
maintenance fund; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

17; Department/ agency: Energy; Fund name/bureau: WCF, Departmental 
Administration; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

18; Department/ agency: HHS[B]; Fund name/bureau: HHS service and 
supply fund, Program Support Center; Secretarial discretion to retain 
unobligated balances[A]: Yes; Explicit authority to retain operating 
reserve: No; Explicit authority to retain up to 4% of total annual 
income: No; Other explicit authority to retain balances: No.

19; Department/ agency: Housing and Urban Development; Fund name/
bureau: WCF, Management and Administration; Secretarial discretion to 
retain unobligated balances[A]: Yes; Explicit authority to retain 
operating reserve: No; Explicit authority to retain up to 4% of 
total annual income: No; Other explicit authority to retain 
balances: No.

20; Department/ agency: State; Fund name/bureau: WCF, Administration of 
Foreign Affairs; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

21; Department/ agency: Interior; Fund name/bureau: WCF, Bureau of 
Reclamation; Secretarial discretion to retain unobligated balances[A]: 
Yes; Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: No; Other 
explicit authority to retain balances: No.

22; Department/ agency: Interior; Fund name/bureau: WCF, Departmental 
Management; Secretarial discretion to retain unobligated balances[A]: 
Yes; Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: No; Other 
explicit authority to retain balances: No.

23; Department/ agency: Interior; Fund name/bureau: WCF, United States 
Geological Survey; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

24; Department/ agency: Treasury; Fund name/bureau: WCF, Departmental 
Offices; Secretarial discretion to retain unobligated balances[A]: Yes; 
Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: No; Other 
explicit authority to retain balances: No.

25; Department/ agency: Transportation; Fund name/bureau: 
Transportation Administrative Service Center, Office of the Secretary; 
Secretarial discretion to retain unobligated balances[A]: Yes; Explicit 
authority to retain operating reserve: No; Explicit authority to 
retain up to 4% of total annual income: No; Other explicit 
authority to retain balances: No.

26; Department/ agency: VA; Fund name/bureau: Supply fund, Departmental 
Administration; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

27; Department/ agency: Equal Employment Opportunity Commission; Fund 
name/bureau: Education, technical assistance and training revolving 
fund; Secretarial discretion to retain unobligated balances[A]: Yes; 
Explicit authority to retain operating reserve: No; Explicit 
authority to retain up to 4% of total annual income: No; Other 
explicit authority to retain balances: No.

28; Department/ agency: GSA; Fund name/bureau: WCF, General Activities; 
Secretarial discretion to retain unobligated balances[A]: Yes; Explicit 
authority to retain operating reserve: No; Explicit authority to 
retain up to 4% of total annual income: No; Other explicit 
authority to retain balances: No.

29; Department/ agency: GSA; Fund name/bureau: Federal buildings fund, 
Real Property Activities; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

30; Department/ agency: GSA; Fund name/bureau: General supply fund, 
Supply and Technology Activities; Secretarial discretion to retain 
unobligated balances[A]: Yes; Explicit authority to retain operating 
reserve: No; Explicit authority to retain up to 4% of total annual 
income: No; Other explicit authority to retain balances: No.

31; Department/ agency: GSA; Fund name/bureau: Information technology 
fund (FEDSIM), Supply and Technology Activities; Secretarial discretion 
to retain unobligated balances[A]: Yes; Explicit authority to retain 
operating reserve: No; Explicit authority to retain up to 4% of 
total annual income: No; Other explicit authority to retain 
balances: No.

32; Department/ agency: International Assistance Programs; Fund name/
bureau: WCF, Agency for International Development; Secretarial 
discretion to retain unobligated balances[A]: Yes; Explicit authority to 
retain operating reserve: No; Explicit authority to retain up to 
4% of total annual income: No; Other explicit authority to retain 
balances: No.

33; Department/ agency: Legislative Branch; Fund name/bureau: Fedlink 
program and Federal research program, Library of Congress; Secretarial 
discretion to retain unobligated balances[A]: Yes; Explicit authority to 
retain operating reserve: No; Explicit authority to retain up to 
4% of total annual income: No; Other explicit authority to retain 
balances: No.

34; Department/ agency: Office of Personnel Management; Fund name/
bureau: Revolving fund; Secretarial discretion to retain unobligated 
balances[A]: Yes; Explicit authority to retain operating reserve: 
No; Explicit authority to retain up to 4% of total annual income: 
No; Other explicit authority to retain balances: No.

Total; Department/ agency: No; Fund name/bureau: No; 
Secretarial discretion to retain unobligated balances[A]: 22; Explicit 
authority to retain operating reserve: 8; Explicit authority to retain 
up to 4% of total annual income: 8; Other explicit authority to retain 
balances: 3.

Source: GAO analysis:

Note: Shading highlights franchise fund pilots.

[A] Most of these funds are required to deposit in miscelleneous 
receipts of the Treasury amounts in excess of the needs fo the fund; 
however, in some cases this requirement is not specifically stipulated.

[B] The HHS franchise fund pilot operates under the statutory authority 
for the HHS Service and Supply Fund, which is not required to return 
excess to the Treasury. There is no explicit authority specifying an 
operating reserve or the retention of up to 4 percent of total annual 
income, although HHS franchise fund officials believe that they are 
allowed this authority according to Chief Financial Officers Council, 
Federal Franchise Pilots: Pilot Program Implementation Guide 
(Washington, D.C.: April 1996).


[End of table]

[End of section]

(450182):

:

:

FOOTNOTES

[1] An IR fund conducts continuing cycles of business-like activity 
within and between government agencies. It charges for the sale of 
products or services and uses the proceeds to finance its spending, 
usually without requirement for annual appropriations. 

[2] The use of a revolving fund does not change the period of 
availability of the customer agency's appropriation. It is improper for 
a customer funded by fiscal year appropriations to place orders in 
excess of legitimate needs, thereby using the revolving fund to extend 
the life of the appropriation.

[3] This is only one of the differences between the Economy Act of 1932 
and the legal authorities for IR funds, but it is the one most 
important for our discussion. Other differences are mentioned on page 
15. 

[4] See appendix II for a list of the 12 business operating principles.

[5] The Statement of Federal Financial Accounting Standards (SFFAS) No. 
4 sets forth basic cost accounting concepts and five main standards for 
managerial cost accounting by the federal government.

[6] The HHS franchise fund pilot operates under the statutory authority 
for the HHS service and supply fund, which is not required to return 
excess to the Treasury. There is no explicit authority specifying an 
operating reserve or the retention of up to 4 percent of annual income, 
although HHS franchise fund officials believe that they are allowed 
this authority according to Chief Financial Officers Council, Federal 
Franchise Pilots: Pilot Program Implementation Guide (Washington, D.C.: 
April 1996).

[7] The standards are set forth in SFFAS No. 4.

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