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

July 2004: 

HOMELAND SECURITY: 

Transformation Strategy Needed To Address Challenges Facing the Federal 
Protective Service: 

GAO-04-537: 

GAO Highlights: 

Highlights of GAO-04-537, a report to the Chairman, Committee on 
Government Reform, House of Representatives:  

Why GAO Did This Study: 

With responsibility for protecting thousands of federal facilities, the 
Federal Protective Service (FPS), which transferred from the General 
Services Administration (GSA) to the Department of Homeland Security 
(DHS) in March 2003, plays a critical role in the federal government’s 
defense against the threat of terrorism and other criminal activity. 
GAO was asked to determine what challenges, if any, FPS faces now that 
it has been transferred from GSA to DHS. 

What GAO Found: 

FPS faces a number of significant challenges now that it has been 
transferred from GSA to DHS. These relate to its expanding mission and 
increased responsibility, unresolved issues about how it will be funded 
in the future, and the transfer of FPS mission-support functions to 
DHS. 

* Expanding mission and increased responsibility. FPS has 
responsibility for securing approximately 8,800 GSA government-occupied 
facilities and as a result of the transfer, plans to take on additional 
DHS facilities. FPS might also seek authority to protect other federal 
facilities. FPS’s mission has also expanded to include other homeland 
security functions, such as support for efforts to apprehend foreign 
nationals suspected of illegal activity. In light of these changes, 
however, FPS does not have a transformation strategy to address its 
expanding mission, as well as the other challenges it is facing.

* Unresolved issues related to funding. As part of GSA, FPS was funded 
from security fees that were included with tenant agencies’ rent 
payments. It has not been decided if FPS will begin billing agencies. 
DHS believes that FPS lacks the authority to bill agencies for facility 
protection, but GSA disagrees with DHS. Also, GSA has historically 
covered a shortfall between the cost of security and security fees 
collected. In commenting on this report, DHS and GSA said that for 
fiscal year 2005 the President’s budget includes an increase in the FPS 
security rate that, if enacted, will eliminate the shortfall. Related 
to funding, we also found that FPS’s involvement in homeland security 
activities not directly related to facility protection is inconsistent 
with a requirement in the Homeland Security Act of 2002 that FPS 
funding from agency rents and fees be used solely for the protection of 
government buildings and grounds. 

* Transfer of mission-support functions to DHS. FPS still relies on GSA 
for mission-support functions, such as travel services, payroll, and 
contracting support. DHS plans to assume these functions by the end of 
fiscal year 2004. However, assuming these functions prematurely could 
affect FPS’s ability to accomplish its mission. For example, FPS relies 
heavily on contract guards and is dependent on GSA’s contracting 
management software to write contracts, track costs, and make vendor 
payments.

The Federal Protective Service Protects Thousands of Federal 
Facilities: 

[See PDF for image]

[End of figure]

What GAO Recommends: 

We are recommending that DHS (1) direct FPS to develop a transformation 
strategy that addresses its significant challenges; (2) initiate a 
dialogue with GSA to resolve disagreement over billing issues; (3) 
take immediate steps to ensure that funds collected from agency rents 
and fees are used in the future solely for facility protection; and (4) 
ensure that DHS is prepared to integrate FPS mission-support functions 
before these functions are transferred, even if the target date has to 
be extended. DHS concurred with recommendations 1, 3, and 4. DHS and 
GSA continue to disagree on whether FPS has the authority to bill 
agencies for its services. As such, we added recommendation 2 after 
receiving comments from DHS and GSA to encourage a resolution of this 
disagreement.

www.gao.gov/cgi-bin/getrpt?GAO-04-537.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Mark L. Goldstein at 
(202) 512-2834 or goldsteinm@gao.gov.

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

Expanding Responsibilities Pose a Challenge for FPS: 

Issues Related to How FPS is Funded: 

Successfully Transferring FPS Mission-Support Functions to DHS Will Be 
Challenging: 

Considering Key Practices Could Help FPS Address Challenges and Achieve 
a Successful Transformation: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Homeland Security: 

Appendix III: Comments from the General Services Administration: 

Appendix IV: GAO Legal Analysis of Issues Concerning FPS Activities Not 
Related to Facility Protection: 

Figures: 

Figure 1: FPS's Location within DHS's Organizational Structure: 

Figure 2: FPS Officers Engaged in Biological and Chemical Weapons 
Response Training: 

Figure 3: FPS Officers Assisting with Crowd Control: 

Figure 4: Key Practices for Successful Mergers and Organizational 
Transformations: 

Abbreviations: 

DHS: Department of Homeland Security: 

GSA: General Services Administration: 

FPS: Federal Protective Service: 

BTS: Border and Transportation Security: 

ICE: Immigration and Customs Enforcement: 

PBS: Public Building Service: 

Customs: U.S. Customs Service: 

INS: Immigration and Naturalization Service: 

FAMS: Federal Air Marshal Service: 

NIH: National Institutes of Health: 

OMB: Office of Management and Budget: 

Letter July 14, 2004: 

The Honorable Tom Davis: 
Chairman: 
Committee on Government Reform: 
House of Representatives: 

Dear Mr. Chairman: 

Attention to the physical security of federal facilities has increased 
since the 1995 bombing of the Alfred P. Murrah Federal Building in 
Oklahoma City. The September 11, 2001, terrorist attacks further 
heightened this concern and led to the consolidation of 22 agencies 
into the Department of Homeland Security (DHS). This report responds to 
your request for information on the transfer of the Federal Protective 
Service (FPS) from the General Services Administration (GSA) to DHS, 
where FPS is now part of the Border and Transportation Security 
Directorate's (BTS) component known as Immigration and Customs 
Enforcement (ICE). In creating DHS, the government's efforts to 
prevent, protect against, and respond to potential terrorism were 
centralized. The establishment of a new federal department is an 
enormous undertaking that, in the case of DHS, comes with significant 
risk, which is why we designated the implementation and transformation 
of DHS as a high-risk area in January 2003. In addition, we also 
designated federal real property as a high-risk area affecting several 
agencies, due in part to the major challenge of protecting federal real 
property from terrorism.

Our objective was to determine what challenges, if any, FPS faces now 
that it has been transferred from GSA to DHS. To do this work, we 
collected and analyzed agency documents about the transfer. This 
included policies and procedures, information about the organizational 
structure, and information on other issues related to the transfer, 
such as funding. We assessed the reliability of the data we used and 
found that they were sufficiently reliable for the purposes of this 
report. We also interviewed DHS, FPS, and GSA officials responsible 
for, and directly affected by, the transfer. More information on our 
scope and methodology appears in appendix I. We conducted our work in 
Washington, D.C., between September 2003 and May 2004 in accordance 
with generally accepted government auditing standards.

Results in Brief: 

FPS faces a number of significant challenges now that it has been 
transferred from GSA to DHS. These relate to its expanding mission and 
increased responsibility, unresolved issues about how it will be funded 
in the future, and the transfer of FPS mission-support functions to 
DHS.

* FPS has responsibility for securing approximately 8,800 GSA owned or 
occupied federal facilities and plans to take on responsibility for, 
according to FPS, approximately 2,500 additional DHS facilities. FPS 
officials also discussed the possibility of expanding FPS's 
responsibilities to include protection for facilities where GSA had 
previously delegated authority to tenant agencies--FPS identified 20 
agencies with delegated authority, including the Departments of 
Defense, Interior, and State. DHS has also expanded FPS's mission to 
include other functions related to homeland security, such as providing 
backup to other DHS law enforcement units in the field in efforts to 
apprehend foreign nationals suspected of illegal activity and assisting 
with crowd control at major protests. Despite these changes and the 
major transformation FPS is facing, FPS does not have an overall 
strategy for how it will carry out its expanding mission, as well as 
meet other challenges it faces. For this reason, we are recommending 
that FPS develop such a strategy for its own transformation. In 
commenting on this report, DHS concurred with our recommendation to 
develop a transformation strategy for FPS. DHS said that it was 
developing a strategic plan for FPS that would address our 
recommendation. Although this plan was not issued when we finalized 
this report, it is important to note that a transformation strategy 
goes beyond what is typically contained in a strategic plan. 
Specifically, a transformation strategy would include overall goals for 
the transformation with specific action plans and milestones that would 
allow FPS to track critical phases and essential activities.

* In addition to these formidable mission-related challenges, there are 
unresolved issues related to funding FPS's operations. When FPS was 
part of GSA, tenant agencies' rental payments included security fees 
that GSA used to fund FPS operations. Now that FPS is part of DHS, 
determining the appropriate funding approach for FPS has centered on 
whether GSA will continue to bill agencies for FPS's services, which 
DHS supports, or whether FPS should take on this function, as GSA would 
prefer. Comments from DHS and GSA showed continued disagreement on this 
issue. As such, we have added a recommendation to DHS aimed at 
resolving the disagreement. Also, GSA has historically covered a gap 
that has existed between the cost of protection provided by FPS and the 
security fees collected from tenant agencies--GSA said that this gap 
was $139 million in fiscal year 2003. In commenting on this report, DHS 
and GSA also noted that, for fiscal year 2005, the President's budget 
includes an increase in the FPS security rate that, if enacted, will 
eliminate the shortfall between FPS collections and the cost of 
security. Also related to funding, we found that FPS's involvement in 
homeland security activities not directly related to facility 
protection is inconsistent with a requirement in the Homeland Security 
Act of 2002 that FPS funding from agency rents and fees be used solely 
for the protection of government buildings and grounds. DHS said that 
FPS's involvement in activities not directly related to facility 
protection did not affect its primary mission. However, this is still a 
concern because of the specific legal requirement that agency rents and 
fees be used solely for facility protection. We are recommending that 
the Secretary of Homeland Security take immediate steps to ensure that 
funds collected from agency rents and fees are used in the future 
solely for the protection of government buildings and grounds. DHS 
concurred with this recommendation but had concerns about our 
interpretation of the statute, which are discussed in more detail in 
the report.

* Another challenge facing FPS is its reliance on GSA for mission-
support functions such as payroll, travel reimbursement, and 
contracting support. DHS and GSA did not meet an original goal to 
transfer these functions by the end of fiscal year 2003. According to 
DHS, FPS, and GSA officials, the delay was caused by issues related to 
how DHS systems would be integrated, DHS's focus on integrating larger 
departmental components, and difficulties extracting FPS activities 
from GSA systems. DHS officials said that they intend to have FPS fully 
integrated by the end of fiscal year 2004. However, assuming these 
functions prematurely could affect FPS's ability to accomplish its 
mission. For example, FPS relies heavily on contract guard services, 
but according to DHS officials, is dependent on GSA's contracting 
management software for tracking costs and managing vendor payments. As 
such, we are recommending that the Secretary of Homeland Security 
ensure that DHS is prepared to effectively integrate FPS mission 
support before these functions are transferred from GSA. DHS concurred 
with this recommendation.

Background: 

FPS was established in 1971 as the uniformed protection force of GSA 
government-occupied facilities. FPS has authority, among other things, 
to enforce laws and regulations aimed at protecting federal property 
and persons on such property, and to conduct investigations on, federal 
property.[Footnote 1] FPS was originally located within GSA's Public 
Building Service (PBS). As part of PBS, FPS was responsible for 
providing law enforcement and security services to GSA's tenants and 
the public at about 8,800 federal buildings nationwide. As of September 
30, 2003, FPS data show that FPS had approximately 1,100 uniformed 
officer full-time equivalents (FTE)[Footnote 2] and 13,000 contract 
guards to protect GSA-owned or -occupied facilities. In addition, these 
data showed that FPS had 353 management and mission-support FTE. In 
addition to managing security at GSA-held facilities, FPS officers also 
provide other security services such as developing risk assessments, 
installing security equipment, and conducting criminal investigations.

In response to the 1995 bombing of the Alfred P. Murrah Federal 
Building in Oklahoma City, FPS began enhancing its strategy for 
protecting federal facilities and making additional security 
improvements at GSA facilities. FPS officials said that FPS also began 
relying more on the use of contract guards to provide security and law 
enforcement protection at its facilities. FPS currently employs 
approximately 13,000 contract guards. The level of physical protection 
services FPS provides at each building varies. In some cases, FPS has 
delegated the protection of facilities to tenant agencies, which may 
have uniformed officers of their own or may contract separately for 
guard services.

The September 11 terrorist attacks resulted in a renewed emphasis on 
protecting federal facilities and the nation against terrorist 
activities. The attacks prompted Congress to pass the Homeland Security 
Act, which created the Department of Homeland Security (DHS). The new 
department's mission, among other things, is to prevent terrorist 
attacks within the United States, reduce the vulnerability of the 
United States to terrorism, and minimize the damage and assist in the 
recovery from attacks that do occur. The act combined 22 federal 
agencies specializing in various disciplines, such as law enforcement, 
border security, biological research, computer security, and disaster 
mitigation. As a result of the creation of DHS, FPS was moved from GSA 
to the new department, effective March 1, 2003. Within DHS, FPS became 
part of the Border and Transportation Security Directorate's (BTS) 
component known as Immigration and Customs Enforcement (ICE). BTS is 
tasked with securing the nation's borders and safeguarding its 
transportation infrastructure. ICE is the investigative and law 
enforcement arm of BTS and is composed primarily of the investigative 
components that were formerly part of the U.S. Customs Service 
(Customs) and the Immigration and Naturalization Service (INS). ICE 
also includes FPS, the Federal Air Marshal Service (FAMS), and a number 
of other offices. Figure 1 shows FPS's location within DHS's 
organizational structure.

Figure 1: FPS's Location within DHS's Organizational Structure: 

[See PDF for image] 

[End of figure] 

The transfer of FPS is only one of a number of organizational transfers 
and related changes that DHS is managing. While DHS faces the challenge 
of protecting the nation from terrorism, it is also tasked with 
combining a disparate group of agencies with multiple missions and 
unique cultures. Recognizing that the establishment of a new department 
is an enormous undertaking, GAO designated the implementation and 
transformation of DHS as high-risk in January 2003. This designation is 
based on three factors: (1) the size and complexity of the undertaking, 
(2) the merging agencies have an array of existing management 
challenges, and (3) failure by DHS has potentially serious 
consequences.[Footnote 3] In January 2003, GAO also designated federal 
real property as a high-risk area in part because of the major 
challenges agencies face in protecting federal real property from 
terrorism.[Footnote 4]

Expanding Responsibilities Pose a Challenge for FPS: 

Under the Homeland Security Act, DHS became responsible for protecting 
buildings, grounds, and property owned, occupied, or secured by the 
federal government that are under GSA's jurisdiction.[Footnote 5] In 
addition to GSA facilities, the act also provides FPS with the 
authority to protect the buildings, grounds, and property of other 
agencies whose functions were transferred to DHS.[Footnote 6] This 
effectively meant that FPS, which was merged into DHS, would continue 
its role as the security and protection force for GSA real property 
assets as well as DHS properties not held by GSA, and would be 
performing this function as part of DHS.[Footnote 7] A March 2003 
operational memorandum of agreement between GSA and DHS made FPS 
responsible for the same types of security services for GSA facilities 
that FPS provided before the move to DHS. These include performing risk 
assessments, managing the installation of security equipment, and 
conducting criminal investigations. With regard to non-GSA properties, 
this amounts to approximately 2,500 properties that were held by DHS 
components and were not part of the GSA real property inventory, 
according to the FPS chief of staff. This official said that in fiscal 
year 2005, FPS would collect information, determine the risk 
categories, and identify existing law enforcement and protective 
measures at each DHS facility. FPS plans to use this information to 
develop a strategy that lays out how FPS can take over responsibility 
for security at the 2,500 additional DHS properties. FPS's chief of 
staff told us that it might take a number of years before FPS fully 
assumes control of security at these facilities.

The Director of FPS said that eventually FPS might seek to expand its 
responsibilities to include protection for facilities where GSA had 
previously delegated authority to tenant agencies, as well as other 
facilities where agencies have protective forces with missions similar 
to that of FPS. The Director of FPS stressed that expanding FPS's 
authority further is a long-term vision and that FPS is still examining 
the feasibility of different options. FPS provided information 
identifying 20 agencies where GSA had previously delegated some of its 
authority for facility protection or contract guard services. This 
included various facilities occupied by the Departments of Defense, 
Agriculture, Commerce, Health and Human Services, Interior, Justice, 
Labor, State, and Transportation. The Director of FPS said that, in 
addition, a number of agencies have their own security forces and that 
it does not make sense for the federal government to have multiple 
security forces, all charged with facility protection. An example FPS 
provided was the National Institutes of Health (NIH), which has a small 
police force charged with protecting NIH's Bethesda, Maryland, campus. 
FPS officials added that the Homeland Security Act, in their view, 
provides FPS with the authority for extending FPS's protection 
responsibilities because it provides the Secretary of Homeland Security 
with broad authority in implementing actions deemed necessary to 
protect against terrorism.[Footnote 8] In commenting on a draft of this 
report, DHS said that we took the comments of the Director out of 
context. DHS also had concerns with our summary and synthesis of the 
relevant statutory requirements FPS has that are related to FPS's 
responsibility for protecting federal buildings, grounds, and property. 
DHS's comments and our evaluation of them are discussed in more detail 
in the agency comments section of this report.

FPS Has New Law Enforcement Authority and Assists with Other DHS 
Activities: 

In addition to increased responsibility in terms of the number of 
buildings under its control, the Homeland Security Act gave FPS new law 
enforcement authority for use in carrying out its facility protection 
mission. This new law enforcement authority empowers officers and 
special agents to take action off of federal property to protect the 
property and the public.[Footnote 9] It also allows officers to enter 
into agreements with state and local law enforcement personnel to carry 
out activities that promote homeland security. Previously, FPS officers 
were not authorized to enforce laws off of federal property and, for 
example, would have to contact local law enforcement personnel to 
handle illegal activity on the street in front of federal buildings, if 
it were to occur. FPS officials said that the new authority would 
better allow them to protect facilities and become more involved in 
intergovernmental activities aimed at promoting homeland security, such 
as biological and chemical weapons response training (see fig. 2).

Figure 2: FPS Officers Engaged in Biological and Chemical Weapons 
Response Training: 

[See PDF for image] 

[End of figure] 

DHS has also broadened FPS's responsibilities to include assisting with 
homeland security activities that are not directly related to facility 
protection. For example, FPS officials said that FPS officers have 
provided backup for other DHS law enforcement officers in immigration-
related work, such as "Operation Predator," a program aimed at 
arresting foreign nationals involved in child pornography. In addition, 
FPS officials said that FPS officers assisted with various DHS 
activities--such as crowd control at the free trade protests in Miami, 
Florida, and protection for major national events such as the Olympics. 
At the time of our review, FPS's Web site also listed other activities, 
including support for security at the Kentucky Derby, which did not 
relate directly to federal facility protection. We also noted instances 
where the press reported on FPS participation in other activities, such 
as involvement in sobriety checks and safety patrols in San Francisco, 
California. FPS officials said that participation in these activities 
was intended to enhance FPS's integration into DHS and that FPS's 
participation in these types of activities will likely continue. FPS's 
involvement in these activities, and, more specifically, issues related 
to how they are funded, will be discussed in more detail later in this 
report and in appendix IV. Figure 3 shows FPS officers assisting with 
crowd control at a protest.

Figure 3: FPS Officers Assisting with Crowd Control: 

[See PDF for image] 

[End of figure] 

FPS's expanding mission and increased responsibility represent a 
formidable change for the agency. Transferring to a new federal 
department is a significant undertaking for any organization. Yet FPS-
-like several other DHS components--is transferring to DHS while 
simultaneously focusing on new issues that reflect fundamental changes 
since September 11 in how the government approaches homeland security 
issues. In our report designating the establishment of DHS as a high-
risk area, we emphasized that the magnitude of the responsibilities, 
combined with the challenge and complexity of the transformation, 
underscores the perseverance and dedication that will be required of 
all DHS's leaders, employees, and stakeholders in order to achieve 
success.[Footnote 10] The Director of FPS agreed with our assessment 
that the mission-related changes FPS is facing represent a formidable 
challenge. However, our work showed that FPS does not have a strategy 
for how it will carry out its expanding mission and increased 
responsibility, as well as meet the other challenges it is facing. 
FPS's need for such a transformation strategy, as well as its belief 
that it is embracing these changes as an opportunity for a positive 
transformation, are discussed in more detail later in this report.

Issues Related to How FPS is Funded: 

Maintaining a means of funding FPS that will ensure the adequate 
protection of federal facilities and allow FPS to meet new homeland 
security responsibilities is another challenge. When it was part of 
GSA, FPS was funded through security fees that were included with the 
rent payments GSA received from tenant agencies. In March 2003, just 
after FPS's transfer, GSA and DHS agreed that for fiscal year 2004, GSA 
would continue to collect security fees on behalf of FPS and transfer 
these funds to DHS. DHS's fiscal year 2004 appropriations act 
identifies about $424 million to be transferred from the revenue and 
collections in the federal buildings fund[Footnote 11] to DHS for FPS 
operations. According to FPS officials, the security fees GSA collects 
are intended to cover security standards designated for each building. 
These standards cover perimeter, entry, and interior security and 
security planning matters.[Footnote 12] Under this process, GSA would 
bill agencies for security services on a prorated, square-foot basis, 
depending on the amount of space each agency occupied. [Footnote 13] 
In addition to these security services, FPS also provides agencies 
with additional services, upon request, under its reimbursable program. 
For example, agencies may request additional magnetometers or more 
advanced perimeter surveillance capabilities. For fiscal year 2004, 
FPS's reimbursable program will provide an estimated $337 million in 
funding for these requests, according to FPS's chief of staff.

The President's fiscal year 2005 budget, released in February 2004, 
proposes that security fee collections be credited to the FPS account 
in the Department of the Treasury and identifies $478 million in 
funding for FPS. GSA and FPS officials said that for fiscal year 2005, 
an approach is under consideration whereby GSA would send tenant 
agencies separate bills for security and rent. Instead of collecting 
security fees with agency rental payments, tenant agencies would send 
the security fees directly to the FPS account at Treasury. Under this 
approach, these officials said that these funds would not pass through 
the federal buildings fund. In addition, estimates in the President's 
2005 budget for the reimbursable program remained at $337 million, 
unchanged from fiscal year 2004. In its written response to several 
funding questions we posed to FPS officials, DHS said that FPS was 
exploring potential future funding strategies that would better support 
the expanded mission and revised law enforcement responsibilities 
associated with the transfer to DHS. Although no decisions have been 
made regarding how FPS will be funded in the future, DHS, FPS, and GSA 
officials indicated that discussions to date have centered on whether 
GSA would continue its practice of billing agencies for security 
services or whether this should be done by FPS. In DHS's written 
response on funding issues, DHS took the position that billing 
individual agencies for the security services FPS provides for GSA 
buildings was GSA's responsibility.

Specifically,

* DHS said that the billing process and equitable distribution of 
security costs among the occupants of federal buildings is inherently a 
real estate function. As such, distributing security costs is similar 
to distributing utility costs, operation and maintenance costs of major 
building mechanical systems, and other shared costs. For federal 
buildings in GSA's inventory, DHS said that this responsibility is 
specifically reserved for GSA.

* DHS said that the Homeland Security Act made it clear that GSA would 
continue to be responsible for all real estate-related functions, such 
as collecting rents and fees, including fees collected for protective 
services.[Footnote 14]

* DHS said that the transfer of FPS to DHS makes it clear that the 
primary mission of FPS is to protect buildings and grounds owned or 
occupied by the federal government and the persons on the 
property.[Footnote 15] According to DHS, FPS does not have the mission 
or authority to establish a separate, duplicative billing and 
collection process, similar to the one presently established and 
operated in support of the GSA real estate mission.

DHS added that one possible approach would entail FPS providing GSA 
with the estimated total costs for its basic law enforcement and 
protective services. Under this approach, which amounts to FPS billing 
GSA in one lump sum for its services, GSA would then determine the best 
method for distributing these costs equitably among the tenant 
agencies. FPS would also provide separate cost estimates for the 
additional costs that are associated with specific buildings, and GSA 
would determine the appropriate distribution of these costs among the 
tenants occupying the building. GSA officials we interviewed had a 
markedly different view from that of DHS on whether GSA or FPS should 
bill agencies for security services in the future. According to the 
Deputy Commissioner of the Public Buildings Service and a GSA budget 
official, GSA does not want to be involved in billing agencies for FPS 
security services. These officials said that GSA feels very strongly 
about this because GSA no longer has control over setting security 
rates and the level of security required at each building.

In addition, in commenting on a draft of this report, GSA provided a 
legal analysis that disagreed with DHS's position that FPS lacks 
authority to bill agencies for security services. GSA said that it 
considers incorrect any implication that GSA is responsible for billing 
and collecting fees owed to DHS for FPS-furnished services and that FPS 
does not have the authority to bill for such services. GSA's complete 
legal analysis is included in appendix III. GSA continued that as a 
matter of government efficiency, and in the interest of avoiding 
unnecessary duplicative systems, GSA could agree to continue to use its 
systems to produce and distribute a bill on behalf of FPS. GSA added 
that while it is authorized to provide its billing services to FPS on a 
reimbursable basis, this does not mean that DHS's billing 
responsibilities for FPS-provided services belong to GSA. We did not 
determine whether DHS or GSA was correct in its legal analysis of 
issues related to billing. However, because of the differing views of 
DHS and GSA, it would be useful for DHS and GSA to engage in further 
dialogue so that agreement can be reached. It would be appropriate, in 
our view, for DHS to initiate these discussions, since FPS is now part 
of DHS. If, after further discussion, DHS and GSA still disagree on 
issues related to authority for billing, it would be worthwhile to seek 
resolution from the Office of Management and Budget (OMB) or the 
Treasury.

Although issues related to authority for billing agencies were 
unresolved, we had the following observations related to various 
options: having GSA continue to bill for security fees makes FPS 
dependent on GSA to implement a funding mechanism for its operations; 
in addition to limiting FPS's control over this process, this could 
also make it unclear which agency is accountable to tenant agencies and 
other stakeholders. On the other hand, much work would likely be needed 
for FPS to develop the expertise, information, and systems for 
interfacing with GSA and tenant agencies if FPS were to take over the 
billing function. For example, on the basis of our discussions with GSA 
and FPS officials, FPS would need to cover the costs of, and develop a 
method for, collecting up-to-date data on buildings in the GSA 
inventory and agency space assignments. FPS would also need a financial 
management function for billing and collections, or DHS would have to 
integrate such a process into its financial management systems.

Regarding DHS's suggestion that a possible approach might entail FPS 
providing a total estimated cost to GSA, it would be critical for FPS 
to develop and provide reliable data and GSA would need assurance that 
FPS was doing so. Providing reliable data would be a challenge for FPS 
because, as will be discussed in more detail later, DHS faces 
challenges related to integrating its component agencies' mission 
support systems and producing reliable management information. 
Nonetheless, DHS emphasized in its discussion on funding issues that 
FPS is working to establish the appropriate level of law enforcement 
and protective services required and is developing a plan for phasing 
these requirements and their related costs into subsequent budget 
years. DHS said that this process would utilize historical costs, 
workload, benchmarks, and best practices collected from federal, state, 
and local agencies that perform similar functions.

As FPS moves forward, accurately identifying costs would also be 
important because of shortfalls GSA has experienced between collections 
and the cost of providing security. According to FPS's director of 
financial management and a GSA budget official familiar with FPS 
funding issues, the security fees GSA charges tenant agencies 
historically have not been sufficient to cover FPS operations. To 
address the past shortfalls, GSA has covered the additional costs with 
other funds from the federal buildings fund. For example, according to 
a GSA budget official, security fees in fiscal year 2003 generated 
about $139 million less than it cost to fund the basic services that 
FPS provides to tenant agencies. According to these GSA and FPS 
officials, the shortfalls have been caused over the years by increasing 
security costs and restrictions on tenant agencies' rental payments 
that were enacted in legislation. In commenting on this report, DHS and 
GSA also noted that for fiscal year 2005 the President's budget 
includes an increase in the FPS security rate that, if enacted, will 
eliminate the shortfall between FPS collections and the cost of 
security. Nonetheless, even if this increase helps close the gap 
between the cost of security and tenant payments, the accurate 
identification of costs still represents a challenge that may need to 
be addressed if the mechanism for funding FPS were restructured.

Funding for Some FPS Activities Not Directly Related to Facility 
Protection: 

DHS has broadened FPS's responsibilities to include assisting with 
homeland security activities that are not directly related to building 
protection. FPS officials said that these activities have primarily 
included providing backup to other DHS law enforcement units in the 
field and that DHS has the authority under the Homeland Security Act to 
engage FPS in activities DHS deems necessary to enhance homeland 
security. However, engaging FPS in these activities under its current 
funding structure is inconsistent with a provision of the act that 
provides that funds transferred by GSA to DHS from rents and fees 
collected by GSA are to be used solely for the protection of federal 
buildings and grounds.[Footnote 16] FPS officials said that GSA-
transferred funds have been FPS's only source of funding for the 
security services it provides and that the reimbursable funds it 
receives from agencies are tied to specific agency requirements. It is 
our position that DHS's use of FPS staff time and other resources for 
activities that are not directly related to the protection of federal 
buildings and grounds is inconsistent with the act, which limits the 
use of agency funds from rents and fees to the protection of buildings 
and grounds owned or occupied by the federal government.

In November 2003, we requested that DHS provide information on the 
extent of FPS's involvement in activities not related to building 
protection, the legal basis for any such activities, and the reasons 
these activities would be permissible in light of the act's prohibition 
on the use of funds transferred from GSA to DHS. In a written response 
from DHS's Under Secretary for Border and Transportation Security, DHS 
stated that it did not keep detailed records of these activities. DHS 
said that FPS's involvement in these activities was minor, or de 
minimus, and that FPS only performed an assist role. DHS added that the 
support FPS provided did not affect the accomplishment of FPS's mission 
and that its participation in operations away from federal facilities 
was minimal. DHS indicated in its response that these activities were 
permissible because they had no impact on FPS operations and because no 
special equipment was procured for these activities.

We understand that FPS's involvement in these activities was, in DHS's 
view, minor and may not have had a direct effect on facility 
protection. We also understand, as DHS pointed out, that FPS's 
involvement in such activities can strengthen interoperability and 
bonding between FPS and other DHS law enforcement units. However, the 
funding of FPS's involvement in these activities is a concern because 
of the specific statutory language contained in the Homeland Security 
Act related to the use of funds collected from agency rents and fees. 
At a minimum, if DHS plans to continue and perhaps increase FPS's 
involvement in these activities, having a means of reimbursing FPS, or 
funding these activities separately, would be consistent with the 
requirement that funds from agency rents and fees intended for facility 
protection are used for that purpose. Also, funding these activities 
separately would make it necessary for DHS to track them and develop a 
way to account for their costs. Having such a process would, as a 
result, allow for greater accountability with regard to the deployment 
of FPS resources. In its written response to questions we had during 
our review on funding issues, DHS said that FPS has an established 
process for recouping expenses of a reimbursable nature. DHS 
acknowledged that this process could also be used--within DHS--to 
recoup the cost of non-facility-protection-related activities 
currently being performed by FPS.

In commenting on this report, DHS again expressed its view that such 
activities would not have to be reimbursed if they are of limited 
duration with local offices, ad hoc, and do not increase the direct 
costs of FPS operations and investment in staff. DHS said it proposes 
to issue guidance to this effect. We continue to disagree with DHS on 
this issue and believe that the proposed guidance would not be 
appropriate. The agency comments section of this report and appendix IV 
contain a complete discussion of our position.

Successfully Transferring FPS Mission-Support Functions to DHS Will Be 
Challenging: 

In addition to challenges associated with expanding responsibilities 
and establishing a funding mechanism, FPS still was relying on GSA for 
many of its mission-support functions. As part of GSA, FPS was not 
self-sufficient with respect to mission-support functions, including 
payroll, travel services, and contracting. These functions were 
performed for FPS by mission-support staff located in other GSA 
organizational units. For example, its contracting functions--which are 
integral to FPS's mission because of FPS's extensive use of contract 
guards--were handled by the contracting component of GSA's Public 
Buildings Service. Furthermore, FPS employees used GSA's centralized, 
integrated administrative system, known as FedDesk, to perform many 
day-to-day functions such as time and attendance and travel requests 
and reimbursement. According to FPS officials, FPS's reliance on staff 
and systems outside of its organization was different from other, 
larger agencies that moved to DHS and had internal mission-support 
functions and systems that were transferred to DHS with the 
organizations.

Recognizing that FPS faced a challenge, DHS and GSA signed a mission-
support memorandum of agreement in February 2003 so that GSA could 
continue to support FPS after the transfer. Under this agreement, GSA 
would provide FPS with reimbursable mission support for human 
resources, payroll, information technology, and some contracting 
functions until these functions were transferred to DHS. FPS officials 
said that funds used to reimburse GSA for these services were to come 
out of agency rents and fees originally transferred from GSA. DHS and 
GSA set a goal of the end of fiscal year 2003 for this transfer. 
However, GSA and DHS were unable to meet this goal and opted to extend 
the agreement until the end of fiscal year 2004. According to DHS, GSA, 
and FPS officials that we interviewed, the transfer of mission support 
did not occur for the following reasons: 

* DHS was still in the process of determining which mission support 
systems it would adopt from agencies and organizations that had 
transferred into DHS and how the various systems would be integrated;

* DHS management was focusing its efforts on the transfer of larger 
agencies, such as INS and Customs, and DHS believed that since FPS was 
being supported by GSA, DHS could focus on agencies that were larger 
and were a greater priority; and: 

* FPS activities were deeply integrated into GSA's mission-support 
systems. For example, FPS's e-mail, telecommunications, travel, time 
and attendance, and human resource systems are all part of GSA's 
FedDesk system, and extracting them individually for use by DHS would 
be difficult.

DHS officials said that they intend to have FPS mission support fully 
integrated before the end of fiscal year 2004. Specifically, at the 
time of our review, DHS intended to transfer FPS's information 
technology support by June 2004 and the remaining administrative 
systems--human resources, travel, payroll, and contracting support--by 
September 2004. We did not assess the effect that FPS's reliance on GSA 
for mission support had on FPS's effectiveness in protecting 
facilities. In commenting on this report's discussion of contracting, 
DHS stated that the contracting function does not pose a challenge 
because it has already transferred from GSA to DHS. According to DHS, 
FPS has a senior contracting specialist at headquarters who oversees 
policies and standards for the contract guard program. DHS added that 
24 contracting officers are currently managing FPS contracts throughout 
FPS's 11 regions. Nonetheless, we still believe that the contracting 
area poses a challenge because of FPS's continued reliance on GSA to 
support this function. More specifically, although FPS has contracting 
staff on line, GSA and FPS officials told us that FPS has continued to 
use GSA's contracting management software to write contracts, track 
costs, and make vendor payments. Contracting support, at the time of 
our review, had not been integrated into DHS's systems. The January 
2004 mission-support memorandum of agreement between GSA and DHS 
specifies that FPS will pay GSA about $544,000 for these services for 
fiscal year 2004. Because contracting support is critical to FPS's 
ability to accomplish its mission due to its reliance on contract 
guards, a smooth transfer of these functions will be imperative.

During our review, we also found other difficulties that FPS had 
encountered related to mission support. FPS officials said that their 
lack of in-house mission support resulted in instances where law 
enforcement officers had to assume administrative duties. For example, 
according to these officials, law enforcement personnel played a large 
role in resolving problems FPS was having in October 2003 with 
government purchase cards that were issued by DHS. These cards, FPS 
officials explained, were not compatible with GSA's financial systems 
because the DHS cards were from a different financial institution. FPS 
officials acknowledged that having law enforcement officers perform 
these types of functions could divert resources from protecting 
facilities and participating in other homeland security activities. 
Furthermore, these officials said that there has been confusion about 
whether FPS should adhere to GSA or DHS administrative policies and 
procedures, as well as where they should go for assistance or to get 
approval for administrative issues. For example, a senior FPS official 
said that in October 2003, 7 months after the transfer, DHS and GSA had 
not resolved which agency would approve restored annual leave for 
officers who were required to be on duty because of emergencies. In 
commenting on this report, GSA said that the January 2004 memorandum of 
agreement between GSA and DHS had resolved many of the issues related 
to administrative policies and procedures. Also, DHS said in its 
comments that related to travel, ICE has implemented an electronic 
travel system to move to a more efficient travel authorization and 
vouchering process.

Clearly, FPS faces a major challenge integrating its mission-support 
activities with DHS. In fact, FPS's situation is symptomatic of the 
broader mission support and information system challenges DHS is facing 
as a new federal department. In our January 2003 Performance and 
Accountability Series report on DHS, we reported that DHS faces 
considerable challenges in integrating the many systems and processes 
that provide management with decision information.[Footnote 17] We 
encouraged DHS to identify its needs in order to build effective 
systems that can support the national homeland security strategy in the 
future. Furthermore, DHS would be faced with the challenge of 
integrating the contracting functions of its many constituent programs 
and missions, some of which have had past deficiencies. For example, in 
May 2002, we reported that for its import processing system, Customs 
lacked important acquisition management controls.[Footnote 18] In July 
2003, we reported that INS did not have the basic infrastructure--
including oversight, information, and an acquisition workforce--in 
place to ensure that its contracting activity is effective.[Footnote 
19] Customs and INS concurred with our findings and agreed to take 
action. These concerns about contracting issues have implications for 
FPS given that it relies heavily on contracting, through its contract 
guard program, to accomplish its mission. Overall, given the concerns 
about DHS's ability to integrate FPS mission-support activities, FPS's 
ability to accomplish its mission could be affected if these functions 
were to be transferred prematurely. Therefore, it is important for DHS 
to ensure that it can effectively integrate these functions before they 
are transferred from GSA, even if it is necessary to extend the 
September 2004 target date.

Considering Key Practices Could Help FPS Address Challenges and Achieve 
a Successful Transformation: 

Despite the challenges it faces, FPS's transfer to DHS presents an 
opportunity for a positive transformation. According to FPS officials, 
the transfer has given FPS the opportunity to reevaluate its mission 
and assess whether it is sufficiently organized and equipped to meet 
its new and broader roles. FPS's top management team has embraced the 
new role in homeland security and is eager to become fully integrated 
with a law enforcement agency. These officials added that they have 
begun to rethink FPS's approaches and priorities so that FPS can better 
protect federal facilities, the employees who occupy them, and the 
visiting public. Fully implementing the transfer into DHS and 
completing the type of transformation FPS envisions will be critical to 
FPS's long-term viability and success. Yet, given the challenges we 
identified, carrying out this transformation will be no easy task. To 
better ensure a successful transformation, FPS and its stakeholders 
could benefit from considering the experiences of other organizations 
that have undergone successful mergers and transformations. GAO's July 
2003 report on implementation steps to assist mergers and 
transformations identified key practices followed by public and private 
sector organizations that have led to success.[Footnote 20] These key 
practices are shown in figure 4 and are briefly described below. A more 
comprehensive discussion of these practices and related implementation 
steps can be found in our July 2003 report.

Figure 4: Key Practices for Successful Mergers and Organizational 
Transformations: 

[See PDF for image] 

[End of figure] 

* Ensure top leadership drives the transformation--Because a merger or 
transformation entails fundamental and often-radical change, strong and 
inspirational leadership is indispensable. Top leadership must set the 
direction, pace, and tone and provide a clear, consistent rationale 
that brings everyone together behind a single mission.

* Establish a coherent mission and integrated strategic goals to guide 
the transformation--The mission and strategic goals of a transformed 
organization must become the focus of the transformation, define the 
culture, and serve as the vehicle for employees to unite and rally 
around. Mission clarity is especially essential to define the purpose 
of the transition to employees, customers, and stakeholders. The 
strategic goals must align with and support the mission and serve as 
continuing guideposts for agency decision making.

* Focus on a key set of principles and priorities at the outset of the 
transformation--A clear set of principles and priorities serves as a 
framework to help the organization create a new culture and drive 
employee behaviors. Focusing on these principles and priorities helps 
the organization focus on performing mission-related activities while 
maintaining its drive toward achieving the goals of the transformation.

* Set implementation goals and a timeline to build momentum and show 
progress--A merger or transformation is a substantial commitment that 
could take years to complete and therefore must be carefully monitored. 
As a result, it is essential to establish long-term action-oriented 
implementation goals and a timeline with milestones to track the 
organization's progress toward its short-and long-term transformation 
goals.

* Dedicate an implementation team to manage the transformation process-
-Dedicating a strong and stable implementation or integration team that 
will be responsible for the transformation's day-to-day management is 
important to ensuring that the transformation receives the focused, 
full-time attention needed to be sustained and successful. 
Specifically, the implementation team is important to ensuring that 
various change initiatives are sequenced and implemented in a coherent 
and integrated way. Top leadership must give the team the necessary 
authority and resources to set priorities, make timely decisions, and 
move quickly to implement top leadership's decisions regarding the 
transformation.

* Use a performance management system to define responsibility and 
ensure accountability for change--An organization's performance 
management system is a vital tool for aligning the organization with 
desired results and showing how team, unit, and individual performance 
contribute to overall organizational results. Performance management 
systems can help manage and direct the transformation process. These 
systems are the basis for setting employee's expectations in the 
transformation process and evaluating individual contributions to the 
success of the transformation process and organizational results.

* Establish a communication strategy to create shared expectations and 
report related progress--Creating an effective internal and external 
communication strategy is essential to implementing a merger or 
transformation. Communication is most effective when it occurs early 
and often and when it is downward, upward, and lateral. Organizations 
have found that communicating information early and often helps to 
build trust among employees and stakeholders, as well as an 
understanding of the purpose of planned changes. Organizations must 
develop a comprehensive communication strategy that reaches out to 
employees, customers, and stakeholders and seeks to engage them in the 
transformation process.

* Involve employees to obtain their ideas and gain their ownership for 
the transformation--A successful merger and transformation must involve 
employees and their representatives from the beginning to gain their 
ownership of the changes that are occurring in the organization. 
Employee involvement strengthens the transformation process by 
including frontline perspectives and experiences. Further, employee 
involvement helps to create the opportunity to establish new networks, 
increase employees' understanding and acceptance of organizational 
goals and objectives, and gain ownership of new policies and 
procedures.

* Build a world-class organization--Successful organizations 
continually seek to implement best practices in processes and systems 
in areas such as information technology, financial management, 
acquisition management, and human capital.

We did not do an in-depth analysis comparing these practices with FPS's 
transformation efforts. Nonetheless, FPS officials, including its 
Director, agreed that it would be useful for FPS to consider following 
these practices. FPS provided examples where it believed its efforts 
reflected these practices. These related to areas such as FPS's heavy 
involvement on departmentwide teams dedicated to integrating DHS's 
components, participating in the development of a strategic plan for 
DHS, and improving its core competencies in, for example, law 
enforcement training, so that it is better prepared to fulfill its 
expanding mission and responsibilities. However, we noted other 
critical areas reflected in the key practices where greater attention 
could, in our view, enhance FPS's chances of making a successful 
transformation. For example, although FPS has provided input to DHS's 
strategic plan,[Footnote 21] which was released in February 2004, FPS 
has not developed a transformation strategy of its own that reflects 
key practices. Such a strategy could contain implementation goals, 
measures, and a timeline that FPS could use to show progress toward its 
transformation. In addition to containing goals and measures related to 
progress with its transformation, FPS could use such a plan as a 
platform for demonstrating its effectiveness with its mission to 
protect federal facilities and performance in other homeland security 
activities. It could also demonstrate how FPS's transformation links 
with the broader goals and objectives that are contained in DHS's 
strategic plan that relate to facility protection and FPS's other 
homeland security activities. To be more effective, it could also be 
linked to DHS's ongoing integration efforts. Incorporating key 
practices into FPS's ongoing transformation efforts could be 
particularly helpful given the significant challenges FPS is facing. 
These challenges--FPS's expanding mission and increased 
responsibility, unresolved issues related to funding, and the transfer 
of mission support from GSA to DHS--will complicate FPS's 
transformation efforts until they are addressed or, at a minimum, 
factored into FPS's transformation planning efforts.

In commenting on a draft of this report, DHS said that in March 2004 
FPS began developing its own strategic plan, which DHS said would 
support the overall goals and objectives of the DHS strategic plan and 
would be consistent with GAO's key practices for organizational mergers 
and transformations. At the time this report was finalized, FPS's 
strategic plan had not been issued. However, it is important to note 
that a transformation strategy would contain information beyond what 
would be found in a typical strategic plan. The agency comments section 
of this report further discusses transformation strategies and what 
they contain.

Our past work has discussed adopting similar practices for DHS. 
Recognizing that the establishment of a new department is an enormous 
undertaking, we designated the implementation and transformation of DHS 
as high-risk in our January 2003 Performance and Accountability and 
High Risk series.[Footnote 22] We reported that in addition to the high 
risk associated with developing a new department from a multitude of 
agencies, DHS is confronted with a number of existing major management 
challenges from the functions and organizations being transferred to 
it. We encouraged DHS to implement some of the key practices to assist 
mergers and organizational transformations discussed earlier, 
including clearly defining the mission and goals of the new department, 
devoting sustained efforts to transition planning, and involving 
employees in the transformation process.

We also recommended adopting similar practices at DHS components such 
as the U.S. Coast Guard and FAMS. In our work looking at the transition 
of the Coast Guard to DHS, we reported that the Coast Guard was 
experiencing numerous implementation challenges as it transitioned to 
DHS.[Footnote 23] These challenges include developing a new strategic 
plan that reflects the Coast Guard's wide variety of missions, 
establishing effective communication links and partnerships within DHS 
and with external organizations, and establishing performance 
management systems that incorporate the Coast Guard's new homeland 
security mission. We suggested that the Coast Guard could also benefit 
from implementing the key practices for mergers and transformations. 
Lastly, we reported that FAMS is facing challenges in implementing 
changes resulting from its merger into DHS, including issues related to 
roles and responsibilities, training, and coordination with external 
organizations such as Transportation Security Administration.[Footnote 
24] We recommended the implementation of some of the key practices to 
help FAMS with such changes. DHS, FAMS, and the Coast Guard concurred 
with our recommendations. For example, in commenting on the 
recommendations for FAMS, DHS said that it welcomed our proposals for 
using key practices that would ultimately maximize FAMS's ability to 
protect the American people, contribute to the protection of the 
nation's critical infrastructure, and preserve the viability of the 
aviation industry.

Conclusions: 

With its critical role in protecting federal real property against the 
threat of terrorism and other criminal activity, it is imperative that 
FPS's transfer to DHS and its related transformation are successful. 
However, in addition to the inherent challenges any organization would 
face in becoming part of a new federal department, FPS brings a set of 
unique challenges that have great bearing on its ability to accomplish 
its mission. Given the significance of the challenges it is facing--an 
expanding mission and increased responsibility; unresolved issues 
related to funding, including past shortfalls that were covered by GSA; 
and various mission-support issues--FPS could benefit from a 
transformation strategy that effectively makes the case for what type 
of organization it believes it should become and provides a road map 
for getting there. Consideration of key practices that others have 
focused on to successfully transform their organizations could be an 
important part of such a strategy.

Related to funding, it would be appropriate for DHS to initiate a 
dialogue with GSA aimed at resolving the disagreement concerning FPS's 
authority to bill agencies for security services. Regarding FPS's 
involvement in homeland security activities not related to facility 
protection, such involvement is a concern because of the requirement in 
the Homeland Security Act that agency rents and fees be used solely for 
the protection of federal buildings and grounds. At a minimum, if DHS 
plans to continue and perhaps increase FPS's involvement in these 
activities, having a means of reimbursing FPS, or funding these 
activities separately, would be consistent with the requirement that 
funds from agency rents and fees intended for facility protection are 
used for that purpose. Also, funding these activities separately would 
make it necessary for DHS to track them and develop a way to account 
for their costs. Finally, ensuring a seamless transfer of mission-
support functions from GSA to DHS is critical. Given the concerns about 
DHS's ability to integrate FPS mission-support activities, prematurely 
transferring these functions to DHS could negatively affect FPS's 
ability to carry out its mission responsibilities.

Recommendations for Executive Action: 

We are making four recommendations to the Secretary of Homeland 
Security. First, we recommend that the Secretary direct the Director of 
FPS--in consultation with the Under Secretary for Border and 
Transportation Security and the Assistant Secretary for Immigration and 
Customs Enforcement--to develop and implement a transformation strategy 
that reflects FPS's consideration of key practices and addresses the 
significant challenges it is facing. In particular, this strategy 
should identify implementation goals, measures, and a timeline that FPS 
could use to show progress toward its transformation and demonstrate 
that it is accomplishing its mission while undergoing changes. It 
should also link FPS's goals and measures to the broader goals and 
objectives contained in DHS's strategic plan and to DHS's ongoing 
integration efforts. In serving as a road map for FPS's transformation, 
such a strategy should be used by FPS as a platform to identify 
strategies and proposals for addressing the significant challenges that 
we identified--expanding mission and increased responsibility, 
unresolved issues related to funding, and mission-support challenges 
related to the eventual transfer of these functions from GSA to DHS. 
Second, we recommend that the Secretary initiate a dialogue with GSA 
aimed at resolving disagreement between DHS and GSA about whether FPS 
has the authority to bill GSA's tenant agencies for security services. 
If this issue cannot be resolved, DHS should seek resolution from OMB 
or the Treasury. Third, we recommend that the Secretary take immediate 
steps to ensure that funds collected from agency rents and fees are 
used in the future solely for the protection of buildings and grounds 
owned or occupied by the federal government. If FPS continues its 
involvement in activities not directly related to facility protection, 
a funding process would be needed that is consistent with the 
requirement regarding the use of funds from agency rents and fees. In 
addition, a means of tracking these activities and determining related 
costs would also be needed. Last, we recommend that the Secretary 
ensure that DHS is prepared to effectively integrate FPS mission-
support functions before these functions are transferred from GSA, even 
if it is necessary to extend the September 2004 goal for the transfer.

Agency Comments and Our Evaluation: 

We provided a draft of this report to DHS and GSA for their official 
review and comment. DHS provided its comments in a letter from the 
Director of Resources, Border and Transportation Security Directorate, 
on May 3, 2004. These comments can be found in appendix II. As noted in 
DHS's letter, DHS also provided separate technical comments, which we 
did not publish but incorporated where appropriate. The U.S. Secret 
Service also provided some technical comments, which we incorporated 
where appropriate. GSA provided its comments in a letter from the 
Deputy Commissioner of the Public Building Service on April 29, 2004. 
In commenting on this report, GSA also provided a legal analysis 
regarding the authority to charge and collect FPS security fees. GSA's 
position was discussed earlier in this report, and its comments and 
legal analysis can be found in appendix III. GSA and DHS comments on 
the historical gap between security fees and costs were also discussed 
earlier in this report.

DHS concurred with our recommendations to develop a transformation 
strategy, to ensure that agency rents and fees are used solely for 
facility protection, and to ensure that DHS can effectively integrate 
FPS mission-support functions before these functions are transferred 
from GSA. On the basis of the comments we received from DHS and GSA 
showing their continued disagreement on billing issues, we added the 
recommendation aimed at resolving this disagreement. As a result, DHS 
did not comment on this additional recommendation because it was added 
after the comment period. Although DHS generally agreed with the 
report's message and concurred with the other recommendations, it took 
issue with certain aspects of our analysis. DHS's comments on the 
challenges FPS faces in the contracting area were discussed earlier. In 
addition, DHS had comments on several other aspects of the report, 
which are discussed below. These related to the FPS Director's 
discussion of delegations of authority for facility protection, the 
extent of FPS's authority to protect federal facilities, the components 
of FPS security fees, funding for activities not related to facility 
protection, and FPS's need for a transformation strategy.

FPS Director's Comments on Delegation of Authority for Facility 
Protection--DHS said that we took certain comments made by the Director 
of FPS out of context. DHS was referring to discussions we had with the 
Director about expanding FPS's authority to include protection of 
facilities where GSA had previously delegated authority to tenant 
agencies. DHS said that the Director was referring to efforts by the 
House Committee on Transportation and Infrastructure, Subcommittee on 
Economic Development, Public Buildings and Emergency Management, to 
suspend further delegations of any authority for facility protection to 
GSA tenant agencies. While the subject of delegation was discussed with 
the Director, we disagree with DHS's assessment that we took the 
Director's comments out of context. The discussions dealt specifically 
with existing delegations and FPS's desire to expand its 
responsibilities by "getting back" authority for protection where it 
had previously been delegated by GSA. Furthermore, the Director's 
comments were not the only instance where the issue of expanding FPS's 
authority was raised. On four other occasions during our review, top 
FPS officials, including the chief of staff, made it clear to us that 
FPS may seek to expand its authority. This was also discussed by an ICE 
official. And, because these issues dealt with possible future plans, 
we included the Director's caveat, in the report, that expanding FPS's 
authority is a long-term vision and that FPS is still examining the 
feasibility of different options. GSA commented that it had no 
objections to our interpretation of the Homeland Security Act and 
agreed that FPS's authority to protect federal property includes 
properties under the custody and control of GSA, as well as those under 
the custody and control of DHS. GSA also said that while FPS's law 
enforcement authority expanded under the Homeland Security Act, it 
defers to DHS on the extent of FPS's authority to protect other federal 
properties and personnel.

Extent of FPS's Authority for Facility Protection--DHS commented that 
our description of its responsibility for protecting buildings, 
grounds, and property suggests limitations that are not present in the 
law. In this regard, for example, DHS takes issue with our statement 
that under the Homeland Security Act DHS is responsible for protecting 
building, grounds, and property "that are under GSA's jurisdiction." 
DHS states that "the Homeland Security Act does not mention property 
controlled by [GSA]." In making this statement--as well as others cited 
by DHS--the report summarizes and synthesizes the relevant statutory 
requirements, rather than quoting them verbatim. Thus, while it is true 
that the particular provision vesting DHS with protective 
responsibilities does not mention GSA-controlled property, DHS clearly 
acquired responsibility for GSA-controlled property under the Homeland 
Security Act because FPS, which was responsible for protecting federal 
agencies and previously under GSA's jurisdiction, was among those 
agencies whose functions and personnel were transferred to DHS under 
the Homeland Security Act. Nonetheless, on the basis of DHS's comments, 
we have made technical clarifications to our descriptions of the law, 
where appropriate.

In addition to raising technical issues, DHS makes several statements 
that, although not entirely clear, could be read as suggesting that DHS 
might be taking a broader view of its authority relating to the 
protection of federal buildings and grounds than our analysis of the 
statute would support. The relevant statutory provision is 40 U.S.C. 
1315(a), as amended by section 1706(b)(1) of the Homeland Security Act, 
which provides that: "To the extent provided for by transfers made 
pursuant to the Homeland Security Act of 2002, the Secretary of 
Homeland Security…shall protect the buildings, grounds, and property 
that are owned, occupied, or secured by the Federal Government 
(including any agency, instrumentality, or wholly owned or mixed-
ownership corporation thereof) and the persons on the property" 
[emphasis added]. DHS states that the description of the facilities 
under DHS control in the latter part of the statute is "all inclusive" 
and that the "intent of the law is far more inclusive than GSA property 
and property transferred as part of the establishment of DHS, none of 
which are instrumentalities nor mixed ownership corporations." To the 
extent that DHS is maintaining that its authority extends beyond 
property under the control and custody of GSA and DHS, we disagree with 
its interpretation. The statute provides DHS with authority over 
buildings and property only to "the extent provided by transfers made 
pursuant to the Homeland Security Act," and thus DHS authority is 
limited to properties under the control of GSA (through the transfer of 
FPS to DHS) and any other agency whose functions were transferred to 
DHS under the act.

Security Fees--DHS said that it believes that our explanation for how 
FPS is funded requires clarification because the report did not 
distinguish between the two components of FPS security fees. According 
to DHS, FPS was traditionally funded through rent portions devoted to 
recovering security costs collected by GSA for space occupied by GSA 
tenants. These "security fees" consisted of two separate components. 
The basic security charge covered security services provided by FPS to 
all GSA tenants and includes such services as patrol and response, 
security surveys, alarm monitoring, salaries, and other common cost 
items. This fee was charged to all GSA tenants and was included in each 
tenant's rent bill as a part of the rate per square foot. The building-
specific security charge is for security measures specific to a 
particular building based on the designated security level that were 
specified by the Department of Justice in June 1995 in response to the 
Oklahoma City bombing. For example, a Level IV building may have more 
guards, magnetometers, and cameras than a Level I building. The charges 
for building-specific security services are allocated by GSA to tenants 
based on the number of square feet they occupy in the building. DHS 
commented that our draft report did not clarify that security fees for 
specific agencies vary depending upon the building and its unique 
security requirements. DHS also noted that FPS uses a reimbursable 
program to charge for security services that are in excess of what FPS 
determines is sufficient for a building or could not be deferred for 
inclusion in the next rent estimate cycle. DHS said that understanding 
how FPS security fees are charged is important in understanding the 
issues associated with how FPS security fees should be billed in the 
future. Finally, DHS added that understanding the elements of the 
security fee process is essential to understanding why DHS and GSA 
disagree as to how security fees should be billed in the future. On the 
basis of DHS's comments, we clarified the information in the report 
related to the different components of security fees.

Funding for Activities Not Related to Facility Protection--Although DHS 
concurred with our recommendation to ensure that funds collected from 
agency rents and fees are used solely for facility protection, DHS 
again expressed its view that such activities would not have to be 
reimbursed if they are of limited duration with local offices, ad hoc, 
and do not increase the direct costs of FPS operations and investment 
in staff. DHS said it proposes to issue guidance to this effect. DHS 
cited Comptroller General legal decisions as a rationale for this 
position. DHS also said that some activities that do not appear to 
relate to facility protection actually do because of the proximity of 
nearby federal buildings. For example, DHS said that FPS's involvement 
in the free trade protests in Miami was critical to protecting the 
facilities of agencies that were the focal point of the demonstration. 
We recognize that there may be situations, such as the Miami protests, 
where FPS may engage in activities that are necessary or incidental to 
protecting federal buildings. Furthermore, DHS said that FPS 
headquarters reviews and approves all FPS regional special operation 
plans and expenditures to ensure the appropriate use of funds. DHS also 
stated that in response to our report, ICE would develop guidance for 
determining when it is reasonable for FPS to provide security services 
that are not directly related to the protection of federal buildings 
and grounds.

We do not believe that the development of such guidance would be 
appropriate. The language in section 422(b)(2) of the Homeland Security 
Act of 2002 explicitly restricts the use of funds collected by GSA from 
its tenants out of rents and fees "solely" for the protection of 
government buildings and grounds.[Footnote 25] Because of this 
limitation in the statute, the use of these funds for any purpose other 
than the protection of government buildings and grounds would not be 
permitted absent reimbursement pursuant to other applicable statutory 
authority. DHS refers to two GAO decisions as supporting its proposal 
to issue guidance approving the use of funds for unrelated purposes if 
such activities "are of limited duration with local offices, ad hoc, 
and do not increase the direct costs of FPS operations and investment 
in staff."[Footnote 26] We do not agree that these two decisions 
support guidance sanctioning the de minimis use of FPS funds for 
explicitly prohibited purposes. The two decisions, in allowing 
nonreimbursable details in certain circumstances, adopted guidance in 
the Federal Personnel Manual, which has been rescinded and is no longer 
effective. Moreover, to the extent that the two decisions are read by 
DHS as setting a de minimis standard of general applicability, they are 
not in keeping with the governing law on the de minimis concept. The 
legal concept of de minimis typically goes to measure the amount 
associated with a legal violation, allowing trivial or inconsequential 
amounts to be overlooked, on a case-by-case basis. The concept has not 
been applied to, nor would the case law support, the prospective 
approval of activities across an organization like FPS, knowing that 
they constitute violations of law.

Accordingly, we would object to DHS establishing guidance for 
prospective situations that would sanction FPS's use of funds for de 
minimis expenditures that are not incidental or necessary to the 
protection of federal buildings and grounds. Our full legal analysis of 
this issue is contained in appendix IV.

The Need For a Transformation Strategy--DHS concurred with our 
recommendation that FPS develop a transformation strategy because of 
its expanding mission and responsibilities, as well as the other 
challenges it is facing. DHS said that in March 2004, FPS began 
developing its own strategic plan, which DHS said would support the 
overall goals and objectives of the DHS strategic plan and would be 
consistent with GAO's key practices for organizational mergers and 
transformations. At the time of our review, FPS's strategic plan had 
not been issued. Although a strategic plan is an important part of 
FPS's transformation, a transformation strategy would contain 
information beyond what would be found in a typical strategic plan. 
More specifically, a transformation strategy would provide a connection 
between long-term strategic goals in its strategic plan and the day-to-
day activities of managers and employees engaged in achieving 
integration of FPS into DHS.[Footnote 27] Such a transformation 
strategy would include overall goals of the transformation with 
specific action plans and milestones that would allow it to track 
transformation and integration goals identifying critical phases and 
essential activities that need to be completed by and on any given 
date.[Footnote 28] By demonstrating progress towards reaching these 
interim goals, FPS can build momentum and demonstrate that real 
progress is being made toward full integration into DHS.

In developing its transformation strategy, it is important that FPS 
also consider all the key practices we have identified for effective 
mergers and transformations. This would include incorporating a 
communications approach that reaches out to employees, customers, and 
stakeholders and seeks to genuinely engage them in the transformation 
process, as well involving them in various aspects of the 
transformation to help gain ownership of the transformation. For 
example, in our July 2003 report on mergers and organizational 
transformations, we stated that according to a JPMorgan Chase managing 
director, the chief executive officer and merger implementation team 
publicized and reported progress on specific goals for each phase of 
its merger to help rally employees and maintain their drive towards 
reaching full integration. These goals were connected to overall themes 
and particular milestones, and the JPMorgan Chase chief executive 
officer reinforced these goals at leadership meetings and employee 
townhalls and in Web-based messages and other communications.

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution of it until 30 
days from the date of this report. We will then send copies to other 
interested congressional committees, the Secretary of Homeland 
Security, DHS's Under Secretary for Border and Transportation Security, 
DHS's Assistant Secretary for Immigration and Customs Enforcement, the 
Administrator of GSA, and the Director of OMB. Copies will also be 
available to other interested parties on request. In addition, the 
report will be available at no charge on the GAO Web site at 
[Hyperlink, http://www.gao.gov].

If you have any questions regarding this report, please contact me on 
(202) 512-2834 or at [Hyperlink, goldsteinm@gao.gov], or David 
Sausville, Assistant Director, on (202) 512-5403 or at [Hyperlink, 
sausvilled@gao.gov]. Other contributors to this report were Kelly 
Blado, Casey Brown, Matt Cail, Anne Izod, and Susan Michal-Smith.

Sincerely yours,

Signed by: 

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To determine what challenges, if any, the Federal Protective Service 
(FPS) has faced since it was taken out of the General Services 
Administration (GSA) and transferred to the Department of Homeland 
Security (DHS), we collected and analyzed agency documents about the 
transfer. This included policies and procedures, information about the 
organizational structure, and information on other issues related to 
the transfer, such as funding. We also interviewed agency officials 
from DHS, FPS, and GSA headquarters who were responsible for and 
directly affected by the transfer. After identifying the challenges FPS 
was experiencing, we collected documents and spoke to DHS and GSA 
agency officials about each challenge. To better understand FPS's 
responsibilities and mission, we reviewed relevant laws and documents 
and interviewed DHS and GSA agency officials. Specifically, we reviewed 
the laws relating to FPS's authority both before and after the transfer 
to DHS and analyzed the Homeland Security Act of 2002 to determine if 
FPS has gained any new legal authority under the act. We also reviewed 
the operational memorandums of agreement between DHS and GSA (for 
fiscal years 2003 and 2004) and other information, which we verified, 
on FPS's new Web site. We met with GSA officials to discuss the types 
of services FPS provided for GSA before and after its transfer to DHS. 
We interviewed DHS headquarters officials about the types of security 
and protection activities FPS has been performing since the transfer 
and their vision for the agency as part of DHS. Lastly, we spoke with 
ICE officials to obtain an understanding of how they envision the role 
of FPS within their organization.

With regard to funding issues, we analyzed agency budget documents and 
interviewed DHS and GSA budget officials. Specifically, to identify how 
the agency would be funded in fiscal years 2004 and 2005, we reviewed 
the Homeland Security Act, the 2004 GSA and DHS appropriations acts, 
and the President's budget for fiscal year 2005 to determine funding 
FPS has received and amounts requested. We corroborated funding data 
with data from FPS and GSA, as well as OMB data provided for a related 
GAO engagement. Lastly, we spoke with GSA and DHS budget officials 
about how the agency was funded during the transition (fiscal years 
2003 and 2004), how the agency would be funded in the upcoming fiscal 
year (fiscal year 2005), and any alternate funding proposals for future 
fiscal years, including fiscal year 2006 and beyond. To better 
understand FPS mission-support issues, we reviewed the operational and 
mission-support memorandums of agreement between DHS and GSA (for 
fiscal years 2003 and 2004) to determine what FPS mission-support 
systems would transfer to DHS. We interviewed DHS and FPS mission-
support officials in charge of managing all aspects of the transfer, 
including the transfer of FPS mission-support functions from GSA to 
DHS.

We considered prior GAO work on major management challenges and program 
risks of the DHS and challenges facing other DHS components, such as 
the Immigration and Naturalization Service, the Federal Air Marshal 
Service, and the U.S. Coast Guard. We considered prior GAO work on key 
practices used by public and private organizations that have undergone 
successful mergers and transformations. We did not do an in-depth 
analysis comparing these practices with FPS's transformation efforts. 
However, we held discussions with FPS officials to obtain their views 
on whether they were applicable to FPS.

DHS, FPS, and GSA provided much of the data and other information used 
in this report. We noted cases where these officials provided 
testimonial evidence, and we were not always able to obtain 
documentation that would substantiate the testimonial evidence they 
provided. In cases where officials provided their views and opinions on 
various issues within the context that they were speaking for the 
organization, we corroborated the information with other officials. We 
assessed the reliability of the funding data by (1) performing limited 
electronic testing of the data elements; (2) corroborating the data 
with FPS, GSA, and information obtained from OMB for another GAO 
review; (3) interviewing knowledgeable agency budget officials; and (4) 
comparing the data with other published data, such as the fiscal year 
2004 GSA and DHS appropriations acts. Overall, we found no 
discrepancies with these data and therefore determined that they were 
sufficiently reliable for the purpose of this report.

[End of section]

Appendix II: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528:

May 3, 2004:

Mark L. Goldstein:
Director, Physical Infrastructure Issues: 
United States General Accounting Office: 
441 G Street, NW:
Washington, D.C. 20548:

Dear Mr. Goldstein:

We have reviewed the GAO Draft Report, Homeland Security: 
Transformation Strategy Needed to Address Challenges Facing the Federal 
Protective Service, GAO-04-537, (5430283), and generally concur in the 
overall findings. However, we believe there are instances in the 
narrative that require clarification. We have discussed these below. 
Attached please find technical comments intended to improve the 
accuracy of the report. With respect to the three recommendations, we 
agree subject to the comments provided and especially invite your 
attention to our comments on your second recommendation. Our response 
follows.

Expanding Responsibilities Pose a Challenge for FPS. The report states: 
"Under the Homeland Security Act, DHS became responsible for protecting 
buildings, grounds, and property owned, occupied, or secured by the 
federal government that are under GSA's jurisdiction." [emphasis added] 
The Homeland Security Act does not mention property controlled by the 
General Service Administration (GSA.) On this issue the report 
continues with "the Homeland Security Act also provides FPS with the 
authority to protect buildings, grounds, and property of other agencies 
whose functions were transferred to DHS." We believe this statement 
requires correction in that the law contains no such language. Further, 
this statement implies an explicit limitation on the scope of 
Department of Homeland Security (DHS) authority for the protection of 
federal property. While the Section 1315 (a) does begin with the phrase 
"To the extent provided for by transfers made pursuant to the Homeland 
Security Act of 2002," there is no limitation as to GSA property. There 
is also no limitation on non-GSA property that was under the custody 
and control of those agencies transferred to DHS, as the report 
implies. We are of the opinion the law is all inclusive based on the 
language in Section 1315 (a) wherein it states after the words "owned, 
occupied, or secured by the Federal Government" the following: 
"including any agency, instrumentality, or wholly owned or mixed-
ownership corporation thereof...." This clearly reflects the intent of 
the law that is far more inclusive than GSA property and property 
transferred as part of the establishment of DHS, none of which are 
instrumentalities nor mixed ownership corporations.

The comments on page 8 of the draft report which are attributed to the 
Director of FPS - "FPS might seek to include protection for facilities 
where GSA had previously delegated authority to tenant agencies, as 
well as other facilities where agencies have protective forces with 
similar missions"-appear to be taken out of context. The comments were 
intended to simply reflect previous guidance from the House Committee 
on Transportation and Infrastructure, Subcommittee on Economic 
Development, Public Buildings and Emergency Management. In two letters 
to the Administrator of the General Services Administration (GSA) on 
January 29, 2002, and then again on March 4, 2003, the Committee 
members expressed their concern about further GSA delegations of FPS 
related authority to other agencies without analysis by the Committee 
in advance. Specifically, the March 4, 2003 letter to Administrator Per 
y from Congressmen LaTourette and Congresswoman Norton stated "Until 
the DHS establishes a comprehensive national program, and the operating 
and oversight systems to support this program, we continue to believe 
that it is in the best interest of not only GSA but also the FPS to 
suspend activities to delegate any authority to protect public 
buildings." The letter also made reference to the January 2002 letter 
indicating that "we requested that you postpone any delegation of such 
[law enforcement] authority until such time that the subcommittee has 
had an opportunity to analyze the impact of such a delegation on the 
FPS..." It is these statements and subsequent conversations with 
committee staff that were the genesis for the Director's comments. The 
information conveyed was intended to reflect the rethinking of several 
approaches, such as delegations of law enforcement authority, 
reconsidered in the post 9/11 environment and in many cases later 
reflected in the creation of the Department of Homeland Security.

We believe that the interpretation of the language in the Homeland 
Security Act on protection of federal property should be broad rather 
than narrow. The report does mention DHS' position that the mission of 
the Federal Protective Service (FPS) is to protect buildings and 
grounds owned or occupied by the Federal Government and the persons on 
the property. Clearly, as with any Department or agency, if security 
effectiveness and efficiencies can be realized by exercising existing 
authorities or pursing additional authorities, the Department will take 
appropriate action to achieve those enhancements.

Issues Related to How FPS is Funded: We believe the sections relating 
to how FPS is funded require clarification, particularly as they relate 
to charging security fees in the future. Preliminarily, a clear 
understanding of how GSA funded FPS is necessary. FPS was traditionally 
funded through those portions of the rents devoted to recovering 
security costs collected by GSA for space occupied by GSA tenant 
agencies. Those "security fees" consisted of essentially two separate 
charges. The first was a charge for the "Basic Services." This rate was 
the same for all agencies regardless of space occupied or location. It 
covered the services provided by FPS to all GSA tenants and included 
such things as patrol and response, security surveys, alarm monitoring, 
salaries, and other common cost items. This charge was included in each 
rent bill as part of the rate per square foot and adjusted annually.

The second charge was a "Building Specific" charge. This charge 
reflected FPS' cost recovery of security measures that were specific to 
a particular building. For example, Level IV security buildings have 
many more guards, more magnetometers, cameras, etc., than Level I 
buildings, which include small federal offices in shopping centers. The 
charges for these Building Specific expenses were allocated by GSA to 
the tenant agencies based on their pro rata share of the square feet 
occupied in the respective building. This is especially important in 
understanding the issues associated with who performs the billing 
function in the future as discussed below. As a result, security fees 
for specific agencies varied depending upon the building and its unique 
security requirements. All tenants share Building Specific expenses. 
The draft report did not distinguish between these two types of 
charges.

In addition to these two charges, a third vehicle for payment of 
security services was the reimbursable program. The reimbursable 
program funds those expenses incurred by agencies for security services 
that are either in excess of what FPS determined sufficient, or could 
not be deferred for inclusion in the next rent estimate cycle. For 
example, many of the guards that are currently provided are paid for 
through the reimbursable program.

Understanding these elements of the security fee process is essential 
to understanding why DHS and GSA disagree as to how security fees 
should be billed in the future. Additionally DHS and GSA continue to 
pursue resolution of questions of who has the authority to bill for the 
provision of FPS services through existing processes. The report 
identified $139 million gap in fund collections compared to the 
provision of FPS services provided in FY 2003. For FY 2005, the 
President's Budget Request includes a rate adjustment that covers FPS' 
projected expenses.

Successfully Transferring FPS Mission-Support Functions to DHS Will Be 
Challenging: We agree that the transfer of mission support functions 
always presents certain challenges. However, the contracting function 
does not pose a challenge and was sufficiently accommodated in the 
transfer. Contracting at FPS has already transitioned to, and is 
operating under the auspices of, the Immigration and Customs 
Enforcement (ICE) Procurement Program within DHS, including the review 
and issuance of DHS Contracting Warrants. The FPS has a senior 
Contracting Specialist at Headquarters that oversees policies and 
standards for the contract guard program. Contracts continue to be 
awarded and administered by 24 FPS Contracting Officers located in the 
1 I FPS Regions. Additional contracting support is available from the 
ICE Procurement Program and the Department at large, should the need 
arise. With respect to concerns raised in the report on travel 
services, ICE has implemented an electronic travel system to move to a 
more efficient travel authorization and vouchering process.

Recommendation 1: The Secretary of Homeland Security should direct the 
Director of FPS - in consultation with the Under Secretary for Border 
and Transportation Security and the Assistant Secretary for Immigration 
and Customs Enforcement - to develop and implement a transformation 
strategy that reflects FPS's consideration of key practices and 
addresses the significant challenges it is facing. In particular, this 
strategy should identify implementation goals, measures, and a timeline 
that FPS could use to show progress toward its transformation and 
demonstrate that it is accomplishing its mission while undergoing 
changes. It should also link FPS's goals and measures to the broader 
goals and objectives contained in DHS's strategic plan.

RESPONSE: Concur. As noted in the draft report, DHS, issued its 
strategic plan in February of 2004. The Director of FPS convened a 
national management conference the week of March 1, 2004, to finalize 
FPS' draft long-range strategic plan. Consultants from the IBM 
Corporation, who participated in the development of the DHS Strategic 
Plan, assisted in that effort and were especially attentive to ensuring 
FPS alignment with the Department's Strategic Plan. FPS presented its 
plan to ICE management and it is in the process of being reviewed and 
vetted through ICE management officials. It is anticipated that the FY 
2006 budget request will be based on this plan. The FPS strategic plan 
will support the overall goals and objectives of the DHS plan and it 
will be consistent with the key practices discussed in the draft report 
so as to ensure effective implementation.

Recommendation 2: The Secretary of Homeland Security take immediate 
steps to ensure that funds collected from agency rents and fees are 
used solely for the protection of buildings and grounds owned or 
occupied by the federal government. If FPS continues its involvement in 
activities not directly related to facility protection, a funding 
process would be needed that would be consistent with the requirement 
regarding the use of funds from agency rents and fees.

RESPONSE: Concur. The FPS policies and procedures, established while 
the FPS was a Program of the GSA, require that the funding transferred 
from the Administrator of GSA from rents and fees be used to for the 
protection of buildings or grounds owned or occupied by the Federal 
Government. Where FPS security services are required but have not been 
accounted for in the rent or fees collected by the Administrator of 
GSA, the individual agencies must reimburse the FPS for the cost of the 
service. The FPS has a program and policies, and extensive experience 
in processing and managing reimbursable services. The FPS provides 
additional security services to Federal agencies on a direct 
reimbursable basis totaling approximately $300 million annually. The 
policies and procedures of the FPS require that requests for support or 
services not related to the protection of Federal buildings and grounds 
must be accompanied by a reimbursement for those services.

However, we must point out that some of the programs questioned by GAO 
in the body of the report are directly related to the protection of 
Federal facilities. The protection of Federal buildings during 
political demonstrations is a primary duty of the FPS. The FPS response 
to the Free Trade protests in Miami was critical to protecting the 
complex of Federal buildings housing the agencies that were the focal 
point of the demonstrations. Likewise, deploying FPS officers and 
assets to cities where major political and national events are 
scheduled focuses primarily on increased protection for Federal 
buildings and grounds adjacent to or in the vicinity of activities 
attracting large numbers of participants. All regional special 
operation plans (major demonstrations and national events) are reviewed 
and approved at FPS Headquarters. Funding is allocated and expenditures 
are reviewed by the Headquarters Financial Management staff to ensure 
the appropriate use of the funds.

ICE will develop guidance for determining when the provision of service 
is reasonable, customary and de minimis with respect to assistance 
provided by FPS that are not generally directly related to the 
protection of Federal building and grounds. We believe that findings of 
the Comptroller General support the provision of this service provided 
support to these activities that are of limited duration with local 
offices, ad hoc and do not increase the direct costs of FPS operations 
and investment in staff.

Recommendation 3. The Secretary of Homeland Security ensure that DHS is 
well equipped to assume FPS mission-support functions before these 
functions are transferred from GSA, even if it is necessary to extend 
the September 2004 goal for the transfer.

RESPONSE: Concur. FPS shares the concern regarding the transfer of 
mission support functions from GSA to DHS. FPS procedures governing 
everything from finance, travel, time and attendance, information 
technology applications, human resource procedures and processes, and 
payroll are electronically linked and interdependent via GSA's advanced 
systems. The transfer of those functions will require new systems, new 
processes, and new training for FPS employees. It will be a challenging 
task. FPS and DHS officials are working daily to ensure the transfer is 
as efficient and as trouble free as possible. We are confident the 
transfer can be accomplished by the target goal of October 1, 2004. We 
are equally confident that should DHS determine that reaching that goal 
might jeopardize FPS' mission, it will negotiate an extension with GSA 
to do so.

Signed by: 

David Nicholson: 
Director of Resources: 
Border and Transportation Security: 
Department of Homeland Security:

Enclosure: 

[End of section]

Appendix III: Comments from the General Services Administration: 

GSA Public Buildings Service:

April 29, 2004:

Mark L. Goldstein:
Director, Physical Infrastructure Issues: 
U.S. General Accounting Office: 
Washington, DC:

Dear Mr. Goldstein:

The General Services Administration (GSA) appreciates this opportunity 
to submit agency comments on the U.S. General Accounting Office (GAO) 
"Draft Report to the Chairman, Committee on Government Reform, U.S. 
House of Representatives, Homeland Security, Transformation Strategy 
Needed to Address Challenges Facing the Federal Protective Service," 
GAO-04-537 (Draft Report). While we know that the Draft Report pertains 
to the Department of Homeland Security's (DHS) Federal Protective 
Service (FPS) and that DHS will undoubtedly be submitting its own 
agency views, GSA felt it necessary to address or clarify certain 
issues raised in the Draft Report in this separate submission. We 
address the challenges GAO set out in the beginning of the Draft 
Report:

Expanding mission and increased responsibility. We have no objections 
to GAO's findings regarding the expanding mission of the FPS and defer 
to DHS on its authorities to expand the mission of the FPS. We agree 
with the Draft Report that under the Department of Homeland Security 
Act of 2002, as amended, (the Act) the FPS authorities to protect 
Federal properties include properties under the custody and control of 
GSA as well as those under the custody and control of DHS. While the 
enclosed legal memorandum from GSA's Office of General Counsel notes 
that section 1706 of the Act did expand the law enforcement authorities 
of the FPS under 40 U.S.C. § 1315, to what extent the FPS has 
authorities to protect other Federal properties and personnel, we defer 
to DHS.

Unresolved issues related to funding. The enclosed legal memorandum 
also addresses most of these issues. However, it does not address the 
restriction in Section 422(b)(2) of the Act regarding the use of funds 
transferred by the Administrator to the Secretary of Homeland Security 
from rents and fees collected by the Administrator. We consider any 
implication that GSA is responsible for billing and collecting fees 
owed to DHS for FPS furnished services, and that FPS does not have the 
authority to bill for their services, to be incorrect. As a matter of 
government efficiency, and in the interest of not creating unnecessary 
duplicative systems, GSA could agree to continue to use its systems to 
produce and distribute a bill on behalf of FPS. While GSA is authorized 
to provide its billing services to FPS on a reimbursable basis, this 
does not mean that DHS's billing responsibilities for FPS-provided 
services belong to GSA.

As for Section 422(b)(2), we note that to the extent that FPS is funded 
through fees collected by the Administrator, those fees must be used to 
protect Federal buildings and grounds and not for other purposes. This 
could definitely impact the ability of FPS to take on expanded roles 
unrelated to the protection of Federal property unless funded through 
direct appropriations or other DHS sources. As FPS' mission expands, it 
is important that the rates charged to GSA and the tenants of GSA 
facilities reflect costs attributable to protecting the GSA-controlled 
property. Costs associated with the expanded mission, including the 
costs associated with the increased overhead at the FPS, Bureau, 
Directorate and DHS headquarters levels, should not be charged to GSA 
customers.

On pages 16 and 17 of the Draft Report, there is a discussion regarding 
the historical gap between the cost of security and tenant payments 
that were directly attributable to security. Although the gap existed 
in prior years, by FY 2005, based on the President's Budget, the gap 
has been closed. Beginning in FY 2004, the President's budget allowed 
for $28 million to be funded by a direct appropriation to DHS instead 
of through offsetting collections. Additionally, the FY 2004 
President's budget reflected an increase in the security rate that 
narrowed the shortfall. The FY 2005 President's Budget reflects a 
security rate that closed the funding gap. Beginning in FY 2005, FPS is 
allowed to charge a security rate to GSA tenants that should fully fund 
FPS for services provided to GSA tenants. We take issue with the 
implication on page 17 that GSA is available to cover FPS shortfalls, 
and specifically the statement: "Addressing this historical gap between 
the cost of security and tenant payments represents another challenge 
that would need to be addressed if the mechanism for funding FPS were 
restructured, particularly if GSA were to no longer cover the shortfall 
with other funds." (Draft Report, p. 17, emphasis added). The funding 
gap associated with protecting GSA facilities has been addressed in the 
FY 2005 President's Budget. GSA has transferred all of the budget 
authority and funds associated with FPS and GSA has not requested any 
additional authority associated with the transferred functions. 
Therefore, if FPS were to expand their mission, it would seem 
appropriate for DHS to look for either a direct appropriation or other 
DHS funding sources, and it would not be appropriate, nor do we think 
legally permissible, to look to GSA to fund any future shortfalls.

Transfer of mission-support functions to DHS. Beginning on page 19, 
there is a discussion of FPS mission support functions transferred to 
FPS. In March, 2003, GSA transferred to FPS 21 FTE that were directly 
related to procurement (contracting) functions and an additional 8 FTE 
related to the budget functions. GSA is not providing the contracting 
functions as implied in the GAO report - those responsibilities have 
been transferred to DHS as required by the Act. The only FTE that are 
temporarily remaining with GSA (per a Memorandum of Agreement between 
DHS and GSA regarding Support Services for FPS and FedCirc (Support 
Services MOU)) are 15 FTE providing payroll, accounting, HR, and other 
services associated with GSA's Working Capital Fund that FPS has asked 
GSA to provide on a reimbursable basis through FY 2004. Once those 
functions are transferred to DHS, the 15 FTE will be transferred to 
DHS. The statement on page 20 of the Draft Report: "After FPS's 
transfer to DHS, GSA retained the contracting staff responsible for 
FPS as part of the memorandum of agreement to provide mission support" 
is incorrect and potentially misleading. All FTE associated with the 
contracting function were transferred immediately. Furthermore, our 
Support Services MOU contemplates the continued availability of 
contracts for security guard services on GSA's Federal Supply Service's 
Schedules contracts.

Finally, on page 21 of the Draft Report, there is a statement that 
"there has been confusion about whether FPS should adhere to GSA or DHS 
administrative policies and procedures, as well as where they should go 
for assistance or to get approval for administrative issues." Although 
that statement may have been true in October 2003, as the example 
illustrated, the GSA/DHS Support Services MOU, signed in January 2004, 
resolved those issues.

Thanks you for this opportunity to address the issues raised in the 
Draft Report. Should you have any questions concerning this letter, 
please contact David Morris on (202) 501-4159.

Sincerely,

Signed by: 

Paul Chistolini:

Deputy Commissioner:
Public Buildings Service:

Enclosure: OGC Legal Opinion:

[End of letter]

GSA Office of General Counsel:

April 22, 2004:

MEMORANDUM FOR: 

PAUL CHISTOLINI: 
DEPUTY COMMISSIONER: 
PUBLIC BUILDINGS SERVICE (P):

THRU: 

Signed by: 

SAMUEL J. MORRIS, III: 
ASSOCIATE GENERAL COUNSEL: 
REAL PROPERTY DIVISION (LR):

FROM: 

Signed by: 

HARMON R. EGGERS:
DEPUTY ASSOCIATE GENERAL COUNSEL: 
REAL PROPERTY DIVISION (LR):

Signed by: 

MICHAEL J. WOOTTE:
SENIOR ASSISTANT GENERAL COUNSEL: 
REAL PROPERTY DIVISION (LR):

SUBJECT: Authority of the General Services Administration (GSA) and the 
Department of Homeland Security (DHS) to Charge and Collect for 
Protection, Law Enforcement and Related Security Services:

QUESTIONS PRESENTED:

In response to a recent GAO Draft Audit Report,[NOTE 1] you asked for 
the Office of General Counsel's opinion on three related questions:

1) Does GSA have authority to charge and collect from other Federal 
agencies for the law enforcement and related security services provided 
by DHS's Federal Protective Service (FPS)?

2) Does DHS have the authority to charge other Federal agencies for the 
law enforcement or related security services provided by FPS?

3) Under what conditions and authorities could GSA charge and collect 
from other Federal agencies for such FPS services?

ANSWERS:

As explained below:

1) GSA lacks the independent authority to bill and collect from other 
Federal agencies for the law enforcement or related security services 
provided by FPS.

2) Although the Homeland Security Act does not directly address this 
function, we believe that an argument can be made that DHS has the 
authority to charge (i.e., bill) and collect from other Federal 
agencies for the law enforcement or related security services provided 
by FPS.

3) GSA could agree to provide the billing and collection services on a 
reimbursable basis to DHS, using DHS's own authority to bill and 
collect for services provided by FPS. However, if DHS concludes that it 
lacks such authority, GSA cannot do for DHS that which DHS lacks 
authority to do for itself.

I. GSA Authority to Charge for Space and Services:

GSA's authority to charge for furnishing space and services to federal 
agencies is set forth in 40 U.S.C. § 586, which provides in pertinent 
part:

§ 586. Charges for space and services:

(a) Definition. In this section, "space and services" means space, 
services, quarters, maintenance, repair, and other facilities.

(b) Charges by Administrator of General Services.

(1) In general. The Administrator of General Services shall impose a 
charge for furnishing space and services.

(2) Rates. The Administrator shall, from time to time, determine the 
rates to be charged for furnishing space and services and shall 
prescribe regulations providing for the rates. The rates shall 
approximate commercial charges for comparable space and services....

40 U.S.C. § 586 (emphasis added). Charges imposed by GSA under 40 
U.S.C. § 586(b) for furnishing space and services are required by law 
to be deposited into the Federal Buildings Fund (FBF). 40 U.S.C. § 
592(b)(1). Deposits into the FBF are available for GSA's real property 
management and related activities in the amounts specified in annual 
appropriation laws without regard to fiscal year limitations. 40 U.S.C. 
§ 592(c)(1).

In accordance with 40 U.S.C. § 586, GSA is required to charge agencies 
occupying GSA-controlled space for "space and services" furnished by 
GSA. This provision does not authorize GSA to charge agencies for 
services furnished to GSA's tenant agencies by agencies other than GSA. 
Therefore, GSA is not authorized by law to charge agencies for the 
protection services (including law enforcement and related security 
services) furnished by FPS because 40 U.S.C. § 586 only authorizes GSA 
to impose charges for services furnished by GSA.

GSA disagrees with the interpretation offered by a DHS official that 
the Homeland Security Act of 2002 (hereinafter, "the Act"), and 
specifically, section 422 of the Act, 6 U.S.C. § 232, requires that GSA 
must continue to be responsible for collecting all fees for protection 
services, regardless of whether the services are furnished by DHS or 
GSA. As we will explain more fully, the Act clearly transfers from GSA 
to DHS certain (but not all) GSA authorities for the protection of 
buildings under the custody and control of GSA. The protection 
functions transferred were all of the FPS functions, including law 
enforcement and related security, along with the necessary GSA 
functions related to FPS. Section 422 of the Act sets forth what was 
retained by GSA and not transferred to DHS. Section 422 provides as 
follows:

§ 422. Functions of Administrator of General Services:

(a) Operation, maintenance, and protection of Federal buildings and 
grounds. Nothing in this Act may be construed to affect the functions 
or authorities of the Administrator of General Services with respect to 
the operation, maintenance, and protection of buildings and grounds 
owned or occupied by the Federal Government and under the jurisdiction, 
custody, or control of the Administrator. Except for the law 
enforcement and related security functions transferred under section 
403(3) [6 U.S.C. § 203(3)] the Administrator shall retain all powers, 
functions, and authorities vested in the Administrator under chapter 10 
of title 40, United States Code [40 U.S.C. §§ 501 et seq.], and other 
provisions of law that are necessary for the operation, maintenance, 
and protection of such buildings and grounds.

(b) Collection of rents and fees; Federal Buildings Fund.

(1) Statutory construction. Nothing in this Act may be construed--:

(A) to direct the transfer of, or affect, the authority of the 
Administrator of General Services to collect rents and fees, including 
fees collected for protective services; or:

(B) to authorize the Secretary or any other official in the Department 
to obligate amounts in the Federal Buildings Fund established by 
section 490(f) of title 40, United States Code [40 U.S.C. § 592].

(2) Use of transferred amounts. Any amounts transferred by the 
Administrator of General Services to the Secretary out of rents and 
fees collected by the Administrator shall be used by the Secretary 
solely for the protection of buildings or grounds owned or occupied by 
the Federal Government.

6 U.S.C. § 232 (emphasis added). Further, section 403 of the Act, 6 
U.S.C. § 203, transferred the FPS of GSA (which handled law enforcement 
and related security functions of GSA), along with the functions of the 
Administrator of General Services relating thereto, to DHS. Section 
1706 of the Act amended 40 U.S.C. § 1315, expanding the law enforcement 
authority of FPS, and providing that DHS became responsible for 
protecting buildings, grounds, and property owned, occupied, or secured 
by the Federal Government that are under GSA's jurisdiction, in 
addition to the properties of other agencies transferred to DHS 
pursuant to the Act.

It is clear from Section 422 of the Act, 6 U.S.C. § 232, that except 
for the law enforcement and related security functions transferred to 
DHS by the Act, GSA retains all powers, functions, and authorities 
vested in the Administrator by law for the operation, maintenance, and 
protection of GSA-controlled buildings and grounds. GSA is authorized 
by numerous interrelated provisions of law to operate, maintain, and 
protect GSA-controlled federal buildings and, at the request of a 
federal agency, other buildings owned by the Federal Government and 
occupied by the agency making the request. [NOTE 2]

Therefore, the Act created some overlap in the protection authorities 
of GSA and DHS. Both DHS and GSA have responsibilities for protecting 
GSA-controlled buildings and grounds. However, as to GSA-controlled 
buildings, DHS is responsible for protection that pertains to law 
enforcement and related security functions. FPS functions are akin to 
those of any law enforcement agency. FPS enforces laws, building rules 
and regulations; investigates and protects against crime; and provides 
other police-type services.

On the other hand, GSA also is responsible for the protection of GSA-
controlled buildings and grounds, excluding the DHS law enforcement and 
related security functions. GSA's remaining protection functions are 
akin to those of any property owner to provide for the care and 
safekeeping of their property and the safety of persons on the 
property. This may include installing fencing, lighting, and locks on 
doors, or controlling access into and out of a building. It can also 
include hiring and deploying contract guards, which are provided by 
many commercial building owners. However, through GSA's Memorandum of 
Agreement (MOA) with DHS, effective as of March 1, 2003, GSA and DHS 
have determined that having DHS provide for security guards is a more 
effective way of coordinating that protection function with FPS's law 
enforcement functions because it provides a more seamless approach to 
the law enforcement response through a single chain of command. 
Pursuant to the MOA, GSA will continue to make guard contracts 
available through the Federal Supply Schedule for use by FPS.

Furthermore, GSA is not authorized to bill and collect for FPS's law 
enforcement services because all of GSA's functions relating to FPS, 
including GSA's preexisting authority to charge for the law enforcement 
and related security services provided by FPS, were transferred by 
sections 403(3) and 1706 of the Act to DHS.

In summary, GSA is authorized by 40 U.S.C. § 586 to impose charges for 
space and services (including protection services) furnished by GSA, 
not protection services (including law enforcement and related security 
services) furnished by DHS. The provisions of Section 422(b) of the 
Act, when read in conjunction with 40 U.S.C. § 586, simply preserve the 
authority of GSA to collect rents and fees (including fees collected 
for protection services) provided that the space and services are 
furnished by GSA. Section 422(b) does not make GSA responsible for 
charging for protection services furnished by DHS.

II. DHS Authority to Charge for Protection Services:

DHS arguably has authority to bill and collect fees for the protection, 
law enforcement and related security services provided by DHS through 
FPS to other Federal agencies under two separate authorities: A. 40 
U.S.C. § 586(c) as to protection services other than strictly law 
enforcement services; and B. the aforementioned Transfer Provisions of 
the Act as to all DHS protection services including law enforcement.

A. 40 U.S.C. Section 586(c). Subject to approval by GSA and the Office 
of Management and Budget (OMB), 40 U.S.C. § 586(c) provides authority 
for DHS to impose a charge for certain protection services currently 
furnished by FPS to agencies occupying GSA-controlled space and to 
credit the amounts received to the DHS appropriation or fund initially 
charged for providing the services.

Section 586(c) provides:

(c) Charges by executive agencies.

(1) In general. An executive agency, other than the Administration 
[GSA], may impose a charge for furnishing space and services at rates 
approved by the Administrator.

(2) Crediting amounts received. An amount an executive agency receives 
under this subsection shall be credited to the appropriation or fund 
initially charged for providing the space or service. However, amounts 
in excess of actual operating and maintenance costs shall be credited 
to miscellaneous receipts unless otherwise provided by law.

40 U.S.C. § 586(c) [formerly section 210(k) of the Federal Property and 
Administrative Services Act of 1949, 40 U.S.C. § 490(k); when re-
codified, the Code uses the word "Administration" to refer to the 
General Services Administration].

The legislative history of 40 U.S.C. § 586(c) states that this section 
"would authorize other executive agencies providing building services 
similar to those furnished by GSA to charge fees therefore as approved 
by the Administrator of General Services. Receipt from such fees could 
be credited to the appropriation or fund initially charged, except that 
amounts in excess of costs incurred would be credited to miscellaneous 
receipts unless otherwise authorized by law." (emphasis added). See 
H.R. REP. No. 92-989, at 13 (1972) and H.R. CONE. REP. No. 92-1097, at 
12 (1972), reprinted in 1972 U.S.C.C.A.N. 2370, 2378, 2383.

In addition to GSA approval, OMB must approve the rates charged by DHS. 
[NOTE 3] Therefore DHS could, with the approval of GSA and OMB, 
establish a separate billing and collection process for protection 
services (excluding law enforcement services) provided by DHS.

Prior to the enactment of the Act, GSA was vested with the authority to 
provide law enforcement services under the former 40 U.S.C. § 318. 
However, the Act eliminated GSA's authority to perform law enforcement 
functions and, at the same time, vested DHS with broader law 
enforcement authority than was previously vested in GSA. See 40 U.S.C. 
§ 1315. Therefore, under current law, it does not appear that GSA could 
approve rates under 40 U.S.C. § 586(c) for law enforcement services now 
being provided by FPS, because such law enforcement services are no 
longer services provided by GSA.

However, section 422 of the Act provides that "[e]xcept for the law 
enforcement and related security functions transferred [to DHS], the 
Administrator shall retain all powers, functions, and authorities 
vested in the Administrator under chapter 10 of title 40, United States 
Code ..., and other provisions of law that are necessary for the 
operation, maintenance, and protection of such buildings and grounds 
[under the jurisdiction, custody, or control of the Administrator]." 6 
U.S.C. § 232. Therefore, the rates approved by GSA under 40 U.S.C. § 
586(c) clearly may include rates for protection services, other than 
law enforcement and related security services, provided by FPS. We 
believe that the costs for providing contract guard services is an 
example of the type of protection service that DHS could bill and 
collect from other agencies through this authority.

B. Transfer Provisions of the Act. Alternatively, and in addition to 
the authority under 40 U.S.C. § 586(c), the Secretary has the authority 
to bill and collect fees for the law enforcement and related security 
services provided by its FPS to other Federal agencies because that 
function (i.e., billing and collecting for FPS-provided services) was a 
function that existed in GSA immediately prior to the creation of the 
DHS, and was a function that was transferred to the Secretary by the 
Act.

The Act provides in relevant part as follows:

§ 403. Functions transferred:

In accordance with title XV (relating to transition provisions), there 
shall be transferred to the Secretary the functions, personnel, assets, 
and liabilities of--... (3) the Federal Protective Service of the 
General Services Administration, including the functions of the 
Administrator of General Services relating thereto;...

Section 403 of the Act, 6 U.S.C. § 203 (emphasis added).

In addition to directing the transfer of the functions of GSA's FPS, 
the section specifically provides that the functions of the GSA 
Administrator that relate to the FPS and to FPS's functions, personnel, 
assets and liabilities are also transferred to DHS. Moreover, section 
403 provides that the transfer of these GSA functions shall be in 
accordance with the Act's transition provisions in title XV (6 U.S.C. § 
541, et seq.) which provide in pertinent part:

§ 1511. Transitional authorities:

(d) Transfer of personnel, assets, obligations, and functions. Upon the 
transfer of an agency to the Department--:

(2) the Secretary shall have all functions relating to the agency 
[i.e., the Federal Protective Service] that any other official could by 
law exercise in relation to the agency immediately before such 
transfer, and shall have in addition all functions vested in the 
Secretary by this Act or other law.

Section 1511(d)(2) of the Act, 6 U.S.C. § 551(d)(2) (emphasis added). 
[NOTE 4]

Further, the Act defines the term "functions" broadly to clearly cover 
any and all responsibilities that GSA performed on behalf of the FPS 
before enactment of the Act. [NOTE 5] Before the Act, GSA routinely 
provided standard level security protection (a FPS function) to other 
agencies as part of GSA's standard level user charge for GSA furnished 
space and services. [NOTE 6] GSA likewise provided special FPS security 
services or above-standard security services to other agencies on a 
reimbursable basis. [NOTE 7] Thus, since GSA did perform such billing 
and collection functions with respect to the FPS before FPS's transfer 
to DHS, that same function (and the concomitant authority and 
responsibility) was vested in the Secretary upon the effective date of 
the Act. While we note that there is no express language in the Act 
specifically authorizing DHS to bill agencies for these services, we 
believe that a rational argument can be made to support that 
proposition based on the express language in the Act transferring all 
the functions as set forth above.

III. GSA Authority to Provide Billing and Collection Services to DHS:

In the alternative to billing agencies directly, because we believe DHS 
has the authority to bill and collect for FPS services, DHS could seek 
to enter into an agreement with GSA for GSA to provide the billing and 
collection services to DHS on a reimbursable basis. Such an agreement 
is authorized by 40 U.S.C. § 592(b)(2), [NOTE 8], 40 U.S.C. § 581(g) 
[NOTE 9], or the Economy Act, 31 U.S.C. § 1535.

GSA could agree to provide the billing and collection services on a 
reimbursable basis to DHS, using DHS's own authority to bill and 
collect for services provided by FPS. However, if DHS concludes that it 
lacks such authority, GSA cannot do for DHS that which DHS lacks 
authority to do for itself.

NOTES: 

[1] U.S. General Accounting Office (GAO) Draft Report to the Chairman, 
Committee on Government Reform, House of Representatives, "Homeland 
Security, Transformation Strategy Needed to Address Challenges Facing 
the Federal Protective Service," GAO-04-537.

[2] See Reorganization Plan No. 18 of 1950, 40 U.S.C. § 301 note; 40 
U.S.C. §§ 8101, 3101, and 582.

[3] The provisions currently found in 40 U.S.C. §§ 586 and 592 
[formerly 40 U.S.C. §§ 490(j), (k), and (f)] were enacted into law by 
the Public Buildings Amendments of 1972, Public Law 92-313, 86 Stat. 
216. Section 7 of Public Law 92-313 provides: "To carry out the 
provisions of the Public Buildings Amendments of 1972, the 
Administrator of General Services shall issue such regulations as he 
deems necessary. Such regulations shall be coordinated with the Office 
of Management and Budget, and the rates established by the 
Administrator of General Services pursuant to sections 210(j) and 
210(k) of the Federal Property and Administrative Services Act of 1949, 
as amended, [now codified as 40 U.S.C. § 586] shall be approved by the 
Director of the Office of Management and Budget." Reference to the OMB 
approval requirements of Section 7 of Public Law 92-313 was included in 
the former 40 U.S.C. § 603 note; however, such a reference is not 
included in the current Title 40, United States Code, as codified by 
Public Law 107-217, August 21, 2002, 116 Stat. 1062. Nevertheless, 
Public Law 107-217 made no substantive changes in existing law; 
therefore, Section 7 of Public Law 92-313 remains in full force and 
effect. See Title 40, U.S.C. notes following the Table of Former Title 
40 U.S.C.

[4] The bracketed text referencing "the Federal Protective Service" was 
inserted here because it is clear from the context of the provision 
that the term "agency" is referring to the transferred components of 
DHS, including the Federal Protective Service. The Act also provides 
that: "[F]or purposes of this title [i.e., the title on the Transition] 
that: (1) The term 'agency' includes any entity, organizational unit, 
program, or function." Pub. L. 107-297, §1501(a), 6 U.S.C. § 541 (a) 
(2004).

[5] See the Act, at § 101 - Definitions, which provides: "In this Act, 
the following definitions apply:

(8) The term 'functions' includes authorities, powers, rights, 
privileges, immunities, programs, projects, activities, duties, and 
responsibilities." 

Pub. L. 107-297, §101(8), 6 U.S.C. § 101 (2004). While some might 
contend the phrase "functions of the Administrator relating thereto" 
was intended to only cover the Administrator's statutory authorities 
that relate specifically to the FPS, like the authority to appoint 
officers, to issue firearms or to provide law enforcement and security 
services, etc., all of these functions were already transferred to the 
Secretary immediately upon enactment of section 1706 of the Act or 
under the first phrase of 403(3), which transferred all of the 
functions, personnel, assets and liabilities of the FPS. So, the 
phrase about "the functions of the Administrator relating thereto" 
must be construed to mean all of GSA's other functions with respect to 
the FPS. Furthermore, the Act directs that, with respect to any 
function transferred to the Secretary under the Act, any reference in 
any Federal law to another department or agency shall be deemed to 
refer to the Secretary of Homeland Security. See section 1517 of the 
Act, 6 U.S.C. § 557.

[6] See GSA's functions under 40 U.S.C. § 581 (a) and 40 U.S.C. § 1315, 
before enactment of the Act; and 40 U.S.C. § 586(b) and § 581(g). See 
also, 41 CFR Part 102-85; and GSA's PBS Pricing Desk Guide, 2nd ed., 
section 3.2.6.; and GSA's PBS Customer Guide to Real Property, Chapter 
4, Security and Law Enforcement Services.

[7] Id. Also, discussions with PBS's Controller's Office confirms that 
GSA would routinely provide above standard services (i.e., services 
above those included in GSA's Rent charge (i.e., base rent and 
building-specific security charges) to other agencies on a 
reimbursable basis using GSA's reimbursable work authorizations 
(RWAs).

[8] 40 U.S.C. § 592(b)(2) provides: "Reimbursements for special 
services. --This subchapter does not preclude the Administrator of 
General Services from providing special services, not included in the 
standard level user charge, on a reimbursable basis. The reimbursements 
may be credited to the Fund.

[9] 40 U.S.C. § 581 provides that: "The Administrator may - (1) obtain 
payments, through advances or otherwise, for services, space, quarters, 
maintenance, repair, or other facilities furnished, on a reimbursable 
basis, to a federal agency...; and (2) credit the payments to the 
applicable appropriation of the Administration." 

[End of section]

Appendix IV: GAO Legal Analysis of Issues Concerning FPS Activities Not 
Related to Facility Protection: 

In its comments on this report, DHS stated that it plans to develop 
guidance allowing the use of funds for activities unrelated to the 
protection of buildings and grounds where the activities are de 
minimis. DHS refers to GAO decisions as supporting the use of funds for 
activities that "are of limited duration with local offices, ad hoc, 
and do not increase the direct costs of FPS operations and investment 
in staff." We do not agree with DHS. We do not believe the GAO 
decisions DHS cites support the implementation of the de minimis 
concept through guidance sanctioning de minimis uses of FPS funds for 
explicitly prohibited purposes.

Under the Homeland Security Act, only the costs of services provided by 
FPS personnel that are necessary or incidental to the protection of 
federal buildings and grounds may be funded out of agency rents and 
fees. Specifically, section 422(b)(2) of the Homeland Security Act of 
2002 states: 

"Any amounts transferred by the Administrator of General Services to 
the Secretary out of rents and fees collected by the Administrator 
shall be used by the Secretary solely for the protection of buildings 
or grounds owned or occupied by the Federal Government."[Footnote 29]

The language in section 422(b)(2) explicitly restricts the use of funds 
collected by GSA from its tenants out of rents and fees "solely" for 
the protection of government buildings and grounds. Because of this 
limitation in the statute, the use of these funds for any purpose other 
than the protection of government buildings and grounds would not be 
permitted absent reimbursement pursuant to other applicable statutory 
authority.

Section 422(b)(2) recognizes that FPS funds come from rents and fees 
paid by other federal agencies to reimburse FPS for services in 
protecting their buildings and grounds. To permit DHS to use those 
funds for purposes unrelated to the protection of federal buildings and 
grounds in effect would burden those agencies with paying part of the 
costs of DHS's mission unrelated to the purpose for which they pay 
rents and fees. This practice also would result in the unauthorized 
augmentation of DHS appropriations. We are not questioning the policy 
judgment of DHS in making FPS personnel available for those activities 
within DHS's mission that are not related to the protection of federal 
buildings and grounds. Rather, we are questioning the use of amounts 
transferred by GSA to DHS, given the restriction of section 422(b)(2) 
of the Homeland Security Act, for these activities.

DHS does not contend that the statute itself permits DHS to expend 
funds for purposes other than the protection of buildings and grounds 
and, in fact, DHS recognizes that if funds are used for unrelated 
purposes they must be reimbursed. However, DHS claims that if the 
unrelated expenditures are de minimis they need not be reimbursed, and 
DHS proposes to issue guidance to this effect.

DHS relies on two GAO decisions, involving inter-and intra-agency 
details, as supporting its proposed guidance. In the first decision, 64 
Comp. Gen. 370 (1985), we held that, absent specific statutory 
authority, non-reimbursable details violate the purpose statute, 31 
U.S.C. § 1301(a), which provides that appropriations may be spent only 
on the objects for which they are appropriated. However, we stated 
there were limited exceptions in which non-reimbursable agency details 
may still be allowed. Under the first exception, we recognized that 
non-reimbursable details would be appropriate, and consistent with the 
purpose statute, where the detail furthers a purpose for which the 
loaning agency receives appropriations. Under the second exception, 
which DHS relies upon, we stated that we would not object to details 
failing to meet the purpose test, as long as the detail is de minimis 
and the fiscal impact on the appropriation is negligible. In this 
decision, for purposes of defining de minimis, we adopted guidance from 
the Federal Personnel Manual (FPM) relating to agency details, and said 
we would permit "details for brief periods when necessary services 
cannot be obtained as a practical matter by other means and the number 
of persons and cost involved are minimal." (64 Comp. 370, describing 
FPM Ch. 300, subchapter 8, Inst. 262, May 7, 1981.) However, in the 
second decision, 65 Comp. Gen. 635 (1986), we recognized that this 
discretion had limits. There, we stated that the proposed transfer of 
15 to 20 National Labor Relations Board administrative law judges to 
the Department of Labor "far exceeds the exception for administrative 
convenience we intended to establish." We declined to state the dollar 
amount or number of people participating in a detail that would be 
considered de minimis. In fact, in subsequent cases regarding the 
detail of employees under the Economy Act,[Footnote 30] we reiterated 
that the reimbursement of the costs of detailed personnel the agency 
must recover must be based on actual costs.[Footnote 31]

As explained below, our opinion in 64 Comp. Gen. 370 does not support 
DHS's proposal to issue guidance authorizing de minimis uses of FPS 
personnel and resources. The guidance adopted in our decision-the FPM-
has been rescinded and is no longer effective.[Footnote 32] Moreover, 
to the extent that our decision is read as setting a de minimis 
standard of general applicability, it is not in keeping with the 
governing law on this subject.

The concept of de minimis comes from the legal maxim De Minimis Non 
Curat Lex--the law does not concern itself with trifles.[Footnote 33] 
This maxim, as applied by courts and by administrative agencies in 
various contexts, recognizes that a fact or amount may be so 
insignificant or trifling that it can be overlooked in deciding a legal 
issue. It places intangible injuries, such as those that are small and 
difficult to measure, outside the scope of legal relief.[Footnote 34] 
In the context of appropriations law, we have occasionally invoked the 
de minimis concept to analyze the impact on an appropriation of past 
conduct alleged to be in violation of the law. For example, where 
agencies have violated anti-lobbying appropriation act restrictions, we 
have sometimes found the improper expense to be too small, or too 
commingled with proper expenses, to warrant recovery.[Footnote 35] In 
those cases we used the de minimis concept to measure the amount 
associated with the violation and not to prospectively sanction what 
would be a violation of law. In a similar vein, the Justice 
Department's Office of Legal Counsel (OLC) has recognized that some 
activities may be so minimal, and so difficult to segregate from 
official activities, that the associated expenses do not need to be 
separately tracked or reimbursed.[Footnote 36]

To the extent generalities can be drawn from these cases, the de 
minimis concept is most appropriately applied where amounts are not 
readily determinable and it is clear that it would be difficult or 
impossible for the agency to allocate the specific costs of an 
activity, such as the costs of reading and signing a letter. However, 
the concept must be applied on a case-by-case basis, depending on the 
unique facts and circumstances involved, not routinely as DHS suggests. 
See 65 Comp. Gen. 635.

The guidance proposed by DHS would sanction uses of the FPS for 
purposes unrelated to the protection of federal buildings and grounds, 
and in our view this is not appropriate. In contrast to the kinds of 
situations illustrated above, DHS and FPS should be able to identify 
costs of FPS personnel used for such activities, since those types of 
costs can be allocated on a daily, hourly, or other periodic basis. For 
reimbursements under the Economy Act, recovery of actual costs is 
required.[Footnote 37] In fact, those types of costs are commonly 
allocated when details or the costs of agency personnel providing 
services to another agency are reimbursed by one agency to 
another.[Footnote 38] While agencies may have flexibility in applying 
the actual cost standard, there must be reasonable assurance that the 
performing agency is reimbursed for its costs to avoid the ordering or 
performing agency augmenting its appropriations.[Footnote 39] 
Furthermore, the de minimis concept applies on a case-by-case basis. As 
noted above, the concept of de minimis typically goes to measure the 
amount associated with a violation or damages to be recovered. The 
concept has not been applied to, nor would the case law support, the 
prospective approval of activities across an organization like FPS 
knowing fully that they constitute violations of law.[Footnote 40] 
Similarly, any violation of a statute, whether it be characterized as 
de minimis or technical, is not permissible.[Footnote 41] For these 
reasons, we would object to DHS establishing prospective guidance which 
would sanction use of FPS funds for expenditures that are not 
incidental or necessary to the protection of federal buildings and 
grounds.

As discussed above, section 422(b)(2) of the Homeland Security Act of 
2002 explicitly directs that funds collected from rents and fees be 
used "solely" for the protection of buildings and grounds, and the 
statute recognizes no exceptions to this restriction. In most 
situations, it can be determined prior to the activity whether it falls 
within FPS's mission and is necessary or incidental to the protection 
of federal buildings and grounds. We recognize that DHS has some 
flexibility under 422(b)(2) of the Homeland Security Act of 2002 in 
determining that certain uses of FPS funds may be necessary or 
incidental to the protection of federal buildings and grounds. For 
example, if FPS officers were engaged in crowd control at the World 
Trade protests in Miami incident to their protection of federal 
buildings during demonstrations, the expenditure of funds for such 
activities would be allowed as "necessary" or "incidental" to the 
protection of federal buildings or grounds. However, as we noted in the 
report, there are other situations where the use of the FPS is not 
related in any way to the protection of federal buildings and grounds 
and FPS funds should not be used for such purposes without 
reimbursement. For example, officers assisting other DHS law 
enforcement personnel in immigration-related work such as "Operation 
Predator" or providing security at the Kentucky Derby is not necessary 
or incidental to the protection of federal buildings and grounds. If 
the activity does not fall within FPS mission or is not necessary or 
incidental to the protection of federal buildings and grounds, then the 
costs of these activities should be identified and reimbursed by the 
benefiting appropriation.

(543083): 

FOOTNOTES

[1] 40 U.S.C.A. § 1315.

[2] Civilian employment in the executive branch is measured on the 
basis of full-time equivalents (FTE). One FTE is equal to one work year 
or 2,080 nonovertime hours. For example, one full-time employee counts 
as one FTE, and two half-time employees also count as one FTE.

[3] U.S. General Accounting Office, High-Risk Series: An Update, GAO-
03-119 (Washington, D.C.: January 2003).

[4] See GAO-03-119 and U.S. General Accounting Office, High-Risk 
Series: Federal Real Property, GAO-03-122 (Washington, D.C.: January 
2003).

[5] 40 U.S.C.A. § 1315 and 6 U.S.C.A. § 203.

[6] 40 U.S.C.A. § 1315.

[7] In technical comments on this report, the U.S. Secret Service said 
that FPS plans to take on responsibility for protecting DHS facilities 
not otherwise protected by the U.S. Secret Service in connection with 
its protective responsibilities under 18 U.S.C. § 3056, or otherwise 
under the control of the U.S. Secret Service.

[8] 6 U.S.C.A. § 111.

[9] 40 U.S.C.A. § 1315.

[10] GAO-03-119.

[11] Established by Congress in 1972 and administered by GSA, the 
federal buildings fund is a revolving fund in the U.S. Treasury into 
which federal agency rent and certain other moneys are deposited. 
Moneys deposited into the fund are available, subject to congressional 
appropriation, for GSA's real property management and related 
activities.

[12] The Department of Justice's June 1995 report, Vulnerability 
Assessment of Federal Facilities, designated security levels I through 
V into which federal buildings were classified. Fifty-two minimum 
standards were established, with level I having 18 minimum standards 
and level V having 39 minimum standards. Examples of minimum standards 
include lighting with emergency power backup for all buildings 
(perimeter security), intrusion detection systems for building levels 
III through V (entry security), visitor control systems for building 
levels II through V (interior security), and standard armed and unarmed 
guard qualifications/training requirements in all buildings (security 
planning). FPS uses periodic risk assessments to validate the current 
security standards and countermeasures in place at each facility as 
well as determine additional security enhancements based on identified 
threats. 

[13] GSA security fees consisted of two separate components: basic and 
building-specific service fees. Basic security fees cover security 
services provided by FPS to all GSA tenants and include such services 
as patrol and response, security surveys, alarm monitoring, salaries, 
and other common cost items. This fee is included in each rent bill on 
a cost-per-square-foot basis. Building-specific security fees are for 
security measures specific to a particular building based on its 
designated security level. For example, a level IV building may have 
more guards, magnetometers, and cameras than a level I building. 
Building-specific fees are also charged to GSA tenants based on the 
square feet they occupy in the building. In technical comments on this 
report, the U.S. Secret Service pointed out that some agencies 
occupying commercial space do not receive services from FPS, but are 
required to pay for FPS benefits at a basic charge per square foot.

[14] 6 U.S.C.A. § 232.

[15] Pub.L. 107-296, Section 1706(b)(1).

[16] 6 U.S.C.A. § 232.

[17] U.S. General Accounting Office, Major Management Challenges and 
Program Risks: Department of Homeland Security, GAO-03-102 (Washington, 
D.C.: January 2003).

[18] U.S. General Accounting Office, Customs Service Modernization: 
Management Improvements Needed on High-Risk Automated Commercial 
Environment Project, GAO-02-545 (Washington, D.C.: May 13, 2002).

[19] U.S. General Accounting Office, Contract Management: INS 
Contracting Weaknesses Need Attention from the Department of Homeland 
Security, GAO-03-799 (Washington, D.C.: July 25, 2003).

[20] U.S. General Accounting Office, Results-Oriented Cultures: 
Implementation Steps to Assist Mergers and Organizational 
Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).

[21] U.S. Department of Homeland Security, Securing our Homeland: U.S. 
Department of Homeland Security Strategic Plan (Washington, D.C.: 
February 2004).

[22] GAO-03-119.

[23] U.S. General Accounting Office, Homeland Security: Challenges 
Facing the Coast Guard as it Transitions to the New Department, GAO-03-
467T (Washington, D.C.: Feb. 12, 2003).

[24] U.S. General Accounting Office, Aviation Security: Federal Air 
Marshal Service Is Addressing Challenges of Its Expanding Mission and 
Workforce, but Additional Actions Needed, GAO-04-242 (Washington, D.C.: 
Nov. 19, 2003).

[25] Public Law 107-296, 116 Stat. 2135, 2184-2185 (2002).

[26] The two cited decisions are 64 Comp. Gen. 370 (1985) and 65 Comp. 
Gen. 635 (1986).

[27] For example, see U.S. General Accounting Office, Architect of the 
Capitol: Management and Accountability Framework Needed for 
Organizational Transformation, GAO-03-231 (Washington, D.C.: Jan. 17, 
2003).

[28] GAO-03-669.

[29] Public Law 107-296, 116 Stat. 2135, 2184-2185 (2002). 

[30] Where no other authority exists, the Economy Act authorizes inter-
or intra-agency provision of services on a reimbursable basis based on 
actual costs. See 31 U.S.C. 1535 and 72 Comp. Gen. 159. 

[31] See, e.g., B-250377, January 28, 1993 and B-257823, January 22, 
1998. 

[32] See 60 Fed. Reg. 3055 (Jan. 13, 1995). The only current material 
on details is found at 5 C.F.R. Part 300, Subpart C which states that 
agencies may detail employees in accordance with 5 U.S.C. 3341 
(allowing details for not more than 120 days). 

[33] Black's Law Dictionary 443 (7TH ed. 1999). 

[34] See 27A Am. Jur. 2d. Equity § 118 and Swick v. City of Chicago, 11 
F.3d 85 (1993) (In action alleging he was deprived of property without 
due process of law under the Fourteenth Amendment of the Constitution, 
police officer was not entitled to recover claimed damages for injury 
resulting from being placed on involuntary sick leave because any 
injury was de minimis, i.e., intangible, small, difficult to measure.)

[35] In this regard, in several GAO decisions we found violations of 
anti-lobbying appropriations act restrictions, but determined that the 
amount expended was nominal and not readily determinable--e.g., the 
costs of preparing a letter or sending an e-mail--and that the efforts 
to effect recovery would greatly exceed the amount to be recovered. See 
B-285298, May 22, 2000; B-178528, July 27, 1978; and B-116331, May 
29,1961.

[36] In 14 U.S. Op. Off. Legal Counsel 144 (1990), OLC dealt with use 
of facilities of the White House Communications Agency (WHCA) for 
Presidential travel and communications. The decision observed that 
appropriated funds can be used for Presidential media contacts only 
with respect to official, as opposed to political communications, but 
in a footnote OLC gave an example of a de minimis use of WHCA 
facilities. Specifically, OLC noted that "there will always be 
particular instances when it will not be evident (and certainly not in 
advance) whether use of a WHCA facility will be in furtherance of the 
President's official, as distinguished from his political 
responsibilities. For example, a presidential aide who returns a 
reporter's telephone call will not know until the conversation is over 
whether the reporter is interested in political or official matters, or 
both. We believe that even when it eventuates that the reporter's 
inquiry relates more to the President's political rather than to his 
official responsibilities, WHCA may pay for such de minimis use of its 
facilities and that special logs need not be maintained nor other 
monitoring methods employed…" 14 Op. Off. Legal Counsel 144, at note 
18. 

[37] See 31 U.S.C. 1535 and 72 Comp. Gen. 159 (1993). 

[38] See B-257823, January 22, 1998. (Direct and indirect costs of 
personnel allocated by standard hourly rates for each general schedule 
grade level included salaries, benefits, costs of management and 
support staff as well as overhead.) See also B-250377, January 28, 
1993. (Recovery of actual costs of detailed employees should be readily 
determinable by pay, personnel and other records that disclose such 
information.)

[39] See B-257823, January 22, 1998.

[40] For example, when the Air Force proposed a change to a regulation 
relating to the shipment of household goods, which would allow an 
agency disbursing officer to make a known overpayment, the Comptroller 
General disapproved of the change noting that it would essentially 
approve in advance violations of the law. 49 Comp. Gen. 359 (1969). 

[41] See, e.g., B-253164, August 23, 1993, in which GAO concluded that 
a seemingly "technical" violation of the Anti-Deficiency Act by the 
National Labor Relations Board was still a violation of the act and 
required a report to Congress and the Office of Management and Budget. 

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