Federal Retirement Thrift Investment Board:

Due Diligence Over Administrative Expenses Should Continue and Be Broadened

GAO-07-541: Published: May 14, 2007. Publicly Released: Jun 13, 2007.

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Susan J. Irving
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The Federal Retirement Thrift Investment Board (FRTIB) is charged with managing the Thrift Savings Plan (TSP)--a key component of retirement savings for many federal employees--in the interest of its participants and beneficiaries. As part of a broader request on oversight of FRTIB, GAO reviewed (1) the administrative expenses of FRTIB and key components of these expenses, (2) whether the administrative expenses of FRTIB are the result of practices consistent with federal regulations and similar functions at other agencies, and (3) FRTIB's current method of benchmarking administrative expenses. GAO reviewed FRTIB's budgets, audited financial statements, a benchmarking study, and written responses to questions that GAO submitted. GAO also reviewed the regulations that guide FRTIB's spending.

FRTIB's administrative expenses ranged from a peak of $101 million in fiscal year 2000 to $83 million estimated for fiscal year 2006. Only the 2001 administrative expenses were lower, reflecting the termination of a key contract. In real terms, FRTIB's administrative expenses in 2006 were at a 7-year low. Throughout this period more than half of FRTIB's administrative expenses went towards purchasing services from outside entities--private contractors and other government agencies. The next largest share of FRTIB's budget was for miscellaneous expenses, such as printing and information technology. Additional administrative expenses were spent on compensation of FRTIB's 65 employees, rent, and travel. FRTIB has established practices that are consistent with federal regulations--for acquisition, compensation, and travel. There are some areas, however, that suggest opportunities for future savings. The amount FRTIB pays per square foot is consistent with average rental rates that the General Services Administration (GSA) cites for nearby available properties. However, FRTIB rents more space per employee than GSA would recommend. Given recent downsizing, FRTIB has begun looking into consolidating its office space. Additionally, opportunities exist to reduce the travel expenses of TSP board members traveling to Washington, D.C. FRTIB's current method of benchmarking TSP participants' investment fees against those charged by 401(k) plans is a very important measure for participants--and the TSP compares favorably on this measure. However, looking only at an aggregate measure provides insufficient information to judge whether individual activities are being conducted either to achieve the best performance or in the most efficient manner. Benchmarking by individual activity permits an organization to compare its performance with standards or "best in class" in a specific activity.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In light of recent declines in staff size at the Federal Retirement Thrift Investment Board (FRTIB) and the agency's current renting of more space per person than GSA recommends, our May 14, 2007 report on FRTIB's administrative expenses recommended that FRTIB consider the square footage and cost per square foot of office space to ensure that it is appropriate for its needs. In response to our recommendation, FRTIB commissioned a study by a real estate advisor. In a FRTIB public meeting on February 19, 2008, board members discussed our recommendation and the results of the study. Although FRTIB decided to maintain its current office space, it stated that it would revisit the issue again next year when the current FRTIB lease approaches expiration. However, in 2009, after revisiting the issue, FRTIB decided to not relocate. FRTIB has not reconsidered its use of telecommunications.

    Recommendation: To ensure that FRTIB continues to operate as efficiently as possible, the board should direct the Executive Director to continue monitoring both the square footage and cost per square foot of office space in the future to ensure that it is appropriate for its needs. In addition, FRTIB should consider expanding its use of telecommunications for its monthly board members' meetings, as appropriate.

    Agency Affected: Federal Retirement Thrift Investment Board

  2. Status: Closed - Not Implemented

    Comments: When we issued GAO-07-541, FRTIB disagreed with our recommendation that it expand its benchmarking practices. FRTIB has not changed its position on this recommendation.

    Recommendation: To provide the board with the most complete and relevant information with which to assess the expenses and performance of administrative functions of FRTIB, the board should direct the Executive Director to move beyond the comparison of participant costs against those for other 401(k) plans to benchmarking cost and performance of individual activities--either against similar activities elsewhere or against validated criteria or standards, such as federal regulations.

    Agency Affected: Federal Retirement Thrift Investment Board


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