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