Consular Affairs: State May Be Unable to Cover Projected Costs if Revenues Do Not Quickly Rebound to Pre-Pandemic Levels
The State Department provides passport and visa services to millions of Americans and foreign nationals. From FY 2013-19, passport and visa user fees fully funded these consular operations. But during the COVID-19 pandemic, these revenues dropped, and State officials said that fee revenue may not return to pre-pandemic levels for several years.
State has some options to address the decline in consular fee revenue, including increasing fees and reducing spending. Our recommendations would help State plan and document what fees or statutory changes may allow it to cover future costs, among other things.
What GAO Found
The Department of State provides passport, visa, and overseas citizens services to millions of Americans and foreign nationals annually and collects user fees for some of these services. The COVID-19 pandemic discouraged potential travelers who would pay fees, resulting in a 41 percent decline in consular fee revenue in fiscal year 2020. To compensate for this decrease in revenue, State used supplemental and annual appropriations and temporarily expanded expenditure and transfer authorities provided by several acts of Congress. It also drew down unobligated balances that it had carried over into fiscal year 2020.
GAO modeled State's future consular fee revenue stream and costs through fiscal year 2026 across five scenarios. These scenarios used pessimistic, neutral, and optimistic revenue outlook projections based on historical consular fee revenue from fiscal years 2013 through 2020. The modeling indicates that State's carryover balances will decline and likely will not meet the targeted threshold for the consular fee carryover balance in some fiscal years if fee revenue does not return to pre-pandemic levels in fiscal year 2022 and beyond. See figure.
Consular and Border Security Program (CBSP) Account Carryover Balance Median Values across Simulation Results, Fiscal Years 2022–2026
Notes: According to State officials, State's official target is to maintain a minimum 25 percent carryover balance by retained fee each year. GAO used State's target to calculate 25 percent of average historical obligations against the CBSP account as a whole. GAO presents this as the benchmark value of $803 million and uses this calculation to determine the likelihood of State meeting the targeted threshold. GAO's model reflects retained fee amounts as of November 2021.
Additionally, GAO's simulation also shows that projected revenue may not be sufficient to cover costs through fiscal year 2026 across all five scenarios. For example, if State's consular fee revenue recovers to pre-pandemic levels in fiscal year 2023 (scenario 2), GAO estimates that the carryover balance is unlikely to meet the targeted threshold each year through fiscal year 2026. Specifically, GAO estimates that in this scenario the carryover balance would be $151 million in fiscal year 2026—hundreds of millions of dollars below the targeted threshold. According to State, falling below the targeted threshold could put State at risk of being unable to make necessary obligations at the beginning of the fiscal year. Consular fee revenue is not received evenly over the course of a year, according to State officials, instead peaking in spring and summer.
State has requested statutory changes to its authorities to set and use some consular fees so that it can generate additional revenue or have more flexibility in how it can use revenue. However, State has not documented its analysis to support these requests. Without a plan for assessing the potential impact of the requested changes, State risks recommending statutory changes that do not align with actual needs. As a result, State could collect consular fees in excess of its costs for some services, thereby over-charging visa or passport applicants.
State uses estimates of unit costs, demand and revenue to achieve full cost recovery and to project the sufficiency of consular revenue. State's process for estimating unit costs of consular services fully meets two and partially meets three key elements of economic analysis. Specifically, State does not calculate the range of potential costs, such as those that result from variations in how much time it takes to process a visa; as such, State does not calculate the statistical variability of the resulting unit costs. This lack of transparency on the plausible range of unit costs may limit management's ability to identify, analyze, and respond to risks to full cost recovery arising from fluctuations in obligations. In addition, State lacks documentation of its processes for estimating demand and revenue. By not documenting these processes or key analytical decisions, State risks being unable to retain and share its organizational knowledge on fee setting, including communicating its compliance with best practices.
Why GAO Did This Study
From fiscal years 2013 through 2019, consular fees fully funded consular operations, according to State documentation. However, the COVID-19 pandemic caused State's revenues from passport and visa fees to drop.
GAO was asked to review consular fees. This report examines, among other things, how State managed the decline in consular fee revenues, projections regarding State's ability to meet the targeted threshold in the future, and the extent to which State's processes for estimating key data meet the key elements of economic analysis. GAO reviewed State documentation and data, modeled projections for the consular fees account, and interviewed State officials.
GAO recommends that State (1) assess what actions would allow it to cover future consular costs; (2) measure the statistical variability of unit costs; and (3) document its cost, demand, and revenue estimates. State did not concur with the first recommendation, indicating it believes the cost model output is sufficient for this purpose. State partially concurred with the other two recommendations, noting it uses a deterministic math model to calculate unit costs and it documents the process for cost estimates. GAO maintains that a plan to assess actions that could cover future costs would better position State to request statutory changes that align with actual needs. GAO also maintains that State should reflect statistical variability in unit costs because not doing so many limit its ability to respond to risks arising from fluctuations in cost. GAO maintains that documenting processes for revenue and demand estimates and fully documenting processes for cost estimates would better position State to identify and respond to risks to full cost recovery.
Recommendations for Executive Action
|Department of State||
Priority Rec.The Secretary of State should ensure the Bureau of Consular Affairs develops a plan to assess and document what fee amounts, statutory changes, supplemental and annual funding, or other actions would allow State to cover future consular costs. (Recommendation 1)
State did not concur with our recommendation to develop a plan to assess and document what measures would allow State to cover future consular costs, indicating that its cost model presents unrecovered costs by service. State does not believe the legislative change authorizing retention of the passport application fee impacts its planning for what other measures (including State's existing requests for legislative changes) it may need to cover future consular costs. In September 2022, State noted that there already is a plan for this analysis, but did not provide documentation for such a plan as of February 2023. State noted in February 2023 that worldwide demand for consular services has rebounded more quickly than previously anticipated, but remains concerned that future fee revenue may remain susceptible to downward swings in demand and continues to advocate for permanent expanded expenditure authorities for multiple fees. We maintain that a plan to assess and document which measures would be sufficient to cover costs without generating carryover balances in excess of the targeted threshold is important, and that State should perform and share such analysis with policymakers to enable them to understand the potential impact of each option, in isolation or in combination, before taking legislative action.
|Department of State||The Secretary of State should ensure the Bureau of Consular Affairs measures the statistical variability of unit costs to improve the transparency of the cost estimates used in the fee-setting process. (Recommendation 2)||
State partially concurred with our recommendation to ensure that State measures statistical variability of unit costs in order to improve the transparency of the cost estimates used in the fee-setting process. According to State, statistical variability analysis is only applicable to level of effort data as measured by their (CODaC) survey because it is the only element within the Cost-of-Service Model (CoSM) that relies on sampling unit cost data. In September 2022, State noted that they do not believe statistical variability analysis is a useful tool to measure these components of the CoSM because they are too deterministic and are not subject to sampling error. State noted in February 2023 that, using data from the FY2019 CoSM, they conducted an analysis to examine the spread of CODaC survey responses in terms of non-petition based nonimmigrant visa (NP NIV) interview and adjudication cycle time, and found the variability in the measured cycle times resulted in only a minor increase in the unit cost of the NP NIV. However, we maintain that statistical variability would apply to both sampling and population data across all consular services, since both standard deviations and standard errors are measure of statistical variability, and recommend that State account for any statistical variability for cost and workload volume data, as well as data from the CODaC survey. State should also update their projections for a post-COVID environment and anticipate any effects of cost side changes and widened cost variability due to the impact of inflation in 2023 and beyond.
|Department of State||The Secretary of State should ensure the Bureau of Consular Affairs fully documents its process for generating cost, demand, and revenue estimates for consular services. (Recommendation 3)||
State partially concurred with our recommendation to fully document its process for generating cost, demand, and revenue estimates for consular services, but stated that documentation for these processes have already been provided to GAO. State asserted that the GAO was provided with its documented process for generating costs and included the actual cost data used to calculate fees and future cost assumptions. In September 2022, State emphasized that the materials and documentation that it provided to GAO over the course of the engagement, including details on consular cost drivers, the activity dictionary, demand estimate papers, and the results of a sensitivity analysis that was conducted all provided full transparency on the financial impact that non-retained fees have on consular operations. State also acknowledged that documentation can be improved with a summary document and comprehensive process SOPs. In February 2023, State had no updates to provide for this recommendation. Despite State's assertion that they have provided GAO with sufficient documentation of their processes, we have, for example, not received documentation on how State generates estimates of demand. In addition, State has not provided clear written protocol, processes, or guidance of how State estimates demand. Also, as State acknowledged, providing a summary paper and written SOPs on these processes would be beneficial. Without documentation, State's ability to identify and respond to risks to full cost recovery and its ability to communicate organizational information about consular fees to external parties is limited.