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entitled 'Immigration Application Fees: Costing Methodology 
Improvements Would Provide More Reliable Basis for Setting Fees' which 
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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

January 2009: 

Immigration Application Fees: 

Costing Methodology Improvements Would Provide More Reliable Basis for 
Setting Fees: 

GAO-09-70: 

GAO Highlights: 

Highlights of GAO-09-70, a report to congressional requesters. 

Why GAO Did This Study: 

The Department of Homeland Security’s (DHS) U.S. Citizenship and 
Immigration Services (USCIS) is responsible for granting or denying 
immigration benefits to individuals. USCIS charges fees for the 
millions of immigration applications it receives each year to fund the 
cost of processing and adjudicating them. In February 2007, USCIS 
completed a study to determine the full costs of its operations and the 
level at which application fees should be set to recover those costs. 
USCIS’s new fee schedule increased application fees by a weighted 
average of 86 percent. Almost 96 percent of USCIS’s fiscal year 2008 
budget of $2.6 billion was expected to have come from fees. GAO was 
asked to review the methodology USCIS used in its fee review and 
controls in place over collection and use of fees. In this report, GAO 
addresses the consistency of the methodology with federal accounting 
standards and principles and other guidance, including whether key 
assumptions and methods were sufficiently justified and documented. The 
report also addresses internal controls USCIS has in place over the 
collection and use of fees. 

What GAO Found: 

In 2007, USCIS completed a fee review in which USCIS estimated the 
costs of its immigration application processing and adjudication 
services and, in accordance with management’s objective, set the fees 
at a level to recover those costs. The methodology USCIS used in its 
review, however, did not consistently adhere to federal accounting 
standards and principles and other guidance. While federal accounting 
standards allow flexibility for agencies to develop managerial cost 
accounting practices that are suited to their needs, they also provide 
certain specific guidance based on sound cost accounting concepts. 
USCIS’s methodology, for example, did not include the costs paid by 
other federal entities on behalf of USCIS. Federal standards and 
guidance also call for documentation that is sufficient to allow an 
understanding of and provide justification for the cost assignment 
processes and data used. USCIS did not adequately document the detailed 
processes used or sufficiently justify assumptions used in allocating 
costs to various activities on a prorated basis. As a result, USCIS 
could not show that its methods provided a reasonable distribution of 
the costs to the various types of applications. For instance, USCIS 
allocated $732 million of overhead costs (or 31 percent of total 
costs)—including information technology operations and maintenance—to 
offices based on the number of staff full-time equivalents (FTE) in 
each office. However, USCIS’s documentation did not sufficiently 
justify (1) why cost allocation was used instead of other possible 
methods or (2) why it did not include about 6,100 contract workers and 
used only approximately 7,900 FTEs of the total federal FTEs of about 
10,400 as the basis for allocation. USCIS also did not adequately 
justify the equal assignment of activity costs representing 51 percent 
of total costs to each application type. While such pro rata assignment 
of costs may be a reasonable method in some circumstances, USCIS did 
not document its justification for the assumptions made when deciding 
which costs to allocate on a prorated basis and how those costs should 
be allocated. Because of these inconsistencies with federal accounting 
standards and principles and other guidance, USCIS cannot support the 
reasonableness of cost assignments to the various application types. 

USCIS has implemented accountability mechanisms to track the use of 
both regular application fees as well as premium processing fees 
intended for specific projects. USCIS plans to use its premium 
processing fee collections to fund its transformation program to make 
long-term improvements to its business processes and technology. 
Through its monitoring of fee collection procedures, USCIS has 
identified some weaknesses at one of its service centers. It has taken 
actions to strengthen service center controls in the short term, and it 
is moving all fee receipt functions and the application processing done 
in preparation for adjudication to lockbox facilities to further 
strengthen control over collections. 

What GAO Recommends: 

GAO makes six recommendations to help USCIS make its costing 
methodology consistent with standards and principles, strengthen the 
reliability of the cost assignments it uses to set fees, and better 
support the reasonableness of its assumptions and methods. DHS and 
USCIS concurred with our recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-70]. For more 
information, contact Jeanette Franzel at (202) 512-9406 or 
franzelj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Costing Methodology Did Not Consistently Adhere to Federal Accounting 
Standards and Principles and Other Guidance: 

Accountability Mechanisms Are in Place to Track Use of Fees, and USCIS 
Is Taking Steps to Strengthen Control over Collections: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Immigration Application Forms and Related Fees Prior to 
and as of the July 30, 2007, Fee Increase: 

Appendix III: Federal Statutes, Accounting Standards and Principles 
Related to Cost Accounting and User Fees, and Other Guidance: 

Appendix IV: Comments from the Department of Homeland Security: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: USCIS Funding Sources and Estimated Amounts for Fiscal Year 
2008: 

Table 2: Amount and Percentage of Fee Collections for the IEFA, Fiscal 
Year 2007: 

Table 3: Date, Amount of Increase, and Reasons for Past Immigration 
Application Fee Increases since 2002: 

Table 4: USCIS's Estimate of Annual Funds Needed for Fiscal Years 2008 
and 2009: 

Table 5: USCIS Estimated Annual Costs for Application Processing 
Activities for Fiscal Years 2008 and 2009: 

Figure: 

Figure 1: Illustration of Cost Assignment Process: 

Abbreviations: 

CFO: chief financial officer: 

DHS: Department of Homeland Security: 

FBI: Federal Bureau of Investigation: 

FFMIA: Federal Financial Management Improvement Act of 1996: 

FMS: Financial Management Service: 

FTE: full-time equivalent: 

IEFA: Immigration Examinations Fee Account: 

INS: Immigration and Naturalization Service: 

OCFO: Office of the Chief Financial Officer: 

OMB: Office of Management and Budget: 

OPM: Office of Personnel Management: 

PAS: Performance Analysis System: 

SAVE: Systematic Alien Verification for Entitlements: 

SFFAS: Statement of Federal Financial Accounting Standards: 

USCIS: U.S. Citizenship and Immigration Services: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

January 23, 2009: 

The Honorable Zoe Lofgren:
Chairwoman:
Subcommittee on Immigration, Citizenship, Refugees, Border Security and 
International Law:
Committee on the Judiciary:
House of Representatives: 

The Honorable David Price:
Chairman:
Subcommittee on Homeland Security:
Committee on Appropriations:
House of Representatives: 

U.S. Citizenship and Immigration Services (USCIS), an agency of the 
Department of Homeland Security (DHS), is responsible for granting or 
denying immigration benefits to individuals seeking to become citizens 
of the United States or to study, work, or live in this country. In 
carrying out its responsibilities, USCIS processes and adjudicates 
millions of immigration and naturalization applications each year, 
administers work authorizations and other petitions, and provides 
services for new residents and citizens. 

To fund the cost of processing and adjudicating applications and 
associated support services, USCIS charges application fees that are 
deposited in the Immigration Examinations Fee Account (IEFA) and are 
available until expended.[Footnote 1] Businesses desiring to hire 
foreign nationals may pay an additional fee to accelerate the 
processing of certain types of applications, such as those for workers 
in specialty occupations or temporary workers.[Footnote 2] Congress 
authorized this fee to be used to provide certain premium processing 
services to business customers, and to make infrastructure improvements 
in the adjudications and customer service processes. 

GAO and DHS's Inspector General have reported the need for USCIS to 
improve its processes, systems, and technology and noted that USCIS's 
efforts to modernize have been unfocused, conducted in an ad hoc and 
decentralized manner, and, in certain instances, duplicative. In 2006, 
USCIS embarked on a transformation of its business processes and 
technology to move its operations from paper-based processes to an 
electronic environment. USCIS plans to fund its transformation program 
mostly with premium processing fees. 

In the past, in addition to its fee collections, USCIS received other 
appropriations from annual appropriations acts (i.e., direct 
appropriations) to help fund its operations. USCIS received 
appropriated funds to pay for administrative costs through fiscal year 
2004. USCIS also received appropriated funds for specific projects, 
such as the initiative to reduce the backlog of pending applications, 
from fiscal year 2002 through 2006 and its business transformation 
program in fiscal years 2006 and 2007. In fiscal year 2007, USCIS 
received direct appropriations for Systematic Alien Verification for 
Entitlements (SAVE).[Footnote 3] USCIS also received direct 
appropriations for E-Verify[Footnote 4] in fiscal years 2007 and 2008. 

We have previously reported that fee collections had not been 
sufficient to recover USCIS's full operating costs.[Footnote 5] To 
provide funding to cover the shortfall from application fees, USCIS 
used the direct appropriations discussed above, and it used premium 
processing fees and fees from applications that were waiting to be 
processed. 

In February 2007--to determine the full costs of its operations and the 
level at which application fees should be set to recover those costs-- 
USCIS completed a review of the processes involved in providing 
adjudication services and the resources needed. Based on the review, 
USCIS implemented a new fee schedule effective July 30, 2007, which 
increased application fees by a weighted average of 86 percent. (See 
appendix II for a list of applications and their fees.) USCIS expects 
that the increased application fees will cover the costs of its 
immigration application processing and adjudicating services. 

Almost 96 percent of USCIS's fiscal year 2008 budget of $2.6 billion 
was expected to have come from fee collections, with the residual 
coming from direct appropriations and from other federal agencies for 
work done by USCIS on their behalf. It is important that USCIS reliably 
accumulate and analyze the costs of its application processing services 
as a basis for setting fees and recovering costs and to offer insights 
for managing its programs and activities. At your request, we reviewed 
the methodology USCIS used in its fee review to develop the current fee 
schedule and controls USCIS has put in place over the collection and 
use of the fees. Specifically, this report[Footnote 6] addresses the 
consistency of the costing methodology USCIS used to develop the 
current fee schedule with federal accounting standards and principles 
and other guidance, including whether USCIS sufficiently justified and 
documented its assumptions and methods. The report also addresses 
internal controls in place over the collection and use of fees. 

In conducting our work, we considered federal accounting standards, 
Office of Management and Budget (OMB) guidance on user fees, and 
federal internal control standards.[Footnote 7] We reviewed USCIS 
documents related to the fee review and its methodology. We obtained an 
understanding of the methodology and reviewed the design and operation 
of USCIS's cost system, including its cost accumulation methods and how 
it assigned costs involved in adjudicating and processing various types 
of immigration applications. We performed a walk-through of the USCIS 
process for accumulating specific types of costs and performed 
analytical reviews and discussed with USCIS officials key assumptions 
and decisions concerning distributing these costs to applications as 
their basis for setting fees. We visited all four USCIS service centers 
in Laguna Niguel, California; Lincoln, Nebraska; Mesquite, Texas; and 
St. Albans, Vermont, and a lockbox facility in Chicago where we 
observed fee collection processes. We discussed with USCIS officials 
and staff the processes for tracking and monitoring fee collections and 
related expenditures and reviewed corroborating and other relevant 
documentation. 

Appendix I provides additional details about our scope and methodology. 
We conducted this performance audit from October 2007 to January 2009 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Results in Brief: 

Although the July 2007 fee increases met management's objective to set 
fees at a level to recover USCIS's estimated costs of immigration 
application processing and adjudication services, the costing 
methodology USCIS used to develop the fees for each application type 
did not consistently adhere to federal accounting standards and 
principles and other guidance. While federal accounting standards allow 
flexibility for agencies to develop managerial cost accounting 
practices that are suited to their needs, they also provide certain 
specific guidance based on sound accounting concepts. USCIS's 
methodology was not consistent with federal accounting standards and 
principles and other guidance in the following aspects: (1) costs paid 
by other federal entities on behalf of USCIS were not included in its 
estimates of costs, (2) key assumptions and methods used for allocation 
of costs to activities and types of applications were not sufficiently 
justified, (3) assumptions about staff time spent on various activities 
were not supported by documented rationale or analysis, (4) the cost of 
premium processing services was not determined, and (5) documentation 
of the processes and procedures was not sufficient to ensure consistent 
and accurate implementation of the methodology. Specifically: 

* USCIS did not include the costs of lockbox services paid by the 
Department of the Treasury (Treasury) or certain retirement benefits to 
be paid by the Office of Personnel Management (OPM) in estimating the 
full cost of its immigration application processing and adjudication 
services. USCIS officials told us that they only included costs that 
the agency paid directly. However, according to federal accounting 
standards, each entity's full cost also should incorporate the cost of 
services that it receives from other entities without charge. 

* Some of the assumptions and methods used by USCIS resulted in cost 
assignments that lacked precision or analytical support, thereby 
reducing confidence that the assignments provided a sound basis for 
setting the fees. For instance, USCIS allocated[Footnote 8] 79 percent 
of overhead costs (representing 31 percent of total costs) to field 
offices based on the number of staff full-time equivalents (FTE) 
[Footnote 9] in an office. However, USCIS did not sufficiently justify 
(1) why cost allocation was used instead of other possible methods or 
(2) why it did not include about 6,100 contract workers and used only 
approximately 7,900 FTEs of the total federal FTEs of about 10,400 as 
the basis for allocation. Also, USCIS did not adequately justify why it 
allocated 51 percent of its total costs equally to the different types 
of applications. While such pro rata assignment of costs may be 
justifiable in some circumstances, USCIS did not document its 
justification to support assumptions made when deciding which costs to 
allocate on a pro rata basis and how those costs should be allocated. 

* USCIS assigned $292 million of direct costs to activities based on 
management's judgment of how much staff time was spent on each 
activity. However, USCIS did not document the rationale for such 
decisions. For example, based on discussions with representatives from 
regions, service centers, and the Performance Management Branch, USCIS 
decided to allocate 88 percent of the costs of the immigration 
information officers at service centers to the "inform the public" 
activity and 12 percent to the "make determination" activity. These 
discussions, including the input of the internal experts, and the 
rationale linking this information and related analysis with the final 
cost assignments were not documented. 

* Regarding premium processing services, USCIS estimated annual fee 
collections of $139 million for fiscal years 2008 and 2009 but did not 
determine the corresponding cost incurred to carry out those 
accelerated application processing services. As a result, USCIS cannot 
determine the extent to which the collections could apply to the two 
authorized uses of premium processing fees--the cost of accelerated 
processing and infrastructure improvements. 

* Further, the documentation USCIS prepared to describe its costing 
methodology was not detailed enough to ensure consistent and accurate 
implementation. Insufficient documentation makes it difficult to assess 
or replicate the methodology. 

Because of these inconsistencies, USCIS cannot support the 
reasonableness of the assignment of costs to the various application 
types. 

USCIS has put accountability mechanisms in place to track the use of 
fees and is taking steps to improve internal control over fee 
collections. It has established unique codes in the financial system 
for specific projects, and according to a USCIS official, the Office of 
the Chief Financial Officer (OCFO) monitors obligations and 
expenditures against those codes to help ensure that (1) regular 
application fees intended to fund processing capability enhancements 
(such as additional staff, equipment, and training) are used as planned 
and (2) premium processing fees are used to make infrastructure 
improvements in the adjudications and customer service processes. USCIS 
has documented and assessed internal control activities and processes 
related to fee collections, and we identified a system of controls 
designed to safeguard fees collected at both the service centers and 
the lockbox facilities. Although USCIS has controls in place over fee 
collections, it has identified through its own monitoring procedures 
some weaknesses at one service center. USCIS has taken actions to 
strengthen service center controls in the short term, and it is in the 
process of moving all preadjudication application processing and fee 
receipt functions to lockbox facilities to further strengthen control 
over collections. 

We are making six recommendations to the Secretary of Homeland Security 
to help make USCIS's costing methodology consistent with federal 
accounting standards and principles and strengthen the reliability of 
the cost assignments used to set fees and to better support the 
reasonableness of USCIS's assumptions and cost assignment methods. In 
written comments on a draft of this report, DHS and USCIS concurred 
with our recommendations. DHS's comments are discussed in the Agency 
Comments and Our Evaluation section of this report and are reprinted in 
their entirety in appendix IV. USCIS also provided technical comments, 
which we incorporated as appropriate. 

Background: 

USCIS is responsible for establishing immigration services policies and 
priorities and for the administration of immigration and naturalization 
adjudication functions. Its approximately 16,000 federal and contractor 
employees work in 250 offices worldwide, including field offices, 
application support centers, service centers, asylum offices, national 
customer service call centers, and forms centers. About 6 million 
applications and petitions for immigration and naturalization benefits, 
along with applicable fee payments, are submitted to USCIS annually. 
USCIS adjudicators process applications and petitions in four general 
categories:[Footnote 10] 

* family-based petitions--for close relatives to immigrate, gain 
permanent residence, or work in the United States; 

* employment-based petitions--for current and prospective employees to 
immigrate to or stay in the United States temporarily; 

* asylum and refugee applications--for those seeking asylum or refugee 
status; and: 

* naturalization applications--for those who wish to become United 
States citizens. 

USCIS is authorized[Footnote 11] to collect fees for providing 
adjudication and naturalization services at a level that will (1) 
ensure recovery of the full costs of providing all such services, 
including the costs of similar services provided without charge to 
asylum applicants, and (2) recover any additional costs associated with 
the administration of the fees collected.[Footnote 12] In 1968, the 
Immigration and Naturalization Service (INS), USCIS's predecessor 
agency,[Footnote 13] began charging fees for immigration and 
naturalization services, depositing the fee collections into the 
General Fund of the Treasury as miscellaneous receipts. In 1988, 
[Footnote 14] Congress established the IEFA. Since 1989, application 
fees have been deposited in the IEFA, which is currently USCIS's 
primary source of funding. Once deposited in the IEFA, the fees remain 
available to USCIS until expended. In fiscal year 1991, Congress 
directed that the IEFA also be used to fund the cost of asylum and 
refugee services and adjudication services provided to some immigrants 
at no charge,[Footnote 15] and thus, the charges for fee-paying 
applicants were increased to recover these costs. 

In December 2000, Congress authorized the establishment of a premium 
processing program for employment-based applications. INS proposed the 
establishment of a premium processing service to provide businesses 
with a high level of customer service and improved processing because 
it could not otherwise meet the demand for expeditious service to the 
business community without an adverse impact on other applications. 
According to the INS Commissioner, an optional additional fee of $1,000 
for business customers would also make capital available for 
infrastructure improvements. In response, Congress authorized the 
premium processing service; set the fee at $1,000, which is to be paid 
in addition to the regular application fee; and specified that it be 
used to provide accelerated processing services to business customers 
and to make infrastructure improvements in the adjudications and 
customer service processes.[Footnote 16] The premium processing service 
is to provide processing of certain employment-based petitions and 
applications within 15 calendar days of receipt of the request for 
premium processing service form. Premium processing fees also are 
deposited in the IEFA to be available until expended. 

Currently, funding for USCIS comes from three fee accounts, direct 
appropriations, and reimbursements from other federal agencies. Table 1 
shows the five funding sources and the amounts estimated for fiscal 
year 2008. 

Table 1: USCIS Funding Sources and Estimated Amounts for Fiscal Year 
2008 (Dollars in millions): 

Funding source: Immigration Examinations Fee Account; 
Fiscal year 2008 budget: $2,495[A]; 
Percentage of total funding: 94.2. 

Funding source: H1-B Nonimmigrant Petitioner Account; 
Fiscal year 2008 budget: $13; 
Percentage of total funding: 0.5. 

Funding source: Fraud Prevention and Detection Account; 
Fiscal year 2008 budget: $31; 
Percentage of total funding: 1.2. 

Funding source: Direct appropriations; 
Fiscal year 2008 budget: $80; 
Percentage of total funding: 3.0. 

Funding source: Reimbursement from other federal agencies[B]; 
Fiscal year 2008 budget: $29; 
Percentage of total funding: 1.1. 

Funding source: Total; 
Fiscal year 2008 budget: $2,648; 
Percentage of total funding: 100.0. 

Source: GAO analysis of data from the Budget of the United States 
Government, Fiscal Year 2009 - Appendix. 

[A] The $2,495 million for the IEFA includes the anticipated $139 
million of premium processing fees. 

[B] USCIS receives reimbursement from other federal agencies for work 
performed by USCIS on the other agencies' behalf. 

[End of table] 

In past years, USCIS received larger amounts of direct appropriations 
to pay for administrative costs and for specific projects, such as the 
initiative to reduce its backlog of pending applications and its 
business transformation program to make long-term improvements in its 
business processes and technology.[Footnote 17] USCIS also received 
direct appropriations for two other specific programs--SAVE in fiscal 
year 2007 and E-Verify in fiscal years 2007 and 2008. 

The three fee accounts provide almost 96 percent of USCIS's total 
fiscal year 2008 budgetary resources. The fee review that is the 
subject of this report covers the application fees deposited in the 
IEFA, which is budgeted to provide approximately 94 percent of USCIS's 
funding for fiscal year 2008. If the number of applications and fee 
payments received in a year is more than projected, USCIS can increase 
its spending authority to cover the increased workload, and thus get 
additional funds from the IEFA through reprogramming after it has 
notified Congress.[Footnote 18] 

Persons seeking immigration and naturalization benefits submit their 
applications and associated fees to one of four service centers, local 
offices within one of four regions, or one of two lockbox facilities, 
depending on the application type and geographic location of the 
applicant. Some applications can be filed electronically with payment 
by credit or debit card or electronic transfer of funds. In addition, 
some applications require biometric services--collecting information 
such as fingerprints, photographs, and signatures for background checks 
conducted by the Federal Bureau of Investigation (FBI)--for which a 
separate fee is charged. 

The four service centers (located in California, Nebraska, Texas, and 
Vermont), the National Benefits Center (located in Missouri), and many 
local offices receive, process, and adjudicate applications and 
petitions for immigration benefits. Contract employees generally are 
responsible for preadjudication processing steps, such as mail room 
operations, fee collection, data collection, and file operations. USCIS 
employees adjudicate the applications, that is, they make 
determinations about whether to approve the benefits for which an 
applicant has applied. 

Lockbox facilities located in Chicago and Los Angeles receive certain 
application types and the related fee payments. Banks that operate the 
lockbox facilities are designated by Treasury's Financial Management 
Service (FMS) as financial agents of the United States.[Footnote 19] 
They perform services for USCIS under a memorandum of understanding 
between the lockbox facility, FMS, and USCIS. Lockbox facilities are 
responsible for mail room operations, data entry, fee collection, 
setting up files, and sending the files to a service center or the 
National Benefits Center for adjudication. In 2007, in consultation 
with USCIS, FMS designated the bank that operates the Chicago lockbox 
as the financial agent responsible for all USCIS fee collections. USCIS 
is in the process of moving fee collection and other preadjudication 
processing activities from the service centers and field offices to 
lockbox facilities operated by that bank by March 2011. 

Table 2 shows the amount and percentage of regular application fees and 
premium processing fees collected by site during fiscal year 2007. 
During fiscal year 2008, USCIS collected over $2.4 billion in regular 
application fees and premium processing fees for the IEFA. 

Table 2: Amount and Percentage of Fee Collections for the IEFA, Fiscal 
Year 2007 (Dollars in millions): 

Collection site: Service centers; 
Amount collected: $1,394; 
Percentage of total collections: 67.7. 

Collection site: Regional/field offices; 
Amount collected: $109; 
Percentage of total collections: 5.3. 

Collection site: Lockbox facilities; 
Amount collected: $471; 
Percentage of total collections: 22.9. 

Collection site: E-filing; 
Amount collected: $84; 
Percentage of total collections: 4.1. 

Total fiscal year 2007 fee collections: 
Amount collected: $2,058; 
Percentage of total collections: 100.0. 

Source: GAO analysis of USCIS data. 

[End of table] 

The fiscal year 2007 fee collections reflect an increase in application 
fees that occurred at the end of July 2007 and an increase in the 
number of application filings prior to the fee increase date by persons 
wanting to avoid higher fees. Application filings also increased 
because of the publication of a State Department Visa Bulletin 
announcing the availability of employment-based visas. Fees increased 
by a weighted average of 86 percent per application, based on the fee 
review completed by USCIS in February 2007. (See appendix II for a list 
of applications and their related fees.) 

USCIS's prior fee review was completed in November 1996 and resulted in 
fee increases that took effect in 1998. Since then, USCIS has increased 
fees four times (including the July 2007 increase). Table 3 shows the 
amount and basis for those fee increases. 

Table 3: Date, Amount of Increase, and Reasons for Past Immigration 
Application Fee Increases since 2002: 

Date of fee increase: February 2002; 
Weighted average fee increase: $18; 
Reasons for fee increase: 
* Recover information technology and quality assurance costs; 
* Inflation adjustment. 

Date of fee increase: April 2004; 
Weighted average fee increase: $55; (plus $20 increase in biometric 
fee); 
Reasons for fee increase: 
* Cover annual cost of additional security checks; 
* Improve refugee processing, provide naturalization services for 
military personnel and other activities; 
* Administrative support costs; 
* Inflation adjustment. 

Date of fee increase: October 2005; 
Weighted average fee increase: $8; 
Reasons for fee increase: 
* Inflation adjustment. 

Date of fee increase: July 2007; 
Weighted average fee increase: $174; 
Reasons for fee increase: 
* Close funding gaps; 
* Accomplish performance goals; 
* Inflation adjustment. 

Source: GAO analysis of USCIS data and Proposed and Final Rules (66 
Fed. Reg. 41456; 66 Fed. Reg. 65811; 69 Fed. Reg. 5088; 69 Fed. Reg. 
20528; 70 Fed. Reg. 56182; 72 Fed. Reg. 4888; 72 Fed. Reg. 29851). 

[End of table] 

To perform its most recent fee review, USCIS used a commercial off-the- 
shelf software application to assign the costs of its immigration 
application processing and adjudication services. Management's 
objective was to set fees that would recover funds sufficient to cover 
USCIS's costs. USCIS officials told us that when developing the 
methodology used in the fee review, management anticipated some 
skepticism about the fairness of the resulting fees, so its objectives 
also included using methods that would distribute costs among the 
various application types fairly and in a way that could be readily 
understood by fee payers and others.[Footnote 20] 

The data USCIS used for its fee review came from a variety of sources. 
Financial data USCIS used were from USCIS's fiscal year 2007 budget 
adjusted for inflation[Footnote 21] and USCIS estimates of the cost of 
enhancements needed to meet its responsibilities. The nonfinancial 
information USCIS used included historical data on application 
completion rates--the average time it takes to complete adjudication of 
an application--from its own Performance Analysis System (PAS) and the 
number of applications USCIS estimated it would receive each year in 
fiscal years 2008 and 2009. 

USCIS estimated that the number of applications to be received in 
fiscal years 2008 and 2009 would be 5.577 million per year, including 
applications for which no fee is charged. Fee-paying application volume 
was estimated to be 4.742 million yearly. USCIS also estimated that 
2.196 million of the fee-paying applications would require biometric 
services, for which an additional fee is charged. 

USCIS also estimated the total annual cost of processing and 
adjudicating immigration applications for fiscal years 2008 and 2009. 
USCIS started with the fiscal year 2007 IEFA budget adjusted for costs 
that will not recur after fiscal year 2007, adjusted for inflation for 
fiscal years 2008 and 2009, and added the estimated cost of additional 
requirements USCIS determined it needed to enhance service, security, 
and infrastructure. USCIS's resulting estimated cost for processing and 
adjudicating immigration benefit applications for fiscal years 2008 and 
2009 is $2.329 billion, as shown in table 4. 

Table 4: USCIS's Estimate of Annual Funds Needed for Fiscal Years 2008 
and 2009 (Dollars in millions): 

Fiscal year 2007 IEFA budget: $1,760.0; 
Less: nonrecurring costs; ($8.5); 
Fiscal year 2007 adjusted IEFA budget; $1,751.5; 
Plus: inflation; $53.2; 
Plus: additional requirements for enhancements; $524.3; 
Total: $2,329.0[A]. 

Source: USCIS. 

Note: Data are from USCIS's document entitled Supporting Documentation 
to the Proposed Rule: Adjustment of the Immigration Benefit 
Application/Petition Fee Schedule, FY 2008/2009 Fee Review Supporting 
Documentation, February 2007. 

[A] The total of $2,329 million to be recovered by regular application 
fees does not include the anticipated annual premium processing fee 
collections of $139 million for fiscal years 2008 and 2009. According 
to USCIS, premium processing fees will be used to fund its 
transformation program to make long-term improvements to its business 
processes and technology. 

[End of table] 

The additional requirements of $524.3 million, shown in table 4, 
represent staff, equipment, training, and other costs that were not 
previously funded and that USCIS determined it needed to improve its 
capabilities to meet its mission responsibilities. These additional 
requirements include: 

* service enhancements ($134.8 million), such as staff and training, 
which according to USCIS, would provide a small surge production 
capacity to give it the flexibility to adapt to temporary increases in 
filings and the ability to incrementally work to marginally shorten 
processing times and improve service delivery over time; 

* security and integrity enhancements ($152 million), such as 
establishing a second card production facility to support day-to-day 
production and to comply with federal standards for contingency 
planning to ensure that critical systems remain available in the event 
of catastrophic failure; 

* humanitarian program enhancements ($14 million) to fully fund the 
Cuban Haitian Entrant Program; and: 

* infrastructure enhancements ($223.4 million), such as strengthening 
administrative support activities and upgrading and maintaining the 
information technology environment to sustain current operations. 

As discussed in the next section (see also figure 1), USCIS classified 
its total estimated costs as either direct or overhead. According to 
USCIS, direct costs were assigned to field offices or activities based 
on an identified relationship between the cost component and the field 
office or activity. Overhead costs were allocated to field offices 
primarily based on the number of FTEs assigned to each field office. 
The field office costs along with their allocated overhead costs were 
assigned to eight application processing activities and distributed as 
shown in table 5. 

Table 5: USCIS Estimated Annual Costs for Application Processing 
Activities for Fiscal Years 2008 and 2009 (Dollars in millions): 

Activity: Inform the public; 
Cost: $245; 
Description: Receiving and responding to customer inquiries through 
telephone calls, written correspondence, or walk-in inquires. 

Activity: Intake; 
Cost: $94; 
Description: Mail room and file room operations, including data entry, 
file assembly, and fee receipting. 

Activity: Conduct Interagency Border Inspection checks; 
Cost: $52; 
Description: Comparing information on applicants, petitioners, 
beneficiaries, and household members who apply for immigration benefits 
against various federal lookout systems. 

Activity: Review records; 
Cost: $233; 
Description: Creating files; searching and requesting files; 
consolidating files; connecting returned evidence with application and 
petition files; pulling, storing, and moving files upon request; 
updating systems on the location of files; and archiving inactive 
files. 

Activity: Make determination; 
Cost: $1,334; 
Description: Adjudicating applications and petitions; making and 
recording adjudicative decisions; requesting and reviewing additional 
evidence; interviewing applicants; and consulting with supervisors and 
legal counsel and researching applicable laws and decisions on 
nonroutine adjudications. 

Activity: Fraud detection and prevention; 
Cost: $99; 
Description: Detecting, combating, and deterring immigration benefit 
fraud. 

Activity: Issue document; 
Cost: $98; 
Description: Producing and distributing secure cards that identify the 
holder as an alien and identify his or her employment authorization. 

Activity: Capture biometrics; 
Cost: $174; 
Description: Electronic capture of biometric (fingerprint, photograph, 
signature) information and background checks performed by the FBI. 

Total activity costs: $2,329. 

Source: GAO analysis of USCIS data. 

[End of table] 

The activity costs include USCIS-estimated costs for asylum and refugee 
services ($191 million), fee waivers and exemptions[Footnote 22] ($150 
million), and biometric services ($174 million). These costs were 
allocated to the applications separately as described below. USCIS 
assigned the remaining $1.814 billion of activity costs to the expected 
4.742 million fee-paying applications, resulting in a processing cost 
for each application type. USCIS then allocated the costs of asylum and 
refugee services and fee waiver and exemptions in equal dollar amounts 
as surcharges to each application's processing cost to arrive at a 
total cost for each application type. USCIS set each application fee 
based on this total cost. The $174 million of "capture biometrics" 
activity costs were allocated evenly to the estimated 2.196 million fee-
paying applications, resulting in a separate and equal biometrics fee 
for each application that would require biometric services. (See 
appendix II for a list of applications and fees.) Figure 1 illustrates 
the cost assignment process. 

Figure 1: Illustration of Cost Assignment Process: 

[Refer to PDF for image] 

Illustration of Cost Assignment Process: 

USCIS Estimated Annual Costs for FY 2008/2009 (Dollars in millions): 
$2,329. 

Direct and Overhead Costs: USCIS identified $1,405 million and $924 
million in direct and overhead costs, respectively. 

Field Offices: Direct costs of $1,137 million were assigned directly to 
field offices. In addition, overhead costs of $924 million were 
allocated to the field offices primarily based on FTEs. Total for Field 
offices: $2,061. 

Activities: Direct costs of $268 million were assigned directly to 
activities. In addition, costs associated with field offices, including 
allocated overhead, were assigned to activities based on the percentage 
of time field office staff spent on a given activity. Total for eight 
activities: $2,329. 

Application Costs: USCIS identified activity costs of $191 million for 
asylum and refugee services, $150 million for fee waivers and 
exemptions, and $174 million for biometric services. The remaining 
$1,814 million was assigned to 4.742 million fee-paying applications 
resulting in a processing cost for each application type. Then, costs 
of asylum and refugee services and fee waivers and exemptions were 
allocated in equal amounts as surcharges and added to the processing 
costs of the fee-paying applications. Biometric services costs were 
allocated in equal amounts to 2.196 million of the 4.742 million fee-
paying applications. 

Source: GAO. 

[End of figure] 

Costing Methodology Did Not Consistently Adhere to Federal Accounting 
Standards and Principles and Other Guidance: 

Although the July 2007 fee increases met management's objective to set 
fees at a level to recover USCIS's estimated costs of immigration 
application processing and adjudication services, the costing 
methodology USCIS used to develop the fees for each application type 
did not consistently adhere to federal accounting standards and 
principles and other guidance. While federal accounting standards allow 
flexibility for agencies to develop managerial cost accounting 
practices that are suited to their specific needs and operating 
environments, they also provide certain specific guidance based on 
sound cost accounting concepts. USCIS officials told us that when 
developing the methodology, management anticipated some skepticism 
about the fairness of the resulting fees, so its objectives also 
included using methods that would distribute costs among the various 
application types fairly and in a way that could be readily understood 
by fee payers and others.[Footnote 23] 

USCIS's methodology was not consistent with federal accounting 
standards and principles and other guidance in the following aspects: 
(1) unreimbursed costs paid by other federal entities on behalf of 
USCIS were not included in USCIS's estimates of total costs, (2) key 
assumptions and methods used for allocation of costs to activities and 
types of applications were not sufficiently justified, (3) assumptions 
about staff time spent on various activities were not supported by 
documented rationale or analysis, (4) the cost of premium processing 
services was not determined, and (5) documentation of the processes and 
procedures was not sufficient to ensure consistent and accurate 
implementation of the methodology. Because of these inconsistencies, 
USCIS cannot support the reasonableness of the cost assignments to the 
various application types. 

Certain Costs Paid by Other Federal Entities Were Not Included in the 
Fee Review: 

USCIS did not include the costs of lockbox services paid by Treasury or 
certain retirement benefits to be paid by OPM in estimating the full 
cost of its immigration application processing and adjudication 
services. USCIS officials told us that they only included costs that 
the agency paid directly, which met management's objective to set fees 
that recover funds sufficient to cover USCIS's costs. However according 
to federal accounting standards, each entity's full cost also should 
incorporate the cost of goods and services that it receives from other 
entities free of charge.[Footnote 24] This is especially important for 
executive agencies when the costs constitute inputs to government goods 
or services provided to nonfederal entities for a fee or user charge 
because executive agencies should recover the full costs. OMB Circular 
No. A-25, which provides guidance for executive agencies on assessment 
of user charges, states that when not in conflict with the fee- 
authorizing statutes, and unless the agency has been granted an 
exception to the general policy, fees should be sufficient to recover 
the full cost of providing a service, which includes all costs to any 
part of the federal government, including accrued retirement costs not 
covered by employee contributions and the costs of collection. In other 
words, costs should be included regardless of which agency pays them. 
Congress authorized, but did not require, USCIS to recover full costs. 
The document USCIS prepared to describe its methodology stated that it 
adhered to the principles in OMB Circular No. A-25, but in the final 
rule for the fee adjustment, USCIS also made clear that its fees would 
recover only the costs of USCIS' operations. Although not inconsistent 
with the legislation authorizing the fees, the scope of the costs to be 
recovered by USCIS, as announced in USCIS's final rule, is inconsistent 
with the general guidance in OMB Circular No. A-25. USCIS did not 
document in its final rule, which it indicated OMB had reviewed, or 
elsewhere the rationale for excluding non-USCIS costs from its fee 
review, including whether or how it considered the executive branch 
policy in OMB Circular No. A-25 on recovering full costs and other 
factors.[Footnote 25] 

At the time of the fee review, USCIS had not estimated the cost of 
lockbox services provided by Treasury's FMS. At our request, FMS 
provided information showing that it compensated two lockbox providers 
$20 million for services provided to USCIS in fiscal year 2007. USCIS 
included $2 million of these lockbox costs in the estimate of its costs 
of immigration application processing and adjudication services. 
According to a USCIS official, these costs were related to changes the 
lockbox facility had to make to its systems controls, for example, to 
accommodate additional data elements required by USCIS in application 
forms. Although the $18 million lockbox costs excluded is not a 
material amount in relation to the current $2.329 billion total costs 
estimated by USCIS, this lockbox cost is expected to grow significantly 
in the future as USCIS executes its plan to move the preadjudication 
processing activities, including fee collection, from service centers 
and field offices to lockbox facilities by March 2011. In fiscal year 
2007, approximately 23 percent of fee collections were at the lockbox 
facilities, while almost 68 percent were at service centers. 

Legislative authority exists for FMS payment for lockbox services. 
[Footnote 26] FMS pays lockbox costs pursuant to its responsibility for 
collecting revenues coming into the federal government and for 
providing specialized receipt and disbursement services for federal 
agencies. FMS officials told us that federal agencies do not pay for 
receipting, custody, and disbursement of federal funds by FMS on the 
agencies' behalf because these services are FMS's responsibility. 
According to FMS officials, agencies are to reimburse FMS only for the 
costs of services that are considered unique to that particular agency. 
[Footnote 27] USCIS and FMS signed an interagency agreement in 
September 2008 that establishes reimbursement levels for onetime and 
annual costs that USCIS will pay to FMS. These costs represent the 
portion of FMS's lockbox costs that are unique to USCIS. 

In addition, USCIS did not include in its estimated costs of 
immigration application processing and adjudication services some of 
the costs of retirement benefits--pensions and health and life 
insurance--to be paid by OPM on behalf of USCIS. Based on its fiscal 
year 2007 costs, USCIS estimated that the average annual projected cost 
for these benefits for fiscal years 2008 and 2009 is $47 million before 
taking into consideration the agency's 14 percent increase in the 
number of employees from May 2007 to May 2008 and 16 percent increase 
in related payroll costs. 

Together, the estimated more than $65 million of FMS and OPM costs 
excluded each year represents approximately $14 per fee-paying 
application for fiscal years 2008 and 2009. This estimate could differ 
among application types if these costs were analyzed more precisely. 
Without consideration of these costs paid by other federal entities, 
USCIS is not accounting for the full costs to the federal government of 
USCIS's immigration application processing and adjudication services, 
and USCIS's cost data used for setting fees are incomplete. 

USCIS Did Not Sufficiently Justify the Use of Less Precise Cost 
Assignment Methods: 

The methodology USCIS used to determine the cost and develop the fees 
for each application type involved various assumptions and cost 
assignment methods. In large part, it consisted of allocating costs on 
a prorated basis. USCIS did not prepare and document analyses to 
justify its assumptions that prorated allocations provided a reasonable 
distribution of those costs. While federal accounting standards do not 
prohibit allocating costs on a prorated basis, they list an order of 
preference for three cost assignment methods that should be used: (1) 
direct tracing of costs wherever economically feasible,[Footnote 28] in 
this case, to an identifiable office, activity, or application type; 
(2) assigning costs on a cause-and-effect basis;[Footnote 29] or (3) 
allocating costs on a reasonable and consistent basis when not 
economically feasible to assign costs directly or on a cause-and-effect 
basis. The standards also state that the third preference, allocation, 
tends to be arbitrary because there may be little correlation between 
the costs and the allocation base, and costing distortions often result 
from arbitrary allocations. Minimizing arbitrary cost allocations will 
improve cost information. Nevertheless, the standards allow flexibility 
so that management can select methods that are best suited to the 
organization's needs. The standards also state that when making the 
selection, management should evaluate alternative costing methods and 
select those that provide the best results under its operating 
environment. 

In the first stage of assigning the estimated $2.329 billion annual 
application processing and adjudication services costs for fiscal years 
2008 and 2009 (see figure 1), USCIS officials identified $1.405 billion 
of direct costs and $924 million in overhead costs. USCIS considered as 
overhead the majority of costs of headquarters functions and some field 
office functions and centrally managed costs such as rent and 
information technology operations and maintenance. Of the $924 million 
of overhead costs, $732 million--31 percent of the total $2.329 billion 
cost--was allocated to field offices based on the number of FTEs 
assigned to each field office. This approach did not consider USCIS's 
approximately 6,100 contract workers and used only approximately 7,900 
FTEs of the total federal FTEs of about 10,400 as the basis for 
distributing overhead costs. Excluding the contract workers from the 
base could have changed the proportion of overhead costs assigned to 
the various field offices which introduces the potential for an 
additional significant effect on the allocation of those costs to 
activities and application types. 

Minimizing arbitrary cost allocations will improve cost information. 
Alternatives to USCIS's FTE-based allocation of overhead to field 
offices might have included direct or cause-and-effect assignment. For 
example, software licenses for applications used by only a specific 
office or activity and training for specific employee groups might have 
been assigned directly to offices or activities causing, or driving, 
each of those costs rather than allocating all of them in the aggregate 
with other overhead costs to all field offices on the basis of FTEs. In 
addition, other costs, such as information technology operations, that 
were attributable to a particular field office or activity might have 
been assigned using a cause-and-effect analysis, such as consumption of 
services, rather than a pro rata FTE-based allocation. 

Federal accounting standards state that allocation should have a 
reasonable basis, usually a relevant common denominator. USCIS costs 
that cannot be assigned directly or on a cause-and-effect basis to 
specific field offices or activities in an economically feasible manner 
might have an alternative allocation basis that is more closely related 
to the attributes of those specific costs than to FTEs. For example, 
using payroll for certain employee benefits or usage for certain 
information technology costs might have provided a more accurate or 
reasonable basis for cost distribution than an FTE-based allocation. 
Without performing and documenting analyses to evaluate such 
alternatives, USCIS management cannot assure itself or others that it 
is using the optimal cost allocation method. 

Field office overhead and direct costs were assigned to eight discrete 
activities (see table 5) related to processing and adjudicating 
applications. (See figure 1.) The activity costs were then assigned to 
types of applications. As part of this process, USCIS assigned 49 
percent (or about $1.143 billion) of total costs to total fee-paying 
applications based on the amount of time it took to adjudicate an 
application, resulting in varying costs per application type for the 
adjudication activity.[Footnote 30] The adjudication time used as the 
basis for assigning these activity costs to types of applications was 
based on historical data on adjudication time from PAS, which measures 
the average time to complete adjudication of each application based on 
daily production information input by adjudicators. Thus, for the "make 
determination" activity, the more complex types of applications that 
take more time to adjudicate were assigned a higher cost, which 
resulted in a higher fee. This is consistent with the methodology's 
general premise, which according to USCIS is that the more time spent 
adjudicating an application, the higher the fee. These cost assignments 
used the federal accounting standards' preferred methods of cost 
assignment. 

USCIS assigned the remaining 51 percent (or about $1.186 billion) of 
its costs to applications in equal amounts.[Footnote 31] This type of 
assignment did not consider any variation in complexity or processing 
time between application types. A USCIS official told us that available 
production data for these activities were not sufficiently reliable to 
use as a basis for assigning costs to applications. Also, according to 
USCIS, pro rata allocation was used because these activities' costs 
were not significantly driven by the complexity of an application type. 
However, USCIS did not justify its assumption that these costs were not 
significantly driven by complexity of application type. 

While recognizing that agency management should select costing methods 
that best meet their needs, taking into consideration the costs and 
benefits of reasonable alternatives, federal accounting standards 
recommend minimizing arbitrary cost assignment methods to help avoid 
inaccurate product or service costs. It is not unusual for a costing 
methodology to assign some costs using logical and justifiable 
allocation, especially if more precise assignment methods are not cost 
effective. However, for several significant cost elements, such as 
those discussed here, USCIS did not prepare the analysis necessary to 
demonstrate the reasonableness of or justification for the costs it 
allocated to each type of application. Without documented justification 
for USCIS's decisions in using methods that are less precise than 
others available, decision makers and fee payers do not have access to 
information significant in determining their level of confidence in the 
reasonableness of USCIS's application fees. 

USCIS Did Not Document Its Rationale and Related Analysis to Justify 
Its Assumptions about Staff Time Spent on Various Activities: 

USCIS did not document its rationale or any related analysis to justify 
the assumptions concerning the amount of time staff spent performing 
various activities, which were used to assign field office costs to 
activities. Although USCIS prepared a supporting document to describe 
the methodology it used, the document did not explain certain key 
assumptions and methods used in sufficient detail to justify the 
reasonableness of the resulting cost assignments. According to federal 
internal control standards, significant events are to be clearly 
documented.[Footnote 32] Significant events can include key decisions 
about assumptions and methods underlying the assignment of costs. Also, 
federal accounting standards require documentation of all managerial 
cost accounting activities, processes, and procedures used to associate 
costs with products, services, or activities.[Footnote 33] 

According to USCIS, of the $1.137 billion[Footnote 34] of direct costs 
assigned to field offices, $845 million was assigned to activities 
based on data from PAS, which include, among other things, the amount 
of time adjudicators spend adjudicating applications. The remaining 
$292 million of direct field office costs, nearly 26 percent, was 
assigned to activities based on management's judgment of how much staff 
time was spent on each activity. For example, based on discussions with 
representatives from regions, service centers, and the Performance 
Management Branch, USCIS decided to allocate 88 percent of the costs of 
the immigration information officers at service centers to the "inform 
the public" activity and 12 percent to the "make determination" 
activity. These discussions, including the input of the internal 
experts, and the rationale linking this information and related 
analysis with the final cost assignments were not documented. Using the 
knowledge of informed experts as the basis for estimating cost 
assignments can be a reasonable method when reliable data about the 
amount of staff time spent performing various activities or other 
factors that drive those costs are not available. However, without 
clear documentation of these factors, consideration given to these 
factors, and the rationale for cost assignment decisions made using 
these factors, USCIS is not able to demonstrate the reasonableness of 
the resulting cost assignments. 

Costs of Premium Processing Services Were Not Determined: 

According to federal accounting standards, Congress and federal 
executives need cost information to make decisions about allocating 
federal resources, modifying programs, and evaluating program 
performance.[Footnote 35] However, USCIS has not determined the costs 
of the accelerated processing services offered through its premium 
processing program, which provides for the processing of certain 
applications within 15 calendar days, rather than the typical 2 months 
or more processing time. A business that wishes to hire a foreign 
national to come to the United States to work temporarily can pay a 
voluntary fee of $1,000, in addition to the regular application fee. By 
law, these premium processing fees are to be used to cover the costs of 
(1) premium processing services to business customers and (2) 
infrastructure improvements in the adjudications and customer service 
processes.[Footnote 36] Currently, USCIS is assigning all premium 
processing fee collections to its business transformation program to 
make long-term improvements to its business processes and technology. 
Because USCIS is not using any of the premium processing fee 
collections for the accelerated processing efforts, regular fee-paying 
applicants could be bearing part of any added cost that might be 
associated with processing these applications. According to USCIS 
officials, because the $1,000 fee is set by law, and not by USCIS, the 
fee was not included in the fee review. Without knowing the cost of its 
premium processing services, USCIS management and Congress cannot 
determine the extent to which the $1,000 fee would cover the costs of 
the agency's premium processing services and infrastructure 
improvements. 

Documentation of Processes and Procedures Was Not Sufficient to Ensure 
Consistent and Accurate Implementation: 

USCIS described the costing methodology it used for its fee review in a 
proposed rule[Footnote 37] announcing the impending application fee 
increases and in a report containing supporting documentation for its 
fee review, which was available to the public during the public comment 
period on the proposed rule. However, USCIS did not prepare the more 
detailed documentation called for in federal accounting standards, 
which would allow results to be validated and agency personnel to 
perform the fee-setting process in a consistent manner. According to 
federal accounting standards, all cost accounting processes and 
procedures should be documented by a manual, handbook, or guidebook of 
applicable accounting operations that provides instructions for 
procedures and practices to be followed.[Footnote 38] 

In accordance with management's objective that the methodology be 
readily understood by fee payers and others, the documentation USCIS 
prepared for the public was prepared so that a third party could 
understand USCIS's overall approach. However, specific procedures and 
information used in the fee review as a basis for assigning costs were 
not documented in sufficient detail to allow a knowledgeable person to 
carry out or replicate the procedures. For example, documentation of 
the multistep process USCIS used to allocate overhead costs to 
activities did not include the percentages used to make these 
allocations. Also, application completion rates (i.e., the average 
amount of time to complete adjudication of an application) were not 
described in enough detail to explain how the rates were used to assign 
adjudication activity costs (i.e., "make determination" costs) to the 
various application types. 

Lack of documentation of the processes and procedures makes it 
difficult to ensure that the methodology used to determine the costs 
and fees is consistent from year to year, especially when there are 
changes in personnel. Lack of documentation also makes it difficult to 
train staff in consistent and accurate application of the methodology. 
Further, without complete documentation reviewed and approved by 
management, an independent party, such as an auditor, cannot readily 
assess major assumptions and methods used in the process or audit the 
procedures to provide accountability and added assurance that the cost 
system is consistent with federal accounting standards and other 
requirements and statutes. 

Accountability Mechanisms Are in Place to Track Use of Fees, and USCIS 
Is Taking Steps to Strengthen Control over Collections: 

USCIS has put accountability mechanisms in place to help ensure that it 
is using regular application fee collections and premium processing fee 
collections as it intended, and it is taking steps to improve internal 
control over collection of fees. USCIS has established unique codes in 
the financial system for specific projects, and the OCFO monitors 
expenditures of fee collections for those projects. Although USCIS has 
controls in place over fee collections, it has identified some 
weaknesses at the service centers. USCIS reported that it has taken 
some actions to strengthen service center controls in the short term, 
and that it is in the process of moving all preadjudication application 
processing and fee receipt functions from the service centers and field 
offices to lockbox facilities to further strengthen control over 
collections. 

Accountability Mechanisms Are in Place to Track Use of Fees Intended 
for Specific Projects: 

USCIS has established unique codes in the financial system for its 
projects, and according to a USCIS official, the OCFO monitors 
obligations and expenditures against those codes to track spending of 
fee collections from both regular application fees and premium 
processing fees. Expenditures for the additional requirements (staff, 
equipment, training, etc.)--enhancements that had not been funded 
previously and that USCIS determined it needed to improve its 
capability to meet its responsibilities--are to be made from regular 
application fees. Expenditures for USCIS's business transformation 
program, to make long-term improvements to its business processes and 
technology, come from premium processing fees. 

USCIS has established accountability mechanisms to track expenditures 
for the planned enhancements of $524 million. As discussed earlier, the 
fee schedule that became effective in July 2007 is based, in part, on 
USCIS's estimated costs for these enhancements. Of the $2.329 billion 
that USCIS determined it needed annually to fund the cost of processing 
and adjudicating immigration applications for fiscal years 2008 and 
2009, over 22 percent (or $524 million) represented additional staff, 
equipment, training, and projects included in the planned enhancements. 
USCIS plans to use $232 million of that amount for payroll and related 
costs to hire about 1,500 additional staff. The remaining $292 million 
is to be used for specific projects, such as the establishment of a 
second card facility and enhanced delivery of secure documents 
(permanent residence cards, employment authorization documents, and 
travel documents), so that the United States Postal Service can ensure 
that they are delivered to the proper recipients. 

USCIS's OCFO has established unique project codes in the financial 
system for specific projects included in the planned enhancements to be 
financed from regular application fees. According to a USCIS official, 
the amounts that USCIS estimated it would spend on each of the 
enhancements were allocated to the applicable individual project codes. 
Obligations and expenditures made against those project code 
allocations are monitored by OCFO to help ensure that USCIS uses the 
increased resources to enhance its processing capabilities. A USCIS 
official told us that the status of each nonfinancial aspect of the 
enhancements, such as new staff hired and draft statements of work for 
contracts to be let, is also tracked and discussed at periodic USCIS 
management meetings. Some amounts included in the additional 
requirements are for items that will not recur, such as the 
establishment of a second card facility. The second facility, according 
to USCIS, is needed to support day-to-day production and to be 
available in the event of catastrophic failure in compliance with 
federal standards for contingency planning for critical systems. A 
USCIS official told us that any nonrecurring costs included in the 
current fee schedule will not be included in the baseline resources for 
the next fee review. As of September 30, 2008, USCIS had hired about 
1,400 additional staff and had obligated or expended over $207 million 
of the planned $292 million for specific projects included in the 
enhancements. 

USCIS's OCFO tracks the amount of premium processing fee collections 
separately from regular application fee collections so that it can 
dedicate premium processing fees to its business transformation program 
to make long-term improvements to its business processes and 
technology.[Footnote 39] USCIS has established an expenditure plan for 
its transformation program that shows the estimated annual costs of the 
program through fiscal year 2012. According to the program's 
expenditure plan, USCIS will dedicate all anticipated premium 
processing fee collections to the transformation program for fiscal 
years 2008 through 2012. A USCIS official told us that commitments, 
obligations, and expenditures for transformation projects are recorded 
to specific codes in the financial system, and those amounts are 
tracked along with premium processing fees. USCIS plans to use the 
entire amount of premium processing fees it received in fiscal year 
2008--almost $163 million[Footnote 40]--for its transformation program. 
During fiscal year 2008, USCIS obligated over $12 million of that 
amount for the transformation program. A USCIS official told us that as 
some planned transformation projects move closer to the awarding of 
contracts, amounts will be allocated to the transformation project 
codes so obligations and expenditures can be made for those projects. 
According to USCIS, a Transformation Solution Architect Task Order in 
the amount of $14.5 million was awarded at the beginning of November 
2008. 

USCIS Is Moving Fee Collections to Lockbox Facilities to Strengthen 
Control over Collections: 

USCIS has documented and assessed its internal control activities and 
processes related to fee collections. Based on our review of USCIS's 
internal control documentation, service center contracts, and 
independent auditor reports and our discussions and observations during 
visits to the service centers and lockbox facilities, we identified a 
system of controls designed to safeguard fees collected. The controls 
include dual custody of fee receipts, surveillance cameras in the fee 
collection areas, and balancing and reconciling fee collection amounts 
as an application moves through processing. Although controls are in 
place, USCIS has identified through its monitoring procedures some 
weaknesses at one of its service centers. Because of these weaknesses, 
and for other reasons, such as the lockbox facility's flexibility to 
respond to unanticipated surges in application receipt volume, USCIS is 
in the process of moving all preadjudication application processing and 
fee receipt functions from the service centers and field offices to 
lockbox facilities. 

USCIS management assessed the effectiveness of its service centers' 
internal controls over collection and depositing of fees in fiscal year 
2007 in accordance with OMB Circular No. A-123, Management's 
Responsibility for Internal Control, and found weaknesses, such as fee 
receipts not being deposited in a timely manner and applications and 
fees being stored in unsecured locations thus creating some security 
issues. USCIS reported that these weaknesses resulted in part from the 
increased workload attributable to filings by applicants attempting to 
beat the proposed fee increases effective in July 2007 and increased 
application filings because of the publication of a State Department 
Visa Bulletin. An influx of applications and fees exceeded service 
center capacity to timely issue receipts and deposit application fees. 
Applications were kept in temporary storage containers, or pods, in the 
parking lot at one service center and were not being receipted and 
deposited timely. USCIS has identified corrective actions, including 
the transition of fee collections and preadjudication processing of 
applications to lockbox facilities, and is in the process of 
implementing them. According to USCIS, other corrective actions were 
implemented, including physical security improvements such as 
installing a barbed wire fence around the perimeter of the area 
containing the pods and a security guard to monitor the area 24 hours a 
day, 7 days a week. 

According to USCIS, at the four service centers, controls related to 
the fee collection process may vary, but each location is expected to 
maintain policies and procedures in accordance with management's 
directives. We observed certain of these controls in operation at the 
service centers. USCIS's procedures require dual custody of fee 
receipts at all times. The procedures also state that after application 
and check information have been entered into USCIS's system, the checks 
are to be removed from the applications and placed in the data entry 
clerk's locked safe. We observed the placement of endorsed checks into 
small safe-type boxes. However, at one service center, the boxes did 
not have locks. 

Another control at the service centers relates to preparing the daily 
bank deposit. USCIS's procedures require verification of collected fee 
amounts at different steps during the process. USCIS and contractor 
staff at one service center described the process, and we observed the 
documentation that was prepared to support a prior day's bank deposit. 
The documentation included required items such as reconciliations, 
approvals, bank deposit slips, and courier signatures acknowledging 
courier receipt of the checks for delivery to the bank. 

At the lockbox facility we visited, we observed controls such as 
restricted access to the entire lockbox operations area, surveillance 
cameras in the segregated area where employees open mail and separate 
checks, and comparing and balancing the number of applications and 
amount of fee collections at each step of the process. An independent 
auditor reviewed controls at the lockbox facility and determined that 
the controls tested were effective. 

USCIS is in the process of moving fee collection and other 
preadjudication processing activities to lockbox facilities by March 
2011. According to USCIS, benefits of the lockbox include reduced 
operational costs, a more secure environment for fee collections, 
centralized and expedited application and fee collection intake, and 
flexibility to address unanticipated surges in application receipt 
volume. For example, the lockbox facilities maintain a certain number 
of staff as temporary workers who can be called upon when needed. 

Conclusions: 

Application fees are intended to fund USCIS's immigration benefit 
application processing operations and other related services. While 
USCIS has met its objective to set fees at a level sufficient to cover 
its estimated costs, it has not considered the costs incurred by other 
federal entities on USCIS's behalf when estimating the cost of each 
type of application and setting fees. Also, key assumptions and methods 
for allocating costs to activities and application types are not 
sufficiently justified or documented, and USCIS does not know how the 
cost of accelerated processing compares to its $1,000 premium 
processing fee. Further, documentation that USCIS prepared to describe 
its costing methodology does not provide sufficient instruction for the 
costing processes and practices to be followed in determining the costs 
of each type of application. USCIS, fee payers, congressional decision 
makers, and others need assurance that the costing methodology used to 
determine the fees for individual application types provides reliable 
results and that the assumptions and assignment methods used are 
justified. A costing methodology consistent with federal accounting 
standards and principles and other guidance, including complete 
documentation of the agency's cost assignment process and its analysis 
and justification for key assumptions used to estimate costs and 
determine application fees, could help provide that assurance. To 
increase confidence that its cost estimates provide a reliable basis 
for setting application fees, USCIS would need to analyze alternate 
cost assignment methods taking into consideration the costs and 
benefits of reasonable alternatives, generating additional operations 
and production data, such as information system usage and 
preadjudication processing time, to prepare those analyses. USCIS's 
internal control monitoring procedures identified weaknesses in service 
center fee collection procedures that USCIS has addressed while 
planning the transition of its collection and preadjudicative 
processing functions to lockbox facilities. 

Recommendations for Executive Action: 

To help make USCIS's costing methodology used for determining 
application fees consistent with federal accounting standards and 
principles and to strengthen the reliability of the cost assignments 
used to set fees, we recommend that the Secretary of Homeland Security 
direct the Director of USCIS to take the following four actions: 

* identify the full cost of application processing services whether 
paid directly by USCIS or by other federal entities for USCIS's 
benefit, such as the costs of lockbox services paid by Treasury's FMS 
and certain retirement benefits to be paid to USCIS retirees by OPM; 

* consider the full costs to the government when USCIS next reviews and 
sets application fees and document the rationale for decisions made 
about including or excluding any types of costs in the fee 
determination process; 

* determine the costs of providing premium processing services to 
identify the extent to which the $1,000 premium processing fee would 
cover associated expedited processing costs and infrastructure 
improvements; and: 

* document the processes and procedures of the costing methodology in 
sufficient detail so that the specific procedures used and the data 
sources and cost assignment methods employed for each step in the 
process can be understood and replicated. 

To better support the reasonableness of USCIS's assumptions and cost 
assignment methods, we recommend that the Secretary of Homeland 
Security direct the Director of USCIS to take the following two 
actions: 

* analyze current cost allocation methods to evaluate whether direct or 
cause-and-effect assignment methods that are economically feasible or 
other allocation bases may offer greater precision and: 

* fully document the rationale and any related analysis for using the 
assumptions and cost assignment methods selected. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, DHS and USCIS concurred 
with our recommendations and reported that related actions are planned 
or underway. These actions, if properly implemented, should better 
support the reasonableness of USCIS's assumptions and cost assignment 
methods and help strengthen the reliability of the cost assignments 
used to set fees. 

DHS characterized the issues raised in the draft report as mostly 
pertaining to documentation and analysis supporting discrete decisions 
by USCIS in developing its costing methodology. In this regard, DHS 
indicated that USCIS had substantial documentation supporting its 
costing methodology. As discussed in the draft report, it will also be 
important that available documentation and analysis is sufficient to 
explain the methodology to potential users, provide justification for 
key assumptions, and guide future program administrators in preparing 
future fee reviews using a consistent methodology. This level of 
documentation and analysis is critical to developing reliable cost 
information for management of fee-based programs on an ongoing basis. 

We are sending copies of this report to interested congressional 
committees, the Secretary of Homeland Security, the Acting Deputy 
Director of USCIS, the Inspector General of DHS, and other interested 
parties. This report is also available at no charge on the GAO Web site 
at [hyperlink, http://www.gao.gov]. 

Should you or your staff have any questions about this report, please 
contact Jeanette Franzel at (202) 512-9406 or franzelj@gao.gov or Susan 
J. Irving at (202) 512-8288 or irvings@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions to 
this report are listed in appendix V. 

Signed by: 

Jeanette M. Franzel: 
Director: 
Financial Management and Assurance: 

Signed by: 

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

[End of section] 

Appendix I: Scope and Methodology: 

To assess the consistency of U.S Citizenship and Immigration Services' 
(USCIS) costing methodology with federal accounting standards and 
principles, including whether USCIS sufficiently justified and 
documented its assumptions and methods, we reviewed federal accounting 
standards and Office of Management and Budget (OMB) guidance on user 
fees.[Footnote 41] We also reviewed USCIS documents related to the fee 
review and its methodology. We obtained further understanding of the 
methodology through interviews with knowledgeable USCIS officials and 
staff. We reviewed the design and operation of USCIS's cost system, its 
accumulation methods, and the assignment of costs involved in 
processing and adjudicating immigration applications. We performed a 
walk-through of the cost system, discussed key assumptions and 
decisions with USCIS officials, and performed analytical reviews. For 
example, we performed calculations to verify USCIS's distribution of 
overhead costs. We reviewed USCIS documents describing the bases on 
which USCIS assigned costs to its processing activities and how 
individual application fees were determined. To determine whether USCIS 
data were sufficiently reliable for purposes of this report, we 
discussed data quality control procedures with agency officials and 
reviewed relevant documentation. 

To identify and assess the accountability mechanisms and internal 
controls that USCIS has in place over the collection and use of fees, 
we reviewed internal control standards and relevant USCIS 
documentation, and we interviewed knowledgeable USCIS officials and 
staff about the controls USCIS has put in place. We corroborated 
information obtained in the interviews by reviewing contracts for 
service center support operations, USCIS internal control 
documentation, and an independent auditor's report on controls in place 
at the lockbox facility and through our visits to four USCIS service 
centers in California, Nebraska, Texas, and Vermont and a lockbox 
facility in Chicago.[Footnote 42] During those visits, we interviewed 
officials and staff and observed the fee collection process. Regarding 
controls over use of fees, we discussed with USCIS officials and staff 
the processes for tracking and monitoring fee collections and related 
expenditures. We corroborated the information obtained in the 
discussions by reviewing USCIS reports showing the amount of fee 
collections received, and we verified that related obligations and 
expenditures were made against the specific project codes system for 
selected projects. 

We conducted this performance audit from October 2007 through January 
2009 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Table: Immigration Application Forms and Related Fees 
Prior to and as of the July 30, 2007, Fee Increase: 

Form no.: I-90; 
Description: Application to Replace Permanent Resident Card; 
Application fees prior to July 30, 2007: $190; 
Application fees as of July 30, 2007: $290; 
Biometrics: required: Yes. 

Form no.: I-102; 
Description: Application for Replacement/Initial Nonimmigrant Arrival-
Departure Document; 
Application fees prior to July 30, 2007: $160; 
Application fees as of July 30, 2007: $320; 
Biometrics: required: No. 

Form no.: I-129; 
Description: Petition for a Nonimmigrant Worker; 
Application fees prior to July 30, 2007: $190; 
Application fees as of July 30, 2007: $320; 
Biometrics: required: No. 

Form no.: I-129F; 
Description: Petition for Alien Fiancé(e); 
Application fees prior to July 30, 2007:$170; 
Application fees as of July 30, 2007: $455; 
Biometrics: required: No. 

Form no.: I-130; 
Description: Petition for Alien Relative; 
Application fees prior to July 30, 2007: $190; 
Application fees as of July 30, 2007: $355; 
Biometrics: required: No. 

Form no.: I-131; 
Description: Application for Travel Document; 
Application fees prior to July 30, 2007: $170; 
Application fees as of July 30, 2007: $305; 
Biometrics: required: No. 

Form no.: I-140; 
Description: Immigrant Petition for Alien Worker; 
Application fees prior to July 30, 2007: $195; 
Application fees as of July 30, 2007: $475; 
Biometrics: required: No. 

Form no.: I-191; 
Description: Application for Advance Permission to Return to 
Unrelinquished Domicile; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-192; 
Description: Application for Advance Permission to Enter as a 
Nonimmigrant; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-193; 
Description: Application for Waiver of Passport and/or Visa; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-212; 
Description: Application for Permission to Reapply for Admission Into 
the United States After Deportation or Removal; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-290B; 
Description: Notice of Appeal or Motion; 
Application fees prior to July 30, 2007: $385; 
Application fees as of July 30, 2007: $585; 
Biometrics: required: No. 

Form no.: I-360; 
Description: Petition for Amerasian, Widow(er) or Special Immigrant; 
Application fees prior to July 30, 2007: $190; 
Application fees as of July 30, 2007: $375; 
Biometrics: required: No. 

Form no.: I-485; 
Description: Application to Register Permanent Residence or Adjust 
Status; 
Application fees prior to July 30, 2007: $325; 
Application fees as of July 30, 2007: $930; 
Biometrics: required: Yes. 

Form no.: I-526; 
Description: Immigrant Petition by Alien Entrepreneur; 
Application fees prior to July 30, 2007: $480; 
Application fees as of July 30, 2007: $1,435; 
Biometrics: required: No. 

Form no.: I-539; 
Description: Application to Extend/Change Nonimmigrant Status; 
Application fees prior to July 30, 2007: $200; 
Application fees as of July 30, 2007: $300; 
Biometrics: required: No. 

Form no.: I-589; 
Description: Application for Asylum and for Withholding of Removal[A]; 
Application fees prior to July 30, 2007: No fee; 
Application fees as of July 30, 2007: No fee; 
Biometrics: required: No. 

Form no.: I-600; 
Description: Petition to Classify Orphan as an Immediate Relative; 
Application fees prior to July 30, 2007: $545; 
Application fees as of July 30, 2007: $670; 
Biometrics: required: Yes. 

Form no.: I-600A; 
Description: Application for Advance Processing of Orphan Petition; 
Application fees prior to July 30, 2007: $545; 
Application fees as of July 30, 2007: $670; 
Biometrics: required: Yes. 

Form no.: I-601; 
Description: Application for Waiver of Grounds of Inadmissibility; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-612; 
Description: Application for Waiver of Foreign Residence Requirement; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-687; 
Description: Application for Status as a Temporary Resident Under 
Section 245A of the INA; 
Application fees prior to July 30, 2007: $255; 
Application fees as of July 30, 2007: $710; 
Biometrics: required: Yes. 

Form no.: I-690; 
Description: Application for Waiver of Grounds of Inadmissibility; 
Application fees prior to July 30, 2007: $95; 
Application fees as of July 30, 2007: $185; 
Biometrics: required: No. 

Form no.: I-694; 
Description: Notice of Appeal of Decision Under Section 210 or 245A; 
Application fees prior to July 30, 2007: $110; 
Application fees as of July 30, 2007: $545; 
Biometrics: required: No. 

Form no.: I-695; 
Description: Application for Replacement of Form I-688A, Employment 
Authorization, or Form I-688, Temporary Residence Card; 
Application fees prior to July 30, 2007: $65; 
Application fees as of July 30, 2007: $130; 
Biometrics: required: No. 

Form no.: I-698; 
Description: Application to Adjust Status From Temporary to Permanent 
Resident; 
Application fees prior to July 30, 2007: $180; 
Application fees as of July 30, 2007: $1,370; 
Biometrics: required: Yes. 

Form no.: I-730; 
Description: Refugee/Asylee Relative Petition[A]; 
Application fees prior to July 30, 2007: No fee; 
Application fees as of July 30, 2007: No fee; 
Biometrics: required: No. 

Form no.: I-751; 
Description: Petition to Remove Conditions on Residence; 
Application fees prior to July 30, 2007: $205; 
Application fees as of July 30, 2007: $465; 
Biometrics: required: Yes. 

Form no.: I-765; 
Description: Application for Employment Authorization; 
Application fees prior to July 30, 2007: $180; 
Application fees as of July 30, 2007: $340; 
Biometrics: required: No. 

Form no.: I-817; 
Description: Application for Family Unity Benefits; 
Application fees prior to July 30, 2007: $200; 
Application fees as of July 30, 2007: $440; 
Biometrics: required: Yes. 

Form no.: I-821; 
Description: Application for Temporary Protected Status (first-time 
applicants)[B]; 
Application fees prior to July 30, 2007: $50; 
Application fees as of July 30, 2007: $50; 
Biometrics: required: Yes. 

Form no.: I-824; 
Description: Application for Action on an Approved Application or 
Petition; 
Application fees prior to July 30, 2007: $200; 
Application fees as of July 30, 2007: $340; 
Biometrics: required: No. 

Form no.: I-829; 
Description: Petition by Entrepreneur to Remove Conditions; 
Application fees prior to July 30, 2007: $475; 
Application fees as of July 30, 2007: $2,850; 
Biometrics: required: Yes. 

Form no.: I-905; 
Description: Application for Authorization to Issue Certification for 
Health Care Workers[C]; 
Application fees prior to July 30, 2007: $230; 
Application fees as of July 30, 2007: $230; 
Biometrics: required: No. 

Form no.: I-907; 
Description: Request for Premium Processing Services[B]; 
Application fees prior to July 30, 2007: $1,000; 
Application fees as of July 30, 2007: $1,000; 
Biometrics: required: No. 

Form no.: I-914; 
Description: Application for T Nonimmigrant Status; 
Application fees prior to July 30, 2007: $270; 
Application fees as of July 30, 2007: No fee; 
Biometrics: required: No. 

Form no.: N-300; 
Description: Application to File Declaration of Intention; 
Application fees prior to July 30, 2007: $120; 
Application fees as of July 30, 2007: $235; 
Biometrics: required: No. 

Form no.: N-336; 
Description: Request for Hearing on a Decision in Naturalization 
Proceedings; 
Application fees prior to July 30, 2007: $265; 
Application fees as of July 30, 2007: $605; 
Biometrics: required: No. 

Form no.: N-400; 
Description: Application for Naturalization; 
Application fees prior to July 30, 2007: $330; 
Application fees as of July 30, 2007: $595; 
Biometrics: required: Yes. 

Form no.: N-470; 
Description: Application to Preserve Residence for Naturalization 
Purposes; 
Application fees prior to July 30, 2007: $155; 
Application fees as of July 30, 2007: $305; 
Biometrics: required: No. 

Form no.: N-565; 
Description: Application for Replacement of Naturalization/Citizenship 
Document; 
Application fees prior to July 30, 2007: $220; 
Application fees as of July 30, 2007: $380; 
Biometrics: required: No. 

Form no.: N-600; 
Description: Application for Certificate of Citizenship; 
Application fees prior to July 30, 2007: $255; 
Application fees as of July 30, 2007: $460; 
Biometrics: required: No. 

Form no.: N-600K; 
Description: Application for Citizenship and Issuance of Certificate 
Under Section 322; 
Application fees prior to July 30, 2007: $255; 
Application fees as of July 30, 2007: $460; 
Biometrics: required: No. 

Form no.: N-644; 
Description: Application for Posthumous Citizenship; 
Application fees prior to July 30, 2007: No fee; 
Application fees as of July 30, 2007: No fee; 
Biometrics: required: No. 

Description: Biometric Services[D]; 
Application fees prior to July 30, 2007: $70; 
Application fees as of July 30, 2007: $80. 

Source: USCIS. 

[A] By law, asylum services are provided without charge; therefore, no 
fees are associated with these applications. 

[B] The fees for Forms I-821 and I-907 are set by statute, and 
therefore were not affected by the proposed rule announcing the fee 
increases. 

[C] The fee for Form I-905 was not increased because the fee was 
recently established and USCIS expects a very low volume of application 
receipts--only 10 are projected to be submitted each year in fiscal 
years 2008 and 2009. 

[D] Applicants filing forms that require biometrics services must pay a 
fee of $80 in addition to the regular application fee. 

[End of table] 

[End of section] 

Appendix III: Federal Statutes, Accounting Standards and Principles 
Related to Cost Accounting and User Fees, and Other Guidance: 

The Federal Financial Management Improvement Act of 1996[Footnote 43] 
(FFMIA) requires, among other things, that agencies covered by the 
Chief Financial Officers (CFO) Act[Footnote 44] have financial 
management systems that substantially comply with federal accounting 
standards. USCIS is part of the Department of Homeland Security and 
must conform to the requirements of the CFO Act. Statement of Federal 
Financial Accounting Standards No. 4, Managerial Cost Accounting 
Standards and Concepts, sets forth the fundamental elements of 
managerial cost accounting. Cost information can be used by federal 
managers for budgeting and cost control, performance measurement, 
program evaluations, making economic choice decisions, and determining 
and setting fees. The standards provide guidance on allocating costs to 
products and services provided by federal agencies. The standards do 
not impose a specific methodology on federal agencies but allow 
flexibility to design a cost accounting system that meets the specific 
needs of each agency. Among other things, the CFO Act requires agencies 
to review fees imposed by them on a biennial basis.[Footnote 45] 

OMB Circular No. A-25, User Charges, contains federal policy regarding 
fees assessed for government services and provides information on the 
basis upon which user charges (i.e., fees) are to be set. OMB Circular 
No. A-25 provisions apply to agencies in their assessment of user 
charges under 31 U.S.C. § 9701 (the user fee statute). It provides that 
when a service or privilege confers special benefits to an identifiable 
recipient beyond those that accrue to the general public, a charge will 
be imposed to recover the full cost to the federal government for 
providing the special benefit. Full costs, according to OMB Circular 
No. A-25, include all direct and indirect costs of providing the 
service. OMB Circular No. A-25 also provides guidance to agencies 
regarding their assessment of user charges under other statutes, such 
as 8 U.S.C. 1356(m) to the extent OMB Circular No. A-25 is not 
inconsistent with those other statutes. 

The Comptroller General's Standards for Internal Control in the Federal 
Government[Footnote 46] provides an overall framework for establishing 
and maintaining internal control. Management is responsible for 
establishing and maintaining internal control to achieve the objectives 
of effective and efficient operations. OMB Circular No. A-123, 
Management's Responsibility for Internal Control, defines management's 
responsibility for internal control in federal agencies and provides 
guidance to federal managers on improving the accountability and 
effectiveness of federal programs and operations by establishing, 
assessing, correcting, and reporting on internal control. 

[End of section] 

Appendix IV: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528: 
[hyperlink, http://www.dhs.gov] 

January 9, 2009: 

Ms. Susan J. Irving
Director for Federal Budget Analysis: 
Strategic Issues: 

Ms. Jeanette M. Franzel: 
Director, Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Irving and Ms. Franzel: 

Re: Draft Report GAO-09-70, Immigration Application Fees: Costing 
Methodology Improvements Would Provide More Reliable Basis for Setting 
Fees (GAO Job Code 194714). 

The Department of Homeland Security welcomes the opportunity to review 
and comment on the draft report referenced above. The report contains 
six recommendations. The Department, specifically the United States 
Citizenship and Immigration Services (USCIS), agrees with the 
recommendations. 

USCIS appreciates the significant time and effort of the U.S. 
Government Accountability Office (GAO) staff in undertaking a thorough 
review of Immigration Examinations Fee Account fee setting under the FY 
2008-2009 fee review cycle. Overall, the issues raised throughout the 
draft report appear to pertain mostly to the adequacy of written 
documentation and analysis supporting discrete decisions by USCIS on 
the adopted accounting methodologies. Any perceived lack of written 
information does not mean alternatives were not discussed or assessed 
internally. In fact, USCIS also discussed at length with GAO staff the 
basis for some accounting methodology decisions. In addition, the test 
of "completeness" with respect to documentation is a subjective one. 
While USCIS did not take minutes at every meeting in which it discussed 
its fee study, USCIS did make available to the public almost 200 pages 
of documentation supporting the methodology, testified before the 
Congress twice on the fee changes, and made its computer model 
available for public inspection. In future reviews, and for subsequent 
audits, USCIS will work to document in even more detail decisions that 
support actions taken. 

The GAO recommended that the Director of USCIS take four actions to 
help make USCIS's costing methodology used for determining application 
fees consistent with federal accounting standards and principles and to 
strengthen the reliability of the cost assignments used to set fees. 

Recommendation 1: Identify the full cost of application processing 
services whether paid directly by USCIS or by other federal entities 
for USCIS's benefit, such as the costs of lockbox services paid by 
Treasury's Financial Management Service and certain retirement benefits 
to be paid to USCIS retirees by the Office of Personnel Management. 

Response: The FY 2008-2009 fee review identified the full estimated 
cost to USCIS of application processing services. Documentation within 
the current fee review covering the FY 2010-2011 period will also 
estimate the cost of services not paid directly by USCIS. However, 
USCIS did state in the final rule adjusting its fee structure that for 
the purpose of OMB Circular A-25, User Charges, it was only recovering 
costs to USCIS and not those borne by other Federal agencies on its 
behalf The Office of Management and Budget (OMB) approved of USCIS 
deviation from OMB Circular A-25 in this area when OMB cleared the 
notice of proposed rulemaking (NPRM) and final rule. In addition, if 
USCIS had charged for costs borne by the Office of Personnel Management 
and Treasury's Financial Management Service, applicant fees would have 
been raised further. 

Recommendation 2: Consider the full costs to the government when USCIS 
next reviews and sets application fees and document the rationale for 
decisions made about including or excluding any types of costs in the 
fee determination process. 

Response: USCIS will continue to consider the full cost of programs in 
future reviews and enhance documentation of the rationale for decisions 
made in the fee determination process during the FY 2010-2011 fee 
review. 

Recommendation 3: Document the processes and procedures of the costing 
methodology in sufficient detail so that the specific procedures used 
and the data sources and cost assignment methods employed for each step 
in the process can be understood and replicated. 

Response: USCIS will include more documentation in subsequent fee 
reviews. 

Recommendation 4: Determine the costs of providing premium processing 
services to identify the extent to which the $1,000 premium processing 
fee would cover associated expedited processing costs and 
infrastructure improvements. 

Response: USCIS will determine the costs of premium processing services 
and consider options to adjust premium processing fees. 

In addition, GAO recommended that the Director of the USCIS take two 
actions to better support the reasonableness of USCIS's assumptions and 
cost assignment methods. 

Recommendation 5: Analyze current cost allocation methods to evaluate 
whether direct or cause-and-effect assignment methods that are 
economically feasible or other allocation bases may offer greater 
precision. 

Response: For future fee reviews USCIS will provide analysis which 
provides better justification for chosen cost allocation methodologies 
against alternatives. 

Recommendation 6: Fully document the rationale and any related analysis 
for using the assumptions and cost assignment methods selected. 

Response: USCIS will make every effort to improve documentation to a 
degree that is sufficient for effective post-fee review audit analysis 
and review. 

Sincerely, 

Signed by: 

Michael E. McFarland, for: 

Jerald E. Levine: 
Director Departmental GAO/OIG Liaison Office: 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Jeanette M. Franzel, (202) 512-9406 or franzelj@gao.gov Susan J. 
Irving, (202) 512-8288 or irvings@gao.gov: 

Acknowledgments: 

In addition to the contacts named above, staff members who made key 
contributions to this report include Jack Warner, Assistant Director; 
Richard Cambosos; Abe Dymond; Emily Eischen; Fred Evans; P. Barry 
Grinnell; Chelsa Gurkin; Maxine Hattery; Jason Kelly; Diane Morris; 
Jacqueline Nowicki; Leah Probst; and Nathan Tranquilli. 

[End of section] 

Footnotes: 

[1] USCIS may set fees for providing adjudication services at a level 
that will ensure recovery of the full costs of providing all such 
services, including the costs of adjudication services provided without 
charge to certain immigrants, such as those seeking asylum in the 
United States, and any additional costs associated with the 
administration of the fees collected. 8 U.S.C. § 1356(m), (n). As such, 
Congress has permanently appropriated amounts collected for these 
purposes. 

[2] Pub. L. No. 106-553, § 1(a)(2) App. B, [Title I, § 112], 114 Stat. 
2762A-68 (Dec. 21, 2000). 8 U.S.C. § 1356(u). 

[3] SAVE is an intergovernmental information-sharing program to help 
federal, state, and local agencies verify the immigration status of 
applicants for public benefits and licenses. 

[4] The E-Verify program allows participating employers to verify the 
employment eligibility of all newly hired employees. 

[5] GAO, Immigration Application Fees: Current Fees Are Not Sufficient 
to Fund U.S. Citizenship and Immigration Services' Operations, 
[hyperlink, http://www.gao.gov/products/GAO-04-309R] (Washington, D.C.: 
Jan. 5, 2004). 

[6] GAO issued three reports related to this request. This report 
assesses USCIS's methodology for determining application fees and 
controls over fees. GAO, Federal User Fees: Improvements Could Be Made 
to Performance Standards and Penalties in USCIS's Service Center 
Contracts, [hyperlink, http://www.gao.gov/products/GAO-08-1170R] 
(Washington, D.C.: Sept. 25, 2008), discusses issues related to 
contract performance standards for preadjudication activities at the 
four service centers. GAO, Federal User Fees: Additional Analyses and 
Timely Reviews Could Improve Immigration and Naturalization User Fee 
Design and USCIS Operations, [hyperlink, 
http://www.gao.gov/products/GAO-09-180] (Washington, D.C.: Jan. 23, 
2009), reports on the design of USCIS fees and the effect of agency 
operations on those fees. 

[7] See appendix III for a description of these cost accounting-and 
user fee-related federal statutes, standards, and principles and other 
guidance. 

[8] Cost allocation is a method of assigning costs to activities, 
outputs, or other cost objects using a base that is not necessarily the 
cause, or driver, of the cost. 

[9] An FTE is a workforce measure representing 2,080 work hours, the 
equivalent of one person working full-time for 1 year. 

[10] Throughout this report, we use "applications" to refer to both 
applications and petitions, and we use "applicants" to refer to both 
applicants and petitioners. 

[11] Section 286(m) of the Immigration and Nationality Act, as amended. 
8 U.S.C. § 1356(m). 

[12] While USCIS used its methodology to determine the cost of each 
application type, setting fees at a level that will cover the costs of 
adjudication services provided without charge to certain immigrants, 
such as those seeking asylum, inherently means fee-paying applicants 
pay more than the cost of services they receive. 

[13] In 2003, functions associated with processing and adjudicating 
immigration and naturalization applications were transferred from INS 
to USCIS upon establishment of DHS. 

[14] Pub. L. No. 100-459, § 209(a), 102 Stat. 2186, 2203 (Oct. 1, 
1988). 

[15] Pub. L. No. 105-515, § 210(d)(1), (2), 104 Stat. 2101, 2121 (Nov. 
5, 1990). 

[16] Pub. L. No. 106-553, § 1(a)(2), App. B, [Title I, § 112], 114 
Stat. 2762A-68 (Dec. 21, 2000). 8 U.S.C. § 1356(u). 

[17] Direct appropriations for (1) administrative expenses ended in 
fiscal year 2004, (2) the backlog initiative ended in fiscal year 2006, 
and (3) the transformation program ended in fiscal year 2007. 

[18] See, e.g., Pub. L. No. 109-295, § 503(a), 120 Stat. 1377 (Oct. 4, 
2006). 

[19] A financial agent is a financial institution that has authority to 
hold deposits of public money and perform related services. See 31 
C.F.R. pt. 202. A financial agent has a principal-agent relationship 
with Treasury and owes a fiduciary duty of loyalty and fair dealing to 
the United States. 

[20] We have reported on the design of federal user fees and discussed 
issues such as equity and efficiency. See GAO, Federal User Fees: A 
Design Guide, [hyperlink, http://www.gao.gov/products/GAO-08-386SP] 
(Washington, D.C.: May 29, 2008). 

[21] The inflation adjustment was based on pay and nonpay inflation 
factors used by OMB in implementing OMB Circular No. A-76, Performance 
of Commercial Activities. 

[22] USCIS may grant fee waivers to eligible applicants if it 
establishes that the applicants are unable to pay the fee. In addition, 
asylum and refugee applicants are exempt from paying the fee for 
certain immigration benefit applications. 

[23] We have reported on the design of USCIS's user fees and discussed 
issues such as equity and efficiency. See [hyperlink, 
http://www.gao.gov/products/GAO-09-180]. 

[24] Statement of Federal Financial Accounting Standards (SFFAS) No. 4, 
Managerial Cost Accounting Standards and Concepts, paras. 8 and 106. 

[25] Any user fee design embodies trade-offs, and policymakers 
ultimately need to balance the relative importance they place on 
various aspects of a fee's design. For more information about weighing 
trade-offs among key design characteristics of user fees, see GAO, 
Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 
29, 2008). 

[26] A permanent indefinite appropriation was established by Pub. L. 
No. 108-199, Div. F, Title II, § 218,118 Stat. 321 (2004), 12 U.S.C. § 
5018 note, making available to the Secretary of the Treasury such sums 
as may be necessary to reimburse financial institutions in their 
capacity as depositaries and financial agents of the United States for 
all services required or directed by the Secretary of the Treasury or 
the Secretary's designee to be performed by such financial institutions 
on behalf of Treasury or other federal agencies. 

[27] For the purpose of this report, we are making no determination as 
to whether lockbox service costs that are unique to USCIS should be 
paid for by USCIS or may be recovered by FMS in light of the authority 
to use the permanent indefinite appropriation to reimburse depositories 
and financial agents for all services required or directed by the 
Secretary of the Treasury on behalf of the department or other federal 
agencies. 

[28] According to federal accounting standards, as a general rule, 
directly tracing costs and assigning costs on a cause-and-effect basis 
are more expensive than cost allocations, because they require detailed 
analyses and record keeping for costs and activities. However, they are 
preferable because they produce more reliable cost information than the 
cost of allocations. (SFFAS No. 4, para. 143.) 

[29] When the relationship of the cost to a product, service or 
activity is not directly identifiable but can be measured based on 
another factor, it is called cause-and-effect cost assignment. 

[30] These costs represented 86 percent of the total $1.334 billion 
assigned to one of the eight activities--the "make determination" 
activity. 

[31] These costs represent costs assigned to the remaining seven 
activities and the asylum and refugee services portion of the "make 
determination" activity. 

[32] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999), 15. 

[33] SFFAS No. 4, para. 71. 

[34] The $1.137 billion is included in the total direct costs of $1.405 
billion, as shown in figure 1. 

[35] SFFAS No. 4, para. 1. 

[36] Pub. L. No. 106-553, § 1(a)(2) App. B, [Title I, § 112], 114 Stat. 
2762A-68 (Dec. 21, 2000). 

[37] 72 Fed. Reg. 4888-4915, February 1, 2007. 

[38] SFFAS No. 4, para. 71. 

[39] In 2006, USCIS embarked on a transformation of its business 
processes and technology. According to USCIS, the transformation 
program will move its operations from paper-based processes to an 
electronic environment. Transformation is to enable both individual and 
business applicants to apply online for immigration benefits; establish 
unique accounts to facilitate changing application information, such as 
changes in name, address, or other contact information; and provide 
enhanced and real-time case status information with e-mail capabilities 
to request information or inform the applicant about a pending 
application. 

[40] At the time of its fee review, USCIS had estimated that it would 
receive $139 million in premium processing fee collections in fiscal 
year 2008. It actually received almost $163 million in fiscal year 
2008. 

[41] See appendix III for a description of cost accounting-and user fee-
related federal statutes, standards, and principles. 

[42] We did not visit the second lockbox facility in Los Angeles. It 
receives and processes only one application type. As discussed in this 
report, in 2007, the bank that operates the Chicago lockbox was 
designated the financial agent responsible for all USCIS fee 
collections. USCIS is in the process of transitioning all application 
and fee collections to lockbox facilities operated by that bank. 

[43] Pub. L. No. 104-208, div. A., § 101(f), title VIII, 110 Stat. 
3009, 3009-389 (Sept. 30, 1996). 

[44] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990). 

[45] 31 U.S.C. 902(a)(8). 

[46] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[End of section] 

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