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entitled 'Budget Issues: Better Fee Design Would Improve Federal 
Protective Service's and Federal Agencies' Planning and Budgeting for 
Security' which was released on May 20, 2011. 

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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

May 2011: 

Budget Issues: 

Better Fee Design Would Improve Federal Protective Service's and 
Federal Agencies' Planning and Budgeting for Security: 

GAO-11-492: 

GAO Highlights: 

Highlights of GAO-11-492, a report to congressional committees. 

Why GAO Did This Study: 

The Federal Protective Service (FPS) is a fee-funded agency in the 
Department of Homeland Security (DHS) responsible for providing 
physical security to over 9,000 federal facilities. In 2003 FPS 
transferred to DHS from the General Services Administration and for 
the first time was to fully recover its costs. GAO recently reported 
that stakeholders were concerned about FPS’s ability to determine 
security costs, and the strategies used to address funding challenges 
had adverse effects on FPS. In this context, Congress directed GAO to 
evaluate FPS’s resource levels. This report (1) analyzes FPS’s fee 
design and proposed alternatives, and (2) examines how FPS’s security 
fees challenge FPS and customer agency budget formulation and 
execution. GAO reviewed legislation and agency documentation and 
interviewed FPS and customer agency officials in headquarters and four 
FPS regions. 

What GAO Found: 

FPS increased its basic security fee four times in 6 years to try to 
cover costs (an increase of over 100 percent). FPS has not reviewed 
its fees to develop an informed, deliberate fee design. GAO has found 
that timely, substantive fee reviews are especially critical for fee-
funded agencies to ensure that fee collections and operating costs 
remain aligned. FPS is legally required to charge fees that cover its 
total costs, but it is not required to align specific fees with 
specific activities. Nevertheless, in its pricing documents FPS 
describes an alignment between specific fees and specific activities 
that does not exist. 

FPS charges a basic security fee based on facility square footage. In 
addition, FPS charges facilities that have contractor-provided 
countermeasures, such as guards, the cost of the countermeasure plus 
an administrative fee that is a percentage of the countermeasure cost. 
Federal facilities vary in how much they cost to protect, but FPS does 
not know to what extent some facilities currently subsidize others. 
This contributes to expectation gaps with and unknown cross-
subsidizations among payers. FPS officials said that basic security 
costs are meant to be “shared evenly” (i.e., based on square footage) 
among all payers while administrative fees for FPS-recommended or 
facility-requested countermeasures are meant to both (1) reflect the 
increased risk inherent to those facilities requiring or requesting 
additional countermeasures and (2) subsidize the aggregate cost of 
basic security services. Charging beneficiaries more or less than 
actual costs may help achieve policy goals, but FPS lacks data to 
determine whether this occurs as intended. Modifying the current fee 
structure or funding FPS through a combination of fees and direct 
appropriations may address equity and cross-subsidization issues and 
improve transparency to customers, but without detailed activity cost 
information and a full fee review the relative trade-offs in any 
particular proposal are unclear. Further, revising the fee structure 
alone will not address the variations in service levels reported by FPS’
s customer agencies or the overall level of services FPS is able to 
provide. 

The design and implementation of FPS’s fees affect agencies’ and FPS’s 
ability to budget for and timely implement security measures in 
multiple ways. First, FPS lacks a method to propose security fee rates 
prior to submitting its budget request and cannot finalize its rates 
each year until it receives congressional instructions about its 
staffing levels in its appropriation act. As a result, agencies 
annually request security funding without accurate security cost 
estimates. Second, FPS makes security recommendations to customer 
agencies based on current threats, but agencies budget for security 
costs in advance and therefore must reallocate funds to pay for 
countermeasures for which they had not planned. Although there are no 
obvious solutions for these and other budget timing disconnects, 
alternative budget account structures like a reimbursable account or a 
revolving fund could help mitigate budgeting and timing challenges for 
FPS and customer agencies without compromising accountability for 
federal funds. 

What GAO Recommends: 

GAO recommends that the Secretary of Homeland Security direct the 
Director of FPS to, among other things, conduct and make available 
regular fee reviews to improve its fee design, include capital 
investment costs in its rates, and evaluate its current and 
alternative funding and budget account structures to mitigate budget 
timing and other issues. DHS concurred with GAO’s recommendations.- 

View [hyperlink, http://www.gao.gov/products/GAO-11-492] or key 
components. For more information, contact Susan J. Irving at (202) 512-
6806 or irvings@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Lack of Informed Fee Design Contributes to Expectation Gaps with 
Stakeholders and Unknown Cross-Subsidizations Among Payers: 

Poor Communication with Customer Agencies About the Fees and a Lack of 
Timely Fee Rate Information Leads to Billing and Budgeting Challenges 
for Both FPS and Customer Agencies: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments & Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Homeland Security: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: FPS Fee Collection Shortages and Mitigating Measures, Fiscal 
Years 2003-2007: 

Table 2: FPS's Security Fee Rates, Fiscal Years 2004 to 2012: 

Table 3: Activities FPS Associates with the Basic Security, Building- 
Specific, and SWA Security Fees: 

Table 4: Annual Percent Change in FPS Basic Security Fee Rate: 

Figure: 

Figure 1: Flow of Funding for FPS Security Fees (Dollars in Millions): 

Abbreviations: 

ABC: Activity based costing: 

CBP: U.S. Customs and Border Protection: 

CDC: Centers for Disease Control and Prevention: 

CFO: Chief financial officer: 

DHS: Department of Homeland Security: 

FBF: Federal Building Fund: 

FEMA: Federal Emergency Management Agency: 

FPS: Federal Protective Service: 

FSL: Facility security level: 

FTE: Full-time equivalent: 

GSA: General Services Administration: 

HHS: U.S. Department of Health and Human Services: 

ICE: Immigration and Customs Enforcement: 

IOAA: Independent Offices Appropriation Act of 1952: 

IRS: Internal Revenue Service: 

ISC: Interagency Security Committee: 

NCR: National Capital Region: 

NPPD: National Protection and Programs Directorate: 

OMB: Office of Management and Budget: 

RAMP: Risk Assessment and Program Management: 

SSA: Social Security Administration: 

SWA: Security Work Authorization: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

May 20, 2011: 

The Honorable Mary Landrieu: 
Chairman: 
The Honorable Dan Coats: 
Ranking Member: 
Subcommittee on Homeland Security: 
Committee on Appropriations: 
United States Senate: 

The Honorable Robert Aderholt: 
Chairman: 
The Honorable David Price: 
Ranking Member: 
Subcommittee on Homeland Security: 
Committee on Appropriations: 
House of Representatives: 

The Federal Protective Service (FPS) within the Department of Homeland 
Security (DHS) is responsible for providing physical security and law 
enforcement services to over 9,000 federal facilities.[Footnote 1] FPS 
is meant to be fully funded by the security fees it collects from the 
agencies it protects.[Footnote 2] We have previously reported on a 
number of funding-related challenges FPS faces.[Footnote 3] For 
example, in 2008 we found that FPS's fee collections were insufficient 
to cover its operational costs, that stakeholders had concerns about 
FPS's ability to determine the costs of providing security services, 
and that FPS's actions to address budgetary challenges had adverse 
effects on the agency.[Footnote 4] More recently, we found that FPS 
had not explained how it intended to fund the increase in full-time 
equivalents (FTEs) called for in its workforce analysis plan.[Footnote 
5] FPS agreed with our findings and recommendations, but generally has 
not yet implemented actions to address them.[Footnote 6] 

In response to Congress's mandate in the House Report which 
accompanied the DHS fiscal year 2009 Appropriations Act[Footnote 7] 
requiring GAO to evaluate FPS's resource levels, this report (1) 
analyzes FPS's current fee design and proposed alternatives, and (2) 
examines how FPS's security fees challenge FPS and customer agency 
budget formulation and execution. 

To meet our objectives we reviewed relevant legislation, regulation, 
guidance, agency documents, and prior reports on user fee design and 
implementation characteristics. We also interviewed officials 
responsible for managing user fees at FPS, the General Services 
Administration (GSA), and selected customer agencies at their 
headquarters and in several regions. We selected four customer 
agencies with a large representation in GSA's facility inventory 
(measured by total rental square footage and total annual rent) and 
based on prior GAO work on FPS. We selected the regional locations 
based on (1) region size (number of FPS-protected buildings), (2) 
geographic diversity, and (3) stakeholder input on successes and 
challenges faced by regional management. Within the selected regions, 
we interviewed FPS officials and customer agency officials who work 
with FPS security fees. Specifically, we interviewed officials from 
the Department of Health and Human Services (HHS), Internal Revenue 
Service (IRS), Social Security Administration (SSA), and the 
Department of Homeland Security (DHS) in the National Capital Region 
(Washington, D.C.), Southeast Region (Atlanta, Ga.), Rocky Mountain 
Region (Denver, Colo.), and Northwest/Arctic Region (Federal 
Way/Seattle, Wash.). 

Appendix I provides additional details about our scope and 
methodology. We conducted this performance audit from May 2009 through 
April 2011 in accordance with generally accepted government auditing 
standards.[Footnote 8] 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. 

Background: 

FPS's Mission: 

FPS's mission is protect the buildings, grounds, and property that are 
under the control and custody of the GSA, as well as the persons on 
the property; to enforce federal laws and regulations; and to 
investigate offenses against these buildings and persons.[Footnote 9] 
FPS conducts its mission by providing security services through two 
types of activities: (1) physical security activities--conducting 
facility risk assessments and recommending countermeasures aimed at 
preventing incidents at facilities--and (2) law enforcement 
activities--patrolling facilities, responding to incidents, conducting 
criminal investigations, and exercising arrest authority. 

In 2007, FPS adopted an inspector-based workforce approach to 
protecting GSA facilities. Under this approach, FPS eliminated the 
police officer position and uses about 752 inspectors and special 
agents to oversee its 15,000 contract guards, provide law enforcement 
services, conduct building security assessments, and perform other 
duties as assigned. According to FPS, its 15,000 contract guards are 
used primarily to monitor facilities through fixed post assignments 
and access control. 

FPS's facility security assessments and the corresponding recommended 
security countermeasures, such as contract security guards, security 
cameras, bollards, or magnometers, are based on standards set by the 
Interagency Security Committee (ISC). The ISC is composed of 49 
federal departments and agencies and is responsible for developing and 
evaluating security standards for federal facilities in the United 
States.[Footnote 10] The foundation of the ISC standards is the 
facility security level (FSL) determination. FSL determinations, which 
range from level I (the lowest) to level V (the highest) are based on 
criteria including facility size and population, mission criticality, 
symbolism, and threat to customer agencies. 

FPS's History and Funding: 

FPS was created in 1971 and was part of the GSA until 2003, when the 
Homeland Security Act of 2002[Footnote 11] transferred it to DHS's 
Immigration and Custom's Enforcement (ICE) component.[Footnote 12] In 
October 2009 FPS was transferred within DHS from ICE to the National 
Protection and Programs Directorate (NPPD).[Footnote 13] During the 
period it was within GSA, FPS was under the umbrella of the Federal 
Building Fund (FBF), an intragovernmental revolving fund that is part 
of GSA's Public Building Service, and received administrative support 
services from GSA. During this period, GSA did not know how much it 
was charging for facility security and, therefore, how much of the 
facility security costs it was recovering. GSA officials said the 
security costs were funded by an unknown portion of the facility's 
appraised rental rate plus an additional charge of approximately $0.06 
per square foot.[Footnote 14] GSA officials said this means there is 
no way to know whether, and, if so, how much, the security costs were 
subsidized by other revenue in the FBF. When FPS transferred to DHS, 
no portion of GSA's rental rate was transferred with FPS. FPS's fees 
did not recover its costs during the transition years from GSA to DHS. 

FPS is authorized to charge customer agencies fees for security 
services and to use those collections for all agency operations. 
[Footnote 15] All of FPS's security fees are available to FPS, without 
fiscal year limitation, for necessary expenses related to the 
protection of federally owned and leased buildings for FPS operations. 
[Footnote 16] Currently FPS is a fully fee-funded organization. 
Customer agencies use their appropriated funds to pay FPS security 
fees, which are credited to FPS as offsetting collections.[Footnote 
17] These fees are used for FPS's expenses in providing security 
services and for overhead costs and capital investments. Rather than 
receiving a direct appropriation each year, FPS receives authority 
through the appropriation process to obligate and spend its collected 
fees. Since 2007 FPS has had authority to use all of its collections 
for necessary expenses.[Footnote 18] 

As we will discuss in more detail, FPS charges federal agencies three 
fees: (1) a basic security fee, (2) the building-specific 
administrative fee, and (3) the security work authorization (SWA) 
administrative fee. All customer agencies in GSA-controlled properties 
pay a basic security fee. Customer agencies in facilities for which 
FPS recommends specific countermeasures pay the building-specific 
administrative fee, along with the cost of the 
countermeasure.[Footnote 19] Customer agencies that request additional 
countermeasures pay the SWA administrative fee, along with the cost of 
the countermeasure. 

FPS security fees are transferred from customer agencies to FPS's 
expenditure account per interagency agreements. FPS retains all 
collected fees, using the basic security fee and the building-specific 
and SWA administrative fees to cover its operating costs. FPS passes 
revenue for the contract costs associated with building-specific and 
SWA countermeasures on to the contractors that provide security 
equipment or guard services. Figure 1 illustrates the flow of funding 
for the three fees. 

Figure 1: Flow of Funding for FPS Security Fees: 

[Refer to PDF for image: illustration] 

FPS customer agencies: Basic security fees ($0.66 per square foot); 
FPS treasury account: $305 million in fiscal year 2010.- 

FPS customer agencies: Building-specific security administrative fee 
(6% of countermeasure cost: $25); 
FPS treasury account: $425 million in fiscal year 2010; 
Contractors providing security countermeasure services: $400 million. 

FPS customer agencies: Security Work Authorizations (SWA) 
administrative fee (6% of countermeasure cost: $24);-
FPS treasury account: $402-million in fiscal year 2010; 
Contractors providing security countermeasure services: $378 million. 

Source: GAO presentation of FPS data. 

[End of figure] 

FPS's security fees do not neatly fit with a single type of fee or 
charge, but aspects of various guidance and criteria may apply, 
including GAO's User Fee Design Guide,[Footnote 20] OMB Circular A-25, 
and the Chief Financial Officers (CFO) Act of 1990.[Footnote 21] 

* We developed a User Fee Design Guide that examines the 
characteristics of user fees, and factors that contribute to a well- 
designed fee.[Footnote 22] The manner in which fees are set, 
collected, used, and reviewed may affect their economic efficiency, 
equity, revenue adequacy, and administrative burden. The design guide 
principles are used in evaluating fees that are charged to readily 
identifiable users or beneficiaries of government services beyond what 
is normally provided to the general public. A number of these 
principles can serve as good practices for FPS to consider: 

- Efficiency: Efficiency refers to requiring identifiable 
beneficiaries to pay for the costs of services, allowing user fees to 
simultaneously constrain demand and reveal the value that 
beneficiaries place on the service. 

- Equity: Equity refers to everyone paying his/her fair share, though 
the definition of fair share can have multiple facets. For example, 
equity could be based on the beneficiary paying for the cost of the 
service or equity could be based on the beneficiaries' ability to pay. 

- Revenue adequacy: Revenue adequacy refers to the extent to which the 
fee collections cover the intended share of costs. It encompasses 
variations in collections over time relative to the cost of the 
program. Revenue adequacy also incorporates the concept of revenue 
stability, which generally refers to the degree to which short-term 
fluctuations in economic activity and other factors affect the level 
of fee collections. 

- Administrative burden: Administrative burden refers to the cost of 
administering the fee, including the cost of collection as well as the 
compliance burden. 

* OMB's Circular A-25 establishes federal policy regarding user fees, 
including the scope and types of activities subject to user fees and 
the basis upon which the fees are set. It also provides guidance for 
executive branch agency implementation of fees and the disposition of 
collections. Circulars No. A-25 and No. A-11 both include guidelines 
to agencies when determining the amount of user charges to assess. 
[Footnote 23] 

* The CFO Act of 1990 requires an agency's CFO to review, on a 
biennial basis, the fees, royalties, rents, and other charges for 
services and things of value and make recommendations on revising 
those charges to reflect costs incurred.[Footnote 24] While the CFO 
Act generally is applied to fees charged by government agencies to 
nongovernmental entities, the act's provision requiring biennial 
review provides a useful leading practice for intragovernmental fee 
review. 

Lack of Informed Fee Design Contributes to Expectation Gaps with 
Stakeholders and Unknown Cross-Subsidizations Among Payers: 

FPS Does Not Have an Informed Fee Design: 

When FPS was a part of GSA, GSA did not charge customer agencies 
security fees to recover the full cost of physical security services. 
However, since FPS transferred to DHS in 2003, FPS has been required 
to recover its full costs through security fees. FPS's initial fee 
rates were established without a clear understanding of what FPS's 
total costs had been and were likely to be. As a result, FPS did not 
initially collect enough in fees to cover its actual costs. Despite a 
number of security fee increases and cost-cutting efforts in the 7 
years since transferring to DHS, FPS has not conducted a fee review to 
develop an informed, deliberate fee design. FPS officials said they 
are not required to report on FPS's security fees as part of the DHS 
biennial fee review required by the CFO Act because FPS's fees are 
paid by government payers. However, the CFO Act does not specify that 
fees from government payers are excluded from the biennial reporting 
requirement. FPS officials said the annual budget formulation process 
and resulting budget justification serve as their fee review. Further, 
although FPS is required to annually certify that its collections will 
be sufficient to maintain a particular FTE level, in 2008 and 2010, 
the years FPS certified its collections, it did not provide detail 
about the operations or activity costs.[Footnote 25] 

Currently, FPS sets its fee rates for a given year so that its 
estimated total collections match the agency's estimated total 
operating costs. To do this FPS first estimates collections from the 
basic security fee and then adjusts the building-specific and SWA 
administrative fees as needed to bridge any difference. Specifically, 
(1) FPS estimates the agency's total operating costs for the upcoming 
fiscal year, then (2) estimates how much it will likely collect in 
basic security fees. FPS estimates the basic security fee collections 
by multiplying the current per-square foot basic security fee rate by 
the square footage it protected in the last quarter of the prior year. 
To set the building-specific and SWA administrative fee rates, FPS 
estimates the total cost of the contractor-provided countermeasures in 
the aggregate based on the prior year's cost. It then determines the 
percentage of the total estimated cost of the countermeasures likely 
to generate enough in collections to cover any difference between its 
estimated operating costs and its estimated basic fee collections. For 
example, if FPS estimates it will need $270 million for total agency 
operating costs and estimates it will get $220 million in collections 
from the basic security fee, FPS sets the building-specific and SWA 
administrative fee rates at a percentage rate of the estimated cost of 
countermeasures that it estimates will raise an additional $50 
million. FPS officials said the current fee-setting methodology is 
simple and shares FPS's costs equitably among its customer agencies in 
about 9,000 GSA-controlled facilities. 

FPS was expected to fully cover its costs for the first time when it 
moved to DHS in 2003, but it did not actually do so until 2007. To 
cover the difference, FPS raised fee rates, requested additional funds 
from GSA and DHS, and imposed cost-cutting efforts (see table 1). We 
have previously reported that these cost-cutting efforts--which 
included restricted hiring and travel and limiting training and 
overtime had adverse effects on the agency, including effects on 
morale, safety, and increased attrition.[Footnote 26] 

Table 1: FPS Fee Collection Shortages and Mitigating Measures, Fiscal 
Years 2003-2007A: 

Fiscal year: 2003; 
Shortage amount: $140 million; 
Measures taken: Received funding from the FBF. 

Fiscal year: 2004; 
Shortage amount: $81 million; 
Measures taken: Received funding from the FBF for the last time. 

Fiscal year: 2005; 
Shortage amount: $70 million; 
Measures taken: Implemented a number of cost-cutting measures, and 
adjusted the security fees. 

Fiscal year: 2006; 
Shortage amount: $57 million; 
Measures taken: Continued cost-cutting measures and DHS transferred 
emergency supplemental funding to FPS. 

Fiscal year: 2007; 
Shortage amount: $0; 
Measures taken: Continued the cost-cutting measures, and adjusted the 
fees. 

Source: GAO analysis of FPS data. 

[A] Prior to FPS's transfer to DHS in 2003, FPS was under the umbrella 
of the FBF within GSA. GSA officials said they did not know how much 
it was charging for facility security at the time and therefore, how 
much of the facility security costs it was recovering. Since 2007, FPS 
has continued to adjust its fees as needed to cover its costs. 

[End of table] 

As shown in table 2, to cover its costs FPS has increased its fees 
four times from 2004 to 2009. The basic security fee alone has 
increased more than 100 percent--from $0.30 cents per square foot in 
fiscal year 2004 to $0.66 cents per square foot in fiscal year 2009. 
Further, the President's Fiscal Year 2012 Budget proposes an 
additional $0.08 increase in the basic security fee to $0.74 per 
square foot (see table 2). In March 2008, FPS increased the basic 
security fee in midyear and made the increase retroactive to the start 
of fiscal year 2008.[Footnote 27] As discussed in more detail later in 
this report, customer agency officials we spoke with said the midyear 
change created serious budgeting challenges. From 2004 to 2010, FPS's 
building-specific and SWA administrative fees have declined from 15 
percent in 2007 to 6 percent in 2010, reflecting the collections level 
needed (see table 2). 

Table 2: FPS's Security Fee Rates, Fiscal Years 2004 to 2012: 

Fiscal year: Basic security fee (per sq. ft); 
2004 actual: $0.30; 
2005 actual: $0.35; 
2006 actual: $0.35; 
2007 actual: $0.39; 
2008 actual: $0.62[A]; 
2009 actual: $0.66; 
2010 actual: $0.66; 
2011 actual: $0.66; 
Requested 2012: $0.74. 

Fiscal year: Building-specific administrative fee (% of countermeasure 
cost); 
2004 actual: 13.69%; 
2005 actual: 14.96%; 
2006 actual: 8%; 
2007 actual: 15%; 
2008 actual: 8%; 
2009 actual: 8%; 
2010 actual: 6%; 
2011 actual: 6%; 
Requested 2012: 6%. 

Fiscal year: Security Work Authorization (SWA) administrative fee (% 
of countermeasure cost); 
2004 actual: Ranged from 2 to 12% [B]; 
2005 actual: Not to exceed 8% [B]; 
2006 actual: 8%; 
2007 actual: 15%; 
2008 actual: 8%; 
2009 actual: 8%; 
2010 actual: 6%; 
2011 actual: 6%; 
Requested 2012: 6%. 

Source: GAO presentation of FPS data. 

[A] The basic fee was $0.57 on October 1, 2007, but in March 2008 FPS 
increased the basic fee to $0.62, which was retroactively applied to 
the beginning of fiscal year 2008. 

[B] SWA administrative fee rate was set and retained by region in 
fiscal year 2004 and fiscal year 2005. 

[End of table] 

We have previously reported that fee collections should be sufficient 
to cover the intended portion of program costs over time and that 
while regular, timely, and substantive fee reviews are critical for 
any agency, they are especially important for agencies--like FPS--that 
are mostly or solely fee funded in order to ensure that fee 
collections and operating costs remained aligned.[Footnote 28] Without 
conducting a fee review to develop an informed, deliberate fee design, 
fee adjustments are arbitrary and are unlikely to align with actual 
agency costs. 

FPS Describes an Alignment Between Specific Fees and Specific 
Activities That Does Not Exist: 

FPS does not know the cost of providing specific security activities 
to its customer agencies, although in its Security Services and 
Pricing Provision[Footnote 29] document, FPS associates specific 
security activities with specific security fees--an alignment that 
does not exist (see table 3). That is, FPS uses security fee receipts 
for activities other than those it associates with a specific fee. For 
example, FPS charges agencies administrative fees for the management 
and oversight of contractor-provided countermeasures, but FPS does not 
know if those fees recover the management and oversight costs, nor are 
they specifically applied to management and oversight activities for 
the countermeasures. FPS's Security Services and Pricing Provision 
document was created to address stakeholder questions about what 
services FPS was providing. By law FPS is required to charge fees that 
cover its total operating expenses, but it is not required to have 
specific fees match the cost of specific activities.[Footnote 30] FPS 
officials acknowledged that customer agencies may assume a tight 
linkage between the fees and the services, but they noted they are not 
required to keep data at this level of detail. 

Table 3: Activities FPS Associates with the Basic Security, Building- 
Specific, and SWA Security Fees: 

Fee: Basic security fee; 
Rate: $0.66 per square foot; 
Description of associated activities: Law enforcement and building 
security assessments. 

Fee: Building-specific administrative fee; 
Rate: 6 percent of countermeasure cost; 
Description of associated activities: Management and oversight of 
countermeasures (e.g., contract guards, security equipment) specific 
to a particular building, recommended by FPS. 

Fee: SWA administrative fee; 
Rate: 6 percent of countermeasure cost; 
Description of associated activities: Management and oversight of 
additional countermeasures (e.g., contract guards, security equipment) 
requested by agency. 

Source: GAO analysis of FPS data. 

[End of table] 

Although FPS is not required to use specific fee collections for 
specific security activities, by suggesting an alignment where none 
exists FPS is contributing to stakeholder confusion and potential 
adverse effects on building security.[Footnote 31] Officials from 
several customer agencies we spoke with said their agencies had 
procured countermeasures, such as closed circuit television systems, 
through private security companies or GSA rather than through 
FPS.[Footnote 32] FPS officials said that this can be problematic 
because services acquired externally from FPS are frequently 
incompatible with FPS's central monitoring system. Officials from 
FPS's customer agencies also described confusion or lack of clarity 
about the basic security and contract oversight services they receive 
in return for the fees they pay. A number of officials from customer 
agencies told us that they wanted to know the cost of FPS's services 
at their facilities. We have previously reported that effectively 
communicating with stakeholders may contribute to an improved 
understanding about how the fees work and what activities they fund. 

FPS's current activity based costing (ABC) model cannot break out the 
costs of the specific FPS inspector-provided services associated with 
the different security fees. Officials told us that this is because an 
inspector may conduct multiple types of activities in a single 
facility visit. For example, FPS officials said that in one facility 
visit, a FPS inspector might conduct oversight of the contract guards 
and conduct an interview with an agency to inform the facility 
security assessment. They said they have an ABC model to help them 
better understand their costs but do not yet have the data on the 
costs of its activities to populate the model and make activity cost 
linkages. FPS expects new systems such as the Risk Assessment and 
Management Program (RAMP), when fully implemented, to provide them 
with more detailed cost data needed for these kinds of linkages. 
[Footnote 33] We believe, however, that even without RAMP, FPS has 
data needed to reasonably estimate certain costs. For example, 
officials told us that they have estimates for the percentage of time 
inspectors spend on standard activities, such as contract oversight, 
that could be used to approximate a large portion of its activity 
costs. 

FPS does not have a detailed understanding of its activity costs, 
including information about the cost of providing its security 
services at federal facilities of different risk levels, and therefore 
has difficulty justifying the rate of the basic security fee to its 
customers. The Statement of Federal Financial Accounting Standards 
Number 4, Managerial Cost Accounting Concepts and Standards for the 
Federal Government, establishes standards for federal agencies to use 
in reporting the costs of their products, services, and activities, 
including providing reliable and timely information on the full cost 
of federal programs, their activities, and outputs.[Footnote 34] We 
have found that having accurate cost information--and understanding 
the drivers of a program's cost--allows an organization to demonstrate 
its cost-effectiveness and productivity to stakeholders, link levels 
of performance with budget expenditures, provide baseline and trend 
data for stakeholders to compare performance, and provide a basis for 
focusing an organization's efforts and resources to improve its 
performance. 

FPS has developed a workforce analysis plan that is under review by 
the Secretary of Homeland Security and OMB.[Footnote 35] Officials 
said the model shows that for FPS to fulfill its mission would require 
more inspector hours than current resources would cover. Although 
staff is the primary cost driver for FPS, FPS officials did not tell 
us how the fee structure or rates would be affected. 

FPS Does Not Include the Costs of Capital Improvements in Its Fee 
Rates, Contributing to Limited or Delayed Critical Investment in 
Critical Systems: 

According to FPS officials, FPS does not include the cost of planned 
systemwide capital investments when estimating its costs and setting 
its fee rates. As a result, FPS is unable to fund all of its capital 
investment priorities. Instead, FPS relies on any carryover balance to 
pay for the systemwide investments.[Footnote 36] Recently, FPS 
officials said FPS has used its carryover balance to fund information 
technology investments, such as FPS's RAMP, and operational 
initiatives, such as overtime associated with FPS's Operation Shield 
Program to measure the effectiveness of FPS countermeasures. The 
carryover balance comes from two main sources: (1) deobligated funds 
from contracts for building-specific countermeasures and (2) unspent 
fee collections from prior years. FPS officials said that as a normal 
part of its contract management business process it deobligates funds 
from contracts when the actual building-specific countermeasure 
contract cost is less than the estimated costs FPS charged to customer 
agencies. For example, officials said if a contract guard does not 
report to his post for 4 hours, FPS's estimated contract cost will be 
higher than the actual contract cost and FPS will deobligate the 
unused funds.[Footnote 37] According to FPS officials, the second 
source of FPS's carryover balance is collections from the basic 
security fee and the building-specific and SWA administrative fees 
that were not spent in the previous fiscal year. FPS officials told us 
that its carryover balance has been about $45 million annually in 
recent years. 

Since FPS's carryover balance is not large enough to fund all its 
systemwide investments, FPS officials said FPS makes investment 
decisions annually based on the cost of the various investments and 
the availability of carryover funds. As a result, FPS has had to delay 
certain critical systemwide capital investments.[Footnote 38] For 
example, FPS officials said they have delayed investment in FPS's 
$79.5 million radio program in both fiscal years 2009 and 2010, which 
would have provided FPS officers with radio communication capabilities 
in many locations across the country where it is currently 
unavailable. Upgrading FPS's communication infrastructure, which FPS 
officials described as in urgent need of replacement, is meant to 
address potential officer safety issues. Instead, FPS pays for 
maintenance on the old system, which FPS described as less effective 
and more expensive in the long term. As we have previously reported, 
it is inevitable that resource constraints will prevent some 
worthwhile capital investments from being undertaken. However, 
decisions about whether any particular capital investment is funded 
should reflect the priorities of the administration and Congress. 
Ideally, those capital investments that are funded will be ones with 
the highest returns or that meet the highest priority mission needs, 
rather than those that happen to fit the unplanned carryover.[Footnote 
39] 

FPS's Current Fee Structure Likely Contributes to Unknown Cross- 
Subsidizations: 

Despite evidence that customer agencies receive varying levels of 
basic security services and therefore do not cost the same amount to 
protect, FPS does not know the extent to which some customers are 
subsidizing the activities received by other customers. The level--and 
therefore the cost--of basic security services FPS provides at each of 
the 9,000 GSA facilities for which it is responsible varies depending 
on the facility's security risk level and its proximity to FPS. FPS 
categorizes buildings in security levels based on its assessment of 
the building's risk and size--but the basic security fee rate is the 
same for all facilities even though higher-risk facilities receive 
more services and cost more to protect. For example, level I 
facilities typically face less risk because they are generally small 
storefront-type operations or have limited public contact, such as a 
Social Security office. A level IV facility may have significant 
public contact and may contain high-risk law enforcement and 
intelligence agencies and highly sensitive government records. In some 
cases, there are known cost variations to providing security services. 
For example, ISC standards require facility security assessments--an 
activity associated with the basic security fee--every 5 years for 
lower risk level, and 3 years for higher risk level facilities. We 
have previously reported that in some situations FPS staff are 
stationed hundreds of miles from buildings under its responsibility, 
with many of these buildings rarely receiving services from FPS staff 
and relying mostly on local law enforcement agencies for law 
enforcement services.[Footnote 40] However, these customer agencies 
are charged the same basic security fee rates as are buildings in 
major metropolitan areas where numerous FPS officers and inspectors 
are stationed and are available to provide security services. We have 
previously reported that a customer in a federally owned building in a 
remote location did not know that FPS provided 24-hour alarm-
monitoring services, because FPS had not visited the office in over 2 
years.[Footnote 41] 

In our design guide we noted that there are trade-offs involved in 
deciding between systemwide and user-specific fees. Effectively 
setting a fee rate requires determining how much a program costs and 
determining how to assign program costs among different users. 
[Footnote 42] Since systemwide fees--or fees set at an average rate--
may be higher or lower than the actual costs of providing services to 
those users, they can lead to cross-subsidizations among users. User-
specific fees--or fees based on the cost of providing the program or 
service from which that user benefits--ensure that each user pays for 
the cost of services actually used. However, there are trade-offs 
between user-specific and systemwide fees. We have previously reported 
that systemwide fees may promote a policy goal such as helping to 
support a national system, but user-specific fees may be more 
desirable if the fee is seen as a way to support individual entities 
or locations or if there is wide variation in the cost of services 
among users. 

FPS officials said the basic security fee and administrative fees were 
designed to spread costs among agencies in two ways. First, FPS 
officials said their mission--to ensure safety at GSA-controlled 
federal facilities--is a national policy goal and therefore the basic 
security costs are intended to be shared evenly among the facilities. 
FPS officials compare the basic security fee to a local property tax 
paid to maintain police services. Second, FPS officials said the 
building-specific and SWA administrative fees are designed to reflect 
the increased risk inherent to facilities requiring or requesting 
additional countermeasures and therefore the administrative fees 
should subsidize the aggregate cost of basic security services. As 
noted, facilities implementing recommended or voluntary security 
countermeasures pay the basic security fee, the cost of the contractor-
provided countermeasures, and a 6 percent building-specific or SWA 
administrative fee. According to the ISC standards security level III 
and IV facilities have nearly all of the countermeasures and therefore 
also pay nearly all of FPS's building-specific and SWA fees.[Footnote 
43] 

FPS officials told us their intent is for the administrative fees paid 
by facilities with recommended or agency-requested countermeasures to 
help fund the basic security costs at higher-risk facilities. FPS 
officials said they do this because having security countermeasures 
reflects an increased security risk at these facilities, and as a 
result, these facilities are also likely to consume more of FPS's 
basic security services. In other words, FPS tries to collect more in 
building-specific and SWA administrative fees from agencies with 
countermeasures than it costs to manage the contracts for the 
countermeasures and uses the additional collections for basic security 
services at higher-risk facilities. However, because FPS does not know 
what it costs to administer these contracts, it does not know whether 
the administrative fees are providing the intended subsidy or are 
supporting basic security costs as intended. While charging some 
beneficiaries more or less than the actual service costs may help 
achieve a particular public policy goal, reliably accounting for the 
costs and benefits of such a provision is important to ensure that 
these provisions are achieving the intended results.[Footnote 44] 

Alternate Fee Structures Could Address Concerns About Alignment and 
Cross-Subsidizations: 

Other security fee structures may address the current equity and cross-
subsidizations and improve transparency to customer agencies. However, 
without a full fee review it is difficult to understand fully the 
relative trade-offs in any particular proposal. In addition, revising 
the funding mechanisms alone would not address the variations in 
service levels reported by FPS's customer agencies nor the overall 
level of services FPS provides at GSA-controlled facilities. 
Alternatives discussed in past GAO work and prior legislative 
proposals--which have not been acted on to date--regarding FPS's 
current security fee design were (1) modifying the current fully fee- 
funded structure to better align fees with facility risk levels and 
(2) funding FPS through a combination of fees and direct 
appropriations.[Footnote 45] 

Modified Fee Structures. Changing the design of the basic fee to 
reduce cross-subsidizations could address equity concerns and increase 
transparency and acceptance among customer agencies. Two alternative 
fee structures discussed were: 

* Charging customer agencies for the basic security activities based 
on a tiered fee system, where facilities in each tier pay fee rates 
based on FPS's average service costs for facilities within the 
respective tiers. 

* Charging customer agencies using a two-part basic fee consisting of 
(1) a flat rate to cover fixed costs and (2) a risk-level-based fee to 
cover average marginal costs associated with facility security risk 
level. 

Both alternatives aim to link more closely each customer's fee rates 
to average costs associated with their building risk level. We have 
previously reported that setting fees in this way--that is, at a rate 
equal to the marginal cost of providing services--maximizes economic 
efficiency by ensuring resources are allocated to their highest use. 
[Footnote 46] However, in part because it is often difficult to 
measure marginal cost, fee rates are sometimes set based on average 
costs. When the marginal costs of providing services are measurable 
but are low compared to the fixed costs of the program, setting the 
fee at marginal cost will lead to collections less than total costs. 
If a review of FPS's costs comes to this conclusion, a two-part fee, 
where all agencies would pay a portion of fixed costs, including 
systemwide capital investments, plus an amount that reflected the 
average service costs by facility security level, could make sense. 

The amount by which an agency's security costs would change under this 
option would depend on the security levels of the buildings in which 
the agency is located. Agencies that are more frequently located in 
facilities with higher security levels are likely to see their basic 
security fee rate increase, while agencies more frequently located in 
lower security risk level facilities may see their basic security fee 
decrease, stay the same, or increase at a slower rate. 

In both alternatives above, revising the basic security fee to reflect 
the service cost variation among customer agencies would better align 
the fee with the costs of the services received.[Footnote 47] This 
would help address concerns about the fee charged considering the 
disparity in services that agencies receive. However, the 
administrative cost of identifying user-specific costs may outweigh 
the benefits. We have previously reported that if a program has 
relatively few categories of users and the cost of providing the 
service to those groups differs significantly, then user-specific fees 
might be both beneficial and feasible. Conversely, if there are 
numerous different categories of users or there is a small cost 
variation among them, the efficiency gains of a user-specific fee may 
be overwhelmed by the added costs of administering a more complicated 
fee structure. Without a fee review, it is unclear which type of fee 
structure is most appropriate for FPS. 

It is important to consider the administrative and collection costs 
both to the provider and to the customers when designing a fee. From 
the customer agency perspective, a varied fee rate system may 
complicate budgeting, space planning, and billing reconciliation. From 
FPS's perspective, a varied fee system would require detailed analysis 
of activity costs and incorporating a facility security level 
component to their billing system. 

Combination of Fees and Direct Appropriations. Proposals to fund FPS 
through a combination of fees and direct appropriations could also 
reduce cross-subsidizations and increase acceptance among customer 
agencies, but it would not address the disparity in the service levels 
among facilities that are charged similar fees. Proposals to fund FPS 
through direct appropriations would: 

* Fund FPS's basic security activities and the administrative costs of 
implementing building-specific and SWA countermeasures via a direct 
appropriation to FPS and charge agencies only for cost of the actual 
countermeasures. 

FPS officials said a funding model that includes a direct 
appropriation to FPS should provide appropriated funds for all of the 
agency's fixed costs since it is difficult for FPS to predict agency 
demand for voluntary services such as additional countermeasures. 
Because the majority of FPS's costs are salary related and must be 
paid whether or not agencies "purchase" voluntary services such as 
SWAs or building-specific security countermeasures in the amounts for 
which FPS planned, FPS officials said funding all of FPS's FTEs with 
appropriations would reduce concerns about revenue adequacy. Receiving 
an appropriation for their fixed costs would not eliminate the need 
for FPS to develop an informed budget request based on estimated 
agency needs. Although security-related missions, like FPS's, may be 
less vulnerable to budget cuts, it is important to note that 
discretionary appropriation decisions are generally made annually and 
should not be assumed to remain at a constant funding level--
especially in the current fiscal environment. 

Any model that shifts some FPS funding from fees to direct 
appropriations must be viewed through the lens of the overall federal 
budget. If Congress desires to keep the total federal investment in 
facility security at current levels, a direct appropriation to FPS 
would mean either (1) an increase in the homeland security 
appropriations subcommittee budget allocation and a corresponding 
decrease in the allocations for the appropriations subcommittees 
responsible for FPS's customer agencies or (2) shifting priorities 
within the homeland security committee's current budget allocation and 
providing resources to FPS in lieu of other homeland security 
activities.[Footnote 48] 

Funding FPS with direct appropriations may result in a decline in 
interagency payment processing costs. FPS officials said they pay the 
ICE's Burlington Finance Center about $3.1 million annually to support 
FPS's billing process. Officials said the finance center does about 80 
percent of the actual processing for FPS transactions. A direct 
appropriation to FPS would mean fewer transactions between FPS and 
customer agencies since only facilities with recommended or requested 
countermeasures would make payments to FPS. Officials said that if it 
received a direct appropriation, FPS's overall budget could be reduced 
by the amount it currently spends on the administrative costs 
associated with collecting fees. 

Funding all or some of FPS's activities with a direct appropriation 
may also increase demand for FPS services. That is, when beneficiaries 
do not pay for the cost of services they may seek more of the service 
than is economically efficient.[Footnote 49] If FPS were to receive 
direct appropriations based on its current costs, the amount would not 
cover security costs for agencies that currently procure security 
services external from FPS if they decide to request them from FPS. 
Based on our updated work, any analysis meant to inform decisions 
about the type of funding model that would best meet FPS's needs would 
be incomplete without discussing the types of funding models discussed 
in this report--specifically, both (1) alternative fee structures and 
(2) a combination of fees and appropriations. 

In 2008 we recommended that FPS evaluate whether its current use of a 
fee-based system or an alternative funding mechanism is the most 
appropriate manner to fund the agency, and although DHS concurred with 
the recommendation, FPS has not begun such an analysis.[Footnote 50] 
When we asked whether FPS had considered the benefits and challenges 
of other fee designs, FPS officials said that there were probably 
other fee designs that could recover all of FPS's costs. However, they 
said that they find the current fee structure to be simple, 
straightforward, and efficient, and they are not convinced that they 
can improve equity among payers within the current structure. FPS 
officials said that having specific options for them to consider--such 
as the ones discussed above--would help them complete this type of 
analysis. 

Poor Communication with Customer Agencies About the Fees and a Lack of 
Timely Fee Rate Information Leads to Billing and Budgeting Challenges 
for Both FPS and Customer Agencies: 

FPS and customer agencies identified two key issues that lead to 
billing and budgeting challenges. First, FPS lacks points of contact 
in its customer agencies for budgeting and billing purposes, which 
leads to difficulties and delays in resolving billing discrepancies. 
Second, FPS and customer agencies described a lack of timely, reliable 
information available for the budget formulation process. This makes 
it difficult for agencies to, for example, timely implement security 
countermeasures meant to address current and emerging security 
threats. Although there are no obvious solutions for many of the 
budget timing disconnects described below, alternative budget account 
structures could help mitigate these challenges without compromising 
accountability. 

FPS Lacks Points of Contact for Budget and Billing Purposes: 

FPS communicates with customer agencies regarding its security fees 
through annual fee rate letters, regional conferences, and Facility 
Security Committee meetings; nevertheless, FPS reported difficulties 
determining the correct customer agency points of contact for the 
fees. Not all customer agencies we spoke with budget and pay for their 
FPS security fees centrally. Rather, headquarters and regional offices 
have shared responsibility for managing FPS security services and 
fees, making it difficult for FPS officials to find the appropriate 
officials with whom to discuss security charges and billing issues. 
FPS officials in one region said they did not have a complete list of 
all appropriate customer agency contacts that budget for FPS security 
fees or pay FPS security bills, who may work in different agency 
offices. In a different region FPS officials said they have trouble 
identifying their target audience and stakeholders at customer 
agencies.[Footnote 51] Because officials in security offices and in 
budget or finance offices have responsibilities regarding FPS services 
and fees, the officials involved in determining which services the 
agency purchases from FPS may be different than the officials that 
budget for FPS security fees or pay FPS security bills. Determining 
the correct points of contacts can be so confusing that even customer 
agency officials themselves reported difficulties in getting 
information about FPS services and fees from their own agencies. 

The confusion goes both ways, as customer agency officials at times 
also find it difficult to identify appropriate points of contact in 
FPS, even though FPS includes a point of contact on its security 
bills. For example, CDC officials said that communicating with FPS 
about billing issues is a constant challenge because CDC handles 
billing in CDC headquarters but FPS determines customer agencies' 
security costs and coordinates with customer agency officials at the 
regional level. FPS has a different point of contact for each of its 
11 regions and sometimes multiple contacts within a region. CDC 
officials said that FPS points of contact vary by facility so they 
often do not know whom to contact at FPS with billing questions. GSA 
officials said that the FPS staff with whom they work are not always 
responsive to problems, which GSA attributed to large workloads. 

Some customer agency officials are confused about the roles of GSA and 
FPS regarding security fees. GSA officials said that some customer 
agencies continue to contact GSA with questions about FPS security 
bills even though FPS transferred out of GSA in 2003.[Footnote 52] FPS 
officials in one region also said that customer agencies confuse the 
roles of FPS and GSA and they sometimes receive questions from 
customer agencies on GSA rent charges and services. FPS officials in 
another region also said bills can be confusing to customer agency 
officials because FPS basic and building-specific security bills are 
displayed with GSA rent bills on GSA's Rent on the Web 
system.[Footnote 53] Complicating matters, FPS officials explained 
that FPS refers agencies to GSA for questions on square footage data 
because FPS bills for the basic security fee based on square footage 
from GSA's STAR inventory system. FPS and GSA officials said their 
agencies need to better educate customers on the different roles of 
FPS and GSA in the billing process. 

Effectively communicating with stakeholders involves sharing relevant 
analysis and information as well as providing opportunities for 
stakeholder input; agencies that do not communicate effectively with 
stakeholders miss opportunities for meaningful feedback that could 
affect the outcome of changes in fees and program implementation. 
[Footnote 54] We found that the quality and quantity of FPS's 
communication with stakeholders varies by region. Officials in some 
FPS regions said they typically wait for client agencies to ask 
questions about the fees rather than taking the initiative to push 
information out to them. In other regions there is a greater focus on 
outreach efforts. For example, in 2009 and 2010 FPS-National Capital 
Region (NCR) invited their security points of contact to an annual 
security summit to discuss a range of issues, including fees. Although 
not all customer agency budget and management officials were aware of 
the summits, those that did attend generally found it helpful. For 
example, SSA officials who work with FPS security fees said several of 
their officials attended the NCR security summit last year and found 
it useful. They said FPS explained its procedures, and attendees were 
able to ask questions. At FEMA in the NCR, a security official 
participated in the summit for 2 years and found it to be beneficial. 
However, FEMA budget officials who manage security fees were not 
informed by either FEMA's security officials or by FPS of the summit. 

Similarly, although FPS provides an annual letter to customer agency 
heads and CFOs regarding fee rates for the upcoming fiscal year, in 
some customer agencies the rates were not communicated to the agency 
officials who are responsible for budgeting. While customer agencies 
are responsible for communicating FPS fee rates within their agency, 
when all the necessary officials do not receive information on FPS 
security fees, it creates implementation challenges for both FPS and 
the customer agencies. We have previously reported that agencies 
providing services can segment their customers into groups and provide 
targeted communication or services to better meet customer needs. 
[Footnote 55] When FPS's communication efforts do not reach all of the 
customer agency officials working with FPS security fees, important 
information on rates and procedures are missed, contributing to 
operational challenges, such as overbilling issues, discussed below. 
FPS has taken steps to improve communication with customer agencies at 
the regional level. FPS officials in two regions said FPS has made 
efforts to educate all FPS employees on the security fee rates and the 
services they cover, so FPS can address customer agency questions at 
all levels of the organization and provide accurate information to its 
customers. They said these efforts have reduced the number of 
questions on their fees from customer agencies. 

In some cases, confusion regarding FPS contacts can lead to 
significant challenges in resolving billing issues. For example, in 
2008 FDA officials said FPS overbilled FDA $2.1 million because FPS 
billed for the same service in both an SWA and the building-specific 
charge. FDA officials said it was difficult to locate the appropriate 
point of contact and they had to communicate with FPS multiple times 
over 6 months to resolve the issue. In another example, HHS 
headquarters officials discovered a $100,000 error in their bill for 
one facility. FPS had billed HHS as if it was the sole tenant in the 
building because another tenant had vacated.[Footnote 56] HHS 
officials said it took several months to resolve the problem because 
they found it difficult to identify someone at FPS who understood the 
problem and could issue them a credit. When we spoke with FPS 
officials about these issues they told us that it can take 3 to 6 
months to credit customer agencies when they are overbilled because 
FPS performs an audit of the account that covers several years and FPS 
and the customer agency need to agree on the amount to be credited to 
the agency. FPS officials also said they process refunds once a month. 
Unresolved billing issues lead to customer agency funds being tied up 
and not available for other activities. In times of fiscal constraint 
this can be especially challenging. Unresolved billing issues also 
lead to wasted customer agency resources in the form of the time spent 
to resolve the issue and create bad will. FPS has procedures in place 
to prevent under-or overbilling customer agencies. FPS NCR officials 
said FPS performs a reconciliation process each month to check for 
billing errors as well as a monthly post-by-post report card that 
reports which contract guard posts are paid by building-specific 
charges and which are tenant-specific charges. 

FPS Does Not Have a Practical Way to Provide Rate Information to 
Customers in Time to Inform Agency Budget Formulation: 

FPS does not have a process to calculate security fee rates prior to 
submitting its budget to OMB and therefore does not have timely 
information to provide to customer agencies to inform their budget 
formulation process. As a result, customer agencies' annual budget 
submissions to OMB include security funding requests that are not 
based on accurate security cost estimates. OMB Circular No. A-11 
states that where possible agencies should include the full cost of a 
program and cover all programs and activities in their budget 
submissions. In the past, FPS has provided estimates of security fee 
rates to customer agencies approximately 9 months after agency budget 
requests are submitted. For example, in the fiscal year 2011 budget 
cycle, agencies submitted their budget requests to OMB in September 
2009 and FPS provided fee rates in July 2010 (after the budget had 
gone to Congress). This is because FPS is on the same budget cycle as 
its customer agencies. 

FPS officials said FPS is working to improve its process to notify 
customers of fee rates and security costs. In his fiscal year 2012 
budget the President proposed increasing the basic security fee to 
$0.74 per square foot. This is the first time FPS has provided its fee 
rate for the upcoming fiscal year in its congressional justification 
of estimates. FPS officials said they included the proposed fee rate 
to allow as much time as possible for agencies to plan for resources 
for security fees. While FPS did provide more notice about a potential 
fee rate change than in the past, federal agencies all submit their 
fiscal year 2012 budget requests to OMB at the same time. The proposed 
fee increase is available to Congress for the appropriations cycle, so 
Congress does have the opportunity to consider FPS's proposed fee rate 
increase at the same time that it considers appropriations for FPS's 
customer agencies. 

FPS Cannot Finalize Its Fee Rates Until Its Appropriation Is Enacted: 

While FPS can indicate a fee increase in its budget documents, it 
cannot finalize its fee rates for a given fiscal year until DHS's 
appropriation is enacted. This is because FTEs are the largest driver 
of FPS's cost and the DHS Appropriations Act specifies the FTE level 
at which FPS must operate. According to FPS officials, if requirements 
in the DHS Appropriations Act require more resources than FPS 
estimated, FPS may need to increase its fee rates midyear. For 
example, in March 2008--halfway through the fiscal year--FPS increased 
its basic security fee to $0.62 to fund increased FTE levels in the 
fiscal year 2008 DHS Appropriations Act. 

Mandated changes to FPS's FTE levels also challenge FPS's ability to 
provide accurate fee rate information to its customer agencies in a 
timely manner. Officials said FPS may have to increase its fee rates 
in the middle of fiscal year 2011 because the proposed Senate bill for 
the fiscal year 2011 Homeland Security Appropriation[Footnote 57] 
included a requirement for FPS to increase FPS's minimum FTEs to 
1,348, or 148 FTEs greater than the current required level on which 
FPS's budget estimates were based. However, under FPS's final fiscal 
year 2011 appropriation, FTE levels were set at 1,250, which is 50 
more than the level on which FPS's budget estimates were based. Such 
changes are not unusual. For example, during the 111th Congress (2009-
2010) two other bills were introduced that would have required FPS to 
increase its FTE level. The proposed Federal Protective Service 
Improvement and Accountability Act of 2010[Footnote 58] included a 
provision to increase FPS's FTEs to 1,350, while the proposed 
Supporting Employee Competency and Updating Readiness Enhancements 
(SECURE) for Facilities Act of 2010[Footnote 59] included a provision 
to increase FPS's FTEs by 350 over a 4-year period. 

Unexpected changes in FPS security fees require customer agencies to 
make unplanned trade-offs during the fiscal year. Because customer 
agencies do not have FPS security fee estimates in time for budget 
formulation, they create their own "rules of thumb," which vary by 
agency. Officials from one agency with whom we met said it budgets for 
a 2-3 percent increase in security fees, while officials from a 
different agency said they budget for a 7 percent increase. In the 
past, customer agency rules of thumb might not have provided enough 
room to cover fee increases in those fiscal years with large increases 
in fee rates. Since 2004, the increase in the basic security fee rate 
has varied from 0 to almost 60 percent (see table 4). We have 
previously found that changes in FPS's security fees--specifically 
notifications about rate increases late in the federal budget cycle 
[Footnote 60]--have adverse implications for customer agencies; our 
current work confirms this is still an issue. While fee rate increases 
are relatively small compared to an agency's overall appropriation, 
they can significantly affect an agency's security budget. When faced 
with unanticipated fee increases, customer agencies described 
unplanned trade-offs they make. FEMA officials said they do not cut 
back on security services at any of their facilities. They ask the 
budget office to allocate more funds to their area; if they are not 
successful they decrease security funding in other areas, such as 
employee background investigations or fingerprinting. 

Table 4: Annual Percent Change in FPS Basic Security Fee Rate: 

Fiscal year: Basic security fee rate; 
2004: $0.30; 
2005: $0.35; 
2006: $0.35; 
2007: $0.39; 
2008: $0.62; 
2009: $0.66; 
2010: $0.66; 
2011: $0.66; 
Proposed 2012: $0.74. 

Fiscal year: Percent change from previous year; 
2004: N/A; 
2005: 16.67%; 
2006: 0.00%; 
2007: 11.43%; 
2008: 58.97%; 
2009: 6.45%; 
2010: 0.00%; 
2011: 0.00%; 
Proposed 2012: 9.09%. 

Source: GAO analysis of FPS information. 

[End of table] 

Customer Agencies Do Not Have Timely Information to Inform Budgeting 
for Current and Emerging Security Threats: 

Customer agencies face challenges in funding recommended building- 
specific countermeasures; that is, measures that are meant to address 
current and emerging security threats. FPS officials said that the 
recommendations in its facility security assessments are made in 
response to security risks present at the time the assessment is made. 
These costs, FPS officials told us, can change quickly and 
unexpectedly depending on external risks in the environment. Given the 
budget cycle, however, there is an inherent mismatch in timing. The 
budget formulation process for any given fiscal year begins 2 years 
prior to the start of that fiscal year. As a result, to respond timely 
to current threats, customer agencies must reallocate funds to 
countermeasures for which they did not and could not plan. For 
example, officials from a facility security committee in Atlanta said 
they did not implement a FPS recommendation for security bollards 
around the perimeter of the building because of budget timing issues. 
This timing issue is not new. In 2009 we reported that the timing of 
the assessment process may be inconsistent with customer agencies' 
budget cycles.[Footnote 61] Similarly, in 2008 we reported on 
instances in which recommended security countermeasures were not 
implemented at some of the buildings we visited because facility 
security committee members were unable to get a funding commitment 
from their agencies, among other reasons.[Footnote 62] 

Alternative Account Structures Could Provide Needed Flexibility to 
Help Mitigate Budgeting Challenges for FPS and Customer Agencies: 

There is no obvious solution for the federal budget timing disconnects 
described above, but in our prior work reviewing fee-funded agencies, 
we have identified various budget account structures that could help 
mitigate budgeting and timing challenges for FPS and customer agencies 
without compromising accountability for federal funds. 

* A no-year reimbursable appropriation. If FPS were to receive a no- 
year reimbursable appropriation account, FPS would receive a direct 
annual appropriation based on its estimated total collections that FPS 
would later reimburse with its fee collections.[Footnote 63] If 
Congress increased FPS's FTEs in a given current fiscal year, thereby 
increasing costs, FPS would be able to draw on its direct 
appropriation to cover the resulting cost increase. It could then 
inform customer agencies of a fee rate increase in time for them to 
build the additional cost into their budget requests for the next 
fiscal year. FPS would then reimburse its appropriation account with 
its future fee collections from its customer agencies. The Customs and 
Border Protection (CBP) uses a reimbursable account to mitigate 
funding issues caused by the timing of certain fee collections. To 
help manage cash flow issues caused by quarterly, rather than more 
frequent, fee collections, CBP initially uses appropriations to 
"front" the cost of the agriculture quarantine and immigration 
inspections and then reimburses its appropriation account from the 
immigration and agriculture user fees collected throughout the year. 
[Footnote 64], [Footnote 65] 

* An intragovernmental revolving fund account. An intragovernmental 
revolving fund is an appropriation account authorized to be credited 
with collections, including both reimbursements and advances, from 
other federal agencies' accounts to finance a cycle of businesslike 
operations.[Footnote 66] For example, GSA's real property activities 
are financed through the FBF--a revolving fund that includes rent 
federal agencies pay for GSA space.[Footnote 67] With respect to 
structural improvements, GSA can provide agencies with the option to 
delay payments on amortized costs to allow agencies time to build the 
costs into their budgets by fronting the costs from its FBF. A similar 
approach could provide FPS with greater ability to assist agencies 
with obtaining building-specific countermeasures. 

FPS already enjoys access to its fee collections without fiscal year 
limitation so a no-year reimbursable account or a revolving fund would 
not create accountability concerns in that respect. These types of 
accounts would, however, provide FPS with the ability to "front" a fee 
rate increase and reduce the pressure of unanticipated fee rate 
increases on its customers. In addition, the transparency of any fee 
increase resulting from changes would facilitate congressional 
oversight both of FPS and of the cost of security at various agencies 
and buildings. 

FPS might also benefit from considering ways other agencies have found 
to provide cost information to customer agencies in a more timely 
manner: 

* An approved fee-setting methodology. An approved methodology by 
which to set fees could allow FPS to set its fee rates in advance of 
receiving requirements in its appropriation and therefore better align 
with the budget formulation needs of its federal customers. For 
example, GSA officials told us that having an approved methodology to 
calculate rent estimates allows GSA to provide them to customer 
agencies in time to inform budget formulation. FPS officials said that 
FPS would need new statutory authority to take this approach. 

* Estimates of future security costs. FPS's customer agencies do not 
receive timely estimates of future costs, impairing agencies' ability 
to budget for those costs. FPS has data that could help FPS's customer 
agencies with this issue. For example, if customer agencies received 
high-level estimates for countermeasure costs--which could be based on 
known costs associated with recommended building-specific 
countermeasures--they could better develop budget estimates for 
unknown future costs. Such information could also help inform 
congressional debate about budget priorities and trade-offs. For 
example, the Federal Emergency Management Administration (FEMA) 
revised its methodology for estimating the cost of disaster response 
after we reported that (1) when FEMA excludes costs from catastrophic 
disasters in annual funding estimates it prevents decision makers from 
receiving a comprehensive view of overall funding claims and trade-
offs, and (2) that especially given the tight resource constraints 
facing our nation, annual budget requests for disaster relief may be 
improved by including known costs from previous disasters and some 
costs associated with catastrophic disasters.[Footnote 68] 

Conclusions: 

FPS is responsible for protecting some of the nation's most critical 
facilities and the people who work in and access these locations every 
day. Analyzing and understanding the costs of providing these 
important security services, including the costs of systemwide capital 
investments, are important so that FPS, customer agencies, and 
Congress have the best possible information available to them when 
designing, reviewing, and overseeing FPS's fees and operations. 
Regular, timely, and substantive fee reviews are critical for any 
agency, but especially for agencies--like FPS--that are mostly or 
solely fee funded in order to ensure that fee collections and 
operating costs remain aligned. FPS has broad authority to design its 
security fees, but the current fee structure has consistently resulted 
in total collection amounts less than agency costs, is not well 
understood or accepted by customer agencies, and continues to be a 
topic of congressional interest and inquiry. In 2008 we recommended 
FPS evaluate whether its use of a fee-based system or an alternative 
funding mechanism is the most appropriate manner to fund the agency. 
Although FPS agreed with this recommendation it has not begun such an 
analysis. Based on our updated work, we believe that such an analysis 
can benefit from the examination of both (1) alternative fee 
structures and (2) a combination of fees and appropriations. 
Considering the various options in this report--a redesigned fee 
structure and funding FPS through a combination of fees and direct 
appropriations--can help guide FPS's analysis and Congress's 
consideration of the trade-offs among a variety of funding mechanisms. 

The success of any fee design depends on complete, reliable, timely 
information on which to base decisions and on informed trade-offs that 
support program goals. Whenever the formulas for assigning costs to 
customer agencies change there will be winners and losers. Whether and 
how to change FPS's funding structure--either to develop an alternate 
fee structure or a model that includes some amount of direct 
appropriations--is largely a policy decision. However, without a 
better understanding of the costs of FPS's services, changes to FPS's 
funding model are unlikely to address FPS's chronic funding gaps or 
the equity concerns and skepticism of FPS's stakeholders. 

Further, our analysis shows that in implementing the fee program on a 
day-to-day basis, FPS and customer agencies encounter challenges that 
are handled by budget and billing officials as well as security 
officials. We have previously recommended that FPS collect and 
maintain a list of facility designated points of contact for security 
issues. Unless FPS also creates a complete and accurate list of 
security fee budget and billing contacts in its customer agencies, FPS 
and its customers will continue to face budget and billing-related 
challenges, and the opportunity costs associated with delays in 
returning appropriated funds to customer agencies will persist. 

Ideally, security decisions at federal facilities are based on real- 
time information about current and emerging threats. However, federal 
agencies budget for planned needs--including security needs--about 2 
years before the start of each fiscal year. While there is no easy 
solution for the mismatch in timing between FPS security costs and the 
federal budget formulation process, options such as different account 
structures and improved fee estimating procedures could help mitigate 
these challenges without compromising accountability over federal 
funds. 

Recommendations for Executive Action: 

The Secretary of Homeland Security should direct the Director of the 
Federal Protective Service to take the following six actions: 

* conduct regular reviews of FPS's security fees and use this 
information to inform its fee setting; 

* include systemwide capital investments when estimating costs and 
include them when setting basic security fee rates; 

* make information on the estimated costs of key activities as well as 
the basis for these cost estimates readily available to affected 
parties to improve the transparency and credibility--and hence the 
acceptance by stakeholders--of the process for setting and using the 
fees; 

* in implementing our previous recommendation to evaluate the current 
fee structure and determine a method for incorporating facility risk, 
assess and report to Congress on: 

* the current and alternative fee structures, to include the options 
and trade-offs discussed in this report, and if appropriate, 

* options to fund FPS through a combination of fees and direct 
appropriations, to include the options and trade-offs discussed in 
this report; 

* evaluate and report to Congress on options to mitigate challenges 
agencies face in budgeting for FPS security costs, such as: 

* an alternative account structure for FPS to increase flexibility, 
while retaining or improving accountability and transparency or: 

* an approved process for estimating fee rates; and: 

* work with customer agencies to collect and maintain an accurate list 
of points of contact of customer agency officials responsible for 
budget and billing activities as well as facility designated points of 
contact as we previously recommended. 

Agency Comments & Our Evaluation: 

We provided a draft of this report to the Secretary of Homeland 
Security and the Administrator of the General Services Administration 
for review. The General Services Administration had no comments on the 
report. DHS provided written comments that are reprinted in appendix 
II. We also provided portions of the report to the four FPS customer 
agencies with which we met. 

In its written comments, the Director of DHS's GAO/Office Inspector 
General Liaison Office concurred with our recommendations and provided 
information about steps DHS is taking to address each recommendation. 
In responding to our recommendation that the Federal Protective 
Service report to Congress on the current and alternative fee 
structures, to include the options and trade-offs discussed in this 
report, DHS said that it has reviewed the current and alterative 
methods to calculate basic security fees in addition to reviewing 
alternative funding structures and will use that analysis as a 
baseline in developing its alternative analysis. Throughout the course 
of our audit work we asked FPS to provide us with any reviews of 
current and alternative funding structures it had conducted; FPS did 
not provide any evidence of having conducted this type of analysis. As 
noted in our report, FPS officials told us that it has not begun such 
an analysis. When we asked whether FPS had considered the benefits and 
challenges of other fee designs, FPS officials said that having 
specific options for them to consider--such as the ones discussed in 
this report--would help them with this type of analysis. 

We are sending copies of this report to the Secretary of the 
Department of Homeland Security, the Directors of the Federal 
Protective Service and the Office of Management and Budget, and the 
Administrator of the General Services Administration. We are also 
sending copies to appropriate congressional committees, and to the 
Chairmen and Ranking Members of other Senate and House committees and 
subcommittees that have appropriation, authorization, and oversight 
responsibilities for FPS. The report also is available at no charge on 
the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff members have any questions or wish to discuss the 
material in this report further, please contact me at (202) 512-6806 
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 making key contributions to this report are listed 
in appendix III. 

Signed by: 

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

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

The objectives of this report were to (1) analyze the Federal 
Protective Service's (FPS) current fee design and proposed 
alternatives, and (2) examine how FPS's security fees challenge FPS 
and customer agency budget formulation and execution. To meet these 
objectives, we reviewed legislation and guidance, agency documents, 
and literature on user fee design and implementation characteristics. 
We also interviewed officials responsible for managing user fees at 
FPS, General Services Administration (GSA), and selected customer 
agencies at their headquarters and in several regional locations. 

We selected four of FPS's customer agencies and four regional 
locations to illustrate how FPS's security charges benefit and 
challenge customer agencies. We selected customer agencies with a 
large representation in GSA's facility inventory (measured by total 
rental square footage and total annual rent) and based on prior GAO 
work on FPS. From these agencies we selected: the Department of Health 
and Human Services, Internal Revenue Service, Social Security 
Administration, and the Department of Homeland Security. We selected 
the regional locations based on (1) a range of region size (number of 
FPS-protected buildings), (2) geographic diversity, and (3) 
stakeholder input on successes and challenges faced by regional 
management. As a result, we selected the following FPS regions for 
site visits: National Capital Region (Washington, D.C.), Southeast 
Region (Atlanta, Ga.), Rocky Mountain Region (Denver, Colo.), and 
Northwest/Arctic Region (Federal Way/Seattle, Wash.). We interviewed 
FPS, GSA, and customer agency officials who are familiar with FPS 
security fees at both headquarters and in our selected regions. 

We conducted this performance audit from May 2009 through April 2011, 
in accordance with generally accepted government auditing 
standards.[Footnote 69] 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: Comments from the Department of Homeland Security: 

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

May 12, 2011: 

Ms. Susan Irving: 
Director, Federal Budget Analysis: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Irving: 

Re: GA0-11-492, Draft Report, Budget Issues: Better Fee Design Would 
Improve Federal Protective Service's and Federal Agencies' Planning 
and Budgeting for Security. 

Thank you for the opportunity to review and comment on this draft 
report. The U.S. Department of Homeland Security (DHS) appreciates the 
U.S. Government Accountability Office's (GAO's) work in planning and 
conducting its review and issuing this report. The GAO evaluated the 
Federal Protective Service's (FPS's) resource levels. As directed by
Congress, GAO analyzed FPS's fee design and proposed alternatives and 
how security fees impact FPS and customer agency budget formulation 
and execution. 

As described in the draft report, there is work to be done, but the 
Department is pleased to note the report's positive acknowledgment of 
the recent actions taken that include the development of the Risk 
Assessment and Management Program and the formulation of the workforce 
analysis plan, currently under review by the Secretary of Homeland 
Security and the Office of Management and Budget (OMB). 

Technical and sensitivity comments on the draft report have been 
provided under separate cover. Following are our detailed responses to 
the six recommendations made by GAO. 

"The Secretary of Homeland Security should direct the Director of the 
Federal Protective Service to take the following 6 actions: 

Recommendation 1: conduct regular reviews of FPS's security fees and 
use this information to inform its fee setting;" 

Response: Concur. As part of its overall financial management and 
budgetary activities, FPS is refining its fee setting processes. 
During the budget development process, FPS reviews the projected out-
year requirements against the anticipated revenues Changes to fees
and activities are based on decisions in the budget process. 

FPS acknowledges that a more robust fee model needs to be available to 
properly improve its fee setting. FPS is working to clarify activities 
that are included within each service offering (e.g., basic security, 
building specific, and Security Work Authorizations) to ensure all 
costs related to activities for each service offering are being 
captured and appropriately aligned to the service under which they are 
provided. 

Recommendation 2: "include systemwide capital investments when 
estimating costs and include them when setting basic security fee 
rates;" 

Response: Concur. FPS is currently developing policy and procedures 
for an investment review process to align with those of the 
Department. The FPS procedures will formalize a method for project 
owners/sponsors to provide justification for their projects for FPS 
approval, including purpose, scope, lifecycle cost, and gap(s) 
addressed by the investment. A formalized review and approval process 
will provide FPS the improved ability to estimate long-term costs 
resulting from investments in capital improvements. 

Additionally, FPS is updating its activity-based costing (ABC) model 
to include updates to the rate setting structure. The updated model 
will calculate projected rates on the basis of expended costs and 
anticipated requirements. 

Recommendation 3: "make information on the estimated costs of key 
activities as well as the basis for these costs estimates readily 
available to affected parties to improve the transparency and 
credibility -and hence the acceptance by stakeholders—of the process 
for setting and using the fees;" 

Response: Concur. FPS is in the process of updating its ABC model to 
improve alignment of costs to activities and to determine the 
appropriateness of the administrative fee (currently 6 percent) 
charged to customer agencies. As part of this update, FPS is reviewing 
key activities and the methodology for the allocation of costs as well 
as identifying cost drivers and the alignment of activity costs by 
customer and risk level. Additional reporting requirements to address 
stakeholder requirements for transparency and credibility also will 
be included as part of the overall ABC model update requirements. 
This information will be standardized so that each region working 
with its individual stakeholders will provide the information in a 
common format. 

Recommendation 4: "in implementing our previous recommendation to 
evaluate the current fee structure and determine a method for 
incorporating facility risk, assess and report to Congress on: 

* the current and alternative fee structures, to include the options 
and tradeoffs discussed in this report, and if appropriate, 

* options to fund FPS through a combination of fees and direct 
appropriations, to include the options and tradeoffs discussed in this 
report;" 

Response: Concur. FPS has reviewed current and alternative methods to 
calculate basic security fees in addition to reviewing alternative 
funding structures. Using these initial studies as a baseline, FPS is 
developing an alternatives analysis to review the advantages and 
disadvantages of these approaches, both directly and in combination, 
to better determine the impact and risk potential to FPS operations. 
FPS will also continue to assess and report to Congress on our 
evaluation of current and alternative fee structures, to include the 
options and tradeoffs discussed in this report. 

Recommendation 5: "evaluate and report to Congress on options to 
mitigate challenges agencies face in budgeting for FPS security costs 
such as: 

* an alternative account structure for FPS to increase flexibility, 
while retaining or improving accountability and transparency or; 

* an approved process for estimating fee rates." 

Response: Concur. To better serve its customers, FPS continues to 
evaluate alternative funding structures, subject to the approval by OMB.
Additionally, as part of the ABC model update and development of FPS-
wide standard operating procedures, FPS is putting processes in place 
to better estimate planned requirements and forecast any corresponding 
fee rate changes. These updates are intended to improve the 
availability, reliability, and timeliness of financial reporting to 
support performance analysis, efficient resource use, and management 
decision-making. FPS will also continue to assess and report to 
Congress on our evaluation of current and alternative fee structures, 
to include the options and tradeoffs discussed in this report. 

Recommendation 6: "work with customer agencies to collect and maintain 
an accurate list of points of contact of customer agency officials 
responsible for budget and billing activities as well as facility 
designated points of contact as we previously recommended." 

Response: Concur. FPS works to strengthen relationships with both 
customer agencies and the General Services Administration to ensure 
customer requirements are met and adequate funding is received. FPS 
continually works with the regional offices to ensure regular 
communications with customer agencies. Specifically, for the purpose 
of revenue collection, the Financial Management Division of FPS 
Headquarters maintains a list of points of contact (POCs) of customer 
agency officials to include either the agency Chief Financial Officer 
or secondary POC. Headquarters contacts these POCs annually to 
communicate square footage fee. Additionally, regional offices 
are required to maintain facility designated POCs so that any changes 
that impact billings are captured accurately and timely. Within each
region, Facility Security Committees (FSCs) are established for each 
building that contains multiple tenant agencies. FPS assigns a 
building inspector and Contract Officer Technical Representative 
(COTR) to each building, and the FSCs act as the primary liaison point 
through which the inspector and COTR communicate. Additionally, each 
FPS-generated bill contains contact information for a regional 
budgetary POC who customer agencies may contact for any billing-
related questions or issues. 

Finally, FPS Headquarters began a recruiting action for a full-time 
senior Public Affairs professional who would direct and supervise 
public information and community relations activities and support the 
Regional Directors nationwide. FPS initiated a separate hiring action 
to identify a second highly qualified career professional communicator 
who will serve as the front-line supervisor for an expanded 
communications office within FPS headquarters. 

Again, thank you for the opportunity to review and comment on this 
draft report. We look forward to working with you on future Homeland 
Security issues. 

Sincerely, 

Signed by: 

Jim H. Crumpacker: 
Director: 
Departmental GAO/01G Liaison Office: 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Susan J. Irving, (202) 512-6806: 

Acknowledgments: 

In addition to the individual above, Jackie Nowicki, Assistant 
Director; Chelsa Gurkin; Lauren Gilbertson; Barbara Lancaster; Felicia 
Lopez; Julie Matta; and Jenny Shinn made key contributions to this 
report. Donna Miller provided the report's graphics. 

[End of section] 

Related GAO Products: 

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.: January 23, 2009. 

Federal User Fees: A Design Guide. [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP]. Washington, D.C.: May 28, 
2008. 

Federal User Fees: Substantive Reviews Needed to Align Port-Related 
Fees with the Programs They Support. [hyperlink, 
http://www.gao.gov/products/GAO-08-321]. Washington, D.C.: February 
22, 2008. 

Federal User Fees: Key Aspects of International Air Passenger 
Inspection Fees Should Be Addressed Regardless of Whether Fees Are 
Consolidated. [hyperlink, http://www.gao.gov/products/GAO-07-1131]. 
Washington, D.C.: September 24, 2007. 

Budget Issues: Electronic Processing of Non-IRS Collections Has 
Increased but Better Understanding of Cost Structure Is Needed. 
[hyperlink, http://www.gao.gov/products/GAO-10-11]. Washington, D.C.: 
November 20, 2009. 

Homeland Security: Addressing Weaknesses with Facility Security 
Committees Would Enhance Protection of Federal Facilities. [hyperlink, 
http://www.gao.gov/products/GAO-10-901]. Washington, D.C.: August 5, 
2010. 

Homeland Security: Preliminary Observations on the Federal Protective 
Service's Workforce Analysis and Planning Efforts. [hyperlink, 
http://www.gao.gov/products/GAO-10-802R]. Washington, D.C.: June 14, 
2010. 

Homeland Security: Federal Protective Service's Contract Guard Program 
Requires More Oversight and Reassessment of Use of Contract Guards. 
[hyperlink, http://www.gao.gov/products/GAO-10-341]. Washington, D.C.: 
April 13, 2010. 

Homeland Security: Greater Attention to Key Practices Would Improve 
the Federal Protective Service's Approach to Facility Protection. 
[hyperlink, http://www.gao.gov/products/GAO-10-142]. Washington, D.C.: 
October 23, 2009. 

Homeland Security: Federal Protective Service Should Improve Human 
Capital Planning and Better Communicate with Tenants. [hyperlink, 
http://www.gao.gov/products/GAO-09-749]. Washington, D.C.: July 30, 
2009. 

Homeland Security: The Federal Protective Service Faces Several 
Challenges That Hamper Its Ability to Protect Federal Facilities. 
[hyperlink, http://www.gao.gov/products/GAO-08-683]. Washington, D.C. 
June 11, 2008. 

Homeland Security: Transformation Strategy Needed to Address 
Challenges Facing the Federal Protective Service. [hyperlink, 
http://www.gao.gov/products/GAO-04-537]. Washington, D.C.: July 14, 
2004. 

[End of section] 

Footnotes: 

[1] 6 U.S.C. § 203; 40 USC § 1315. 

[2] Department of Homeland Security Appropriations Act, 2007, Pub. L. 
No. 109-295, title II, 120 Stat. 1355, 1361 (Oct. 4, 2006). 

[3] See GAO, Homeland Security: Addressing Weaknesses with Facility 
Security Committees Would Enhance Protection of Federal Facilities, 
[hyperlink, http://www.gao.gov/products/GAO-10-901] (Washington, D.C.: 
Aug. 5, 2010); Homeland Security: Preliminary Observations on the 
Federal Protective Service's Workforce Analysis and Planning Efforts, 
[hyperlink, http://www.gao.gov/products/GAO-10-802R] (Washington, 
D.C.: June 14, 2010); Homeland Security: Federal Protective Service's 
Contract Guard Program Requires More Oversight and Reassessment of Use 
of Contract Guards, [hyperlink, http://www.gao.gov/products/GAO-10-
341] (Washington, D.C.: Apr. 13, 2010); Homeland Security: Greater 
Attention to Key Practices Would Improve the Federal Protective 
Service's Approach to Facility Protection, [hyperlink, 
http://www.gao.gov/products/GAO-10-142] (Washington, D.C.: Oct. 23, 
2009); Homeland Security: Federal Protective Service Should Improve 
Human Capital Planning and Better Communicate with Tenants, 
[hyperlink, http://www.gao.gov/products/GAO-09-749] (Washington, D.C.: 
July 30, 2009); Homeland Security: The Federal Protective Service 
Faces Several Challenges That Hamper Its Ability to Protect Federal 
Facilities, [hyperlink, http://www.gao.gov/products/GAO-08-683] 
(Washington, D.C.: June 11, 2008); Homeland Security: Transformation 
Strategy Needed to Address Challenges Facing the Federal Protective 
Service, [hyperlink, http://www.gao.gov/products/GAO-04-537] 
(Washington, D.C.: July 14, 2004). 

[4] [hyperlink, http://www.gao.gov/products/GAO-08-683]. 

[5] [hyperlink, http://www.gao.gov/products/GAO-10-802R]. 

[6] As appropriate, we discuss particular recommendations and any 
steps taken to address them throughout our report. 

[7] H.R. No. 110-862, at 59 (2008). 

[8] During this time we discussed information related to FPS's fiscal 
year 2010 and 2011 budgets with the committee. We also suspended work 
on this engagement for 6 months, as agreed with you, due to competing 
priorities. 

[9] 40 U.S.C. § 1315(a) & (b). 

[10] Exec. Order No. 12977, Interagency Security Committee, 60 Fed. 
Reg. 54411 (Oct. 24, 1995), as amended by Exec. Order No. 13286, 
Amendment of Executive Orders, and Other Actions, in Connection with 
the Transfer of Certain Functions to the Secretary of Homeland 
Security, 68 Fed. Reg. 10619 (Mar. 5, 2003). 

[11] Homeland Security Act of 2002, Pub. L. No. 107-296, 116 Stat. 
2135 (Nov. 25, 2002). 

[12] As outlined in a 2006 memorandum of agreement between the two 
agencies, both FPS and GSA have a continued role in physical security. 
In general, GSA is responsible for security fixtures--or measures that 
are part of a building--while FPS is responsible for law enforcement, 
security assessments, and non-fixture countermeasures. 

[13] Department of Homeland Security Appropriations Act of 2010, Pub. 
L. No. 111-83, 123 Stat. 2142, 2156 (Oct. 28, 2009). 

[14] This amount was raised slightly each of the 2 years before FPS 
transferred from GSA. 

[15] 40 U.S.C. 586(c). 

[16] Department of Homeland Security Appropriations Act of 2010, Pub. 
L. No. 111-83, Stat. 2142, 2156 (Oct. 28, 2009). 

[17] Offsetting collections result from businesslike transactions. The 
offsetting collections are recorded as offsets to spending. They are 
deemed offsetting when the collections are authorized by law to be 
credited to expenditure accounts, as in the case of FPS. See A 
Glossary of Terms Used in the Federal Budget Process, [hyperlink, 
http://www.gao.gov/products/GAO-05-734SP] (September 2005). 

[18] See Pub. L. No. 111-83, 123 Stat. 2142, 2156 (Oct. 28, 2009); 
Pub. L. No. 111-329, 122 Stat. 3574, 3659 (Sept. 30, 2008); Pub. L. 
No. 1110-161, 121 Stat. 1844, 2051 (Dec. 26, 2007); Pub. L. No. 109-
295, 120 Stat. 1355, 1361 (Oct. 4, 2006). 

[19] 41 CFR § 102-85.35. 

[20] GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 28, 
2008). 

[21] Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990), codified at, 
31 U.S.C. § 902. 

[22] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[23] Agencies derive their authority to charge fees either from the 
Independent Offices Appropriation Act of 1952 (IOAA) or from specific 
statutory authority. The IOAA states that regulations prescribed by 
the heads of executive agencies establishing a charge for goods or 
services are subject to policies prescribed by the President and shall 
be as uniform as practicable. Circular A-25 establishes the 
President's policy regarding user fees. 

[24] 31 U.S.C. § 902(a)(8). 

[25] Annually since 2007, the Secretary of Homeland Security has been 
required to certify to the House and Senate Appropriations Committees 
that FPS's operations will be fully funded in that fiscal year by its 
security fees. See Pub. L. No. 109-295, title II, 120 Stat. 1355, 1361 
(Oct. 4, 2006). Pub. L. No. 110-161, div. E, title II, 121 Stat. 1844, 
2051 (Dec. 26, 2007). Pub. L. No. 110-329, div. D, title II, 122 Stat. 
3574, 3659-60 (Sept. 30, 2008). Pub. L. No. 111-83, title III, 123 
Stat. 2142, 2156-7 (Oct. 28, 2009). 

[26] [hyperlink, http://www.gao.gov/products/GAO-08-683]. 

[27] Pub. L. No. 110-161, div. E, title II, 121 Stat. 1844, 2051 (Dec. 
26, 2008). FPS officials said the midyear increase was necessary to 
fund a congressionally-mandated FTE increase. 

[28] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[29] FPS's Security Services and Pricing Provision is dated September 
2007 through June 2008. However, FPS officials said the document has 
not been updated. 

[30] Pub. L. No. 109-295, title II, 120 Stat. 1355, 1361 (Oct. 4, 
2006). 

[31] Congress has expressed interest in seeing how fees align with 
activities, however. In the 2007 conference report accompanying fiscal 
year 2007 DHS appropriations, conferees said they were concerned about 
the ability of some agencies', including FPS, ability to effectively 
align resource requirements to workload and mission needs. To address 
the issue, conferees included specific reporting requirements and/or 
realigned the funding structure of select agencies experiencing 
difficulty aligning resources to the mission. 

[32] Customer agency officials provided varying reasons for procuring 
countermeasures from non-FPS sources. For example, officials said they 
thought it was less expensive, quicker, or that they have more control 
over the services than going through FPS. 

[33] As of March 30, 2011, FPS did not have a final date for when RAMP 
will have this capability. 

[34] Federal Accounting Standards Advisory Board, Statement of Federal 
Financial Accounting Standards No. 4: Managerial Cost Accounting 
Standards and Concepts (July 31, 1995). Cost information can be used 
by Congress and federal executives in making decisions about 
allocating federal resources, authorizing and modifying programs, and 
evaluating program performance; and can also be used by program 
managers in making managerial decisions to improve operating economy 
and efficiency. 

[35] For more information see, GAO, Homeland Security: Preliminary 
Observations on the Federal Protective Service's Workforce Analysis 
and Planning Efforts, [hyperlink, 
http://www.gao.gov/products/GAO-10-802R] (Washington, D.C.: June 14, 
2010). 

[36] FPS refers to this as a carry forward balance. Carryover balance 
is the portion of obligational authority that has not yet been 
obligated. Because FPS's fees are available to it without fiscal year 
limitation, unobligated balances are carried forward to future fiscal 
years. 

[37] Conversely, if actual contract costs are higher than estimated, 
FPS, not the customer agency, pays the overage. 

[38] We have reported on leading practices for capital budgeting and 
planning. See GAO, Executive Guide: Leading Practices in Capital 
Decision-Making, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-99-32] (Washington, D.C.: 
December 1998). 

[39] GAO, Budget Issues: Budgeting for Federal Capital, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-97-5] (Washington, D.C.: Nov. 12, 
1996). 

[40] [hyperlink, http://www.gao.gov/products/GAO-08-683]. 

[41] [hyperlink, http://www.gao.gov/products/GAO-09-749]. 

[42] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[43] According to the ISC standards, the objective of the risk 
management process is to identify an achievable level of protection 
that is commensurate with--or as close as possible to--the level of 
risk, without exceeding the level of risk. Levels of risk determined 
for each undesirable event should be mitigated by countermeasures that 
provide a commensurate level of protection--the higher the risk, the 
higher the level of protection. The facility security level 
determination is an estimation of the level of risk at a facility. The 
baseline level of protection is intended to mitigate that estimated 
risk. 

[44] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[45] [hyperlink, http://www.gao.gov/products/GAO-08-693]. 

[46] Marginal cost is equal to the cost of providing an additional 
unit of the good or service. 

[47] This is known as the beneficiary pays principle of equity. See 
[hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[48] The budget resolution sets a cap, called a 302a allocation, on 
total appropriations for the Appropriations Committees. In turn, the 
Appropriations Committees provide caps, or 302b allocations, to their 
subcommittees. If a subcommittee were to exceed its 302b allocation, 
another subcommittee would have to allocate less. The section 302 
allocations refer to relevant sections of the Congressional Budget and 
Impoundment Control Act of 1974. 2 U.S.C. §633. 

[49] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[50] [hyperlink, http://www.gao.gov/products/GAO-08-683]. 

[51] We previously reported that FPS does not have complete and 
accurate security points of contact for the customers in GSA 
facilities who are responsible for working with FPS and recommended 
that FPS collect and maintain an accurate and comprehensive list of 
all facility designated points of contact, as well as a system for 
regularly updating the list. FPS has not yet implemented this 
recommendation. [hyperlink, http://www.gao.gov/products/GAO-09-749]. 

[52] Homeland Security Act of 2002, Pub. L. No. 107-296, 116 Stat. 
2135 (Nov. 25, 2002). 

[53] GSA officials said FPS's security bills are posted on Rent on the 
Web at the request of FPS because FPS does not have a system to post 
security bills. 

[54] [hyperlink, http://www.gao.gov/products/GAO-08-386SP] and Federal 
User Fees: Key Aspects of International Air Passenger Inspection Fees 
Should Be Addressed Regardless of Whether Fees Are Consolidated, 
[hyperlink, http://www.gao.gov/products/GAO-07-1131] (Washington, 
D.C.: Sept. 24, 2007). 

[55] GAO, Managing for Results: Opportunities to Strengthen Agencies' 
Customer Service Efforts, [hyperlink, 
http://www.gao.gov/products/GAO-11-44] (Washington, D.C.: Oct. 27, 
2010). 

[56] Costs for vacant space are not absorbed by the remaining tenants 
in a building; rather, GSA pays for these costs. 

[57] Department of Homeland Security Appropriations Act. S. 3607, 
111TH Cong. (2010). 

[58] H.R. 6122, 111thCong. (2010). 

[59] S. 3806, 111th Cong. (2010). 

[60] [hyperlink, http://www.gao.gov/products/GAO-08-683]. 

[61] Other reasons we previously reported customer agencies may not 
approve FPS security equipment countermeasure recommendations include: 
(1) customer agencies may not have the security expertise needed to 
make risk-based decisions, (2) consensus may be difficult to build 
among multiple customer agencies, (3) customer agencies may find the 
associated costs prohibitive, and (4) customer agencies may lack a 
complete understanding of why recommended countermeasures are 
necessary because they do not receive facility security assessments in 
their entirety. GAO, Homeland Security: Greater Attention to Key 
Practices Would Improve the Federal Protective Service's Approach to 
Facility Protection, [hyperlink, 
http://www.gao.gov/products/GAO-10-142] (Washington, D.C.: Oct. 23, 
2009). 

[62] [hyperlink, http://www.gao.gov/products/GAO-08-683]. 

[63] See A Glossary of Terms Used in the Federal Budget Process, 
[hyperlink, http://www.gao.gov/products/GAO-05-734SP] (September 2005). 

[64] [hyperlink, http://www.gao.gov/products/GAO-07-1131]. 

[65] Such a strategy would limit the amount of budget authority 
available to FPS but it should be noted that, as with any direct 
appropriation, the choice to make budget authority available to FPS 
means that Congress has less budget authority available for other 
programs. 

[66] [hyperlink, http://www.gao.gov/products/GAO-05-734SP]. 

[67] GAO, Federal Energy Management: GSA's Recovery Act Program Is on 
Track, but Opportunities Exist to Improve Transparency, Performance 
Criteria, and Risk Management, [hyperlink, 
http://www.gao.gov/products/GAO-10-630] (Washington, D.C.: June 16, 
2010). 

[68] GAO, Disaster Cost Estimates: FEMA Can Improve Its Learning from 
Past Experience and Management of Disaster-Related Resources, 
[hyperlink, http://www.gao.gov/products/GAO-08-301] (Washington, D.C.: 
Feb. 22, 2008). 

[69] During this time we discussed information related to FPS's fiscal 
year 2010 and 2011 budgets with the committee. We also suspended work 
on this engagement for 6 months, as agreed with you, due to competing 
priorities. 

[End of section] 

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