Personnel Vetting: DOD Should Improve Management and Operation of Its Background Investigation Working Capital Fund
Fast Facts
The Department of Defense conducts background checks for over 4 million employees and contractors across the federal government. It finances the background checks by charging fees to other agencies through a working capital fund—a self-sustaining fund that breaks even over time.
DOD must maintain a cash reserve in the fund to cover operational costs for the background checks. But it overestimated how much money it needed to hold in reserve—leading it to charge unnecessarily high prices for its services. We recommended that DOD implement guidance for how to accurately calculate its cash reserve, among other recommendations.
Highlights
What GAO Found
The Defense Counterintelligence and Security Agency (DCSA) uses a working capital fund (WCF) to recover the costs of providing personnel vetting products and services, such as background investigations. Defense WCFs must plan to maintain monthly cash balances within an operating range. DCSA generally did so for fiscal years 2020 through 2022. However, GAO found DCSA miscalculated one element of its operating range in fiscal year 2021, resulting in an operating range being more than five times that of other defense WCFs. If calculated correctly, DCSA could have reduced prices and saved customers hundreds of millions of dollars.
Defense Working Capital Funds' Operating Ranges, Fiscal Year 2021
Source: GAO analysis of Defense Counterintelligence Security Agency (DCSA) and DOD data. | GAO-23-105812
DCSA implemented two of four key operating principles for effective WCF management.
Assessment of DCSA's Management of Its Working Capital Fund
|
Key operating principle |
GAO analysis |
|---|---|
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Clearly delineate roles and responsibilities |
● |
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Ensure self-sufficiency by recovering the agency's actual costs |
● |
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Measure performance |
◐ |
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Build in flexibility to obtain customer input and meet customer needs |
◐ |
Legend: ● Implemented ◐ Partially Implemented
Source: GAO analysis of Defense Counterintelligence Security Agency (DCSA) documents and GAO-12-56. | GAO-23-105812
GAO found that DCSA's management of its WCF is limited by the following:
- DCSA has not aligned performance measures with its strategic goal for its WCF or developed targets for those performance measures, hindering its ability to evaluate and improve WCF performance.
- DCSA could improve its understanding of customer needs by developing a systematic and reliable method for obtaining and analyzing information on customer satisfaction with WCF performance.
Why GAO Did This Study
The U.S. government relies on over 4 million personnel with security clearances to provide critical public services, including national defense. In October 2019, the Department of Defense (DOD) became the federal government's primary background investigation service provider through a new agency, DCSA, which considers security clearances for millions of federal and contractor personnel. DCSA established a WCF to finance its personnel vetting activities.
House Report 117-118, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2022, included a provision for GAO to evaluate, among other things, the extent to which DCSA maintained its monthly cash balances within established operating ranges and calculated cash requirements correctly, and managed its WCF in accordance with key operating principles for WCFs.
To address these objectives, GAO assessed whether WCF monthly cash balances were within operating ranges; compared DCSA's calculation of its operating range with DOD's cash management guidance; assessed DCSA's WCF management; and interviewed officials.
Recommendations
GAO is making six recommendations to the Secretary of Defense, including that DCSA issues and implements guidance for correctly calculating its WCF operating range; evaluate its WCF performance measures; establish performance targets; and implement a systematic and reliable method for analyzing customer satisfaction. DOD concurred with these recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should ensure that the Director of the DCSA issues and implements guidance for calculating the operating range of DCSA's working capital fund that is consistent with DOD's cash management policy. (Recommendation 1) |
DOD concurred with this recommendation. In September 2023, the Defense Counterintelligence Security Agency (DCSA) published an updated cash management policy that is consistent with DOD's cash management policy. In DCSA's Revolving Funds Narrative for Fiscal Year (FY) 2025 Budget Estimates, DCSA updated the operating range for its working capital fund to align with the September 2023 guidance. This recommendation is closed as implemented.
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| Department of Defense | The Secretary of Defense should ensure that the Director of the DCSA adjusts the prices charged to customers upon implementation of DCSA guidance to ensure that DCSA's cash balance is within its operating range. (Recommendation 2) |
DOD concurred with this recommendation. In the Defense Counterintelligence Security Agency's (DCSA) Revolving Funds Narrative Fiscal Year (FY) 2025 Budget Estimates, DCSA updated the operating range for its working capital fund to align with its September 2023 cash management guidance. In this budget submission, DCSA narrowed its operating range for the working capital fund and included a one percent reduction in prices, from the fiscal year 2023 rates, for background investigation services. In September 2024, DCSA provided documentation of its annual costing and pricing process with timelines that implements its new cash management guidance. DCSA also provided documentation of its fiscal year 2024 analysis which will support its fiscal year 2026 budget estimates and price determinations. This recommendation is closed as implemented.
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| Department of Defense | The Secretary of Defense should ensure that the Director of the DCSA presents WCF upper and lower operating range amounts in the DCSA WCF annual budget submission to Congress in addition to the budget supplement, starting with the fiscal year 2025 budget. (Recommendation 3) |
DOD concurred with this recommendation. The Defense Counterintelligence Security Agency (DCSA) included the upper and lower operating range amounts of its working capital fund in its budget submission for fiscal year 2025, the DCSA Revolving Funds Narrative Fiscal Year (FY) 2025 Budget Estimates. If DCSA continues to provide this information in future years' budget submissions, we will update the status of this recommendation.
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| Department of Defense | The Secretary of Defense should ensure that the Director of the DCSA evaluates DCSA's existing performance measures to confirm they are appropriate for assessing progress toward DCSA's strategic goal; develop new performance measures if needed; and articulate how those performance measures relate to DCSA's strategic goals. (Recommendation 4) |
DOD concurred with this recommendation. DOD officials stated that DCSA is evaluating its performance measures and their appropriateness for assessing progress toward its strategic goals through agency-wide transformation initiatives. DCSA expects to refine and develop additional performance measures by December 2024 and provide documentation in early 2025. When we receive documentation of actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Defense | The Secretary of Defense should ensure that the Director of the DCSA establishes performance targets for each of DCSA's performance measures. (Recommendation 5) |
DOD concurred with this recommendation. DOD officials stated that DCSA plans to codify performance targets and ranges for relevant performance measures by December 2024 and will provide relevant documentation in early 2025. When we receive documentation of actions the agency has taken in response to this recommendation, we will provide updated information.
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| Department of Defense | The Secretary of Defense should ensure that the Director of the DCSA implements a systematic and reliable method for obtaining and analyzing information on customer needs and satisfaction with WCF performance. DCSA could accomplish this by establishing new methods for collecting and analyzing feedback from customers or by redesigning its customer satisfaction survey to follow leading practices for federal agency surveys. (Recommendation 6) |
DOD concurred with this recommendation. DOD officials stated that DCSA is revising its FY 2024 customer survey and incorporating leading practices for federal agency surveys during the revision. When we receive documentation of actions the agency has taken in response to this recommendation, we will provide updated information.
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