Budget Issues
Franchise Fund Pilot Review Gao ID: GAO-03-1069 August 22, 2003Congress is considering the reauthorization of the six franchise fund pilots authorized by the Government Reform Act of 1994. These self-supporting business-like entities were established to provide common administrative services on a fully reimbursable basis. The authorization for most of the pilots will expire at the end of fiscal year 2003. In addition to the suggestion of giving the pilots permanent authorization, there has been some discussion in recent years of expanding the franchise fund concept so that all departments and independent agencies can set up a franchise fund. To provide the context to evaluate franchise fund pilots and fully understand reauthorization issues, GAO agreed to identify the many funds, called intragovernmental revolving funds, that operate with purposes similar to that of franchise funds and to analyze their legal authorities to determine if franchise funds were somehow unique. In addition, we examined the operations and managerial cost accounting processes of the franchise fund pilots at the Departments of the Interior and Commerce. We determined if they had taken into account the criteria suggested by the Office of Management and Budget (OMB), including: (1) adhering to OMB/Chief Financial Officers (CFO) Council's 12 business operating principles, (2) accounting for full cost, and (3) conducting audits of financial statements at the fund level.
The six franchise fund pilots are part of a group of 34 intragovernmental revolving (IR) funds that were created to provide the common support services required by many federal agencies. In general, the legal authorities for these 34 funds are very similar. Twelve of the 34 funds--including 5 of the franchise fund pilots--have explicit authority to charge for an operating reserve and/or to retain a reserve for acquisition of capital equipment and financial management improvements. The franchise fund pilots at the Departments of Interior and Commerce have both (1) taken into account many of the 12 business operating principles, (2) designed their cost accounting processes to set fees to recover the full cost of operations, and (3) progressed toward implementing the main cost accounting standards. The Interior Franchise Fund's (IFF) major business line, GovWorks, provides acquisition services and has seen dramatic growth in revenue and workload since fiscal year 1997. GovWorks expects continuing growth through fiscal year 2007. The IFF has been subject to an audit of its financial statements at the franchise fund level through fiscal year 2002. The Commerce Franchise Fund's (CFF) only business line, Office of Computer Services (OCS), provides information technology infrastructure support services and has had a declining revenue and customer base. However, OCS expects its revenues to remain stable through fiscal year 2005. The CFF was subject to financial audits at the franchise fund level for fiscal years 1997 and 1998, and at the department level for fiscal years 2001 and 2002. No audits were conducted for fiscal years 1999 or 2000. Longer-term reauthorization (more than 1 or 2 years) would be helpful to the operation of franchise fund pilots, but neither their legal authority nor their operation makes franchise funds unique compared to other IR funds. A primary attraction to the franchise fund label is the explicit ability to retain reserves, and Congress could, and has, given this authority to other IR funds. The explicit authority provisions granted to franchise fund pilots (and a few other IR funds) could be considered case-by-case for individual IR funds. In deciding whether to provide these authorities to any individual fund, Congress could use the same criteria suggested by OMB for franchise fund pilots, including: (1) examining operations against OMB/CFO's 12 business operating principles, (2) determining if managerial cost accounting processes are in place to account for the full unit costs of outputs produced, and (3) considering if annual or periodic independent audits are being conducted at the fund level to ensure the reliability of the fund's financial information. Individual case-by-case authority would also permit Congress to consider and evaluate the agency's commitment and the strength of the IR fund's leadership, which are additional factors that can influence the success of the fund.
GAO-03-1069, Budget Issues: Franchise Fund Pilot Review
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Report to the Committee on Government Reform, House of Representatives:
August 2003:
BUDGET ISSUES:
Franchise Fund Pilot Review:
GAO-03-1069:
GAO Highlights:
Highlights of GAO-03-1069, a report to the Committee on Government
Reform, House of Representatives
Why GAO Did This Study:
Congress is considering the reauthorization of the six franchise fund
pilots authorized by the Government Reform Act of 1994. These self-
supporting business-like entities were established to provide common
administrative services on a fully reimbursable basis. The
authorization for most of the pilots will expire at the end of fiscal
year 2003. In addition to the suggestion of giving the pilots
permanent authorization, there has been some discussion in recent
years of expanding the franchise fund concept so that all departments
and independent agencies can set up a franchise fund. To provide the
context to evaluate franchise fund pilots and fully understand
reauthorization issues, GAO agreed to identify the many funds, called
intragovernmental revolving funds, that operate with purposes similar
to that of franchise funds and to analyze their legal authorities to
determine if franchise funds were somehow unique. In addition, we
examined the operations and managerial cost accounting processes of
the franchise fund pilots at the Departments of the Interior and
Commerce. We determined if they had taken into account the criteria
suggested by the Office of Management and Budget (OMB), including: (1)
adhering to OMB/Chief Financial Officers (CFO) Council‘s 12 business
operating principles, (2) accounting for full cost, and (3) conducting
audits of financial statements at the fund level.
What GAO Found:
The six franchise fund pilots are part of a group of 34
intragovernmental revolving (IR) funds that were created to provide
the common support services required by many federal agencies. In
general, the legal authorities for these 34 funds are very similar.
Twelve of the 34 funds”including 5 of the franchise fund pilots”have
explicit authority to charge for an operating reserve and/or to retain
a reserve for acquisition of capital equipment and financial
management improvements.
The franchise fund pilots at the Departments of Interior and Commerce
have both (1) taken into account many of the 12 business operating
principles, (2) designed their cost accounting processes to set fees
to recover the full cost of operations, and (3) progressed toward
implementing the main cost accounting standards. The Interior
Franchise Fund‘s (IFF) major business line, GovWorks, provides
acquisition services and has seen dramatic growth in revenue and
workload since fiscal year 1997. GovWorks expects continuing growth
through fiscal year 2007. The IFF has been subject to an audit of its
financial statements at the franchise fund level through fiscal year
2002. The Commerce Franchise Fund‘s (CFF) only business line, Office
of Computer Services (OCS), provides information technology
infrastructure support services and has had a declining revenue and
customer base. However, OCS expects its revenues to remain stable
through fiscal year 2005. The CFF was subject to financial audits at
the franchise fund level for fiscal years 1997 and 1998, and at the
department level for fiscal years 2001 and 2002. No audits were
conducted for fiscal years 1999 or 2000.
Longer-term reauthorization (more than 1 or 2 years) would be helpful
to the operation of franchise fund pilots, but neither their legal
authority nor their operation makes franchise funds unique compared to
other IR funds. A primary attraction to the franchise fund label is
the explicit ability to retain reserves, and Congress could, and has,
given this authority to other IR funds. The explicit authority
provisions granted to franchise fund pilots (and a few other IR funds)
could be considered case-by-case for individual IR funds. In deciding
whether to provide these authorities to any individual fund, Congress
could use the same criteria suggested by OMB for franchise fund
pilots, including: (1) examining operations against OMB/CFO‘s 12
business operating principles, (2) determining if managerial cost
accounting processes are in place to account for the full unit costs
of outputs produced, and (3) considering if annual or periodic
independent audits are being conducted at the fund level to ensure the
reliability of the fund‘s financial information. Individual case-by-
case authority would also permit Congress to consider and evaluate the
agency‘s commitment and the strength of the IR fund‘s leadership,
which are additional factors that can influence the success of the
fund.
www.gao.gov/cgi-bin/getrpt?GAO-03-1069.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Susan J. Irving at
(202) 512-9142 or irvings@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Intragovernmental Revolving Funds and Their Legal Authorities:
Operations of the Franchise Fund Pilots at Interior and Commerce:
Reauthorization Issues:
Appendixes:
Appendix I: Franchise Fund Pilot Review:
Appendix II: 12 Business Operating Principles:
Appendix III: Authority to Retain Unobligated Balances--Franchise
Pilots and Comparable IR Funds:
Letter August 22, 2003:
The Honorable Tom Davis
Chairman
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives:
In your January 9, 2003, letter you asked us to evaluate the franchise
fund pilots authorized by the Government Management Reform Act of 1994
as you consider their reauthorization. To fully understand
reauthorization issues, we agreed to (1) examine the universe of
intragovernmental revolving (IR) funds[Footnote 1] (of which franchise
funds are a type) and their legal authorities and to determine how
these authorities differ, (2) study the operations of selected
franchise fund pilots, and (3) identify issues that Congress might
consider as it contemplates permanent reauthorization of franchise
funds. On July 11, 2003, we briefed committee staff on the results of
our work. As agreed with your office, this letter summarizes and
transmits the information provided in that briefing.
We used budget data to identify IR funds and reviewed the U.S. Code to
analyze their legal authorities. We selected the franchise fund pilots
at the Departments of the Interior and Commerce for case studies. We
determined that GovWorks is the primary component of the Interior
franchise fund (IFF) and that the Office of Computer Services (OCS) is
the sole component of the Commerce franchise fund (CFF), and our case-
study work focused on these two entities. We interviewed agency
officials at the department and franchise fund levels, examined a
variety of documentation, and did an in-depth review of the managerial
cost accounting processes at the franchise fund level. During this
review, we examined work done by other auditors and performed limited
testing of data reliability but did not conduct audit procedures
designed to render an opinion on the franchise funds' financial
information. We obtained comments from GovWorks and OCS on a draft of
the report relevant to each and incorporated those comments, which were
technical in nature, where appropriate. Our work was conducted in
Washington, D.C., from January through July 2003, in accordance with
generally accepted government auditing standards. (See pages 12 to
14.):
Results in Brief:
Although longer-term authorization for franchise fund pilots would be
helpful to the operation of the funds and their clients, neither their
legal authority nor their operation makes franchise funds unique
compared to other IR funds. A primary attraction to the franchise fund
label is the explicit ability to retain 4 percent of total annual
income, and Congress could, and has, given this authority to other IR
funds. Since most large agencies already have at least one IR fund,
allowing all departments and independent agencies to set up franchise
funds is unnecessary. Instead, the explicit authority provisions
granted to franchise fund pilots (and a few other IR funds) could be
considered case-by-case for individual IR funds. In deciding whether to
provide these authorities, Congress could use the same criteria
suggested for franchise fund pilots, including: (1) examining
operations against the 12 business operating principles established by
the Office of Management and Budget (OMB) and the Chief Financial
Officers (CFO) Council, (2) determining if managerial cost accounting
processes are in place to account for the full unit costs of outputs
produced, and (3) considering if annual or periodic independent audits
are being conducted at the fund level to ensure the reliability of the
fund's financial information. Individual case-by-case authority would
also permit Congress to consider and evaluate the agency's commitment
and the strength of the IR fund's leadership, which are additional
factors that can influence the success of the fund. (See pages 47 and
48.):
Background:
Federal agencies are prohibited by law from transferring funds from one
agency to another, unless otherwise authorized by law. The Economy Act
of 1932 authorizes a federal agency to provide goods or services to
another federal agency and generally provides authority for federal
agencies to enter into intragovernmental transactions when no other,
more specific, authority applies. However, the Economy Act restricts
flexibility by requiring the client agency to deobligate fiscal year
funds at the end of the period of availability to the extent that these
funds have not been obligated by the performing agency. In contrast,
where an interagency agreement is based on specific statutory authority
other than the Economy Act, an agency is not required to deobligate
funds at the end of the period of availability. The specific legal
authorities creating IR funds authorize these funds to enter into
intragovernmental transactions and provide more flexibility by allowing
the client agency's fiscal year funds to remain obligated, even after
the end of the fiscal year, to pay the IR fund for the provision of
services which meet a legitimate or bona fide need incurred during the
period of availability of the customer agency's appropriation.[Footnote
2],[Footnote 3]
The Government Management Reform Act of 1994 authorized OMB to
designate six franchise fund pilots. These pilots are a type of IR fund
that were established as self-supporting business-like entities
providing common administrative services on a fully reimbursable basis.
Between May 1996 and January 1997, OMB designated pilots at the
Departments of Commerce, Veterans Affairs (VA), Health and Human
Services (HHS), the Interior, and the Treasury, and at the
Environmental Protection Agency (EPA). As criteria for operation, OMB
and the CFO Council defined 12 business operating principles for the
franchise fund pilots.[Footnote 4] OMB also stressed the importance of
accounting for full cost[Footnote 5] and suggested that agencies
consider the usefulness of audited financial statements at the fund
level. The six pilots provide a variety of common services, such as
acquisition management, financial management services, and employee
assistance programs. They are similar to other business-like entities
such as the National Finance Center (NFC) at the Department of
Agriculture and the Federal Systems Integration and Management Center
(FEDSIM) at the General Services Administration (GSA).
The pilots were originally to expire at the end of fiscal year 1999,
but the date has been extended three times (the last two times on an
annual basis). As of August 2003, authorization for most of the pilots
will expire at the end of fiscal year 2003. The Treasury franchise fund
is authorized through the end of fiscal year 2004 and the EPA pilot has
permanent authorization. In addition to suggestions of permanent
authorization for the pilots, there has been some discussion in recent
years of expanding the franchise fund concept governmentwide, that is,
allowing all departments and independent agencies to set up franchise
funds.
Intragovernmental Revolving Funds and Their Legal Authorities:
We identified 58 IR funds with varying titles and purposes. Most IR
funds function under the title or label "working capital fund."
Examples of other labels include revolving funds, supply funds, and
franchise funds. Most large agencies have at least one IR fund, and
many have more than one. For example, Interior has a franchise fund
pilot and four working capital funds. Intragovernmental revolving funds
were created for a variety of purposes, but most frequently, to provide
the common support services required by many federal agencies. Examples
include photocopying, payroll services, information technology
services, and financial management services. We determined that 34 of
the 58 IR funds provide common services, while the remaining 24 have
very specific purposes of providing goods or services to satisfy needs
unique to their agencies. (See pages 22 and 23.):
The 34 IR funds that provide common services operate under similar
legal authorities. These authorities generally specify the means of
initial capitalization and allow both internal entities and external
agencies to pay the IR funds for services provided, either by
reimbursement or in advance (some are required to receive payments in
advance). Intragovernmental revolving funds are generally required to
charge rates for their services sufficient to recover all operational
expenses, although over the long term they are not intended to earn
more than is required to break-even. In fact, the legal authorities for
IR funds commonly require the return of surplus amounts to the Treasury
at the end of the fiscal year. However, some receipts may be carried
over to the next fiscal year as unobligated balances, including amounts
reserved to cover the costs of annual leave and depreciation. Some
additional discretion to carry over unobligated balances is provided to
22 of the 34 IR funds. For example, the head of the agency is allowed
to determine the level of funding required to meet the needs of 16 of
the IR funds and 6 IR funds are not specifically required to return
surpluses to the Treasury. This discretion does not mean that IR funds
are allowed to operate with continuing surpluses; over the long term,
they are still required to break-even. The remaining 12 of the 34
funds--including 5 of the franchise fund pilots--have explicit
authority to retain additional unobligated balances. By statute, the 12
funds are authorized to charge for an operating reserve and/or to
retain a reserve for acquisition of capital equipment and financial
management improvements. Five of the franchise fund pilots have
explicit authority for both a "reasonable operating reserve" and "to
retain up to 4 percent of total annual income for acquisition of
capital equipment and financial management improvements."[Footnote 6]
Appendix 3 shows the various authorities by fund. (See pages 24 through
27.):
Operations of the Franchise Fund Pilots at Interior and Commerce:
During our case studies at the Interior and Commerce franchise fund
pilots, we found that both have (1) taken into account many of the 12
business operating principles, (2) designed their cost accounting
processes to set fees to recover the full cost of operations, and (3)
progressed toward implementing the five main cost accounting
standards.[Footnote 7] The IFF's major business line, GovWorks,
provides acquisition services and has seen dramatic growth in revenue
and workload since fiscal year 1997. GovWorks projects continuing
growth through fiscal year 2007. The IFF has been subject to an audit
of its financial statements at the franchise fund level through fiscal
year 2002. The CFF's only business line, OCS, provides information
technology infrastructure support services and has had a declining
revenue and customer base. However, OCS expects its revenues to remain
stable through fiscal year 2005. The CFF was subject to financial
audits at the franchise fund level for fiscal years 1997 and 1998, and
at the department level for fiscal years 2001 and 2002. No audits were
conducted for fiscal years 1999 or 2000. (See pages 28 through 35 for
the IFF and pages 36 through 43 for the CFF.):
Reauthorization Issues:
During the course of our work, we identified several reauthorization
issues. Franchise fund managers cited the benefits of working under the
franchise fund label and perceived the ability to retain 4 percent of
total annual income as a benefit of a franchise fund. However, there is
not a clear understanding of the relationship between the "4 percent
retention" provision and the "operating reserve" provision.
Clarification of the relationship between these two provisions could
avoid different interpretations. (See pages 44 and 45.):
If franchise funds were to be reauthorized, longer term
reauthorizations (i.e., more than 1 or 2 years) would be beneficial and
might provide less uncertainty for current and potential clients than
do annual reauthorizations. Franchise fund managers mentioned other
changes that might be helpful. Although the ability to receive payment
in advance is sometimes advantageous, the requirement for advance
payment reduces the IR funds' flexibility to work with some clients.
One franchise fund manager said that additional human capital
flexibilities, such as in hiring practices, might be beneficial. (See
page 45.):
If the pilots were not reauthorized, many of the services provided
would probably continue under other authorities. For example, both
GovWorks and OCS operated under different authorities prior to becoming
part of their respective franchise fund pilots. OCS officials told us
that they would probably continue to operate under the authority of the
working capital fund if the CFF pilot did not continue. GovWorks would
seek authorization as a working capital fund so that it would not have
to operate under the authority of the Economy Act. (See page 46.):
:
As agreed with your office, unless you announce the contents of this
report earlier, we plan no further distribution until 30 days from the
date of this letter. At that time, we will provide copies of this
report to other interested congressional committees and make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions regarding the information in
this report, please contact me at (202) 512-9142 or Christine Bonham,
Assistant
Director, at (202) 512-9576. Key contributors to this review were
Jennifer A. Ashford, Michael S. LaForge, Bill Wright, Hannah R. Laufe,
Mark P. Connelly, and Elizabeth Lessman.
Susan J. Irving
Director,
Federal Budget Analysis
Strategic Issues:
Signed by Susan J. Irving:
[End of section]
Appendixes:
[End of section]
Appendix I: Franchise Fund Pilot Review:
[See PDF for image]
[End of figure]
[End of section]
Appendix II: 12 Business Operating Principles:
Operating Principle: 1) Services; OMB Description: The enterprise
should only provide common administrative support services.
Operating Principle: 2) Organization; OMB Description: The organization
would have a clearly defined organizational structure including readily
identifiable delineation of responsibilities and functions and
separately identifiable units for the purpose of accumulating and
reporting revenues and costs. The funds of the organization must be
separate and identifiable and not commingled with another
organization.
Operating Principle: 3) Competition; OMB Description: The provision of
services should be on a fully competitive basis. The organization's
operation should not be "sheltered" or be a monopoly.
Operating Principle: 4) Self-sustaining/; Full Cost Recovery; OMB
Description: The operation should be self-sustaining. Fees will be
established to recover the "full costs," as defined by standards issued
in accordance with FASAB (the Federal Accounting Standards Advisory
Board).
Operating Principle: 5) Performance Measures; OMB Description: The
organization must have a comprehensive set of performance measures to
assess each service that is being offered.
Operating Principle: 6) Benchmarks; OMB Description: Cost and
performance benchmarks against other "competitors" are maintained and
evaluated.
Operating Principle: 7) Adjustments to Business; Dynamics; OMB
Description: The ability to adjust capacity and resources up or down as
business rises or falls, or as other conditions dictate, if necessary.
Operating Principle: 8) Surge Capacity; OMB Description: Resources to
provide for "surge" capacity and peak business periods, capital
investments, and new starts should be available.
Operating Principle: 9) Cessation of Activity; OMB Description: The
organization should specify that prior to curtailing or eliminating a
service, the provider will give notice within a reasonable and mutually
agreed time frame so the customer may obtain services elsewhere. Notice
will also be given within a reasonable and mutually agreeable timeframe
to the provider when the customer elects to obtain services elsewhere.
Operating Principle: 10) Voluntary Exit; OMB Description: Customers
should be able to "exit" and go elsewhere for services after
appropriate notification to the service provider and be permitted to
choose other providers to obtain needed service.
Operating Principle: 11) FTE Accountability[A]; OMB Description: Full
Time Equivalents (FTEs) would be accounted for in a manner consistent
with the Federal Workforce Restructuring Act and OMB requirements, such
as Circular A-11.
Operating Principle: 12) Initial Capitalization[A]; OMB Description:
Capitalization of franchises, administrative service, or other cross-
servicing operations should include the appropriate FTE commensurate
with the level of effort the operation has committed to perform.
Source: OMB and the CFO Council:
[A] We did not examine these principles in our case study of the
Interior and Commerce franchise fund pilots.
[End of table]
[End of section]
Appendix III: Authority to Retain Unobligated Balances--Franchise
Pilots and Comparable IR Funds:
1; Department/ agency: Commerce; Fund name/bureau: Franchise fund,
Departmental Management; Secretarial discretion to retain unobligated
balances[A]: No; Explicit authority to retain operating reserve:
Yes; Explicit authority to retain up to 4% of total annual income: Yes;
Other explicit authority to retain balances: No.
2; Department/ agency: Interior; Fund name/bureau: Franchise fund,
Minerals Management Service; Secretarial discretion to retain
unobligated balances[A]: No; Explicit authority to retain
operating reserve: Yes; Explicit authority to retain up to 4% of total
annual income: Yes; Other explicit authority to retain balances: No.
3; Department/ agency: Treasury; Fund name/bureau: Franchise fund,
Departmental Offices; Secretarial discretion to retain unobligated
balances[A]: No; Explicit authority to retain operating reserve:
Yes; Explicit authority to retain up to 4% of total annual income: Yes;
Other explicit authority to retain balances: No.
4; Department/ agency: VA; Fund name/bureau: Franchise fund,
Departmental Administration; Secretarial discretion to retain
unobligated balances[A]: No; Explicit authority to retain
operating reserve: Yes; Explicit authority to retain up to 4% of total
annual income: Yes; Other explicit authority to retain balances: No.
5; Department/ agency: EPA; Fund name/bureau: Working capital fund
(WCF); Secretarial discretion to retain unobligated balances[A]:
No; Explicit authority to retain operating reserve: Yes; Explicit
authority to retain up to 4% of total annual income: Yes; Other explicit
authority to retain balances: No.
6; Department/ agency: Transportation; Fund name/bureau:
Administrative services franchise fund, FAA; Secretarial discretion to
retain unobligated balances[A]: No; Explicit authority to retain
operating reserve: Yes; Explicit authority to retain up to 4% of total
annual income: Yes; Other explicit authority to retain balances: No.
7; Department/ agency: Commerce; Fund name/bureau: WCF, Census;
Secretarial discretion to retain unobligated balances[A]: No;
Explicit authority to retain operating reserve: Yes; Explicit authority
to retain up to 4% of total annual income: No; Other explicit
authority to retain balances: No.
8; Department/ agency: Homeland Security; Fund name/bureau: WCF,
Departmental Management; Secretarial discretion to retain unobligated
balances[A]: No; Explicit authority to retain operating reserve:
Yes; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
9; Department/ agency: Justice; Fund name/bureau: WCF, General
Administration; Secretarial discretion to retain unobligated
balances[A]: No; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
Yes; Other explicit authority to retain balances: Yes.
10; Department/ agency: CIA; Fund name/bureau: Central services WCF;
Secretarial discretion to retain unobligated balances[A]: No;
Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: Yes; Other explicit
authority to retain balances: No.
11; Department/ agency: Labor; Fund name/bureau: WCF, Departmental
Management; Secretarial discretion to retain unobligated balances[A]:
No; Explicit authority to retain operating reserve: No;
Explicit authority to retain up to 4% of total annual income: No;
Other explicit authority to retain balances: Yes.
12; Department/ agency: National Archives and Records Administration;
Fund name/bureau: Records center revolving fund; Secretarial discretion
to retain unobligated balances[A]: No; Explicit authority to
retain operating reserve: No; Explicit authority to retain up to
4% of total annual income: No; Other explicit authority to retain
balances: Yes.
13; Department/ agency: Agriculture; Fund name/bureau: WCF, Executive
Operations; Secretarial discretion to retain unobligated balances[A]:
Yes; Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: No; Other
explicit authority to retain balances: No.
14; Department/ agency: Commerce; Fund name/bureau: WCF, Departmental
Management; Secretarial discretion to retain unobligated balances[A]:
Yes; Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: No; Other
explicit authority to retain balances: No.
15; Department/ agency: Commerce; Fund name/bureau: WCF, National
Institute of Standards and Technology; Secretarial discretion to retain
unobligated balances[A]: Yes; Explicit authority to retain operating
reserve: No; Explicit authority to retain up to 4% of total annual
income: No; Other explicit authority to retain balances: No.
16; Department/ agency: Defense--Military; Fund name/bureau: Buildings
maintenance fund; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
17; Department/ agency: Energy; Fund name/bureau: WCF, Departmental
Administration; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
18; Department/ agency: HHS[B]; Fund name/bureau: HHS service and
supply fund, Program Support Center; Secretarial discretion to retain
unobligated balances[A]: Yes; Explicit authority to retain operating
reserve: No; Explicit authority to retain up to 4% of total annual
income: No; Other explicit authority to retain balances: No.
19; Department/ agency: Housing and Urban Development; Fund name/
bureau: WCF, Management and Administration; Secretarial discretion to
retain unobligated balances[A]: Yes; Explicit authority to retain
operating reserve: No; Explicit authority to retain up to 4% of
total annual income: No; Other explicit authority to retain
balances: No.
20; Department/ agency: State; Fund name/bureau: WCF, Administration of
Foreign Affairs; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
21; Department/ agency: Interior; Fund name/bureau: WCF, Bureau of
Reclamation; Secretarial discretion to retain unobligated balances[A]:
Yes; Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: No; Other
explicit authority to retain balances: No.
22; Department/ agency: Interior; Fund name/bureau: WCF, Departmental
Management; Secretarial discretion to retain unobligated balances[A]:
Yes; Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: No; Other
explicit authority to retain balances: No.
23; Department/ agency: Interior; Fund name/bureau: WCF, United States
Geological Survey; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
24; Department/ agency: Treasury; Fund name/bureau: WCF, Departmental
Offices; Secretarial discretion to retain unobligated balances[A]: Yes;
Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: No; Other
explicit authority to retain balances: No.
25; Department/ agency: Transportation; Fund name/bureau:
Transportation Administrative Service Center, Office of the Secretary;
Secretarial discretion to retain unobligated balances[A]: Yes; Explicit
authority to retain operating reserve: No; Explicit authority to
retain up to 4% of total annual income: No; Other explicit
authority to retain balances: No.
26; Department/ agency: VA; Fund name/bureau: Supply fund, Departmental
Administration; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
27; Department/ agency: Equal Employment Opportunity Commission; Fund
name/bureau: Education, technical assistance and training revolving
fund; Secretarial discretion to retain unobligated balances[A]: Yes;
Explicit authority to retain operating reserve: No; Explicit
authority to retain up to 4% of total annual income: No; Other
explicit authority to retain balances: No.
28; Department/ agency: GSA; Fund name/bureau: WCF, General Activities;
Secretarial discretion to retain unobligated balances[A]: Yes; Explicit
authority to retain operating reserve: No; Explicit authority to
retain up to 4% of total annual income: No; Other explicit
authority to retain balances: No.
29; Department/ agency: GSA; Fund name/bureau: Federal buildings fund,
Real Property Activities; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
30; Department/ agency: GSA; Fund name/bureau: General supply fund,
Supply and Technology Activities; Secretarial discretion to retain
unobligated balances[A]: Yes; Explicit authority to retain operating
reserve: No; Explicit authority to retain up to 4% of total annual
income: No; Other explicit authority to retain balances: No.
31; Department/ agency: GSA; Fund name/bureau: Information technology
fund (FEDSIM), Supply and Technology Activities; Secretarial discretion
to retain unobligated balances[A]: Yes; Explicit authority to retain
operating reserve: No; Explicit authority to retain up to 4% of
total annual income: No; Other explicit authority to retain
balances: No.
32; Department/ agency: International Assistance Programs; Fund name/
bureau: WCF, Agency for International Development; Secretarial
discretion to retain unobligated balances[A]: Yes; Explicit authority to
retain operating reserve: No; Explicit authority to retain up to
4% of total annual income: No; Other explicit authority to retain
balances: No.
33; Department/ agency: Legislative Branch; Fund name/bureau: Fedlink
program and Federal research program, Library of Congress; Secretarial
discretion to retain unobligated balances[A]: Yes; Explicit authority to
retain operating reserve: No; Explicit authority to retain up to
4% of total annual income: No; Other explicit authority to retain
balances: No.
34; Department/ agency: Office of Personnel Management; Fund name/
bureau: Revolving fund; Secretarial discretion to retain unobligated
balances[A]: Yes; Explicit authority to retain operating reserve:
No; Explicit authority to retain up to 4% of total annual income:
No; Other explicit authority to retain balances: No.
Total; Department/ agency: No; Fund name/bureau: No;
Secretarial discretion to retain unobligated balances[A]: 22; Explicit
authority to retain operating reserve: 8; Explicit authority to retain
up to 4% of total annual income: 8; Other explicit authority to retain
balances: 3.
Source: GAO analysis:
Note: Shading highlights franchise fund pilots.
[A] Most of these funds are required to deposit in miscelleneous
receipts of the Treasury amounts in excess of the needs fo the fund;
however, in some cases this requirement is not specifically stipulated.
[B] The HHS franchise fund pilot operates under the statutory authority
for the HHS Service and Supply Fund, which is not required to return
excess to the Treasury. There is no explicit authority specifying an
operating reserve or the retention of up to 4 percent of total annual
income, although HHS franchise fund officials believe that they are
allowed this authority according to Chief Financial Officers Council,
Federal Franchise Pilots: Pilot Program Implementation Guide
(Washington, D.C.: April 1996).
[End of table]
[End of section]
(450182):
:
:
FOOTNOTES
[1] An IR fund conducts continuing cycles of business-like activity
within and between government agencies. It charges for the sale of
products or services and uses the proceeds to finance its spending,
usually without requirement for annual appropriations.
[2] The use of a revolving fund does not change the period of
availability of the customer agency's appropriation. It is improper for
a customer funded by fiscal year appropriations to place orders in
excess of legitimate needs, thereby using the revolving fund to extend
the life of the appropriation.
[3] This is only one of the differences between the Economy Act of 1932
and the legal authorities for IR funds, but it is the one most
important for our discussion. Other differences are mentioned on page
15.
[4] See appendix II for a list of the 12 business operating principles.
[5] The Statement of Federal Financial Accounting Standards (SFFAS) No.
4 sets forth basic cost accounting concepts and five main standards for
managerial cost accounting by the federal government.
[6] The HHS franchise fund pilot operates under the statutory authority
for the HHS service and supply fund, which is not required to return
excess to the Treasury. There is no explicit authority specifying an
operating reserve or the retention of up to 4 percent of annual income,
although HHS franchise fund officials believe that they are allowed
this authority according to Chief Financial Officers Council, Federal
Franchise Pilots: Pilot Program Implementation Guide (Washington, D.C.:
April 1996).
[7] The standards are set forth in SFFAS No. 4.
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