Budget Issues
Electronic Processing of Non-IRS Collections Has Increased but Better Understanding of Cost Structure Is Needed Gao ID: GAO-10-11 November 20, 2009The Department of the Treasury's Financial Management Service (FMS) collections program provides services to agencies to collect, deposit, and account for collections through a variety of methods. Electronic collection methods can reduce government borrowing costs and agency administrative costs, while improving compliance and security. The Government Accountability Office (GAO) was asked to identify (1) the extent to which agencies other than the Internal Revenue Service (IRS) use various collection methods, (2) ways to maximize the benefits of and overcome any barriers to agency use of the various collection methods, and (3) issues that FMS should consider in its plans to improve the efficiency and security of collections. GAO analyzed collections data, plans, and documents from FMS and five case-study agencies in the Departments of the Interior and Commerce that use a variety of collection methods, observed fee collection methods, and interviewed FMS and case-study agency officials. GAO also interviewed selected payer groups for case study agencies.
Over the past 5 years, more than 80 percent of funds collected by agencies other than the Internal Revenue Service (IRS) were collected using fully electronic methods, including wire transfers and credit cards. As shown in the figure below, from fiscal year 2005 through 2009 there was a significant shift from nonelectronic collection methods to partly electronic methods. This shift was largely a result of a growth in electronic check-processing capacity. Moving to electronic collection methods can reduce costs and mitigate risks, such as theft, but the specific circumstances of individual agencies and payers have affected agencies' ability to fully adopt these methods. Use of electronic methods can result in cost savings, increased processing speed and accuracy, and improved security of staff and deposits. Specifically, FMS reports that on average the government saves 78 cents for each electronic transaction. Additionally, case-study agencies and payer groups GAO spoke with reported reduced costs when using electronic collection methods. Despite the advantages, payer characteristics, other agency considerations, and set-up costs or required system changes have limited agencies' adoption of electronic collection methods. Also, agencies may not have enough information to make cost-effective decisions about their choice of collection method. FMS is implementing a plan to improve the efficiency and effectiveness of federal collections, but the plan excludes important cost considerations and does not use all available incentives. Specifically, the plan does not consider the cost differences among different electronic methods or ensure the consistent application of policies on reimbursement for certain services. The FMS plan also does not include a strategy for incorporating key lessons-learned from agency reviews into its guidance and communicating that information to agencies. With such information, agencies not scheduled for review until later years could begin to transition to more efficient methods.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-11, Budget Issues: Electronic Processing of Non-IRS Collections Has Increased but Better Understanding of Cost Structure Is Needed
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
November 2009:
Budget Issues:
Electronic Processing of Non-IRS Collections Has Increased but Better
Understanding of Cost Structure Is Needed:
GAO-10-11:
GAO Highlights:
Highlights of GAO-10-11, a report to congressional requesters.
Why GAO Did This Study:
The Department of the Treasury‘s Financial Management Service (FMS)
collections program provides services to agencies to collect, deposit,
and account for collections through a variety of methods. Electronic
collection methods can reduce government borrowing costs and agency
administrative costs, while improving compliance and security. GAO was
asked to identify (1) the extent to which agencies other than IRS use
various collection methods, (2) ways to maximize the benefits of and
overcome any barriers to agency use of the various collection methods,
and (3) issues that FMS should consider in its plans to improve the
efficiency and security of collections. GAO analyzed collections data,
plans, and documents from FMS and five case-study agencies in the
Departments of the Interior and Commerce that use a variety of
collection methods, observed fee collection methods, and interviewed
FMS and case-study agency officials. GAO also interviewed selected
payer groups for case study agencies.
What GAO Found:
Over the past 5 years, more than 80 percent of funds collected by
agencies other than the Internal Revenue Service (IRS) were collected
using fully electronic methods, including wire transfers and credit
cards. As shown in the figure below, from fiscal year 2005 through 2009
there was a significant shift from nonelectronic collection methods to
partly electronic methods. This shift was largely a result of a growth
in electronic check-processing capacity.
Moving to electronic collection methods can reduce costs and mitigate
risks, such as theft, but the specific circumstances of individual
agencies and payers have affected agencies‘ ability to fully adopt
these methods. Use of electronic methods can result in cost savings,
increased processing speed and accuracy, and improved security of staff
and deposits. Specifically, FMS reports that on average the government
saves 78 cents for each electronic transaction. Additionally, case-
study agencies and payer groups GAO spoke with reported reduced costs
when using electronic collection methods. Despite the advantages, payer
characteristics, other agency considerations, and set-up costs or
required system changes have limited agencies‘ adoption of electronic
collection methods. Also, agencies may not have enough information to
make cost-effective decisions about their choice of collection method.
FMS is implementing a plan to improve the efficiency and effectiveness
of federal collections, but the plan excludes important cost
considerations and does not use all available incentives. Specifically,
the plan does not consider the cost differences among different
electronic methods or ensure the consistent application of policies on
reimbursement for certain services. The FMS plan also does not include
a strategy for incorporating key lessons-learned from agency reviews
into its guidance and communicating that information to agencies. With
such information, agencies not scheduled for review until later years
could begin to transition to more efficient methods.
Figure: Growth in Use of Partly Electronic Collection Methods, Fiscal
Years 2005-2009:
[Refer to PDF for image: stacked line graph]
Fiscal year: 2005
Partly electronic collection methods: 1.6%;
Nonelectronic collection methods: 98.4v
Fiscal year: 2006
Partly electronic collection methods: 7.4%;
Nonelectronic collection methods: 92.6%.
Fiscal year: 2007
Partly electronic collection methods: 17.2%;
Nonelectronic collection methods: 82.8%.
Fiscal year: 2008
Partly electronic collection methods: 34.4%;
Nonelectronic collection methods: 65.6%.
Fiscal year: 2009
Partly electronic collection methods: 46.1%;
Nonelectronic collection methods: 53.9%.
Source: GAO analysis of FMS data.
[End of figure]
What GAO Recommends:
GAO is making recommendations to the Secretary of the Treasury to
facilitate transition to more cost-effective collection methods and to
the Secretaries of the Interior and Commerce to consider all collection
costs, including FMS‘s, as available, in managing their programs. All
three agencies generally agreed with GAO‘s findings and
recommendations.
View GAO-10-11 or key components. For more information, contact Susan
J. Irving at (202) 512-6806 or irvings@gao.gov.
[End of section]
Contents:
Letter:
Background:
Use of Electronic Collection Methods Has Increased:
Movement to Electronic Collection Methods Can Reduce Costs and Mitigate
Some Risks, but Agency-Specific Circumstances Have Affected Adoption of
These Methods:
FMS Is Working to Improve the Efficiency of Collections, but Reviews
Exclude Important Considerations and Do Not Make Full Use of Available
Incentives:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Minerals Management Service Collections:
Appendix III: National Park Service Collections:
Appendix IV: United States Geological Survey Collections:
Appendix V: U.S. Patent and Trademark Office Collections:
Appendix VI: National Oceanic and Atmospheric Administration
Collections:
Appendix VII: Comments from the Department of the Treasury's Financial
Management Service:
Appendix VIII: Comments from the Department of the Interior:
Appendix IX: Comments from the Department of Commerce:
Appendix X: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Federal Collection Methods:
Table 2: Case-Study Agency Collections--Percent of Dollars Collected,
by Collection Method, Fiscal Year 2008:
Table 3: Collection Processing Times, by Collection Method:
Figures:
Figure 1: Collection Methods Flowchart:
Figure 2: Growth in Use of Partly Electronic Collection Methods by
Agencies other than IRS, Fiscal Years 2005-2009:
Figure 3: MMS Collections by Type and Method:
Figure 4: NPS Collections by Type and Method:
Figure 5: USGS Collections by Type and Method:
Figure 6: USPTO Collections by Type and Method:
Figure 7: NOAA Collections by Type and Method:
Abbreviations:
ACHPAD: automated clearing house pre-authorized debits:
CCC: Commodity Credit Corporation:
ECP: electronic check processing:
FMS: Financial Management Service:
FRB: Federal Reserve Bank:
IOAA: Independent Offices Appropriation Act of 1952:
IRS: Internal Revenue Service:
ITGA: International Treasury General Account:
MMS: Minerals Management Service:
NESDIS: National Environmental Satellite, Data, and Information
Service:
NMFS: National Marine Fisheries Service:
NOAA: National Oceanic and Atmospheric Administration:
NPS: National Park Service:
OMB: Office of Management and Budget:
PCC: paper check conversion:
TGA: Treasury General Account:
Treasury: Department of the Treasury:
USGS: U.S. Geological Survey:
USPTO: United States Patent and Trademark Office:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 20, 2009:
The Honorable Richard J. Durbin:
Chairman:
Subcommittee on Financial Services and General Government:
Committee on Appropriations:
United States Senate:
The Honorable José E. Serrano:
Chairman:
Subcommittee on Financial Services and General Government:
Committee on Appropriations:
House of Representatives:
The Department of the Treasury's (Treasury) Financial Management
Service (FMS) collected almost $509 billion in funds received by
agencies other than the Internal Revenue Service (non-IRS collections)
in fiscal year 2009. In prior work we found that the method used to
collect payments can affect compliance with payment requirements as
well as administrative costs for both agencies and fee payers.[Footnote
1] Although certain FMS collections services can reduce government
borrowing costs, reduce agency/payer administrative costs, and improve
the security of collections, some agencies do not use these services
for collections, relying instead on agency deposit of paper-based
collections. As a result we reported there were delays between the time
payments were received and the time they were deposited into the
Treasury, thus increasing government borrowing costs.[Footnote 2]
This report responds to your request that we examine opportunities to
improve the efficiency of federal collections governmentwide.
Specifically, we examined (1) the extent to which agencies other than
IRS use collection methods in FMS's collections program, (2) how FMS
and these agencies can maximize the benefits of and overcome any
barriers to use of the various collection methods, and (3) issues FMS
should consider as it implements its plans for improving the efficiency
and security of these collections. As agreed with your offices, we did
not review IRS collections. Also excluded from the review are
collections of the Commodity Credit Corporation (CCC), a federal
corporation within the U.S. Department of Agriculture.[Footnote 3]
To assess the extent to which agencies use various collection methods,
we analyzed FMS data on collections received by agencies other than IRS
for fiscal years 2005 through 2009, by collection method.[Footnote 4]
We reviewed FMS guidance and interviewed FMS officials to gather
operational information on each collection method and understand why
use of the various collection methods changed over time. To identify
ways FMS and selected agencies can maximize the benefits of and
overcome any barriers to the use of collection methods, we conducted
case-study reviews of five agencies within two departments: the
Minerals Management Service (MMS), the National Park Service (NPS), and
the U.S. Geological Survey (USGS) in the Department of the Interior;
and the United States Patent and Trademark Office (USPTO) and the
National Oceanic and Atmospheric Administration (NOAA) in the
Department of Commerce. The case-study agencies selected permitted us
to cover the variety of collection methods and payer characteristics,
however the findings cannot be generalized across the government. For
each case-study agency, we analyzed collections data; observed agency
collection processes; reviewed relevant legislation, regulations,
agency guidance, and audit reports; and interviewed agency officials.
We also reviewed FMS regulations and guidance, analyzed FMS data
related to the costs and benefits of the various collection methods,
and interviewed FMS officials. We also met with four payer groups
identified by case-study agencies to gain an understanding of the
effects of the shift to electronic collections on payers. These payer
groups were trade organizations, one private-sector company, and
representatives from state governments. To identify the issues FMS
should consider in implementing its plans for improving the efficiency
and security of collections, we reviewed legislation and FMS plans and
agency agreements, applied relevant findings from our case studies, and
interviewed FMS and case-study agency officials. We assessed the
reliability of the data we used for this review and determined that
they were sufficiently reliable for our purposes. Appendix I provides
additional details about the scope and methodology of our review.
We conducted this performance audit from October 2008 through November
2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
As the government's financial manager, FMS establishes and implements
collections policies, regulations, standards, and procedures for the
federal government.[Footnote 5] Through its collections program, FMS
also provides services to federal agencies to collect, deposit, and
account for federal collections.[Footnote 6] Its collections program
provides a means for individuals and organizations, including
businesses, state and local governments, and nonprofit organizations,
to remit funds such as taxes, duties, fees, sales, leases, and loan
repayments to the government. FMS offers a range of fully electronic,
partly electronic,[Footnote 7] and nonelectronic collection methods
(see table 1 and figure 1).
Table 1: Federal Collection Methods:
Collection type: Fully electronic;
Collection method: Wire transfers;
Description: Fedwire: The payer initiates a real-time transfer of funds
from its bank to the Treasury's account in the Federal Reserve Bank
(FRB).
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers[A];
Description: ACH Remittance Express: The payer electronically sends an
ACH credit through its financial institution to a unique routing number
at the FRB.
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers[A];
Description: ACH pre-authorized debits (ACH PAD): An electronic
transfer of funds from the payer's bank through the ACH network to the
Treasury's account, authorized in advance by the payer.
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers[A];
Description: Lockbox ACH: The payer sends payment information to a
designated lockbox bank through its financial institution. The lockbox
bank then deposits funds into the Treasury's account using the payer's
financial information.
Collection type: Fully electronic;
Collection method: Credit or debit cards[A];
Description: Credit/debit card: Agencies collect credit or debit card
payments through a Web interface, at the point of sale, or by mail,
phone, or fax and transmit the data through a designated financial
agent, which transfers the funds to the Treasury's account.
Collection type: Partly electronic;
Collection method: Electronic check processing;
Description: Agency paper check conversion (PCC): Agencies collect
paper checks over-the-counter at the point of sale or by mail, which
are then converted on site to an electronic transaction or substitute
check[B] and deposited into the Treasury's account.
Collection type: Partly electronic;
Collection method: Electronic check processing;
Description: Lockbox[C] electronic check processing (ECP): Paper checks
received through the general lockbox network are converted into an
electronic transaction or substitute check for deposit into the
Treasury's account.
Collection type: Nonelectronic;
Collection method: Paper checks and cash;
Description: Federal Reserve Bank deposits: Checks and cash received by
the agency are mailed or taken by courier or armored car to the nearest
FRB for deposit to the Treasury's account.
Collection type: Nonelectronic;
Collection method: Paper checks and cash;
Description: Treasury General Account (TGA) and International Treasury
General Account (ITGA) deposits: Agencies collect cash and checks and
deposit them at a local TGA bank (if domestic) or an ITGA bank (if
international). The bank then transfers the funds to the Treasury's
account.
Collection type: Nonelectronic;
Collection method: Paper checks and cash;
Description: Lockbox[C] General: Paper checks are mailed to a post
office box designated by the collecting agency and FMS, where they are
picked up by a courier and delivered to a lockbox bank, and then
processed and deposited into the Treasury's account.
Source: GAO analysis of FMS information.
[A] Pay.gov, FMS's Web-based, governmentwide collections portal,
processes collections made by ACH transfer and credit card.
[B] A substitute check is a paper copy of an image of the front and
back of the original check.
[C] FMS enters into lockbox service agreements with commercial banks to
collect certain payments on behalf of federal agencies. FMS uses two
lockbox networks: the general network for all payments except federal
taxes and the Internal Revenue Service (IRS) lockbox network for
federal tax payments. The banks establish post office boxes and
electronic accounts to receive payments.
[End of table]
Figure 1: Collection Methods Flowchart:
[Refer to PDF for image: illustration]
Fully electronic:
Wire transfers;
ACH Transfers: through Pay.gov;
ACH Transfers: Lockbox[A];
Credit or debit card payments: through Pay.gov; to Card processor;
Credit or debit card payments: through Agency: to Card processor.
All of the above flow to:
Treasury accounts in Federal Reserve Banks.
Partly electronic:
Paper checks: through Agency: to electronic check processing; or;
Paper checks: Mailed to post office box, then physically transported to
lockbox bank: to electronic check processing.
Flow is to:
Treasury accounts in Federal Reserve Banks.
Nonelectronic:
Paper checks or cash: through Agency: Physically transported to Bank:
TGA or ITGA bank[B]; or:
Paper checks or cash: Mailed to post office box, then physically
transported to lockbox bank.
Flow is to:
Treasury accounts in Federal Reserve Banks.
Source: GAO analysis of FMS information.
[A] A few lockbox accounts also accept and process payments by wire
transfer, credit/debit cards, or both.
[B] Some TGA and ITGA banks process checks using electronic check
processing.
[End of figure]
The agencies we examined for our case studies use a variety of these
collection methods (see table 2).
Table 2: Case-Study Agency Collections--Percent of Dollars Collected,
by Collection Method, Fiscal Year 2008:
Agency: Minerals Management Service (MMS);
Collections: Rents, royalties, lease sales, other cost recovery
services and payments;
Fully electronic: collection methods: Wire transfers: 93;
Fully electronic: ACH transfers: 5;
Fully electronic: Credit/debit cards: < 1;
Partly electronic collection methods: Electronic check processing: 0;
Nonelectronic collection methods: Paper checks and cash: 2.
Agency: National Park Service (NPS);
Collections: Recreation, special park use, concessions, and commercial
use fees;
other reimbursables;
Fully electronic: collection methods: Wire transfers: 14;
Fully electronic: ACH transfers: 13;
Fully electronic: Credit/debit cards: 12;
Partly electronic collection methods: Electronic check processing: 0;
Nonelectronic collection methods: Paper checks and cash: 61.
Agency: U.S. Geological Survey (USGS);
Collections: Payments for cooperative water programs, reimbursable
programs, product sales;
Fully electronic: collection methods: Wire transfers: 2;
Fully electronic: ACH transfers: 0;
Fully electronic: Credit/debit cards: 5;
Partly electronic collection methods: Electronic check processing: 73;
Nonelectronic collection methods: Paper checks and cash: 21.
Agency: U.S. Patent and Trademark Office (USPTO);
Collections: Patent fees, trademark fees;
Fully electronic: collection methods: Wire transfers: 28;
Fully electronic: ACH transfers: 15;
Fully electronic: Credit/debit cards: 24;
Partly electronic collection methods: Electronic check processing: 9;
Nonelectronic collection methods: Paper checks and cash: 24.
Agency: National Oceanic and Atmospheric Administration (NOAA);
Collections: Data sales, inspection fees, permit fees, civil monetary
penalties, other reimbursables;
Fully electronic: collection methods: Wire transfers: 8;
Fully electronic: ACH transfers: 9;
Fully electronic: Credit/debit cards: 4;
Partly electronic collection methods: Electronic check processing: 45;
Nonelectronic collection methods: Paper checks and cash: 35.
Source: GAO analysis of FMS data and agency information.
Note: Totals do not always sum to 100 because of rounding.
[End of table]
FMS manages the services through which all federal collections are
deposited in the Treasury and strives to minimize the time between when
funds are collected and when they are deposited in the Treasury.
Treasury regulations state that when it is cost effective, practicable,
and consistent with current statutory authority, electronic transfers
of funds are the optimal method for federal collections, especially
when fees are recurring or of large dollar amounts.[Footnote 8]
Accordingly, FMS may require an agency wishing to use a collection
method other than electronic transfer to provide a cost-benefit
analysis to justify this selection. In past work, we highlighted the
benefits of electronic collection processing. Specifically, we reported
that electronic collections provide better accuracy, lower mailing and
processing costs, and fewer delinquencies and defaults.[Footnote 9]
When the Federal Reserve moved to electronic conversions of paper
checks, work hours spent on check processing decreased by almost half
and transportation costs associated with check processing decreased by
about 11 percent. In recent years FMS has made it a priority to
increase the use of electronic collection methods and reduce collection
costs.[Footnote 10] FMS has begun an initiative, called the Holistic
Approach, to further these goals.
Selection of the best collection mechanism is a joint responsibility of
agencies and FMS.[Footnote 11] Agencies have responsibility for working
with FMS to conduct cash-management reviews, gathering volume and
dollar data relative to the operation of the systems, and funding any
implementation and operational costs above those normally funded by
Treasury. FMS provides guidance to agencies in its Treasury Financial
Manual regarding the selection and cost-effective use of collection
mechanisms. Agencies must provide FMS with a recommended mechanism for
any new or modified cash flows. FMS reviews the recommendations,
approves a mechanism, and assists with implementation.
FMS's oversight of federal agencies' cash-management activities
includes review of collections.[Footnote 12] FMS uses findings from
such reviews to develop initiatives to improve an agency's collections
and set and monitor dates by which the agency must implement changes.
Moreover, FMS may charge agencies that do not meet the implementation
deadlines for the amount of interest savings that would have been
realized by timely implementation.[Footnote 13] According to Treasury
regulations, when funds are not collected electronically, agencies
generally must deposit funds into the Treasury or a designated
depositary on the day of receipt.[Footnote 14]
FMS's collections program is funded in part by permanent and indefinite
appropriations for all financial agent (banking) services required or
directed by Treasury.[Footnote 15] In some cases federal agencies
reimburse FMS for a part or all of these costs. For fiscal year 2009,
FMS obligated $568 million for banking services, an 8 percent increase
over the $528 million obligated in fiscal year 2008.[Footnote 16]
Fiscal year 2009 reimbursements for these banking services were $92
million. Such reimbursements are deposited in the Treasury's general
fund.
Use of Electronic Collection Methods Has Increased:
Since 2005, agency use of collection methods has reflected FMS's
increased focus on electronic payments. Fully electronic payments
accounted for more than 80 percent of dollars collected by agencies
other than IRS for fiscal years 2005 through 2009, with $441 billion of
the almost $509 billion collected using fully electronic methods in
fiscal year 2009. While the percentage of funds collected through
nonelectronic methods in 2009 was low, it constituted over $36 billion.
Nor does it represent a similarly low percentage of transactions. For
example, in fiscal year 2008, MMS's Minerals Revenue Management program
collected over $23 billion in federal rents and royalties from the
public; while payments by check represented only 2 percent of the
dollars collected, they represented 77 percent of the total number of
its transactions.
In fiscal year 2009, of the almost $509 billion in non-IRS collections,
about $68 billion was collected as cash or checks and processed using
either partly electronic or nonelectronic collection methods. As shown
in figure 2, there was a significant shift from nonelectronic to partly
electronic methods from 2005 to 2009. In 2005, partly electronic
collection methods accounted for just under 2 percent of cash and check
collections, but by 2009 this share had increased to over 46 percent.
Given the significant process and cost differences between fully
electronic and partly electronic collection methods, we distinguish
between them in this analysis.
Figure 2: Growth in Use of Partly Electronic Collection Methods by
Agencies other than IRS, Fiscal Years 2005-2009:
[Refer to PDF for image: stacked line graph]
Fiscal year: 2005
Partly electronic collection methods: 1.6%;
Nonelectronic collection methods: 98.4v
Fiscal year: 2006
Partly electronic collection methods: 7.4%;
Nonelectronic collection methods: 92.6%.
Fiscal year: 2007
Partly electronic collection methods: 17.2%;
Nonelectronic collection methods: 82.8%.
Fiscal year: 2008
Partly electronic collection methods: 34.4%;
Nonelectronic collection methods: 65.6%.
Fiscal year: 2009
Partly electronic collection methods: 46.1%;
Nonelectronic collection methods: 53.9%.
Source: GAO analysis of FMS data.
Note: Consistent with FMS's data-collection methods, the chart
represents dollars collected, not number of transactions. According to
FMS officials, FMS does not have reliable data on the number of
transactions for most collection methods but they plan to collect these
data.
The data do not contain any dollars collected through methods designed
for the IRS to collect taxes. IRS collections may be included in other
categories if the agency or taxpayer used nontax methods to collect or
pay fees. The data may contain taxes that are not collected by the IRS,
such as customs excise taxes.
[End of figure]
The growth in partly electronic payments largely represents a change in
agency processes rather than in payer behavior: the shift is largely
the result of a growth in electronic check processing capacity both at
agencies and through lockbox banks. In fiscal year 2008 almost $24
billion in collections settled as paper checks at lockbox banks, but in
fiscal year 2009 less than $2.4 billion was settled this way.[Footnote
17] Conversely, collections through electronic check processing were
about $27 billion in fiscal year 2008, but were over $31 billion in
fiscal year 2009. FMS attributes this growth to a large marketing
effort and new electronic check processing locations (according to FMS
officials, 209 new locations--185 agency PCC and 24 lockbox ECP
locations--were added in fiscal year 2009).
FMS plans to discontinue some current electronic collection methods and
shift programs that use those methods to Pay.gov--a Web-based portal
that processes collections made through ACH transfer and credit card--
which will consolidate and simplify the number of collection methods
available through FMS. FMS officials told us that they expect ACH pre-
authorized debits will be phased out and replaced by Pay.gov by the end
of calendar year 2009. In addition, FMS plans to shift most of the
existing 32 lockbox ACH accounts to Pay.gov or other electronic
collection methods, leaving only 2 such accounts in existence at the
end of calendar year 2010. There are also plans to shift certain
collections from nonelectronic methods to Pay.gov; for example, MMS is
currently shifting its rent collections from paper checks to Pay.gov
and, according to MMS officials, will continue to expand its use of
Pay.gov in 2010.
Movement to Electronic Collection Methods Can Reduce Costs and Mitigate
Some Risks, but Agency-Specific Circumstances Have Affected Adoption of
These Methods:
FMS, case-study agencies, and the payer groups we interviewed have
identified a variety of cost savings stemming from the use of
electronic collection methods. These savings stem from more efficient
agency processing, expected lower future costs for system changes, the
acceleration of deposits to the Treasury, and a lower administrative
burden for payer groups. The shift to electronic methods has also
mitigated some security and accuracy risks for agencies. Nevertheless,
some organizations identified agency-specific circumstances that make
full adoption of electronic collection methods less beneficial. These
circumstances were determined by the characteristics of an agency's
payer base, other agency considerations, and the initial system or
equipment costs related to the transition.
Electronic Collection Methods Have Reduced FMS's, Agencies', and
Customers' Costs:
Officials from all five case-study agencies cited a decrease in current
or estimated future costs resulting from the use of electronic
collection methods but none of the agencies could fully quantify these
savings.
* In some cases, agencies increased the efficiency of internal
processing operations. For example, officials at USGS said their 2008
move from nonelectronic check processing to partly-electronic paper
check conversion increased process efficiency. Specifically, according
to officials in one USGS office that underwent the transition,[Footnote
18] the change reduced the time it takes staff to process checks, thus
freeing up staff to undertake additional tasks. This office
disseminates USGS products such as maps and books and processes checks,
credit card payments, and small amounts of cash from its sales. Prior
to the transition, the nonelectronic check process required manual
preparation of the deposit and a staff member to take the deposit to
the bank each day. The new partly electronic process permits a Web-
based deposit process and reduces the need to physically go to the
bank.
* In another case, a decrease in agency processing costs has the
potential to reduce the size of cost-recovery fees. A NOAA regional
permit official said that an upcoming shift from using a lockbox bank
to Pay.gov for its fee collections is expected to increase staff
efficiency and reduce payment processing costs such as the office's
mailing costs. If these cost savings are realized, the cost reductions
may be passed along to the payers of the fee.
* In addition, fully electronic collection methods may incorporate
electronic submission of remittance data, enabling automatic transfers
of payment and remittance data to the agency's accounting system. For
example, to account for ACH transfers after funds are deposited in the
Treasury, MMS prints out detailed payment information from FMS, matches
payment information to the correct payer, and manually enters the
detailed data into MMS's internal accounting system. MMS officials told
us that they are planning to update their accounting software to make
this process automatic. They also said they expect that the
implementation of Pay.gov will be designed to automate this process and
thus reduce costs.
* In May 2008 USPTO shifted its credit card processing function to
Pay.gov both to decrease current costs and avoid future system costs
for the agency. Adopting Pay.gov enabled USPTO to discontinue the lease
of a line to a credit card authorization provider, a monthly savings of
about $1,000. Agency officials also said they expect that costs
associated with future agency system changes stemming from a change in
the FMS credit card processor will be eliminated because Pay.gov will
manage the transition. Potential exists for similar savings at other
agencies; according to officials at NPS and USGS, they also incurred
costs for system and equipment changes that were required after FMS
changed its credit card processor.
Some payer groups also cited benefits of a shift towards electronic
collection methods. Three of the four payer groups we spoke with
reported that the increased use of electronic methods has improved
efficiency and saved money for their organizations or members by
reducing administrative time, costs, or both. For example, state
government representatives agreed that for many organizations, paying
by ACH transfer is preferred because paying by check is expensive in
terms of the cost and time of printing, mailing, and reconciling
payments. More specifically, a representative of the state of
Mississippi said that the state requires all vendors, besides federal
agencies, to accept payments from the state electronically. The
specific challenges faced by these payers when using federal agency
collection methods is discussed later in this report.
As we have previously reported, the acceleration of deposits to the
Treasury can reduce the amount Treasury needs to borrow each day to pay
government obligations.[Footnote 19] According to FMS, moving to
electronic check processing reduces processing time by 1 day on
average, whether done at the agency or at a lockbox bank. These total
times range from 1 day to 6 days depending on the collection method
selected and whether mail time is included (see table 3). In the case
of paper check conversion, this improvement brings check processing on
par with some fully electronic collection methods such as ACH transfers
and credit cards.
Table 3: Collection Processing Times, by Collection Method:
Collection type: Fully electronic;
Collection method: Wire transfers;
Description: Fedwire;
Average total processing time (in days): 1;
Average settlement time[A]: Varies.
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers;
Description: ACH Remittance Express;
Average total processing time (in days): 2;
Average settlement time[A]: Varies.
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers;
Description: ACH PAD;
Average total processing time (in days): 2;
Average settlement time[A]: Next day.
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers;
Description: Lockbox ACH;
Average total processing time (in days): 2;
Average settlement time[A]: Next day.
Collection type: Fully electronic;
Collection method: Automated clearing house (ACH) transfers;
Description: Pay.gov ACH;
Average total processing time (in days): 2;
Average settlement time[A]: Next day.
Collection type: Fully electronic;
Collection method: Credit or debit cards [B];
Description: Credit/debit card;
Average total processing time (in days): 2;
Average settlement time[A]: Next day.
Collection type: Partly electronic;
Collection method: Electronic check processing;
Description: Agency paper check conversion;
Average total processing time (in days): 2;
Average settlement time[A]: Next day.
Collection type: Partly electronic;
Collection method: Electronic check processing;
Description: Lockbox electronic check processing;
Average total processing time (in days): 5[C];
Average settlement time[A]: Next day.
Collection type: Nonelectronic;
Collection method: Paper checks and cash;
Description: Lockbox General;
Average total processing time (in days): 6[C];
Average settlement time[A]: Next day.
Collection type: Nonelectronic;
Collection method: Paper checks and cash;
Description: Federal Reserve Bank deposits;
Average total processing time (in days): 1 to 2 days;
Average settlement time[A]: Checks--next day; cash--same day.
Collection type: Nonelectronic;
Collection method: Paper checks and cash;
Description: Treasury General Account and International Treasury
General Account deposits;
Average total processing time (in days): 3 to 6 days;
Average settlement time[A]: Next day.
Source: GAO analysis of FMS information.
[A] Settlement cut off times may vary. Later cut off times permit more
collections to be processed in a given day.
[B] Amounts collected by credit card may also be processed by Pay.gov.
[C] Includes typical mailing time estimate of 3 days.
[End of table]
Case-Study Agencies Make Collection Decisions without Full Information:
Although the shift to electronic collection methods has increased
efficiencies and decreased costs, agencies are generally unable to
consider the full range of the federal government's expenses--
specifically FMS's total collection costs--when analyzing program costs
and setting fee rates. This is because FMS generally does not provide
these cost data to agencies, although according to officials, it
could.[Footnote 20] FMS officials stated that FMS does not track cost
of collection information by agency, but instead by collection method
and bank. FMS has this cost information and could provide it, but based
on past practices, it generally has not. As we have previously
reported, reliable information on the costs of federal programs and
activities is crucial for effective management of government
operations.[Footnote 21] Currently, agencies make decisions about
collection methods without the benefit of this information. Moreover,
agencies could determine whether such costs should be considered in the
design and level of full-cost recovery fees. To the extent such cost
data are provided, agencies that are authorized to charge full-cost
recovery fees--for example, fees charged under the Independent Offices
Appropriation Act of 1952 (IOAA)--could, in some cases, include FMS's
cost of collections in their fee rates and deposit these funds into the
Treasury.[Footnote 22]
Electronic Collection Methods Mitigate Security Concerns and Risks of
Inaccuracy, Potentially Decreasing Collection Losses:
Officials from all five case-study agencies and FMS stated that use of
electronic collection methods have reduced the risk of either security
problems or processing errors. Four of the five case-study agencies
stated that electronic collection methods alleviated security concerns
for staff members, reduced the risk of theft, or both.
* As noted above, prior to the move to paper check conversion, USGS
staff drove deposits to a local bank, exposing staff to risk of theft
or injury. USGS officials said that the move to paper check conversion
reduced these safety concerns. Alternatively, some agencies reduced
concerns about staff safety by making bank deposits by means of a
courier service. However, using couriers poses other security risks and
adds costs to the collections process.[Footnote 23] For example, MMS
officials said that courier costs at its Denver office are
approximately $80,000 a year for two daily mail deliveries and one
daily bank deposit.
* NPS guidance also deals with security concerns pertaining to cash
collections and the use of personnel to collect fees. For example, this
guidance notes that parks' implementation of a type of ACH transfer
that is primarily used for commercial tour groups reduces the amount of
cash handled by staff and therefore improves security.[Footnote 24] In
addition, officials at the Rocky Mountain National Park said that
permitting unattended entrance stations to accept only credit cards,
rather than both cash and credit cards, reduced collection costs and
made the machines less vulnerable to attempted theft.
Officials from three of our case-study agencies stated that the
electronic collection or provision of payment data has lowered the risk
of processing errors, reducing repeated work and lost time and effort.
* USGS staff said that using paper check conversion has reduced the
errors in the process because the system confirms deposit totals before
completing a deposit.
* Similarly, MMS officials reported a decrease in administrative errors
stemming from the use of Pay.gov for a selection of its fees.
* USPTO's adoption of an automated method for uploading remittance
information for organizations making multiple payments also reduced
errors. In some cases, USPTO may receive several thousand patent
renewals in one submission from a single company that manages these
renewals for multiple customers. In the past, these renewals would be
sent to a lockbox bank and remittance information would be entered
manually. This new system allows maintenance fee payment information to
be submitted on a single compact disc and the data file on the disc to
be uploaded directly into USPTO's internal accounting system.
Agency-Specific Circumstances Can Affect Adoption of Electronic
Collection Methods:
An agency's payer base characteristics and other issues can influence
collection method selection, sometimes causing agencies to leave
nonelectronic collection methods in place and incur costs associated
with maintaining separate collection methods. In its work with
agencies, FMS recognizes the importance of considering an agency's
payer base and whether those payers are likely to accept electronic
collection methods. All five of our case-study agencies stated that
payer characteristics and customer needs affected the selection of
collection methods. In some cases, customer preferences as well as
customer access to banks and online banking systems have influenced the
different payment methods that agencies offer.
* MMS said that its customers, while typically large companies, also
include smaller operations that may not be amenable to electronic
collections. When MMS mandated electronic submission of royalty
collections, it granted waivers for those that appealed the
requirement--approximately 100 of the 2,100 entities for which it
processes royalty revenues. Although a small percentage, such
accommodation requires that the agency manage a waiver system and
requires the maintenance of a nonelectronic or partly electronic
collection method alongside the new fully electronic collection method.
In the case of MMS, the agency maintained its nonelectronic check
processing for collections other than royalties, so the nonelectronic
processes were not solely maintained for those customers with waivers.
* A representative of a commercial tour operator industry group stated
that smaller operators in his membership would prefer the maintenance
of a more flexible method of payment for NPS entrance fees than that
preferred by larger operators. NPS is considering adopting Pay.gov to
allow customers to use a Web portal to make online purchases. The tour
representative recommended that NPS continue to accept credit cards
from commercial operators at its entrances in order to accommodate
smaller operators as the agency shifts to Pay.gov. While credit cards
are an electronic collection method, the desire to maintain this
alternative payment option in order to better serve its customers
imposes costs on the agency, such as the purchase of necessary
equipment.[Footnote 25]
Other agency considerations also influence the selection and adoption
of collection methods. MMS officials told us that they decided to
pursue Pay.gov for MMS's rent collections rather than selecting a
commercial lockbox because a lockbox service would not meet their
internal process needs. Although the shift to Pay.gov is underway,
officials acknowledge there will always be some paper check collections
to manage. In another case, NPS officials told us that the services
provided by those performing collection activities go beyond the
collection itself. They explained that they do not wish to remove all
representatives from entrance fee collection stations--even if it were
possible--because fee collectors are often "ambassadors" for the park
and provide an important public service. Nonetheless, it requires that
NPS incur some level of labor costs related to collections.
For two case-study agencies the setup costs or required system changes
necessary to implement electronic collection methods affected the
ability or the extent to which the agency or program office could adopt
or maintain electronic collection methods.
* In 2002 and 2003, one NOAA regional permit office used Pay.gov as a
payment method. The office discontinued the use of Pay.gov because of
changes to the office's database system and lack of information
technology support required to establish the new system's connection to
Pay.gov. Nonetheless, a current project aims to reestablish the link to
Pay.gov.
* NPS reports that at some remote park locations the telephone and
Internet access necessary to support electronic collection methods may
be difficult to establish. Even in less remote areas, geographic
dispersion may create challenges, such as the need to maintain and
purchase equipment for multiple collection or processing points within
one park. For example, Rocky Mountain National Park, which covers
265,800 acres and has four entrances, maintains two remittance offices
to prepare collections for deposit because the road crossing the park
also crosses the continental divide and is impassable during winter
months. Therefore, collections cannot be transported from one side of
the park to the other and must be prepared for deposit separately.
Finally, meeting the varying system requirements for some electronic
collection methods can also be a barrier for customer use. Officials
from three state governments that submit payments to USGS told us that,
while they prefer electronic collection methods such as ACH transfers,
the differing technical requirements and data formats at each federal
agency can make such transfers a burdensome, manual process. Our prior
work has found a similar lack of standardization across federal grant-
making agencies. For example, the use of multiple payment systems has
resulted in an excessive administrative burden for grantees.[Footnote
26] FMS officials stated that limited funding is often cited as a
barrier to agency adoption of new collection methods.
FMS Is Working to Improve the Efficiency of Collections, but Reviews
Exclude Important Considerations and Do Not Make Full Use of Available
Incentives:
FMS Reviews of Agency Collections Exclude Important Considerations:
As the financial manager and principal fiscal agent for the federal
government, FMS is responsible for planning and managing federal
collections and has oversight responsibilities to ensure that agencies
are making adequate progress in improving their cash-management
practices. Consistent with these responsibilities, FMS developed a 5-
year "Holistic Approach" plan, which establishes a framework for
increasing the use of electronic collection mechanisms governmentwide;
streamlining the collections process; offering collection mechanisms
that are easy to use, convenient, and secure; managing depositary
services that banks provide to federal agencies; and providing timely
collection of federal receipts.[Footnote 27] To implement this plan,
FMS ranked agencies for review based largely on their dollar volume of
collections using nonelectronic methods. It plans to review the
collections of and draft Strategic Cash Management Agreements with 112
agencies spread about evenly over fiscal years 2009 through 2013.
[Footnote 28] During the development of the agreements, FMS reviews all
agency collections, including those already using electronic methods,
to see if a more efficient method could be adopted. According to FMS
officials and as described above, the payer and type of collection are
key factors in choosing a collection method. Each interagency Strategic
Cash Management Agreement will outline the methods currently used by
the agency for each of its collections; recommend electronic collection
mechanisms; set conversion timelines, agencywide goals, and metrics;
and estimate savings from conversion. The agreements commit both FMS
and the agencies to implement improvements to agencies' overall cash-
management practices.
As laid out in its Holistic Approach plan, FMS estimates savings of
conversion from nonelectronic to electronic collection methods as part
of each agency review. FMS estimates that average per transaction
collection costs are $1.679 for nonelectronic methods and $0.897 for
electronic methods.[Footnote 29] Using these figures, FMS estimates
that shifting to electronic collections will save an average of $0.78
per transaction.[Footnote 30] However, there are significant
differences in cost per transaction between different electronic
collection methods which may be obscured by using only these two broad
categories to estimate savings. For example, FMS estimates that, on
average, ACH transfers processed through Pay.gov cost $0.64 per
transaction, credit card transactions cost $1.30 per transaction, and
lockbox ECP costs $0.58 per transaction.[Footnote 31]
Although the cost of using different collection methods also can vary
by the dollar amount of the transaction, FMS officials said they do not
use volume threshold guidelines when working with agencies to select
payment methods. Specifically, credit card merchant fees are, in part,
a percentage of the value of the transaction. Though it may be less
costly to process a small collection by credit card than by check, the
reverse may be the case for large-dollar-value collections. We recently
reported that the average merchant discount rate FMS paid in fiscal
year 2007 was 1.43 percent.[Footnote 32] In a hypothetical example
using this rate, the total fees for a $100 transaction would be $1.43
and the fees for a $10,000 transaction would be $143. FMS limits
individual credit card transactions to under $100,000 in order to limit
merchant fees.
FMS's Holistic Approach plan does not provide for all available
incentives to encourage agencies to increase the use of more cost
effective collection methods. By using FMS services, agencies can
reduce their own costs of collection. Specifically, as noted earlier,
agencies that collect credit card payments through Pay.gov would be
able to avoid the costs of future system changes because with Pay.gov
those changes would be handled by FMS. The Holistic Approach plan
includes a provision for an inefficiency charge of $1.00 per
transaction for any collection not converted by the deadline as
outlined in the agreement. Although FMS has the authority to assess
inefficiency charges against agencies regardless of an agreement,
according to FMS officials, the charge is only assessed on agencies
that voluntarily sign an agreement and then only if the agency misses
agreed-upon and likely flexible deadlines. Furthermore, FMS officials
said they are not using the Holistic Approach to review whether
agencies are paying for certain collection services as required. FMS
guidance--Treasury Bulletin 94-07--requires that agencies reimburse FMS
for ancillary services and for standard lockbox collection services
unless lockbox processing provides a net financial benefit to the
Treasury's general fund.[Footnote 33] In one case, we found that
charges for a NOAA lockbox were initiated by FMS and then halted for an
unknown reason. In the past, NOAA reimbursed FMS for services on one of
its lockboxes. However, when the lockbox was moved to a different bank
in 2005, the reimbursement charge was discontinued.[Footnote 34] FMS
officials do not have any records of why they ceased to charge NOAA;
NOAA officials were also not aware of the reason why the charges were
discontinued. By not reviewing agency responsibility to pay for
collection services, FMS does not make use of an available incentive to
agencies to move to more efficient collection methods. FMS officials
stated that as part of the review, FMS negotiates the collections
proposals with the agency, but that agencies may have other, higher
priorities than making the investments needed for a change. If FMS also
reviewed whether the agency should reimburse FMS for the collection
services and charged the agency based on the findings of that review,
the agency would have a financial incentive to adopt the more cost-
effective method.
FMS Plan Does Not Include Strategy for Communicating and Incorporating
Lessons Learned from Agency Reviews as It Proceeds with Expanded
Implementation:
The Holistic Approach plan does not include a strategy for
communicating lessons-learned from earlier reviews to agencies. Without
such information, agencies not scheduled for review until later
years[Footnote 35] might not have an opportunity to correct common
problems. As part of the reviews, FMS assesses whether the agencies use
unauthorized or inefficient cash management practices. In its reviews
to date, FMS found that two agencies were holding funds outside of TGA
banks and is aware of some inefficient collection practices that do not
rise to the level of being unauthorized cash-management practices.
[Footnote 36] In our case-study reviews we also found examples of
inefficient collection practices, including the following:
* On a few occasions, USPTO accepted credit cards as payment for
multiple, individual sale transactions processed on the same day to the
same credit card account number. This resulted in the sum of the
payments to the same credit card account number to be at or near the
dollar limit for credit card transactions. Because credit card fees are
based in part on a percentage of the dollar amount charged, the cost of
processing large collections by credit card may be more than by other
methods.
* NOAA maintains some lockbox accounts with volumes below what FMS
officials told us was their rule-of-thumb for lockbox services. FMS
does not have an official volume threshold for lockboxes, but officials
stated that processing checks through a lockbox might be a good choice
for a program collecting a minimum of 1,000 checks and $1 million per
month. Of the eight NOAA lockboxes,[Footnote 37] all had calendar year
2008 collections volume that averaged less than 1,000 checks per month
and only one processed over $1 million per month on average; one
lockbox processed 208 checks totaling less than $5,000 that year. Check
volume affects the per-transaction cost of lockbox services because
some lockbox bank charges are fixed (e.g., monthly account maintenance
charges).
* As a standard practice for one NOAA regional permit office, payers
mailed checks to the office and then NOAA mailed the checks to the
lockbox bank for processing on a weekly basis. This practice delays
deposit of the collections.
Agencies not scheduled for review until later years also may lack
information on how to overcome barriers to the use of electronic
collection methods or invest in more cost-effective collection methods.
Such barriers include agency regulations that define the methods an
agency uses to make collections, and payers that are less amenable to
electronic collection methods. With better information about the
capabilities and benefits of the various collection methods, agencies
could in turn communicate that information to their payer groups.
According to payer groups we spoke with, their members would be more
likely to adopt electronic collection methods if agencies encouraged
them. According to FMS, existing agency collection contracts and
systems can be a barrier to adoption of more efficient collection
methods.
Some FMS collections guidance is outdated, but the Holistic Approach
plan does not include a strategy for updating guidance based on lessons-
learned from the agency reviews. The primary guidance to agencies on
the various options for collection methods--FMS's Cash Management Made
Easy--was last updated in April 2002 and includes outdated descriptions
of some methods. FMS's guidance for the situations in which agencies
must reimburse FMS for costs of lockbox services--Treasury Bulletin 94-
07--is, in some respects, also outdated.[Footnote 38] It bases the
responsibility to pay for the costs of standard lockbox services on the
net benefit to the Treasury's general account of accelerated deposits.
However, since the time the bulletin was issued, electronic processing
of checks has become an option for agencies. In some cases, this new
option may be a more cost-effective choice.
Conclusions:
FMS has made important progress helping the federal government improve
the efficiency and effectiveness of non-IRS collections; in fiscal year
2009, almost 87 percent of these funds were collected using fully
electronic methods. As work continues to overcome barriers to
electronic collection methods, several benefits continue to accrue: the
cost of government borrowing is decreased as the time to process
collections is reduced; agencies, customers, and FMS may enjoy lower
costs of collection; and security of collections and staff are
improved.
Reliable information on the costs of federal programs and activities is
crucial for effective management of government operations. However, it
can be difficult for agencies to effectively manage their programs or
make informed choices among collection options because FMS generally
does not provide agencies data or information on FMS's costs of
collections for a given agency, program, or collection method. FMS has
cost information by collection method but generally does not provide it
to agencies. While FMS officials said that they could and have provided
cost information upon request, we believe provision of such data should
not be ad hoc. Rather, data should be distributed systematically to
facilitate agency program management. The lack of information on FMS's
costs of collections means that agencies do not have complete
information for analysis of their fee structure and level. For some
full-cost recovery fees this means that the federal government may be
inappropriately foregoing revenues.
FMS's ongoing initiative to analyze and review the collection activity
in each agency through implementation of its Holistic Approach plan
facilitates growth in the use of electronic collection methods.
However, two aspects of the approach may lead to decisions that are not
the most cost-effective. First, FMS groups all fully and partially
electronic methods together when developing an estimate of the cost
savings of shifts from nonelectronic to other collection methods.
Second, FMS does not make use of all available financial incentives--
including enforcing its own guidance by requiring agencies to reimburse
it for certain collection services.
Finally, some inefficient agency collection practices may persist
longer than necessary because FMS's Holistic Approach plan does not
include either a strategy to communicate key lessons-learned from early
agency reviews to other agencies whose reviews are scheduled for future
years or a way to use the information to update FMS guidance to
agencies. Interim updates of collections guidance and regulations could
allow agencies to benefit from key lessons-learned during FMS reviews.
Recommendations for Executive Action:
We are making five recommendations in this report.
To strengthen oversight of the costs of collecting federal fees and
other receipts, we recommend that the Secretary of the Treasury direct
the FMS Commissioner to take the following four actions:
(1) Provide each agency with information on FMS's annual costs of
processing related to that agency's collections by, for example,
providing information on the agency's total collections, by collection
method, and FMS's costs by collection method.
(2) Revise FMS's Holistic Approach plan to assure that the reviews of
agency collections will consider the differences in costs of the
various electronic collection methods.
(3) Enforce FMS guidance by:
a. specifying criteria for determining whether FMS collection services
are either ancillary or are lockbox services not providing a net
benefit to the Treasury's general account and so should be reimbursed
by the agency; and:
b. using these criteria during Holistic Approach plan reviews to
determine whether each agency should reimburse FMS for services and
document that decision.
(4) Establish a process for updating collections guidance and
regulations based on key lessons-learned from its reviews and
communicating that information to all agencies so that agencies whose
review is scheduled for later years can begin to implement changes.
We recommend that the Secretaries of the Interior and Commerce include
FMS's costs of collection, as available, in analyzing MMS, NPS, USGS,
USPTO, and NOAA programs and, as appropriate, the design and level of
user fees.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Secretaries of the Treasury,
the Interior, and Commerce for review. We received written comments
from the Department of the Treasury's Financial Management Service, the
Department of the Interior, and the Department of Commerce, which are
reprinted in appendixes VII, VIII, and IX, respectively. In addition,
Treasury provided technical comments, which we incorporated as
appropriate. We also provided portions of the report to nonfederal
stakeholders for their review and made technical corrections as
appropriate.
FMS agreed with our recommendations and stated that it will develop an
action plan to address each recommendation. Initially, the draft's
third recommendation said that, while implementing the Holistic
Approach reviews, FMS should specify criteria for determining whether
its collection services are ancillary and should therefore be
reimbursed by the agency. FMS commented that it is working on
establishing such criteria in an initiative separate from the Holistic
Approach. In describing this initiative to us, FMS officials explained
that by separating the two initiatives they expect to be able to review
and update the policy on reimbursement more quickly. They expect to
complete the review of the reimbursement policy by April 2010. The
officials also noted that enforcement of the policy may need to be
phased-in over time as agencies will need to ensure that their
appropriations allow reimbursement to FMS for certain collection
services. In response to these comments, we revised the recommendation
to clarify that the reimbursement criteria need not be developed as
part of the Holistic Approach plan, only that, to consistently enforce
FMS policies, the criteria should be applied as part of the reviews.
The Department of the Interior concurred with our findings and
recommendation and stated that the report accurately depicts their
efforts to implement electronic collection methods.
The Department of Commerce also agreed with our recommendation and
expressed its commitment to implementing the recommendation and to
working with Treasury to improve the efficiency and effectiveness of
collection processes. It also provided technical comments specifically
with regard to the USPTO, which we incorporated as appropriate.
We are sending copies of this report to the Honorable Timothy F.
Geithner, Secretary of the Treasury; the Honorable Ken Salazar,
Secretary of the Interior; and the Honorable Gary Locke, Secretary of
Commerce. This report is also available at no charge on the GAO Web
site at [hyperlink, http://www.gao.gov].
Should you or your staff have any questions about this report, please
contact me on (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 who made major contributions to
this report are listed in Appendix X.
Signed by:
Susan J. Irving:
Director for Federal Budget Analysis, Strategic Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
To analyze opportunities to improve the efficiency of federal
collections governmentwide we examined (1) the extent to which agencies
other than the Internal Revenue Service (IRS) use collection methods in
the Financial Management Service's (FMS) collections program, (2) how
FMS and these agencies can maximize the benefits of and overcome
barriers to use of the various collection methods, and (3) issues FMS
should consider as it implements its plans for improving the efficiency
and security of these collections.
To assess the extent to which agencies use various collection methods,
we analyzed data on governmentwide collections by collection method
from FMS's Total Collections Report for fiscal years 2005 through 2009.
We worked with FMS to group collection methods consistently over time
and to categorize them as fully electronic, partly electronic, and
nonelectronic. In order to focus our analysis on nontax collections, we
excluded collections FMS identified as IRS collections. However,
according to FMS, some IRS collections may nonetheless be included in
the remaining data. We also excluded collections of the Commodity
Credit Corporation (CCC)--a federal corporation within the U.S.
Department of Agriculture--because, according to FMS officials, CCC
does not use the FMS collections program in the same way as other
agencies. CCC uses its own network of banks to process collections. We
reviewed FMS guidance and interviewed FMS officials to gather
operational information on each collection method and understand why
use of the various collection methods changed over time.
To analyze ways FMS and selected agencies can maximize the benefits of
and overcome barriers to the use of collection methods, we conducted
case-study reviews of five agencies: the Minerals Management Service
(MMS), the National Park Service (NPS), the United States Geological
Survey (USGS), the United States Patent and Trademark Office (USPTO),
and the National Oceanic and Atmospheric Administration (NOAA). We
selected this set of case-study agencies to cover the use of the
variety of collection methods, a variety of payer and payment
characteristics, programs with significant collection totals,
representation of at least two departments, potential for improved
efficiency, and instances of a recent change in collection method.
These case studies are not intended to be representative and therefore
the information gleaned from them cannot be generalized across the
government. We used fiscal year 2006 OMB data on fee collections and
fiscal year 2008 FMS data on collections by method to identify the case-
study agencies. For each case-study agency, we analyzed collections
data, interviewed agency officials, and reviewed relevant legislation,
regulations, agency guidance, and audit reports. We performed site
visits at NPS's Rocky Mountain National Park in Estes Park, Colorado,
and USGS's Central Region Geospatial Information Office and MMS's
Minerals Revenue Management office both in Denver, Colorado. At each
site-visit location, we observed collection processes and interviewed
agency officials. We also observed the lockbox process and interviewed
bank officials at a U.S. Bank lockbox location in St. Louis, Missouri
that provides lockbox services to NOAA and USPTO. We also interviewed
representatives or members from four payer organizations--the American
Petroleum Institute, the National Tour Association, Computer Packages
Inc., and the National Association of State Auditors, Comptrollers and
Treasurers--to gain an understanding of the effects of the shift to
electronic collections on payers. We selected these organizations from
stakeholder or payer organizations suggested by each case-study agency.
We also reviewed FMS regulations and guidance, analyzed FMS data
related to the costs and benefits of the various collection methods,
and interviewed FMS officials.
To identify the issues FMS should consider in implementing its plans
for improving the efficiency and security of collections, we reviewed
relevant legislation and FMS plans and agency agreements, applied
relevant findings from our case studies, and interviewed FMS and case-
study agency officials.
We assessed the reliability of the data we used for this review and
determined that it was sufficiently reliable for our purposes. We
conducted this performance audit from October 2008 through November
2009 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Minerals Management Service Collections:
Agency Description:
The Minerals Management Service (MMS), a bureau in the Department of
the Interior, manages the nation's natural gas, oil, and other mineral
resources on the outer continental shelf. The agency also collects,
accounts for, and disburses more than $8 billion per year in revenues
from federal offshore mineral leases and from onshore mineral leases on
federal and Indian lands.
Types of Collections:
MMS's Minerals Revenue Management collects rents, royalties, and
proceeds from lease sales by means of automated clearing house (ACH)
transfers, wire transfers, and Federal Reserve Bank deposits. Although
most of the payments MMS receives are transmitted electronically, as of
October 2008 MMS still received nearly 50,000 checks per year. In
fiscal year 2008, rents and royalties totaled $13.4 billion and lease
sales totaled $10.2 billion. Royalty payments are typically high-dollar
payments, while onshore and offshore rent payments can range from a few
hundred to several thousand dollars.
MMS's Offshore Energy and Minerals Management program also collects
fees for cost-recovery services and payments, public-information
service fees, and linear rental fees, totaling $11.2 million in fiscal
year 2008. These collections are solely made through Pay.gov. MMS fee-
paying customers are often large companies, but also include smaller
organizations and individuals.
Figure 3: MMS Collections by Type and Method:
[Refer to PDF for image: pie-chart and accompanying data]
Fully electric: 98%;
Nonelectronic: 2%.
Collection method: Fully electronic: Fedwire;
Percent of total: 93;
Fiscal year 2008 collection amount (dollars): $22,190,869,435.
Collection method: Fully electronic: ACH remittance express;
Percent of total: 5;
Fiscal year 2008 collection amount (dollars): $1,205,198,009.
Collection method: Fully electronic: Pay.gov ACH;
Percent of total: 0;
Fiscal year 2008 collection amount (dollars): $1,762,200.
Collection method: Fully electronic: Lockbox ACH;
Percent of total: 0;
Fiscal year 2008 collection amount (dollars): $58,601,307.
Collection method: Fully electronic: Credit/debit card;
Percent of total: 0;
Fiscal year 2008 collection amount (dollars): $9,472,223.
Collection method: Nonelectronic: Federal Reserve Bank;
Percent of total: 2;
Fiscal year 2008 collection amount (dollars): $361,526,550.
Collection method: Nonelectronic: TGA and ITGA;
Percent of total: 0;
Fiscal year 2008 collection amount (dollars): $360,820.
Total:
Percent of total: 100;
Fiscal year 2008 collection amount (dollars): $23,827,790,543.
Source: GAO analysis of FMS data.
Note: Amounts collected by credit card may also be processed by
Pay.gov.
[End of figure]
[End of section]
Appendix III: National Park Service Collections:
Agency Description:
The National Park Service (NPS) is a bureau of the Department of the
Interior. The national park system is comprised of 391 areas covering
more than 84 million acres. These areas include national parks,
monuments, battlefields, military parks, historical parks, historic
sites, lakeshores, seashores, recreation areas, scenic rivers and
trails, and the White House.
Types of Collections:
NPS collects funds from the public for recreation fees, special park
use permits and fees, transportation fees, and other collections such
as payments from concessionaires and commercial use fees and other
forms of debt collection. Recreation fees include park entrance fees
and special recreation permit fees. Recreation fees range from $5 to
$25, or more for large group purchases. Special use fees are charged
for the use of park lands or facilities for activities that occur in a
park and provide benefit to an individual, group, or organization
rather than the public at large. These administrative fees are intended
to recover full costs and are calculated on a case-by-case basis, but
range from $50 to $50,000. Transportation fees are collected to recover
costs associated with an NPS-provided transportation system.
In fiscal year 2008 NPS collected approximately $179 million in
recreation fees through credit cards, automated clearing house (ACH)
transfers, Federal Reserve Bank (FRB) deposits, Treasury General
Account (TGA) deposits, and Pay.gov. Fiscal year 2008 special park use
fees totaled $12,938,317 and were collected predominantly through TGA
deposits and some credit card collections. Transportation fees totaled
$13,883,451 in fiscal year 2008. NPS fee-paying customers include
individuals, tour operators, concessionaires, and commercial operators.
Figure 4: NPS Collections by Type and Method:
[Refer to PDF for image: pie-chart and accompanying data]
Fully electric: 39%;
Nonelectronic: 61%.
Collection method: Fully electronic: Fedwire;
Percent of total: 14;
Fiscal year 2008 collection amount (dollars): $53,336,733.
Collection method: Fully electronic: ACH remittance express;
Percent of total: 2;
Fiscal year 2008 collection amount (dollars): $7,118,224.
Collection method: Fully electronic: ACH PAD;
Percent of total: 11;
Fiscal year 2008 collection amount (dollars): $39,519,488.
Collection method: Fully electronic: Pay.gov ACH;
Percent of total: 0;
Fiscal year 2008 collection amount (dollars): $80,297.
Collection method: Fully electronic: Credit/debit card;
Percent of total: 12;
Fiscal year 2008 collection amount (dollars): $45,358,940.
Collection method: Nonelectronic: Federal Reserve Bank;
Percent of total: 14;
Fiscal year 2008 collection amount (dollars): $52,280,800.
Collection method: Nonelectronic: TGA and ITGA;
Percent of total: 46;
Fiscal year 2008 collection amount (dollars): $171,487,947.
Total:
Percent of total: 100;
Fiscal year 2008 collection amount (dollars): $396,182,422.
Source: GAO analysis of FMS data.
Note: Amounts collected by credit card may also be processed by
Pay.gov.
[End of figure]
[End of section]
Appendix IV: United States Geological Survey Collections:
Agency Description:
The U.S. Geological Survey (USGS), a Department of the Interior agency,
is the nation's largest water, earth, and biological science and
civilian mapping agency. The USGS collects, monitors, analyzes, and
provides scientific understanding about natural resource conditions,
issues, and problems.
Types of Collections:
USGS collects funds for products sales (mostly relating to mapping
products), cooperative water program agreements, and fully-
reimbursable programs. Under the cooperative water program, cooperators
partner with USGS and reimburse USGS for a portion of the costs of
specific USGS data-collection activities, investigations, or studies.
Payments under these agreements vary, with 40 percent of agreements
yielding $25,000 per year or less and the largest agreement falling
between $2 million and $3 million. These funds make up the majority of
USGS collections and are mostly collected by lockbox electronic check
processing (ECP). Other collections, including those for product sales
and reimbursable agreements, are made via agency paper check conversion
(PCC), Treasury General Account (TGA) deposits, International Treasury
General Account (ITGA) deposits, credit cards, and wire transfers.
Fiscal year 2008 collections totaled $217 million, with the majority of
this amount ($215 million) stemming from reimbursables. Reimbursables
include reimbursements from nonfederal sources such as states, tribes,
and municipalities for cooperative efforts and proceeds from the sale
of photographs and record copies; reimbursements for permits and
licenses of the Federal Energy Regulatory Commission; and
reimbursements from foreign countries and international organizations
for technical assistance.
Figure 5: USGS Collections by Type and Method:
[Refer to PDF for image: pie-chart and accompanying data]
Fully electric: 6%;
Partly electronic: 73%;
Nonelectronic: 21%.
Collection method: Fully electronic: Fedwire;
Percent of total: 2;
Fiscal year 2008 collection amount (dollars): $3,733,919.
Collection method: Fully electronic: Credit/debit card;
Percent of total: 5;
Fiscal year 2008 collection amount (dollars): $10,008,197.
Collection method: Partially electronic: Agency PCC;
Percent of total: 9;
Fiscal year 2008 collection amount (dollars): $18,921044.
Collection method: Partially electronic: Lockbox ECP;
Percent of total: 64;
Fiscal year 2008 collection amount (dollars): $138,515,030.
Collection method: Nonelectronic: TGA and ITGA;
Percent of total: 1;
Fiscal year 2008 collection amount (dollars): $2,793,893.
Collection method: Nonelectronic: Lockbox General;
Percent of total: 20;
Fiscal year 2008 collection amount (dollars): $43,195,362.
Total:
Percent of total: 100;
Fiscal year 2008 collection amount (dollars): $217,167,445.
Source: GAO analysis of FMS data.
[End of figure]
[End of section]
Appendix V: U.S. Patent and Trademark Office Collections:
Agency Description:
The U.S. Patent and Trademark Office (USPTO) is an agency of the
Department of Commerce. The agency's main functions are the examination
and issuance of patents and the examination and registration of
trademarks.
Types of Collections:
USPTO receives its funding through fees that are paid to obtain and
renew patents and trademarks. Patent fees, for activities such as
application filing, maintenance, and patent extensions, totaled $1.6
billion in fiscal year 2008. These fees can range from $3 for a patent
copy to over $8,000 for other services such as inter partes
reexamination. Patent fee payments are accepted through credit cards,
Pay.gov accepting credit cards or automated clearing house (ACH)
transfers, lockbox electronic check processing (ECP) and Treasury
General Account (TGA) deposits. Trademark fees, charged for services
such as trademark processing and services, totaled $236 million in
fiscal year 2008. Trademark fees range from $3 to $400 and are paid
through credit cards, Pay.gov accepting credit cards or ACH transfers,
and TGA deposits. USPTO also accepts replenishments to deposit accounts
through wire transfers, lockbox ECP, and TGA deposits. Payments for
some fees from foreign sources are sent through wire transfers. Payers
for patent and trademark fees are individuals, attorneys, law firms,
small businesses, nonprofits, and large corporations. Patent fees are
also paid by annuity companies.
Figure 6: USPTO Collections by Type and Method:
[Refer to PDF for image: pie-chart and accompanying data]
Fully electric: 67%;
Partly electronic: 9%;
Nonelectronic: 24%.
Collection method: Fully electronic: Fedwire;
Percent of total: 28;
Fiscal year 2008 collection amount (dollars): $571,996,867.
Collection method: Fully electronic: Pay.gov AHC;
Percent of total: 15;
Fiscal year 2008 collection amount (dollars): $299,738,355.
Collection method: Fully electronic: Credit/debit card;
Percent of total: 24;
Fiscal year 2008 collection amount (dollars): $497,331,148.
Collection method: Partially electronic: Lockbox ECP;
Percent of total: 9;
Fiscal year 2008 collection amount (dollars): $192,208,448.
Collection method: Nonelectronic: TGA and ITGA;
Percent of total: 16;
Fiscal year 2008 collection amount (dollars): $336,842,585.
Collection method: Nonelectronic: Lockbox General;
Percent of total: 7;
Fiscal year 2008 collection amount (dollars): $153,766,254.
Total:
Percent of total: 100;
Fiscal year 2008 collection amount (dollars): $2,051,883,657.
Source: GAO analysis of FMS data.
Note: Amounts collected by credit card may also be processed by
Pay.gov. FMS and agency accounting of deposits may differ due to
deposits in transit. Collections totals include normal fee collections,
as well as other collections for deposit accounts and amounts provided
to the USPTO that are passed through from and to other entities.
[End of figure]
[End of section]
Appendix VI: National Oceanic and Atmospheric Administration
Collections:
Agency Description:
The National Oceanic and Atmospheric Administration (NOAA) is a science-
based federal agency within the Department of Commerce with regulatory,
operational, and information-service responsibilities. NOAA's mission
is to understand and predict changes in the earth's environment and to
conserve, protect, and manage coastal, marine, and Great Lakes'
resources to meet our nation's economic, social, and environmental
needs. NOAA offices include the National Environmental Satellite, Data,
and Information Service (NESDIS), the National Marine Fisheries Service
(NMFS), the National Ocean Service, National Weather Service, the
Office of Marine and Aviation Operations, the Office of Oceanic and
Atmospheric Research, and the Office of Program Planning and
Integration.
Types of Collections:
NOAA offices receive collections for various programs using a wide
range of collection methods. In fiscal year 2008, NESDIS received $1.7
million in revenue for its sales of data. These collections were made
through a combination of lockbox electronic check processing (ECP),
Pay.gov, lockbox general, and Treasury General Account (TGA) deposits.
Pay.gov processed the largest amount of these collections at $1.2
million. NMFS receives fees for a variety of permits, penalties, and
inspections, totaling over $48 million in fiscal year 2008. Seafood
inspection fees, for example, averaged over $23,000 per fee collected
and were collected by means of wire transfer, Federal Reserve Bank
deposits, lockbox ECP, Pay.gov, lockbox general, and TGA deposits.
Other NMFS collections averaged from $26 for tuna permits to over
$6,000 for civil monetary penalties. Other NOAA collections include
payments to the Damage Assessment and Restoration Revolving Fund, loan
and buy back payments, and other reimbursables. Payer groups for NOAA
fees vary, but include private and corporate customers for NESDIS data
sales as well as individual fishermen and fishing companies for NMFS
permit fees.
Figure 7: NOAA Collections by Type and Method:
[Refer to PDF for image: pie-chart and accompanying data]
Fully electric: 20%;
Partly electronic: 45%;
Nonelectronic: 35%.
Collection method: Fully electronic: Fedwire;
Percent of total: 8;
Fiscal year 2008 collection amount (dollars): $10,030,891.
Collection method: Fully electronic: Pay.gov AHC;
Percent of total: 9;
Fiscal year 2008 collection amount (dollars): $10,914,559.
Collection method: Fully electronic: Credit/debit card;
Percent of total: 4;
Fiscal year 2008 collection amount (dollars): $5,113,032.
Collection method: Partially electronic: Agency PCC;
Percent of total: 1;
Fiscal year 2008 collection amount (dollars): $783,727.
Collection method: Partially electronic: Lockbox ECP;
Percent of total: 44;
Fiscal year 2008 collection amount (dollars): $55,821,557.
Collection method: Nonelectronic: Federal Reserve Bank;
Percent of total: 1;
Fiscal year 2008 collection amount (dollars): $1,275,595.
Collection method: Nonelectronic: TGA and ITGA;
Percent of total: 28;
Fiscal year 2008 collection amount (dollars): $35,173,788.
Collection method: Nonelectronic: Lockbox General;
Percent of total: 6;
Fiscal year 2008 collection amount (dollars): $8,192,041.
Total:
Percent of total: 100;
Fiscal year 2008 collection amount (dollars): $127,305,190.
Source: GAO analysis of FMS data.
Note: Amounts collected by credit card may also be processed by
Pay.gov.
[End of figure]
[End of section]
Appendix VII: Comments from the Department of the Treasury's Financial
Management Service:
Department Of The Treasury:
Financial Management Service:
Washington, D.C. 20227:
October 23, 2009:
Ms. Susan Irving:
Director of Strategic Issues:
US Government Accountability Office:
441 G Street, NW:
Room 2908:
Washington, DC 20548:
Dear Ms. Irving:
Thank you for the opportunity to review and comment on the November
2009 draft report entitled "Budget Issues: Electronic Processing of Non-
IRS Collections Has Increased but Better Understanding of Cost
Structure is Needed (GA0-10-11)."
FMS agrees with the four Recommendations for Executive Action and will
develop a plan of action to address each recommendation.
Recommendation number three specifies establishing criteria for
determining whether FMS collection services are ancillary and should be
reimbursed by the agency while implementing the Holistic Approach
reviews. FMS will implement actions to address this recommendation;
however, we are working on this effort as a separate initiative from
the Holistic Approach.
If you have any questions, please feel free to call me on (202) 874-
7000 or Sheryl Morrow on (202) 874-6847.
Sincerely,
Signed by:
David A. Lebryk:
[End of section]
Appendix VIII: Comments from the Department of the Interior:
United States Department of the Interior:
Office Of The Secretary:
Washington, DC 20240:
October 23, 2009:
Ms. Susan J. Irving:
Director, Federal Budget Analysis, Strategic Issues:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Ms. Irving:
Thank you for providing the Department of the Interior the opportunity
to review and comment on the draft Government Accountability Office
(GAO) Report - Budget Issues: Electronic Processing of Non-IRS
Collections Has Increased but Better Understanding of Cost Structure is
Needed, Report No. GAO-10-11.
The leadership in the Department of the Interior and its bureaus has
actively promoted the benefits of adopting the electronic collection
methods offered by Treasury's Financial Management Service (FMS). We
find that the GAO's draft report accurately depicts our efforts to
implement these collection methods.
We concur with GAO's finding and recommendation. As the cost of FMS'
various collection methods are made available, they will be taken into
consideration in determining which electronic collection methods to
implement.
The Department appreciates the opportunity to participate in GAO's
review of FMS electronic processing of collections. We hope these
comments will assist you in preparing the final report. If you have any
questions, or need additional information, please contact Ms. Karen
Baker at (703)648-7261.
Sincerely,
Signed by:
Rhea Suh:
Assistant Secretary for Policy, Management and Budget:
[End of section]
Appendix IX: Comments from the Department of Commerce:
United States Department Of Commerce:
The Secretary of Commerce:
Washington, D.C. 20230:
October 27, 2009:
Ms. Carol Henn:
Assistant Director, Strategic Issues:
Government Accountability Office:
441 G Street, N.W., Room 2440:
Washington, DC 20548:
Dear Ms. Henn:
Thank you for the opportunity to review and provide comments for your
Government-wide assessment of electronic user fee collection methods.
The Department of Commerce appreciates the Government Accountability
Office's (GAO) recommendations concerning agencies' adoption of
electronic collection methods for Federal fees, and we look forward to
working with the Department of the Treasury's implementation of a plan
to improve the efficiency and effectiveness of Federal collections that
are non-Internal Revenue Service. Our efforts are meant to assist in
identifying the electronic collections costs for Federal agencies and
making a determination as to whether these agencies should reimburse
the Financial Management Service (FMS) for the specific electronic
services that they provide. Below you will find the Department of
Commerce's comments on the draft report:
GAO Recommendation: We recommend that the Secretaries of the Interior
and Commerce include FMS costs of collection, as available, in
analyzing MMS, NPS, USGS, USPTO and NOAA programs and, as appropriate,
the design and level of user fees.
The following comments are provided specifically with regard to the
United States Patent and Trademark Office (USPTO): The USPTO agrees
with the GAO recommendation. If the USPTO is granted fee-setting
authority for all fees, the available costs of collection in
calculating the user fee amounts to recover costs of the services would
be included. Additionally, the following changes in terminology are
recommended, also regarding the USPTO:
1. Page 11: change the phrase "collect as cash or checks..." to
"collected as cash or checks...."
2. Page 26: change the first bullet that begins, "On a few occasions,
USPTO accepted..." to read, "On a few occasions, USPTO accepted credit
cards as payment for multiple individual sale transactions processed on
the same day to the same credit card account number, which resulted in
the sum of the payments to the same credit card account number to be at
or near the dollar limit for credit card transactions."
3. Page 40, paragraph 3, line 4: change the sentence that begins with
"USPTO also accepts replenishments..." to read, "USPTO also accepts
replenishments to deposit accounts via wire transfers, Lockbox ECP, and
TGA deposits."
Again, I thank the Government Accountability Office for the opportunity
to comment on the report. Every effort will be made to meet the
recommendations in a diligent manner, and we will gratefully accept
suggestions as we move forward to ensure that the USPTO fee collection
process is an effective system that will enable us to attain the goals
of the Department of Commerce.
Sincerely,
Signed by:
Gary Locke:
[End of section]
Appendix X: GAO Contact and Staff Acknowledgments:
GAO Contact:
Susan J. Irving, (202) 512-6806 or irvings@gao.gov:
Staff Acknowledgments:
In addition to the individual listed above, Carol Henn, Assistant
Director; Mallory Bulman; Susan Etzel; Katherine Hamer; and Elizabeth
Hosler made significant contributions to this report. Charles Fox, Cody
Goebel, Christine Houle, Paul Kinney, Felicia Lopez, Julie Matta, Anu
Mittal, Donna Miller, Robin Nazzaro, Jacqueline M. Nowicki, Melanie
Papasian, Sheila Rajabiun, Thomas Short, and Jay Smale also made key
contributions to this report.
[End of section]
Footnotes:
[1] See GAO, Federal User Fees: A Design Guide, [hyperlink,
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29,
2008).
[2] See GAO, Federal User Fees: Additional Analyses and Timely Reviews
Could Improve Immigration and Naturalization User Fee Design and USCIS
Operations, GAO-09-180 (Washington, D.C.: Jan. 23, 2009).
[3] According to FMS officials, CCC does not use the FMS collections
program in the same way as other agencies. CCC uses its own network of
banks to process collections (generally loan repayments), which totaled
over $4 billion in fiscal year 2009. For the purposes of this report,
non-IRS collections also exclude CCC collections.
[4] The almost $509 billion of non-IRS collections was about 18 percent
of the $2.9 trillion collected through FMS's collections program in
fiscal year 2009.
[5] The Secretary of the Treasury has authority to designate fiscal
agents and depositaries of the U.S. government and to promulgate
regulations implementing that authority. See 12 U.S.C. § 90. FMS
implements Treasury regulations pertaining to the designation of such
fiscal agents and depositaries. See 31 C.F.R. Pt. 202.
[6] The FMS collections program is a centralized, consolidated
governmentwide service with one national infrastructure operated by a
network of commercial financial institutions and Federal Reserve Banks
designated by FMS.
[7] FMS tracks collections in two categories: (1) electronic methods
and (2) nonelectronic methods.
[8] 31 C.F.R. § 206.4(a).
[9] GAO, Tax Administration: Increasing EFT Usage for Installment
Agreements Could Benefit IRS, [hyperlink,
http://www.gao.gov/products/GAO/GGD-98-112] (Washington, D.C.: June 10,
1998). Specific to governmentwide efforts to transition to electronic
conversions of paper checks, we reported that the efforts had not yet
resulted in economic efficiencies, but that officials expected greater
efficiencies in the future. See GAO, Check 21 Act: Most Consumers Have
Accepted and Banks Are Progressing Toward Full Adoption of Check
Truncation, [hyperlink, http://www.gao.gov/products/GAO-09-8]
(Washington, D.C.: Oct. 28, 2008).
[10] Treasury's fiscal year 2009 budget justification outlines several
performance goals for the collections program, such as the unit cost to
process a collection transaction and the percent of the dollar amount
of receipts collected electronically. These goals were reiterated in
Treasury's fiscal year 2010 budget justification.
[11] 31 C.F.R. § 206.4(c).
[12] 31 C.F.R. § 206.6 (d); 1 TFM 6-8075.30.
[13] Any noncompliance charges are required by law to be deposited into
the Cash Management Improvement Fund and are available to develop
systems for the collection and timely deposit of federal funds. 31
U.S.C. § 3720(a). According to FMS officials, to date Treasury has not
imposed any such charges.
[14] 31 C.F.R. § 206.5. Under federal law, federal officials in custody
of public money must deposit it no later than the third day after
receiving the money. 31 U.S.C. § 3302(c)(1). However, the Secretary of
the Treasury is authorized by law to prescribe by regulation a
different time frame than the one established by statute. 31 U.S.C. §
3302(c)(2).
[15] 12 U.S.C. § 391a and 12 U.S.C. § 5018, note. Section 218 of the
Transportation, Treasury, and Independent Agencies Appropriation Act,
2004, Pub. L. No. 108-199, Div. F, 118 Stat. 279, 321 (Jan. 23, 2004),
established a permanent, indefinite appropriation for Treasury to
reimburse financial institutions for depository and financial services.
Before 2004, Treasury reimbursed banks for these services with
compensating balances--noninterest-bearing balances deposited in banks
to compensate them for collecting tax and nontax receipts. See GAO,
Debt Management: Backup Funding Options Would Enhance Treasury's
Resilience to a Financial Market Disruption, GAO-06-1007 (Washington
D.C.: Sept. 26, 2006).
[16] According to FMS, the increase was primarily related to lockbox
collection services for passport and immigration programs as well as
implementation of an enterprise architecture.
[17] According to FMS, as of August 2009, 99 percent of checks and
dollars collected through lockbox banks are settled using electronic
check processing. According to FMS officials, a few lockbox accounts
have not converted to ECP either because the collection will soon move
to a different collection method and the lockbox contract will end or
because some aspect of the collection makes conversion to ECP
exceptionally complicated.
[18] USGS's Central Region Geospatial Information Office in Denver,
Colorado.
[19] See GAO, IRS Lockbox Banks: More Effective Oversight, Stronger
Controls, and Further Study of Costs and Benefits Are Needed,
[hyperlink, http://www.gao.gov/products/GAO-03-299] (Washington, D.C.:
Jan. 15, 2003).
[20] FMS officials told us that they have provided collection cost
information upon an agency's request.
[21] As discussed in Statement of Federal Financial Accounting
Standards No. 4, Managerial Cost Accounting Concepts and Standards for
the Federal Government (July 31, 1995). See GAO-08-386SP.
[22] Whether an agency can recover certain costs will be limited by the
statute providing authority to charge a particular fee and the
application of federal case law regarding the proper scope of fee-
setting authority. For a discussion on the legal parameters of setting
fees and other user charges, see GAO, Principles of Federal
Appropriations Law, Vol. III, 3rd ed., Ch. 12D. Office of Management
and Budget (OMB) Circular No. A-25 specifies that "full cost" includes
all direct and indirect costs to any part of the federal government
(such as collection costs). User fees may be assessed under specific
statutory authority or under the broad authority of the IOAA, 31 U.S.C.
§ 9701. OMB Circular No. A-25 provides guidance regarding assessments
of user charges not only under IOAA, but also under other more specific
fee statutes to the extent permitted by law--that is, the provisions of
a more specific user fee statute take precedence over the circular's
guidance, and indeed over the more general provisions of IOAA itself
(see GAO, Federal User Fees: Substantive Reviews Needed to Align Port-
Related Fees with the Programs They Support, GAO-08-321 (Washington,
D.C.: Feb. 22, 2008).
[23] Recently we reported instances of couriers not properly
safeguarding IRS receipts in transit to depositary institutions. See
GAO, Management Report: Improvements Are Needed to Enhance IRS's
Internal Controls and Operating Effectiveness, [hyperlink,
http://www.gao.gov/products/GAO-09-513R] (Washington, D.C.: June 24,
2009).
[24] NPS recently replaced this type of ACH transfer with transfers
through Pay.gov.
[25] In all of the case studies done for this engagement, we found no
evidence that the cost associated with maintaining separate collection
methods eliminated the net benefit of even a partial move to electronic
collection methods.
[26] See GAO, Grants Management: Grantees' Concerns with Efforts to
Streamline and Simplify Processes, [hyperlink,
http://www.gao.gov/products/GAO-06-566] (Washington, D.C.: July 28,
2006).
[27] For prior work related to FMS efforts to increase the use of
electronic collections and payments, see GAO, Credit and Debit Cards:
Federal Entities Are Taking Actions to Limit Their Interchange Fees,
but Additional Revenue Collection Cost Savings May Exist, [hyperlink,
http://www.gao.gov/products/GAO-08-558] (Washington, D.C.: May 15,
2008) and GAO, Electronic Payments: Many Programs Electronically
Disburse Federal Benefits, and More Outreach Could Increase Use,
[hyperlink, http://www.gao.gov/products/GAO-08-645] (Washington, D.C.:
June 23, 2008).
[28] As of September 30, 2009, FMS had signed agreements with 10
agencies and draft agreements were under review by an additional 6
agencies.
[29] FMS groups partly electronic transactions--electronic check
processing--with other electronic methods.
[30] FMS's estimates include only costs borne by FMS, not any potential
savings realized by federal agencies.
[31] The average cost of lockbox ECP processing reflects costs of both
electronic and paper services provided by the banks.
[32] The type of card, the method in which it is accepted, and other
factors affect the rate charged for any particular transaction. See GAO-
08-558.
[33] Examples of ancillary services are special handling of remittances
including notation, date stamping, document matching, assembly, and
stapling as well as special or detailed sorting. Reimbursements to the
Treasury for ancillary services may be authorized under The Economy Act
(31 U.S.C. § 1535) or 31 U.S.C. § 327. 31 U.S.C. § 327 authorizes
Treasury to be reimbursed or advanced costs for services for which the
Treasury does not receive an appropriation.
[34] The current lockbox agreement states that NOAA will be responsible
for paying the costs of the lockbox account.
[35] FMS plans to review the collections of approximately 22 agencies
per year in fiscal years 2009 through 2013.
[36] FMS officials stated that they work with agencies to immediately
eliminate unauthorized practices and negotiate with agencies to change
inefficient practices when developing Strategic Cash Management
Agreements.
[37] NOAA maintains nine lockboxes, but the collections for two of the
lockboxes are processed together.
[38] In commenting on a draft of this report, FMS said that it was in
the process of rewriting the Cash Management Made Easy guidance and
updating Treasury Bulletin 94-07. According to FMS officials the
updated guidance will set criteria for determining what FMS collection
services are ancillary and should be reimbursed by agencies.
[End of section]
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