Watchdogs

The government’s modernization fund has money problems

The General Services Administration-operated Technology Modernization Fund is not sufficiently recovering its operational costs as it should, a federal watchdog found.

According to a Dec. 12 report from the Government Accountability Office, the TMF, which loans money to federal agencies for modernization projects, has fallen well-short of collecting administrative fees from recipients. Administrative fees are supposed to offset the cost of operating the fund.

The TMF, established in late 2017, has awarded $89 million to seven government agencies to pursue modernization projects. As part of receiving award money, however, agencies are also expected to pay an administrative fee to offset GSA’s operating costs. As of August 2019, GSA had set aside $1.2 million in operational costs, but collected just $33,125 in administrative fees, or 3 percent of GSA’s total expense.

The GAO analysis found that the GSA will not fully recover the $1.2 million until the end of fiscal year 2025 if the current rate continues. Of the seven projects awarded money, just three have paid any administrative fees.

The GAO outlined several factors contributing to the administrative fee shortfalls. The first reason is simple: Guidelines from the Office of Management and Budget allow agencies to forgo fee payment until one year after receiving an award — meaning that projects allocated money since TMF became operational in June 2018 didn’t have to make fee payments until fiscal 2019.

Projects were also allowed to choose what fee rate they would pay dependent over the period of time they planned to make payments. All seven projects chose the longer schedule of five years.

The third problem is that agencies make fee payments based on dollars transferred to the projects, instead of dollars awarded. So while the TMF has awarded $89.4 million, it has only transferred about $37.7 million, therefore reducing fee collection. The seven projects plan to pay $2.68 million in administrative fees through 2025, according the report.

TMF appropriations also affected the fee collection as GSA officials set the fee rate based on an assumption that it would receive the full $438 million budget request for the first two years. Congress demurred and appropriated $125 million for the fund for the fiscal 2018 and 2019.

The TMF may be in more financial troubles on the appropriations front. The fiscal year 2020 budget still hasn’t been passed, but the Senate zeroed out TMF funding for FY2020.

Significant changes to projects accounted for the fifth challenge to the TMF, as four project managers planned to make changes to their projects, resulting in revised fee schedules.

The GAO wrote that the GSA has acknowledged that the problem exists, but “has not yet developed a plan outlining the actions needed to fully recover its TMF operating costs in a timely manner.”

Fee shortages are a problem for the TMF because it means that the fund has to spend more money on sustaining itself, instead to awarding that money to government agencies for modernization projects.

The GAO also found that agency estimates on cost savings weren’t reliable because the project officials didn’t follow GAO’s best practices for creating those estimations.

The GAO made five recommendations, three to GSA and two to OMB. The watchdog recommends that OMB develop a plan to recover the operating expenses and clarify that cost estimates follow GAO best practices. It also recommends that GSA implement the OMB guidance on recovering operation costs, work with OMB to clarify the cost estimates and develop guidance on completing the TMF cost estimate template.

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