Figure 1  depicts the execution process. State indicated  that it has begun to take actions that would address our recommendations. Prior to this legislation, U.S. citizens did not need a  passport to enter the United States if they were traveling from Canada,  Mexico, the Caribbean, or Bermuda. The current passport book fee is $97 for first time, adult applicants (16  years and older). Thus, in October 2006, State announced  plans to produce a passport card as a lower cost means of establishing  citizenship and identity for U.S. citizens. For the passport card, State has  proposed to charge $45, which includes a $25 execution fee. State Proposes Reduced Execution Fee Based on Commitment to Congress and Other Factors

State considered several factors, including congressional interest in having  a low-cost travel document and its own estimated execution costs, when  setting the proposed execution fee. These include:    Commitment to Congress to issue a low-cost document. According to  consular officials, the department made a commitment to issue an  alternative document to meet WHTI requirements that would be, at most,  one-half the cost of the passport book, which currently costs $97. State’s estimates of its passport execution costs. According to  consular officials, State wanted to ensure that, while the cost of the  passport card was lower than the cost for the current passport book, that  its execution fee was not so low that it jeopardized State’s relationship  with its network of acceptance facilities, on which the department  depends to provide passport services to U.S. citizens. Based, in part, on these data, consular officials concluded that,  even with the reduced execution fee, the department and its acceptance  facilities could continue to expect additional funds from passport services. For example, the  estimates that USPS provided to Congress and State did not account for  the projected increase in passport application volume or the growth in  active postal acceptance facilities. Lack of Transparency in State’s Most Recent Passport Execution Cost Estimate

We found that State’s most recent cost of service study, which the  department considered when establishing the reduced passport execution  fee, lacked documentation of several of the contractor’s key decisions. Rigorous documentation increases the  credibility of an estimate and helps support an organization’s decision- making process. In particular, the documentation should explicitly identify  the primary methods, calculations, results, rationales or assumptions, and  sources of the data used to generate each cost element. We requested  documentation from State on the contractor’s sampling plan and survey  results, but officials were not able to provide additional details about the  survey’s sample design, results by office, or how the data was used to  arrive at the final estimated time State officials spend on passport  execution. In addition, USPS  did not provide detailed information regarding its estimated passport  execution costs, which were based on a fiscal year 2001 study. The study should also document the extent to which State’s  contractor incorporated estimated passport execution costs from USPS  and other acceptance facilities. Appendix I: Scope and Methodology

To determine the process by which the Department of State (State) set the  proposed passport execution fee, we reviewed current laws and  regulations that authorize the setting of fees, as well as guidance to  agencies on the fee-setting process from the Office of Management and  Budget, and State’s procedures as outlined in the Foreign Affairs Manual.
Why GAO Did This Study

As early as January 31, 2008, U.S. citizens will be required to present a passport or other approved document to enter the United States at all ports of entry. The Department of State (State) is developing a "passport card" as a means of establishing U.S. citizenship for individuals crossing U.S. land borders or arriving by sea from Canada, Mexico, the Caribbean, or Bermuda. State proposes to charge $45 for the card, which would include a $25 execution fee. Acceptance facilities, including State's passport offices, as well as post offices and state courts, execute passport applications on State's behalf, and retain this fee. GAO was asked to examine (1) the factors State considered when setting the proposed fee and (2) how execution cost data were developed. GAO reviewed current laws that authorize the setting of fees and met with State officials to determine how they set the execution fee. GAO also met with officials from State and the U.S. Postal Service (USPS) to discuss acceptance facility execution costs and how these costs were estimated.

What GAO Found

State considered several factors, including congressional interest in having a low-cost travel document, when setting the proposed passport execution fee. State has proposed to reduce the current execution fee from $30 to $25, which would help the department to issue a lower cost passport card that meets the new documentation requirements. Consular officials told GAO that State made a commitment to Congress to issue a document that would be, at most, one-half the price of the current passport book, which costs $97 for first time, adult applicants. To do this, State needed to reduce its fees, including the execution fee. Consular officials stated that State did not want to reduce the execution fee below $25 because it wanted to recover its costs, which it estimated at $24.36 per execution. In addition, the fee needed to be high enough to avoid jeopardizing State's relationship with acceptance facilities, on which State depends to provide passport services. State concluded that $25 would compensate acceptance facilities based, in part, on data from USPS that initially indicated its passport execution costs were about $19, as well as a projected increase in application volume. USPS later told State that the $19 figure did not include additional indirect costs. GAO found that State's most recent cost of service study, which estimated passport execution costs, lacked documentation of key decisions. Rigorous documentation increases an estimate's credibility and helps support an organization's decision-making process. Documentation of cost estimates should explicitly identify the primary methods, calculations, results, and rationales or assumptions. State was not able to provide documentation of critical components of the study's methodology. For example, consular officials could not provide details of its survey used to estimate the time it takes to execute a passport, including how the data was used to arrive at the final time estimate. State has begun a new cost study that will provide updated estimates of execution costs.