Starting in 1999, OMB required that agencies with GWACs should identify, account for, and recover fully allocated actual costs in accordance with federal financial accounting standards. They have developed their own approaches to accounting and to reporting program costs, and these approaches are evolving as the agencies make periodic changes. Such fluctuations significantly impact reported program operating results. OMB guidance on earnings stipulates that (1) GWAC fees should be adjusted so that total revenues do not exceed actual costs and (2) revenues generated in excess of the agency’s actual costs are to be transferred to the miscellaneous receipts account of the U.S. Treasury’s General Fund. Other interagency contracting services we reviewed allow the providing agency to retain funds. Support of the stock program primarily involved offsetting substantial losses in fiscal years 2000 and 2001. However, some agencies are not identifying, determining accurately, or recovering the full costs of their programs as directed by OMB. The conflict between the way agencies are operating their revolving funds—using GWAC earnings to support other programs—and OMB’s guidance on the handling of earnings is a matter of concern. Program customers are, in effect, being consistently overcharged for the contract services they are buying, while GSA is using excess earnings to support other programs. Appendix I: Scope and Methodology

We focused our review on all five agencies granted executive agent status by the Office of Management and Budget (OMB) to provide governmentwide acquisition contracts (GWACs) for information technology. The term of the contracts is 5 years. Fees are not charged to NASA customers because of an agency policy against charging fees for internal use of NASA-based contracts. NITAAC provides a variety of client services. GovWorks establishes its fee for the franchise fund at the beginning of the project based on an assessment of the amount of assistance needed for the planned procurement. Appendix XIII: Program Data Sheet – Federal Supply Schedules

	Program Description:

The General Services Administration’s (GSA) Federal Supply Service (FSS) organization offers a supply and procurement business under the Federal Supply Schedules Program (Schedules program), which provides federal customers with services from more than 7,400 program vendors, as well as a wide range of commercial products.
What GAO Found

Federal interagency contract service programs are being used in a wide variety of situations, from those in which a single agency provides limited contracting assistance to an approach in which the provider agency's contracting officer handles all aspects of the procurement. This increased use of interagency contracts is a result of reforms and legislation passed in the 1990s, allowing agencies to streamline the acquisition process, operate more like businesses, and offer increasing numbers of services to other agencies. Most of the contract service programs GAO reviewed reported an excess of revenues over costs in at least one year between fiscal years 1999 and 2001. Office of Management and Budget (OMB) guidance directs agencies with governmentwide acquisition contracts (GWAC) or franchise fund programs to account for and recover fully allocated actual costs and to report on their financial results. Agencies are to identify all direct and indirect costs and charge fees to ordering agencies based on these costs. However, some GWAC programs have not identified or accurately reported the full cost of providing interagency contract services. OMB's guidance further directs that agencies return GWAC earnings to the miscellaneous receipts account of the U.S. Treasury's General Fund. However, this guidance conflicts with the operations of agencies' revolving funds, which were established by statutes that allow retention of excess revenues. The Federal Supply Schedules program has generated hefty earnings, largely because of the rapid growth of information technology sales. Rather than adjust the fee, however, the General Services Administration has used the earnings primarily to support its stock and fleet programs. However, the significant amount of earnings means that Federal Supply Schedules program customers are being consistently overcharged for the contract services they are buying.