However, states have limited budgets and  staff to assist their firms. Both CS and most states’  trade offices focus their export promotion efforts on SMEs. In addition, to facilitate access to CS’s programs,  about a third of the states responding to our survey indicated that they  provide grants or payments to firms from their states to defray the costs of   CS’s fee services. Most States’ Trade Offices Report CS’s Services Are Important to Their Export Promotion Capabilities and Have Partnered with CS

States’ trade offices collaborate with CS to help provide firms export  promotion services, and some states’ domestic offices are colocated with  CS’s staff at a USEAC with a goal of helping firms access CS services. CS Needs to Improve Its Methodology to Determine Costs and Set User Fees

CS needs better information to maximize the efficient and effective  operation of its export promotion programs and to ensure there is a sound  basis for setting its user fee rates. CS decided to base its export promotion  user fees on program costs, though it has a yearly legislative exemption  from having to recover full costs, and it attempted to recover only a  portion of the cost of its services. Complete and accurate full cost information would assist CS  and the Congress in making decisions about resource allocations,  evaluating program performance, and improving program efficiency. The Extent to Which CS’s User Fees Affect SMEs’ Use of Its Export Promotion Services Is Unclear

The extent to which CS’s user fees affect SMEs’ use of its export  promotion programs is unclear because CS lacks comparable and reliable  historical data on fees charged its customers and has only limited  disaggregated data on services sold by company size and type of  customers. CS Lacks Reliable and Sufficient Data to Evaluate Its Customer Base

CS lacks reliable and sufficient data on its export promotion fee-based  services to evaluate its customer base. The  10 percent increase in SMEs’ demand is not based on any analysis of  historical data. Most states  view CS’s new fee schedule to be reasonable. Conclusions

CS and states’ trade offices provide various types of export promotion  programs. Studies and other sources suggest that the types of services CS offers  compared with other providers, the level of individualized attention  provided, and service quality are factors that also affect SMEs’ choice to  use CS’s services. These steps could, for example, include    documenting the procedures and processes of the costing methodology in  sufficient detail so that staff who work with costing at a later point could  understand the specific procedures used and the data sources and cost  assignment methods for each step in the process; incorporating costs paid by other federal entities for CS’s benefits, such as  pensions and health insurance paid for by the Office of Personnel  Management when determining the full cost of each service;    updating estimates of the amount of time staff spent performing various  activities to realize any efficiency gained and to provide more accurate  estimates of full costs; and    documenting the methods and assumptions for establishing the user fees  CS charges different firms for each service to clearly show the linkage  between costs and user fees, particularly with regard to the lower user  fees for SMEs. GAO staff who made major contributions to  this report are listed in appendix V.

Appendix I: Scope and Methodology

Our objectives were to evaluate (1) the relationship between the U.S.  Commercial Service (CS) and states’ trade offices’ export promotion  programs, (2) CS’s methodology and practices for determining costs and  establishing user fees, and (3) how CS’s user fees affect small and  medium-sized enterprises’ (SME) use of its programs. To determine CS’s procedures for determining costs and establishing user  fees, we interviewed key CS and International Trade Administration staff  and reviewed and analyzed available documentation about CS’s export  promotion programs and user fees based on the 2005 and 2008 user fee  changes; CS’s methodology for full cost recovery; cost templates of CS’s  fee-based export promotion programs; data on CS’s budget and staff; data  on staff time spent on various activities to deliver services; legislation  authorizing CS to charge a fee for services (annual appropriations and the  Mutual Education and Cultural Exchange Act); OMB Circular A-25, User  Charges; Statement of Federal Financial Accounting Standards 4:  Managerial Cost Accounting Standards and Concepts; GAO’s Standards  for Internal Control in the Federal Government; and GAO’s Federal User  Fees: A Design Guide.
Why GAO Did This Study

Federal and state trade promotion activities are intended to help U.S. firms compete successfully in foreign markets. Small and medium-sized enterprises (SME)--firms with fewer than 500 employees--represent a key segment of exporting firms. GAO was asked to determine (1) the relationship between the Department of Commerce's (Commerce) U.S. Commercial Service (CS) and states' trade offices' export promotion programs, (2) CS's methodology and practices for determining costs and establishing user fees for export promotion services, and (3) how CS's user fees affect SMEs' use of its programs. GAO conducted a survey of states' trade offices and reviewed data such as export promotion budgets and fees, program information, government standards, and user fee studies. GAO met with officials from Commerce, the State International Development Organizations, six states' trade offices, and others.

What GAO Found

Both CS and most states' trade offices provide various types of export promotion services. However, states have limited resources and scope when compared with CS's $235 million budget and large overseas staff. Thus, most states responding to GAO's survey reported that CS's services are important to their export promotion capabilities. State offices often partner with CS on trade missions and other activities. CS and most states focus their efforts on encouraging SMEs to participate in their programs, but user fees can influence whether firms choose to access export promotion services. CS lowers fees for SME exporters, but about a third of the states said they provide grants or payments to defray firms' costs and facilitate access to CS's programs. CS needs better information to maximize the efficient and effective operation of its programs and to ensure that there is a sound basis for setting fees. CS set user fees in May 2008 guided by the Office of Management and Budget's (OMB) full cost recovery policy. However, CS has had a yearly legislative exemption from having to recover full costs through its fees and attempted to recover only a portion of the full cost of its export promotion services. CS did not support and document the methodology and assumptions it used to determine costs and cannot ensure its cost information is consistent and reliable and in accordance with government standards. GAO found significant instances where CS used incomplete and potentially inaccurate data. Complete and accurate full cost information would assist CS and the Congress in making decisions about resource allocations, evaluating program performance, and improving program efficiency. Finally, CS did not document how it established the lower user fees for SMEs and cannot show how the fees it charges different firms for each service link to costs. The extent to which CS's user fees affect SMEs' use of its export promotion programs is unclear. CS lacks reliable and sufficient data to evaluate its customer base and needs to ensure it charges firms the right fees. CS lacks reliable historical data on fees charged, firm size and status, and purchases by location and type. CS is taking steps to better evaluate its customer base. GAO's survey showed that most states reported the 2008 user fees to be reasonable but thought fees charged SMEs for some services were too high when compared with those charged by private sector providers. CS projects an increase in SMEs' demand for its services, but the projection is not based on any analysis of historical data. Relevant studies and other sources suggest that the types of services CS offers compared with other providers, the level of individualized attention provided, and service quality are factors that also affect SMEs' choice to use CS's services.