	Background

The Federal Employees’ Retirement System Act of 1986 (FERSA) created  the Thrift Savings Plan (TSP), a retirement savings plan similar to private- sector 401(k) plans, as a key component of the Federal Employees’  Retirement System (FERS) for federal workers. First, an independent entity audits  administrative expenses as part of a larger financial audit of FRTIB. Trends and Composition of Administrative Expenses

FRTIB’s administrative expenses ranged from a peak of $101 million in  fiscal year 2000 to $83 million estimated for fiscal year 2006. However, in real terms,  FRTIB’s administrative expenses in 2006 were at a 7-year low. Overview of Individual Categories of Expenses and Comparison of Expenses Against Other Agencies and Federal Regulations

For its administrative activities, FRTIB has established practices that are  consistent with federal regulations. Although the  cost per square foot for its headquarters is comparable to average rates  that GSA cites for nearby available properties, the amount of space FRTIB  rents is greater per employee than GSA recommends. Services Purchased from Private Contractors and Other Federal Agencies

The amount that FRTIB spends purchasing services from other entities is  at a 7-year low. Currently, FRTIB rents more than 47,000 square feet. FRTIB travel is governed by federal travel regulations. This measure is very important for  participants—and the TSP compares favorably on this measure. Looking only at an aggregate measure—whether the investment fee or the  total administrative costs—provides insufficient information to judge  whether individual activities are being conducted either to achieve the  best performance or in the most efficient manner. Benchmarking by individual activity permits an  organization to compare the performance of its individual  processes/activities—and the way those processes/activities are  conducted—with either standards or “best in class” in a specific activity. Consistent with this commitment FRTIB is looking  into consolidating its office space. Appendix I: Objectives, Scope, and Methodology

To identify the administrative expenses of the Federal Retirement Thrift  Investment Board (FRTIB) we reviewed the President’s budget, FRTIB’s  audited financial statements, FRTIB’s budget documents from meeting  notes of the board members, and FRTIB’s written responses to our  questions. To judge whether the administrative expenses of FRTIB are the result of  practices consistent with federal regulations, we identified the regulations  that guide FRTIB’s expenses for activities such as compensating  employees. We also reviewed FRTIB’s responses to questions we submitted. 2. However, consistent with  FRTIB’s commitment to managing the TSP in the interest of  participants and beneficiaries of TSP, we note that use of  telecommunications offers opportunities to further reduce expenses. 3.
Why GAO Did This Study

The Federal Retirement Thrift Investment Board (FRTIB) is charged with managing the Thrift Savings Plan (TSP)--a key component of retirement savings for many federal employees--in the interest of its participants and beneficiaries. As part of a broader request on oversight of FRTIB, GAO reviewed (1) the administrative expenses of FRTIB and key components of these expenses, (2) whether the administrative expenses of FRTIB are the result of practices consistent with federal regulations and similar functions at other agencies, and (3) FRTIB's current method of benchmarking administrative expenses. GAO reviewed FRTIB's budgets, audited financial statements, a benchmarking study, and written responses to questions that GAO submitted. GAO also reviewed the regulations that guide FRTIB's spending.

What GAO Found

FRTIB's administrative expenses ranged from a peak of $101 million in fiscal year 2000 to $83 million estimated for fiscal year 2006. Only the 2001 administrative expenses were lower, reflecting the termination of a key contract. In real terms, FRTIB's administrative expenses in 2006 were at a 7-year low. Throughout this period more than half of FRTIB's administrative expenses went towards purchasing services from outside entities--private contractors and other government agencies. The next largest share of FRTIB's budget was for miscellaneous expenses, such as printing and information technology. Additional administrative expenses were spent on compensation of FRTIB's 65 employees, rent, and travel. FRTIB has established practices that are consistent with federal regulations--for acquisition, compensation, and travel. There are some areas, however, that suggest opportunities for future savings. The amount FRTIB pays per square foot is consistent with average rental rates that the General Services Administration (GSA) cites for nearby available properties. However, FRTIB rents more space per employee than GSA would recommend. Given recent downsizing, FRTIB has begun looking into consolidating its office space. Additionally, opportunities exist to reduce the travel expenses of TSP board members traveling to Washington, D.C. FRTIB's current method of benchmarking TSP participants' investment fees against those charged by 401(k) plans is a very important measure for participants--and the TSP compares favorably on this measure. However, looking only at an aggregate measure provides insufficient information to judge whether individual activities are being conducted either to achieve the best performance or in the most efficient manner. Benchmarking by individual activity permits an organization to compare its performance with standards or "best in class" in a specific activity.