oversight

Improved Financial Administration and Revision of Fees Needed-Consular Services Program

Published by the Government Accountability Office on 1971-04-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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Department     of State




BY THE COMPTROLLER GENERAL
OF THE UNITED STATES
ci
                    CC9MPTWOLLER         GENERAL         OF      THE       UNITED      STATES
 .’
                                       WASHINGTON.        D.C.         20548




        B- 118682




        To the President   of the Senate and the
      ’ Speaker  of the House of Representatives

               This is our report    on improved                                    financial      administration
       and revision     of fees needed - consular    l                                services      program,      De-
       partment     of State.

               Our review was made pursuant   to the Budget and Account-
       ing Act, 1921 (31 U.S.C. 53), and the Accounting   and Auditing Act
       of 1950 (31 U.S.C. 67).

              Copies of this report                  are being sent to the Director,                              Office
        of Management   and Budget,                  and to the Secretary  of State.




                                                                       Comptroller               General
                                                                       of the United             States




                                   50 TH ANNIIVERSARY                          1921 - 1971
                                                                 IMPROVED FINANCIAL ADMINISTRATION AT;D
                                                                 REVISION OF FEES NEEDED--CONSULAR SERVICES
                                                                 PROGRAM
                                                               1 Department of State B-118682   " *'

              I
              I
                   DIGEST
                  ------
              I
                  WHY THE REKEW WAS MADE
              I
              I            Under established      Government policy,       Federal    agencies charge a fee for
              I            services   performed    for special    beneficiaries       that are not provided   to
 .I
          I                the public    at large.     This policy   is referred        to as the user-charge
          I                principle.
          I
          I
          I                During    fiscal     year 1970 the Department
                                                                      ._- of State collected       about $32 mil-
          l                lion in     user charges for provliding    consuiarservices      including     the is-
          I
          I                suance    of about 2.2 miT1i‘on passports,     2 million    nonimmigrant     visas,    and
          I                310,000     imigrant      visas.
          I
          I                The General Accounting     Office  (GAO) was concerned as to the basis for
          I                the establishment     of user charges for consular   services andY?h'?Xhe~-?he
          I
          I                fee5.'c'ollected  were adequate to recover the cost of rendering     these
          I                sew+ces-*~
                            _----

          I
          I       FINDINGS AND CONCLUSIONS

                           Fees collected     by the Department of State for issuing              several   million     tra-
                           vel documents annually        to individuals     traveling     between the United States
                           and foreign    countries    represent     a substantial      source of income to the
                           U.S. Government.       The Department,       however,    has  had no definitive       policy
                           or criteria    for establishing       consular   fees nor any method for defining              and
                           accumulating     cost data necessary       for the effective       financial    administra-
                           tion of the program or for determining             the equity     of the fees charged.
          I
          I
“_I                        On the basis of computations    using fiscal     year 1970 data, GAO estimates
  I                        that departmental   costs associated     with processing   and issuing      immigrant
  I                        visas to foreign   nationals  exceed revenues by $9 million         annually.      Cur-
  l                        rent fees charged for immigrant      visa services    were established      in 1952.
  7
  I                        AS of October 1970 the Secretary       of State had not taken any positive          ac-
  I                        tion to determine   whether these fees needed to be revised          in the light
  I                        of current  costs or any other factors       that might have a bearing        on the
  I
  I                        level of fees.    (See p. 7.)
      I
      I
      I                    The Secretary    of State has not promulgated            definitive       policy and criteria
  I                        for the establishment     of fees for consular          services      responsive    to Public
  I
  I                        Law 90-609 of October 1968.       This statute         eliminated       the prescribed
  I
                  Tear
                  ---    Sheet
                                                                                                    I                 .




      statutory    fees for certain    consu?ar se!)vices,       particularly       immigrant and
      non-immigrant visas,     and author?','-* '; the Secretary      of State to establish
      such fees.      Passport fees continue       to be established        by legislation.
      (See p. 16.)

      The Department of State does not have an accounting          system which will
      provide for the systematic      accumulation    of cost and revenue data neces-
      sary for the establishment      of fees and for the effective      financial man-
      agement of the various     consular activities.       (See p. 19.)
                                                                                                        I
                                                                                                                 :
RECOMMEi~DATIONSAND SUGGESTIONS

      The Secretary    of State      should                                                             I
                                                                                                        I -.
                                                                                                        I
        --revise    immigrant    visa and other consular  fees on a basis that is                       I
                                                                                                        I
           responsive    to Public Law 90-609 and in consonance with public policy                      I
           that services     provided  to or for any person should be self-sustaining                   ;
           to the fullest     extent possible,                                                          I
                                                                                                            I
        --promulgate    definitive      policy   and criteria     for   establishing    consular            I
           fees, and                                                                                        I


        --develop   an accounting   system and related           procedures     for periodi-
           tally  determining   the cost of providing           consular    services.


AGENCY ACTIONS AlldD VYRESOLVED ISSUES

      The Department     of State expressed the view that legislative       history                         I
      clearly    showed that passport   fees were established      by law as a means of                     I
      increasing    revenue and that recent legislation       increasing  passport  fees                    I
                                                                                                            I
      did not change this long-established       concept.                                                   I
      The Department      expressed also the view       that the recent legislation       vest-                 I
                                                                                                                I
      ing authority     in the Attorney    General     and the Secretary     of State to set                    I
      immigrant    visa fees had as its purpose         the setting    of fees on a fair and                    I
      equitable    basis comensurate      with the     services   rendered and moving in                        I
                                                                                                                I
      the direction     of fuller   implementation      of the user-charge     principle.                       I "

      Regarding the specific         recommendations the Deputy         Assistant  Secretary
      for Budget and Finance         has informed GAO (see app.         I) that the Department                  I
                                                                                                                I’
      will:                                                                                                     I

                                                                                                                I
          1. Analyze the existing      fee structure    to determine the necessity     for                      I
             and extent of a change in the fees, giving due weight to the bene-                                 I
             fits   accruing    to the U.S. Government from the requirement       that an
             immigrant     secure a visa for entry into the United States,        and ex-                        I
             eluding the costs involved       in the investigations    of applicants                             I
                                                                                                                 I
             whose visas are not issued.          (See p. 14.)                                                   I
                                                                                                                 I
     I
     I
     I
     I
     I
     I
     I
     I
     I
                      2. Develop definitive          po licy and criteria       for the estab lishment      of
     I                   consular    fees.      These will    include     (a) a determination       as to the
     I
     I
                         appropriate      indirect      costs that should be assessed to consular
     I                   services9     (b) a method for deducting            costs related    to furnishing
     I                   consular    services      for which no charges are assessed,            and (c) a
     I
                         means of offsetting          the costs related       to performing     services    for
                         U.S. Government employees and dependents for which no fee is pre-
     I
                         scribed.      (See p* 18.)
     I
     I
                      3. Devise a system for determining      once every 3 or 4 years the costs
:    ’                   of consular  services  by using cost-finding      techniques within the
     1                   framework of the policy   and criteria     developed under item 2 above.
     I
     I
                         (See pa 22.)
.-
     I
     I
                 Actions     proposed by the Department            of State represent      significant       prog-
     I           ress toward meeting needed improvements                 in the management of consular
     I
                 activities.        The proposed action        for periodic     determinations        of the cost
     I
     I           of providing       consular    services,     however, falls     short of what is needed
     I           in the long run for effective             financial    management of the program.              Re-
     I
     I
                 garding the Department's            proposal    to analyze the existing          fee structure,
     I           we believe      that the Department         should reconsider      its position        that costs
     I
                 involved     in investigations         of applicants      whose visas are not issued be
     I
     I           excluded in determining           the fees to be charged.
     I
     I
     I           In the absence of an adequate accounting          system, the Department    of
     I           State is not in a position      to provide     the Congress with reliable    data on
     I
     I
                 the costs that should be associated         with the passport    activity.   This
     I           information  is necessary    to assess properly       whether the fee structure     is
     I
     I
                 meeting the legislative    criterion     for the establishment      of the passport
     I           fee as a means of increasing       revenue.
     I
         I
         I       Similarly,   reliable   information      on the cost of providing     immigrant  visas
         I       and other consular    services      is largely  contingent  on the existence     of an
         I
         I       adequate accounting     system even though cost-finding        techniques    may be
         I       utilized   in an analysis     of the fee structure.
         I
   I
   I             Management needs cannot be adequately            met by accounting    determinations
   I
                 which may be made only once in every 3 or 4 years.               Therefore    GAO re-
+. 1
   I             mains firmly    of the view that,      until    the Department   of State develops
   I
   I
                 an acceptable    accounting     system, it will     not be in a position      to obtain
- - I            reliable   cost information      necessary    for the effective    financial     manage-
         I       ment of the consular      services    program.
         I
         I
         I
         I
         I
         I       GAO is reporting   this matter    to the Congress to show the need for improvc-
         I
         I
                 ments in the financial    administration      of the consular   services   activity
         I       and to show the potential     non-tax-derived      revenues which could accrue to
         I       the Government if services     performed     by the Department   of State for spe-
         I
         I       cial beneficiaries    were provided     on the basis of recovery      of costs.
         I
         I
         I       Tear Sheet
         I
         I

             I
             I
             I
             I
                         Contents
                                                             Page

DIGEST                                                         1

CHAPTER

  1        INTRODUCTION                                        4

  2        NEED TO REVISE CERTAIN CONSULARFEES                 7
              Immigrant visas                                  9
              Nonimmigrant visas                              12
              Passports                                       12
              Agency Comments and GAO Evaluation              12
              Recommendation                                  15

           DEPARTMENTAL POLICY AND CRITERIA FOR
           ESTABLISBMEE\rT
                         OF FEES LACKING                      16
               Recommendation                                 18
               Agency Comments and GAO Evaluation             18

           ACCOUNTINGSYSTEMNEEDEDFOR MANAGEMENT  OF
           CONSULARACTIVITIES                                 19
              Agency Comments and GAO Evaluation              21
              Recommendation                                  22

           SCOPEOF REVIEW                                     24

APPENDIX

  I        Letter dated October 6, 1970, from the
             Deputy Assistant  Secretary for Budget and
             Finance, Department of State, to the Gen-
             eral Accounting Office                           27

  II       Tariff  of Fees, Foreign Service    of the
             United States of America                         33

  III      Basis used in determining   costs   of the con-
             sular program                                    35

  IV       Principal   Department of State officials
              concerned with the subject matter of this
              report                                          36
     COMPTROLLERGENERAL'S                       IMPROVED FINANCIAL ADMINISTRATION AND
     Rt2PORT TO THE C@NGmSS                     REVISION OF FEES NEEDED--CONSULAR SERVICES
                                                PROGRAM
                                                Department    of State    B-118682


      DIGEST
     ------


     WHY THE REVIEW WAS MADE

          Under established    Government policy,      Federal      agencies charge a fee for
.-        services   performed  for special    beneficiaries        that are not provided to
          the public at large.      This policy is referred           to as the user-charge
          principle.

          During    fiscal   year 1970 the Department of State collected         about $32 mil-
          lion in     user charges for providing     consular services    including     the is-
          suance    of about 2.2 million   passports,     2 million  nonimmigrant     visas,    and
          310,000     immigrant   visas.

          The General Accounting     Office  (GAO) was concerned as to the basis for
          the establishment     of user charges for consular services  and whether the
          fees collected    were adequate to recover the cost of rendering   these
          services.


     FINDINGS AND CONCLUSIONS

           Fees collected     by the Department of State for issuing            several million     tra-
           vel documents annually        to individuals     traveling   between the United States
           and foreign    countries    represent     a substantial    source of income to the
           U.S. Government.       The Department,       however, has had no definitive       policy
           or criteria    for establishing       consular   fees nor any method for defining          and
           accumulating     cost data necessary for the effective           financial   administra-
           tion of the program or for determining             the equity of the fees charged.

           On the basis of computations    using fiscal     year 1970 data, GAO estimates
           that departmental   costs associated     with processing   and issuing      immigrant
           visas to foreign   nationals  exceed revenues by $9 million         annually.     Cur-
           rent fees charged for immigrant      visa services    were established      in 1952.
           As of October 1970 the Secretary       of State had not taken any positive         ac-
           tion to determine whether these fees needed to be revised in the light
           of current  costs or any other factors       that might have a bearing on the
           level of fees.    (See p. 7.)

           The Secretary    of State has not promulgated    definitive           policy  and criteria
           for the establishment     of fees for consular services           responsive    to Public
           Law 90-609 of October 1968.      This statute  eliminated           the prescribed
          statutory    fees for certain   consular       services,   particularly       immigrant and
          nonimmigrant     visas3 and authorized       the Secretary     of State to establish
          such fees.      Passport fees continue       to be established        by legislation.
          (See p0 16.)

          The Department of State does not have an accounting      system which will
          provide for the systematic  accumulation    of cost and revenue data neces-
          sary for the establishment  of fees and for the effective      financial man-
          agement of the various consular activities.       (See p. 19.)
.I
 I
     RECOIWU~ZN~A~'IG~~S
                   AND SUGGESTIONS

          The Secretary    of State      should

            --revise    immigrant    visa and other consular fees on a basis that is
               responsive    to Public Law go-609 and in consonance with public policy
               that services     provided to or for any person should be self-sustaining
               to the fullest     extent possible,

            --promulgate    definitive      policy   and criteria     for   establishing    consular
               fees, and

            --develop   an accounting   system and related           procedures     for periodi-
               tally  determining   the cost of providing           consular    services.


     AGEKY ACTIONSAflD UflRESOLVED
                                 ISSUES
          The Department of State expressed the view that legislative        history
          clearly    showed that passport fees were established     by law as a means of
          increasing    revenue and that recent legislation    increasing  passport fees
          did not change this long-established     concept.

          The Department expressed also the view            that the recent legislation       vest-
          ing authority      in the Attorney   General     and the Secretary     of State to set
          immigrant visa fees had as its purpose            the setting    of fees on a fair and
          equitable     basis commensurate with the        services   rendered and moving in
          the direction      of fuller  implementation      of the user-charge     principle.

          Regarding the specific         recommendations the Deputy Assistant  Secretary
          for Budget and Finance         has informed GAO (see app. I) that the Department
          will:

              1. Analyze the existing      fee structure   to determine the necessity    for
                 and extent of a change in the fees, giving due weight to the bene-
                 fits   accruing    to the U.S. Government from the requirement     that an
                 immigrant     secure a visa for entry into the United States,      and ex-
                 cluding    the costs involved    in the investigations  of applicants
                 whose visas are not issued.         (See p. 14.)
          2. Develop definitive          policy and criteria       for the establishment       of
             consu;ar    fees.      These will include       {a) a determination       as to the
             appropriate      indirect      costs that should be assessed to consular
             services,     (b) a method for deducting           costs related    to furnishing
             consular    services      for which no charges are assessed, and (c) a
             means of offsetting          the costs related      to performing     services    for
             U.S. Government employees and dependents for which no fee is pre-
             scribed.      (See p. 18.)

          3. Devise a system for determining    once every 3 or 4 years the costs
             of consular  services  by using cost-finding      techniques within the
             framework of the policy and criteria       developed under item 2 above.
             (See p. 22.)

     Actions proposed by the Department of State represent                  significant      prog-
     ress toward meeting needed improvements              in the management of consular
     activities.      The proposed action for periodic           determinations       of the cost
     of providing     consular     services,     however, falls   short of what is needed
     in the long run for effective            financial   management of the program.            Re-
     garding the Department's           proposal to analyze the existing           fee structure,
     we believe that the Department should reconsider                its position       that costs
     involved    in investigations         of applicants    whose visas are not issued be
     excluded in determining          the fees to be charged.

     In the absence of an adequate accounting         system, the Department of
     State is not in a position      to provide the Congress with reliable        data on
     the costs that should be associated         with the passport activity.      This
     information  is necessary to assess properly         whether the fee structure    is
     meeting the legislative    criterion     for the establishment   of the passport
     fee as a means of increasing       revenue.

     Similarly,   reliable   information      on the cost of providing     immigrant  visas
     and other consular    services      is largely  contingent  on the existence     of an
     adequate accounting     system even though cost-finding        techniques    may be
     utilized   in an analysis     of the fee structure.

     Management needs cannot be adequately        met by accounting    determinations
     which may be made only once in every 3 or 4 years.           Therefore    GAO re-
     mains firmly    of the view that,   until  the Department of State develops
     an acceptable    accounting system, it will not be in a position          to obtain
     reliable   cost information  necessary for the effective       financial     manage-
     ment of the consular services     program.

MATTERSFOR CONSIDERATION
                       BY THE CONGRESS
     GAO is reporting   this matter to the Congress to show the need for improve-
     ments in the financial      administration     of the consular services   activity
     and to show the potential      non-tax-derived      revenues which could accrue to
     the Government,if    services   performed by the Department of State for spe-
     cial beneficiaries    were provided on the basis of recovery         of costs.
                                CHAPTER1

                             INTRODUCTION

      The Department of State is responsible,   with the excep-
tion of certain military   activities,  for the overall  direc-
tion, coordination,   and supervision  of the activities  of
the U.S. Government in the conduct of its foreign affairs.

      An integral   part of this responsibility   is providing
various consular services to both United States and foreign
nationals   under the authority   of 63 Stat. 111, as amended;
22 U.S.C. 2651; 22 U.S.C. 811; and Executive Order
No. 10718. These services include passport and citizenship
services,   visa services for aliens,    services relating     to
vessels and seamen, notarial     services and authentications,
services relating    to taking evidence, and copying and re-
cording services.

       Consular services are perform&d at departmental          offices
in the United States and at approximately          265 embassies, con-
sulates,   and other posts located in major cities         throughout
the world.     Within the Department, the Bureau of Security
and Consular Affairs      has overall responsibility     for admin-
istering   and coordinating    the consular services which are
conducted in the field by Foreign Service personnel.

       The Bureau was created by an act of the Congress
(8 U.S.C. 1104) and is directed by an Administrator,                 whose
position   is equivalent    to that of an Assistant         Secretary of
State.    The Administrator    develops, establishes,          revises,
promulgates,   and directs policies       and procedures relating
to functions of the Bureau, including          the administration       and
enforcement of the provisions        of the immigration        and nation-
ality laws, issuance of passports and related              services,
issuance of visas and related        services,    protection      and wel-
fare of American citizens      and interests      abroad, and third
country representation      of interests     of foreign governments.

      The activities     of the Bureau are carried        out by
three offices,     as follows:

     Passport Office--Administers           laws, develops regulations,
and recommends policy relating           to nationality  and to

                                     4
protection,    documentation,   and control    of travel of U.S.
citizens    and foreign nationals.    Coordinates      and provides
general substantive     and technical   direction    to the work of
the Foreign Service in this functional         area.

       Visa Office --Discharges  responsibilities    under the im-
migration   laws and regulations    in matters relating   to the
issuance of visas and directs      and coordinates   the work of
the Foreign Service in this field.

       Office of Special Consular Services--Recommends         and
coordinates   policy respecting     the welfare and protection      of
U.S. citizens    and interests   abroad, including   protective
services rendered to U.S. ships and seamen in foreign ports.
Also coordinates    the representation    of U.S. interests     through
foreign governments and U.S. representation        of foreign gov-
ernment interests.

       The Department provides consular services on a fee
basis as established       by the Congress or administratively
by the Secretary of State.        Certain nonimmigrant visas and
other services are provided ona nominal or no fee basis, as
are those services rendered to Government employees on of-
ficial   business.    Title 22, Code of Federal Regulations,
prescribes    the specific    fees to be charged for official      ser-
vices performed by the Foreign Service.         At the time of our
fieldwork,    the fee schedule contained 73 categories         of ser-
vice and had been in effect from December 29, 1962.             (See
app. II.)     Certain of the fees, however, had been estab-
lished as far back as the 192OOs.

       During fiscal  year 1970 approximately    $32 million    were
collected    in fees for the various consular services pro-
vided by the Department and Foreign Service posts, which in-
cluded the issuance of about 2.2 million       passports,    2 million
nonimmigrant visas, and 310,000 immigrant visas.          Fees col-
lected for such services are deposited into the Treasury of
the United States as miscellaneous     receipts.

       The passport and immigrant visa fees, which resulted
in collections     of nearly $32 million,   or about 94 percent
of all revenue collected     for consular services during fis-
cal year 1970, were established       by the Congress.  The in-
dividual    passport fees of $1 for the application    and $9 for


                                   5
the issuance, which had been in effect from 1932, were in-
creased by the Congress, in July 1968, to $2 and $10, re-
spectively.    The fees currently    charged for processing        an
immigrant visa consist of $5 for the application           and $20 for
the issuance of the visa.     These   fees  were  originally      estab-
lished by the Congress in 1952; however, Public Law 90-609,
approved October 21, 1968, amending the Immigration and Na-
tionality   Act (8 U.S.C. 1351 and 14551, eliminated           the pre-
scribed statutory   fees and, in effect,     authorized      the Sec-
retary of State to set fees at a level sufficient            to recover
the cost of rendering    these services,

       The scope of our review is shown on page 24. The prin-
cipal Department of State officials   responsible   for the ad-
ministration   of matters discussed in this -report are listed
in appendix IV.




                                   6
                               CHAPTER2

             NEED TO REVISE CERTAIN CONSULARFEES

      Cur review shows that the Department of State needs to
revise certain   consular fees to recover the cost for pro-
viding these services.       On the basis of our computations
using fiscal   year 1970 data, we estimate that departmental
costs associated     with processing  and issuing immigrant
visas to foreign nationals      exceed revenues by an estimated
$9 million   annually.

       Consular services conducted by the Department during
fiscal   year 1970 resulted     in fee collections of about
$32 million.      These services were provided on a fee, no fee,
or nominal fee basis depending upon the legislative        author-
ity.    No fee or nominal fee services include nonimmigrant
visas and official     passports provided to employees of the
U.S. Government.      Immigrant visa and passport services rep-
resented the major sources of fees in fiscal       year 1970.
Collections    of over $22 million    for passport services and
$7.9 million    for immigrant visas were made during this pe-
riod, which represented      about 94 percent of the total con-
sular fees collected.

      Although financial    information     on total fees collected
through the consular program had been available          within the
Department, we found that information          on costs incurred,
except for certain direct charges, was practically           nonexis-
tent, because the Department's        accounting   system did not
provide for the systematic      accumulation     of data on the cost
of conducting  departmental     activities.

       To estimate the total costs borne by the Government
for providing     consular services,       we were required to calcu-
late the cost of the consular program within the Department
on the basis of the best available           information.      We in-
cluded both the direct and indirect            costs of overseas and
domestic operations      in computing the total cost of the pro-
gram. Direct costs are those which can be readily                identi-
fied with a particular      program or activity,          such as direct
salaries   and space costs.       Indirect     costs are those costs
which would be applicable       to numerous programs or activities,


                                    7
such as the Departmentss      administrative    costs,            (Refer   to
aPP 0 III for greater  detail.   on the calculation             of costs.)

       As guidance       in determining       those costs    to be included,
we utilized     Bureau     of the   Budget1     Circular    No. A-25 which
states:

       w** The cost computation shall cover the direct
       and indirect    costs to the Government of carrying
       out the activity,     including but not limited  to:

              "(1) Salaries,    employee leave, travel ex-
              pense, rent, cost of fee collection,       post-
              age 9 maintenance,   operation  and depreciation
              of buildings   and equipment, and personnel
              costs other than direct salaries     (e.g., re-
              tirement and employee insurance);

              "(29 A proportionate   share of the agency's
              management and supervisory   costs; **I'

       On the basis of the above criteria,     we calculated   the
total direct and indirect    costs of the consular program to
be about $62 million   for fiscal  year 1970. This amount rep-
resents about 27 percent of the total expenditures         for all
programs of the Department funded by the appropriation         for
salaries   and expenses for the administration     of foreign af-
fairs.
        It should be noted that our computations        did not in-
clude any of the costs incurred under the Department of
State appropriations     for representation     allowances;     acqui-
sition,    operation, and maintenance of buildings         abroad; and
emergencies in the diplomatic      and consular service,          If
these amounts, which approximated        $18 million    in fiscal    year
1970, had been included in our computations,          the overall


1On July 1, 1970, the Bureau of the Budget became the Of-
 fice of Management and Budget.
cost of the consular program would have been somewhat
higher.   It should be understood, however, that our calcula-
tions are not absolute and include allocations     of indirect
costs which may be subject to further   refinement   and deter-
mination as to methodology but, nevertheless,     demonstrate
within reasonable parameters the problem that needs to be
resolved.

      The following             table summarizes our estimates                    of the
cost of providing              consular services during fiscal                    year
1970.
                                     Visa services                           Other
                                    Im-       Non-           Passport      consular
                                  migrant  immigrant         services      services        Total
                                                          (000 Cknitted)
Direct costs:
     Domestic                     $ 1,001     $    709       $ 6,828       $     618    $ 9,156
     Space                              70          49            489             37         645
     Retirement   contribu-
       tion                            72            51           385              44        552
     Overseas                       8,Q61        5,707         4,290           5,132     23,190
              Total   direct        9,204        6,516        11,992           5,831     33,543
Indirect   costs:
     Allocable    portion:
          Administration    of
             Bureau of Secu-
             rity and Consu-
             lar Affairs                44           31           293              31        399
          Other domestic            3,328        2,357         4,288           2,112     12,085
          State administra-
             tive                   2,304        1,689         -3,143          1,512       8,728
          State executive           1,977        1,400         2,606           1,254       7,237
              Total   indirect      7,733        5,477        10,330                     28,449
              Total   costs       $16,937    $11.993         $22,322                    $61,992

IMMIGRANTVISAS

      Our review showed that during fiscal   year 1970 depart-
mental costs associated  with processing   and issuing immi-
grant visas exceeded the revenues collected    by approxi-
mately $9 million.
      Immigrant visa fees, which have been in effect since
1952, consist of a $5 fee for the application  and a $20 fee

                                             9
for the issuance of the visa,           On October 21, 1968, the Con-
gress passed legislation         (Pub. Law 90-609) which, in effect,
eliminated    the statutory     fees for immigrant visas and per-
mitted the Secretary of State to set such fees on a fair and
equitable    basis, commensurate with services rendered and in
the direction      of fuller   implementation      of the user-charge
principle.      The user-charge     principle     was enunciated in the
provisions    of title     V of the Independent Offices Appropria-
tion Act of 1952 (31 U.S.C. 483a9, which states that ser-
vices provided by any Federal agency to the public should
be self-sustaining       to the fullest      extent possible.
          In October 1968 the Secretary of State reestablished
 the immigrant visa fees at the same level as had been in
 effect     from 1952. This action had been in accord with the
 official      position   taken by the Department in commenting on
 the proposed legislation        and 'had been based on the need to
 determine what portion of the activities          of the Department,
 pertinent      to the issuance of visas, involved services to
users and the difficulty         involved in relating    the fees
 charged for immigrant visas to the total cost of visa opera-
tions.
          Our review showed that it cost the Department about
 $17 million       to provide immigrant visa services during fiscal
year 1970 for which fees of about $7.9 million            were col-
lected (see chart p, 119. During this period the Depart-
ment processed approximately          333,000 immigrant visa appli-
cations of which about 23,000 were refused.             On the basis
of our computed cost of about $17 million,            we estimated that
the average cost for each immigrant visa issued was about
$54 during fiscal        year 1970 compared with the $25 total fee
charged.
        Department of State officials        have been aware for a
number of years that established          fees for immigrant visas
might not cover the cost of providing           these services.      Such
information    has been available      from 1965 when Department
personnel completed a study which had been undertaken to
identify,    accumulate,    and allocate     the cost of performing
certain    consular services.      This study showed that the cost
of processing      immigrant visas had been substantially        in ex-
cess of the fees charged for such services.              As of October
1970, 'however,     the  Secretary  of   State  had  not  taken action
to increase these fees to a level that would cover the cost
of the services rendered.

                                    10
    350




E 300
4M
 a

z
5   250




    200




                                                FEES COLLECTED     FOR
                                               IMMlGWAsdT VISAS ISSUED
                                                     FY 1965 - 1970




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                           1965                                      1967                                             1968                                                 1969                       1970
     NONIMMIGRANTVISAS

            Nonimmigrant visas are provided by the Department of
     State on a fee or no fee basis.     The United States has en-
     tered into agreements with many countries     permitting,    on a
     reciprocal   basis, the waiver of visa fees.    Public Law
     90-609, approved October 21, 1968, eliminated     the requirement
     that fees for nonimmigrant services be strictly       on a recip-
     rocal basis.

     PASSPORTS
           Our review of the passport function   for fiscal   year
     1970 showed that fees approximating    $22 million  were col-
     lected for processing about 2 million    passports   (see chart
     pe 131, which we calculated   to cost about $22 million.

            In August 1968 a new passport law became effective,
     which revised the fees that had been in effect from 1932.
     The new law eliminated      the renewal provision    and extended
     the life of a passport from 3 years to 5 years.          Collections
     derived from the revised fees of $2 for the application            and
     $10 for the issuance of each passport approximates          the cost
     of providing    such services as estimated by GAO. In the ab-
“!   sence of an accounting system which provides for the system-
     atic accumulation     of costs and revenues for this activity,
     however, it is difficult       to determine, with any degree of
     certainty,    whether the current fee level meets the legisla-
     tive criterion     for the establishment    of passport fees as a
     means of increasing     revenue.

     AGENCYCOMMENTS
                  AND GAO EVALUATION

            In responding to our draft report (see app. I), the De-
     partment commented that the views expressed by GAO ignored
     the fact that the requirement     for a passport or visa was im-
     posed by governments for their purposes and the fact that
     the applicant    has no choice as to whether he wishes the ser-
     vice.    The Department stated that the passport or visa docu-
     ment provides the governments with a means of establishing
     identity    and a means of control over the movement of people
     for a variety    of domestic and foreign policy reasons and
     that, when due weight is given to the benefit     accruing to
                                     . .............
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            (SNOIllIW   NI)                                                  (SNBIllIW   N;
    the government         from these considerations,                the present    fees
    for passports         and visas may be considered                entirely   appro-
    priate.

            We believe     that it is inherent           in any fee structure
    that elements       of control       are an integral        part of the process
    and that the Congress,            in enacting      the legislation          providing
    for user fees to be established               at a level       to recover        the
    costs of rendering          services    to the extent        possible,       was well
    aware of this       factor.       In our opinion,        the Congress,         in deal-
    ing specifically        with legislation         involving       passport      and
    visa fees,      supports     the concept      that passport         and visa ap-
    plicants    are the recipients          of a special        benefit     not appli-
    cable to the public          generally     and therefore         should be as-
    sessed the cost of the service              to the extent         possible.

             In our draft        report   we proposed          that the Department           re-
    view and revise           immigrant    visa fees to establish                 the basic
    fees at a level           which will     recover       the cost of providing
    such visas        to the individual         aliens       involved,         The Depart-
    ment informed          us that it proposed           to analyze         the existing
I   fee structure          to determine      the necessity           for,     and the extent
    of.9   a   change    in   the   fees,  giving      due     weight     to   the benefits
    accruing       to the U.S. Government            from the requirement               that an
    immigrant        secure a visa for entry into the United                        States,
    and excluding          the costs involved          in the investigation               of ap-
    plicants      whose visas are not issued.

           Although       we are in accord with the Department's                 pro-
    posal to analyze           the existing       fee structure,     we believe       that
    the Department          should reconsider        its position      that costs in-
    volved      in the investigation          of applicants      whose visas      are
    not issued         should be excluded         in determining     the fees to be
    charged.         In this respect,       the Department's       reply    pointed
    out that the greater           portion      of the expense in visa work re-
    lated    to the investigation           and that annually        more than 10
    percent       of the applications         received    for visas resulted          in
    formal     refusals       or were not processed         to completion      with no
    way to recover          the cost of the investigation            or any other ex-
    penses incurred.

            We do not     question      the   Department's    position         that the
    greater    portion     of the      cost   for visas    is related         primarily
to the application        and resulting      investigation,      rather than
the issuance.         The present fee structure         consisting     of $5
for the application         and $20 for the issuance of the visa,
however, is not consistent           with the Department's         position.
The Department of State in its analysis of the immigrant
visa fees should consider increasing              the fee for the appli-
cation to a level commensurate with the cost of services
rendered,      including    any applicable      costs associated with
performing       the investigation,      notwithstanding      the possibility
that the applicant        may be denied a visa as a result of the
investigation.         We believe that such a position           is consis-
tent with the user-charge           concept and that denial for ap-
propriate     reasons is within the prerogative             of the issuing
authority.

RECOMMENDATION

       We recommend that the Secretary of State revise immi-
grant visa and other consular fees on a basis that is respon-
sive to Public Law 90-609 and in donsonance with public pol-
icy that services provided to or for any person should be
self-sustaining   to the fullest  extent possible.      In this con-
nection the Department should reconsider      its position    that
costs involved in investigations    of applicants   whose visas
are not issued should be excluded from any fee determination.




                                       15
                                     C&PTER      3

                   DEPARTPIENTAL POLICY AND CRITERIA

                   FOR ESTABLISHMENT OF FEES IXKTNG

       The Secretary         of State has not promulgated               definitive
policy    and criteria         for the establishment           of user fees for
consular      services,      although    Public     Law 90-609,       approved
October     21, 1968, which amended the Immigration                     and Nation-
ality    Act (8 U.S.C.        1351 and 1455),         eliminated      the pre-
scribed     statutory      fees for specified           immigration      and nation-
ality    benefits      and services      including       those pertaining          to
immigrant      visas.      The legislation,         in effect,      authorized        the
Secretary      to establish        such fees in accordance           with the Gov-
ernmentls      policy    that services        provided      to, or for,        any per-
son be self-sustaining             to the fullest        extent    possible.

       In considering        the legislation,        a Department    official
informed    the Judiciary         Committee,    House of Representatives,
that the existing        fees would be utilized          until    it could be
determined     what portion        of the activities      of the Department
involved    services     to users and that the Department             would be
governed   in setting        similar     charges by all of the consider-
ations   of public     policy      specified    in title   V of the Tndepen-
dent Offices      Appropriation        Act of 1952 (31 U.S.C. 483a).

       According    to 31 U.S.C.       483a, any service       provided     by
any Federal      agency to, or for,        any person,     except those en-
gaged in the transaction          of official     business     of the Gov-
ernment,    shall   be self-sustaining        to the fullest        extent   pos-
sible.    Further,     the head of each Federal          agency is autho-
rized   to prescribe      a fee for services       provided      that is fair
and equitable,      taking    into consideration       direct      and indirect
costs to the Government,          value to the recipient,           public   pol-
icy or interest       served,    and other pertinent        facts.

      The general  policy   for developing       an equitable   system
of charges  for certain   Government     services    is set forth    by
the Bureau of the Budget Circular        No. A-25 issued on Sep-
tember 23, 1959.    The circular    states     that




                                          16
      '"A reasonable charge -k-k* should be made to each
       identifiable  recipient for a measurable unit or
      amount of Government service or property     from
      which he derives a special benefit."

The circular         defines       a special            service,       as follows:

      "Where a service (or privilege)       provides special
      benefits  to an identifiable    recipient     above and
      beyond those which accrue to the public at large,
      a charge should be imposed to recover the full
      cost to the Federal Government of rendering          that
      service.   For example, a special benefit        will be
      considered to accrue and a charge should be im-
      posed when a Government-rendered       service:"
              *                *               *                   *                 *


      l'(c)       Is performed at the request of the recip-
                  ient and is above and beyond the services
                  regularly   received by other members of the
                  same industry    or group, or of the general
                  public (e.g.,    receiving   a passport,    visa,
                  airman's certificate,      or an inspection     af-
                  ter regular duty hours)."

      The circular    states also that the responsibility    for
the initiation,     development,  and adoption of schedules of
charges and fees consistent      with the policies  set forth in
the circular    rests with the agency.

       Upon repeal of the statutory      fees in October 1968, the
Department reestablished      by administrative     action (33 F. R.
15862) the immigrant visa fees at the same level as had been
in effect from 1952. As of October 1970 these fees were
still   in effect and no action had been taken by the Secre-
tary of State to prescribe       a policy to define (1) the con-
sular services of the Department, which are to be construed
as services to users and accordingly         subject to the user-fee
provisions    of 31 U.S.C. 483a or (2) those elements of cost
that are properly    recoverable    in the fee structure.




                                                   17
RECQ@1MEhQATION

        We recommend that the Secretary of State promulgate
definitive     policy and criteria  for establishing fees, to en-
sure the equitable     development of charges for consular ser-
vices.     Such action is necessary before adequate determina-
tions can be made on the appropriate      level and structure  for
the various fees administered      by the Department of State.

AGENCYCOMMEiNTS
              AND GAO EVALUATION

       In commenting on our recommendation,       the Department of
State noted that there were widely divergent           views as to
which, and how,     indirect  costs  should   be distributed   to the
various consular functions      in ascertaining     the total costs
from which fee determinations       could be made. Further,       the
Department pointed out that many services performed by con-
sular officers     and employees were services for which the
tariff     of fees provided that no fee be charged or which tra-
ditionally     have been performed without charge.

       The Department advised us that action would be taken to
develop definitive      policy and criteria     for the establishment
of consular fees, including        (1) a determination   as to the
appropriate   indirect     costs that should be assessed to con-
sular services,     (2)  a  method for deducting costs related       to
furnishing   consular services for which no charges are as-
sessed, and (3) a means of offsetting         the costs related    to
performing   services for U.S. Government employees and depen-
dents for which no fee is prescribed,
                                  CHAPTER4

                      ACCOUNTINGSYSTEMNEEDEDFOR

                   MANAGEMENT
                            OF CONSULARACTIVITIES

           The Department of State has not established     an account-
    ing system to provide for the systematic     development of re-
    liable   data on the Department"s assets and liabilities     or
    the value of resources consumed with respect to the various
    programs and activities    carried out by the Department.

           In September 1969 the Comptroller    General stated in a
    report1 addressed to the Congress that the Department's         ex-
    isting accounting    system was designed primarily    to account
    for its appropriations     and funds in terms of obligations     and
    cash transactions.     The report also stated that the system
    did not readily    permit the systematic   development of reli-
    able data on the value of resources consumed with respect
    to each of the programs and activities      carried out by the
    Department.

           In an April 1970 letter   to the Department, GAO again
    pointed out that, although the appropriation       accounting     sys-
    tem had been reasonably adequate for the political        activi-
    ties of the Department through the years, with the Depart-
    ment's increasingly   assumed program responsibilities,       obli-
    gation cash data clearly     was not sufficient  for management
    purposes.
            The letter    stated that a most effective     contribution
    to overall      program management within the Department could
    be made through the modernization         of the Department's       bud-
    geting, management, reporting,         and accounting   systems.      The
b
    letter    stated also that, in line with the Department's            ob-
    jective    of improving management, the basic accounting            and
    financial     reporting    concepts of the Department, particularly
    as they related       to its operating   programs, needed to be ex-
    panded from a management viewpoint          for adequate and reliable
    financial     data to be available     to program managers.

    1Progress
              and Problems Relating to Improvement of Federal
     Agency Accounting Systems as of December 31, 1968 (B-115398).

                                       19
        To determine the cost of rendering any program, includ-
ing the consular program, certain         fundamental principles       and
concepts must be established.         An understanding       and concur-
rence relative     to what constitutes     cost--the     types of cost
and their interrelationship,       assignment of cost to areas of
effort,    and the methods for measuring performance--is           para-
mount for an effective       cost accounting     system.

      Based on these fundamental principles,      a properly de-
vised accounting   system should provide for the systematic
accumulation   of cost information   on a continuing     basis to
provide data for management review of overall        program costs
and cost trends.    In adequate detail,   the system would not
only provide a basis for periodically     analyzing     specific
cost areas for productivity     but would also provide the basic
revenue and cost data necessary for the determination            of
fees on a current basis.

        The financial   reporting produced by the accounting sys-
tem, for each service program conducted by the Department,
should be designed to recognize the whole cost of the opera-
tion.     For revenue-producing   programs, the accounting system
should recognize such revenues as an integral      part of the
financial     management picture  to truly reflect the financial
results    of the program.

       Although the Department's need for modernized account-
ing procedures and a financial         management consciousness
adapted to management actions is most acute, the Department
does have some of the fundamentals for the implementation           of
a cost accounting       system and for determining    the cost of its
consular activities.         These include two reports which give
essential    statistics     regarding consular work at overseas
posts.

       The Consular Services Report, which is submitted annu-
ally by all posts, shows the approximate number of services
or actions performed, the total of each type of fee col-
lected,   and the other information  that is specifically  re-
quested by the Department,     The Monthly Summary of Visa
Workload, which is submitted either monthly or quarterly      de-
pending on the volume of visas issued, shows the number of
man-hours worked on each activity,     Although neither of
these two reports contains data relating     to the cost, direct


                                   20
or indirect,   of the consular services performed, we believe
that the existing   manpower and statistical   data, relative
to the various consular services,     provides the Department
with a basis for the assignment and distribution     of certain
direct costs.

        The Passport Office accumulates some cost figures             on a
fiscal    year basis; however, these figures         include only cer-
tain direct domestic costs of operating           the Passport Office.
The Passport Office excludes from its computations               such
costs as the Department's         share of retirement     contributions,
space occupied by the passport offices           (estimated     by GAO to
amount to $489,000 for fiscal year 1970), overseas costs of
providing     consular services,     and a pro rata share of the
general administrative       costs of the Bureau and the Depart-
ment. Such administrative          costs would include an appropri-
ate allocation      of the cost of performing      the accounting
function,     employee activities,      and other functions      that con-
tribute    to the operation     of the activity.

      Government policy requires      that user fees be established
to recover cost to the extent possible,,         Bureau of the Bud-
get Circular    No. A-25 and 31 U.S.C. 483a provide adequate
authority    for the administrative    establishment    of fees on
the basis of recovery of costs.        The circular    provides also
that the cost of supplying       these services be reviewed every
year and the fees be adjusted as necessary.

       We are fully cognizant that the establishment          of fees
based on costs will entail       some difficulties   relating     to
what costs should be included,        development of an equitable
basis for allocation,       and assignment of effort    and related
costs.    The magnitude of the costs and revenues relative            to
supplying    consular services,     an estimated $62 million      and
$32 million,    respectively,    in fiscal year 1970, however,
should provide sufficient       impetus for the development of an
accounting    system that will provide cost information         for the
consular program,

AGENCYCOMMENTS
             AND GAO EVALUATION

      In commenting on our draft report,     the Department stated
that, because of certain variables,     it would be very diffi-
cult to devise,   install, and maintain    a cost accounting
system for all consular services both here and abroad and
that such a system would be overly elaborate        for the pur-
poses to be served and would result in unnecessary costs be-
ing allocated  to the consular-fee   structure.      As an alterna-
tive, the Department proposes to use cost-finding        techniques,
for the purpose of setting   and adjusting     fees every 3 or
4 years, based on the policy and criteria        to be established
by the Department.

       Although the actions proposed by the Department of
State will represent     progress toward meeting needed improve-
ments in the administration      of consular activities,    we be-
lieve that an adequate accounting        system is a necessary pre-
requisite    for the effective   financial    management of the
overall    consular program.

        Additional    costs may be involved in the establishment
of such a system; however, we believe that the additional
costs would have to be measured against the need for obtain-
ing adequate financial       information   for making informed
judgments for the effective        management of one of the more
significant      programs of the Department.     We would be
pleased to cooperate with the Department in developing a
system that would meet the Comptroller         General@s principles
and standards and that would not be overly elaborate           and
unnecessarily       costly in meeting management needs.

        In the absence of an adequate accounting          system, the
Department is unable to obtain reliable           information     on the
costs of supplying       immigrant visas or other consular ser-
vices even though cost-finding         techniques may be utilized
in estimating     and analyzing     the fee structure.       It is also
our firm belief      that without such a system the Department
is not in a position       to furnish    the Congress with the neces-
sary basic financial       data upon which a determination         can be
made as to whether passport fees are meeting the revenue
criterion     as established    by legislative   history.

RECOMMENDATION

      In view of the financial magnitude         and importance of
the consular program, we recommend that          the Secretary of
State reconsider  the need to develop an         accounting   system
that will provide the necessary data to          permit management


                                   22
to make continuing    assessment     of the program and to provide
a sound basis to evaluate      the reasonableness       of the fees
and that will    meet the principles      and standards    prescribed
by the Comptroller    General.




                                   23
                                 CHAPTER 5

                             SCOPE OF REVIEW

        Our review,      which was conducted     at the Department        of
State in Washington,          D.C.,  included   an  examination      of  ap-
plicable     legislation      and departmental     policies,     procedures,
and records       pertinent    to the establishment        of fees for con-
sular    services      and to the accounting     and monitoring        of as-
sociated     costs.

        The review      did not encompass the overall        management of
the consular        program or individual        services nor the finan-
cial    control     exercised     over fee collections    but was directed
primarily       toward ascertaining       the basis used in establishing
fees and whether          the fees charged were adequate       to recover
the cost of rendering           related   services.




                                       24
    APPENDIXES




.




       25
                                                                   APPENDIX i
                                                                       Page I


                           DEPARTMENT         OF STATE




                                                           OCT 6 1970
Mr.   Oye V. Stovall
Director
International Division
United States General Accounting                  Office
Washington, D.C. 20548
Dear Mr.      Stovall:

On August 24, 1970 you transmitted    to the Secretary  copies
of the General Accounting  Office  draft   report on the Need
to Improve Administration  and to Revise Fees for Certain
Consular  Services.

The subject     of establishing           consular   fees has a long history.
For many years both visa and passport                  fees were established
by law apparently         with little       regard being given to whether
the fee charged recovered              the cost of providing         the service,
During the Civil        War a passport          fee was imposed by Act of
Congress    "to provide       internal       revenue to support         the Govern-
ment, and to pay interest              on the public      debt".     In 1932
the fee for a passport           was increased       from $5 to $9 and
clearly    advocated      as a means of increasing             revenue.      The
most recent     legislation        (P.L.     90-428)   increasing       the appli-
cation   fee from $1 to $2 and the passport                  fee from $9 to
 $10 did not change this           long established         concept.       Recent
legislation        (P.L.   90-609)      which abolished       the statutory
immigrant   visa fees and vested authority          in the Attorney
General   and the Secretary    of State to set the fees, had
as its purpose    the setting   of fees on a fair        and equitable
basis commensurate     with the services       rendered    and moving
in the direction     of fuller   implementation       of the user
charge principle.

Cost analyses   of consular   services  have been made by both
the Department    and the General Accounting     Office   in recent
years.   However,   there are widely   divergent    views as to



                                         27
APPENDIX I
    Page 2
which and how indirect      costs should be distributed        to the
various consular functions        in ascertaining    the total costs
from which fee determinations        could   be made. There is
also interest    and concern on the part of Congress and
the OMB in the passport and visa fee levels that must be
taken into consideration      when proposed changes are to be
made. In Senate Report No. 113 of the Government Operations
Committee on Progress on Reorganization           of the Passport
Office issued February 25, 1957 the Committee stated -
"The Committee strongly      believes that only items bearing
directly   on the passport operation       and service to travelers
should be included in this cost accounting,           and that peri-
odic review of these charges be made by the General Accounting
Office."     However, elsewhere in the same report the Committee
stated - "With the increased public demands for better
service in the issuance of passports for their personal
convenience,    and the heavy costs that are involved both
at home and abroad in servicing         American travelers    through
the Passport Office,     the Consular Service, and other agencies
of the Department of State, it is the view of the Committee
that an increase of 100 percent or more in fees for such
services is fully warranted."

In the latest legislation     affecting   the passport fee a
$3 application    fee and a $12 passport fee was initially
proposed.     The House Committee on Foreign Affairs     felt the
proposed fees were too high in view of the elimination        of
the renewal feature and,accordinglp       reduced them to $2 and
$10 respectively,    which prevailed    in the final enactment.

The substance of the GAO draft report is based on the premise
that the passport and visa applicants     are the recipients   of
a special benefit not applicable    to the public generally,
and, therefore,   should be assessed the cost of the service.
This ignores the fact that the requirement      for a passport
or visa is imposed by governments for their purposes and
the applicant   has no choice as to whether or not he wishes
the service.    The passport or visa document provides the
governments with a means of establishing     identity   and a
means of control   over the movement of people for a variety




                               28
                                                             APPENDIX I
                                                                 Page 3
of domestic and foreign policy reasons.      An argument can
be made that the government should bear some of the costs
because it is a beneficiary    of the requirements.     It
could well be that when the benefit     to the government of
these considerations   are given due weight, the present
fees for passports and visas may be considered      entirely
appropriate.

Another important     consideration     is that many services
performed by consular officers        and employees are services
for which the tariff     of fees provides that no fee shall
be charged or which traditionally          have been performed with-
out charge.     Welfare and protection        of American citizens
abroad absorbs a substantial        amount of time.       No fees are
charged for these services.         To illustrate     this point,
considerable    time is spent by consular officers          in gaining
access to American citizens        who have been arrested       for
violation    of the laws of the host country and in providing
them with various types of assistance.            In the case of
passports,    152,600 no fee passportswere        issued in Fiscal
Year 1970, 7.34 percent of the total,           to provide passports
to officers    and employees of the U.S. Government and their
dependents as well as certain        other categories      prescribed
by law. The costs of providing          these services should not
be assessed against those from whom a fee is required.
Contrary to the statement in the report that 85 categories
of services are provided in the fee schedule, there are
only 73 items of which 16 are No-Fee items.

Further,    with respect to immigrant visa applicants             a $5
fee is charged for the application,          and $20 for the visa
when it is issued.        Each application     requires     an investi-
gation by the consular officer         to determine the applicant's
eligibility     for the visa.     The greater portion        of the
expense involved       in visa work relates to the investigation.
Each year 40,000 or more of the applications              received for
visas result      in formal refusals.      This is more than 10
percent of the total.         An even greater number of applica-
tions are never processed to completion.              Although the




                                    29
APPENDIX I
     Page 4
expense has been incunred, i.f the -,iis;i is I;ot i,sscc:d
there is no wav in which to recm7er    the full cost of
the investigation         and other expenses incurred.          costs
attributable        to these categories       should not be assessed
against      tne applicants    Gho are successfal        in rePei~?ing
visas.       Moreover,    the benefit     of the investigation      accrues
not to the unsuccessful          applicant     but to the government       that
established       the ground of ineligibility        disclosed     by the
investigation,
Because of the variables           described    above it would be very
difficult   to devise,     install       and maintain    an integrated
cost accounting      system for alI consular           services   bDth here
and abroad.     Further,     to establish       a system that would pro-
vide for the systematic          accumufation      of costs on a continuing
basis would be overly        elaborate       for the purposes     to be
served and only result         in unnecessary costs to be allocated
to the consular      fee structure.
It is the DepartmentDs position   that cost determinations
can be made periodically  using cost-finding  techniques
which are comparatively  simple and entirely  adequate    for
the purposes of setting  fees.  Also, it would not be the
intent of the Department to adjust fees at more frequent
intervals  than every 3 or 4 years.
The draft report      contains     the following  three recommendations.
The Department's      proposed     action follows each of the three
recommendations,
Recommendation      No. 1 - Review        and revise immigrant visa
                               fees     in order to establish    the basic
                               fees     at a level which will recover
                               the    cost of providing    such visas ts
                               the    individual   aliens involved.
      Proposed Action       - The Department wiPE analyze the
                              existing  fee structure     to determine
                              the necessity   for and extent of a
                              change in the fees, giving due weight
                              to the benefits    accruing   to the U.S,
                              Government from the requirement       that
                              an immigrant secure a visa for entry
                              into the United States, and excludilng
                              the costs involved in the investiga-
                              tions of applicants      whose visas are
                              not issued.




                                        30
                                                                 APPE'\lDTX I
                                                                     Page 5

Recommendatj.c>n    No. 2 - Promulgate    definitive    policy     and
                            criteria   for establishing        consular
                            fees.

      Proposed     Action   - The Department        will     develop     defini-
                              tive policy      and criteria         for estab-
                              lishment    of consular         fees,    including
                              (a) a determination            as to the
                              appropriate      indirect       costs that
                              should be assessed           to consular
                              services,     (b) a method for deducting
                              costs related       to furnishing          consular
                              services    for which no charges              are
                              assessed,     and (c) a means of offsetting
                              the costs related          to performing
                              services    for U.S. Government              employees
                              and dependents        for which no fee is
                              prescribed.

Recommendation      No. 3 - Devise procedures      within     the Depart-
                            ment for periodically         determining     the
                            cost of providing      consular      services
                            through  an integrated        cost accounting
                               sys tern.

      Proposed     Action   - The Department       will     devise a system
                              for periodically          determining      the costs
                              of consular      services      using csst-
                              finding   techniques,         within    the frame-
                              work of the policy           and criteria
                              developed    under Recommendation             No. 2.

Departmental    representatives            would be happy to discuss   the
substance    of this   reply with          your staff if you need further
information.




                                        Deputy Assistant  Secretary
                                        for Budget and Finance




                                   31
                                                         APPENDIX l-11


            BASIS USED IN DETERMININGCOSTS OF THE

                         CONSULARPROGRAM


        Costs of conducting     the consular program of the Depart-
ment of State were calculated          on the basis of obligations
incurred during fiscal      year 1970 together with information
obtained from such material         as staffing    patterns,   employee
authorizations,      space distribution       schedules, rental rate
schedules,      and other varied reports dealing with the work-
load of the various consular activities.              Specific  reports
utilized     included the Consular Services Report and the
Monthly Summary of Visa Workload.            We also considered cer-
tain data developed in a study conducted by the Department
of State in 1965 on the cost of providing             consular services.

        The direct cost of the consular program was calculated
on the basis of consular positions       and related   salaries,
both domestic and overseas, with identifiable         support costs
allocated     directly to the various activities     or on the basis
of cumulative personnel costs.       Cost of space occupied by
the various domestic offices      was included as a direct charge
and was computed by applying the General Services Adminis-
tration    rental rates to the square footage occupied.

        The indirect  costs of the consular program were com-
puted through the allocation      of a portion     of the various
support functions     which could not be related      to,or identi-
fied with, specific     programs.   These   include   a proportion-
ate share of the costs of security,       communications,     admin-
istration     of the Bureau of Security   and Consular Affairs,
as well as a share of the general administrative           and execu-
tive costs of the Department and overseas posts.




                                    35
APPENDIX IV


            PRINCIPAL   DEPARTMENT OF STATE OFFICIALS

      CONCERNED WITH THE SUBJECT MATTER OF THIS REPORT


                                                Tenure    of office
                                                From                  To
                                                                      -
                                                                            .
SECRETARY OF STATE:
    Dean Rusk                            Jan.      1961      Jai-l.  1969   I
    William P. Rogers                    Jan.      1969      Present

DEPUTY UNDER SECRETARY OF STATE
  FOR ADMINISTRATION:
    William  J. Crockett                 June      1963      Jan.    1967
    Idar Rimestad                        Feb.      1967      Sept. 1969
    William  B, Macomber? Jr.            act *     1969      Present

BUREAU OF SECURITY AND CONSULAR
  AFFAIRS:
    Administrator:
         Abba P. Schwartz                Sept.     1962      Mar.    1966
         Philip    B. Heymann (acting)   Mar.      1966      Apr.    1967
         Barbara M. Watson (acting)      Apr.      1967      Aug.    1968
         Barbara M. Watson               Aug.      1968      Present




                                 36