U.S. Citizenship and Immigration Services continues to face a significant financial crunch after narrowly averting mass furloughs last year, a government oversight agency found, threatening to grow an already bloated visa backlog and lengthy wait times.

In its annual report to Congress, published Wednesday, the Homeland Security ombudsman said the immigration agency, which processes requests for visas and other immigration benefits, “is still running at a revenue loss,” which will lead to “continuing backlogs and lengthening processing times.”

“Without a significant infusion of funding, whether from customer filings or from Congress, USCIS is not well-placed to overcome its fiscal challenges,” the ombudsman said.

Spending cuts the agency made to avoid needing to furlough more than half of its USCIS employees last year — including a hiring freeze — have also compromised operations, according to the report.

“While the agency recently lifted its hiring freeze, it will take months, if not years, to re-achieve full staffing,” the report said.

The report partly attributes the agency’s financial woes to the coronavirus pandemic, which forced USCIS to shutter its offices for several months last year before resuming operations at a reduced capacity. As a result, processing times for visa applications and renewals have stretched months, leaving many foreign citizens working in the U.S. with gaps in work authorization.

In October, Congress authorized the agency, which is primarily funded by application fees, to expand premium processing services to additional benefits. USCIS has started this expansion, which allows applicants to pay higher fees for faster adjudication, and plans to make the service available for additional benefits later this year.

However, premium processing is “labor-intensive,” and with the agency understaffed, it could cause even longer wait times for applications in regular processing, the report said.

Ur Jaddou, President Joe Biden’s pick to lead USCIS, told lawmakers during her confirmation hearing earlier this year that tackling processing delays would be her “top priority.”

She also pledged to resolve the agency’s financial situation, saying one of her “most immediate responsibilities, if confirmed, will be to return the agency to firm solvency.”

Felicia Escobar Carrillo, USCIS chief of staff, said in May that the agency will likely need to increase application fees. Under the Trump administration, USCIS tried to increase application fees across the board, including by imposing a first-ever fee to apply for asylum, but the policy was struck down in court.

House Democrats have proposed providing the agency with $474.5 million to address backlogs in the chamber’s Homeland Security spending bill for fiscal 2022.

However, the ombudsman recommended that USCIS move away from its fee-based funding model, which carries “too much unpredictability to accurately predict future revenue.”

“Policy changes or pandemics, or both, can occur in any given fee cycle,” the report said. “This lack of predictability not only undercuts its ability to perform its essential mission, it also can have an adverse impact on employee retention and morale.”

The agency should also save money by continuing some of the flexibility measures it enacted during the pandemic, even as the U.S. reopens, such as waiving duplicative fingerprinting requirements and allowing remote interviews, the ombudsman said.

Joe Sowers, a USCIS spokesman, highlighted some of those steps in a statement Thursday, including the agency’s decision to reinstate a policy to defer to past visa approvals when considering an extension request.

USCIS has also resumed hiring efforts, and until fully staffed, the agency “will continue to redistribute workload and shift resources to increase capacity and address areas of high demand when appropriate,” Sowers said.

“The agency will continue to review existing policies and procedures, and [USCIS] will advance those that limit processing delays and reduce undue burdens for applicants and petitioners while still balancing the need to maintain a healthy stream of revenue to continue agency operations,” he continued.