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General government > 43. Federal User Fees

Regularly reviewing federal user fees and charges can help the Congress and federal agencies identify opportunities to address inconsistent federal funding approaches and enhance user financing, thereby reducing reliance on general fund appropriations.

Why This Area Is Important

Federal user fees and charges are generally related to some voluntary transaction or request for government goods or services beyond what is normally available to the public, such as fees for national park entrance, patent applications, and customs inspections. Twenty-three federal agencies reported collecting nearly $64 billion in fees or charges in fiscal year 2010. As GAO reported in May 2008, well-designed user fees can reduce the burden on taxpayers to finance those portions of activities that provide benefits to identifiable users. Regular, comprehensive fee reviews can help identify duplicative fee-funded activities, prevent misalignment between fees and the activities they cover, and maximize opportunities for user financing.

What GAO Found

In many instances, Congress has provided specific authority to federal agencies to assess user fees in agency authorization or appropriations legislation. Agencies that lack specific statutory authority to charge fees can rely on the Independent Offices Appropriation Act of 1952[1] which provides broad authority to assess user fees or charges on identifiable beneficiaries by administrative regulation.[2] When a fee’s authorizing statute does not specify review and reporting requirements, and for fees that derive their statutory authority from the Independent Offices Appropriation Act, the CFO Act of 1990[3] (CFO Act) and OMB Circular No. A-25 directs agencies to biennially review their fees and to recommend fee adjustments as appropriate. In addition, OMB Circular No. A-25 directs agencies to include non-fee-funded programs in these reviews to determine whether fees should be initiated for government services or goods for which fees are not currently charged. Further, if imposing such fees is prohibited or restricted by law, agencies are to recommend legislative changes as appropriate. Moreover, agencies are to discuss the results of these reviews and any resulting proposals, such as adjustments to fee rates, in the CFO annual report required by the CFO Act. This discussion may be included in agency performance and accountability reports. Lastly, budget formulation guidance to agencies in OMB Circular No. A-11 directs agencies to follow fee review guidance in OMB Circular No. A-25 and to report on the results of fee reviews in CFO Act reports.

GAO previously reported that not reviewing fees regularly can result in large fee increases and create costly challenges. For example, prior to its 2007 fee review, U.S. Citizenship and Immigration Services had not conducted a comprehensive review of its immigration and naturalization fees in 9 years and, as a result, had to increase fees by an average of 86 percent to cover its costs. Further, during the month before the fee increase took effect, applications increased an unprecedented 100 percent over the prior month, far outpacing the agency’s processing capacity. As a result, 1.47 million applications were delayed and the agency incurred unplanned costs to secure additional facilities to store these applications.

In May 2008, GAO issued its User Fee Design Guide, which examined how the four key design and implementation characteristics—how fees are set, collected, used, and reviewed—may affect the economic efficiency, equity, revenue adequacy, and administrative burden of the fees. The Design Guide also stated that the tools for congressional and stakeholder oversight could be enhanced by agencies reporting the methods for setting fees, including an accounting of program costs and assumptions it uses to project future program costs and fee collections.

In GAO’s 2011 survey of the 24 agencies covered by the CFO Act and OMB Circular No. A-25, 21 of the 23 agencies that responded reported charging more than 3,600 fees and collecting nearly $64 billion in fiscal year 2010, but agency responses indicated varying levels of adherence to the biennial review and reporting requirements of the CFO Act and OMB Circular No. A-25.[4] The survey responses indicated that for most fees, agencies (1) had not discussed fee review results in annual reports, and (2) had not reviewed the fees and were inconsistent in their ability to provide fee review documentation. Specifically, agencies reported that only 29 percent of the fees (1,064 fees), representing only 37 percent ($23.6 billion) of total fee collections in fiscal year 2010 were discussed in their CFO annual report as directed by OMB Circular No. A-25. However, agencies reported reviewing 1,687 fees, which make up about 46 percent of the total 3,666 fees charged.[5] This suggests that agencies are reviewing more fees than are being discussed in their annual reports. For agency responses, please see the table below. While these reviews may provide information for agency management and decision making, the extent to which this information is being shared with congressional decision makers or other stakeholders appears far more limited. When asked why they did not review individual reported fees, agencies most commonly chose “other” amongst the survey responses provided. When selecting “other,” agency-provided responses included that fees were based upon market prices, that the fee was set or administrated by another agency, or that they did not review some fees because the fee was set in legislation, and therefore they may not have the authority to revise the fee. Agencies also commonly selected responses that GAO provided, including minimal total fee collections or that fee requirements were not clear. GAO has previously reported that to ensure decision makers have complete information about program costs and activities, agencies must substantively review and report on all cost-based fees regularly, regardless of whether agencies have sole discretion for revising fee rates.

Table: Agencies Reported Fiscal Year 2010 Total Fee Collections and Adherence to the CFO Act and OMB Circular No. A-25 Guidance on Reviewing and Discussing Results of Biennial Fee Reviews

Dollars in millions

Agency

Reported FY 2010 total fee collections

Reported percentage of fees and charges revieweda

Reported percentage of fees and charges reviewed biennially and discussed in CFO annual documents

Department of Health and Human Services

$31,545

84%

30%

Department of the Treasury

9,789

97

67

Department of Homeland Security

8,784

87

96

Department of Agriculture

3,991

100

100

Department of Energy

2,498

86

0

Department of Commerce

2,136

83

65

Department of State

1,896

100

73

Department of Interior

1,320

6

5

Department of Justice

777

71

65

Social Security Administration

370

100

100

Department of Transportation

214

89

0

Department of Labor

164

90

0

Environmental Protection Agency

84

100

29

National Aeronautics and Space Administration

61

83

0

Department of Veterans Affairs

51

80

47

Small Business Administration

16

100

100

Office of Personnel Management

8

0

0

General Services Administration

6

50

0

United States Agency for International Development

5

0

0

Nuclear Regulatory Commission

2

100

50

Department of Housing and Urban Development

0.043

100

0

Source: GAO summary of agency-reported data.

aThe third column, “reported percentage of fees and charges reviewed” is generally inclusive of fees and charges reported in the fourth column as reviewed biennially and discussed in CFO annual documents.

Agencies were inconsistent in their ability to provide documentation for their fee reviews. For example, the Department of Agriculture provided documentation of reviews for all of its fees, while a few agencies did not provide any documentation. Even for agencies that provided documentation however, GAO found the reviews contained varying levels of detail and analysis, potentially limiting their value to decision makers. For one agency, it was not clear when the reviews had been conducted. GAO has previously reported that decision makers must understand the decisions and tradeoffs made when designing fees to achieve specific policy goals and the costs of these decisions in determining if the policy goals were being met. Finally, most of the reporting agencies (16 out of 23) reported reviewing at least some of their non-fee-funded programs for opportunities to initiate new fees for government services or goods.

Without regular comprehensive reviews, agencies and Congress may miss opportunities to make improvements to a fee’s design which, if left unaddressed, could contribute to inefficient use of government resources. For example, fee reviews could help ensure that fees are properly set to cover the total costs of those activities which are intended to be fully fee-funded, thus eliminating the need for direct appropriations for those activities. Fee reviews may also

  • allow agencies and Congress to identify where similar activities are funded differently; for example, one by fees and one by appropriations. One such example is the export control system, in which the State Department charges fees for the export of items on the U.S. Munitions List, while the Commerce Department does not charge fees for those items exported under its jurisdiction. Fee reviews may thereby assist in eliminating or managing inconsistent or overlapping funding sources for similar activities; and
  • be a useful step toward examining whether the activities themselves are duplicative or overlapping.

As GAO reported in September 2007, fragmentation exists in the Department of Homeland Security’s One Face at the Border program, which integrated the customs, agriculture, and immigration air passenger inspection programs and is funded by three separate fees and general fund appropriations, creating administrative, operational, and oversight challenges. GAO also reported in February 2008 that fragmentation in Harbor Maintenance Fee administration between the Army Corps of Engineers and Department of Homeland Security’s U.S. Customs and Border Protection inhibits oversight. Further, regular reviews increase congressional and agency awareness of federal program costs, and therefore may increase incentives to reduce costs where possible.



[1]Pub. L. No. 82-137 (Aug. 31, 1951), codified at 31, U.S.C. § 9701.

[2]User fees assessed under the Independent Offices Appropriation Act’s authority must be (1) fair and (2) based on costs to the government, the value of the service or thing to the recipient, public policy or interest serviced, and other relevant facts. Fees collected under this authority are deposited in the general fund of the U.S. Treasury and are generally not available to the agency or the activity generating the fees. Unless otherwise authorized by law, the act requires that agency regulations establishing a user fee are subject to policies prescribed by the President.

[3]Pub. L. No. 101-576 (Nov. 15, 1990), codified at, 31 U.S.C. § 902. The CFO Act requires agencies to report on “fees, royalties, rents, and other charges imposed by the agency for services and things of value it provides.” For the purposes of this discussion, GAO collectively refers to all of these as user fees.

[4]Twenty-three of the 24 departments covered by the CFO Act and OMB Circular No. A-25 responded to GAO’s survey. The Department of Defense did not respond to GAO’s survey. The Department of Education and the National Science Foundation reported no fees. The Department of Commerce’s National Technical Information Service is a fee-based agency that charges more than 3 million different fees as a clearing house for government-funded, technical, engineering and business related information. The service reported these as a single fee. For all Department of Commerce Bureaus, other than the U.S. Patent and Trademark Office, fee collections are as of June 30, 2010, per the Department of Commerce. The U.S. Patent and Trademark Office reported collections for all of fiscal year 2010. There may be some duplication of reported fees as both the Department of Commerce and Department of State reported collecting fees for Commercial Services.The Mint reported a single fee and collection amount for the fees related to all Numismatic products which account for $3.25 billion of the Department of the Treasury’s total collections.

[5]Agency documentation of these fee reviews varied, limiting GAO’s ability to corroborate individual fee reviews and the recency and frequency of these fee reviews.

Actions Needed

Federal agencies reported collecting nearly $64 billion in federal user fees and charges in fiscal year 2010. Regular fee reviews can help the Congress and federal agencies identify opportunities to revise fees in ways that enhance user funding of goods or services above and beyond what is normally available to the public, and can be a useful step towards examining whether the activities themselves are duplicative or overlapping. GAO has ongoing work evaluating federal user fee reviews and opportunities to initiate new fees for government services or goods. The Director of the Office of Management and Budget (OMB) should use its budget reviews to ensure that agencies

  • review their fee-funded programs biennially, as required by the CFO Act and consistent with GAO’s User Fee Design Guide, to help identify opportunities to improve the (1) efficiency, equity, revenue adequacy, and administrative burden of the fee design and (2) alignment of fee collections with program costs over time; and
  • review their non-fee-funded programs on a regular basis, in accordance with OMB Circular No. A-25 guidance, and discuss the results in their CFO annual report. Regular reviews of non feefunded programs can help agencies and Congress determine whether programs funded with general fund revenues could be fully or partially funded with user fees.

Further, the Director of OMB could direct agencies to

  • use a framework such as GAO’s User Fee Design Guide when designing or redesigning user fees.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the products listed in the related GAO products section, as well as work GAO conducted between May 2011 and February 2012. GAO surveyed 24 agencies covered by the CFO Act to obtain (1) the number of fees the department or agency administered, (2) the basis for setting the fee amounts, (3) the aggregate amount of fees collected for fiscal year 2010, (4) the most recent CFO Act/OMB Circular No. A-25 review date, (5) documentation of fee reviews, and (6) in cases where reviews were not conducted, the reasons why. Because this was not a sample survey, there are no sampling errors. However, the practical difficulties of conducting any survey may introduce nonsampling errors, such as variation in how respondents interpret questions and their willingness or ability to offer accurate responses. GAO took steps to minimize nonsampling errors. For example, prior to surveying agencies, GAO pretested the survey with three agencies with differing numbers of fees, as well as varying values of total collections, to ensure that GAO’s questions were clear and that the definitions used in the survey were correct and understandable to the respondents. GAO revised the final survey instrument based on the pretest results. Since this was a self-administered survey using a spreadsheet completed by the respondents, there was no need to have data entered by another party, thus eliminating another source of error. Finally, all calculations used in the analysis of the data were reviewed by another GAO analyst. GAO did not independently verify survey responses provided by the 23 agencies. GAO did not verify that the results of these fee reviews and any resulting proposals were discussed in the CFO annual report, per OMB Circular No. A-25. Some fees have more specific, statutorily-set review and reporting requirements, and are therefore not subject to the CFO Act’s or OMB Circular No. A-25’s biennial review. As a result, GAO did not independently verify whether agencies reported all of the applicable user fees.

Agency Comments & GAO Contact

GAO provided a draft of this report section to OMB as well as the Departments of State, Commerce, and Homeland Security. OMB as well as the Departments of State and Commerce provided technical comments, which were incorporated as appropriate. The Department of Homeland Security responded that it generally agreed.

OMB said that two of our three recommended actions—that is, that OMB use its budget reviews to (1) ensure that agencies review their fee-funded programs biennially and (2) review their non fee-funded programs—seem unnecessary. OMB Circular No. A-11 guidance directs agencies to comply with the user fee review requirements in OMB Circular No. A-25 and the CFO Act. OMB did not comment on our third recommended action.

As we note above, agencies review less than half of the fees that they charge, and report the reviews of less than one-third of the fees charged. In addition, as noted above, 16 out of the 23 agencies told us that they review at least some of their non fee-funded programs to determine whether fees should be assessed.

GAO continues to believe that the recommended actions have merit. Especially in light of the significant impact user fees can have on the federal treasury given the current budgetary outlook, we believe that OMB should do more to ensure that agencies comply with OMB’s own guidance. We have added clarifying language regarding OMB’s direction to agencies. As part of its routine audit work, GAO will track the extent to which progress has been made to address the identified actions and report to Congress.

For additional information about this area, contact Susan J. Irving at
(202) 512-6806 or irvings@gao.gov.

Related Products

Budget Issues:

Budget Issues:

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Federal User Fees:

A Design Guide
GAO-08-386SP:
Published: May 29, 2008. Publicly Released: May 29, 2008.

Federal User Fees:

Substantive Reviews Needed to Align Port-Related Fees with the Programs They Support
GAO-08-321:
Published: Feb 22, 2008. Publicly Released: Mar 24, 2008.

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