Federal User Fees: Some Agencies Do Not Comply With Review Requirements
(Letter Report, 06/30/98, GAO/GGD-98-161).
Pursuant to a congressional request, GAO reviewed agencies' adherence to
the user fee review and reporting requirements in the Chief Financial
Officers (CFO) Act of 1990 and Office of Management and Budget (OMB)
Circular A-25, focusing on whether the agencies: (1) reviewed their user
fee rates biennially during fiscal years (FY) 1993 through 1997; (2)
determined both direct and indirect costs when reviewing fees based on
costs or current market value for fees based on market value; (3)
reviewed other programs within the agency to identify potential new user
fees; and (4) reported the results of the user fee reviews in their CFO
annual reports.
GAO noted that: (1) six of the 24 CFO agencies reviewed all of their
reported user fees at least every 2 years as required by OMB Circular
A-25 during FY 1993 through FY 1997, 3 reviewed all of their reported
fees at least once, 11 reviewed some of their reported fees, and 4 did
not review any of their reported fees during this period; (2) the 24
agencies reported 546 user fees, of which 418 were reviewed either
annually or biennially; (3) the agencies provided various reasons for
not reviewing fees, including insufficient cost data and because some of
the fees set by legislation could not be changed without new
legislation; (4) it appeared that agencies did not place significantly
less emphasis on reviewing fees that went to the Department of the
Treasury's general fund than on fees authorized to cover agency
expenses; (5) documentation provided by the agencies indicated that of
the reviewed fees that were based on cost recovery, 99 percent included
both direct and indirect costs; (6) fee review documentation indicated
that of the 23 reviewed fees that were based on market value, 14 reviews
included a determination of current market value; (7) GAO did not verify
these cost data or market evaluations; (8) agency documentation also
indicated that of the 20 agencies that conducted user fee reviews, 8
agencies that had the potential for new fees did not consider new fee
opportunities in their reviews; (9) twelve of the 20 agencies either
looked for potential new fees or reported that they did not provide a
service for which a fee was not already charged; (10) eleven of the 24
agencies had not reported the results of their biennial reviews, or lack
thereof, in their CFO annual reports for FY 1993 through FY 1997; (11)
only six agencies reported the review results two or more times during
the 5-year period; (12) most of the agencies not reporting their user
fee reviews said they did not do so either because the total amount of
the fees was considered to be minimal and not considered material or
because they found the reporting requirements confusing; and (13) OMB
agreed that reporting instructions for the user fee review need to be
clarified and plans to address this matter during 1998, as it revises
its instructions.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GGD-98-161
TITLE: Federal User Fees: Some Agencies Do Not Comply With Review
Requirements
DATE: 06/30/98
SUBJECT: User fees
Funds management
Noncompliance
Reporting requirements
Federal property management
Fair market value
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Report to Congressional Requesters
June 1998
FEDERAL USER FEES - SOME AGENCIES
DO NOT COMPLY WITH REVIEW
REQUIREMENTS
GAO/GGD-98-161
Federal User Fees
(240252)
Abbreviations
=============================================================== ABBREV
OMB -
CFO -
DOD -
FAA -
FFMIA -
GAO -
HCFA -
IOAA -
PMA -
SSA -
IG -
Letter
=============================================================== LETTER
B-277387
June 30, 1998
The Honorable Stephen Horn
Chairman
The Honorable Dennis J. Kucinich
Ranking Minority Member
Subcommittee on Government Management,
Information and Technology
Committee on Government Reform and Oversight
House of Representatives
This report responds to your request that we review agencies'
adherence to the user fee review and reporting requirements in the
Chief Financial Officers (CFO) Act of 1990 and Office of Management
and Budget (OMB) Circular A-25. The CFO Act and OMB Circular are
designed in part to help ensure that government fees are periodically
reviewed and updated, where appropriate, to reflect changes in cost
or in market value. User fees may be based on the recovery of costs
of providing the service, the market value of goods and services
provided, or may be set by legislation. In fiscal year 1997, user
fees and charges provided the U.S. government with $217.1 billion in
revenues, amounting to over 13 percent of the federal revenues
collected during that year.\1
Our specific objectives were to determine whether, as required by OMB
Circular A-25, the 24 agencies subject to the CFO Act (1) reviewed
their user fee rates biennially during fiscal years 1993 through
1997, (2) determined both direct and indirect costs when reviewing
fees based on costs or current market value for fees based on market
value, (3) reviewed other programs within the agency to identify
potential new user fees, and (4) reported the results of the user fee
reviews in their CFO annual reports. Subsequent to your initial
request, we also agreed to determine whether agencies were more
likely to review fees when they could use such fees for their
expenses than when the fees went to Treasury's general fund.
--------------------
\1 These revenues included insurance premiums which were not included
in our review.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Six of the 24 CFO agencies reviewed all of their reported user fees
at least every 2 years as required by OMB Circular A-25 during fiscal
years 1993 through 1997, 3 reviewed all of their reported fees at
least once, 11 reviewed some of their reported fees, and 4 did not
review any of their reported fees during this period. The 24
agencies reported 546 user fees, of which 418 were reviewed either
annually or biennially. The agencies provided various reasons for
not reviewing fees, including insufficient cost data and because some
of the fees set by legislation could not be changed without new
legislation. It appeared that agencies did not place significantly
less emphasis on reviewing fees that went to Treasury's general fund
than on fees authorized to cover agency expenses.
Documentation provided by the agencies indicated that of the reviewed
fees that were based on cost recovery, 99 percent included both
direct and indirect costs. Fee review documentation indicated that
of the 23 reviewed fees that were based on market value, 14 reviews
included a determination of current market value. We did not verify
these cost data or market evaluations.
Agency documentation also indicated that of the 20 agencies that
conducted user fee reviews, 8 agencies that had the potential for new
fees did not consider new fee opportunities in their reviews. Twelve
of the 20 agencies either looked for potential new fees or reported
that they did not provide a service for which a fee was not already
charged.
Eleven of the 24 agencies had not reported the results of their
biennial reviews, or lack thereof, in their CFO annual reports for
fiscal years 1993 through 1997. Only six agencies reported the
review results two or more times during the 5-year period. Most of
the agencies not reporting their user fee reviews said they did not
do so either because the total amount of the fees was considered to
be minimal and not considered material or because they found the
reporting requirements confusing. OMB agreed that reporting
instructions for the user fee review need to be clarified and plans
to address this matter during 1998, as it revises its instructions.
BACKGROUND
------------------------------------------------------------ Letter :2
User fees or user charges are defined by OMB as assessments levied on
a class of individuals or businesses directly benefiting from, or
subject to regulation by, a government program or activity.\2
Examples of user fees are trademark registration fees, park entrance
fees, and food inspection fees. User fees represent the principle
that identifiable individuals or businesses who receive benefits from
governmental services beyond those that accrue to the general public
should bear the cost of providing the service.
General user fee authority was established under title V of the
Independent Offices Appropriation Act (IOAA) of 1952. The IOAA gave
agencies broad authority to assess user fees or charges on
identifiable beneficiaries by administrative regulation. This does
not authorize agencies to retain and/or use the fees they collect.
In the absence of specific legislation that authorizes agencies to
retain and/or use the fees they collect, fees must be deposited in
the U.S. Treasury general fund. Authority to assess user fees may
also be granted to agencies through the enactment of specific
authorizing or appropriations legislation, which may or may not
authorize the agencies to retain and/or use the fees they collect.
OMB Circular A-25, dated July 8, 1993, establishes guidelines for
federal agencies to use in assessing fees for government services and
for the sale or use of government property or resources. The
Circular (1) states that its provisions shall be applied by agencies
in their assessment of user charges under the IOAA and (2) provides
guidance to agencies regarding their assessment of user charges
authorized under other statutes.
A specific user fee rate or amount may be based on the full cost to
the government of the service or goods provided or on market value,
or may be set legislatively. The Circular outlines the circumstances
under which agencies are to use cost recovery or market value for
determining the fee amount. It defines full cost as all direct and
indirect costs to any part of the federal government of providing
goods or services, including, but not limited to, direct and indirect
personnel costs (i.e., salaries and fringe benefits); overhead costs
(i.e., rents and utilities); and management and supervisory costs.
The Circular defines market value as the price for goods, resources,
or services that is based on competition in open markets and creates
neither a shortage nor a surplus of the goods, resources, or
services.
In some cases, legislation either sets the specific user fee rate or
amount or stipulates how the fee is to be calculated, such as a
formula. These fees can be based on partial cost recovery, partial
market value, or some other basis.\3 For example, the Social Security
Administration's (SSA) fees for administration of state supplementary
payments are legislatively set at $6.20 per payment for fiscal year
1998. An example of partial cost recovery is under Public Law
98-575, which excludes the recovery of overhead costs from the
National Aeronautics and Space Administration's commercial space
launch services fees.
Both the CFO Act and OMB Circular A-25 provide that agencies review
their user fees biennially. The CFO Act of 1990 requires an agency's
CFO to review on a biennial basis the fees, royalties, rents, and
other charges for services and things of value and make
recommendations on revising those charges to reflect costs incurred.
OMB Circular A-25 provides that each agency will review user charges
biennially to include (1) assurance that existing charges are
adjusted to reflect unanticipated changes in costs or market values
and (2) a review of other programs within the agency to determine
whether fees should be initiated for government services or goods for
which it is not currently charging fees. Circular A-25 further
states that agencies should discuss the results of the user fee
reviews and any resultant proposals in the CFO annual report required
by the CFO Act. The Circular also states that when the imposition of
user charges is prohibited or restricted by existing law, agencies
will review activities and recommend legislative changes when
appropriate.
Periodic reviews of all user fees are important because the reviews
can provide agencies, the administration, and Congress with
information on the government's costs to provide these services or,
in some cases, the current market value of goods and services
provided.
--------------------
\2 OMB's 1997 revision to OMB Circular A-11 (Preparation and
Submission of Budget Estimates) for the fiscal year 1999 budget
changed the definition of user fees. The revised definition excludes
fees deposited in Treasury's general fund. Because our assignment
covered the period before the revision occurred, our review includes
those fees that are to be deposited in Treasury's general fund.
\3 Legislation also may stipulate that the fee is to be based on full
cost recovery or market value. We included such fees in the cost
recovery category or the market value category, as appropriate, for
purposes of our review.
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :3
To obtain the information for the first three objectives, we
requested the CFOs of the 24 agencies to provide for fiscal year 1996
(1) a list of all user fees, (2) the basis (cost recovery, market
value, or legislatively set) for determining the fee amount, (3)
total amount of user fees collected in fiscal year 1996, and (4)
supporting documents for the most recent review they had conducted of
each user fee between fiscal years 1993 and 1997. We used 1996 fees
because 1996 was the most recent year agencies had complete data. We
reviewed the supporting documentation of the fee reviews to determine
whether the reviews (1) indicated that direct and indirect costs were
determined (if the fee was based on cost recovery) or current market
value was determined (if the fee was based on market value) and (2)
included an assessment of other programs within the agency to
identify potential new user fees. We followed up with agency program
officials when necessary to clarify the CFOs' responses. We also
reviewed Federal Register notices for fiscal years 1993 through 1997
that discussed fee revisions and how the fees were calculated. In
addition, we reviewed prior reports by the agencies' Inspectors
General (IG) and us that covered user fees in CFO agencies during the
time period covered by the scope of our work. We did not verify
whether agencies reported all of their user fees.
To obtain information on the fourth objective, we reviewed the CFO
annual reports for fiscal years 1995 through 1997 and requested
information from the 24 agencies on whether they reported the results
of reviews in the CFO reports during fiscal years 1993 and 1994.
To determine whether agencies were more likely to review fees if the
fees were authorized to be used to cover agencies' expenses compared
to when they were not, we obtained information from each of the
agencies on whether they had legislative authority to use fees they
collect. We then compared the number of reviews of fees that
agencies were allowed to keep to the number of reviews of those that
they were not allowed to keep.
We reviewed relevant laws and regulations pertaining to user fees,
including the CFO Act of 1990, the IOAA and other user fee
authorizing legislation, and OMB Circular A-25. We also reviewed OMB
Bulletins 94-01 and 97-01, Form and Content of Agency Financial
Statements, to determine whether they contained user fee reporting
requirements. We met with OMB officials to obtain additional
information on OMB's user fee review and reporting requirements.
In some cases, agencies said they did not formally conduct "biennial
fee reviews" but instead periodically, generally annually, conducted
fee rate updates that met the key requirements of a biennial review.
In these instances, we considered the rate updates as user fee
reviews.
In those cases where agency documentation indicated that agencies
determined the direct and indirect costs of providing services, we
did not verify that both direct and indirect costs had been
considered or that the types of costs considered were appropriate.
Our previous work has concluded that, in general, the federal
government does not have adequate cost accounting systems to track
costs to specific programs or services. For example, we stated in
our audit of the first consolidated financial statements of the
United States that major problems included the federal government's
inability to accurately report major portions of the net costs of
government operations.\4 We also stated that as of the date of the
report, only four agency auditors had reported that their agency's
financial systems complied with the Federal Financial Management
Improvement Act (FFMIA) of 1996's requirements for financial
management systems, which would include a comprehensive cost
accounting system.\5 To audit each individual cost factor for the
fees we reviewed was beyond our scope and would have involved more
time and resources than were available. Thus, we can not provide any
assurance that those agencies that reported they were recovering both
direct and indirect costs through user fee charges were actually
doing so or that the costs identified by the agencies were complete
and accurate.
Our scope did not include fees charged to other federal agencies or
federal employees. We also excluded insurance premiums because
according to an OMB official, they were not subject to Circular A-25
during the scope of our review. We excluded credit-related fees,
such as loan guarantee fees, since OMB advised that credit-related
fees were not covered by Circular A-25, but were governed by OMB
Circular A-129, Policies for Federal Credit Programs and Non-Tax
Receivables.
We did our work at the 24 CFO agencies' headquarters in Washington,
D.C., between June 1997 and June 1998 in accordance with generally
accepted government auditing standards.
We requested comments on a draft of this report from the Director of
the Office of Management and Budget and asked the Chief Financial
Officers of the 24 agencies included in the review to verify the
accuracy of their agencies' data used in the report. Their comments
are discussed near the end of this letter.
--------------------
\4 Financial Audit: 1997 Consolidated Financial Statements of the
United States Government (GAO/AIMD-98-127, Mar. 31, 1998).
\5 The four agencies referred to in the report as being in compliance
with FFMIA's system requirements were the Department of Energy, the
General Services Administration, the National Aeronautics and Space
Administration, and the National Science Foundation.
THE CFO AGENCIES REVIEWED MOST
OF THEIR USER FEES
------------------------------------------------------------ Letter :4
As table 1 shows, the 24 CFO agencies reported having 546 total user
fees in effect in fiscal year 1996. Agencies reported that 397 of
their fees were based on cost recovery, 35 were based on market
value, and 114 were set by legislation. As previously stated,
statute-based formulas can be based on either market value, cost
recovery, or some other basis.
Table 1
CFO Agencies' Reported User Fees, Fiscal
Year 1996
Basis of fees
-----------------------
Legislati
vely set
(not full
Mar cost
Number Cost ket recovery
of user recover val or market
Agency fees y ue value)\a
------------------------------------ ------- ------- --- ---------
Department of Agriculture 59 39 7 13
Department of Commerce 66 66 0 0
Department of Defense 35 25 5 5
Department of Education 4 3 0 1
Department of Energy 12 6 3 3
Department of Health and Human 20 16 0 4
Services
Department of Housing & Urban 1 0 0 1
Development
Department of the Interior 88 30 14 44
Department of Justice 12 9 0 3
Department of Labor 7 4 0 3
Department of State 7 5 0 2
Department of Transportation 150 148 1 1
Department of the Treasury 31 17 0 14
Department of Veterans Affairs 14 4 4 6
U.S. Agency for International 3 2 0 1
Development
Environmental Protection Agency 5 2 0 3
Federal Emergency Management 1 1 0 0
Agency
General Services Administration 3 1 0 2
National Aeronautics and Space 6 4 0 2
Administration
National Science Foundation 1 0 0 1
Nuclear Regulatory Commission 9 8 1 0
Office of Personnel Management 1 0 0 1
Small Business Administration 3 2 0 1
Social Security Administration 8 5 0 3
======================================================================
Total 546\b 397 35 114
----------------------------------------------------------------------
\a If the legislation provided for full cost recovery or full market
value, we included that fee in the cost recovery or market value
category, as appropriate.
\b This total does not include 15 fees that agencies reviewed on a
case-by-case basis under negotiated reimbursable agreements.
Source: GAO's analysis of CFO agencies' data.
Of the 24 CFO agencies with 546 reported user fees, 6 agencies
reviewed all of their reported fees at least biennially as required
by Circular A-25 during fiscal years 1993 through 1997, 3 reviewed
all of their reported fees at least once, 11 reviewed some of their
reported fees, and 4 did not review any of their reported fees during
this period.
The agencies reported that they had reviewed 259 of the fees
annually, 159 biennially, and 34 once during this 5-year period, as
shown in table 2.
Table 2
CFO Agencies' 1996 Reported User Fees
and the Number of Fees Reviewed Between
Fiscal Years 1993-1997
Reported frequency of user
fee reviews
---------------------------
Reviewed
Number Review Reviewe once Total
of ed d during the number of
user annual biennia 5-year fees
Agency fees ly lly period reviewed
---------------------- ------ ------ ------- ---------- ---------
Department of 59 35 11 3 49
Agriculture
Department of Commerce 66 32 21 9 62
Department of 35 14 0 1 15
Defense\a
Department of 4 0 4 0 4
Education
Department of Energy 12 5 7 0 12
Department of Health 20 8 4 4 16
and Human Services
Department of Housing 1 0 0 1 1
& Urban Development
Department of the 88 0 88 0 88
Interior
Department of Justice 12 0 8 0 8
Department of Labor\ 7 2 2 1 5
Department of State 7 0 2 2 4
Department of 1 50 140 0 2 \b 1 42
Transportation
Department of the 31 10 4 2\b 16
Treasury
Department of Veterans 14 1 0 3 4
Affairs
U.S. Agency for 3 0 0 0 0
International
Development
Environmental 5 2 0 3\c 5
Protection Agency
Federal Emergency 1 1 0 0 1
Management Agency
General Services 3 1 0 1 2
Administration
National Aeronautics 6 6 0 0 6
and Space Admini
stration
National Science 1 0 0 0 0
Foundation
Nuclear Regulatory 9 0 8 1\b 9
Commission
Office of Personnel 1 0 0 0 0\d
Management
Small Business 3 2 0 1 3
Administration
Social Security 8 0 0 0 0\e
Administration
======================================================================
Total 546\f 259 159 34\b 452
----------------------------------------------------------------------
Note: The frequency of fee reviews and the number of user fees are
based on information reported by agencies. We reviewed the most
recent fee review agencies had conducted during the 5-year period for
each fee.
\a The Department of Defense (DOD) information also includes
information provided by the Department of the Army Corps of
Engineers. DOD also reported that its policy requires that all user
fees be reviewed annually and that it did not provide documentation
of reviews for installation-level fees because the task would require
significant use of the Department's resources.
\b For the Departments of the Treasury and Transportation and the
Nuclear Regulatory Commission, each had reviewed a newly effective
fee once and thus were in accordance with the biennial review
requirement. Accordingly, the Nuclear Regulatory Commission reviewed
all of its reported fees in accordance with Circular A-25.
\c The Environmental Protection Agency reported that in addition to
the documented formal review of these fees in 1997, it reviewed these
fees informally and did not document the reviews in 1993 and 1995.
We did not count these as biennial reviews because, as EPA reported,
they were undocumented.
\d The Office of Personnel Management had two fees, one of which the
agency reviewed and is included in the 15 fees reviewed on a
case-by-case basis discussed in the footnote below.
\e The Social Security Administration reported that as of June 1998,
it had completed the reviews of two fees and was in the process of
making the final decision on the fee amounts.
\f The total does not include 15 fees that agencies reviewed on a
case-by-case basis under reimbursable agreements.
Source: GAO's analysis of CFO agencies' data.
According to OMB Circular A-25, agencies should have reviewed the
fees at least biennially. The fee reviews that were conducted
annually or biennially were in compliance with the Circular.
Excluding the three newly effective fees in table 2, 13 agencies did
not comply with the Circular for 31 fees that were reviewed only once
during the 5-year period. All of the 31 fees were in effect long
enough to have had biennial reviews.
Fifteen of the 24 CFO agencies had not reviewed 94 user fees at all
during the 5-year period. These 94 fees were about 17 percent of the
total 546 fees. The agencies provided various reasons for not
conducting the reviews. For example, the Department of the
Treasury's U.S. Customs Service reported that it had not reviewed
its nine fees (reported as totaling over $1 billion in fiscal year
1996) because of insufficient cost data. Customs said that it was in
the process of developing the necessary data to evaluate the fees and
make recommendations to Congress on any necessary changes. The U.S.
Agency for International Development reported that it did not review
its three fees because the amount of user fees collected was minimal
(reported as $50,000 for fiscal year 1996). SSA said that it had not
reviewed its eight fees because the majority of its fees were either
legislatively set or were based on the actual computation of the full
cost to provide the service. According to an agency official, SSA
was currently conducting a review of two of its fees and stated that
four additional fees will be reviewed in conjunction with the
agency's comprehensive evaluation of its fee charging policy.
Of the 94 fees not reviewed, 42 were set by legislation. The 42 fees
represent about 37 percent of the 114 fees set by legislation and
about 45 percent of the fees that agencies had not reviewed. Several
agencies reported that they had not reviewed the fees set by
legislation because they believed the fees were either not subject to
the user fee review requirements or could not be changed unless
legislation was amended. For example, the Department of Veterans
Affairs and the Department of Health and Human Services' Food and
Drug Administration reported that they had not reviewed fees that
were set by legislation because they believed the fees were not
subject to the CFO Act. The Department of Transportation's Federal
Aviation Administration (FAA) and the Department of Health and Human
Services' Health Care Financing Administration (HCFA) reported that
they did not review the fees because they believe the fees could not
be changed unless legislation was amended.
However, OMB Circular A-25 provides that all fees, including those
set by specific legislation, be reviewed. One rationale for
reviewing all user fees, even those where a policy decision was made
to not recover full costs, is that the extent to which fees do not
recover the direct and indirect costs--i.e., the government
subsidy--should be transparent so that program managers can properly
inform the public, Congress, and federal executives about the extent
of the subsidy.\6
--------------------
\6 Statement of Federal Financial Accounting Standards (SFFAS) No.
4: Managerial Cost Accounting Standards, July 31, 1995. The purpose
of this Standard is to provide managerial cost accounting concepts
and standards aimed at providing reliable and timely information on
the full cost of federal programs, their activities, and outputs.
DOCUMENTATION INDICATED THAT
GENERALLY BOTH DIRECT AND
INDIRECT COSTS OR CURRENT
MARKET VALUE WAS CONSIDERED
------------------------------------------------------------ Letter :5
OMB Circular A-25 provides that the user fee review include assurance
that existing charges reflect costs or current market value. Of the
397 cost-based fees, agencies reviewed 357. For 352 (or about 99
percent) of the cost-based fees reviewed, documentation indicated
that both direct and indirect costs were considered. Agencies had
reviewed 23 of the 35 fees based on market value. Documentation
indicated that current market value was assessed for 14 of the 23
reviewed fees. Overall, the reviews determining whether fees
reflected cost or current market value resulted in 159 fee increases
that became effective during the period we reviewed.
We did not verify whether the agencies had appropriate cost
accounting systems in place to identify all direct and indirect costs
or whether the costs included were complete and appropriate.
However, problems with CFO agencies' cost systems were one of the
reasons given by the CFO Council in June 1997 for requesting the
Financial Accounting Standards Advisory Board to delay implementation
of SFFAS No. 4.\7
Prior work by agency IGs and us has also shown that agencies often
lack cost accounting systems to track costs by specific program or
service. In 1998, we reported in our audit of the U.S. Government's
1997 Consolidated Financial Statement that the government was unable
to support significant portions of the more than $1.6 trillion
reported as the total net costs of government operations. We further
stated that without accurate cost information, the federal government
is limited in its ability to control and reduce costs, assess
performance, evaluate programs, and set fees to recover costs where
required. We also stated in the report that, as of the date of the
report, only four agency auditors had reported that their agency's
financial systems complied with FFMIA's requirements for financial
management systems.\8 In 1996 and 1997, we reported that while three
Power Marketing Administrations (PMA), with reported revenues of $997
million in fiscal year 1996, were generally following applicable laws
and regulations regarding recovery of power-related costs, they were
not recovering all costs.\9 Although PMAs are required to recover all
costs, they had not done so, partly because they did not follow the
full cost definition as set forth in OMB Circular A-25. In addition,
IGs within 6 of the 24 CFO agencies reported on weaknesses in
agencies' procedures for determining the cost of goods or services
for which there were user fees during the 5-year period covered by
our scope.\10
Also, in reference to market value assessments, we reported in 1996
and 1998 that the Department of Agriculture's U.S. Forest Service
did not always obtain the fair market value for user fees covering
the use of federal land.\11
--------------------
\7 The CFO Act of 1990 created the CFO Council to advise and
coordinate activities of the CFO agencies on financial management
matters. The Council consists of agencies' CFOs, top OMB officials,
and other agency officials involved in financial management.
\8 FFMIA requirements state that "In General - Each agency shall
implement and maintain financial management systems that comply
substantially with Federal financial management systems requirements,
applicable Federal accounting standards, and the United States
Government Standard General Ledger at the transaction level." The
four agencies referred to in the report as being in substantial
compliance with FFMIA's system requirements were the Department of
Energy, the General Services Administration, the National Aeronautics
and Space Administration, and the National Science Foundation.
\9 Federal Electricity Activities: The Federal Government's Net Cost
and Potential for Future Losses, Volume 1 (GAO/AIMD-97-110, Sept.
19, 1997) and Power Marketing Administrations: Cost Recovery,
Financing, and Comparison to Nonfederal Utilities (GAO/AIMD-96-145,
Sept. 19, 1996). PMAs, part of the Department of Energy, market
electric power generated mainly at federal hydropower facilities.
The Southeastern, Southwestern, and Western Area PMAs were included
in the reports.
\10 The IGs who reported on weaknesses in CFO agencies' procedures
for determining cost included the Departments of Agriculture,
Defense, the Interior, Justice, and the Treasury; and the Nuclear
Regulatory Commission.
\11 U.S. Forest Service: Fee System for Rights-of-Way Program Needs
Revision (GAO/RCED-96-84, Apr. 22, 1996) and U.S. Forest Service:
Barriers to Generating Revenue or Reducing Costs (GAO/RCED-98-58,
Feb. 13, 1998).
SOME AGENCIES' USER FEE REVIEWS
DID NOT INDICATE THAT OTHER
PROGRAMS WITHIN THE AGENCY WERE
REVIEWED TO IDENTIFY POTENTIAL
USER FEES
------------------------------------------------------------ Letter :6
OMB Circular A-25 provides that agencies' user fee reviews should
include a review of other agency programs to determine whether
additional fees should be charged either under existing authority or
by proposing new legislative authority. Of the 20 agencies that
conducted user fee reviews, documentation indicated that
-- seven agencies considered new fees,
-- five agencies did not consider new fee opportunities because
they did not provide a service for which a fee was not already
charged, and
-- eight agencies where the potential for new fees existed did not
consider new fee opportunities.
Agencies' reasons for not looking for new fee opportunities varied.
The Department of Energy reported that Section 2203 of the Energy
Policy Act of 1992 specifically prohibits the Secretary from changing
the user fee practice in effect as of October 1, 1991, with respect
to user facilities unless the Secretary notifies Congress 90 days
before the effective date of any change. The Department of Veterans
Affairs reported that it views its nonfee services as goodwill to the
community, and the agency would have to obtain legislative authority
to charge for the nonfee services. An FAA official said FAA had not
attempted to identify new individual user fees pending the outcome of
the ongoing consideration being given to the financial restructuring
of FAA, which was included in legislation proposed to Congress on
April 20, 1998. The Department of Commerce's Bureau of the Census
said that it is facing the task of achieving the best balance between
maximizing the usefulness of data to the widest possible audience and
charging for more of the information. HCFA reported that it had
looked at potential user fees earlier and decided that the new fees
would not be in the best interest of the government because either
the cost of fee collection would have outweighed the expected
revenues or the agency and the recipient benefited equally from the
service.
MANY AGENCIES DID NOT REPORT
USER FEE REVIEW RESULTS IN CFO
REPORTS
------------------------------------------------------------ Letter :7
OMB Circular A-25 provides that agencies should discuss the results
of the user fee reviews and any resultant proposals in the CFO annual
reports required by the CFO Act. The act requires that the CFOs of
the 24 agencies identified in the act submit an annual financial
management report to the Director of OMB. To satisfy this CFO
reporting requirement, agencies submit annual, audited financial
statements. The CFO Act requires the Director of OMB to prescribe
the form and content of the financial statements, consistent with
applicable accounting principles, standards, and requirements. The
CFO Act also requires that these agencies analyze the status of
financial management and prepare and make their annual revisions to
plans implementing the OMB governmentwide 5-year financial management
plan. The OMB guidance is not clear as to how the user fee review
results should be reported.
Thirteen\12 of the 24 CFO agencies had referenced the user fee
reviews in either their annual financial statements or their annual
revisions to the 5-year financial management plan between fiscal
years 1993 and 1997 as follows:
-- One agency reported review results in 4 of the 5 years.
-- Five agencies reported review results in 2 of the 5 years.
-- Seven agencies reported review results in 1 of the 5 years.
Five of these seven agencies reported results for the first time
in their fiscal year 1997 reports after we had asked about the
reporting. Two of them said that they had not previously
reported the reviews because the reporting guidance was not
clear. The remaining three said (1) the total amount of fees
was not material, (2) nonadherence was an oversight, and (3)
prior reviews were informal and undocumented.
The other 11 agencies reported that they had not reported the results
of their biennial reviews, or lack thereof, in any of the CFO annual
reports for fiscal years 1993 through 1997. As shown in table 3,
eight agencies said they did not report the review results because
either the total amount of fees was considered to be minimal and not
material or the reporting requirements were confusing and not
consistent with OMB guidance for the form and content of annual
financial statements. Guidance for form and content states
specifically what agencies should present in the annual financial
statements and does not include the user fee reporting requirement.
Table 3
Agencies' Reasons for Not Reporting User
Fee Results
Reasons for not referencing the
user fee review in the CFO annual
Agencies reports
---------------------------------- ----------------------------------
Departments of State and Confusion existed as to where to
Transportation, National report the results. Neither the
Aeronautics and Space CFO Act of 1990 nor OMB Circular
Administration, Nuclear Regulatory A-25 was clear in the requirement
Commission to report the biennial reviews,
and OMB's form and content
instruction for agencies' annual
financial statements does not
contain this reporting
requirement.
Department of Education, U.S. The amounts of user fees involved
Agency for International were considered to be minimal and
Development, General Services not considered material.
Administration, National Science
Foundation
Department of Housing and Urban An oversight of the requirement.
Development
Department of Defense Because the frequency of rate
updates exceeded that required by
OMB Circular A-25, the agency had
not addressed this area in the CFO
annual reports.
Office of Personnel Management Prior to 1997, OMB had stated that
the agency's service was not a
user fee service.
----------------------------------------------------------------------
Source: GAO's analysis of CFO agencies' data.
According to OMB officials, OMB has not provided any guidance on
reporting the results of the user fee reviews other than Circular
A-25. OMB agreed that Circular A-25 user fee reporting instructions
need to be clarified and plans to address this during 1998, by
updating Circular A-11, Preparation and Submission of Budget
Estimates. An OMB official said Circular A-11 has a higher profile
than Circular A-25 and was scheduled to be revised before A-25.
--------------------
\12 These agencies were the Departments of Agriculture, Commerce,
Energy, Health and Human Services, the Interior, Justice, Labor, the
Treasury, and Veterans Affairs; Environmental Protection Agency;
Federal Emergency Management Agency; Social Security Administration;
and the Small Business Administration.
FEES AUTHORIZED TO COVER AGENCY
EXPENSES GENERALLY WERE NOT
MORE LIKELY TO BE REVIEWED THAN
FEES THAT WERE NOT
------------------------------------------------------------ Letter :8
It did not appear that agencies placed significantly less emphasis on
reviewing fees that went to Treasury's general fund than on fees of
which all or a portion were authorized to cover agency expenses. In
78 percent of the 452 fees agencies reviewed, all or a portion of the
fees were authorized to cover or reimburse agency expenses. In 67
percent of the 94 fees agencies did not review, all or a portion of
the fees were authorized to cover or reimburse agency expenses.
CONCLUSIONS
------------------------------------------------------------ Letter :9
Generally, the CFO agencies did not fully adhere to OMB Circular A-25
and the CFO Act user fee review provisions requiring that user fee
rates be reviewed biennially. It did not appear that agencies placed
significantly less emphasis on reviewing fees that were to be
deposited in Treasury's general fund than they placed on fees that
were authorized to cover agencies' expenses.
The agencies did not review all of the fees that should have been
reviewed and reviewed fees set by legislation less often than other
fees. For example, only 6 of the 24 CFO agencies reviewed all of
their user fees at least biennially. Also, some agencies could be
recovering less than their actual costs when their fees are based on
cost recovery because of a lack of adequate cost accounting systems
in the government to identify actual costs. Further, eight of the
agencies did not include a review of potential new user fees as
required by OMB. As a result, the government may not be recovering
the costs or the current market value, where appropriate, for the
goods and services it provides.
OMB's guidance on how and where to report the results of user fee
reviews is not clear. Many of the agencies reported that Circular
A-25 user fee reporting instructions were confusing and had not
reported the results of the user fee reviews in CFO reports.
Administration officials and Congress, therefore, have incomplete
information on whether the government is recovering costs of
providing goods and services or is obtaining the current market
value, where appropriate.
RECOMMENDATION TO THE DIRECTOR,
OMB
----------------------------------------------------------- Letter :10
We recommend that the Director of OMB clarify the user fee reporting
instructions by specifying how agencies should report the results of
their user fee reviews and address the issues of compliance with the
biennial review requirements, including the requirements regarding
statutorily set fees and agencies' consideration of potential new
user fees.
AGENCY COMMENTS AND OUR
EVALUATION
----------------------------------------------------------- Letter :11
We requested written comments on a draft of this report from the
Director of the Office of Management and Budget and oral comments
from the Chief Financial Officers of the 24 agencies on the accuracy
of information in the draft report pertaining to the agencies.
On June 12, 1998, we received written comments from OMB's Assistant
Director for Budget, which are included in appendix I. OMB commented
that while it was pleased to see that most of the fees were reviewed
annually or biennially, it shares our concern that agencies pay
attention to the review and discussion requirements in the Chief
Financial Officers Act of 1990 and OMB Circular A-25. OMB further
stated that it will continue its efforts in 1998 to increase agency
awareness and compliance with current CFO Act and Circular A-25
requirements. OMB said that it would highlight the requirements of
user fee reviews in this year's update to Circular A-11 to make
agencies more fully aware of the requirements.
As of June 24, 1998, we had received responses from 23 of the 24 CFO
agencies. We had not received a response from the Department of
Housing and Urban Development. Seventeen agencies provided oral
comments, and six agencies provided written comments. Ten of the
agencies responded that they either had no comments on the draft
report or agreed with the information in the report. Nine of the
agencies provided additional information on their user fee reviews or
suggested technical changes, which we considered and incorporated
within the report where appropriate.
Four agencies raised programmatic or policy-related issues, as
follows:
-- SSA said that it had reviewed two of its fees annually and asked
us to revise our data to recognize this. SSA provided
documentation it believed would support its contention that the
reviews had been done. However, in our view, the documentation
SSA provided was not sufficient evidence that the user fee
reviews met the requirements of Circular A-25. Accordingly, we
did not revise our report as SSA had requested, and we informed
SSA of our decision. SSA also said it had reviewed two other
fees and was deciding the fee amounts, and we noted this in the
report.
-- The Department of Health and Human Services, the National
Aeronautics and Space Administration, and the Small Business
Administration raised policy-related issues, such as the need
for biennial reviews in light of the new Managerial Cost
Accounting Standards and whether the new user fee definition in
Circular A-11 supersedes the Circular A-25 definition. We did
not cover these types of issues in our review, but expect that
OMB will consider such issues as it revises its instructions on
user fee reviews.
--------------------------------------------------------- Letter :11.1
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Governmental Affairs and
the Senate Subcommittee on Oversight of Government Management,
Restructuring, and the District of Columbia, and the Director of OMB.
We will also make copies available to others upon request. Major
contributors to this report are listed in appendix II. If you have
any questions about the report, please call me on (202) 512-8387.
Bernard L. Ungar
Director, Government Business
Operations Issues
COMMENTS FROM THE OFFICE OF
MANAGEMENT AND BUDGET MAJOR
CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix I
GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C.
John S. Baldwin, Sr., Assistant Director
Lucy M. Hall, Evaluator-in-Charge
Abraham L. Logan, Evaluator
Joshua M. Bartzen, Evaluator
William R. Chatlos, Senior Social Science Analyst
OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. ALAN N. BELKIN,
ASSISTANT GENERAL COUNSEL
JESSICA A. BOTSFORD, SENIOR
ATTORNEY
*** End of document. ***