Between the two reserves,  APHIS aims to maintain a total reserve balance equal to 3 to 5 months of  AQI program costs. Pending approval from both USDA and DHS, APHIS expects to  publish a notice in the Federal Register with a proposed new fee  schedule in the fall of 2013. APHIS Currently Does Not Fully Recover Program Costs

		In Fiscal Year 2011 There Was a Nearly 40 Percent Gap Between Total Identified AQI Costs and Collections

In fiscal year 2011—the most recent year for which data were available— AQI fee collections covered 62 percent of total identified AQI program  costs, leaving a gap of more than $325 million between total AQI costs  and total AQI collections. This gap was covered with funds from CBP’s  Salaries and Expenses appropriation and by funds from other agencies to  cover imputed costs. However, as shown in table 1, APHIS has chosen not to charge some  classes of passengers, and the collections of the AQI program as a whole  do not equal total identified program costs. In 2005, CBP agreed to report its AQI-related expenses to  APHIS quarterly. APHIS agreed with the  recommendation and, as we will discuss more fully later on in this report,  has included some, but not all, of these costs in its recent analysis of AQI  costs. APHIS’s rates for  reimbursable agriculture overtime services are similarly misaligned with  its costs. The Distribution of Fee Collections among CBP, APHIS, and the AQI Reserve Is Misaligned with AQI Costs

		APHIS’s and CBP’s Shares of Fee Revenues Are Misaligned

CBP’s share of AQI fee revenue is significantly lower than its share of  program costs. For example, in fiscal year 2011 (the most recent year  for which APHIS could provide this data), CBP incurred 81 percent of total  AQI program costs, but received only 60 percent of fee revenues; APHIS  incurred 19 percent of program costs but retained 36 percent of the  revenues, as shown in table 3. Although the 2005 agreement states that AQI funds will be distributed  between CBP and APHIS in proportion to each agency’s AQI-related  costs, this does not happen in practice. The upper end of the target—5 months—is the amount  APHIS officials estimate would be needed to completely shut down the  inspection program if it were to cease. However, a maximum target  balance aligned with more realistic program risks would also allow for  lower reserve levels. APHIS and CBP Do Not Ensure that All AQI Fees Due are Collected

		APHIS Does Not Collect AQI Railcar Fees Consistent with Its Regulations

APHIS’s collection practices for the AQI fees assessed on railcars are not  consistent with APHIS regulations. CBP Does Not Verify Payment for Commercial Truck, Private Vessel, and Private Aircraft Fees

CBP does not verify that it collects applicable user fees for every  commercial truck, private aircraft, and private vessel for which the fees  are due, resulting in an unknown amount of lost revenue. As of February 2013, the fees APHIS is considering would not fully  remedy these issues (partly because of gaps in AQI’s statutory authority  and partly because APHIS chooses not to fully exercise the AQI fee  authorities), thus requiring APHIS and CBP to continue to rely on  appropriated funds to bridge the historical gap of nearly 40 percent  between AQI program costs and collections. Although APHIS is to  be commended for its in-depth review of the AQI user fees and program  costs, until APHIS includes all imputed costs when setting fee rates and  CBP ensures that its CMIS cost data accurately reflect program costs at  all ports, APHIS will not be able to set fees to recover the full costs of AQI  services. Until APHIS and CBP improve oversight of  these collection processes, they will continue to forgo revenue due the  government, which will increase reliance on appropriated funds to cover  program costs. To help ensure that fee rates are set to recover program costs, as  authorized, and to enhance economic efficiency and equity with  consideration of the administrative burden, we recommend that the  Secretary of Agriculture establish an AQI cruise passenger fee aligned with the costs of  inspecting cruise passengers and vessels and collected using the  existing processes for collecting cruise passenger customs fees; establish a fee for passenger railcars aligned with the costs of inspecting  rail passengers and railcars and collected using the existing processes  for collecting passenger railcar customs fees; eliminate caps on the commercial vessel and commercial rail AQI fees; set truck fee rates to recover the costs of AQI services for trucks while  maintaining a financial incentive for trucks to use transponders; and  recover the costs of AQI services for buses and bus passengers by either  establishing a bus passenger fee that is remitted by the bus companies  or seeking legislative authority to establish a bus fee that covers the  costs of bus passenger inspections. GAO staff who made major contributions to  this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

To analyze the Agricultural Quarantine Inspection (AQI) fees, we  assessed (1) the AQI fees currently charged and how, if at all, the  proposed revisions would improve efficiency, equity, and revenue  adequacy, and reduce administrative burden; (2) how, if at all, changes to  the allocation of fee revenues between the Department of Agriculture  (USDA) and the Department of Homeland Security (DHS) could improve  efficiency, equity, and revenue adequacy, and reduce administrative  burden; and (3) the extent to which Animal and Plant Health Inspection  Service (APHIS) and U.S. Customs and Border Protection (CBP) fee  collection processes provide reasonable assurance that all AQI fees due  are collected. In addition, to examine how APHIS and CBP fee collection  processes have ensured that all AQI fees are collected, we interviewed  APHIS and CBP officials, examined documents related to fee collection  procedures, and observed fee collection processes at ports of entry.
Why GAO Did This Study

The AQI program guards against agriculture threats by inspecting international passengers and cargo at U.S. ports of entry, seizing prohibited material, and intercepting foreign agricultural pests. The program, which cost $861 million in 2011, is funded from annual appropriations and user fees. GAO has reported several times on the need to revise the fees to cover program costs as authorized. In 2010, APHIS initiated a review of AQI costs and fee design options. APHIS and CBP are considering options for a new fee structure. Pending departmental approval, APHIS expects to issue a proposed rule in fall 2013. GAO was asked to examine issues related to the AQI fees. This report examines 1) the fees currently charged and proposed revisions; 2) how fee revenues are allocated between the agencies; and 3) the extent to which fee collection processes provide reasonable assurance that all AQI fees due are collected. To do this, GAO reviewed AQI fee and cost data, and relevant laws, regulations, and policies; observed inspections at ports of entry; and interviewed APHIS and CBP officials.

What GAO Found

GAO's analysis of the Agricultural Quarantine Inspection (AQI) fee and cost data revealed a more than $325 million gap between fee revenues and total program costs in fiscal year 2011, or 38 percent of AQI program costs. The program, which is co-administered by the Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS) and Department of Homeland Security (DHS) Customs and Border Patrol (CBP), has a gap for several reasons: 1) APHIS's authority does not permit it to charge all persons seeking entry to the United States (e.g., pedestrians) and does not permit it to charge the costs of those inspections to others; 2) APHIS has chosen not to charge some classes of passengers, citing administrative fee collection difficulties; 3) CBP does not charge a portion of all primary inspections to agriculture functions, as required by CBP guidance; 4) APHIS does not consider all imputed costs (that is, costs incurred by other agencies on behalf of the AQI program) when setting fees; and 5) the allowable rates for overtime services are misaligned with the personnel costs of performing those services. APHIS is considering fees that would better align many, but not all, AQI fees with related inspection activity costs. APHIS and CBP can take additional steps to better align fees with costs; however, additional authority will be needed to fully recover all program costs.
Contrary to APHIS-CBP agreements and APHIS policy, the distribution of fee collections between CBP and APHIS is significantly misaligned with AQI costs. In 2005, CBP and APHIS agreed to divide AQI collections in proportion to each agency's share of AQI costs. However, in fiscal year 2011, for example, CBP incurred over 80 percent of total program costs but received only 60 percent of collections, while APHIS incurred 19 percent of program costs but retained 36 percent of collections. CBP bridges the gap between its AQI costs and its share of the fee revenues with its annual appropriation. In keeping with its authorities and with good practices for fee-funded programs, APHIS carries over a portion of AQI collections from year to year to maintain a shared APHIS-CBP reserve to provide a cushion against unexpected declines in fee collections. APHIS's stated goal is to maintain a 3- to 5-month reserve but the preliminary fee proposal would fund the reserve at a level higher than the 5 month maximum. Further, the 5-month maximum target balance is the amount officials say they would need to completely shut down the program, and therefore does not reflect realistic program risks. Further, this is more than the amount required to cover shortfalls during both the 2009 financial crisis and the events of September 11, 2001, and would increase reliance on appropriated funds to cover current program costs.
APHIS's and CBP's collection processes do not provide reasonable assurance that all AQI fees due are collected. Specifically, APHIS does not collect AQI fees for railcars consistent with its regulations, resulting in a revenue loss of $13.2 million in 2010. Further, CBP does not verify that it collects fees due for every commercial truck, private aircraft, and private vessel, resulting in an unknown amount of revenue loss annually. CBP has tools available to help remedy these issues but does not require their use. Until APHIS and CBP improve oversight of these collection processes, they will continue to forgo revenue due the government, which will increase reliance on appropriated funds to cover program costs.

What GAO Recommends

GAO is making a number of recommendations aimed at more fully aligning fees with program costs, aligning the division of fees between APHIS and CBP with their respective costs, and ensuring that fees are collected when due. Further, GAO suggests Congress amend the AQI fee authority to allow the Secretary of Agriculture to set fee rates to recover the full costs of the AQI program. USDA and DHS generally agreed with the recommendations.