Both producers and consumers of agricultural products and commodities, such as beef, seafood, grain, vegetables, food additives, and animal drugs, benefit from these services. Categories of Services

The food-related services provided by the federal government can be grouped into four general categories. The agency also inspects imported and exported meat, poultry, and egg products to ensure that they meet U.S. standards. One-Quarter of Food-Related Services Are Funded Through User Fees

Of the about $1.6 billion available to the six agencies in fiscal year 1995 for food-related services, about $411 million was provided by user fees. Certain types of activities, for example grading, were generally funded through user fees, whereas the costs of other activities, such as compliance inspections, generally were funded through general fund appropriations. Opportunities Exist to Increase the Share of Funding by Program Beneficiaries

Potentially about $723 million in additional user fees could have been charged to program beneficiaries in fiscal year 1995, according to our review of selected food-related services. Applying OMB’s criteria in Circular A-25, we determined that these user fees could have been assessed in three areas. Full Costs of Providing Services Are Not Always Recovered

For certain food-related services, the federal government charges user fees that are less than the full costs of providing the service. For example, some user fees are based on calculations that exclude the cost of activities essential to the service, such as the cost associated with developing program standards. Border Inspections

In addition to inconsistencies in user fees for premarket reviews, user fees are not charged consistently for agricultural inspection activities at the nation’s borders and ports of entry. NMFS develops and maintains processing, inspection, and grading standards. Food-Related Services That Are Provided Without Charge to Identifiable Beneficiaries

The federal government provides a number of food-related services for which no user fees are charged. In addition to meat and poultry inspection and marketing agreements and orders discussed in the body of this report, other federal services provided without charge that benefit specific individuals or industries include (1) the Food Safety Inspection Service’s (FSIS) egg product inspections, laboratory services, pathogen reduction activities, and import inspections; (2) the Agricultural Marketing Service’s (AMS) seed regulatory activities; (3) the Grain Inspection, Packers and Stockyards Administration’s (GIPSA) regulatory oversight of packers and stockyards; and (4) Food and Drug Administration’s (FDA) domestic and import compliance inspections. The amount of the fee would vary based on the size of the firm. Comments From the Department of Commerce

Objectives, Scope, and Methodology

To identify and evaluate opportunities for increasing the share of program funding paid for by beneficiaries of food-related services, we identified (1) the types of food-related services provided by federal agencies, (2) the extent to which beneficiaries currently pay for such services through user fees, and (3) potential opportunities for recovering more of the service costs through user fees, as well as arguments for and against doing so.
Why GAO Did This Study

GAO reviewed opportunities to increase the share of funding by beneficiaries for food-related services provided by the federal government, focusing on: (1) the types of food-related services provided by the federal government; (2) the extent to which beneficiaries currently pay for such services through user fees; and (3) potential opportunities for recovering more of the service costs through user fees, as well as arguments for and against doing so.

What GAO Found

GAO noted that: (1) federal agencies provide individuals, firms, and industries such food-related services as: (a) premarket reviews, including approving new animal drugs and food additives for use and grading grain and other commodities for quality; (b) compliance inspections of meat and poultry and domestic foods and processing facilities to ensure adherence to safety regulations; (c) import inspections and export certifications to ensure that food products in international trade meet specified standards; and (d) standard setting and other support services essential to these functions; (2) about one-quarter of the $1.6 million spent by the federal government in fiscal year (FY) 1995 on food-related services was funded through user fees; (3) the premarket service of quality grading of grains and agricultural commodities was the primary food-related service funded through user fees; (4) nearly three-quarters of the cost of food-related services was funded by general fund appropriations rather than user fees; (5) compliance activities, such as the inspection of meat and poultry, were the primary food-related activities funded through general fund appropriations; (6) on the basis of its review of selected food-related services, GAO determined that potentially about $723 million in additional user fees could have been charged for services provided in FY 1995; (7) according to the Office of Management and Budget's criteria, additional user fees could have been assessed in three principal areas; (8) additional user fees could have been charged for some federal services by including the full costs of providing the service, such as the cost of setting standards, in the fee calculations; (9) user fees currently charged for certain food-related services, such as agricultural inspections at the nation's borders and ports of entry, could have been consistently applied to similar types of services that are provided without charge; (10) user fees could have been assessed on certain services, such as the inspection of meat and poultry, that are provided to identifiable beneficiaries without charge; and (11) although the arguments for and against user fees vary with the agency and service in question, the arguments center on who benefits from the service, the general public or specific beneficiaries, and the impact the user fee would have on producers or consumers.