Offsetting receipts are required by law to be deposited into receipt accounts. Scope and Methodology

To better understand differences in how offsetting collections for business-type activities are treated in the budget process and how they have fared recently, we created a universe of 27 agencies to review that rely on fees as a source of funds. To identify changes in agency reliance on user fees since the passage of BEA, we used OMB actual year data to construct a series of analyses that described trends in budget authority and collections for fee-reliant agencies. The Congress increased the reliance of the U.S. Mint and INS on user fees, though not to the extent of the agencies noted above. User Fees Increasingly Offset Discretionary Spending

Most new user fees enacted between fiscal years 1991 and 1996 were designated as offsets to discretionary spending for BEA purposes. Budgetary Treatment Among Agencies That Collect User Fees Is Inconsistent

The 27 fee-reliant agencies in our review varied in how their user fees were classified, what kind of account they were deposited into, the legislative controls on the amount or use of these fees, and how they were treated under BEA. For example, some agricultural inspection fees were netted against their accounts’ budget authority and outlays, which reduced spending counted against BEA discretionary spending limits. Budgetary Treatment of Similar User Fees

Although fees are treated differently for similar activities, increasingly authority is being provided to allow fees to offset discretionary spending no matter what the source or purpose of the fee. Issues for Consideration in the Design and Management of User Fees

Increased reliance on fee collections as an agency’s primary source of funding has implications for federal budgeting and management that may call for a reexamination of the basic principles as well as the actual practices underlying the treatment of fees. Fee-Reliant Agencies Face Unique Management Issues

Fee-reliant agencies face management issues not faced by those that depend primarily on general fund appropriations. Where the Congress and fee payers agree on priorities, there may be no conflict between oversight and accountability to the Congress and accountability to fee payers. In addition, agencies with some fee-funded activities will have to redefine relationships between fee-funded and appropriated activities. We will make copies available to others on request. We defined our universe of fee-reliant agencies using the following criteria: (1) fees from the public must be used to support the agency that generated the fee, (2) services, goods, or benefits must be provided in exchange for fees and the exchange should be closely linked in time, and (3) budget authority from fees from the public must represent 20 percent or more of the agency’s gross outlays from federal sources averaged over fiscal years 1991 through 1996. To meet these criteria, we excluded (1) agencies that collected fees that were deposited in the general fund of the Treasury instead of designated for the agency’s use, (2) insurance and retirement programs because of the delay between when a fee is paid and when there is a pay out, although many of these programs, such as the Federal Deposit Insurance Corporation are totally self-supporting, (3) credit programs because they involve subsidies, (4) agencies that receive fees from the public that are then transferred to another federal agency or a state, (5) agencies that receive fees from the public intermittently, (6) Government-sponsored enterprises, such as the Federal Reserve, which receive funding from the public, but are classified as private and not included in the federal budget, and (7) agencies that receive most of their fees from other federal agencies, although many of the agencies included have some funding from this source. Discretionary Spending Limits/Spending Caps

Under the Budget Enforcement Act, discretionary spending limits, or spending caps, are maximum amounts of new budget authority and outlays for specific categories of discretionary appropriations.
Why GAO Did This Study

Pursuant to a congressional request, GAO identified 27 agencies that rely on federal user fees for a significant portion of their budget, focusing on: (1) identifying of changes in agency reliance on user fees since passage of the Budget Enforcement Act (BEA) of 1990; (2) describing the ways user fees are structured in the budget, including what budgetary controls govern the availability and use of theses fees and how they are treated under BEA; and (3) identifying of issues for consideration in the future design and management of user fees.

What GAO Found

GAO noted that: (1) since the 1990 enactment of BEA, the 27 agencies in its review have increased or maintained their reliance on user fees as a source of funding; (2) several of the regulatory agencies GAO surveyed were given authority to substantially increase user fee collections and to use these fees for program purposes; (3) importantly, most new user fees enacted between fiscal years 1991 and 1996 were authorized to offset discretionary spending; (4) the Congress authorized new user fees either: (a) to maintain program size by replacing general fund appropriations, which may then be used to fund other activities or (b) to increase program size without increasing budget authority and outlay totals; (5) this growth in new and existing fees does not add to the amount of spending that is scored under BEA discretionary spending limits, but frees up discretionary resources for other purposes; (6) although federal agencies often collect user fees for similar purposes, not all user fees are treated alike in the federal budget; (7) some user charges must be deposited in the general fund of the U.S. Treasury, while others are required by law to provide funding for specific purposes; (8) yet, even when fees are dedicated to the agency or activities that generated the fee, there are differences in when and how the fees are made available to the agency and in how much flexibility agencies have in using the fee revenue; (9) the attempt to distinguish between fees collected for the government's business-type activities from those derived from the government's power to tax was always problematic; (10) how fees are categorized has become increasingly important by the fact that under BEA scoring rules some fees are netted against their accounts' budget authority and outlay spending and not counted against discretionary spending limits; (11) the disparate treatment of fees--particularly those associated with discretionary spending--raises issues for congressional control, agency management, and competition for limited federal resources; (12) in shifting to a more fee-reliant government, inconsistencies in budgetary treatment of fees with similar characteristics are likely to increase; (13) unlike agencies that rely primarily on appropriated funds from general revenues, both the Congress and fee-reliant agencies face additional policy and management issues such as how to: (a) meet the needs for accountability to both the Congress and fee payers, including agreement on priorities and the appropriate assessment of fees and (b) define the relationship between fee-financed and appropriated activities, particularly if resource disparities between the two groups increase.