Setting Regulatory User Fees: The Amount Set Can Determine the Level of Regulatory Activity

Congress determines in statute the degree of flexibility to make fee  design and implementation decisions that will be retained or delegated to  the agency. This has implications for whether agencies issue regulations  to set fees, who will determine the amount of regulatory activity, and how  costs will be allocated among the various beneficiaries of regulatory  programs, including small entities (see figure 1). Congress provided the National Credit Union Administration (NCUA) and the Office of  the Comptroller of the Currency (OCC) with broad statutory authority to charge fees to  fund their operations. In some cases, agencies are required by statute to provide special  consideration for small entities. Collecting Regulatory User Fees: Timing Could Have Management Implications

Regulatory user fees are not always collected at the time of a specific  service or transaction. Rather, many are collected from an entire industry  at regular intervals as prescribed by statute or regulation. One advantage of regular collections is that they can create a predictable  revenue stream. Using Regulatory User Fees: Variations in Availability of Fees and Unobligated Balances

Considering key questions about using regulatory user fees can enable  Congress and agencies to identify and manage issues related to revenue  instability. Collected Fees Are Sometimes Unavailable to the Agency

Some collections are only available to the agencies if Congress  appropriates them. Reviewing Regulatory User Fees: Time Frames and Methods Vary, and Transparency and Stakeholder Outreach Are Critical for Fee Reviews

Regulatory user fee reviews provide decision makers with information  important for deliberations about fee financing, such as identifying effects  of changes in a regulated industry, but the appropriate time frames and  methods will vary by individual circumstances. Agencies can  promote transparency by providing appropriate information to address the  diverse needs of policymakers and stakeholders, including fee payers  and the general public. Through appropriate stakeholder involvement and  dissemination of information, decision makers can help avoid the  appearance of regulatory capture (that fee payers have undue influence  on regulatory outcomes) (see figure 5). Transparency and public participation are especially  important for regulatory user fees because these fees support a mix of  benefits to the general public, not only to fee payers. These products should be used together when designing, implementing,  and evaluating regulatory user fees. c.  Can the agency withhold service when the fee is not paid? Appendix II: Objectives, Scope, and Methodology

Our objectives were to identify the design and implementation  characteristics of regulatory user fees in terms of how these fees are: (1)  set, (2) collected, (3) used, and (4) reviewed. Based on these sources and  feedback from the agencies we spoke with in the course of our case  studies and panel discussion, for the purposes of this report, we define  regulatory user fees as a subset of federal user fees which are charged to  nonfederal entities subject to federal government regulation, in  conjunction with regulatory activities. Case Study Selection

We selected case studies of 10 regulatory user fees within six agencies  based on high dollar amounts of regulatory user fee collections, high  amounts of rulemaking activity, and diverse fee characteristics, including: agencies that are subject to the Chief Financial Officers Act of 1990  (CFO Act) and agencies that are not; independent regulatory agencies and executive agencies; fees that are intended to recover the full cost of operating an agency  or program, as well as fees that are intended to recover partial costs  and fees that are not cost based; and fees that are collected at the time of a specific transaction between  the user and the regulator, and fees that are collected at regular time  intervals (such as annually or quarterly) and not at the time of a  transaction.
Why GAO Did This Study

Regulatory user fees are assessed on certain nonfederal entities subject to regulation in conjunction with regulatory activities. They represent a significant source of federal government revenue—some individual regulatory user fees exceed $1 billion in annual collections—and often support agencies' regulatory missions. Well-designed regulatory user fees can help fund regulatory programs while reducing taxpayer burden.
GAO built on its prior user fee work by assessing what additional design and implementation characteristics exist specifically for regulatory user fees in terms of how these fees are: (1) set, (2) collected, (3) used, and (4) reviewed. To do so, GAO reviewed relevant literature and analyzed 10 regulatory user fees within 6 agencies—Environmental Protection Agency, Food and Drug Administration, National Credit Union Administration (NCUA), Nuclear Regulatory Commission, Office of the Comptroller of the Currency, and Securities and Exchange Commission. GAO selected these agencies based on their high amounts of fee collections and rulemaking activity and diverse fee characteristics. GAO also examined stakeholder views on these selected fees and held a multi-agency panel discussion to ensure the broad applicability of the findings.

What GAO Found

GAO identified key elements of regulatory user fees for decision makers to consider as they design, implement, and evaluate these fees.
Setting regulatory user fees: Congress determines in statute the degree of flexibility to make fee design and implementation decisions that will be retained or delegated to the agency. This has implications for whether agencies issue regulations to set fees, who will determine the level of regulatory activity, and how costs will be allocated among beneficiaries. In setting fees, agencies typically give special consideration to small businesses' ability to pay.
Collecting regulatory user fees: Regulatory user fees are not always collected at the time of a specific service or transaction. While some regulatory user fees are charged for specific services, many are collected from an entire industry at regular intervals as prescribed by statute or regulation. Collecting fees this way can create a stable revenue stream. Agencies may use different methods to ensure collection of fees because they cannot always withhold services until the fee is paid.
Using regulatory user fees: It is important to consider the availability of fee collections and unobligated balances. In some cases, agencies have the authority to use balances to mitigate revenue instability. In other cases, collected fees are only available to the agencies if Congress appropriates them.
Reviewing regulatory user fees: Regulatory user fee reviews provide important information for decision makers, such as identifying the effects of changes in a regulated industry. The appropriate time frames and methods for agency review will vary by individual circumstances. Regulatory programs produce both public benefits and services to fee payers, so it is important that fee review processes provide opportunities for input from stakeholders, including fee payers and the general public. Agencies can promote transparency by providing information on how fees are calculated and used to address the diverse needs of policymakers, stakeholders, and the general public. Decision makers can help mitigate the appearance that fee-payers have undue influence on regulatory outcomes through appropriate stakeholder involvement and dissemination of information.

What GAO Recommends

GAO is not making any recommendations in this report. NCUA provided written comments agreeing with GAO's findings. NCUA and three other agencies also provided technical comments, which were incorporated as appropriate.