FEDERAL USER 

FEES

Fee Design Options 

and Implications for 

Managing Revenue 

Instability

Report to the Chairman, Committee 

on the Budget, 

House of Representatives

September 2013

GAO-13-820

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-820, a report to the 

Chairman, Committee on the Budget, House 

of Representatives.

September 2013

FEDERAL USER FEES

Fee Design Options and Implications for Managing 

Revenue Instability 

Why GAO Did This Study

In 2012, the President’s Budget 

reported nearly $300 billion collected in 

user fees from the public. Given the 

nation’s fiscal condition it is critical that 

every funding source and spending 

decision be carefully considered and 

applied to its best use. GAO was 

asked to review oversight opportunities 

for fees. GAO examined (1) key 

Congressional design decisions and 

related implications for achieving the 

desired balance between agency 

flexibility and congressional control, (2) 

issues related to identifying and 

managing unobligated balances in 

selected fee-funded agencies, and (3) 

key questions to identify potential

sources of fee revenue instability and 

to manage any consequences. To do 

so, GAO analyzed laws, agency 

documents and guidance, literature, 

and prior GAO work. In addition, GAO 

interviewed officials at three fully feefunded agencies, which were selected 

to illustrate implications of key design 

options, unobligated fee balances, and 

approaches for managing revenue

instability. GAO also validated certain

findings with budget subject matter 

specialists. 

What GAO Recommends 

GAO is not making any new 

recommendations in this report. GAO 

previously recommended that the 

Office of Management and Budget 

(OMB) review fee-funded programs 

and identify opportunities to improve 

their design and better align fee 

collections with program costs. OMB 

has not yet taken action on this

recommendation. Two of the three

selected fully fee-funded agencies 

provided technical comments which 

were incorporated as appropriate. 

What GAO Found

GAO identified six key fee design decisions related to how fees are set, used, 

and reviewed that, in the aggregate, enable Congress to design fees that strike 

the desired balance between agency flexibility and congressional control (see 

figure below). For example, narrowly limiting the activities for which fees may be 

used heightens congressional control over the funds; however, doing so can also 

reduce an agency’s flexibility to reallocate resources as needs change and may

increase administrative costs. Design decisions also have program management 

implications. For example, the frequency of fee reviews and adjustments affects 

the alignment between collections and costs. Failing to review fees regularly has 

sometimes resulted in large increases when fees are eventually updated, 

creating costly challenges. Understanding the implications of fee design is 

important to avoid such unintended consequences. 

Congressional Fee Design Decisions Key to Determining Agency Flexibility 

and Congressional Control 

Identifying and understanding unobligated balances—the portion of obligational 

authority that has not yet been obligated—in fee-based accounts is challenging. 

There is no single list of all federal user fees, and in general, budget accounts 

are not labeled in a way that indicates whether an account contains fee 

collections. This makes it challenging to identify whether (or which) unobligated 

balances in an account are fee-related. Further, some fee designs include 

dedicated reserves that appear as unobligated balances. Despite these 

challenges, funding a program or agency through fees does not eliminate the 

need for careful monitoring and managing of unobligated balances. 

Considering key questions about costs and collections can enable Congress and 

agencies to identify and manage potential fluctuations in fee collections–known 

as revenue instability–as well as potential consequences. Importantly, decision 

makers need to understand potential vulnerabilities in the context of a fee’s

design. Examples of such questions include: what is the risk that fee revenue 

instability will affect a program? What analysis is needed to understand factors 

such as cost drivers and elements that influence collections? Are there data

limitations that could add uncertainty to collection estimates? Can the agency 

quickly respond to changing costs? What factors affect the timing and pattern of 

collections and spending? If revenue instability is a function of a fee’s design, the 

most sustainable solutions are often found by realigning costs and collections. In 

other cases, maintaining a reserve can help address sudden or temporary 

fluctuations in collections and/or costs and can minimize the effect of revenue 

instability on operations.

View GAO-13-820. For more information, 

contact Susan J. Irving at (202) 512-6806 or 

irvings@gao.gov or Jacqueline M. Nowicki at 

(617) 788-0580 or nowickij@gao.gov. 
Page i GAO-13-820 Federal User Fees

Letter 1 

Background 3

Fee Design Affects the Balance between Congressional Control 

and Agency Flexibility and Has Implications for Program 

Management 6

Agencies Manage Unobligated Balances Differently Depending on 

Whether They Represent Operating Reserves or Reflect the 

Timing of Collections and Outlays 19

Considering Key Questions About Costs and Collections Can 

Enable Congress and Agencies to Identify and Manage Revenue 

Instability 25

Concluding Observations 37

Agency Comments & Our Evaluation 37

Appendix I Key Fee Design Decisions Allow for Agency Flexibility or 

Congressional Control 39

Appendix II Key Questions about Costs and Collections to Enable 

Congress and Agencies to Identify and Manage Revenue 

Instability 41

Appendix III GAO Contact and Staff Acknowledgments 42

Related GAO Products 43

Tables

Table 1: Three Agencies Selected to Illustrate Reasons for 

Unobligated Balances in Fee Accounts 5

Table 2: Unobligated Balances of Selected Fee-Funded Agencies, 

Fiscal Year 2012 20

Table 3: Collections, Disbursements, and Set-Asides for Universal 

Service Fund Programs, 2012 24

Contents 
Page ii GAO-13-820 Federal User Fees

Figures

Figure 1: Key Fee Desigh Decisions Allow for Agency Flexibility or 

Congressional Control. 8

Figure 2: Key Fee Design Options: Setting 9

Figure 3: Key Fee Design Options: Using 12

Figure 4: Key Fee Design Options: Reviewing 17

Abbreviations

AIA Leahy-Smith America Invents Act of 2011

APHIS Animal and Plant Health Inspection Service

AQI Agricultural Quarantine Inspection 

CBP Customs and Border Protection

CBO Congressional Budget Office

CFO Act Chief Financial Officers Act of 1990

COBRA Consolidated Omnibus Reconciliation 

Act of 1985 

FCC Federal Communications Commission

IOAA Independent Offices Appropriation 

Act of 1952

OMB Office of Management and Budget

PEF Public Enterprise Fund 

Mint United States Mint

USAC Universal Service Administrative Company

USCIS United States Citizenship and 

Immigration Service

USF Universal Service Fund 

USPTO United States Patent and Trademark Office

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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Page 1 GAO-13-820 Federal User Fees

441 G St. N.W.

Washington, DC 20548

September 30, 2013

The Honorable Paul Ryan

Chairman

Committee on the Budget

House of Representatives

Dear Mr. Chairman:

In 2012, the federal government collected nearly $300 billion in user fees 

from the public.1 Given the nation’s fiscal condition, it is critical that every 

funding source and spending decision be carefully considered and 

applied to its best use.2

You asked us to provide information on the key appropriations 

frameworks used to design federal user fees and charges, on the 

unobligated balances in selected fee accounts—specifically, the portion of 

obligational authority that has not yet been obligated—and on some key 

questions Congress and agencies could consider when overseeing and 

managing fee revenue instability. Our objectives were (1) to identify the 

key Congressional design decisions and related implications for achieving 

the desired balance between agency flexibility and Congressional control, 

(2) to examine issues related to identifying and managing unobligated 

balances in selected fee-funded agencies, and (3) to identify key 

questions to identify potential sources of fee revenue instability and 

manage any consequences. 

As funds become increasingly scarce and new 

policy priorities emerge, policymakers have demonstrated interest in user 

fees as a means of financing new and existing services. Well designed 

fees can fund programs or activities that benefit an identifiable population 

beyond what is normally provided to the public, while promoting economic 

efficiency and equity.

 

1

User charges from the public as reported in The President’s Fiscal Year 2014 Budget 

Analytical Perspectives. 

2

We have also identified the key considerations for evaluating carryover balances in nonfee accounts. See GAO, Budget Issues: Key Questions to Consider When Evaluating 

Balances in Federal Accounts, GAO-13-798 (Washington, D.C.: Sept. 30, 2013).

 
 

Page 2 GAO-13-820 Federal User Fees

To identify the key Congressional design decisions for achieving the 

desired levels of agency flexibility and Congressional control, we 

reviewed our prior work, including Federal User Fees: A Design Guide,

3

and selected user fee statutory authorities and regulations and met with 

the Congressional Budget Office. We also reviewed relevant user fee 

policies contained in the Office of Management and Budget’s (OMB) 

Circular A-25 and contained in the Chief Financial Officers Act of 1990 

(CFO Act).4

To review unobligated balances derived from fees, we reviewed fiscal 

year 2007 through 2011 unobligated balance data from OMB’s MAX 

database, agency congressional justifications, and agency financial 

documents. We also reviewed data from our 2011 survey of fee 

collections in agencies covered by the CFO Act and OMB Circular A-25 

that we collected for our annual review of program duplication, overlap, 

and fragmentation.5

 

3

GAO, Federal User Fees: A Design Guide, 

In addition, we reviewed congressional budget 

justifications and financial reports from agencies not covered by the CFO 

Act. We reviewed the amount of fees collected and the statutory 

authorities governing collection and use of fees. Based on this, we 

selected three fully fee-funded agencies— the United States Mint (the 

Mint) in the Department of the Treasury, the United States Patent and 

Trademark Office (USPTO) in the Department of Commerce, and the 

Federal Communications Commission (FCC). Although the results from 

these three agencies may not be generalized to all fee-funded agencies, 

the selection of these agencies was appropriate to illustrate implications 

of key design options, of fee unobligated balances, and of approaches for 

managing revenue instability. For each of these three agencies, we 

reviewed agency annual reports and financial statements; we also 

reviewed agency fee collection procedures, policies, and data. We spoke 

with agency officials about their management of fee collections. To 

assess the reliability of OMB’s MAX data, and data on unobligated 

balances that we received from FCC, we reviewed available 

GAO-08-386SP (Washington, D.C.: May 29, 

2008). 

4 Chief Financial Officers Act of 1990, Pub. L. No. 101-576 (Nov. 15, 1990), codified at, 31 

U.S.C. § 902. 

5 GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington, 

D.C.: Feb. 28, 2012), 279-284. 
 

Page 3 GAO-13-820 Federal User Fees

documentation and followed up as needed to resolve any questions. 

Based on our review, we found these data sufficiently reliable for the 

purposes of our report. 

To develop the key questions for managing revenue instability, we 

reviewed our past work on federal user fees—including our user fee 

design guide and reviews of specific fees—and considered our current 

audit work in the three selected agencies noted above. We also reviewed 

literature from governmental and nongovernmental organizations to 

identify common principles for managing reserve funds. Specifically, we 

used published guidance from a state government, from professional 

associations, and from a consulting firm that described practices in 

managing reserve funds; these sources were selected from a literature 

review, based upon their applicability to a federal fee-funded framework. 

Once we identified common themes in fee-funded programs that were 

experiencing revenue instability, and identified leading practices for 

creating and managing reserve funds, we developed a set of questions 

that agency managers and Congress could use to identify and manage 

fee revenue instability. We validated our key questions with subject 

matter specialists selected for their fee program expertise in both the 

public and private sectors, as well as with relevant officials at USPTO, the 

Mint, the FCC, and OMB. 

We performed our work from August 2012 to September 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In general, a user fee is related to some voluntary transaction or request 

for government goods or services, above and beyond what is normally 

available to the public (such as a national park entrance fee or a license 

to operate a radio station). We have previously reported on the 

characteristics (equity, efficiency, revenue adequacy, and administrative 

Background 
 

Page 4 GAO-13-820 Federal User Fees

burden) that can influence the effectiveness of user fees to fund activities 

that provide benefits to identifiable users.6

User fee designs can vary widely and, in general, are governed by two 

authorities: an authority to charge fees, and an authority to use fee 

collections. Agencies derive their authority to charge fees either from the 

Independent Offices Appropriation Act of 1952 (IOAA) or from a specific 

statutory authority.7

Regardless how the imposition of fee collections is authorized, 

Congressional action is required for agencies to use those collections. 

Congress may provide agencies with the authority to collect and use a fee 

within authorizing legislation, within appropriations legislation, or within 

both.

Overall, fees established under the IOAA must be (1) 

fair and (2) based on costs to the government, on the value of the service 

or thing to the recipient, on public policy, or on interest serviced. Agencies 

that established fees under the IOAA, however, are only authorized to 

charge the fee; a separate authority is required to use the fee collections. 

However, Congress has frequently provided agencies with the authority 

via authorizing or appropriations legislation both to collect fees and to use 

the collections. In these specific fee authorities, Congress determines the 

degree of flexibility to make fee design and implementation decisions that 

will be retained or delegated to the agency.

8

 

6

For agencies whose fee collections are available for obligation on a 

no-year or multi-year authority basis, unobligated balances can be carried 

forward from year to year. To illustrate the reasons why such balances 

exist in fee-related programs, we selected three fee-funded agencies with 

unobligated balances: the United States Mint (Mint), the United States 

Patent and Trademark Office (USPTO), and the Federal Communications 

Commission (FCC). 

GAO-08-386SP. 

7

Without additional statutory authority to retain collections, fees collected under the IOAA 

are deposited in the general fund of the U.S. Treasury and are generally not available to 

the agency or the activity generating the fees. IOAA requires that agency regulations 

establishing a user fee are subject to policies prescribed by the President. OMB provides 

such guidance to executive branch agencies under this authority through OMB Circular 

No. A-25. 

8

Depending on the type of legislation providing the authority to collect or spend the fees, 

these funds are either mandatory or discretionary. Collections authorized in authorizing 

legislation are considered mandatory and collections that are authorized in appropriations 

legislation are discretionary. 
 

Page 5 GAO-13-820 Federal User Fees

Table 1: Three Agencies Selected to Illustrate Reasons for Unobligated Balances in Fee Accounts 

The United States Patent and 

Trademark Office (USPTO)

USPTO is a component of the Department of Commerce and is charged with examining 

applications and granting patents to new, useful, and non-obvious inventions and with 

reviewing and registering marks—trademarks, service marks, certification marks, and 

collective membership marks. USPTO is fully funded by fee collections paid by applicants 

and owners applying for and maintaining patents or trademarks. The fees correspond to 

products and services at different points in patent and trademark application and 

examination processes and lifecycles. The Leahy-Smith America Invents Act (AIA)a of 

2011 provides USPTO the authority to set all fee amounts through the regulatory 

process. USPTO is authorized to spend the fee amounts collected each year, up to the 

amount appropriated by Congress. The AIA also created a special account called the 

Patent and Trademark Fee Reserve Fund, referred to as the FRF by USPTO. Any 

USPTO collections in excess of the amounts annually appropriated by Congress are 

deposited into this fund. The USPTO can access money from the Patent and Trademark 

Fee Reserve Fund only to the extent appropriated by Congress. We reported in 2012 that 

90 percent of USPTO’s revenues came from patent fees, and the remainder of revenue 

came from trademark fees.

The United States Mint (Mint) The Mint, a component of the Department of the Treasury, manufactures and distributes 

coins and medals. It provides circulating coins to the Federal Reserve for distribution to 

banks, and prepares and distributes numismatic items, including investment-grade bullion 

coins and high-quality versions of circulating coinage, precious metal coins, 

commemorative coins, medals, and sets. It is also responsible for safeguarding 

noncirculating coins and medals and the precious metals used to make them. In 1995, 

Congress created the United States Mint Public Enterprise Fund (PEF), which accounts 

for all receipts and expenses related to production and sale of numismatic items and 

circulating coinage, as well as protection activities. Since establishment of the PEF, the 

Mint has operated without direct appropriations, and is entirely funded by its collections.

Any amounts in the PEF that are determined by the Mint to be in excess of the amount 

required for Mint expenses are transferred to the Treasury’s General Fund. From fiscal 

years 2006 to 2010 the Mint returned collections between $388 million and $825 million 

annually to the General Fund. In fiscal year 2012 the Mint collected $3.4 billion in revenue 

from the sale of circulating and noncirculating items. Numismatic coins, including gold 

and silver bullion coins, generated approximately 86 percent of the Mint’s revenues; sales 

of circulating coins generated 14 percent.
 

Page 6 GAO-13-820 Federal User Fees

The Federal Communications 

Commission (FCC)

The FCC is an independent regulatory agency governed by five commissioners 

appointed by the President and confirmed by the Senate. It is charged with regulating 

interstate and international communications by radio, television, wire, satellite, and cable, 

and with regulating telecommunications services for all people of the United States. The 

FCC is authorized by Section 9 of the Communications Act of 1934 (as amended) to 

assess and collect regulatory fees to recover the regulatory costs associated with the 

Commission’s enforcement, policy- and rulemaking, user information, and international 

activities;b it is subject to annual Congressional appropriations that specify the amount of 

regulatory fees it may collect each year. In addition, the FCC manages the Universal 

Service Fund (USF), which was created by the Telecommunications Act of 1996.

c This 

fund is administered by the Universal Service Administrative Company (USAC), an 

independent, not-for-profit corporation designated as the administrator of the federal USF 

by the FCC, and financed by mandatory contributions from U.S. telecommunications 

service providers and other providers of telecommunications. The USAC provides USF 

funds directly to service providers to defray the cost of serving customers in high cost and 

rural areas, and of serving customers who have low incomes. In addition, USF funds 

provide financial support to assist schools, libraries, and health care providers in 

purchasing telecommunications services, advanced telecommunications and information 

services, and Internet access. In fiscal 2012, the FCC collected $340 million in the form of 

regulatory fees which were deposited into the FCC’s salaries and expense account, and 

$9.3 billion in the form of contributions for the USF, which were deposited in the USF 

account administered by USAC.

d

Source: USPTO, the Mint, and FCC. 

Notes: (a) Leahy-Smith America Invents Act of 2011, P.L. 112-29. § 10 (Sept. 16, 2011). 

(b) Pub. L. No. 73-416, section 9 is codified at 47 U.S.C. § 159. FCC also collects application fees 

from companies for activities such as license applications, renewals or requests for modification. 

These fees are deposited in the General Fund of the Treasury and cannot be used by the FCC. 47 

U.S.C. § 158(e). 

(c) Pub. L. No. 104-104, codified at 47 U.S.C. § 254. 

(d) The remaining revenue collected was from contributions to the Telecommunications Relay Service 

Fund, and proceeds from radio spectrum auctions and the North American Numbering Plan.

Fee Design Affects 

the Balance between 

Congressional Control 

and Agency Flexibility 

and Has Implications 

for Program 

Management 
 

Page 7 GAO-13-820 Federal User Fees

When designing fees, Congress is presented with a number of decisions 

regarding how a fee will be set, collected, used, and reviewed. At each 

decision point, Congress can delegate some flexibility to agencies, or it 

can retain that control. In the aggregate, these decisions enable 

Congress to design a fee that strikes its desired balance between agency 

flexibility and Congressional control. It is important to note that regardless 

of how Congress designs a fee, it always retains oversight over the fee 

and over the goods and services the fee supports. Figure 1 identifies six 

key fee design decisions for Congress that have a direct bearing on how 

much control Congress will retain and how much flexibility will be 

delegated to an agency.9 For each design question, we have identified at 

least two options, one granting the agency more flexibility and the other 

retaining more control for Congress. In some cases, Congress selects an 

option that falls in between the two options shown in figure 1. For 

example, Congress can grant an agency the authority to set some of its 

fee rates by regulation while setting other fees, or requirements for any of 

the rates such as provisions for exemptions, waivers, and caps, in statute.

 

9

There are other Congressional design decisions that are not included in figure 1. These 

decisions have less direct bearing on the amount of agency flexibility or the nature of 

congressional control. For example, Congress could specify how an agency should collect 

its fees in some cases, but might delegate that decision to the agency in other cases. 

However, the Department of the Treasury established government-wide guidance 

directing agencies to use electronic collections in the absence of specific Congressional 

direction. As a result of this executive direction, even when Congress delegates the 

collection method to the agency, the implication for increased agency flexibility is generally 

less significant. 

Congress Delegates or 

Retains Varying Degrees of 

Decision-Making Authority 

Depending on How It 

Designs Key Aspects of 

User Fees
Page 8 GAO-13-820 Federal User Fees

Interactive graphic Figure 1: Key Fee Design Decisions Allow for Agency Flexibility or Congressional Control 

Directions:

Print instructions To print full text version of this graphic, go to appendix I.

Mouse over entries in the table below for additional information

Options increasing agency 

flexibility

Options increasing congressional 

Key design questions control

Source: GAO.

a

GAO-08-386SP.
 

Page 9 GAO-13-820 Federal User Fees

Congress’s fee design decisions have implications for fee program 

management beyond striking the desired balance between agency 

flexibility and Congressional control. Below, we discuss in more detail the 

key fee design options introduced in figure 1—setting, using, and 

reviewing—and the implications that flow from decisions about each 

design option. Understanding these implications, especially in the context 

of Congress’s own priorities and goals, can help to avoid unintended 

consequences in fee design.

Figure 2 shows the key design options related to how fee rates are set.

Figure 2: Key Fee Design Options: Setting

Note: See interactive figure on page 8 for more details.

The frequency of fee review and adjustment, and the ability to keep fees 

and costs aligned, have a number of potential implications for agencies. 

The CFO Act10

 

10 The CFO Act requires agencies to review “fees, royalties, rents, and other charges 

imposed by the agency for services and things of value it provides.” For the purposes of 

this discussion, GAO refers to all of these collectively as user fees. 

requires federal agencies to review user fees biennially

Fee Design Options Have 

Implications for Fee 

Program Management

Implications of Fee 

Design: Setting 
 

Page 10 GAO-13-820 Federal User Fees

and OMB’s Circular A-25 directs agencies to set fees to recover all direct 

and indirect costs to the federal government of a good or service. We 

have previously reported that the failure to review fees regularly can 

result in large fee increases when the fees are eventually updated, which 

creates costly challenges.11 For example, the U.S. Citizenship and 

Immigration Service (USCIS) is authorized to charge fees for the 

adjudication of immigration and naturalization applications. Although 

USCIS has the authority to adjust its fees through the regulatory process, 

in 2007 it conducted its first comprehensive fee review in nine years.12 As 

a result, USCIS had to increase fees by an average of 86 percent to align 

them with its costs.13 During the month before the fee increase took 

effect, the number of applications received increased an unprecedented

100 percent over the prior month, far outpacing the agency’s processing 

capacity. This contributed to a backlog of 1.47 million applications and 

unplanned costs to secure additional facilities to store these applications.

In 2012, we found that prior to the passage of the AIA, fees generating 

over 80 percent of the USPTO’s revenues were set in statute.14

In contrast, there are other examples of intentional deviation from cost-fee 

alignment. In some cases, a less precise alignment between costs and 

each fee is chosen in order to achieve a policy or administrative goal. A 

fully fee-funded agency covers program costs in the aggregate, but not 

This 

limited the USPTO’s ability to adjust fee rates as costs changed. Other 

than periodic increases to reflect inflation, these statutorily-set fees had 

not been reviewed or adjusted for the 7 years before 2012. 

 

11GAO, Federal User Fees: Additional Analyses and Timely Reviews Could Improve 

Immigration and Naturalization User Fee Design and USCIS Operations, GAO-09-180

(Washington, D.C.: Jan. 23, 2009). 

12 USCIS issued a subsequent fee review in 2010. 

13 In 2009 we found that USCIS’s fees did not include the costs of certain retirement 

benefits paid by the Office of Personnel Management and the costs of the Department of 

Treasury’s lockbox services—where some applications were received and processed. In 

response to our recommendation, USCIS identified these costs in its 2010 fee review. 

However, USCIS did not include these costs in setting its fees and the Office of 

Management and Budget concurred with USCIS’s decision. See GAO, Immigration 

Applications Fees: Costing Methodology Improvements Would Provide More Reliable 

Basis for Setting Fees, GAO-09-70. (Washington, D.C.: Jan. 23, 2009).

14 GAO, Patent and Trademark Office: New User Fee Design Presents Opportunities to 

Build on Transparency and Communication Success, GAO-12-514R (Washington, D.C.: 

Apr. 25, 2012).
 

Page 11 GAO-13-820 Federal User Fees

necessarily on a fee-by-fee basis. For example, within the suite of 

USCIS’s immigration and naturalization fees, Congress directed that fees 

providing adjudication and naturalization services be set to ensure 

recovery of full costs of providing such services. This includes the costs of 

similar services provided without charge to asylum applicants or other 

immigrants.

15

We have found over the years that fees set through the regulatory 

process may be updated more frequently than fees set in statute: 

therefore, they may more consistently align collections with costs.

As a result, the costs of processing applicants granted the 

fee waivers are distributed to other fee payers as a flat-rate surcharge.

However, unintentional misalignment between fees and costs can 

increase the demand for more expensive services, because fee payers 

do not bear the agency’s total cost of the service. This can result in some 

fee payers subsidizing others with no public policy purpose.

16

However, we have also previously reported that, in the past, stakeholders 

expressed concern about the agency incentive to inflate costs or the lack 

of incentive to restrain costs.17 This risk may be reduced, and tools for 

Congressional and stakeholder oversight may be enhanced, if the agency 

clearly reports its methods for setting the fee, including an accounting of 

program costs and the assumptions it uses to project future program 

costs and fee collections. Further, federal agencies must also follow 

guidelines regarding their cost accounting information, providing some 

safeguards against artificial inflation of program costs.18

Figure 3 shows the key design options related to an agency’s access to 

and use of its fee collections.

 

15The use of fee waivers is one method of incorporating the ability-to-pay principle of 

equity in a fee design. See GAO-08-386SP and GAO-09-180. 

16For examples, see GAO-08-386SP and GAO-12-514R. 

17GAO-08-386SP. 

18Federal Accounting Standards Advisory Board, Statement of Federal Financial 

Accounting Standards No. 4: Managerial Cost Accounting Standards and Concepts (July 

31, 1995). Cost information can be used by Congress and federal executives in making 

decisions about allocating federal resources, authorizing and modifying programs, and 

evaluating program performance; it can also be used by program managers in making 

managerial decisions to improve operating economy and efficiency. 

Implications of Fee Design: 

Using
 

Page 12 GAO-13-820 Federal User Fees

Figure 3: Key Fee Design Options: Using

Note: See interactive figure on page 8 for more details.

Congressional decisions about the collection and use of a fee will 

determine how the fee will be considered within the context of all federal 

budgetary resources. Fee collections are classified into 3 categories: 

offsetting collections, offsetting receipts, or governmental receipts.19

 

19The Budget Enforcement Act of 1990, defines offsetting collections and receipts as 

negative budget authority and the reductions to it as positive authority. 

As 

noted in figure 1, fees classified as offsetting collections can provide 

agencies with more flexibility because they are generally available for 
 

Page 13 GAO-13-820 Federal User Fees

agency obligation without an additional annual appropriation. In contrast, 

offsetting receipts and governmental receipts offer greater Congressional 

control because, generally, additional Congressional action is needed 

before the collections are available for agency obligation. Regular 

Congressional review—whether through reauthorization or the annual 

appropriations process—offers opportunities to exercise Congressional 

oversight. Regardless of the specific classification, all fees remain subject 

to Congressional oversight at any point in time. 

The authorities under which an agency may collect and use fees can be 

affected by different legislative decisions made over time, resulting in 

increased complexity and potentially significant intended or unintended 

effects. For example, a program’s authorizing legislation may grant the 

agency the authority to collect fees but not provide the agency the 

authority to spend the fees. As a result, any later enacted legislation to 

allow the agency to spend the fees may not be consistent with the 

authorizing legislation, contributing to increased complexity. 

Congress also determines the period of time the collections are available 

for obligation, the purposes for which they may be used, and the amount 

of collections that are available to the agency—thereby determining how 

much flexibility the agency has in managing its fee collections.

Time. When Congress limits the period of availability of funds, it retains 

greater control over when the funds will be used. When Congress 

provides an agency unlimited access to its fee collections (that is, makes 

the fee collections available until they are expended) agencies have 

greater flexibility and can carry over unobligated amounts to future fiscal 

years. This enables agencies to align fees and costs over a longer 

horizon and to better prepare for, and adjust to, fluctuations in collections 

and costs. Carrying over unobligated balances from year to year, if an 

agency has multi- or no-year fee collections, is one way a reserve can be 

established. Set aside or reserved funds can sustain operations in the 

event of a sharp downturn in collections or increase in costs. We have 

previously found that, for programs where fees are expected to cover all 

or most program costs, and especially when program costs do not 

necessarily decline with a drop in fee collections, a reserve is important.20

 

20GAO, Federal User Fees: Substantive Reviews Needed to Align Port-Related Fees with 

the Programs They Support, GAO-08-321 (Washington, D.C.: Feb. 22, 2008). 
 

Page 14 GAO-13-820 Federal User Fees

(Later in this report, we will discuss reserve funds at fee-funded 

agencies.)

Purpose. Congress can also specify limits on the activities or purposes 

for which an agency may use fee collections. Congress has granted some 

agencies broad authority to use some of the fees they collect for any 

program purpose, but has limited the use of other fees to specific sets of 

activities. Such restrictions may benefit stakeholders and increase 

Congressional control. For example, according to USPTO officials, patent 

fee collections can only be used for patent processes, and trademark fee 

collections can only be used for trademark processes, as well as the 

proportionate share of the administrative costs of the agency. USPTO 

officials stated that patent and trademark customers are typically two 

distinct groups and this division helps to assure stakeholders that their 

fees are supporting the activities that affect them directly.

On the other hand, statutes that too narrowly limit how fees can be used 

reduces both Congress’s flexibility to make resource decisions and an 

agency’s flexibility to reallocate resources. This can make it more difficult 

to pursue public policy goals or respond to changing program needs, 

such as when the activities intended to achieve fee-funded purposes 

change. For example, Customs and Border Protection’s (CBP) 

Merchandise Processing Fee is authorized to fund only a specific set of 

activities. However, after the events of September 11, 2001, as the 

program’s focus shifted towards security, other activities (such as 

screening and inspecting conveyances and inspecting vessels and 

containers) became part of the program. While CBP views these activities 

as part of the merchandise processing service, they are not included in 

the set of authorized activities that may be funded by the fee collections; 

the result is a misalignment between the services provided and the 

authorized uses for the fees.

Narrowing the authorized uses of a fee in statute can also increase 

agency administrative costs. For example, the narrower the subset of 

activities for which collections can be used, the more detailed and 

potentially expensive the required cost accounting. Given these 

challenges, more frequent reviews and updated fee schedules become 

even more important to ensure that the authorized purposes remain 

aligned with program needs. For example, in 2008 we reported that some 

CBP inspection fees can pay for only some inspection activities and only 

under certain circumstances. In order to be reimbursed for time spent on 

authorized activities for various fees, CBP must track the time spent on 

these activities for several of its inspection fees—including customs, 
 

Page 15 GAO-13-820 Federal User Fees

immigration, and agriculture activities.21 In early 2007, to help address a 

concern that timekeeping was taking time away from officers’ inspection 

duties, CBP implemented a standard process for tracking the time

dedicated for these activities. However, at one port we visited for the 

2008 report, on each shift, a full-time CBP officer was assigned solely to 

tracking staff time. In 2013, we found that CBP still does not capture all of 

the time spent on agriculture activities in its Cost Management 

Information System—the system in which CBP tracks its activities and 

determines personnel costs.22

Amount. Congress determines the specific level of budget authority 

provided for a program’s activities by limiting the amount of fee collections 

that can be collected or used by the agency; however, these limits can 

also pose challenges for the agency. For example, when the agency is 

not authorized to retain or use all of its fee collections and no other 

funding source is provided, the agency may not have the funds available 

to produce the goods or services that it has promised, or that it is required 

by law to provide. In a 2012 report, we found that in USPTO’s case, fees 

must be designed to recover costs of the related activities in aggregate as 

directed by the AIA.

23 However, with each set of application fees 

collected, USPTO takes on an additional work activity. In some years 

Congress chose not to make available to USPTO the full amount of its 

collections to support that work.24

 

21

USPTO officials stated that, prior to the 

passage of the AIA, this contributed to USPTO’s inability to hire sufficient 

examiners to keep up with USPTO’s workload and invest in needed 

GAO-08-321. 

22GAO, Agricultural Quarantine Inspection Fees: Major Changes Needed to Align Fee 

Revenues with Program Costs, GAO-13-268 (Washington, D.C.: March 1, 2013). 

23GAO-12-514R. 

24Prior to enactment of the AIA, all fees collected were deposited into USPTO’s account 

and were available to the extent appropriated. Since the enactment of AIA, collections 

during a fiscal year in excess of the amount appropriated to USPTO for the fiscal year are 

deposited into the new Patent and Trademark Fee Reserve Fund. As before, these 

excess collections are available to USPTO only to the extent appropriated by Congress. In 

2012 we reported that the establishment of this special account increased transparency of 

these funds because any amounts appropriated, transferred, or rescinded from the fund 

would be clearly visible.
 

Page 16 GAO-13-820 Federal User Fees

technology systems to modernize the USPTO. In 2012, we reported a 

backlog of over 640,000 patent applications.25

Limiting the availability of fee collections may also have future budgetary 

implications for Congress. For example, as mentioned above, USPTO 

collections in excess of appropriations are deposited into the Patent and

Trademark Fee Reserve Fund and are not available to the agency without 

additional Congressional action. If these amounts are made available in 

future years rather than in the year the fees were collected, the action will 

count or “score” as new budget authority against discretionary spending 

limits in place in a given future fiscal year, and will not offset against 

budget authority made available that year. The effect of this scoring may 

make the fee-funded activities appear more costly and can make granting 

access to previously collected amounts a less desirable option for 

Congressional fee designers. The outcome can lead to the buildup of 

unavailable and unobligated balances.

Figure 4 shows the design decisions related to the kinds of specific 

reporting or review requirements Congress may wish to impose, beyond 

the standard biennial review requirement in the CFO Act.

 

25As of July 2013, this backlog has been reduced to approximately 591,000 patent 

applications. 

Implications of Fee 

Design: Reviewing 
 

Page 17 GAO-13-820 Federal User Fees

Figure 4: Key Fee Design Options: Reviewing

Note: See interactive figure on page 8 for more details.

When designing a fee, Congress must balance granting more autonomy 

to an agency (by requiring no additional reporting and review beyond that 

required in the CFO Act) with stronger control for itself (via additional 

reporting and oversight requirements over and above the CFO Act 

requirements). When a fee’s authorizing statute does not specify review 

and reporting requirements or if a fee derives its statutory authority from 

the Independent Offices Appropriation Act of 1952,26

 

26Pub. L. No. 82-137 (Aug. 31, 1951), codified at, 31 U.S.C. § 9701. 

the CFO Act 

requires and OMB Circular No. A-25 directs agencies to review their fees 

biennially and to recommend fee adjustments as appropriate. In addition, 

OMB Circular No. A-25 directs agencies to include non-fee-funded 

programs in these reviews to determine whether fees should be initiated 

for government services or goods for which fees are not currently 

charged. Further, if imposing such fees is prohibited or restricted by law, 

agencies are to recommend legislative changes as appropriate. 

Moreover, OMB Circular No. A-25 directs agencies to discuss the results 

of these reviews and any resulting proposals, such as adjustments to fee 
 

Page 18 GAO-13-820 Federal User Fees

rates, in annual reports, such as performance and accountability reports. 

However, our 2011 survey of the 24 agencies covered by the CFO Act 

and OMB Circular No. A-25 suggested that agencies are reviewing more 

fees than they are discussing in their annual reports.27 While these 

reviews may provide information for agency management and decision 

making, the extent to which this information is being shared with 

Congressional decision makers or other stakeholders appears far more 

limited. In 2012, we concluded that OMB should do more to ensure that 

agencies comply with requirements and recommended that OMB use its 

budget reviews to ensure agencies are adhering to this guidance. As of 

March 2013, OMB had not taken action on this recommendation.28

Additional reporting requirements can further increase information 

available to Congress about fee programs. We previously concluded that 

whether fee rates are set by the agency in regulation or by Congress in 

statute, agencies must substantively review and report on all cost-based 

fees regularly to ensure decision makers have complete information 

about program costs and activities.29

 

27Specifically, 21 of the 23 agencies that responded to our survey reported varying levels 

of adherence to the biennial review and reporting requirements. The survey responses 

indicated that for most fees, agencies (1) had not discussed fee review results in annual 

reports, and (2) had not reviewed the fees and were inconsistent in their ability to provide 

fee review documentation. The 24th CFO Act agency, the Department of Defense, did not 

respond to our survey in time to be included. See GAO, 2012 Annual Report: 

Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and 

Enhance Revenue, 

A variety of reporting requirements 

can be included in appropriations, authorizing legislation, or committee 

reports. For example, AIA requires USPTO to report on the 

implementation of the AIA, which includes fee-setting authority. In 

GAO-12-342SP (Washington, D.C.: Feb. 28, 2012).

28GAO, “General Government: Federal User Fees,” GAO’s Action Tracker (Washington, 

DC: March 6, 2013), accessed July 25, 2013, 

http://www.gao.gov/duplication/action_tracker/Federal_User_Fees/action1. 

29GAO-09-180. For example, in 2007 we found that under CBP’s authorizing statute for 

passenger inspection user fees, not all activities that may be funded from the customs fee 

were necessarily associated with conducting air passenger inspections, and not all 

inspection activities were reimbursable by funds from the user fee account. We concluded 

in that report that unless agencies present a comprehensive picture of the fees, including 

the full scope of inspection activities and their costs, Congress will lack a complete picture 

of whether the fees work in concert or conflict with each other, which could hamper 

oversight. See GAO, Federal User Fees: Key Aspects of International Air Passenger 

Inspection Fees Should be Addressed Regardless of Whether Fees are Consolidated, 

GAO-07-1131 (Washington, D.C.: Sept. 24, 2007).
 

Page 19 GAO-13-820 Federal User Fees

addition, USPTO’s 2012 appropriations required a spending plan to 

access funds in the Patent and Trademark Fee Reserve Fund. Similarly, 

the Mint is required to report to Congress biennially on the status of coin 

production costs, and annually on the operation of the Mint’s Numismatic 

Public Enterprise Fund, as well as provide quarterly financial reports on 

the Funds. 

Reporting requirements sometimes contain requirements to include 

stakeholders during the course of reviews. For example, in accordance 

with the AIA, USPTO is required to work with the relevant public advisory 

committee to hold public hearings on fee-setting, to consider and analyze 

any comments, advice or recommendations from the advisory committee, 

and to publish proposed and final rules in the Federal Register, including 

the purpose, rationale, and possible benefits resulting from the change. 

Our previous work has found that including stakeholders in the fee review 

process can increase success for substantive, two-way communication 

and understanding/buy-in on the fee setting process,30 and that effectively 

communicating with stakeholders involves sharing relevant analysis and 

information as well as providing opportunities for stakeholder input.31

Identifying and understanding unobligated balances in fee-based 

accounts is challenging. There is no single list of all federal user fees. In 

addition, although some fees are deposited into an account containing 

only fee collections, others are deposited into accounts that also contain 

other types of funds such as general fund appropriations. In general, 

budget accounts are not labeled in a way that indicates whether the 

account contains fee collections. This also makes it challenging to identify 

which unobligated balances in an account are related to fee collections. 

Further, as discussed below, some fee designs include dedicated 

reserves that appear as unobligated balances. Despite these challenges, 

unobligated balances must be carefully monitored in agencies funded by 

fee collections. 

 

30GAO-08-321 and GAO-07-1131. 

31GAO-08-386SP. 

Agencies Manage 

Unobligated Balances 

Differently Depending 

on Whether They 

Represent Operating 

Reserves or Reflect 

the Timing of 

Collections and 

Outlays 
 

Page 20 GAO-13-820 Federal User Fees

Table 2: Unobligated Balances of Selected Fee-Funded Agencies, Fiscal Year 2012

USPTO Mint FCC

Unobligated balance $238 million $694 million $3.2 billion

Total budget authority $2.4 billion $3.4 billion $10.5 billion

Unobligated balances as a percentage of 

budget authority 

9.9% 20.4% 30.5%

Source: GAO review of agency financial reports and GAO calculation.

The three fee-funded agencies took different approaches to managing 

their unobligated balances. At the end of the fiscal years 2009 through 

2012, USPTO, the Mint, and the FCC each reported large unobligated 

balances related to fee collections (see table 2). The origin of each 

agency’s unobligated balance, and how each agency manages its 

unobligated balance, is related in part to how the fees were designed by 

Congress and the agencies.

USPTO’s $238 million unobligated balance at the end of fiscal year 2012 

represents the agency’s operating reserve. USPTO officials said that 

during the economic recession in fiscal year 2009, the agency 

experienced serious operational challenges as a result of a decline in the 

number of applications and patent renewals – and corresponding fee 

collections.32

 

32Congress passed legislation in late 2010 that included a number of supplemental 

appropriations and rescissions affecting various government agencies. Included among 

them was a $120 million supplemental appropriation for USPTO. As a result of this 

supplemental appropriation, USPTO had access to almost all fees collected during fiscal 

year 2010.

When collections are less than costs, USPTO faces a 

situation which impairs its ability to maintain operations, hire sufficient 

examiners, and invest in technology to handle a large backlog 

(approximately 591,000 patent applications as of July 2013). In 2010, to 

smooth the impact of economic downturns on operations and to help 

address funding uncertainty, USPTO announced its intention to designate 

a portion of Congress’s annual appropriations as an operating reserve 

that could be carried over for use in future years. This reserve appears in 

USPTO’s financial statements and OMB’s budget database as an 

unobligated balance. USPTO officials said they do not intend to obligate 

these funds unless needed, and therefore USPTO will likely report 

U.S. Patent and Trademark 

Office’s Unobligated 

Balances are a Long-term 

Strategy to Manage 

Revenue Instability
 

Page 21 GAO-13-820 Federal User Fees

unobligated balances every year. This operating reserve is separate and 

distinct from the Patent and Trademark Fee Reserve Fund established by 

the AIA, which is only available to USPTO to the extent appropriated by 

Congress and currently has no balance.33

In its patent fee rulemaking process, USPTO established and 

communicated a strategy to its stakeholders for developing the agency’s 

patent operating reserve. In its proposed and final rules, USPTO included 

information on the intended size and funding strategy for the reserve. 

While developing this strategy, USPTO also sought and incorporated 

stakeholder input. For example, in response to comments from the public 

and from the Patent Public Advisory Committee, USPTO decided to slow 

the reserve’s growth and to reduce the amount of fees designated for the 

reserve beginning in fiscal year 2013. In fiscal year 2013, USPTO issued 

a final rule reflective of this input and increased its patent fees, in part to 

fund a 3 month operating reserve (approximately $700 million) by fiscal 

year 2018. Specifically, the final rule adopted fees set at a lower amount 

compared to the proposed rule.

To determine the size of its reserve, USPTO used a risk assessment 

process to inform its decisionmaking, analyzing its operations and 

drawing on the reserve guidance from other organizations.34

 

33The AIA created a second account, the Patent and Trademark Fee Reserve Fund. 

USPTO collections in excess of appropriations are to be deposited into this account. In the 

fiscal year 2012 appropriations, Congress provided USPTO with access to the funds in the 

Patent and Fee Trademark Reserve Fund; this was extended through FY 2013 by the 

continuing resolution. However, according to USPTO officials, there is currently no 

balance in the Reserve Fund. 

The two 

main factors that contribute to instability in patent operations are 

increases in costs and decreases in fee collections. Costs of patent 

operations consist mostly of the expense of patent examinations, and 

also include expenditures for information technology and general support 

costs. Collections consist of fees paid by patent applicants at different 

stages of the examination process and throughout the life of the patent: 

they vary with the speed of the application process (which is a function of 

34 We recommended in April 2012 that USPTO finalize an operating reserve policy, 

including the expected level of reserves, to smooth the impact of economic downturns on 

operations and to ensure its use aligns with agency goals. The Department of Commerce 

accepted this recommendation. See GAO, Patent and Trademark Office: New User Fee 

Design Presents Opportunities to Build on Transparency and Communication Success, 

GAO-12-514R (Washington, D.C.: Apr. 12, 2012).
 

Page 22 GAO-13-820 Federal User Fees

the number of examiners available), and with economic conditions both in 

the United States and in other countries. USPTO plans to assess the 

patent operating reserve balance against its target balance annually and, 

at least every 2 years, plans to evaluate whether the target balance is 

sufficient to meet USPTO’s needs. According to agency officials, a similar 

reserve is planned for trademark fees, but the analysis to determine the 

appropriate size of the reserve is on-going; USPTO officials expect this 

analysis to be completed in fiscal year 2014. 

The Mint’s unobligated balance is the source of the Mint’s operating 

reserves, established in 2011 in response to operational challenges.

Specifically, Mint officials said that they regularly review their open 

obligations, liabilities, projected earnings, and financial risks which include 

not having sufficient cash to meet required obligations, or sufficient 

resources needed to fulfill the mission appropriately. The Mint has had to 

take into account various factors, including (1) a decline in the Federal 

Reserve’s demand for circulating coins due to the recession, (2) the 

Treasury Secretary’s decision to suspend minting and issuing of $1 coins 

for circulation, (3) an increase in metal prices causing the Mint to lose 

money on the production of one-cent and 5-cent coins, (4) delays in 

release of numismatic products for sale, (5) decreasing demand for the 

Mint’s numismatic products, and (6) increasing demand for the cashintensive silver bullion coin program.

In response to these factors, Mint officials exercised their authority to 

suspend transfers of collections from the Mint’s circulating coin revenues 

to the General Fund and, starting in fiscal year 2011, reserves were 

created from the unobligated balance as follows:

• Seignorage Reserve ($377.5 million as of August 2013): established 

to approximate one year’s worth of circulating coinage operating 

expenses. This is to ensure continued delivery of coinage to the 

Federal Reserve Banks until other mitigating decisions or strategies 

are implemented to offset any effects that are impairing the continued 

financing of circulating operations

• Numismatic Reserve ($50 million as of August 2013): established to 

mitigate the risk of loss in revenue in sufficient amounts to cover cost 

should demand significantly decrease. The reserve represents the 

availability of funds for ongoing funding of approximately one year’s 

funding of the Mint’s protection activity. The protection activity is a 

cost without revenue to offset, and presents the most significant cost 

to fully cover should demand significantly decrease.

The Mint’s Unobligated 

Balance Represents a 

Reserve to Address Policy 

Changes, Collection 

Declines and Increased 

Costs 
 

Page 23 GAO-13-820 Federal User Fees

Mint officials said they will to continue to monitor Mint operations and the 

operating environment, including changes in customer demand, costs of 

inputs, administration policies, natural or man-made disasters, and critical 

investment needs, to determine if the reserves are at suitable levels for 

their purposes. These target levels were set at a level meant to reflect the 

needs and/or the risks that require mitigation over the next 2-5 years.

Both FCC’s salaries and expenses account, which contains regulatory fee 

collections, and USAC’s USF contribution account had unobligated 

balances at the end of fiscal year 2012, with the USF account,

35

Since fiscal year 2008, the FCC has not been provided access to its 

regulatory fee collections in excess of its annual appropriation. FCC’s 

annual appropriation permits the agency to assess and collect regulatory 

fees up to a specified amount. This amount remains available until 

expended.

which 

includes Telecommunications Relay Service funds, containing much 

larger unobligated balances (approximately $3 billion) than the salaries 

and expenses account ($18 million). According to FCC officials, $10.4 

million in unobligated funds in the salaries and expenses account is noyear funding and will be reapportioned in fiscal year 2013. Of the 

remaining $7.6 million, FCC officials said that $7.1 million will remain 

unobligated until FCC receives OMB and Congressional approval for 

special projects, and $500,000 relates to expired reimbursable authority. 

According to FCC officials, the salaries and expenses account’s 

unobligated balances were regulatory fees associated with expired 

contracts or Recovery Act funds deobligated because contracts had not 

been signed. 

36

 

35USF collections are administered by the USAC, which is a non-governmental, private 

entity. As such, USF contributions are not subject to the appropriations process, unlike 

FCC’s regulatory fee collections held in the agency’s salaries and expenses account. 

 With respect to USF contributions, FCC officials reported 

that the approximately $3 billion in unobligated balances from USAC’s 

36 In August 2012, we recommended that Congress should consider whether FCC’s 

excess regulatory fees (approximately $66 million through fiscal year 2011) should be 

appropriated for FCC’s use, or, if not, what the disposition of these funds should be, and 

whether to change FCC’s annual appropriations language to permit reconciliation of 

excess collections or to govern FCC’s handling of any future excess collections. Congress 

has not as yet taken any action. See GAO, Federal Communications Commission: 

Regulatory Process Needs to Be Updated, GAO-12-686, (Washington, D.C.: Aug. 10, 

2012), 36.

Federal Communications 

Commission’s Unobligated 

Balance Largely Reflects 

the Timing of Collections 

and Outlays
 

Page 24 GAO-13-820 Federal User Fees

USF amounts37 was largely the result of the timing of collections and 

obligations for the four programs funded by USF contributions: (1) the 

Connect America Fund (also known as the High Cost program) for rural 

areas, (2) the Lifeline program (for low-income consumers), (3) the 

Schools and Libraries (or E-rate) program, and (4) the Rural Health Care 

program.38

In addition to these timing issues, FCC officials said some USF 

contributions are set aside for specific multi-year pilot projects and 

appeals. Table 3 below shows the contributions, disbursements, and 

amounts set-aside in each program for fiscal 2012.

 A significant length of time can lapse between contribution 

collections and the funding commitment. In the E-rate and Rural Health 

Care programs, the USAC does not record USF amounts as committed 

until the application is approved. 

Table 3: Collections, Disbursements, and Set-Asides for Universal Service Fund Programs, 2012

Connect America Schools and 

libraries

Rural 

health care Lifeline

Contributions received (CY) $4.5 billion $2.4 billion $110 million $2.3 billion

Disbursements to providers (CY) $4.1 billion $2.3 billion $173.5 million $2.0 billion 

Unobligated balance (FY) $ 1 billion $1.7 billion $136 million $205 million

Reserves/set-asides (FY) $805 million

(for Connect America 

Fund implementation)

$683 million

(for appeals and invoice 

extension requests)

$25 million

(for broadband pilot)

Source: FCC

 

37USF contributions are paid monthly by telecommunications carriers (including landline 

and wireless companies, interconnected Voice over Internet Protocol (VoIP) providers, 

and other providers of telecommunications) based on their projected revenues. The 

contributions are collected by the Universal Service Administrative Company (USAC) an 

independent, not-for-profit corporation created in 1997 to collect universal service 

contributions and administer universal support programs. 

38 GAO, Telecommunications: FCC Has Reformed the High-Cost Program, but Oversight 

and Management Could Be Improved, GAO-12-738 (Washington, D.C.: July 25, 2012.); 

Telecommunications: FCC’s Performance Management Weaknesses Could Jeopardize 

Proposed Reforms of the Rural Health Care Program, GAO-11-27 (Washington, D.C.: 

Nov. 17, 2010); Telecommunications: Improved Management Can Enhance FCC Decision 

Making for the Universal Service Fund Low-Income Program, GAO-11-11 (Washington, 

D.C.: Oct. 28, 2010); Telecommunications: FCC Should Assess the Design of the E-rate 

Program’s Internal Control Structure, GAO-10-908 (Washington, D.C.: Sept. 29, 2010).
 

Page 25 GAO-13-820 Federal User Fees

The more a program or agency depends on fees to fund its activities, the 

more vulnerable it is to revenue instability: that is, the extent to which fee 

collections cover the intended share of costs over time.39 Largely or 

wholly fee-funded programs do not necessarily see a proportional decline 

in costs when they experience a drop in collections. Absent access to 

other funding sources these program are sensitive to revenue instability,

making the following considerations especially important.

40

Key aspects of fee design can help or hinder agencies in managing 

revenue instability, and minimize or exacerbate the effect on the agency’s 

ability to provide goods or services. The following key questions center on

understanding (1) the data and analysis needed to identify and manage 

revenue instability, (2) the factors likely to affect collections, (3) the 

factors likely to affect costs, and (4) how agencies can manage fee 

revenue instability. They will be most useful when considered in 

conjunction with key questions for designing and implementing user fees: 

that is, how fees are set, collected, used and reviewed.41 Appendix II

provides a summary of the key questions discussed below.

In order to identify and manage revenue instability, decision makers need 

regular information and analysis to understand potential vulnerabilities in 

the context of the specific fee design. The authority to create or 

implement a tool to manage revenue instability may be retained by 

Congress or it may be delegated to the agency. But regardless of where 

the authority lies, it is the agency’s responsibility to obtain and analyze 

the necessary data to inform decision making. This is true even—or 

especially—in cases where statutory authority is required to act on the 

analysis.

 

39 Ensuring that fees are set at a rate to cover the intended costs is referred to as revenue 

adequacy. We discuss the key considerations for ensuring revenue adequacy in 

GAO-08-386SP. 

40 Programs that rely solely on general fund appropriations can also experience 

fluctuations in funding, but the causes and considerations are distinct from those affecting 

fee-reliant programs.

41 See GAO-08-386SP for the questions to consider when designing and implementing 

user fees. 

Considering Key 

Questions About 

Costs and Collections 

Can Enable Congress 

and Agencies to 

Identify and Manage 

Revenue Instability

What Data and Analysis 

are Needed to Identify 

and Manage Revenue 

Instability? 
 

Page 26 GAO-13-820 Federal User Fees

Agencies should consider the following questions when gathering 

information for decision makers.

What is the risk that fee revenue instability will affect this 

program?

In considering approaches to managing fee revenue instability, an agency 

should develop a risk-based strategy. Risk assessment is the 

identification and analysis of relevant risks associated with achieving the 

program’s objectives, and with forming a basis for determining how risks 

should be managed. Risk identification methods may include qualitative 

and quantitative ranking activities, management conferences, forecasting 

and strategic planning, and findings from audits and other reviews.

Once risks have been identified, they should be analyzed for their 

possible effect. Risk analysis generally includes estimating the risk’s 

significance, assessing the likelihood of its occurrence, and deciding how 

to manage the risk. GAO’s Standards for Internal Controls in the Federal 

Government notes that the specific risk analysis methodology used can 

vary by agency because of differences in agencies’ missions and the 

difficulty in qualitatively and quantitatively assigning risk levels.42

The strategy developed to manage revenue instability should match the 

level of risk identified. For example, preparing for risks that are highly 

unlikely but would have dire consequences can result in a reserve 

balance that is unnecessarily high and draws revenue away from other 

fee program needs. In 2013, we found that for the Agricultural Quarantine 

Inspection (AQI) program, the Animal and Plant Health Inspection Service 

(APHIS) had based its target reserve balance on largely unrealistic 

risks—including the possibility of ceasing all inspections—and as a result, 

developed a target reserve balance that was unnecessarily high.43

 

42 GAO, Internal Controls: Standards for Internal Controls in the Federal Government, 

We 

recommended a reserve target that is more closely aligned with program 

needs and risks. United States Department of Agriculture agreed with the 

recommendation, and adjusted its target reserve balance to a level it said 

would allow for continuous services in the event of an unforeseen 

GAO/AIMD-00-21.3.1. (Washington, D.C.: November, 1999.)

43 GAO-13-268. 
 

Page 27 GAO-13-820 Federal User Fees

decrease in user fee collections, or other instances that could cause an 

increase in workload for the program.

What analysis should be performed and what data are needed?

The appropriate analysis can help an agency obtain a thorough 

understanding of factors such as cost drivers and elements that influence 

collections. As recognized in the Statement of Federal Financial 

Accounting Standards 4: Managerial Cost Accounting Standards and 

Concepts, agency cost information should be sufficient to be used by 

Congress and federal executives in making program and resources 

decisions, as well as for setting fees, but the analysis does not 

necessarily need to be complex, costly, or require special resources. 

Agencies should seek to leverage data and analysis that already exists.

For example, agencies may use proxies, or leading or lagging indicators 

to forecast key changes, rather than undertake complex, original analysis 

to do the same. USCIS is almost entirely funded from immigration and 

naturalization application fees and uses data from DHS’s Office of 

Immigration Statistics, among other sources, to project the volume of 

incoming applications.44

Are there limitations to the available data (such as preliminary 

estimates) that could add uncertainty to collection estimates?

Indicators that are drawn from early estimates may add vulnerabilities to 

demand or collection forecasts. For example, each quarter, Universal 

Service Administrative Company projects the next quarter’s anticipated 

USF demand and assessable industry revenues. The FCC uses this 

information to determine the applicable contribution factor (percentage of 

assessable revenues) for the following quarter. FCC officials have found 

that their use of projected data in setting the USF contribution factor has 

led to collections that are more or less than initially expected.

How frequently should this analysis be conducted?

Once the necessary analysis has been identified, agencies should 

consider how frequently to perform the analysis. Although agencies are 

required to conduct biennial fee reviews per the CFO Act, revenue 

 

44 GAO-09-180. 
 

Page 28 GAO-13-820 Federal User Fees

instability may occur over a shorter time horizon and may demand more 

frequent examinations. In particular, agencies should balance 

informational and reporting needs with the cost of performing the 

analysis. For example, FCC reviews USF outlays, receipts, and cash 

balances monthly, and these are taken into account in the quarterly 

adjustment of the USF contribution factor. 

Fee-funded agencies sometimes experience revenue instability as a 

result of how, or how frequently, fees are collected and external factors 

that can influence the demand for the goods or services. Agencies can 

plan for contingencies by understanding the factors affecting payers and 

external events affecting the collection process. Asking the following 

questions could help decision makers plan for contingencies.

How frequently are fees collected?

User fees are not always received at regular or predictable intervals 

throughout the year. The frequency of collections is sometimes related to 

how and by whom fees are collected and paid to the Treasury. For 

example, airlines collect international air passenger inspection fees at the 

time a ticket is sold, but remit fees to the government quarterly on behalf 

of the passengers. Collections that come in small increments on a rolling 

basis or late in the fiscal year may inhibit an agency’s ability to identify 

patterns and fluctuations in collections in the aggregate, or may create 

cash flow challenges. For example, USCIS receives application fees 

throughout the fiscal year but enters into year-long contracts at the start 

of the fiscal year. Because of the kind of legal authority USCIS has to 

obligate funds, USCIS must have collections equal to the full contract 

value available for obligation at the start of the year. (See also: What is 

the timing and pattern of spending?)

What remittance compliance issues may exist, and what are the 

tools for ensuring compliance?

Agencies may not collect amounts they are owed because of external 

factors affecting payers or because of vulnerabilities in the remittance 

process. For example, the FCC adjusts contribution rates and payments 

due from telecommunication service providers quarterly; however, abrupt 

changes in a company’s finances (such as bankruptcy) can affect the 

actual remittance amounts. On the other hand, CBP has lost an unknown 

amount of revenue because it does not verify that it collects applicable 

What Factors Could 

Affect the Timing and 

Pattern of Collections?
 

Page 29 GAO-13-820 Federal User Fees

user fees for every commercial truck, private aircraft, and private vessel 

for which the fees are due.45

In the event payers do not remit fees in a timely manner, the agency may 

need tools such as penalties to ensure remittance compliance. For 

example, CBP can levy interest charges or deny landing rights to airlines 

for non- or late remittance of the international air passenger inspection 

fees.46

What external known or unknown events could affect fee 

collections?

Similarly, the FCC can place a delinquent payer of regulatory user 

fees or USF contributions in “Red Light” status, which results in 

withholding Commission action in any licensing or similar proceeding until 

the payment or other satisfactory arrangements are made.

Understanding external influences – for example, weather, world events, 

or changes in technology— allows for the proper planning of resources or 

the use of limited funding in the face of changing revenue. For example, 

according to USPTO officials, economic activity, like a recession, is an 

important consideration when developing workload forecasts, primarily 

patent and trademark application filings. In addition to economic factors, 

officials stated that USPTO considers overseas activity, policies and 

legislation, process efficiencies, and anticipated applicant behavior when 

preparing estimates. Estimates of incoming workload are developed after 

researching and modeling these elements, which helps USPTO plan. 

There may be indirect influences as well. For example, a fee on imports 

may be tied to the exchange rate. When currency exchange rates are 

favorable, the demand for cheaper items from foreign countries may 

increase. In this example the fee revenue would go up, or conversely, it 

would go down with a weaker exchange rate. Programs should regularly 

conduct environmental scans to identify new influences, or significant 

changes to existing influences.

 

45 GAO-13-268. In 2013, we recommended that the Secretary of Homeland Security 

establish internal controls to alert personnel when fees are not paid, and to use available 

information to verify that arriving trucks, private aircraft, and private vessels pay applicable 

inspection user fees.

46 Penalties need to be strong enough to deter unwanted behavior but not so severe that 

they cannot practically be imposed. For more information on design of non-remittance 

penalties, see GAO-07-1131. 
 

Page 30 GAO-13-820 Federal User Fees

Program management decisions can also influence the level of demand 

for a fee-funded activity, for example, when services are delivered 

through a third party. In 2010, we found that FCC had allowed certain 

prepaid wireless providers to be eligible telecommunications carriers in 

order to expand the availability of its Lifeline program.47 Both participation 

in the program and payments to providers increased, but the program’s 

internal controls were not addressing the risks of the telecommunication 

providers’ inconsistent adherence to applicant eligibility requirements.48

In programs where fees for some activities subsidize the costs for other 

activities, payers’ overuse of the subsidized activity may affect the 

agency’s ability to cover costs. For example, according to USPTO 

officials, USPTO has intentionally designed fees to encourage innovation 

by reducing up-front fees for patent applicants and imposing higher 

maintenance fees later in the process, after users have already obtained 

a patent. Moreover, higher than aggregate costs must be charged of 

applicants and owners that do not qualify for reduced fees as a small or 

micro entity applicant. However, if applicants pay only the lower 

application filing fee and then decide against maintaining the patent, the 

higher maintenance fees are lost to USPTO. Because USPTO incurs the 

same cost to process an application whether the patent is maintained or 

not, and because costs are fully recovered in the aggregate over time and 

not at each step in the patent process, USPTO’s patent examination 

costs do not match collections if maintenance fees are not collected.

How quickly is a change in collection amounts likely to occur?

External events or changes to internal policies can affect collections, in 

either the short or long term. For example, USPTO officials said rates of 

 

47GAO, Telecommunications: Improved Management Can Enhance FCC Decision Making 

for the Universal Service Fund Low-Income Program, GAO-11-11 (Washington, D.C.: Oct. 

28, 2010). 

48Since the release of our 2010 report, the FCC made efforts to address the risks of 

telecommunication providers' inconsistent adherence to applicant eligibility requirements. 

For example, the Lifeline Reform Order established uniform eligibility criteria for the 

federal Lifeline program, and required service providers to determine whether a subscriber 

was in fact eligible for Lifeline service, based on documentation provided by the 

subscriber, rather than allowing subscribers to self-certify their eligibility. See Lifeline and 

Link Up Reform and Modernization et al., WC Docket Nos. 11-42 et al., Report and Order 

and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656 (2012) (Lifeline Reform 

Order). 
 

Page 31 GAO-13-820 Federal User Fees

collections can change rapidly in response to economic events. During 

the 2009 recession, fewer patent applications were filed and maintained 

than were anticipated in the 2009 fiscal year, which reduced fee 

collections. Policy changes can affect collections as well, as when USCIS 

experienced a 100 percent increase in immigration and naturalization 

applications before USCIS increased its fees by an average of 86 percent 

in July 2007. Revenues can also be affected by market supply and 

demand. Further analysis can reveal whether fee changes are prudent 

based on the price elasticity of the good or service being provided, 

including whether there may be substitutes in the private sector.49

Fee-funded agencies should ask the following questions to gather 

information about the factors that affect their costs.

What are the fixed and variable costs of fee-funded activities?

If a fee is designed to recover all or a portion of the costs associated with 

an agency program or service, it is critical that agencies record, 

accumulate, and analyze timely and reliable data relating to those costs, 

consistent with applicable federal cost accounting standards. For 

example, according to USPTO officials, when USPTO began redesigning 

its fees under AIA in 2011, it used an activity-based cost accounting 

system to understand all agency costs as they relate to the activities 

performed supporting the fees collected. USPTO’s Activity Based 

Information helps officials identify and analyze current activity costs on an 

ongoing basis, which helps with planning decisions as well as justifying 

budget requests.

What is the timing and pattern of spending?

Program management needs to understand the timing of program 

obligations in relation to the timing of collections during the fiscal year. As 

with collections, some agencies may have predictable patterns of 

obligations — whether regularly scheduled payments (such as payroll) or 

established spikes at particular points in the year (such as payouts for 

performance awards or bonuses). Other obligations may occur in a less 

predictable pattern.

 

49 See GAO-08-386SP for more information about price elasticity and fee-funded 

programs. 

What Factors Can Affect 

Costs in Fee-funded 

Programs?
 

Page 32 GAO-13-820 Federal User Fees

Large upfront costs (such as IT investments or capital asset purchases) 

should be identified in time to capture those costs when setting fee rates, 

especially if the costs are ongoing (see also: Develop and Maintain a 

Reserve Fund). Fee-funded programs may require specific efforts to 

ensure that necessary infrastructure improvements are not neglected in 

cost accounting methods. For example, in 2007, USCIS stated in its fee 

review its intention to use all premium-processing fee collections toward 

investments in information technology and business-system 

transformation,50 two planned infrastructure improvements.51

Can the agency quickly respond to changing costs?

Fee-funded programs may have flexibility to adjust program activities in 

response to rising costs, but certain types of costs create vulnerabilities if 

not considered in advance. For example, if fee-funded activities are 

inherently governmental in nature, and therefore required to be performed 

by federal employees, a reduction in fee revenue may be more 

challenging, because it takes longer to increase or decrease the number 

of federal employees than it would to adjust the number of contractors.

Data analysis can help program managers understand how quickly

changes in costs could affect program activities. For example, USF 

sometimes experiences short-term changes in demand, stemming from 

program changes (such as the creation of pilot programs), revised 

eligibility rules, or program growth due to outreach efforts. The FCC and 

USAC regularly monitor potential changes in the level of USF 

commitments, and calculate the telecommunication companies’ 

contribution levels on a quarterly basis. This allows USF collections to be 

more responsive to mid-year changes in obligations.

 

50Funding USCIS’ information technology investments with premium-processing fees was 

consistent with Congressional report language accompanying the fiscal years 2008-2010 

Department of Homeland Security appropriations bills. 

51In December 2000, Congress authorized the collection of a premium processing fee in 

addition to the regular application fees for employment-based applications. Congress set 

the amount of the fee at $1,000 and directed that these amounts be available for (1) the 

premium processing activities and (2) infrastructure improvements associated with 

adjudications and customer-service. 
 

Page 33 GAO-13-820 Federal User Fees

What is the relationship between costs and revenue?

Without data analysis, it is difficult to fully understand the relationship 

between costs and revenue. If costs increase and there is no 

corresponding increase in collections, programs will likely experience a 

cost-collections gap that needs to be addressed. However, increasing 

costs are sometimes due to improvements in service delivery (which can 

be more expensive), and over the course of time may lead to increased 

revenue. For example, a USPTO official said that spending more on 

overtime can increase production, which in this case is increasing the 

number of patent applications being examined. Since fees are required 

for many responses during examination, the increase in overtime costs 

generates more fee revenue as a result of the increase in applications 

examined and the replies necessary. 

To manage revenue instability actively and ensure continuity of goods or 

services, fee-funded agencies can better align fees with costs and create 

reserve funds. First, ensuring that program costs and fee rates remain 

aligned will minimize the chance of a cost-collections gap over the longterm. If revenue instability is a function of a fee’s design, the most 

sustainable solutions will be found by realigning costs and collections. Not 

all fee revenue instability can be completely addressed in this way, 

however, and some agencies may need to take additional action. 

Maintaining a reserve can help address sudden or temporary fluctuations 

in collections and/or costs, and can minimize the effect of revenue 

instability on operations. Reserve funds can both help manage revenue 

instability, and where appropriate, serve as a mechanism for 

accumulating revenue for identified future capital investments.

To determine whether closer cost-collection alignment could sufficiently 

and timely address revenue instability, agencies should consider the 

following questions.

How quickly can the program adjust fee rates in response to 

changes in collections or costs?

Adjusting fees through either statutory or rulemaking processes can be a 

lengthy process, so it is important to plan ahead. Regular fee reviews 

ensure that Congress, stakeholders, and agencies have complete 

information about changing costs and whether a fee needs to be 

changed.

Decision Makers Can 

Manage Revenue 

Instability By More Closely 

Aligning Fees and Costs 

and Using Reserve Funds

Closer Alignment of Fee Costs 

and Collections 
 

Page 34 GAO-13-820 Federal User Fees

Are fees set at a rate that enables the program to respond to 

spikes or surges?

Fee reviews can help agencies determine if they are prepared for spikes 

or surges in demand, which may occur more or less frequently, 

depending on the good or service. Over-staffing or excess capital creates 

waste and establishes a higher-than-needed unit cost for the service; 

however 100 percent efficiency provides for no flexibility to address surge 

capacity.

Does the program have other sources of funding that may mitigate 

initial revenue shortfalls, or is the program fully fee-reliant?

Fully fee-funded programs typically experience some lag time before 

initial collections are realized. To cover costs before collections are 

realized, the program may require another source of initial funding. 

Congress has sometimes provided this initial funding through an 

appropriation that may or may not be reimbursed over time. If an 

appropriation is to be reimbursed, reimbursement is generally done 

through incoming fee collections.

When the risks of revenue instability are greater than the agency can 

manage by aligning costs and fees, having a reserve can enable the 

agency to continue providing goods and services despite fluctuations in 

collections, and to act quickly in response to changing conditions. 

Reserve funds can also be a tool for fee-funded programs in planning for 

capital investments. Agencies should consider the following questions in 

developing a reserve fund.

What legal authority does the program or agency have to develop 

and fund a reserve?

Before an agency commits to building a reserve, agencies must 

understand their statutory structures. Agencies with no-year funds—that 

is, collections that remain available for obligation until expended – 

allowing the agency to carry over balances indefinitely. This gives the 

agency the flexibility to build or maintain an internal reserve fund within 

their existing fee accounts. Also, agencies with multiyear collections, or 

collections available for obligation for a fixed period of time beyond one 

fiscal year, may also be able to maintain a reserve fund. Absent those 

authorities, agencies would require additional authority from Congress to 

develop and maintain a reserve. If not specified in statute, agencies 

should verify their legal authority to keep funds in reserve.

Develop and Maintain a 

Reserve Fund 
 

Page 35 GAO-13-820 Federal User Fees

Further, individual authorizing statutes may require or restrict a fee 

reserve. For example, the Consolidated Omnibus Reconciliation Act of 

1985 (COBRA) requires CBP to maintain a $30 million reserve in the 

existing COBRA fee account, and the United States Department of 

Agriculture’s AQI program is authorized to develop and maintain a fee 

reserve in the existing fee account.

Does the agency need to notify Congress or seek permission, 

beyond its existing authority, to use its reserve fund?

Money in the reserve may only be accessible up to a set amount or within 

a specified time frame. Decision makers can also limit use of the reserve 

in other ways, such as

• money in the reserve may only be available for specified purposes or 

in response to a trigger, like a natural disaster;

• agencies may only have access to reserves in specific amounts, such 

as a percentage at a time in order to avoid total depletion of funds, or

• agencies may be required to report on their level of use and their plan 

for ending their use of the reserve.

Alternative budget account structures like a reimbursable account or 

revolving fund could help mitigate budgeting or timing challenges without 

compromising accountability for federal funds.52

What is the goal of the reserve?

Program managers may 

also consider what mechanisms exist within the agency to track reserve 

balances.

Regardless of the authority under which a reserve is created, setting clear 

goals for the reserve and clarifying how the reserve will be implemented 

helps ensure accountability and transparency both to Congress and users 

of fee-based programs. For example, some agencies may wish to use a 

reserve to help ensure the long‐term financial stability of the agency or to 

position the agency to respond to varying economic conditions. Others 

may seek a reserve to smooth expected fluctuations in costs or 

collections, or to build capital for necessary infrastructure improvements.

 

52 GAO, Budget Issues: Better Fee Design Would Improve Federal Protective Service’s 

and Federal Agencies’ Planning and Budgeting for Security, GAO-11-492 (Washington, 

DC: May 20, 2011).
 

Page 36 GAO-13-820 Federal User Fees

Still other programs may seek a reserve as a means to mitigate 

unforeseen and unavoidable revenue shortfalls.

Historical data can demonstrate to Congress, to stakeholders, and to fee 

payers why a reserve is needed. For example, based on USPTO’s 

experience with a rapid decline in collections during the recession in 

2009, and to address other sources of revenue instability, officials told us 

they are building an operating reserve to avoid a slowdown in operations 

should collections suddenly decline. According to officials, the agency 

used risk assessments of spending levels and revenue streams to explain 

to stakeholders why fees were being increased to build an operating 

reserve. (See also: What is the risk that revenue instability will affect this 

program?) 

Who should review and approve the reserve policy?

In addition to notifying Congress as part of a transparent communication 

strategy, reserve policies could be published and reviewed by 

stakeholders via the Federal Register notice and comment process or 

alternatively, by existing fee advisory boards or committees. Internal 

agency policies may also require review by cognizant financial officers.

What level of reserves should be maintained?

To ensure accountability and adherence to the reserve’s goals, 

establishing minimum and maximum reserve levels may be advisable. 

These numbers should be justified with program data and risk 

management considerations. When established reserve goals have been 

achieved, such as to fund planned capital investments, the level of 

reserve should be assessed for reasonableness.

How should the reserve fund be built and at what pace?

Data analysis and communication with users should inform the rate at 

which funds are applied to the reserve, and what actions are taken when 

the desired level is reached. For example, USPTO estimated in January 

2013 that the patent operating reserve would reach its target of 3 months 

of operating expenses in fiscal year 2018, after accumulating a proportion 

of patent fees over 5 years. As the operating reserve approaches its 

target, USPTO plans to consider the level of reserve in its biennial fee 

review. USPTO sought input from patent users and stakeholders in 

creating a reasonable timeline for building its reserve.
 

Page 37 GAO-13-820 Federal User Fees

In 2012, the President’s budget reported collections of nearly $300 billion 

in federal user fees, funding a wide variety of programs integral to our 

nation’s security, to the security of our financial system, and to the 

protection of our natural resources. In light of the nation’s current fiscal 

condition, it is essential that every funding source and spending decision 

be carefully considered and applied to its best and most efficient use. By 

their nature, federal user fees do not—and should not—follow a single 

model or design. However, wide variation can contribute to more 

challenging oversight. In light of this, it is critical for Congress and 

agencies to understand the implications of the key design decisions—

each choice in isolation and also in the aggregate—to achieve a 

deliberate design that minimizes unintended consequences. Regardless 

of the fee design decisions made, Congress and agencies both have a 

role in effectively managing fee funded programs and ensuring that fees 

are designed to meet the goals of the program and are managed 

effectively. 

The same prudent management standards should be applied to feefunded programs as to those funded by general revenues. As such, 

unobligated balances in fee programs should be scrutinized. The federal 

budget’s accounting structure can make it challenging to isolate 

unobligated balances resulting from fee collections, increasing the 

responsibility agencies have to manage and report on unobligated fee 

balances. Unobligated balances in fee programs may represent a reserve 

intended to manage the effects of revenue instability. However, to be 

effective as a reserve, agencies and Congress need to understand a fee’s 

vulnerabilities and be deliberate in their design of a reserve fund to 

effectively manage them.

We provided a draft of this report for review and comment to the 

Secretaries of Commerce and Treasury, and the Managing Director of the 

Federal Communications Commission (FCC). The Secretary of 

Commerce and the Managing Director of the FCC provided technical 

changes, which we incorporated where appropriate. We also provided a 

copy of the report to the Office of Management and Budget. 

We are sending copies of this report to the Secretaries of Commerce, 

Treasury and the Managing Director of the FCC and interested 

Congressional committees. In addition, the report is available at no 

charge on the GAO website at http://www.gao.gov.

Concluding 

Observations 

Agency Comments & 

Our Evaluation
 

Page 38 GAO-13-820 Federal User Fees

If you or your staff have any questions about this report please contact 

me at (202) 512-6806 or irvings@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix III. 

Sincerely yours,

Susan J. Irving

Director for Federal Budget Analysis

Strategic Issues

Jacqueline M. Nowicki

Acting Director

Education, Workforce, and Income Security 
Appendix I: Key Fee Design Decisions Allow 

for Agency Flexibility or Congressional Control

Page 39 GAO-13-820 Federal User Fees

Options increasing 

agency flexibility

Options increasing 

congressional control

Key design questions 

Setting

For further 

discussion of 

setting user 

fees, see GAO’s 

Federal User 

Fees: A Design 

Guide, p. 7.a

How are fee rates set?

Congress specifies how 

specific fee amounts will be 

determined. This could 

include specific dollar 

amounts, rates or other 

requirements (such as 

provisions for exemptions, 

waivers, and caps).

By regulation

Congress may grant the agency the 

authority to set fee rates by following the 

rule-making process spelled out in the 

Administrative Procedure Act. 

In statute

Congress may set fee amounts or rates in 

statute. 

 

Using

For further 

discussion of 

using user fees, 

see GAO’s 

Federal User 

Fees: A Design 

Guide, p. 26.a

What Congressional 

action triggers the use of 

fee collections?

Collections are classified 

into 3 major categories: 

offsetting collections, 

offsetting receipts and 

governmental receipts. 

Offsetting collection authority

Offsetting collections are authorized by 

law to be credited to expenditure accounts 

from which they may be obligated without 

further legislation. However, an annual 

appropriation act may limit the total 

amount an agency may collect during a 

given fiscal year.

Offsetting receipt authority

Government receipt authority

Offsetting receipts and government 

receipts are required by law to be 

deposited into receipt accounts. Whether 

government receipts can be used without 

additional appropriation depends on the 

specific authorizing legislation for the 

collection. Offsetting receipt collections 

may not be used without additional 

appropriations.

 What is the period of 

availability for the 

collections?

Congress specifies the 

length of time for which 

collections are available for 

new obligations. 

No-year 

No-year collections remain available for 

obligation for an indefinite period of time. 

A no-year appropriation of fee collections 

is usually identified by language such as 

“to remain available until expended.”

Limited year

One-year (fiscal year) or multiyear 

authority is available for a fixed period of 

time.

 For what purposes may 

the collections be used?

Congress assigns the 

purpose(s) for which the 

collections can be used. 

Broadly defined uses

Congress may define the uses for 

particular collections broadly, for example, 

authorizing fees to be used for “all 

authorized activities and operations.”

Narrowly defined uses 

Congress may define the uses for 

particular collections narrowly, authorizing 

fees to be used for specific, limited 

activities. 

 To what degree will 

Congress limit the 

amount of collections 

that can be used?

Congress sets the level of 

fee collections that the 

agency can spend in a 

given fiscal year.

No limit

Congress may grant the agency the 

authority to spend all the money it collects 

without regard to amount or time. 

Limit set in statute

Congress may limit the amount of fee 

collections that the agency can spend to a 

particular dollar amount, often in annual 

appropriations acts. In some cases, 

Congress sets the limit and provides 

specific direction for the treatment of 

collections in excess of that limit. 

 

Appendix I: Key Fee Design Decisions Allow 

for Agency Flexibility or Congressional 

Control 
Appendix I: Key Fee Design Decisions Allow 

for Agency Flexibility or Congressional Control

Page 40 GAO-13-820 Federal User Fees

Options increasing 

agency flexibility

Options increasing 

congressional control

Key design questions 

Reviewing

For further 

discussion of 

reviewing user 

fees, see GAO’s 

Federal User 

Fees: A Design 

Guide, p. 33.a

What types of reporting 

and oversight 

requirements are in 

place?

Congress determines what 

type of requirements the 

agency must meet in order 

to permit the desired level 

of oversight. 

Basic requirements such as CFO Act 

Biennial Fee Reviews

Congress has designated basic review 

and reporting requirements. According to 

the CFO Act, the agency must review its 

fees on a biennial basis. This basic 

requirement applies for all 24 CFO Act 

agencies unless other requirements are 

specified for a particular fee program.

Additional requirements

Congress may designate a number of 

additional requirements, such as reporting 

requirements and consulting with an 

advisory council. These requirements may 

be laid out in appropriations or authorizing 

legislation.

Source: GAO.

a

GAO-08-386SP. 
Appendix II: Key Questions about Costs and 

Collections to Enable Congress and Agencies 

to Identify and Manage Revenue Instability

Page 41 GAO-13-820 Federal User Fees

What Data and Analysis Are Needed to Identify and Manage 

Revenue Instability?

• What is the risk that fee revenue instability will affect this program?

• What analysis should be performed and what data are needed?

• Are there limitations to the available data (such as preliminary 

estimates) that could add uncertainty to the collection estimates?

• How frequently should this analysis be conducted?

What Factors Could Affect the Timing and Pattern of Collections?

• How frequently are fees collected?

• What remittance compliance issues may exist, and what are the tools 

for ensuring compliance?

• What external known or unknown events could affect fee collections?

• How quickly is a change in collection amounts likely to occur?

What Factors Can Affect Costs in Fee-funded Programs?

• What are the fixed and variable costs of fee-funded activities?

• What is the timing and pattern of spending?

• Can the agency quickly respond to changing costs?

• What is the relationship between costs and revenue?

Closer Alignment of Fee Costs and Collections

• How quickly can the program adjust fee rates in response to changes

in collections or costs?

• Are fees set at a rate that enables the program to respond to spikes or 

surges?

• Does the program have other sources of funding that may mitigate 

initial revenue shortfalls, or is the program fully fee-reliant?

Develop and Maintain a Reserve Fund

• What legal authority does the program or agency have to develop and 

fund a reserve?

• Does the agency need to notify Congress or seek permission, beyond 

its existing authority, to use its reserve fund?

• What is the goal of the reserve?

• Who should review and approve the reserve policy?

• What level of reserves should be maintained?

• How should the reserve fund be built and at what pace?

Appendix II: Key Questions about Costs and 

Collections to Enable Congress and Agencies 

to Identify and Manage Revenue Instability
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 42 GAO-13-820 Federal User Fees

Susan J. Irving, (202) 512-6806 or irvings@gao.gov

Jacqueline M. Nowicki, (617) 788-0580 or nowickij@gao.gov

In addition to the contacts named above, Chelsa Gurkin, Assistant 

Director, Steven Berke, Amber Edwards, Elizabeth Gregory-Hosler, 

Hayley Landes, and Felicia Lopez made key contributions to this report. 

Also contributing to this report were Virginia Chanley, Robert Gebhart, 

and Donna Miller.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contacts

Staff 

Acknowledgments 
Related GAO Products

Page 43 GAO-13-820 Federal User Fees

Agricultural Quarantine Inspection Fees: Major Changes Needed to Align 

Fee Revenues with Program Costs. GAO-13-268. Washington, D.C.: 

March 1, 2013. 

Federal Communications Commission: Regulatory Fee Process Needs to 

Be Updated. GAO-12-686. Washington, D.C.: August 10, 2012.

Patent and Trademark Office: New User Fee Design Presents 

Opportunities to Build on Transparency and Communication Success. 

GAO-12-514R. Washington, DC: April 25, 2012.

2012 Annual Report: Opportunities to Reduce Duplication, Overlap 

and Fragmentation, Achieve Savings, and Enhance Revenue. 

GAO-12-342SP. Washington, DC: February 28, 2012. 

User Fees: Additional Guidance and Documentation Could Further 

Strengthen IRS’s Biennial Review of Fees.GAO-12-193. Washington, DC: 

November 22, 2011. 

Budget Issues: Better Fee Design Would Improve Federal Protective 

Service’s and Federal Agencies’ Planning and Budgeting for 

Security.GAO-11-492. Washington, DC: May 20, 2011.

Federal User Fees: Fee Design Characteristics and Trade-Offs Illustrated 

by USCIS’s Immigration and Naturalization Fees.GAO-10-560T. 

Washington, DC: March 23, 2010.

Budget Issues: Electronic Processing of Non-IRS Collections Has 

Increased but Better Understanding of Cost Structure Is Needed. 

GAO-10-11. Washington, DC: November 20, 2009.

Immigration Application Fees: Costing Methodology Improvements Would 

Provide More Reliable Basis for Setting Fees. GAO-09-70. Washington, 

DC: January 23, 2009. 

Federal User Fees: Additional Analyses and Timely Reviews Could 

Improve Immigration and Naturalization User Fee Design and USCIS 

Operations. GAO-09-180. Washington, DC: January 23, 2009.

Federal User Fees: Improvements Could Be Made to Performance 

Standards and Penalties in USCIS’s Service Center Contracts. 

GAO-08-1170R. Washington, D.C.: September 25, 2008.

Related GAO Products
Related GAO Products

Page 44 GAO-13-820 Federal User Fees

Federal User Fees: A Design Guide.GAO-08-386SP. Washington, D.C.: 

May 29, 2008. 

Federal User Fees: Substantive Reviews Needed to Align Port-Related 

Fees with the Programs They Support.GAO-08-321. Washington, DC: 

February 22, 2008. 

Federal User Fees: Key Aspects of International Air Passenger Inspection 

Fees Should Be Addressed Regardless of Whether Fees Are 

Consolidated.GAO-07-1131. Washington, DC: September 24, 2007.

(451010)
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