Directive 407.1 

10/9/92 

 FEE-SUPPORTED PROGRAMS--USER FEE CHARGES AND FUNDING FOR SHUTDOWN EXPENSES 

I. This Directive: 

PURPOSE 

 A. States the policy, gives responsibilities, and provides 

 guidelines for preparing proposals to establish or adjust fees. 

 B. Sets forth requirements for funding liabilities of 

 terminated fee-supported programs. 

II. A. The majority of the programs in AMS are userAUTHORITIES funded. Fees are established for each of these programs to 

 offset the cost of providing the service. The laws authorizing 

 user-funded programs in AMS are: 

 1. The Agricultural Marketing Act of 1946 authorizing the 

 grading programs. 

 2. The Tobacco Inspection Act and the Dairy and Tobacco 

 Adjustment Act of 1983 authorizing tobacco inspection. 

 3. The Cotton Statistics and Estimates Act, the United States 

 Cotton Standards Act, and the United States Cotton Futures Act 

 authorizing cotton classing. 

 4. The Cotton Statistics and Estimates Act authorizing cotton 

 service testing. The United States Cotton Standards Act 

 authorizing cotton standards. 

 5. The Plant Variety Protection Act authorizing the issuance 

 of "patent-like" certificates. 

 6. The Perishable Agricultural Commodities Act (PACA) of 

 1930 authorizing the PACA program. 

 7. The Food, Agriculture, Conservation and Trade Act of 

 1990 authorizing fees to be charged for Market News printed reports. 

 B. The first six of the above listed Acts require that the entire 

 cost of providing the service be recovered through user fees. 

 Such costs include all direct and indirect costs of providing the 

 service, including salaries and other personnel costs (retirement, 

 insurance, and leave); travel; rent; postage; maintenance and 

 depreciation of equipment; supplies; and a proportionate share of 

 Agency management and supervisory costs as well as accrued 

 liabilities, which include severance pay, unemployment compensation, 

 and unused leave costs. 

 C. The Act referred to in Paragraph A.7. above authorizes fees to 

 recover postage, printing, and handling costs associated with the 

 issuance of pamphlets, reports, or other statistical and economic 

 research publications prepared in the Department of Agriculture. 

III. It is AMS policy that all user-funded activities 

POLICY recover the costs of providing services and that each program 

 maintain a reasonable reserve to finance accrued liabilities. It is 

 also Agency policy that annual fee analyses be prepared so that 

 fee increases can be implemented either to coincide with annual 

 pay raises or prior to the beginning of crop years. 

IV. A. Accrued liabilities are expenses incurred that 

DEFINITIONS must be paid at some time in the future. 

 B. Fee analysis is a comparison of the actual and projected 

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 revenues and costs incurred while performing a service with the 

 time or other applicable measurement required to perform the 

 service, in order to determine an appropriate fee to recover the 

 cost of providing the service. 

 C. Object class is a budget classification identifying the nature 

 of goods or services purchased. 

 D. Shutdown expenses are all costs and accrued liabilities which 

 must be paid if a program terminates. 

 E. Unobligated balances are funds which have not been expended. 

 F. User fees represent assessments which are charged to 

 recipients of a service. 

V. The Office of the Administrator will approve all 

APPROVAL rate proposals (both new and revised) except when 

OF RATE the responsibility for approval has been delegated 

PROPOSALS to the Division Director. 

VI. A. The Administrator will review requests for 

RESPONSI- changes, except those listed in Section V. above, 

BILITIES and will determine whether fee changes will be proposed in the Federal Register.

 B. Division Directors of fee-supported programs shall: 

 1. Maintain actual obligation, revenue, and workload data 

 from official accounting records for the current and 

 previous 2 years. 

 2. Determine current and one subsequent year's costs for 

 services or activities to cover the direct and indirect costs 

 to AMS for carrying out the activity. 

 3. Decide the appropriate time to initiate a fee analysis. 

 At the same time, provide workload and revenue estimates to 

 the Financial Management Division (FMD) so that a parallel 

 analysis can be prepared. 

 4. Review activities and applicable costs, and prepare 

 annual fee analyses to determine the adequacy of such fees 

 and charges for AMS user-financed programs. These analyses 

 should include the adequacy of fees for the current year and 

 the subsequent year, considering estimated cost increases and 

 fluctuations in workload. 

 5. Establish appropriate fees and charges for authorized 

 services at rates which will recover as nearly as practicable 

 the costs of such services and will maintain a reasonable 

 reserve. 

 6. Maintain an unobligated balance level commensurate with 

 governing legislation or AMS policy. 

 7. Work with FMD to reconcile any fee recommendation 

 differences that may occur between the program and FMD 

 analyses. If differences cannot be reconciled, the 

 program Division Director is responsible for making 

 the final decision on which fee will be recommended to 

 the Administrator. The rationale for recommending a particular 

 fee should be documented and maintained in both the program 

 Division's and FMD's fee analyses files. 

 

 8. Recommend to the Administrator the appropriate fees 

 to be charged. 

 C. The Director, FMD, shall: 

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 1. Provide the program Divisions with AMS financial reports 

 prepared by the National Finance Center. These reports are 

 to be used, in conjunction with any other available program 

 information, by Divisions in determining proper fees 

 and charges. 

 2. Provide consultation and assistance to Divisions in 

 developing methods to be used for identifying costs and 

 determining adequacy of rates. 

 3. Prepare annual fee analyses on the basis of budgetary 

 and financial records and reports available to FMD, and 

 workload data and/or revenue developed in cooperation with 

 the staff of fee-supported programs. These fee analyses 

 should reflect the effect of various fees and various workload 

 levels on the current year and the subsequent year, considering 

 estimated cost increases. 

 4. Provide fee analyses, including the effect of various fees 

 and workload levels on the program's financial status, to the 

 respective program Division Director as additional information 

 to be considered in determining the fee. FMD's fee analyses 

 will not be the sole basis for setting fees but will supplement 

 the analyses prepared by the staffs of fee-supported programs. 

 5. Prepare annual reports on user charges as required by the 

 Department from fiscal and budget records and other data 

 furnished by the respective Division under this and other 

 AMS Directives. 

VII. A. Frequency of Analysis. Fee analyses are 

PREPARATION required on an annual basis. These analyses and 

OF FEE supporting data must be kept on file for 3 years. 

ANALYSIS 

 B. Contents of Analysis. The fee analysis should be a 

 comprehensive review of all revenue and expense components. 

 The analysis should include: 

 1. Current and projected workload indicators such as revenue 

 producing hours, pounds graded, or other applicable indicators. 

 2. Object class data which details existing and anticipated 

 costs for providing the service. 

 3. At least a 2-year projection of the financial position of 

 the program using several alternative fees. 

 4. A sensitivity analysis which details the impact on revenue 

 and obligations resulting from varying workload data. A suggested 

 format for the analysis is shown in Attachment 1. An example 

 of a completed analysis is shown in Attachment 2. 

VIII. A. The Division Director of the fee-supported 

SUBMISSION program must follow the procedures prescribed 

OF FEE below to secure approval for a fee change. 

ANALYSIS Exceptions to this requirement are mailed Market News reports 

 and fee programs covered by agreements provided for in 

 other regulations. 

 1. Prepare a fee change docket as prescribed in the current 

 edition of the Federal Register Document Drafting Handbook. 

 2. Submit the docket for clearance within the Department in 

 accordance with instructions outlined in Departmental 

 Regulation 1512-1, USDA Regulatory Decisionmaking Requirements, 

 dated 9/7/90; and AMS Directive 123.1, Rulemaking Proceedings 

 and Publication of Documents in the Federal Register, 

 dated 5/24/90. Obtain a copy of these regulations, if 

 needed, from FMD. 

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 3. Forward a copy of the docket to the Regulatory Review 

 Officer, Legislative and Regulatory Review Staff, Office of 

 the Administrator, for clearance with the Office of 

 Management and Budget. 

 B. To revise the subscription fee for printed Market News 

 reports, the Division Director must follow the procedures outlined 

 in Paragraph A.1., above. The Administrator is authorized 

 (7 CFR Part 60.5(b)) to review and revise subscription fees. 

IX. A. The Agency has determined, based on a study 

LEVEL OF prepared by FMD, that each fee-supported program 

UNOBLIGATED should maintain an unobligated balance of at least 

BALANCES 4 months of operating expenses. This unobligated balance is 

 needed to cover accrued liabilities should the program terminate. 

 The Administrator may waive or modify this requirement if an 

 applicant agrees to assume responsibility for shutdown costs and 

 maintains sufficient funds in escrow, bonds, taxing authorities or 

 other means satisfactory to the Agency. 

 B. Legislation which provides for a maximum level of an unobligated 

 balance will take precedence over the requirements in this Directive. 

 C. Fee-supported programs not having sufficient unobligated 

 balances to cover 4 months of operating expenses should plan to 

 gradually increase user fees over a period of time to reach 

 this level. 

 D. Market News subscription fee programs should maintain an 

 unobligated balance sufficient to cover liabilities associated 

 with the cost of terminating the printing and distribution of 

 Market News reports. 

X. A. An emergency appropriation will be requested to 

FUNDING OF fund unobligated balances of terminated programs. 

LIABILITIES 

FOR B. As a last resort, unobligated balances from other 

TERMINATED fee supported programs funded by the same Treasury 

PROGRAMS fund will be utilized to cover shutdown expenses should 

 sufficient funds be unavailable in the terminated program. 

 During this time, a supplemental appropriation will be requested by 

 FMD to replace all funds utilized from those programs not terminated. 

 L. P. Massaro 

 Deputy Administrator, Management 

 Attachment 1 

 AMS Directive 407.1 

 10/9/92 

 SUGGESTED FORMAT OF ANALYSIS REPORT 

 SENSITIVITY (WHAT IF) ANALYSIS 

 LIST ACTIVITY 

 (Tobacco Grading, Meat Grading, etc.) 

 FY 

 Workload Indicators (1) 

 Current 

 Estimated 95% of 105% of 

 Pounds Current Current 

 Bales/Hours Estimate Estimate 

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SERVICE PERFORMED: (2) 

Base Hours 

Premium Hours 

Holiday Hours 

PROJECTED REVENUE & COSTS: 

 

REVENUE: (3) 

Base Hours @: 

Premium Hours @: 

Holiday Hours @: 

EXPENSES: 

Program (4) 

Division Management (5) 

Agency Management (6) 

 TOTAL 

PROFIT/(LOSS) @: (7) 

OPERATING BALANCE AT 

BEGINNING OF NEW FEE: (8) 

OPERATING BALANCE 1 YEAR 

AFTER IMPLEMENTATION OF 

NEW FEE AT VARYING RATES: 

 

 Attachment 2 

 AMS Directive 407.1 

 10/9/92 

 EXAMPLE OF COMPLETED ANALYSIS REPORT 

 SENSITIVITY (WHAT IF) ANALYSIS 

 LIST ACTIVITY 

 (Tobacco Grading, Meat Grading, etc.) 

 FY 199 (1) 

 Workload Indicators 

 Current 

 Estimated 95% of 105% of 

 Pounds Current Current 

 Bales/Hours Estimate Estimate 

SERVICE PERFORMED: 

Base Hours 10,000 9,500 10,500 

Premium Hours 3,000 2,850 3,150 

Holiday Hours 100 95 105 

PROJECTED REVENUE & EXPENSES 

REVENUE: 

Base Hours @: 

 $5.00 $50,000 $47,500 $52,500 

 $4.00 $40,000 $38,000 $42,000 

 $3.00 $30,000 $28,500 $31,500 

Premium Hours @: 

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 $10.00 $30,000 $28,500 $31,500 

 $ 9.00 $27,000 $25,650 $28,350 

 $ 8.00 $24,000 $22,800 $25,200 

Holiday Hours @: 

 $15.00 $ 1,500 $ 1,425 $ 1,575 

 $14.00 $ 1,400 $ 1,330 $ 1,470 

 $13.00 $ 1,300 $ 1,235 $ 1,365 

EXPENSES: 

Program $40,000 $38,000 $42,000 

Division Management $10,000 $ 9,500 $10,500 

Agency Management $ 3,500 $ 3,325 $ 3,675 

 TOTAL $53,500 $50,825 $56,175 

 FY 199 (2) 

 Workload Indicators 

 Current 

 Estimated 95% of 105% of 

 Pounds Current Current 

 Bales/Hours Estimate Estimate 

PROFIT/(LOSS): 

Base/Premium/Holiday Hours: 

 $5.00/$10.00/$15.00 $28,000 $26,600 $29,400 

 $4.00/$ 9.00/$14.00 $14,900 $14,155 $15,645 

 $3.00/$ 8.00/$13.00 $ 1,800 $ 1,710 $ 1,890 

OPERATING BALANCE AT 

BEGINNING OF NEW FEE: $10,000 $10,000 $10,000 

OPERATING BALANCE 1 YEAR 

AFTER IMPLEMENTATION OF 

NEW FEE AT VARYING RATES: 

Base/Premium/Holiday Hours: 

 $5.00/$10.00/$15.00 $38,000 $36,600 $39,400 

 $4.00/$ 9.00/$14.00 $24,900 $24,155 $26,645 

 $3.00/$ 8.00/$13.00 $11,800 $11,710 $11,890 

------------- NOTES ------------- 

 Three levels are required: The current workload level and two levels which 

 indicate the impact if the workload is less (e.g., 95%) than the current 

 estimated level, or greater (e.g., 105%) than the estimated level. 

 List each service component for which fees are charged 

 (i.e., regular hours, holiday, Saturday, Sunday, bales, lots, 

 resident grading, etc.). 

 Three different revenue rates should be presented for 

 each service component. 

 Direct program cost. 

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 Division management includes the Director's office and 

 administrative support. 

 Agency management includes all support Division costs assessed to the 

 program Division (i.e., financial management, personnel, information 

 resources management, Animal and Plant Health Inspection Service's 

 administrative support to AMS, compliance, management services, 

 Training Institute, etc.). 

 Calculate profit or loss based on the various rates and three 

 workload levels in the revenue section and expenses incurred 

 at each workload level. 

 Determine the operating balance at the effective date of the 

 fee increase and show the effect on the available balance of the 

 three proposed workload levels in the revenue section. 

 Prepare this analysis for current fiscal year and 

 two subsequent fiscal years. 

 Prepare this analysis for current fiscal year and 

 two subsequent fiscal years. 

 

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