### 1



# New Registrant Fee Schedule Calculations

Diversion Control Fee Account

By



## Drug Enforcement Administration

Office of Diversion Control

Diversion Pla nning and Resource Section

February 2012New Registrant Fee Schedule Calculati ons



### 2



## Table of Contents

1 INTRODUCTION

................................ ................................ ................................ ................................ ............ 3

2 OVERVIEW OF REGISTRA NT FEE CALCULATION M ETHODOLOGY

................................ ................................ .. 5

3 FEE CALCULATION

................................ ................................ ................................ ................................ ......... 7

3.1 B UDGET : FY 2012

- FY 2014

................................ ................................ ................................ ................................ 7

3.1.1 FY 2012

................................ ................................ ................................ ................................ .................. 7

3.1.2 FY 2013 Estimate

................................ ................................ ................................ ................................ ... 7

3.1.3 FY 2014 Estimate

................................ ................................ ................................ ................................ ... 8

3.1.4 FY 2012

- FY 2014 Summary

................................ ................................ ................................ .................... 8

3.2 R EQUIRED C OLLECTIONS FROM R EGISTRATION F EES

................................ ................................ ................................ .... 9

3.2.1 Transfer to Treasury

................................ ................................ ................................ ............................... 9

3.2.2 Operational Continuity Fund (OCF)

................................ ................................ ................................ ........ 9

3.2.3 Combat Methamphetamine Epidemic Act of 2005 (CMEA) Collections

................................ .............. 10

3.2.4 Other Collections

................................ ................................ ................................ ................................ .. 10

3.2.5 Recoveries from Money Not Spent as Planned (Deobligation of Prior Year Obligations)

.................... 11

3.2.6 Summary

................................ ................................ ................................ ................................ .............. 11

3.3 E STIMATED N UMBER OF R EGISTRATION F EE T RANSACTIONS : FY 2012

– F 2014

................................ ........................... 11

3.4 R EGISTRATION F EES BY B USINESS A CTIVITY

................................ ................................ ................................ .............. 12

3.5 E STIMATED C OLLECTIONS FROM R EGISTRATION F EES

................................ ................................ ................................ 15

4 SUMMARY OF RESULTS

................................ ................................ ................................ .............................. 16

5 FACTORS THAT CAN INF LUENCE ACTUAL RESULT S

................................ ................................ ...................... 18

APPENDIX 1: LIST OF ACRONYMS

................................ ................................ ................................ ........................ 19

APPENDIX 2: TARGET OPERATIONAL CONTINUI TY FUND

................................ ................................ .................... 20

APPENDIX 3: ESTIMAT ED NUMBER OF REGISTR ATION FEE TRANSACTIO NS

................................ ........................ 23New Registrant Fee Schedule Calculati ons



### 3



## 1 Introduction

Under the Controlled Substance s Act ( CSA ), the Drug Enforcement Administration ( DEA ) is

authorized to charge reasonable fees relating to the registration and control of the manufacture,

distribution, dispensing, import, and export of controlled substances and listed chemicals. 21

U.S.C. 821 and 958(f). DEA must set fees at a level that ensures the recovery of the full costs of

oper ating the various aspects of the D iversion C ontrol P rogram ( DCP )

. 21 U.S.C. 886a(1) ( C )

. Fe e revenues are deposited into a separate fund of the Treasury called the Diversion Control Fee

Account (DCFA). 21 U.S.C. 886a.

DEA continually monitors the anticipated budget and collections to determine whether the

registration fee s need to be adjuste d. Since the publication of the Notice of Proposed

Rulemaking (NPRM) on July 6, 2011 at 76 FR 39318 , DEA has revised the fee calculation based

on end of the year financial information for Fiscal Year (FY) 2011 ending September 30, 2011 as

well as updated budget and registrant population estimates for FY 2013 and FY 2014. The

budgets are key factors in calculating fees, as monies may be paid from the Diversion Control

Fee Account only in accordance with the budget requests or after notification to the Committees

on Appropriations of the House of Representatives and the Senate. 21 U.S.C. 886a(1)(D). The

primary u pdates for purposes of calculating the new fees include:

Higher unobligated balance, Operational Continuity Fund (OCF), at end of FY 2011.

Lower FY 2013 and FY 2014 estimated budgets.

Higher estimates for recoveries from deobligation of prior year obligations.

Higher registrant population projection.



### DEA has determined that registration and reregistration fees need t o increase in FY 2012;

however, t hese updates lower slightly the amount require d to be collected from fees for the FY

2012 to FY 2014 fee calculation period from that published in the NPRM

. DEA estimates that

the collection at the new fee level will begi n March 1, 2012 . T he amounts indicated in Table 1:

Registration and Reregistration Fees are the amounts needed in order to fully fund the DCP as

required by statute

.

Table 1 : Registration and Reregistration Fees

Registrants on Three Y

ear R egistration C

ycle

Registrant Class/Business Current

Three Year

Fee * New Three

Year Fee* Difference

Per Year

Pharmacy $551 $ 731 $ 60

Hospital/Clinic $551 $ 731 $ 60

Practitioner $551 $ 731 $ 60

Teaching Institution $551 $ 731 $ 60

Mid

- Level Practitioner $551 $ 731 $ 60New Registrant Fee Schedule Calculati ons



### 4

*Pharmacies, hospitals/clinics, practitioners, teaching institutions, and mid

- level practitioners currently pay a fee for a

three

- year period. This current three

- year fee is $551. The new fee for the three year registration period would be

$ 731 . The three year difference is $ 180 or an annual difference of $ 60

. Registrants on A nnual R egistration C ycle

Registrant Class/Business Current

Annual Fee New Annual

Fee Difference

Researcher/Canine Handler $184 $ 244 $ 60

Analytical Lab $184 $ 244 $ 60

Maintenance $184 $ 244 $ 60

Detoxification $184 $ 244 $ 60

Maintenance and Detoxification $184 $ 244 $ 60

Compounder/Maintenance $184 $ 244 $ 60

Compounder/Detoxification $184 $ 244 $ 60

Compounder/Maintenance/ Detoxification $184 $ 244 $ 60

Distributor (chemical and controlled substances) $1,147 $ 1,523 $ 376

Reverse distributor $1,147 $ 1,523 $ 376

Importer (chemical and controlled substances) $1,147 $ 1,523 $ 376

Exporter (chemical and controlled substances) $1,147 $ 1,523 $ 376

Manufacturer (chemical and controlled

substances) $2,293 $ 3,047 $ 754



### The purpose of this document is to allow the reader to understand the various factors that

contributed to the calculated fee and how these factors were applied in determining fees.

*** DISCLAIMER ***

ALL ASSUMPTIONS, INP UTS, AND CALCULATION S CONTAINED IN THIS

DOCUMENT ARE FOR THE PURPOSES OF CALCULAT ING THE FEE ONLY.

MANY PROCEDURAL, OPE RATIONAL, AND ECONOM IC VARIABLES CAN

CAUSE THE ACTUAL RES ULTS TO DIFFER FROM ESTIMATES AND

PROJECTIONS CONTAINE D IN THIS DOCUMENT.New Registrant Fee Schedule Calculati ons



### 5



## 2 Overview of Registrant Fee Calculation Methodology

As the vast majority of registrants are on a three year renewal cycle, the fee calculation is also

based on a three year analysis , FY 2012

- FY 2014

.

Th e registration fees were calculated through the se five major steps :

1. Estimate program obligations for FY 2012, FY 20 13, and FY 2014. The President’s Budget for FY

2012 was released in February 2011. The official FY 2013 and FY 2014 budget requests are

released in February of 2012 and 2013, respectively.

2. Determine the total amount of registration fees that need to be collected over the three year

period by a pplying additional factors such as:

a. Mandated transfer to the Treasury , which increase s the amount to be collected from

registration fees

.

b. Maintenance of the Operational Continuity Fund ( OCF ) balance , which reduces the

amount to be collected from registration fees in this instance

.

c. Combat Methamphetamine Epidemic Act ( CMEA ) of 2005 self

- cert ification fee

collections , which decrease the amount that need s to be collected from registration

fees

.

d. Other collections from the sale of official government vehicles , which decrease s the

amount to be collected from registration fees

.

e. Recoveries from the deobligation of prior obligations (see Section 3.2.5 for explanation),

which decrease the amount that need s to be collected from registration fees.

3. Estimate the total number of registration fee transactions 1 by business activity, new and

renewal, over the three year period.

4. Apply the weighted ratio to the total required collections and the total number of registrations

to determine the various fees per each registrant business activity.

5. Finally, apply these fees to the estimated number of registrations by b usiness a ctivity for each of

the three years to determine projected collections per year and estimated OCF balance

, based

on a n estimated fee collection date beginning March 1, 201 2

. C onfirm that the calculated fees

allow DEA to recover the full cost of t he DCP.



### Each of the five steps has multiple sub

- steps and components that will be described in Section 3

of this document. Section 3 details the various components and how these components were

applied in calculating the fees.

1 “Number of registration fee transactions” is different from the number of registrants. First, fee exempt

registrations are not included in this number. Second, the registrants on the three year registration cycle will register

only once in the FY 2012

– FY 2014 period. Since the vast majority of registration (non

- fee exempt) fee

transactions are on the three year registration cycle, the number of registrations per year is roughly one

- third the

number of registrants. In calculating the new fee, the “num ber of registration fee transactions” is a key figure

discussed in Section 3.3.New Registrant Fee Schedule Calculati ons



### 6

Figure 1: Diagram of Majo r Components of the Registration Fee Calculation below summarizes

the five major steps and key components that were factored into the fee calculation.

Figure 1: Diagram of Major Components of the Registration Fee CalculationNew Registrant Fee Schedule Calculati ons



### 7



## 3 Fee Calculation

3.1 Budget: FY 2012

- FY 2014

As depicted in Figure 1, the process for estimating the budget for each year is the same. The

previous year’s budget provides the base level of DCP activities to which adjustments are made

to formulate the budget for the given fiscal year

.

Adjustments to base may include adjustments in :

1. Personnel pay and benefits

2. Facilities and rent expenses

3. Task force officer and contractor expenses



### 3.1.1 FY 2012

The FY 2012 DCFA budget of $ 322,000,000 is included in the FY 2012 Consolidated and Further

Continuing Appropriations Act, signed into public law on November 18, 2011 (P ub

. L. 112

- 55)

. For

more information, see “U.S. Department of Justice, Drug Enforcement Administration, FY 2012

Performance Budget Congressional Submission” at

http://www.justice.gov/jmd/2012justification/pdf/fy12

- dea

- justification.pdf

. Also see House Report 112

-

169 accompany ing H.R. 2596, Senate Report 112

- 7 8 accompany ing S.R. 157 2, House Report 112

- 284

accompany ing H.R. 2112

, and Public Law 112

- 55.



### 3.1.2 FY 2013 Estimate

DEA does not anticipate that it will initiate any significant new initiatives or increases in

authorized positions in FY 2013. The FY 2013 estimate includes base adjustments to maintain

the positions and program costs as outlined in the FY 2012 President’s Budget. The current

estimate of $ 352,563,000 for FY 2013 includes the following:

FY 2012 Request $ 322,000,000

Projected Adjustments to Base

Pay and Benefits $ 20,589,000

Facilities and Rent $3,227,000

Tactical Diversion Squad (TDS) Task Force Officers

and Administrative Contractors $6,198,000

Foreign Personnel Charges $549,000

Total Projected Adjustments to Base $ 30,563,000

Total, FY 2013 Estimate d Obligations $ 352,563,000New Registrant Fee Schedule Calculati ons



### 8

The FY 2013 estimate d obligations represents only the estimated costs of operating the

DCP. The formal FY 2013 DCFA budget will be included in the FY 2013 President’s Budget,

which will be provided to Congress in February 2012.



### 3.1.3 FY 2014 Estimate

Similar to FY 2013, no significant new in itiatives or increases in authorized positions are

anticipated for FY 2014. However, some base adjustments are projected to fund the full cost of

the DCP in FY 2014. To estimate the FY 2014 budget requirement , the average percentage

increase from adjustments to base for the six year period of FY 2007

- FY 2013 ( excluding any

adjustme nts related to new positions) of 1.57 % was applied to the FY 2013 estimate to arrive at

the estimated FY 2014 adjustments to base. The full ye ar cost of positions adjustment was

calculated using the standard cost modules for estimating costs of personnel enhancements. The

FY 2014 estimate of $ 364,895,000 includes the following:

FY 2013 Estimate d Obligations $ 352,563,000

Projected Adjustments to Base (ATB)

Estimated ATBs $5,523,000 2

Full year cost of positions added in FY 2012 $ 6,809,000

Total Projected Adjustments to Base $12,332,000

Total, FY 2014 Estimate d Obligations $364,895,000



### The FY 2014 estimate d obligations represent s only the estimated costs of operating the

DCP

. The formal FY 2014 DCFA b udget will be included in the FY 2014 President’s Budget,

which will be provided to Congress in February 2013.



### 3.1.4 FY 2012

- FY 2014 Summary

FY2012 FY2013 FY2014

Prior Year Budget $ 322,000,000 $ 352,563,000

Adjustments to Base $ 30,563,000 $ 12,332,000

Budget $ 322,000,000 $ 352,563,000 $ 364,895,000

2 The average percentage increase of 1.57% is rounded to 2 decimal places.New Registrant Fee Schedule Calculati ons



### 9



## 3.2 Required Collections from Registration Fees

As described in Section 2: Overview of Registrant Fee Calculation Methodology , in order to

fund the full cost of the DCP, DEA needs to collect enough from registration fees to fund the FY

2012

– FY 2014 budgets and:

1. Make the statutorily required transfer to the Treasury, which increase s the amount to be

collected from registration fees.

2. Maintain the target ed Operational Continuity Fund ( OCF ) balance , which reduces the amount

to be collected from registration fees in this instance

.

3. Includes estimat ed Combat Methamphetamine Epidemic Act ( CMEA ) of 2005 self

certification fee collections, which decrease the amount to be collected from registration

fees.

4. Adds o ther collections from the sale of personal property and official government vehicles,

which de crease s the amount that need s to be collected from registration fees.

5. Estimates r ecoveries from money not spent as planned ( deobligation of prior obligations )

(see Section 3.2.5 for an explanation), which decrease s the amount that need s to be

collected fro m registration fees.



### 3.2.1 Transfer to Treasury

In the 1993 appropriations for DEA, Congress determined that the DCP would be fully funded

by registration fees and no longer by appropriations. 3 

### Congress established the DCFA as a

separate account of the Treasury to “ensure the recovery of the full costs of operating the various

aspects of [the Diversion Control Program]” by those participating in the closed system

established by the CSA. 21 U.S .C. 886a(1)(C). Fees collected are deposited into a separate

Treasury account. Each fiscal year

, t he first $15 million is transferred to the Treasury and is not

available for use by the DCP. Therefore, DEA needs to collect an additional $15 million per

year for transfer to the Treasury.



### 3.2.2 Operational Continuity Fund (OCF)

DEA maintains an operational continuity fund (OCF) to maintain DCP operations during

historically low (or negative) collection periods (e.g.

, the first quarter of a new fiscal year wh en

the first $15 million collected is transferred to the Treasury). Monthly collections and

obligations fluctuate throughout the year. There are times when obligations (spending) exceed

collections. This can happen consecutively for several months. The refore, an operational

continuity fund is maintained to avoid operational disruptions due to these fluctuations and

3 Departments of Commerce, Justice, and State, the Judiciary and Related Agencies Appropriations Act of 1993,

Public Law 102

- 395, codified in relevant part at 21 U.S.C. 886a.New Registrant Fee Schedule Calculati ons



### 10

monthly differences in collections and obligations (spending). Using statistical analysis of the

historical fluctuations between amounts co llected and amounts obligated, DEA has determined

that a reserve fund of $15 million plus seven percent of the projected obligations is adequate.

See Appendix 2 : Target Operational Continuity Fund for an explanation of how this level was

determined. The amount reduced to bring the operational continuity fund balance to the $15

million plus a seven percent level is subtracted from projected costs.

T he t able below summarizes the target ed OCF balances and the amounts needed to raise the

OCF balance to the target ed balance :

FY2012 FY2013 FY2014

Budget /Estimate $ 322,000,000 $ 352,563,000 $ 364,895,000

Target OCF ($15M + 7%) $ 39,679,410 $ 40,542,650 $ 40,943,670

Beginning OCF balance $ 41,726,554 $ 39,679,410 $ 40,542,650

Needed Change to Achieve Target OCF $ (2,047,144) $ 863,240 $ 401,020

3

- year cumulative change $ ( 782,884 )



### 3.2.3 Combat Methamphetamine Epidemic Act of 2005 (CMEA) Collections

Under the CMEA, DEA collects a self

- certification fee for regulated sellers of sche duled listed

chemical products that are included as part of the total collections

. The fee is waived for any

person holding a current DEA registration in good standing

, such as a pharmacy , authorized to

dispense controlled substances. Although DEA has observed an approximately 26 percent

decline in self

- certifications from FY 2008 to FY 2011 , DEA anticipate s that the number of self

certifications will stabilize at approximately 5,000 per year from FY 2012 to FY 2014. The s elf

certification fee is $21 and is paid on an annual basis

. The CMEA self

- certification fee

collection estimate s for FY 2012

– FY 2014 are below :

FY2012 FY2013 FY2014

Number of paying self

- cert 5,000 5,000 5,000

Fee $ 21 $ 21 $ 21

CMEA collection estimate $105,000 $105,000 $105,000



### 3.2.4 Other Collections

DEA also derives revenue from the sale/salvage of official government vehicles dedicated for

use in the DCP. DEA’s estimate for o ther c ollections is $ 533,766 per year. This is the actual

amount for FY 2011

.New Registrant Fee Schedule Calculati ons



### 11



### 3.2.5 Recoveries from Money Not Spent as Planned ( De obligation of Prior

Year Obligations )

At times, DEA enters into an obligation to purchase a product or service that is not delivered

immediately

, such as in a multi

- year contract. Changes in obligations can occur for a variety of

reasons, i.e., changes i n planned operations, delays in staffing , implementation of cost savings,

changes in vendor capabilities, etc. When DEA does not spend the obligated money as planned

, that obligation is “deobligated.” T he “deobligate d ” funds are “recovered” and the fund s become

available for DCP use. Based on historical trends, the recovery from money not spent as planned

( deobligation of prior year obligations ) is estimated at $13.5 million per year.



### 3.2.6 Summary

The r equired registration fee collections for F Y 20 12

– FY 20 14 are summarized below :

FY2012 FY2013 FY2014 3

- yr Total

Budget /Estimate 322,000,000 352,563,000 364,895,000 1,039,458,000

Recoveries (13,500,000) (13,500,000) (13,500,000) (40,500,000)

Net Budget 308,500,000 339,063,000 351,395,000 998,958,000

Transfer to the Treasury 15,000,000 15,000,000 15,000,000 45,000,000

Change to Achieve Target OCF (2,047,144) 863,240 401,020 (782,884)

CMEA Self

- cert collections (105,000) (105,000) (105,000) (315,000)

Other collections (533,766) (533,766) (533,766) (1,601,29 8 )

Required collections from Registration

Fees 320,814,090 354,287,474 366,157,254 1,041,258,818

*Numbers are r ounded

.



### Based on the above, DEA needs to collect $ 1,041,258,818 in registration fees over the three year

period, FY 2012

– FY 2014 to fully fund the DCP.



## 3.3 Estimated Number of Registration Fee Transactions : FY 2012

– F 2014

In Section 3.2, DEA determined that the required collection over the three year FY 2012

– FY

2014 period must be $ 1,041,258,818

. T o determine the registration fees, the number of

registration fee transactions by business activity was estimated. Although related, the number of

registration fee tra n sactions is different from the registran t population for three primary reasons

. One, r egistrants on a three year registration cycle have only one registration fee transac tion every

three years. Regis tration renewal dates are staggered across a three year period to generateNew Registrant Fee Schedule Calculati ons



### 12

registration fee transactions from roughly one

- third of these registrants each year. Two, a

registrant may have multiple registrations

, paying multiple fees. Three , a pproximately seven

percent of the registrant population is exempt from paying registration fees.

Based on historical data, the t able below summarizes the estimated num ber of registration fee

transactions for FY 2012

– FY 2014. See Appendix 3 : Estimated Number of Registration Fee

Transactions for details on how the estimate was derived.

Group Business Activity 2012 2013 2014 Total

3 year registration A Pharmacy 25,270 22,823 25,367 73,460

B Hospital/Clinic 4,457 4,553 4,512 13,522

C Practitioner 376,768 367,226 382,387 1,126,381

D Teaching Institution 81 68 65 214

M Mid

- level Practitioner (MLP) 72,978 75,076 84,448 232,502

1 year registration E Manufacturer 521 517 510 1,548

F Distributor 773 778 782 2,333

G Researcher/Canine Handler 4,143 4,255 4,373 12,771

H Analytical Lab 868 868 868 2,604

J Importer 213 217 220 650

K Exporter 248 249 250 747

L Reverse Distributor 66 67 68 201

N Maintenance 171 174 177 522

P Detoxification 81 80 79 240

R Maintenance & Detox 912 928 943 2,783

S Compounder/Maintenance 4 4 4 12

T Compounder/Detoxification 1 1 1 3

U Compounder/Maintenance/Detox 59 59 59 177

W Chemical Manufacturer 191 167 148 506

X Chemical Importer 200 201 202 603

Y Chemical Distributor 480 414 364 1,258

Z Chemical Exporter 169 173 177 519

Total 488,654 478,898 506,004 1,473,556



### Groups A, B, C, D, and M renew their registration every three years. The remaining groups

renew annually. The 1,473,556 registrations over the three year period will need to result in

collections of $ 1,041,258,818

.



## 3.4 Registration Fees by Business Activit y

The registration fees are based on:New Registrant Fee Schedule Calculati ons



### 13

1. The amount that needs to be collected (determined in Section 3.2 ).

2. The number of transactions/ registration fee transactions (determined in Section 3.3)

.

3. The share of cost burden (relative fees) across various registrant groups

.



### DEA examined four options as outlined in the NPRM and selected the “ weighted

- ratio ”

approach to set varying fees across registrant groups. A d iscussion of the other options is

beyond the scope of this document.

As in previous f

ee s chedules, the fees for distributors, importers, and exporters are 6.25 times the

fees for retail level registrants and manufacturer fees are two times the fees for distributors. The

table below describes the relative difference among the groups :

Group Business Activity Ratio

A Pharmacy 3.00

B Hospital/Clinic 3.00

C Practitioner 3.00

D Teaching Institution 3.00

M Mid

- level Practitioner (MLP) 3.00

E Manufacturer 12.50

F Distributor 6.25

G Researcher/Canine Handler 1.00

H Analytical Lab 1.00

J Importer 6.25

K Exporter 6.25

L Reverse Distributor 6.25

N Maintenance 12.50

P Detoxification 1.00

R Maintenance & Detox 1.00

S Compounder/Maintenance 1.00

T Compounder/Detoxification 1.00

U Compounder/Maintenance/Detox 1.00

W Chemical Manufacturer 12.50

X Chemical Importer 6.25

Y Chemical Distributor 6.25

Z Chemical Exporter 6.25



### Fees for groups A, B, C, D, and M are three times the other retail level registrant s: G, H, P, R, S,

T, and U

. Since these groups are on a three year renewal cycle, the annualized fee remains the

same as for other retail level registrants.New Registrant Fee Schedule Calculati ons



### 14

The number of registration fee transactions in Section 3.3 can be simplified as below:

Groups Ratio Registration Fee

Transactions:

FY12

- FY14

Distributor F,L,Y 6.25 3,792

Importer/Exporter J,K,X,Z 6.25 2,519

Manufacturer E,W 12.50 2,054

Retail, 1

- yr G,H,N,P,R,S,T,U 1.00 19,112

Retail, 3

- yr A,B,C,D,M 3.00 1,446,079

Total 1,473,556



### For purposes of the fee calculation

, collection of the new fee is assumed to begin March 1, 2012.

T hus

, fee collections in the first five months of FY 2012 will be at current fees. Therefore, of

488,654 estimated registration fee transactions in FY 2012, approximately five twelfths (5/12),

or 203,606 transactions

, are anticipated at the current fee, resulting in estimated collections of

$112,283,229 for the first five months in FY 2012 (October 1, 2011 to February 29, 2012. )

* Numbers are rounded.



### Subtracting collectio ns at the current fee in the first five months of FY 2012 ($112,283,229)

from the t otal needed collections from registration fees for the total 3

- year period

( $ 1,041,258,818 ), DEA estimates $ 928,975,590 of registration fee collections are required for

the remainder of the 3

- year period (seven months in FY 2012 and all of FY 2013 and FY 2014).

Therefore, registration fee s of $ 928,975,590 need to be collected from the remaining 1,269,950

(1,473,556

– 203,606) registration fee transactions at the new fee leve l

.

After a ssigning the ratio as weights, the following algebraic expressio n is used to calculate the

fees:

( 6.25 x 

### * 3,242 ) + ( 6.25 x * 2,173 ) + ( 12.50 x * 1,757 ) + ( 1.00 x * 16,512 ) + ( 3.00 x * 1,246,265) =

$ 928,975,590

Solving for x, x = $ 243.75 (Retail, 1

- yr)New Registrant Fee Schedule Calculati ons



### 15

By applying the weights/ratio

, the calculated fees are shown in the table below

, rounded to the

whole dollar.

* Numbers are rounded.



## 3.5 Estimated Collections from Registration Fees

Due to rounding

, the registration fees will not generate exactly $ 1,041,258,818

. 

### The estimated

collections based on the first five months of FY 2012 at current fees and the remainder of the 3

- year period at the new fees, are $ 1,040,934,380

. The table below summarizes the estimated

collections for the three years, FY 2012

– FY 2014.

FY2012 FY2013 FY2014 Total (3

- yr)

Collections from Registration

Fees 320,835,793 350,219,287 369,879,300 1,040,934,380

CMEA Self

- Cert Collections 105,000 105,000 105,000 315,000

Total Collections 320,940,793 350,324,287 369,984,300 1,041,249,380New Registrant Fee Schedule Calculati ons



### 16



## 4 Summary of Results

T he t able below summarizes the fee and resulting cash flow :

Group Business Current Fee Ratio New Fee

A Pharmacy 551 3 731

B Hospital/Clinic 551 3 731

C Practitioner 551 3 731

D Teaching Institution 551 3 731

M Mid

- level Practitioner (MLP) 551 3 731

E Manufacturer 2,293 12.5 3,047

F Distributor 1,147 6.25 1,523

G Researcher/Canine Handler 184 1 244

H Analytical Lab 184 1 244

J Importer 1,147 6.25 1,523

K Exporter 1,147 6.25 1,523

L Reverse Distributor 1,147 6.25 1,523

N Maintenance 184 1 244

P Detoxification 184 1 244

R Maintenance & Detox 184 1 244

S Compounder/Maintenance 184 1 244

T Compounder/Detoxification 184 1 244

U Compounder/Maintenance/Detox 184 1 244

W Chemical Manufacturer 2,293 12.5 3,047

X Chemical Importer 1,147 6.25 1,523

Y Chemical Distributor 1,147 6.25 1,523

Z Chemical Exporter 1,147 6.25 1,523

FY2012 FY2013 FY2014

Congressional Budget 322,000,000 352,563,000 364,895,000

Operational Continuity Fund (OCF)

Brought Forward From Prior Year 41,726,554 39,701,112 36,496,165

Collections: Registration Fees 320,835,793 350,219,287 369,879,300

Collections: CMEA 105,000 105,000 105,000

Treasury (15,000,000) (15,000,000) (15,000,000)

Net Collections 305,940,793 335,324,287 354,984,300

Recoveries from Deobligations 13,500,000 13,500,000 13,500,000

Other Collections 533,766 533,766 533,766

Subtotal Availability 361,701,112 389,059,165 405,514,231New Registrant Fee Schedule Calculati ons



### 17 Obliga t i ons 322,000,000 352,563,000 364,895,000

EOY OCF Balance 39,701,112 36,496,165 40,619,231

Target OCF ($15M+7% of Budget) 39,679,410 40,542,650 40,943,670

Numbers are rounded.

*For purposes of the fee calculation, the Congressional Budget and Obligations are treated as the same.New Registrant Fee Schedule Calculati ons



### 18



## 5 Factors that Can Influence Actual Results

All assumptions, inputs, and calculations contained in this document are for the purposes of

calculating the fee only. Many procedural , operational, and economic variables can cause the

actual results to differ from estimates and projections contained in this document.

Factors include (but are not limited to):

Delay in New Fee

Effective Date E stimates are based on the new fee s chedule being effective and

collections beginning on March 1, 2012 . Any delay will have a large

impact on the registration fe es collected. Additionally, projected

spending will also be impacted as operations are adjusted to meet

financial constrain t s.

Change in Fee Collections and budget estimates are based on the calculated fees.

Any change in the amount will have a large impact on the

registration fees collected. Additionally, projected spending will also

be impacted as operations are adjusted to meet financial

constrain t s.

New

Legislative/ Regulatory

Mandate A new legislative/ regulatory mandate can require more sp ending

and greatly impact cash flow.

Changes in

Technology New technology can be leveraged to improve efficiency and

effectiveness within the Diversion Control Program. Technology can

also be exploited by criminal groups to illegally divert controlled

substances or listed chemicals.

Change in Staffing

Level or Mix Staffing increases account for the majority of budget increases.

Changes in diversion trends may require DEA to change the level or

mix (mix of job categories) in staffing, which would impa ct spending.

Change in Registrant

Population The registration fee collection projection assumes a certain level of

new registrant s and renewals. The a ctual number of registrations

will impact collections from registrant fees and cash flow.

Change in

Adjustments to Base

(ATBs) 1.53 percent is assumed for ATBs to account for an annual inflation

in DEA costs in estimating the FY 2014 budget. Actual inflation and

ATB different from this assumed value can impact expenditures and

cash flow . Depending on the severity, operational adjustments may

be required.New Registrant Fee Schedule Calculati ons



### 19



## Appendix 1: List of Acronyms

Acronym Definition

AT Attorney

CAGR Compound Annual Growth Rate

CH Forensic Chemist

CMEA Combat Methamphetamine Epidemic Act of 2005

CON Tactical Diversion Squad Contractor

CSA Controlled Substances Act

DCFA Diversion Control Fee Account

DCP Diversion Control Program

DEA Drug Enforcement Administration

DI Diversion Investigator

DOJ Department of Justice

EOY End of Year

FR DEA Office of Resource Management

FY Fiscal Year

GS General Schedule

IA Intel Analyst

IT Investigative Technology Specialist

LEAP Law Enforcement Availability Pay

MET Mobile Enforcement Team

MLP Mid

- level Practitioner

OCF Operational Continuity Fund

OF Other Federal

OT Overtime

PA Professional/Administrative

PE/PI Purchase of Evidence/Purchase of Information

SA Special Agent

PCS Permanent Change of Station

SL State & Local

TC Technical/Clerical

TDS Tactical Diversion Squad

TFO Task Force OfficerNew Registrant Fee Schedule Calculati ons



### 20



## Appendix 2 : Target Operational Continuity Fund

Unlike appropriated funds where approved budgets are assured by law, DEA collects registration

fees

, which are subject to fluctuations and uncertainty, to fund the activities of the DCP. DEA

maintains an operational continuity fund (OCF) 4 

### based on the need to maintain DCP operations

during historically low (or negative) collection periods.

Specifically, the OCF serves two purposes:

1. To h ave sufficient funds at the beginning of the fiscal year to fund operations while the first $15

million in collections are paid to the Treasury.

2. To h ave sufficient funds to prevent fluctuations in collections from adversely affecting

operations. (Without OCF, periods of lower than expected collection would require adjustment

in operation/spending to prevent a negative balance.)



### Since the $15 million is a constant amount specified in law that is needed at the beginning of

each year, $15 million would be enough to satisfy purpose one above

.

To determine the OCF needed to satisfy purpose two above , historical collections and obligations

were examined. Tables below summarize the monthly collections and obligations as a percent of

the total :

4 Often called “working capital” in industry, DEA avoids using this term to not cause confusion between OCF and a

specific account “Working Capital Fund” maintained by DOJ. Cumulative Net Obligations as % of Total Obligations

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

FY2004 9.27% 16.66% 20.62% 32.55% 38.64% 46.31% 53.56% 61.09% 69.62% 78.38% 88.06% 100.00%

FY2005 7.34% 12.76% 21.52% 28.83% 35.27% 45.84% 55.88% 64.38% 70.87% 83.04% 85.59% 100.00%

FY2006 8.51% 14.36% 25.49% 32.69% 42.17% 51.27% 59.73% 66.95% 74.02% 83.88% 92.71% 100.00%

FY2007 4.80% 12.57% 19.33% 25.62% 33.26% 42.87% 53.48% 60.53% 65.62% 72.54% 90.36% 100.00%

FY2008 4.91% 11.42% 16.30% 22.65% 29.62% 42.19% 48.32% 55.14% 74.84% 83.52% 92.21% 100.00%

FY2009 7.14% 12.34% 22.38% 28.94% 35.51% 41.10% 48.14% 58.73% 69.01% 77.34% 87.77% 100.00%

FY2010 5.02% 10.70% 19.24% 25.22% 33.48% 40.59% 51.85% 59.65% 72.99% 83.62% 89.23% 100.00%

Average 6.71% 12.97% 20.70% 28.07% 35.42% 44.31% 52.99% 60.92% 71.00% 80.33% 89.42% 100.00%

Minimum 4.80% 10.70% 16.30% 22.65% 29.62% 40.59% 48.14% 55.14% 65.62% 72.54% 85.59% 100.00%

Maximum 9.27% 16.66% 25.49% 32.69% 42.17% 51.27% 59.73% 66.95% 74.84% 83.88% 92.71% 100.00%

(Net Obligations = Obligations

- Recoveries from Deobligation)

Cumulative Gross Collections as % of Total Gross Collections

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

FY04 2.12% 7.23% 14.90% 23.49% 31.96% 41.51% 49.01% 58.16% 71.19% 79.99% 91.20% 100.00%

FY05 4.77% 12.92% 21.51% 30.56% 37.89% 47.78% 55.43% 63.90% 72.82% 81.38% 90.80% 100.00%

FY06 6.01% 13.00% 20.49% 31.39% 40.71% 48.92% 56.72% 65.33% 74.54% 82.58% 91.90% 100.00%

FY07 4.90% 9.71% 16.75% 28.23% 37.64% 46.15% 54.02% 64.19% 73.10% 82.32% 91.71% 100.00%

FY08 6.48% 12.51% 21.67% 31.53% 40.52% 48.44% 56.17% 64.22% 72.90% 82.00% 91.09% 100.00%

FY09 6.84% 13.39% 19.32% 29.42% 39.87% 48.39% 55.76% 64.87% 73.97% 82.92% 91.26% 100.00%

FY10 6.10% 12.77% 20.55% 29.89% 38.96% 47.23% 55.77% 65.13% 73.89% 82.29% 91.36% 100.00%

Average 5.32% 11.65% 19.31% 29.22% 38.22% 46.92% 54.70% 63.68% 73.20% 81.92% 91.33% 100.00%

Minimum 2.12% 7.23% 14.90% 23.49% 31.96% 41.51% 49.01% 58.16% 71.19% 79.99% 90.80% 100.00%

Maximum 6.84% 13.39% 21.67% 31.53% 40.71% 48.92% 56.72% 65.33% 74.54% 82.92% 91.90% 100.00%

(Gross Collections = Registration Fees + Other Collections (sale of vehicles) + CMEA Self

- certification Collections)New Registrant Fee Schedule Calculati ons



### 21

The tables show that there are times where o bligations exceed c ollections. For example, in

November FY 2004

, cumulative obligations exceeded collections by 9.4 percent , or the

cumulative balance (collections minus obligations) was

- 9.4 percent . This was an unusual year

and operational adjustments were made to ensure DEA did not spen d beyond funds that were

available.

Therefore, OCF needs to be sufficient to cover the maximum difference between c umulative

o bligations and c umulative c ollections at any given month in the year.

Model historical data as a triangular probability distribu tion

, 5 

### f or ex ample

, in the month of

November:

Cumulative O bligation

o Maximum: 16.66%

o Minimum: 10.70%

o Average /Mode : 12.97 %.

Cumulative Collection

o Maximum: 13.39%

o Minimum: 7.23%

o Average /Mode : 11.65%



### In a given year, there may have been instances where spending was altered due to low

collections. Since the purpose of the OCF is to prevent adjusting operations/spending as a result

of low collections, collections and obligations are modeled independently to prevent this

relationship from influencing the m odel.

Using Monte

- Carlo 6 

### simulation (10,000 iterations)

, the maximum negative minimum balance

( cumula tive collections minus obligations) was determined . T he t able below shows an example

of one iteration . T he minimum balance is

- 3.61 percent in April.

5 Triang ular distribution in this example means that future cumulative collections in November will be at a

minimum 7.23 percent, a maximum 13.39 percent, and most likely 11.65 percent.

6 Monte Carlo simulation (named after Monte Carlo, Monaco, where games of chan ce are a popular attraction) is an

iterative method where variables are randomly varied according to the assumed probability distribution. Aided by a

computer, numerous iterations (10,000 in this case) result in numerous outcomes. The results define the probability

of different outcomes occurring.New Registrant Fee Schedule Calculati ons



### 22

Results of the 10,000 iterations are summarized by the below probability density function.

The results indicate that of the 10,000 iterations the lowest minimum balance is

- 9.64 percent

, the highest minimum balance is 0.00 percent and on average the minimum balance is

- 4.47

percent . Also, 95 percent of the outcomes are above

- 7.00 percent , which m ean s that only five

percent of the time the cumulative obligations w ere more than seven percent of cumulative

collections. Alternativel y, having a seven percent OCF has a 95 percent likelihood of being

enough to fund DCP operations without operational adjustments as a result of fluctuations and

differences between collections and obligations.

DEA has decided that the five percent risk of having to adjust operations as a result of month

- to

month fluctuations/ differences in collections and obligations is a tolerable risk. Therefore, a

sufficient amount for purpose number two above is seven percent of planned obligations/budget.

C ombining the two components of the OCF , the Target OCF Balance is $15 million plus seven

percent of planned obligations.New Registrant Fee Schedule Calculati ons



### 23



## Appendix 3 : Estimated Number of Registration Fee Transactions

The estimated number of registration fee transactions is a forecast based on a ten year history of

registration fee transactions

.

Below is a summary of the forecasted number of registrations. Groups A, B, C, D, and M are on

three year registration cycles. Thus

, the number of annual registration fee transactions is roughly

one

- th ird of the population of paying registrants.

Group Business Activity 2012 2013 2014 Total

3 year registration A Pharmacy 25,270 22,823 25,367 73,460

B Hospital/Clinic 4,457 4,553 4,512 13,522

C Practitioner 376,768 367,226 382,387 1,126,381

D Teaching Institution 81 68 65 214

M Mid

- level Practitioner (MLP) 72,978 75,076 84,448 232,502

1 year registration E Manufacturer 521 517 510 1,548

F Distributor 773 778 782 2,333

G Researcher/Canine Handler 4,143 4,255 4,373 12,771

H Analytical Lab 868 868 868 2,604

J Importer 213 217 220 650

K Exporter 248 249 250 747

L Reverse Distributor 66 67 68 201

N Maintenance 171 174 177 522

P Detoxification 81 80 79 240

R Maintenance & Detox 912 928 943 2,783

S Compounder/Maintenance 4 4 4 12

T Compounder/Detoxification 1 1 1 3

U Compounder/Maintenance/Detox 59 59 59 177

W Chemical Manufacturer 191 167 148 506

X Chemical Importer 200 201 202 603

Y Chemical Distributor 480 414 364 1,258

Z Chemical Exporter 169 173 177 519

Total 488,654 478,898 506,004 1,473,556



### The f orecast ed number of registration fee transactions is based on the following mathematical

expressions:

[New Registration Fee Transactions ] + [ Registration Renewal Transactions ] = [Total Registration Fee

Transactions ]

Wh ere

,New Registrant Fee Schedule Calculati ons



### 24

[ Registration Renewal Transactions ] = [Total Registration Fee Transactions , previous period] x

[Retention Rate]

And

,

[Retention Rat e] = average of historical ( Registration Renewal Transactions divided by Total

Registration Fee Transactions Previous Period)

“Previous Period” = 3 years for Business Activities on 3 year registrations, 1 year for Business

Activities on 1 year registration s



### The following steps were taken to generate the forecast (refer to the detailed table below) :

1. Get historical data

a. Query historical numbers for [New Registration Fee Transactions ] and [ Registration

Renewal Transactions ] by Registrant Group (Business Activity) for each of the 10 years.

b. Sum the two numbers to get [Total Registration Fee Transactions ]

c. Calculate [Retention Rate] for each year by dividing the [ Registration Renewal

Transactions ] by [Total Registration Fee Transactions , previous period].

d. Cal culate [Average Retention Rate]

2. Forecast [New Registration Fee Transactions ] for FY 2012 to FY 2014

a. Examine FY 2001 to FY 2010 [New Registration Fee Transactions ] for any discernible

trends

.

i. Examination of the historical number of new registrants showed th at some

registrant groups had a well

- defined trend line (low scatter), while other s did

not (large scatter). Trend lines were used to project new registrants for

registrant groups with well

- defined trend lines, while an a verage was used for

registrant groups with large scatter. Although a trend line can be

mathematically generated on a registrant group with large scatter, the

confidence level on the trend line would be low.

ii. Additionally, trend lines for some groups changed over time

. For the registran t

groups that did have a noticeable change in new registrants, a five year history

is used to not skew the data with data prior to the fee increase. For the

registrant groups that did not have a noticeable drop in new registrants, a ten

year history is us ed

.

b. If there is a discernible trend, linear regression 7 is used to develop a trend line and

forecast 8 [New Registration Fee Transactions ] for FY 2011 to FY 2014. If the use of trend

line results in unrealistic values, then professional judgment is used

.

7 Linear regression is a statistical approach used to calculate a straight line that best fits the data: historical number

of new registration fee transactions by year. The calculated line is used to forecast the number of registration fee

transactions for future years.New Registrant Fee Schedule Calculati ons



### 25 c. I f the trend is indiscernible, the average of FY 2001 to FY 2010 [New Registration Fee

Transactions ] is used to forecast [New Paying Registration] for FY 2011 to FY 2014.

d. Use five or ten years of data based on historical data examination in step 2.a.ii above.

[New Registration Forecast Method] in the table below indicates whether five or ten

year history was used and whether a trend line or average was used to forecast [New

Paying Registration] for FY 2012 to F Y 2014.

3. Forecast [ Registration Renewal Transactions ] for FY 2012 to FY 2014

a. Use [Average Retention Rate] as the [Retention Rate] for years FY 2012 to FY 2014.

b. Multiply [Total Registration Fee Transactions , previous period] by [Retention Rate] for

[ Registra tion Renewal Transactions ]

i. For groups A, B, C, D, M ( Three year registrations):

[Total Registration Fee Transactions , FY 2009 ] * [Retention Rate, FY 2012 ]

= [ Registration Renewal Transactions , FY 2012 ]

ii. For all other groups ( One year registrations):

[Total Reg istration Fee Transactions , FY 2011 ] * [Retention Rate, FY 2012 ]

= [ Registration Renewal Transactions , FY 2012 ]

4. Forecast [Total Registration Fee Transactions ] for FY 2012 to FY 2014

a. Sum [New Registration Fee Transactions , FY 2012 ] from step 2 and [Paying Renewal,

FY 2012 ] from step 3 for [Total Registration Fee Transactions , FY 2012 ]

b. Repeat steps 3 and 4.a for FY 2013 and FY 2014 for [Total Registration Fee Transactions ]

for FY 2013 to FY 2014.

8 Used “FORECAST” function in MS Excel. From Microsoft Office Excel 2007 Help: “(FORECAST function)

Calculates, or predicts, a future value by using existing values. The predicted value is a y

- value for a given x

- value.

The known values are existing x

- values and y

- values, and the new value is predicted by using linear regression.

You can use this function to predict future sales, inventory requirements, or consumer tr ends. ”

### 26New Registrant Fee Schedule Calculati ons



### 27