Federal User Fees: Fee Design Options and Implications for Managing Revenue Instability
Published: 2013-09-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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. 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.
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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: In 2012, the federal government collected nearly $300 billion 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. 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.
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.
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,  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).
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. 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  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.
subsections: section_title: Background
paragraphs: 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  burden) that can influence the effectiveness of user fees to fund activities  that provide benefits to identifiable users.
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.  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.
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   For agencies whose fee collections are available for obligation on a  both. 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).
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.
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.
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) 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.
subsections: section_title: The United States Mint (Mint)
paragraphs: 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.
section_title: The Federal Communications Commission (FCC)
paragraphs: 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; 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. 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.
section_title: Fee Design Affects the Balance between Congressional Control and Agency Flexibility and Has Implications for Program Management
subsections: section_title: Congress Delegates or Retains Varying Degrees of Decision-Making Authority Depending on How It Designs Key Aspects of User Fees
paragraphs: 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. 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.
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.
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 Act requires federal agencies to review user fees biennially  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. 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. As  a result, USCIS had to increase fees by an average of 86 percent to align  them with its costs.    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. 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.
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  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. 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.
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. 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. 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.
Figure 3 shows the key design options related to an agency’s access to  and use of its fee collections.
For examples, see GAO-08-386SP and GAO-12-514R.
GAO-12-514R. technology systems to modernize the USPTO. In 2012, we reported a  backlog of over 640,000 patent applications.
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.
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, 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  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. 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.
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. 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  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, and that effectively  communicating with stakeholders involves sharing relevant analysis and  information as well as providing opportunities for stakeholder input.
section_title: Agencies Manage Unobligated Balances Differently Depending on Whether They Represent Operating Reserves or Reflect the Timing of Collections and Outlays
paragraphs: 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.
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.
subsections: section_title: U.S. Patent and Trademark Office’s Unobligated Balances are a Long-term Strategy to Manage Revenue Instability
paragraphs: 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. 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  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.
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.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   The two  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.
section_title: The Mint’s Unobligated Balance Represents a Reserve to Address Policy Changes, Collection Declines and Increased Costs
paragraphs: 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 cash- intensive 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.
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.
section_title: Federal Communications Commission’s Unobligated Balance Largely Reflects the Timing of Collections and Outlays
paragraphs: 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, 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 no- year 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.
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    With respect to USF contributions, FCC officials reported  expended.that the approximately $3 billion in unobligated balances from USAC’s  USF amounts 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.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.
A significant length of time can lapse between contribution  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.
section_title: Considering Key Questions About Costs and Collections Can Enable Congress and Agencies to Identify and Manage Revenue Instability
paragraphs: 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. 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.
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. provides a summary of the key questions discussed below.
subsections: section_title: What Data and Analysis are Needed to Identify and Manage Revenue Instability?
paragraphs: 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.
See GAO-08-386SP for the questions to consider when designing and implementing  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.
GAO-13-268. 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.
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  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.
section_title: What Factors Could Affect the Timing and Pattern of Collections?
paragraphs: 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  user fees for every commercial truck, private aircraft, and private vessel  for which the fees are due.
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.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.
What external known or unknown events could affect fee  collections?
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.
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. 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.
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  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.
section_title: What Factors Can Affect Costs in Fee-funded Programs?
paragraphs: 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.
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, two planned infrastructure improvements.
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.
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.
section_title: Decision Makers Can Manage Revenue Instability By More Closely Aligning Fees and Costs and Using Reserve Funds
paragraphs: 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 long- term. 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.
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.
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. Program managers may  also consider what mechanisms exist within the agency to track reserve  balances.
What is the goal of the reserve?
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.
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.
section_title: Concluding Observations
paragraphs: 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 fee- funded 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.
section_title: Agency Comments & Our Evaluation
paragraphs: 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.
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.
section_title: Appendix I: Key Fee Design Decisions Allow for Agency Flexibility or Congressional Control
subsections: section_title: Key design questions
paragraphs: 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.
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.  For what purposes may  the collections be used?  Congress assigns the  purpose(s) for which the  collections can be used.
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.
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.
section_title: Key design questions
paragraphs: 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.
GAO-08-386SP.
section_title: Appendix II: Key Questions about Costs and Collections to Enable Congress and Agencies to Identify and Manage Revenue Instability
paragraphs: Appendix II: Key Questions about Costs and  Collections to Enable Congress and Agencies  to Identify and Manage Revenue Instability 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?
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?
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?
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: 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.
section_title: Related GAO Products
paragraphs: 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.
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.