Federal User Fees:

Budgetary Treatment, Status, and Emerging Management Issues

AIMD-98-11: Published: Dec 19, 1997. Publicly Released: Dec 19, 1997.

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Paul L. Posner
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Pursuant to a congressional request, GAO identified 27 agencies that rely on federal user fees for a significant portion of their budget, focusing on: (1) identifying of changes in agency reliance on user fees since passage of the Budget Enforcement Act (BEA) of 1990; (2) describing the ways user fees are structured in the budget, including what budgetary controls govern the availability and use of theses fees and how they are treated under BEA; and (3) identifying of issues for consideration in the future design and management of user fees.

GAO noted that: (1) since the 1990 enactment of BEA, the 27 agencies in its review have increased or maintained their reliance on user fees as a source of funding; (2) several of the regulatory agencies GAO surveyed were given authority to substantially increase user fee collections and to use these fees for program purposes; (3) importantly, most new user fees enacted between fiscal years 1991 and 1996 were authorized to offset discretionary spending; (4) the Congress authorized new user fees either: (a) to maintain program size by replacing general fund appropriations, which may then be used to fund other activities or (b) to increase program size without increasing budget authority and outlay totals; (5) this growth in new and existing fees does not add to the amount of spending that is scored under BEA discretionary spending limits, but frees up discretionary resources for other purposes; (6) although federal agencies often collect user fees for similar purposes, not all user fees are treated alike in the federal budget; (7) some user charges must be deposited in the general fund of the U.S. Treasury, while others are required by law to provide funding for specific purposes; (8) yet, even when fees are dedicated to the agency or activities that generated the fee, there are differences in when and how the fees are made available to the agency and in how much flexibility agencies have in using the fee revenue; (9) the attempt to distinguish between fees collected for the government's business-type activities from those derived from the government's power to tax was always problematic; (10) how fees are categorized has become increasingly important by the fact that under BEA scoring rules some fees are netted against their accounts' budget authority and outlay spending and not counted against discretionary spending limits; (11) the disparate treatment of fees--particularly those associated with discretionary spending--raises issues for congressional control, agency management, and competition for limited federal resources; (12) in shifting to a more fee-reliant government, inconsistencies in budgetary treatment of fees with similar characteristics are likely to increase; (13) unlike agencies that rely primarily on appropriated funds from general revenues, both the Congress and fee-reliant agencies face additional policy and management issues such as how to: (a) meet the needs for accountability to both the Congress and fee payers, including agreement on priorities and the appropriate assessment of fees and (b) define the relationship between fee-financed and appropriated activities, particularly if resource disparities between the two groups increase.

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