Circular No. A-25
Revised
(Transmittal Memorandum No. 1)
MEMORANDUM FOR HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: User charges
1. Purpose
2. Rescission
3. Authority
4. Coverage
5. Objectives
6. General Policy
7. Implementation
8. Agency
Repsonsibility
9. Disposition of Collections
10. New Activities
11. Inquiries
1. Purpose: The Circular establishes Federal
policy regarding fees assessed for Government services and for sale or use of
Government goods or resources. It provides information on the scope and types
of activities subject to user charges and on the basis upon which user charges
are to be set. Finally, it provides guidance for agency implementation of
charges and the disposition of collections.
2. Rescission: This rescinds Office of
Management and Budget Circular No. A-25, dated September 23, 1959, and
Transmittal Memoranda 1 and 2.
3. Authority:Title V of the Independent Offices
Appropriations Act of 1952 (31 U.S.C. 9701); 31 U.S.C. 1111; and Executive
Orders No. 8248 and No. 11,541.
4. Coverage:
a. The provisions of this Circular cover all Federal activities that
convey special benefits to recipients beyond those accruing to the general
public. The Circular does not apply to the activities of the legislative and
judicial branches of Government, or to mixed-ownership Government corporations,
as defined in 31 U.S.C. 9701.
b. The provisions of the Circular shall be applied by agencies in their
assessment of user charges under the IOAA. In addition, this Circular provides
guidance to agencies regarding their assessment of user charges under other
statutes. This guidance is intended to be applied only to the extent permitted
by law. Thus, where a statute prohibits the assessment of a user charge on a
service or addresses an aspect of the user charge (e.g., who pays the charge;
how much is the charge; where collections are deposited), the statute shall
take precedence over the Circular. In such cases (e.g., sale or disposal under
Federal surplus property statutes; or fringe benefits for military personnel
and civilian employees), the guidance provided by the Circular would apply to
the extent that it is not inconsistent with the statute. The same analysis
would apply with regard to executive orders that address user charges.
c. In any case where an Office of Management and Budget circular
provides guidance concerning a specific user charge area, the guidance of that
circular shall be deemed to meet the requirements of this Circular. Examples of
such guidance include the following: OMB Circular No. A-45, concerning charges
for rental quarters; OMB Circular No. A-130, concerning management of Federal
information resources; and OMB Circular No. A-97, concerning provision of
specialized technical services to State and Local governments.
5. Objectives: It is the objective of the United
States Government to:
a. ensure that each service, sale, or use of Government goods or
resources provided by an agency to specific recipients be self-sustaining;
b. promote efficient allocation of the Nation's resources by
establishing charges for special benefits provided to the recipient that are at
least as great as costs to the Government of providing the special benefits;
and
c. allow the private sector to compete with the Government without
disadvantage in supplying comparable services, resources, or goods where
appropriate.
6. General policy: A user charge, as described
below, will be assessed against each identifiable recipient for special
benefits derived from Federal activities beyond those received by the general
public. When the imposition of user charges is prohibited or restricted by
existing law, agencies will review activities periodically and recommend
legislative changes when appropriate. Section 7 gives guidance on drafting
legislation to implement user charges.
a. Special benefits
- Determining when special benefits exist. When a service (or
privilege) provides special benefits to an identifiable recipient beyond those
that accrue to the general public, a charge will be imposed (to recover the
full cost to the Federal Government for providing the special benefit, or the
market price). For example, a special benefit will be considered to accrue and
a user charge will be imposed when a Government service:
- (a) enables the beneficiary to obtain more immediate or
substantial gains or values (which may or may not be measurable in monetary
terms) than those that accrue to the general public (e.g., receiving a patent,
insurance, or guarantee provision, or a license to carry on a specific activity
or business or various kinds of public land use); or
(b) provides business stability or contributes to public
confidence in the business activity of the beneficiary (e.g., insuring deposits
in commercial banks); or
(c) is performed at the request of or for the convenience of
the recipient, and is beyond the services regularly received by other members
of the same industry or group or by the general public (e.g., receiving a
passport, visa, airman's certificate, or a Custom's inspection after regular
duty hours).
- Determining the amount of user charges to assess.
- (a) Except as provided in Section 6c, user charges will be
sufficient to recover the full cost to the Federal Government (as defined in
Section 6d) of providing the service, resource, or good when the Government is
acting in its capacity as sovereign.
(b) Except as provided in Section 6c, user charges will be
based on market prices (as defined in Section 6d) when the Government, not
acting in its capacity as sovereign, is leasing or selling goods or resources,
or is providing a service (e.g., leasing space in federally owned buildings).
Under these business- type conditions, user charges need not be limited to the
recovery of full cost and may yield net revenues.
(c) User charges will be collected in advance of, or
simultaneously with, the rendering of services unless appropriations and
authority are provided in advance to allow reimbursable services.
(d) Whenever possible, charges should be set as rates rather
than fixed dollar amounts in order to adjust for changes in costs to the
Government or changes in market prices of the good, resource, or service
provided (as defined in Section 6d).
- In cases where the Government is supplying services, goods, or
resources that provide a special benefit to an identifiable recipient and that
also provide a benefit to the general public, charges should be set in
accordance with paragraph (2) of Section 6a. Therefore, when the public obtains
benefits as a necessary consequence of an agency's provision of special
benefits to an identifiable recipient (i.e., the public benefits are not
independent of, but merely incidental to, the special benefits), an agency need
not allocate any costs to the public and should seek to recover from the
identifiable recipient either the full cost to the Federal Government of
providing the special benefit or the market price, whichever applies.
- No charge should be made for a service when the identification of the
specific beneficiary is obscure, and the service can be considered primarily as
benefiting broadly the general public.
b. Charges to the direct recipient. Charges will be made to the direct
recipient of the special benefit even though all or part of the special
benefits may then be passed to others.
c. Exceptions
- Agency heads or their designee may make exceptions to the general
policy if the provision of a free service is an appropriate courtesy to a
foreign government or international organization; or comparable fees are set on
a reciprocal basis with a foreign country.
- Agency heads or their designee may recommend to the Office of
Management and Budget that exceptions to the general policy be made when:
- All exceptions shall be for a period of no more than four years
unless renewed by the agency heads or their designee for exceptions granted
under Section 6c(1) or the Office of Management and Budget for exceptions
granted under Section 6c(2) after a review to determine whether conditions
warrant their continuation.
- Requests for exceptions and extensions under paragraphs (2) and (3)
of Section 6c shall be submitted to the Director of the Office of Management
and Budget.
d. Determining full cost and market price
- ``Full cost'' includes all direct and indirect costs to any part of
the Federal Government of providing a good, resource, or service. These costs
include, but are not limited to, an appropriate share of:
- (a) Direct and indirect personnel costs, including salaries and
fringe benefits such as medical insurance and retirement. Retirement costs
should include all (funded or unfunded) accrued costs not covered by employee
contributions as specified in Circular No. A-11.
(b) Physical overhead, consulting, and other indirect costs
including material and supply costs, utilities, insurance, travel, and rents or
imputed rents on land, buildings, and equipment. If imputed rental costs are
applied, they should include:
(c) The management and supervisory costs.
(d) The costs of enforcement, collection, research,
establishment of standards, and regulation, including any required
environmental impact statements.
(e) Full cost shall be determined or estimated from the best
available records of the agency, and new cost accounting systems need not be
established solely for this purpose.
- ``Market price'' means the price for a good, resource, or service
that is based on competition in open markets, and creates neither a shortage
nor a surplus of the good, resource, or service.
- (a) When a substantial competitive demand exists for a good,
resource, or service, its market price will be determined using commercial
practices, for example:
- (i) by competitive bidding; or
(ii) by reference to prevailing prices in competitive
markets for goods, resources, or services that are the same or similar to those
provided by the Government (e.g., campsites or grazing lands in the general
vicinity of private ones) with adjustments as appropriate that reflect demand,
level of service, and quality of the good or service.
(b) In the absence of substantial competitive demand, market
price will be determined by taking into account the prevailing prices for
goods, resources, or services that are the same or substantially similar to
those provided by the Government, and then adjusting the supply made available
and/or price of the good, resource, or service so that there will be neither a
shortage nor a surplus (e.g., campsites in remote areas).
7. Implementation:
a. The general policy is that user charges will be instituted through
the promulgation of regulations.
b. When there are statutory prohibitions or limitations on charges,
legislation to permit charges to be established should be proposed. In general,
legislation should seek to remove restraints on user charges and permit their
establishment under the guidelines provided in this Circular. When passage of
this general authority seems unlikely, more restrictive authority should be
sought. The level of charges proposed should be based on the guidelines in
Section 6. When necessary, legislation should:
- define in general terms the services for which charges will be
assessed and the pricing mechanism that will be used;
- specify fees will be collected in advance of, or simultaneously with,
the provision of service unless appropriations and authority are provided in
advance to allow reimbursable services;
- specify where collections will be credited (see Section 9).
Legislative proposals should not normally specify precise charges. The user
charge schedule should be set by regulation. This will allow administrative
updating of fees to reflect changing costs and market values. Where it is not
considered feasible to collect charges at a level specified in Section 6,
charges should be set as close to that level as is practical.
c. Excise taxes are another means of charging specific beneficiaries
for the Government services they receive. New user charges should not be
proposed in cases where an excise tax currently finances the Government
services that benefit specific individuals. Agencies may consider proposing a
new excise tax when it would be significantly cheaper to administer than fees,
and the burden of the excise tax would rest almost entirely on the user
population (e.g., gasoline tax to finance highway construction). Excise taxes
cannot be imposed through administrative action but rather require legislation.
Legislation should meet the same criteria as in Section 7b; however, it is
necessary to state explicitly the rate of the tax. Agency review of these taxes
must be performed periodically and new legislation should be proposed, as
appropriate, to update the tax based on changes in cost. Any excise tax
proposals must be approved by the Assistant Secretary for Tax Policy at the
Department of the Treasury.
d. When developing options to institute user charges administratively,
agencies should review all sources of statutory authority in addition to the
Independent Offices Appropriations Act that may authorize implementation of
such charges.
e. In proposing new charges or modifications to existing ones, managers
of other programs that provide special benefits to the same or similar user
populations should be consulted. Joint legislative proposals should be made,
and joint collection efforts designed to ease the burden on the users should be
used, whenever possible.
f. Every effort should be made to keep the costs of collection to a
minimum. The principles embodied in Circular No. A-76 (Performance of
Commercial Activities) should be considered in designing the collection
effort.
g. Legislative proposals must be submitted to the Office of Management
and Budget in accordance with the requirements of Circular No. A-19. To ensure
the proper placement of user fee initiatives in the budget account structure,
agencies are encouraged to discuss proposals with OMB at an early stage of
development.
8. Agency responsibility: Agencies are
responsible for the initiation and adoption of user charge schedules consistent
with the policies in this Circular. Each agency will:
a. Identify the services and activities covered by this Circular;
b. Determine the extent of the special benefits provided;
c. Apply the principles specified in Section 6 in determining full cost
or market price, as appropriate;
d. Apply the guidance in Section 7 either to institute charges through
the promulgation of regulations or submit legislation as appropriate;
e. Review the user charges for agency programs biennially, to include:
(1) assurance that existing charges are adjusted to reflect unanticipated
changes in costs or market values; and (2) a review of all other agency
programs to determine whether fees should be assessed for Government services
or the user of Government goods or services. Agencies should discuss the
results of the biennial review of user fees and any resultant proposals in the
Chief Financial Officers Annual Report required by the Chief Financial Officers
Act of 1990;
f. Ensure that the requirements of OMB Circular No. A- 123 (Internal
Control Systems) and appropriate audit standards are applied to collection;
g. Maintain readily accessible records of:
- the services or activities covered by this Circular;
- the extent of special benefits provided;
- the exceptions to the general policy of this Circular;
- the information used to establish charges and the specific method(s)
used to determine them; and
- the collections from each user charge imposed.
- Maintain adequate records of the information used to establish
charges and provide them upon request to OMB for the evaluation of the
schedules and provide data on user charges to OMB in accordance with the
requirements in Circular No. A-11.
9. Disposition of collections:
a. Unless a statute provides otherwise, user charge collections
will be credited to the general fund of the Treasury as miscellaneous receipts,
as required by 31 U.S.C. 3302.
b. Legislative proposals to permit the collections to be retained
by the agency may be appropriate in certain circumstances. Proposals should
meet the guidelines in Section 7b.
Proposals that allow agency retention of collections may be
appropriate when a fee is levied in order to finance a service that is intended
to be provided on a substantially self-sustaining basis and thus is dependent
upon adequate collections.
- Generally, the authority to use fees credited to an agency's
appropriations should be subject to limits set in annual appropriations
language. However, it may be appropriate to request exemption from annual
appropriations control, if provision of the service is dependent on demand that
is irregular or unpredictable (e.g., a fee to reimburse an agency for the cost
of overtime pay of inspectors for services performed after regular duty hours).
- As a normal rule, legislative proposals that permit fees to be
credited to accounts should also be consistent with the full-cost recovery
guidelines contained in this Circular. Any fees in excess of full- cost
recovery and any increase in fees to recover the portion of retirement costs
which recoups all (funded or unfunded) accrual costs not covered by employee
contributions should be credited to the general fund of the Treasury as
miscellaneous receipts.
10. New activities: Whenever
agencies prepare legislative proposals for new or expanded Federal activities
that would provide special benefits, the policies and criteria set forth in
this Circular will apply.
11. Inquiries: For information
concerning this Circular, consult the Office of Management and Budget examiner
responsible for the agency's budget estimates.
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