Individual Fishing Quotas
Management Costs Varied and Were Not Recovered as Required Gao ID: GAO-05-241 March 11, 2005Overfishing may have significant environmental and economic consequences. One tool used to maintain fisheries at sustainable levels is the individual fishing quota (IFQ), which sets individual catch limits for eligible vessel owners or operators. This is GAO's third study on IFQ programs. For this study, GAO determined (1) the costs of managing (i.e., administering, monitoring, and enforcing) IFQ programs and how these costs differ from pre-IFQ management costs; (2) what, if any, IFQ management costs are currently being recovered by the National Marine Fisheries Service (NMFS); and (3) ways to share the costs of IFQ programs between government and industry.
Fiscal year 2003 management costs varied considerably among IFQ programs. According to fishery managers, halibut and sablefish program costs were higher and surfclam/ocean quahog program costs were lower, when compared with pre-IFQ management costs. Although complete cost information was not available, GAO aggregated cost estimates from information provided by NMFS and other organizations involved in IFQ-related activities and estimated that fiscal year 2003 IFQ management costs were at least $3.2 million for the Alaska halibut and sablefish program, $274,000 for the surfclam/ocean quahog program, and $7,600 for the wreckfish program. While NMFS does not systematically track the costs of managing IFQ programs and does not have complete information on pre-IFQ management costs, fishery managers said management costs were greater under the halibut and sablefish IFQ program than under pre-IFQ management, in part, because of the IFQ program's complex rules. In contrast, fishery managers said costs were less under the surfclam/ocean quahog IFQ program than under pre-IFQ management, in part, because the simplicity of the program's design made it easier to monitor compliance. Moreover, according to fishery managers, NMFS incurred additional costs for the development and initial implementation of both programs. NMFS is not recovering management costs as required by the Magnuson- Stevens Act for two of the three IFQ programs. Under the act, as amended by the 1996 Sustainable Fisheries Act, NMFS is required to recover the "actual costs directly related to the management and enforcement" of all IFQ programs. NMFS has implemented cost recovery for the halibut and sablefish program, but it has not done so for the surfclam/ocean quahog or wreckfish programs. NMFS officials said that cost recovery for the surfclam/ocean quahog program has been a low priority and very few people were fishing wreckfish. Also, the Magnuson-Stevens Act does not define "actual costs directly related to the management and enforcement" of an IFQ program. NMFS has interpreted the term to mean those costs that would not have been incurred but for the IFQ program (i.e., the incremental costs). However, another way to interpret the term "actual costs directly related to" is full costs. Under a "full cost" approach, NMFS could have recovered more costs of managing the IFQ program. Several methods are used for sharing IFQ management costs between government and industry. These methods principally fall into three categories: user fees, quota set-asides, and devolution of services. Under user fees, government recovers costs by collecting a fee from the quota holder or fisherman. Under a quota set-aside, government can set aside (i.e., not allocate) a certain amount of quota each year, lease the set-aside quota to fishermen, and use the revenue to pay for program management costs. Finally, under devolution of services, management services previously performed by government, such as monitoring compliance with individual catch limits, are transferred to industry.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-241, Individual Fishing Quotas: Management Costs Varied and Were Not Recovered as Required
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Report to Congressional Requesters:
March 2005:
Individual Fishing Quotas:
Management Costs Varied and Were Not Recovered as Required:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-241]:
GAO Highlights:
Highlights of GAO-05-241, a report to congressional requesters:
Why GAO Did This Study:
Overfishing may have significant environmental and economic
consequences. One tool used to maintain fisheries at sustainable levels
is the individual fishing quota (IFQ), which sets individual catch
limits for eligible vessel owners or operators. This is GAO's third
study on IFQ programs. For this study, GAO determined (1) the costs of
managing (i.e., administering, monitoring, and enforcing) IFQ programs
and how these costs differ from pre-IFQ management costs; (2) what, if
any, IFQ management costs are currently being recovered by the National
Marine Fisheries Service (NMFS); and (3) ways to share the costs of IFQ
programs between government and industry.
What GAO Found:
Fiscal year 2003 management costs varied considerably among IFQ
programs. According to fishery managers, halibut and sablefish program
costs were higher and surfclam/ocean quahog program costs were lower,
when compared with pre-IFQ management costs. Although complete cost
information was not available, GAO aggregated cost estimates from
information provided by NMFS and other organizations involved in IFQ-
related activities and estimated that fiscal year 2003 IFQ management
costs were at least $3.2 million for the Alaska halibut and sablefish
program, $274,000 for the surfclam/ocean quahog program, and $7,600 for
the wreckfish program. While NMFS does not systematically track the
costs of managing IFQ programs and does not have complete information
on pre-IFQ management costs, fishery managers said management costs
were greater under the halibut and sablefish IFQ program than under pre-
IFQ management, in part, because of the IFQ program's complex rules. In
contrast, fishery managers said costs were less under the
surfclam/ocean quahog IFQ program than under pre-IFQ management, in
part, because the simplicity of the program's design made it easier to
monitor compliance. Moreover, according to fishery managers, NMFS
incurred additional costs for the development and initial
implementation of both programs.
NMFS is not recovering management costs as required by the Magnuson-
Stevens Act for two of the three IFQ programs. Under the act, as
amended by the 1996 Sustainable Fisheries Act, NMFS is required to
recover the "actual costs directly related to the management and
enforcement" of all IFQ programs. NMFS has implemented cost recovery
for the halibut and sablefish program, but it has not done so for the
surfclam/ocean quahog or wreckfish programs. NMFS officials said that
cost recovery for the surfclam/ocean quahog program has been a low
priority and very few people were fishing wreckfish. Also, the Magnuson-
Stevens Act does not define "actual costs directly related to the
management and enforcement" of an IFQ program. NMFS has interpreted the
term to mean those costs that would not have been incurred but for the
IFQ program (i.e., the incremental costs). However, another way to
interpret the term "actual costs directly related to" is full costs.
Under a "full cost" approach, NMFS could have recovered more costs of
managing the IFQ program.
Several methods are used for sharing IFQ management costs between
government and industry. These methods principally fall into three
categories: user fees, quota set-asides, and devolution of services.
Under user fees, government recovers costs by collecting a fee from the
quota holder or fisherman. Under a quota set-aside, government can set
aside (i.e., not allocate) a certain amount of quota each year, lease
the set-aside quota to fishermen, and use the revenue to pay for
program management costs. Finally, under devolution of services,
management services previously performed by government, such as
monitoring compliance with individual catch limits, are transferred to
industry.
What GAO Recommends:
To comply with the cost recovery requirements of the Magnuson-Stevens
Act, GAO recommends that the Secretary of Commerce direct the Director
of NMFS to (1) implement cost recovery for all IFQ programs and (2)
develop guidance as to which costs are to be recovered and, when actual
cost information is unavailable, how to estimate these costs. If the
Congress would like NMFS to recover other than incremental costs, it
may wish to clarify the IFQ cost recovery fee provision of the Magnuson-
Stevens Act.
NOAA reviewed a draft of this report and generally agreed with the
findings and recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-241.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Anu Mittal at (202) 512-
3841 or mittala@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Depending upon the IFQ Program, Management Costs Were Higher or Lower
Than Pre-IFQ Costs:
NMFS Has Not Recovered IFQ Management Costs as Required:
Several Methods Are Used for Sharing Costs between Government and
Industry:
Conclusions:
Matter for Congressional Consideration:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Descriptions of Individual Fishing Quota Programs in the
United States:
Surfclam/Ocean Quahog IFQ Program (1990):
Wreckfish IFQ Program (1992):
Halibut and Sablefish IFQ Program (1995):
Appendix III: Descriptions of Individual Fishing Quota Cost-Sharing
Programs in Selected Countries:
Australia:
Canada:
New Zealand:
Appendix IV: Comments from the Department of Commerce:
GAO Comments:
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Staff Acknowledgments:
Tables:
Table 1: Estimates of IFQ Management Costs by Program and Organization,
Fiscal Year 2003:
Table 2: IFQ Cost-Sharing Methods Used in Selected Countries:
Abbreviations:
IFQ: individual fishing quota:
NMFS: National Marine Fisheries Service:
NOAA: National Oceanic and Atmospheric Administration:
Letter March 11, 2005:
The Honorable Olympia J. Snowe:
United States Senate:
The Honorable John F. Kerry:
United States Senate:
Overfishing is a problem with significant environmental and economic
consequences. When a fishery--one or more fish stocks within a
geographic area--cannot be sustained because of overfishing, the marine
ecosystem in which those stocks live can be harmed, and fishermen and
their communities can experience economic hardship. Yet, about one-
third of the U.S. fish stocks assessed by the National Marine Fisheries
Service (NMFS), within the Department of Commerce's National Oceanic
and Atmospheric Administration (NOAA), are overfished or approaching an
overfished condition. Greater competition for fewer fish increases the
likelihood that stocks will decline further and catches will decrease.
One of the causes of overfishing is the excessive investment in fishing
capacity, such as when there are more boats than the fishery can
support. An individual fishing quota (IFQ) is one of the management
tools available to help reduce overcapacity and promote conservation.
Today, several countries, including the United States, use IFQ programs
to manage fisheries within their 200-mile exclusive economic zone (see
apps. II and III). In the United States, IFQ programs are developed
primarily by regional fishery management councils established by the
Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-
Stevens Act) in 1976 and implemented by NMFS. Under an IFQ program,
fishery managers set a total allowable catch in a particular fishery on
the basis of fish stock assessments and other indicators of biological
productivity, and the managers then allocate quota--the privilege to
harvest a certain portion of the catch--to eligible boats, fishermen,
or other recipients. IFQ program rules often allow a quota holder to
transfer quota by sale, lease, or other methods. Such transfers are
expected to reduce the number of fishermen and boats and consolidate
the quota among the more efficient fishermen. At the time of our
review, NMFS had implemented three IFQ programs: the Mid-Atlantic
surfclam/ocean quahog program in 1990, the South Atlantic wreckfish
(snapper-grouper complex) program in 1992, and the Alaskan halibut and
sablefish (black cod) program in 1995. In addition, at the time of our
review, an IFQ program had been approved but not yet implemented for
the Bering Sea crab; an IFQ program was being developed for the Gulf of
Mexico red snapper; and IFQ programs were being considered for other
commercial fisheries, such as the Gulf of Alaska groundfish (e.g.,
pollock, cod, and sole).
IFQ programs have achieved many of the desired conservation and
management benefits, such as helping to stabilize fisheries and
reducing excessive investment in fishing capacity. However, these
programs have also raised concerns, such as the costs of IFQ management
and the equity of gifting a public trust resource to a select group of
beneficiaries.
This is the third in a series of reports you requested on IFQ programs
as Chairman and Ranking Minority Member of the former Subcommittee on
Oceans, Fisheries, and Coast Guard, Senate Committee on Commerce,
Science, and Transportation. In December 2002, we reported on the
extent of consolidation of quota holdings, the extent of foreign
holdings of quota, and the economic effect of IFQ programs on seafood
processors.[Footnote 1] In February 2004, we reported on methods
available for protecting the economic viability of fishing communities
and facilitating new entry into IFQ fisheries, key issues facing
fishery managers in protecting communities and facilitating new entry,
and the comparative advantages and disadvantages of the IFQ system and
the fishery cooperative approach.[Footnote 2] For this report, you
asked us to (1) determine the costs of managing (i.e., administering,
monitoring, and enforcing) IFQ programs and how these costs differ from
pre-IFQ management costs; (2) determine what, if any, IFQ management
costs are currently being recovered by NMFS; and (3) assess ways to
share the costs of IFQ programs between government and industry.
To conduct this review, we visited locations in Alaska, Florida,
Massachusetts, New Jersey, and South Carolina. We selected these sites
to obtain broad geographic coverage for the three domestic IFQ
programs. In these locations and elsewhere, we interviewed fishery
participants; officials at NMFS, the U.S. Coast Guard, and state
enforcement agencies; representatives of the International Pacific
Halibut Commission; and fishery council staff. In Alaska and New
Jersey, we visited ports where we observed offloads of IFQ fish. In
addition, we obtained information from government officials from
Australia, Canada, and New Zealand because these countries share
fishery management costs with the fishing industry. Because NMFS does
not systematically track IFQ management costs, we estimated these costs
from information that we gathered for fiscal year 2003 from NMFS and
other organizations involved in IFQ-related activities. Since the data
we received appeared reasonable, given differences among the programs,
and were consistent with explanations of program operations and costs
provided by agency officials, we concluded that these data were
sufficiently reliable for purposes of this report. See appendix I for
additional details on our scope and methodology. We conducted our
review from February through December 2004 in accordance with generally
accepted government auditing standards.
Results in Brief:
IFQ management costs for fiscal year 2003 varied by program and,
according to fishery managers, when compared with pre-IFQ management
costs, were higher for the halibut and sablefish program and lower for
the surfclam/ocean quahog program. Although complete cost information
was not available, we aggregated cost estimates from information
provided by NMFS and other organizations involved in IFQ-related
activities and estimated that the fiscal year 2003 management costs of
(1) the Alaskan halibut and sablefish IFQ program amounted to at least
$3.2 million, or 1.4 percent of the dockside (known as ex-vessel) value
of the catch, and (2) the surfclam/ocean quahog program amounted to at
least $274,000, or less than 0.5 percent of the ex-vessel value.
Wreckfish program cost estimates amounted to $7,600, in part, because
only two boats were fishing wreckfish in 2003. Because NMFS does not
systematically track the costs of managing IFQ programs and does not
have complete information on pre-IFQ management costs, we could not
evaluate the difference between IFQ and pre-IFQ management costs.
However, fishery managers told us that halibut and sablefish management
costs were greater under the IFQ program than under pre-IFQ management,
in part, because of the program's complexity and longer fishing season.
In contrast, fishery managers said surfclam/ocean quahog management
costs were less under the IFQ program when compared with pre-IFQ
management, in part, because the simplicity of the program's design
made it easier to monitor compliance. Information on how wreckfish
management costs changed with the introduction of the IFQ program was
not available. In addition to the annual costs of managing IFQ
programs, according to fishery managers, NMFS and the fishery
management councils incurred additional costs to develop the halibut
and sablefish and the surfclam/ocean quahog IFQ programs and implement
them during the initial years. For example, according to Mid-Atlantic
Fishery Management Council staff, during each year of development of
the surfclam/ocean quahog IFQ program, council staff spent more than
twice as much time as they spent during fiscal year 2003 to manage the
IFQ program. According to a NMFS official, by the end of the second
year of the halibut and sablefish IFQ program, NMFS's Alaska Region was
dedicating the equivalent of five or six full-time staff to manage the
170 appeals regarding halibut and sablefish quota allocations, whereas
the region currently receives only 1 or 2 appeals each year.
NMFS is not recovering management costs for two of the three IFQ
programs as required by the Magnuson-Stevens Act. Under the act, as
amended by the 1996 Sustainable Fisheries Act, NMFS is required to
collect a fee, not to exceed 3 percent of the ex-vessel value of the
fish harvested, to recover the "actual costs directly related to the
management and enforcement" of all IFQ programs. While NMFS has
implemented cost recovery for the halibut and sablefish program, it has
not implemented cost recovery for the surfclam/ocean quahog or
wreckfish programs. NMFS officials told us that (1) they considered
cost recovery for the surfclam/ocean quahog program to be a low
priority and (2) very few people were fishing wreckfish. We are
recommending that NMFS implement cost recovery for all programs as
required. Also, the Magnuson-Stevens Act does not define "actual costs
directly related to the management and enforcement" of an IFQ program.
NMFS has interpreted the term to mean those costs that would not have
been incurred but for the IFQ program (i.e., the incremental costs).
Under this interpretation, NMFS does not include, for example, the cost
of performing the sablefish stock assessments because these assessments
would be done regardless of whether or not the fishery was managed
under an IFQ program. Applying the "incremental costs" approach, NMFS
identified and recovered about $3.2 million in halibut and sablefish
program costs for fiscal year 2003. However, another way to interpret
the term "actual costs directly related to" is full costs. Under a
"full cost" approach, NMFS could have recovered more costs of managing
the IFQ program. If the Congress would like NMFS to recover other than
incremental costs, it may wish to clarify the IFQ cost recovery fee
provision of the act.
Several methods are used for sharing the costs of IFQ management
between government and industry, each of which has advantages and
disadvantages. These methods principally fall into three categories:
user fees, quota set-asides, and devolution of services. Under the user
fee method, government recovers costs by collecting a fee from the
quota holder or fisherman. While user fees distribute management costs
to the immediate beneficiaries of the program, they directly affect a
fishing firm's profitability. Several countries, including the United
States, recover IFQ management costs through user fees, but the
features of each user fee program vary. Under the quota set-aside
method, government can set aside (i.e., not allocate) a certain amount
of quota each year and lease the set-aside quota to fishermen, using
the resulting revenue to pay for program management costs. A set-aside
program does not necessitate the collection of fees from each quota
holder. However, if the value of the quota is too low, the government
may not raise enough funds to cover the IFQ management costs. Finally,
under the devolution of services method, management services previously
performed by government, such as monitoring compliance with individual
quota limits, are transferred to industry. Giving industry
responsibility for such management services could reduce concerns about
potential government inefficiencies. However, by devolving services to
industry, government may be further removed from enforcement, making it
a greater challenge to ensure that industry is complying with the
program rules.
In commenting on a draft of this report, NOAA said that the report was
well researched and presented, and was responsive to the specific
requests made by the Congress. NOAA generally agreed with our findings
and recommendations. NOAA agreed to work with the Mid-Atlantic and
South Atlantic Fishery Management Councils to implement cost recovery
for the surfclam/ocean quahog and wreckfish IFQ programs. NOAA also
agreed to develop guidance regarding which costs are to be recovered,
because it will ensure the appropriate costs will be measured in a
consistent manner in all fisheries. NOAA's comments appear in appendix
IV.
Background:
The Magnuson-Stevens Fishery Conservation and Management Act provides
for the conservation and management of fishery resources in the United
States.[Footnote 3] Under the act, eight regional fishery management
councils--the New England, Mid-Atlantic, South Atlantic, Gulf of
Mexico, Caribbean, Pacific, North Pacific, and Western Pacific
councils--are responsible for developing plans for managing fisheries
in federal waters.[Footnote 4] To develop their plans, the councils
each use a collaborative process that involves advisory committees,
public hearings, and other means to ensure that interested parties have
an opportunity to provide input. Council staff then analyze the
information for use in plan development. Once a council adopts a plan,
NMFS drafts regulations to implement the plan. The council then submits
the plan and regulations to the Secretary of Commerce for approval. The
Secretary reviews the plan and proposed regulations for consistency
with U.S. law and with each other. The plan and proposed regulations
may then be published for public comment. Plans may be fully or
partially approved, or disapproved and returned to the council for
revision. If approved, regulations must be issued for implementation.
Once a fishery management plan is approved, NMFS is responsible for
implementing it. In the case of an IFQ program, NMFS must set up the
systems for collecting annual permit, logbook, and fish dealer data;
obtain records of qualifying catches and other information to determine
eligibility to hold quota share; process initial requests for quota;
and issue the initial quota share. The quota share represents a
percentage of the total allowable catch for the fishery, which a
fishery management council sets--typically each year--subject to NMFS's
confirmation. To set the total allowable catch, the council relies on
stock assessments performed by one of the NMFS regional fisheries
science centers. In the case of the halibut fishery, the International
Pacific Halibut Commission performs the stock assessment and sets the
total allowable catch.
Once a fishery management plan becomes operational, NMFS is responsible
for administering it. Administrative activities unique to an IFQ
program include, among others, calculating and distributing the annual
quota allocations, approving and processing quota transfers, and
monitoring compliance with program requirements. In addition,
administrative activities in early IFQ program years may include
adjudicating appeals of the initial allocation. Both NMFS and the
councils have responsibility for monitoring existing plans and
proposing any changes for approval and implementation by NMFS.
NMFS shares responsibility with the U.S. Coast Guard and state agencies
for enforcing the rules of a fishery management plan. For an IFQ
program, the Coast Guard generally conducts at-sea and aerial
surveillance of fishing activities, and NMFS contracts with state
agencies to assist its Office for Law Enforcement with inshore
activities, such as monitoring the landings for compliance with
individual catch limits. NMFS also audits the paper trail (consisting
of logbook, landings, and buyer records) created by the IFQ program.
The 1996 Sustainable Fisheries Act amended the Magnuson-Stevens Act to
require the Secretary of Commerce to recover "actual costs directly
related to the management and enforcement" of IFQ programs.[Footnote 5]
The act limits cost recovery fees to 3 percent of the ex-vessel value
of fish harvested under any IFQ program and further requires that the
fees be collected at the time of landing, at the time of filing a
landing report, at the time of sale during a fishing season, or during
the final quarter of the year when the fish is harvested. In addition,
the Secretary is authorized to reserve up to 25 percent of the fees
collected for use in an IFQ loan program to help finance the purchase
of quota share by entry-level fishermen and fishermen who fish from
small boats.
Depending upon the IFQ Program, Management Costs Were Higher or Lower
Than Pre-IFQ Costs:
Estimated IFQ management costs for fiscal year 2003 varied by program
and, according to fishery managers, when compared with pre-IFQ
management costs, were higher for the halibut and sablefish program and
lower for the surfclam/ocean quahog program. Whether management costs
were higher or lower than under the previous fishery management system
depended, in part, on the characteristics of the fishery, as well as
program complexity. Also, according to fishery managers, both the
fishery management councils and NMFS incurred additional costs
associated with the development and implementation of the halibut and
sablefish and surfclam/ocean quahog IFQ programs.
IFQ Management Costs Varied by Program:
We aggregated cost estimates for each IFQ program on the basis of
information provided by various organizations and estimated that the
management costs for fiscal year 2003 ranged from a high of at least
$3.2 million for the halibut and sablefish program to a low of $7,600
for the wreckfish program. Since NMFS does not systematically track the
costs of IFQ programs or the time spent on IFQ activities, we requested
cost information from NMFS and other organizations that performed IFQ-
related activities during fiscal year 2003. However, these
organizations did not or could not provide cost information for all of
their IFQ-related activities. (See app. I for information on the
organizations that provided data.) The estimated management costs shown
in table 1 varied significantly by program, in part, because of
differences in the number of program participants and program design.
For example, the halibut and sablefish program had the largest number
of quota holders--about 4,300--and a complex set of rules designed, in
part, to protect the owner-operator character of the fleet, such as
limits on the amount of quota an individual could hold and restrictions
on who could receive quota transfers. In contrast, the surfclam/ocean
quahog program had no more than 120 quota holders and a simpler set of
rules designed, in part, to minimize government regulation.[Footnote 6]
Table 1: Estimates of IFQ Management Costs by Program and Organization,
Fiscal Year 2003:
Organization: NMFS administration and review;
IFQ program: Halibut and sablefish: (4,311 quota holders)[A]: Amount:
$1,379,100;
IFQ program: Halibut and sablefish: Percent: 42.7%;
IFQ program: Surfclam/ocean quahog: (120 quota holders): Amount:
$196,000;
IFQ program: Surfclam/ocean quahog: Percent: 71.5%;
IFQ program: Wreckfish: (25 quota holders): Amount: $7,600;
IFQ program: Wreckfish: Percent: 100.0.
Organization: NOAA legal;
IFQ program: Halibut and sablefish: (4,311 quota holders)[A]: Amount:
[B];
IFQ program: Halibut and sablefish: Percent: [B]%;
IFQ program: Surfclam/ocean quahog: (120 quota holders): Amount:
$9,400;
IFQ program: Surfclam/ocean quahog: Percent: 3.4%;
IFQ program: Wreckfish: (25 quota holders): Amount: [B];
IFQ program: Wreckfish: Percent: [B].
Organization: NMFS enforcement;
IFQ program: Halibut and sablefish: (4,311 quota holders)[A]: Amount:
$1,665,700;
IFQ program: Halibut and sablefish: Percent: 51.6;
IFQ program: Surfclam/ocean quahog: (120 quota holders): Amount:
$14,400;
IFQ program: Surfclam/ocean quahog: Percent: 5.3%;
IFQ program: Wreckfish: (25 quota holders): Amount: [B];
IFQ program: Wreckfish: Percent: [B].
Organization: International Pacific Halibut Commission;
IFQ program: Halibut and sablefish: (4,311 quota holders)[A]: Amount:
$167,100;
IFQ program: Halibut and sablefish: Percent: 5.2%;
IFQ program: Surfclam/ocean quahog: (120 quota holders): Amount: [C];
IFQ program: Surfclam/ocean quahog: Percent: [C]%;
IFQ program: Wreckfish: (25 quota holders): Amount: [C];
IFQ program: Wreckfish: Percent: [C].
Organization: Fishery management councils[D];
IFQ program: Halibut and sablefish: (4,311 quota holders)[A]: Amount:
$19,100;
IFQ program: Halibut and sablefish: Percent: 0.6%;
IFQ program: Surfclam/ocean quahog: (120 quota holders): Amount:
$54,400;
IFQ program: Surfclam/ocean quahog: Percent: 19.8%;
IFQ program: Wreckfish: (25 quota holders): Amount: [B];
IFQ program: Wreckfish: Percent: [B].
Organization: Total;
IFQ program: Halibut and sablefish: (4,311 quota holders)[A]: Amount:
$3,231,000;
IFQ program: Halibut and sablefish: Percent: 100.1%;
IFQ program: Surfclam/ocean quahog: (120 quota holders): Amount:
$274,200;
IFQ program: Surfclam/ocean quahog: Percent: 100.0%;
IFQ program: Wreckfish: (25 quota holders): Amount: $7,600;
IFQ program: Wreckfish: Percent: 100.0%.
Source: GAO compilation of cost information provided by NMFS, NOAA, the
International Pacific Halibut Commission, and the North Pacific and Mid-
Atlantic Fishery Management Councils.
Note: Dollar amounts have been rounded to the nearest $100, and
percentages may not total 100 because of rounding.
[A] According to NMFS data, there were 3,435 halibut quota holders and
876 sablefish quota holders as of December 31, 2003. Persons holding
both halibut and sablefish quota are counted twice in the total.
[B] No cost information was provided.
[C] The International Pacific Halibut Commission conducts no activities
related to the surfclam/ocean quahog and wreckfish IFQ programs.
[D] Council costs for IFQ-related activities can vary by year. During
fiscal year 2003, for example, the North Pacific Council spent less
time on the halibut and sablefish IFQ program, so its IFQ costs were
lower than usual, whereas the Mid-Atlantic Council spent time setting
multiyear catch limits for the surfclam/ocean quahog fisheries, so its
IFQ costs were higher than usual.
[End of table]
On the basis of information provided to us by NMFS and other
organizations involved in IFQ-related activities, we determined that
the $3.2 million spent in fiscal year 2003 to manage the halibut and
sablefish program represented about 1.4 percent of the $236.5 million
ex-vessel value of the halibut and sablefish catch. Of the total spent
to manage the program, about 51.6 percent, or $1.7 million, was spent
on NMFS enforcement activities, such as dockside monitoring, and 42.7
percent, or $1.4 million, was spent on NMFS administrative activities,
such as managing IFQ permits and quota share transfers. The remaining
5.8 percent, or $186,100, was spent by the International Pacific
Halibut Commission to conduct halibut stock assessments, among other
things, and the North Pacific Fishery Management Council to perform IFQ-
related management activities, such as reviewing and revising the
program.[Footnote 7]
The reported fiscal year 2003 management costs for the surfclam/ocean
quahoq IFQ program totaled about $274,000 and represented about 0.45
percent of the $60 million ex-vessel value of the surfclam and ocean
quahog catch. NMFS administrative and review activities constituted
about 71.5 percent, or $196,000, of the cost, whereas NMFS enforcement
activities amounted to about 5.3 percent, or $14,400. The remaining
23.2 percent, or $64,800, consisted of costs incurred by the Mid-
Atlantic Fishery Management Council to review and amend the program and
by NOAA's Northeast Regional Counsel to provide legal advice on
measures considered by NMFS and the Mid-Atlantic Council.[Footnote 8]
The wreckfish IFQ program cost estimates totaled about $7,600 for
fiscal year 2003. Only two boats fished wreckfish during the 2003
fishing season. However, since NMFS cannot disclose ex-vessel value for
fewer than three participants for confidentiality reasons, estimated
wreckfish costs as a percentage of ex-vessel value were not available.
The estimated costs comprised NMFS administrative activities associated
with managing IFQ permits and quota shares for the wreckfish IFQ
program. According to NMFS officials, NMFS incurred no other costs
associated with the program's management during fiscal year 2003, and
cost information from the South Atlantic Fishery Management Council was
not available.
Whether IFQ Management Costs Were Higher or Lower Than Pre-IFQ Costs
Depended on Fishery and Program Characteristics:
IFQ management costs were higher than pre-IFQ costs for the halibut and
sablefish program but lower for the surfclam/ocean quahog program,
according to fishery managers. Since information on how wreckfish
management costs changed with the introduction of the IFQ program was
not available, we did not include wreckfish in our analysis of
comparative costs. While NMFS does not systematically track IFQ
management costs and cost data on fishery management activities prior
to the IFQ program are incomplete, fishery managers said the overall
costs of managing the halibut and sablefish fisheries were higher under
the IFQ program than under the previous management system. Before
implementation of the IFQ program, both the halibut and sablefish
fisheries were managed by setting an annual catch limit for the entire
fishery by fishing area, as well as restricting the times when fishing
could occur and the type of gear that could be used--for example,
hooks, pots, and nets. However, there were no restrictions on the
number of people that could fish. Over time, as more boats entered the
fishery and the catch limits were reached sooner, the fishing seasons
became shorter; in some areas, fishing was limited to less than 48
hours a year, resulting in so-called fishing derbies--that is,
fishermen trying to catch as much fish as they could within the time
allotted. With the implementation of the IFQ program, the fisheries
were managed under a complex set of rules designed, in part, to protect
the owner-operator character of the fleet. For example, the rules
limited the amount of quota an individual could hold, restricted who
could receive quota transfers, and required that quota be issued by
vessel categories with quota transfers prohibited across vessel
categories--for example, larger boats could not buy quota from smaller
boats. In addition, the IFQ program allowed fishery managers to extend
the fishing season to 8 months.
The IFQ program's complexity and longer fishing season required NMFS to
devote more staff time to administrative, monitoring, and enforcement
activities than previously needed. More specifically,
* NMFS created a Restricted Access Management division to handle the
administrative activities of the IFQ program, such as issuing annual
quota allocations, handling quota transfers, and maintaining the IFQ
landings database;
* NMFS created an Office of Administrative Appeals to handle appeals
related to the IFQ program, such as appeals of the initial quota
allocation determinations and subsequent decisions regarding quota
transfers;
* NMFS hired 20 additional staff (16 enforcement officers and 4 agents)
to monitor the individual catch limits of the more than 3,000 halibut
fishermen who now, with an 8-month fishing season, could land their
catch at any 1 of more than 35 ports along the coasts of Alaska,
Oregon, and Washington; and:
* the International Pacific Halibut Commission, which conducts halibut
stock assessments and annually establishes halibut catch limits, by
geographic area, determined that the IFQ program's extended season
increased the resources needed for the U.S. portion of its halibut
sampling program.
In contrast to the halibut and sablefish program, fishery managers
reported that overall management costs for the surfclam and ocean
quahog fisheries were lower following the implementation of the IFQ
program. Fishery managers primarily attributed the lower costs to the
simplicity of the IFQ program as compared with the previous management
system. Before the IFQ program, the fisheries were managed through a
combination of tools, such as minimum size limits for harvested clams;
annual and quarterly quotas; and, in the case of surfclams, fishing
time restrictions. Fishery managers said that the pre-IFQ time
management system, which required NMFS to set and monitor an allowable
fishing time for each vessel in the fishery, was very labor-intensive
for the Mid-Atlantic Council and the following offices: NMFS
Sustainable Fisheries, NMFS Enforcement, NOAA Northeast Regional
Counsel, and NOAA Northeast General Counsel for Enforcement and
Litigation. Further, as overfishing continued, the length of time each
vessel was allowed to fish continued to be reduced until it had
decreased to six 6-hour trips per fishing quarter in the mid-1980s.
According to NMFS officials, the continual changes in policy required
NMFS to spend significant staff time monitoring the status of the
fishery, as well as drafting revisions to fishery regulations.
After implementation of the surfclam/ocean quahog IFQ program, fishery
managers reported that the amount of management time the council and
NMFS spent on the surfclam and ocean quahog fisheries decreased
dramatically. For example, council staff estimated that the IFQ program
reduced the amount of time they spent on surfclam/ocean quahog
activities from 3 or 4 staff-years annually to less than 1/2 a staff-
year during fiscal year 2003. This decrease occurred because the
surfclam/ocean quahog population had stabilized, and fishery managers
no longer had to micromanage the fisheries.
In addition, NMFS officials also reported that enforcement costs were
substantially lower after implementation of the surfclam/ocean quahog
IFQ program. Before IFQ implementation, enforcement under the time
management system required the use of Coast Guard boats and helicopters
to monitor boats for compliance with their fishing time restrictions.
Enforcement also required monitoring offloads to ensure that minimum
clam sizes were being met. With the implementation of the IFQ program
and its reliance on individual catch limits, NMFS changed its
enforcement efforts from the costly at-sea monitoring of boats to
monitoring the amount of clams coming ashore and making sure all
landings were reported accurately. The council and NMFS generally
believe that the surfclam/ocean quahog fisheries are ideally suited to
dockside enforcement because the fisheries have a small number of
vessels that can offload their clam cages only at docks with cranes and
sell their product to one of a few processors with a canning facility.
For this reason, fishery managers said that the surfclam and ocean
quahog fisheries required substantially less enforcement effort than
before the IFQ program was implemented.
Fishery Councils and NMFS Incurred Additional Costs Associated with
Development and Implementation of Two IFQ Programs:
According to fishery managers, the fishery councils and NMFS incurred
additional costs associated with developing and implementing the
halibut and sablefish and surfclam/ocean quahog IFQ programs. IFQ
program development, which includes developing the fishery management
plan and the regulations and infrastructure to implement it, was time-
consuming and costly for fishery management councils and NMFS because
of the complexity and controversy of designing a fishery program based
on individual quota shares and the need to develop infrastructures to
manage the program. In addition to development costs, NMFS reported
that it also incurred additional implementation costs during the
initial years of the halibut and sablefish and surfclam/ocean quahog
IFQ programs, as fishery managers and participants adjusted to a new
management system.
IFQ Development Costs:
Both the fishery management councils and NMFS incurred additional costs
during the development phase of the halibut and sablefish and
surfclam/ocean quahog IFQ programs, according to fishery managers. As
shown below, staff from the North Pacific and Mid-Atlantic Councils--
the councils responsible for the halibut and sablefish and
surfclam/ocean quahog fisheries, respectively--said that the costs the
councils incurred annually to develop the IFQ programs were much higher
than the annual costs they now incur to monitor and review the
programs.
* North Pacific Council staff estimated that the council devoted 25
percent of its staff time and 20 percent of its budget to the
development of the halibut and sablefish IFQ program for 3 years until
the program was adopted in 1991. In contrast, they said the council
spent less than 10 percent of 1 staff-year on management activities
related to the halibut and sablefish program during fiscal year 2003.
* Mid-Atlantic Council staff said that it took the equivalent of about
one full-time council staff between 2 and 3 years to develop the
fishery plan amendment that created the surfclam/ocean quahog IFQ
program. In contrast, they estimated that they spent about 40 percent
of 1 staff-year on the program during fiscal year 2003.
Similarly, NMFS reported incurring the following additional costs
during the development phase of both IFQ programs.
* NMFS Sustainable Fisheries staff estimated that it took the
equivalent of two and one-half staff almost 2 years to write the
regulations for the halibut and sablefish IFQ program, which is
significantly higher in comparison with the time it now spends annually
to write program regulations.
* A NOAA Northeast Regional Counsel attorney estimated that providing
legal input on the development of the surfclam/ocean quahog program
required 30 to 50 percent of one attorney's time, in contrast to the 5
percent of one attorney's time spent on the IFQ program during fiscal
year 2003, because the surfclam/ocean quahog IFQ program raised legal
issues that NMFS had not previously addressed.
* NMFS Restricted Access Management officials estimated that over a 6-
month period, they devoted the equivalent of four full-time staff, in
addition to supervisory and clerical staff, to the halibut and
sablefish quota application and allocation process.
* NMFS Restricted Access Management officials also said the Alaska
Region spent over $1.2 million on personnel, contractual services
related to the establishment of computer technology, and the
computerized transaction terminals used to record halibut and sablefish
IFQ landings.
* NMFS Law Enforcement officials estimated that NMFS spent about $2
million during fiscal year 1994 to hire and train 16 new enforcement
officers and four agents for the halibut and sablefish program and to
establish an enforcement presence in a variety of ports around the
state of Alaska and the Pacific Northwest.
IFQ Implementation Costs:
In addition to development costs, NMFS also reported incurring
additional implementation costs during the initial years of the halibut
and sablefish and surfclam/ocean quahog IFQ programs. According to
fishery managers, management costs for the halibut and sablefish IFQ
program were higher during its first years as NMFS and industry
adjusted to the new program. For example, as shown below, NMFS incurred
additional costs in the area of adjudicating appeals, learning and
enforcing new program rules, and handling many minor legal issues
related to the halibut and sablefish IFQ program.
* A NMFS official from the Alaska Region's Office of Administrative
Appeals said the costs associated with appeals from industry related to
quota were much higher during the initial years of the halibut and
sablefish program than they are today. By the end of the program's
second year, for example, NMFS had received 170 appeals, requiring the
equivalent of five or six full-time staff, whereas the region currently
receives just 1 or 2 appeals each year.
* According to NMFS enforcement data, staff in the Alaska Division of
NMFS's Office for Law Enforcement spent almost twice as much time on
IFQ activities during the first year of the IFQ program than during the
program's second year. NMFS officials said that in addition to their
customary enforcement activities, agents and officers spent a
significant amount of time learning new policies and procedures for
enforcing IFQ program rules. In addition, the number of written
warnings and summary settlements increased from 192 in 1994 to 404 in
1995, the first year of the IFQ program, and then dropped to 260 in
1996 as industry adjusted to the new program rules.
* Attorneys from NOAA's Alaska General Counsel for Enforcement and
Litigation reported that they received many minor cases resulting from
participant misunderstandings about program rules. Also, attorneys
needed time to develop their knowledge and familiarity with IFQ case
management. As the program matured, however, the number of violations
declined, and attorneys became more skilled at handling IFQ violations.
Over time, enforcement attorneys have also been able to reduce their
workload by handing over clear-cut violations to NMFS enforcement
officers for resolution by summary settlement. As a result, the amount
of enforcement attorney time spent on the IFQ program has decreased.
The surfclam/ocean quahog IFQ program incurred additional costs in
several management areas during implementation but also experienced
some cost reductions in others. For example, program managers reported
that learning to manage transfers and leases of quota shares was very
time-consuming for NMFS staff, particularly because the program was the
first one with transferable quotas in the country. In addition,
management of quota allocations and annual distribution of cage tags
was time-consuming until NMFS officials developed a more efficient
procedure for producing and distributing tags. A NMFS official
estimated that during the program's first years, these activities
required the time of two Sustainable Fisheries' staff during the first
month of each year and 25 percent of their time for the remainder of
the year. While some offices incurred additional costs during initial
program implementation, NOAA Regional Counsel staff said that they
spent considerably less time on the surfclam/ocean quahog fisheries
once the IFQ program was implemented. Also, in contrast to the halibut
and sablefish IFQ program, there were very few appeals of the initial
quota allocation, because the allocation was based on landings and
vessel ownership data that already had been recorded. For this reason,
according to NOAA Northeast Regional Counsel, it was difficult for
fishermen to contest the validity of these data.
NMFS Has Not Recovered IFQ Management Costs as Required:
In 1996, the Magnuson-Stevens Act was amended by the Sustainable
Fisheries Act, requiring NMFS to collect a fee to recover the "actual
costs directly related to the management and enforcement of any
individual fishing quota program" and limiting the fee to 3 percent of
the ex-vessel value of the fish harvested.[Footnote 9] Further, the
amendment prohibited NMFS from collecting such fees in the
surfclam/ocean quahog and wreckfish fisheries until after January 1,
2000.[Footnote 10] NMFS implemented cost recovery for the halibut and
sablefish program in 2000, 5 years after the IFQ program became
operational. However, at the time of our review, NMFS had not
implemented cost recovery for the surfclam/ocean quahog and wreckfish
IFQ programs. According to NMFS officials, they had not recovered
surfclam/ocean quahog or wreckfish management costs as required under
the act, because (1) cost recovery has not been a priority for the
surfclam/ocean quahog program and (2) very few people were fishing
wreckfish, and they believe that recovering program management costs
would be an economic burden for these fishermen.
Although NMFS is recovering some costs for the halibut and sablefish
program, it may not be recovering full costs associated with the
program. The Magnuson-Stevens Act does not define "actual costs
directly related to the management and enforcement" of an IFQ program,
and the legislative history is also silent as to the meaning of this
term. However, NMFS has interpreted the term to be limited to the costs
that would not have been incurred but for the IFQ program (i.e., the
incremental costs). Under this interpretation, at the end of each
fiscal year, offices in NMFS's Alaska Region, including Restricted
Access Management, Sustainable Fisheries, and Law Enforcement, as well
as the International Pacific Halibut Commission, submit their
incremental cost estimates to the Restricted Access Management office.
The Restricted Access Management office uses these estimates and the
total ex-vessel value of the two fisheries to calculate an annual fee
to be levied on halibut and sablefish program participants. NMFS relies
on cost estimates provided by these various offices because it does not
systematically track the costs of IFQ programs or the time spent on IFQ
activities. NMFS officials told us that developing the cost estimates
is challenging because most staff work on more than one program at a
time, and it is difficult to isolate the costs attributable to the IFQ
program.
While NMFS requests cost estimates for nine budget categories--
personnel compensation, personnel benefits, travel, transportation,
rent, printing, other contractual services, supplies, and equipment--
NMFS does not have a standard procedure for estimating these costs.
Instead, each organization develops its cost estimates independently
using its own methodology.[Footnote 11] For example, the Restricted
Access Management office prepares year-end estimates of the amount of
time each staff person spent on IFQ work, an average percentage of all
staff time spent on IFQ work, and a percentage of its overhead costs to
be charged to the IFQ program. In contrast, the International Pacific
Halibut Commission prepares its incremental cost estimates by adjusting
the U.S. portion of its pre-IFQ (1994) costs upward by 5 percent per
year and then subtracts that amount from the U.S. portion of the
commission's total annual costs. Nonetheless, NMFS officials believe
that their cost estimates represent the best available information on
the incremental costs of the IFQ program.
Applying the "incremental costs" definition and using the cost
estimates submitted by the various offices, NMFS reported recovering
about $3.2 million in halibut and sablefish IFQ program costs for
fiscal year 2003. However, there is another way to interpret "actual
costs directly related to" an IFQ program, that is, full
costs.[Footnote 12] Under a "full cost" approach, NMFS could have
recovered more than the $3.2 million recovered for fiscal year 2003.
For example, NMFS could have recovered the costs associated with the
sablefish stock assessment, which would be done regardless of whether
or not the fishery was managed under an IFQ program. It also could have
recovered the IFQ-related costs of the North Pacific Fishery Management
Council and the U.S. Coast Guard, which perform activities needed to
manage the halibut and sablefish IFQ program.
Several Methods Are Used for Sharing Costs between Government and
Industry:
Several methods are used for sharing IFQ management costs between
government and industry; each method has advantages and disadvantages.
These methods principally fall into three categories--user fees, quota
set-asides, and devolution of services from government to
industry.[Footnote 13] Sharing costs between government and industry
can help alleviate concerns about fishery management costs and the
equity of giving away a public resource in the form of individual
fishing quota to a select group of beneficiaries.
Table 2 shows the types of cost-sharing methods used in selected
countries that manage fisheries under individual fishing quotas.
Table 2: IFQ Cost-Sharing Methods Used in Selected Countries:
Country: United States;
Method: User fees: Yes;
Method: Quota set-asides: No;
Method: Devolution of services: No.
Country: Australia;
Method: User fees: Yes;
Method: Quota set-asides: No;
Method: Devolution of services: No.
Country: Canada;
Method: User fees: Yes;
Method: Quota set-asides: Yes[A];
Method: Devolution of services: Yes.
Country: New Zealand;
Method: User fees: Yes;
Method: Quota set-asides: No;
Method: Devolution of services: Yes.
Source: GAO analysis of information provided by NMFS and foreign
government agencies.
[A] Canada uses a type of quota set-aside, which it calls quota
reallocation. Under this method, the government allocates a portion of
the annual quota to industry associations, which, in turn, lease the
quota to fishermen.
[End of table]
User Fees:
Under the user fee method, government recovers costs by collecting a
fee from those who benefit from using the resource. In the case of an
IFQ program, the beneficiary is generally the quota holder or
fisherman. Among the advantages, user fees promote equity, because they
distribute management costs to those who benefit from having exclusive
access to a public resource. Further, government can select the method
for collecting fees that best reflects the extent to which program
participants have benefited. For example, in the Alaskan halibut and
sablefish IFQ program, fishermen pay their fees after the fishing
season closes on the basis of the amount of fish caught. Fishermen who
have not caught any fish do not pay a fee. By collecting fees after the
end of the season, government also has better cost information for the
program. Charging fees also creates an incentive for users to evaluate
which management services have benefits that exceed their costs and
communicate this information to government.
Among the disadvantages, user fees directly affect a fishing firm's
profitability and its ability to compete. In cases where participants
pay a flat fee regardless of the extent to which they benefit from
using the resource, user fees could be disproportionately borne by the
smaller fishing firms. Also, user fees have administrative costs to
government for determining the total amount of recoverable costs, as
well as for billing, tracking, collecting, and enforcing the fee
payments of each individual quota holder or fisherman. User fee
programs that base their fees on ex-vessel value may require additional
recordkeeping. In the United States, for example, NMFS must keep
records on IFQ fish prices and IFQ landings by species, month, and port
in order to calculate the annual fee charged for halibut and sablefish
IFQ management costs.
Several countries recover IFQ management costs through user fees.
However, the features of each user fee program vary by which costs are
recovered and how fees are assessed. As previously discussed, in the
United States, NMFS collects fees to recover the incremental costs of
the Alaskan halibut and sablefish IFQ program, and it does not recover
stock assessment costs. In contrast, other countries, such as Australia
and New Zealand, do not limit recovery to incremental costs. Australia
recovers all domestic commercial fisheries' licensing, data management,
and logbook management costs; 50 percent of monitoring and enforcement
costs; and 80 percent of research and data collection costs, which
include stock assessment research. New Zealand recovers all research,
compliance, and administrative costs. Moreover, both Australia and New
Zealand, unlike the United States, base their fees on the amount of
quota shares an individual holds, with no limit on the amount of the
fee charged.
Quota Set-Asides:
Under the quota set-aside method, the government sets aside (i.e., does
not allocate) a certain amount of quota each year, leases it to
fishermen, and then uses the revenue to pay for IFQ program management
costs. An advantage of the quota set-aside method is that it does not
necessitate the collection of fees from each quota holder, thus
avoiding late or nonpayment concerns and reducing collection costs to
government. Another advantage of quota set-asides is that government
eliminates the possibility that those who do not pay their fees might
continue to benefit from the public resource.
A disadvantage of the set-aside method is that if the value of the
quota is too low, the government may not raise enough funds to cover
the IFQ program's management costs. Therefore, government needs to
accurately estimate the value of the quota for the upcoming season and
the cost of managing the fishery when determining the amount of quota
to withhold.
Canada uses a method similar to a quota set-aside (known as quota
reallocation) to collect costs of its halibut IFQ fishery. In that
fishery, a portion of each quota holder's annual quota--not to exceed
15 percent of the total allowable catch--is allocated to an industry
association for redistribution. The original quota holder has the right
to lease back his or her shares. If he or she declines, the industry
association makes the shares available for purchase by other quota
holders. In either case, the representative industry association uses
the revenue raised from the quota reallocation to defray the costs of
the halibut IFQ program.
Devolution of Services:
Under the devolution of services method, responsibility for providing
selected fishery management services is transferred to the fishing
industry. Since government is no longer responsible for providing some
fisheries management services, industry must obtain these services and
pay for them itself. Even though responsibility for making some fishery
management decisions is devolved to industry, government must ensure
that industry acts in accordance with government standards and
specifications and complies with program rules. This approach could
also reduce concerns about potential government inefficiencies in
providing such services. Also, devolving services to industry means
that the government can avoid future investments in fisheries
management infrastructure, such as computer systems to track individual
catch amounts.
Regarding disadvantages of devolving services to industry, government
may be further removed from enforcement, making it a greater challenge
to ensure that industry is complying with the program rules. Also,
devolving services may raise legal concerns regarding who is ultimately
responsible should a service fail to be provided. Another disadvantage
is that government could face some resistance from industry when it
wants to change program rules.
Both New Zealand and Canada have devolved some of their IFQ management
responsibilities to industry. In New Zealand, the government has
devolved responsibility for certain services to industry, including
maintaining the quota share database, registering quota shares,
monitoring landings data for compliance with quota limits, and issuing
permits, while retaining responsibility for developing standards,
specifications, and regulatory proposals. In Canada, the government
provides a baseline of fishery management services, but it has devolved
to industry the responsibility for hiring and paying for government-
certified at-sea and dockside observers to monitor fishing activities.
Canada also gives industry associations the option to select and pay
the government for additional fishery management services through
service contracts. Canada currently has 15 service contracts with
industry, including several involving IFQ programs.
Conclusions:
IFQ programs bring special benefits to quota holders, who receive
exclusive access to a public trust resource. With the enactment of the
Sustainable Fisheries Act, NMFS is required to recover actual costs
directly related to the management and enforcement of all IFQ programs.
While NMFS recovers some costs for the halibut and sablefish IFQ
program, it does not recover any management costs for the
surfclam/ocean quahog and wreckfish IFQ programs. Such a situation not
only raises concerns regarding noncompliance with the law, but it also
raises concerns about fairness because a select group of beneficiaries
is receiving exclusive access to a public resource without compensation
to the public. Also, quota holders in the halibut and sablefish
fisheries are paying fees, while quota holders in the surfclam/ocean
quahog and wreckfish fisheries are not.
Moreover, because NMFS does not provide guidance on how to estimate
costs for IFQ programs, each organizational unit with IFQ-related costs
uses its own methodology to estimate recoverable costs. Without a
standard cost estimation process, NMFS has no credible basis for
knowing whether it is charging the appropriate fees and whether it is
recovering all required costs. Finally, since the Magnuson-Stevens Act
does not define "actual costs directly related to the management and
enforcement" of an IFQ program and NMFS has interpreted the term to
mean incremental costs, NMFS may be recovering fewer costs than the
Congress intended. Another interpretation, that is, a "full cost"
approach, could result in greater cost recovery by NMFS.
Matter for Congressional Consideration:
If the Congress would like NMFS to recover other than incremental
costs, it may wish to clarify the IFQ cost recovery fee provision of
the Magnuson-Stevens Act.
Recommendations for Executive Action:
To comply with the cost recovery requirements of the Magnuson-Stevens
Act, we recommend that the Secretary of Commerce direct the Director of
NMFS to take the following two actions:
* implement cost recovery for all IFQ programs and:
* develop guidance regarding which costs are to be recovered and, when
actual cost information is unavailable, how to estimate these costs.
Agency Comments and Our Evaluation:
We provided a draft copy of this report to the Department of Commerce
for review and comment. We received a written response from the Under
Secretary of Commerce for Oceans and Atmosphere that includes comments
from the National Oceanic and Atmospheric Administration (NOAA).
Overall, NOAA stated that our report was well researched and presented,
and was responsive to the specific request made by the Congress.
NOAA agreed with our recommendation to implement cost recovery for all
IFQ programs. NOAA agreed that the IFQ cost recovery provision of the
Magnuson-Stevens Act applies to all IFQ programs. NOAA said that it
would work with the Mid-Atlantic and South Atlantic Fishery Management
Councils on adding cost recovery to the surfclam/ocean quahog and
wreckfish IFQ plans. It also said that the costs of collecting these
fees should be taken into account when determining whether cost
recovery is required in a particular IFQ fishery. To that end, NOAA
suggested that we may want to recommend that the Congress consider
adding a rule exempting IFQ programs from the cost recovery requirement
if those costs fall below some reasonable threshold. Since the scope of
our work did not include an evaluation of the cost recovery provisions
of the Magnuson-Stevens Act, we believe that it would be premature to
make a recommendation to the Congress at this time.
NOAA also agreed with our recommendation to develop guidance regarding
which costs are to be recovered and, when actual cost information is
unavailable, how to estimate these costs. Specifically, it said that
NOAA will develop guidance on how to identify activities directly
attributable to an IFQ program and on how the costs associated with
these activities can be measured.
NOAA also raised some questions about specific issues covered in the
report. For example, NOAA suggested that we should have looked at the
net benefits of IFQ programs and the circumstances and general cost
recovery policies in selected foreign countries, but doing so was
beyond the scope of our work. Also, NOAA believes that the recovery of
incremental costs is more consistent with the requirements of the
Magnuson-Stevens Act than an interpretation requiring the recovery of
full costs. Because the act does not define "actual costs directly
related to the management and enforcement" of an IFQ program, which we
believe can be interpreted in more than one way, our report suggests
that the Congress may wish to clarify this provision if it would like
NMFS to recover other than incremental costs. NOAA's specific comments
and our detailed responses are presented in appendix IV of this report.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to interested congressional committees, the Secretary of Commerce, and
the Director of the National Marine Fisheries Service. We will also
provide copies to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [Hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please call
me at (202) 512-3841 or Stephen Secrist at (415) 904-2236. Key
contributors to this report are listed in appendix V.
Sincerely,
Anu K. Mittal:
Director, Natural Resources and Environment:
[End of section]
Appendixes:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
This is the third in a series of reports on individual fishing quota
(IFQ) programs requested by the Chairman and Ranking Minority Member of
the former Subcommittee on Oceans, Fisheries, and Coast Guard, Senate
Committee on Commerce, Science, and Transportation. For this report, we
reviewed domestic quota programs to (1) determine the costs of managing
(i.e., administering, monitoring, and enforcing) IFQ programs and how
these costs differ from pre-IFQ management costs; (2) determine what,
if any, IFQ management costs are currently being recovered by the
Department of Commerce's National Marine Fisheries Service (NMFS); and
(3) assess ways to share the costs of IFQ programs between government
and industry. The term "individual fishing quota" as used in this
appendix includes individual transferable quota and individual vessel
quota.
For all three objectives, we visited locations in Alaska, Florida,
Massachusetts, New Jersey, and South Carolina. We selected these sites
to obtain broad geographic coverage for the three domestic IFQ
programs. In these locations and elsewhere, we interviewed agency
officials at the headquarters office of NMFS as well as its Northeast,
Southeast, and Alaska regional offices; representatives of the Gulf of
Mexico, Mid-Atlantic, North Pacific, and South Atlantic Fishery
Management Councils; representatives of the International Pacific
Halibut Commission; officials at the headquarters office of the U.S.
Coast Guard and the 1st, 7th, and 17th Districts; officers from the
Alaska State Troopers and the New Jersey Division of Fish and Wildlife;
and others. We also visited ports in Juneau, Homer, and Seward, Alaska,
and Point Pleasant and Wildwood, New Jersey, where we observed offloads
of IFQ fish.
To determine the costs of managing IFQ programs, because NMFS does not
systematically track this information, we developed a data collection
instrument and asked organizations that perform IFQ-related activities
to provide information on their IFQ-related costs for fiscal year 2003.
For the halibut and sablefish IFQ program, the following organizations
provided cost information: the Restricted Access Management Program and
the Sustainable Fisheries Division of NMFS's Alaska Region, the Alaska
Division of NMFS's Office for Law Enforcement, the International
Pacific Halibut Commission, and the North Pacific Fishery Management
Council. The following organizations did not provide cost information
although we requested it: the National Oceanic and Atmospheric
Administration's (NOAA) Office of the Alaska Regional Counsel
(information regarding IFQ-related legal activities) and NMFS's Alaska
Fisheries Science Center (information regarding the sablefish stock
assessment). Although NOAA's Office of General Counsel for Enforcement
and Litigation, Alaska Region, provided estimates of staff hours spent
on IFQ work, it could not provide the associated costs. For the
surfclam/ocean quahog IFQ program, the following organizations provided
cost information: the Sustainable Fisheries Division, the Fishery
Statistics Office, and the Information Resource Management of NMFS's
Northeast Region; NOAA's Northeast Regional Counsel; the Northeast
Division of NMFS's Office for Law Enforcement; and the Mid-Atlantic
Fishery Management Council. NMFS's Northeast Fisheries Science Center
did not provide cost information regarding the surfclam and ocean
quahog stock assessments, although we asked it to do so. For the
wreckfish IFQ program, the Constituency Services Branch of the
Management, Budget and Operations Division of NMFS's Southeast Region
provided cost information, but the Southeast Division of NMFS's Office
for Law Enforcement (information regarding IFQ-related enforcement
activities) and the South Atlantic Fishery Management Council
(information regarding wreckfish management) did not. For all three IFQ
programs, the U.S. Coast Guard could not provide any cost information
because it does not track the costs associated with IFQ-related
enforcement activities.
Using the cost information received, we prepared estimates of the
management costs incurred in fiscal year 2003 for each IFQ program. We
obtained the views of fishery managers on how halibut and sablefish and
surfclam and ocean quahog management costs changed after the two IFQ
programs were implemented. We also obtained views and supporting
information, where possible, on the costs incurred during the
development and implementation of each IFQ program. To assess the
reliability of the data we received, we interviewed officials most
knowledgeable about each IFQ program and its probable costs. On
reviewing the data, they appeared reasonable, given differences among
the programs. Consequently, we concluded that the reported data were
sufficiently reliable for purposes of this report.
To determine what costs, if any, are currently being recovered by NMFS,
we reviewed laws and regulations, including the Magnuson-Stevens Act
and the Sustainable Fisheries Act and their legislative histories,
which set out the cost recovery requirements for IFQ programs. We also
interviewed NMFS officials and fishery council representatives to
determine which IFQ programs are recovering management costs; what
costs they are recovering; and, if costs are not being recovered, the
reasons why.
To assess ways to share the costs of IFQ programs between government
and industry, we identified domestic and foreign programs that share
IFQ costs between government and the fishing industry. We interviewed
and obtained the views of government officials from the United States,
Australia, Canada, and New Zealand and academicians on cost-sharing
methods that are being used or could be used to share costs and their
advantages and disadvantages. We also reviewed studies related to
existing and potential cost-sharing methods. For purposes of this
report, we did not examine foreign laws and regulations, relying
instead on foreign fishery managers for the legal requirements of their
programs and how they operated.
We conducted our review from February through December 2004 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Descriptions of Individual Fishing Quota Programs in the
United States:
This appendix describes the three IFQ programs in the United States.
The term "individual fishing quota" as used in this appendix includes
individual transferable quota.
Surfclam/Ocean Quahog IFQ Program (1990):
Surfclams and ocean quahogs are mollusks found along the East Coast,
primarily from Maine to Virginia, with commercial concentrations off
the Mid-Atlantic Coast. While ocean quahogs are found farther offshore
than surfclams, the same vessels are largely used in each fishery.
These vessels tow hydraulic clam dredges that extract clams from the
ocean floor. The catch is emptied into metal cages holding roughly 32
bushels, off-loaded at one of a small number of landing sites, and sold
to processing facilities. Surfclams are used in strip form for fried
clams and in chopped or ground form for soups and chowders. Ocean
quahogs are used in soups, chowders, and white sauces. The fishery
consists of a few large, vertically integrated firms, small processors,
and independent fishermen.
The surfclam fishery developed after World War II. When the surfclam
fishery declined in the mid-1970s, the ocean quahog fishery arose as a
substitute. Disease and industry overfishing led the Mid-Atlantic
Fishery Management Council to develop a management plan for surfclams
and ocean quahogs, the first such plan in the United States. Between
1977 and 1990, the council and NMFS used a variety of effort controls
to limit the harvest to sustainable levels, such as restrictions on
fishing times, areas fished, clam sizes, gear, vessels, who fished, and
how fishing occurred.
IFQs were established for the surfclam/ocean quahog fishery in 1990--
the first IFQ program approved under the Magnuson-Stevens Act. The
program was designed to help stabilize the fishery, reduce excessive
investment in fishing capacity, and simplify the regulatory
requirements of the fishery to minimize the government and industry
cost of administering and complying with program requirements.
Wreckfish IFQ Program (1992):
Wreckfish are found in the deep waters far off the South Atlantic
coast, primarily from Florida to South Carolina. They were first
discovered in the southern Atlantic in the 1980s by a fisherman
recovering lost gear. Wreckfish are fished by vessels over 50 feet in
length using specialized gear. These vessels are used primarily in
other fisheries.
Within 3 years of the discovery of wreckfish, wreckfish landings
increased to more than 3 million pounds, and the number of vessels used
for wreckfish increased from 2 to 40. Because of concerns that the
resource could not support unlimited expansion, the South Atlantic
Fishery Management Council added wreckfish to the snapper-grouper
fishery management plan and set the catch limit at 2 million pounds per
year. The council developed an IFQ program for wreckfish in 1991. After
the IFQ program was implemented in 1992, wreckfish landings declined
rapidly, in part because of the difficulty and costs associated with
fishing wreckfish in relation to their market value, and quota holders
started participating in easier, less costly fisheries with higher
market values. Today, the wreckfish fishing fleet is small, with only 2
vessels reporting wreckfish landings in 2003. Wreckfish are sold fresh
or frozen as a market substitute for snapper and grouper.
Halibut and Sablefish IFQ Program (1995):
Pacific halibut and sablefish (black cod) are found off the coast of
Alaska, among other areas. The fishing fleets are primarily owner-
operated vessels of various lengths that use hook-and-line gear for
halibut and hook-and-line or pot (fish trap) gear for sablefish. Some
vessels catch both halibut and sablefish.
The International Pacific Halibut Commission manages the halibut
fishery under a treaty between the United States and Canada. The
Halibut Commission adopts conservation regulations, such as seasons and
area catch limits, which it forwards to the United States and Canada
for approval. NMFS, in consultation with the North Pacific Fishery
Management Council, has the authority to develop other regulations that
do not conflict with the Halibut Commission's regulations.
Historically, there was no limit on the number of people who could
participate in the halibut and sablefish fisheries, and, starting in
the mid-1970s, the number of boats in these fisheries began to increase
rapidly. By the late 1980s, overcapitalization of the halibut and
sablefish fleets led to seasons that lasted less than 2 days in some
areas and a race for fish that put boats and fishermen at risk and
resulted in gear loss, excessive bycatch of nontarget species, and poor
product quality, among other things. In response to these conditions,
the North Pacific Council developed an IFQ program that was implemented
by NMFS in 1995. The program was designed, in part, to help improve
safety for fishermen, enhance efficiency, reduce excessive investment
in fishing capacity, and protect the owner-operator character of the
fleet. The program set caps on the amount of quota that any one person
may hold, limited transfers to bona fide fishermen, issued quota in
four vessel categories, and prohibited quota transfers across vessel
categories.
[End of section]
Appendix III: Descriptions of Individual Fishing Quota Cost-Sharing
Programs in Selected Countries:
This appendix describes IFQ cost-sharing programs in Australia, Canada,
and New Zealand. The term "individual fishing quota" as used in this
appendix includes individual transferable quota and individual vessel
quota.
Australia:
Australia's fishing zone,[Footnote 14] the third largest in the world,
supports many high-value fisheries. The gross value of Australia's
commercial fisheries production was an estimated AU$2.3 billion in
fiscal year 2003. Australia introduced IFQs in the early 1980s and
currently has at least 20 federal and state fisheries under IFQ
management. These fisheries account for about 22 percent of the total
value of Australia's commercial fisheries.
Australia began recovering fishery management costs in the mid-1980s as
part of a governmentwide initiative to introduce user charges for
government services. The fishing industry (i.e., fishing permit
holders) pays for services that directly benefit fishermen, while the
government pays for management activities that may benefit the general
public. According to an Australian government official, in commercial
fisheries managed by the federal government, Australia recovers 50
percent of compliance costs, 80 percent of research and data collection
costs, and 100 percent of all other management costs. The recoverable
costs are collected through levies, license fees, and observer fees.
The amount of the levy for each quota holder is generally based on the
amount of quota held and the fishery's budgeted costs for the year,
with an adjustment made the following year if actual costs differ from
the budgeted costs.
In fiscal year 2003, the Australia Fisheries Management Authority, the
government group that manages commercial fisheries, received AU$11.3
million from levies and license fees and AU$609,000 from observer and
other fees. These fees are paid to the general treasury but are then
transferred to the Australia Fisheries Management Authority to finance
fisheries management costs.
Canada:
Canada, the fifth largest exporter of fish and seafood products in the
world, exported CA$4.7 billion worth of fish and seafood products in
2002. In the early 1990s, Canada started using IFQs to manage several
of its commercial fisheries, including western Canadian sablefish,
Pacific halibut, and groundfish.
In an effort to eliminate its budget deficit and promote government
efficiency, the Canadian government cut spending and made cost sharing
with industry a priority in 1994. Under Canada's system, as follows,
fishermen pay an access fee to the government, a cost-sharing fee to
industry associations, and observer fees to private companies.
* The access fee, paid to the Canadian government's general treasury,
is considered a form of rent to the government and Canadian people for
the right to use a public resource. Canada's Department of Fisheries
and Oceans does not receive funding to support program delivery from
this fee.
* Canada provides a baseline level of fishery management services at no
cost to industry. However, if fishermen want additional services, they
must pay for them. Examples of additional services include adding
enforcement officers, adding stock assessment reports, and running an
IFQ program. Industry associations representing fishermen negotiate
with the Department of Fisheries and Oceans on the costs to be shared
to provide for the additional services. The associations then collect
payments from the fishermen through various methods. For example, in
the groundfish fishery, the association asks individual license holders
to voluntarily contribute funds. For the halibut fishery, the industry
association raises funds by setting aside a portion of the total
commercial quota, not to exceed 15 percent, and leases it back to
individual fishermen. The association then uses these funds to share
IFQ program costs with the government.
* In addition to user fees and cost-sharing fees, fishermen pay
observer fees. Canada requires fishermen to hire government-certified
at-sea and dockside observers from the private sector to monitor
fishing activities.
New Zealand:
Seafood is New Zealand's fourth largest export, after dairy, meat, and
forest products. In 2000, seafood exports were worth about NZ$1.43
billion and accounted for 90 percent of industry revenue. New Zealand
introduced IFQs in 1986, and about 50 species are now managed under the
IFQ system. New Zealand's IFQ fish accounted for about 95 percent of
the fishing industry's value in 2003.
A provision for cost recovery for fisheries and conservation services
was added into fishing legislation in 1994 to enable the government to
recover costs associated with the commercial fishing industry.
Recoverable costs include conservation costs and costs that can be
attributed to a beneficiary of the resource. Costs of services that
also benefit the general public are not recoverable.
The 1996 Fisheries Act encouraged government to give industry a greater
role in the quota management system. As a result, since 2001, New
Zealand has transferred, or devolved, responsibility to industry for
specified services, while retaining responsibility for developing
standards and specifications for industry to follow. Currently, New
Zealand has devolved to industry responsibility for the quota registry
system and collecting fishing activity information.
[End of section]
Appendix IV: Comments from the Department of Commerce:
UNITED STATES DEPARTMENT OF COMMERCE:
The Under Secretary of Commerce for Oceans and Atmosphere:
Washington, D.C. 20230:
FEB 11 2005:
Ms. Anu K. Mittal:
Director, Natural Resources and Environment:
United States Government Accountability Office:
Washington, D.C. 20548:
Dear Ms. Mittal:
Thank you for the opportunity to review and comment on the Government
Accountability Office's draft report entitled Individual Fishing
Quotas: Management Costs Varied and Were Not Recovered As Required (GAO-
05-241). Enclosed is the National Oceanic and Atmospheric
Administration's comments to this draft report.
Sincerely,
Signed by:
Conrad C. Lautenbacher, Jr.:
Vice Admiral, U.S. Navy (Ret.):
Under Secretary of Commerce for Oceans and Atmosphere:
Enclosure:
NOAA Comments on the Draft GAO Report Entitled "Individual Fishing
Quotas: Management Costs Varied and Were Not Recovered As Required"
(GAO-05-241/March 2005):
General Comments:
NOAA finds the draft GAO report was well researched and presented, and
responsive to the specific requests made by the Congress. However, we
also believe these issues could have been placed in a more meaningful
context of "net benefits," making it an even more useful report. While
NOAA understands GAO was asked to do a report on "costs" of individual
fishing quota (IFQ) programs, the analysis would have been strengthened
if GAO looked at benefits as well as costs. Such a net benefits
approach would have provided a more accurate and comprehensive picture
of the full economic effects of IFQ programs. This broader analytical
framework could have been proposed and explained even in the absence of
adequate economic data.
This study responds to three questions relating to the costs of IFQ
programs. First, it provides infonnation on the FY 2003 costs
associated with managing current IFQ programs and how they compared
with pre-IFQ management costs. Second, it determines what IFQ
management costs are recovered by NOAA's National Marine Fisheries
Service (NMFS). Finally, it reviews various ways of sharing the costs
of IFQ programs between government and industry.
The first question (costs before and after IFQ programs) is designed to
provide additional information to fishery management councils
considering the adoption of an IFQ program. NOAA's view is that the
critical issue is how management costs will change. For example, the
GAO report repeatedly notes costs in the halibut/sablefish program
increased, but decreased in the surf clam/ocean quahog program. This
point would be more meaningful if the GAO report had placed more
emphasis on the differences between the two fisheries and in the degree
of complexity of the two IFQ programs.
The purpose of the second question (recovery of management and
enforcement costs) is to determine how the mandated cost recovery
program is being implemented. While NOAH agrees compliance with this
provision has presented challenges, we also believe the report tends to
exaggerate the problems. First, GAO notes NMFS does not systematically
track IFQ costs, but these costs are in fact compiled annually by the
NMFS Alaska Regional Office for the halibut and sablefish IFQ program.
This annual exercise may not qualify as "systematic tracking," but it
does account for the majority of total recoverable costs in all IFQ
programs. Second, the title of the report Management Costs ... Were Not
Recovered As Required may suggest to some readers non-compliance is a
general problem, while the facts do not support that conclusion. In
fact, with cost recovery in place in the halibut and sablefish IFQ
program (which is the largest IFQ program), cost recovery applies
effectively to over 95 percent of all IFQ permit holders, and 90
percent of all management and enforcement costs. Third, in the case of
wreckhsh, management and enforcement costs only amounted to $7,600, a
negligible amount, and it would cost more to collect these fees. In
fact, the non-compliance problem centers on one IFQ program (surf clam
and ocean quahogs), with recoverable costs of only $274,000 in FY 2003.
Another point NOAA believes could have been treated more equitably is
what IFQ costs are recoverable under the law. NOAA's interpretation is
recoverable costs are those directly attributable to the IFQ program.
Although it is true the Magnuson-Stevens Act is not explicit in
defining what costs are recoverable, NOAA maintains its interpretation
is more consistent with the Magnuson-Stevens Act than GAO's suggestion
that all IFQ management and enforcement costs should be recovered.
NOAA's view that Congress intended to limit recoverable costs in IFQ
programs as opposed to recovering all these costs is supported by
several other provisions dealing with fees, including the following:
* a provision generally limiting fishing fees to the administrative
costs in issuing the permits,
* a cap of three percent of ex-vessel revenue applying to IFQ fees, and:
* a provision setting aside up to 25 percent of IFQ fees to fund a loan
program for small-boat and entry-level fishermen resulting in only 75
percent of fees recovered, because the remainder is ploughed back into
the IFQ fishery.
This question could be clarified if Congress, when it reauthorizes the
Magnuson-Stevens Act, adds a definition or a more explicit explanation
of recoverable costs in IFQ programs.
In summary, NOAA stresses the distinction between (1) changes in pre-
and post-IFQ costs and (2) recoverable costs, and points to the surf
clam and ocean quahog program as an excellent example. As GAO reports,
management costs in this fishery have decreased after 1990, and NOAA
believes this reduction in costs should be an important consideration
when fishery management councils are debating the adoption of an IFQ
program. At the same time, the attributable costs of the surf clam and
ocean quahog program, that under law must be recovered, are positive
($274,000 in FY 2003).
The third question addressed in this report is how to improve the
recovery of IFQ costs. GAO provides an interesting discussion of
various means, including user fees, quota set-asides, and devolution of
services. NOAA notes, however, "user fees" is the sole approach
currently mandated in the Magnuson-Stevens Act and believes "quota set-
asides" and "devolution of services," while interesting in theory, are
not available instruments under existing law. In addition, NOAA
suggests GAO should also have considered "auctions" as a means of
recovering IFQ costs. Finally, NOAA also finds some of the material in
Appendix III on foreign IFQ cost sharing programs is of limited value
and potentially misleading since the GAO report did not explain the
different circumstances and general cost recovery policies in these
other countries. NOAA would be interested in an exchange of views with
Congress on these other means of recovering costs in federally managed
fisheries.
Recommended Changes for Factual/Technical Information:
NOAH suggests no factual/technical changes to the draft report.
Editorial Comments:
NOAA offers no editorial comments to the draft report.
NOAA Response to GAO Recommendations:
The draft GAO report states, "To comply with the cost recovery
requirements of the Magnuson-Stevens Act, we recommend that the
Secretary of Commerce direct the Director of NMFS to take the following
two actions:"
Recommendation 1: "Implement cost recovery for all IFQ programs."
NOAA Response: NOAA agrees with this recommendation. The IFQ cost
recovery provisions in section 304(d)(2) of the 1996 Sustainable
Fisheries Act amendments to the Magnuson-Stevens Act apply to all IFQ
programs, even though Congress delayed its application to the surf
clam/ocean quahog and wreckfish IFQ programs until after January 1,
2000. Further, in its Magnuson-Stevens Act reauthorization proposals
the Administration transmitted to Congress in June 2003, cost recovery
for all IFQ programs is specifically provided. NOAA and the
Administration agree all future IFQ programs should include the
recovery of directly attributable costs. With respect to the two
existing East Coast IFQ programs not implementing this provision thus
far, NOAA will work with the Mid-Atlantic and South Atlantic Fishery
Management Councils on adding cost recovery to the surf clam/ocean
quahog and wreckfish IFQ plans, respectively. At the same time, as
noted in the GAO report, the costs associated with the two East Coast
programs are modest, totaling just over $280,000 in FY 2003, and NOAA
notes the costs of collecting these fees should be taken into account,
especially in the wreckfish program in which management and enforcement
costs amounted to only $7,600. With this in mind, NOAA is willing to
consider a recommendation to Congress to add a de minimis rule
exempting IFQ programs from the cost recovery requirement if those
costs fall below some reasonable threshold. To that end, NOAA suggests
GAO may want to introduce this issue as a "Matter for Congressional
Consideration" so Congress, NMFS, and fishery management councils can
explore it in the context of a broader discussion of cost recovery in
federally managed fisheries.
Recommendation 2: "Develop guidance as to which costs are to be
recovered and, when actual cost information is unavailable, how to
estimate these costs."
NOAA Response: NOAA agrees with this recommendation, because it will
ensure the appropriate costs will be measured in a consistent manner in
all fisheries. However, NOAA believes the current general methodology
of defining recoverable costs as those that are directly attributable
to the implementation of an IFQ program to be a correct interpretation
of the Magnuson-Stevens Act. NOAA will develop guidance on how to
identify activities directly attributable to an IFQ program. The
guidelines will discuss how the costs associated with these activities
can be measured using the product/service computation schedule in OMB
Circular A-25 and Department of Commerce and NOAA Finance Handbooks.
The following are GAO's comments on NOAA's written comments provided by
the Under Secretary of Commerce for Oceans and Atmosphere in a letter
dated February 11, 2005.
GAO Comments:
1. As NOAA acknowledged, we were asked to report on the costs of IFQ
programs. An analysis of the net benefits of IFQ programs was beyond
the scope of our work.
2. We noted several times in the report that management costs changed
with IFQ implementation, in part, due to the characteristics of the
fishery and the complexity of the program. We believe that we have
given this point sufficient emphasis and, for this reason, we made no
changes to the report.
3. We disagree with NOAA's comments that the report exaggerates the
problems of NMFS's noncompliance with the cost recovery requirements of
the Magnuson-Stevens Act. NOAA does not believe that noncompliance is a
general problem because NMFS is recovering costs for the largest and
costliest IFQ program. However, the act requires NMFS to recover the
costs of all IFQ programs, regardless of their size and cost. Our
report title reflects our finding that NMFS is only recovering costs
for one of the three programs. Not only does such a situation raise
concerns regarding compliance with the law, it also raises concerns
about fairness because halibut and sablefish quota holders are paying
fees, while surfclam/ocean quahog and wreckfish quota holders are not.
For these reasons, we made no changes to the report.
4. We disagree with NOAA's comment that our report suggests that all
IFQ management and enforcement costs should be recovered. We said that
the Magnuson-Stevens Act does not define "actual costs directly related
to the management and enforcement" of an IFQ program. We also said that
NMFS has defined the term to mean incremental costs and noted that
there is another way to interpret costs, that is, full costs. We did
not suggest that all IFQ management and enforcement costs should be
recovered. Rather, we said that if the Congress would like NMFS to
recover other than incremental costs, it may wish to clarify the IFQ
cost recovery fee provision of the act. For this reason, we made no
changes to the report.
5. Our report reviews different methods for sharing IFQ costs between
government and industry in the United States as well as in other
countries. We clarified that under U.S. law, the sole approach provided
in the Magnuson-Stevens Act is user fees.
6. In our review of cost-sharing methods, we found that auctions were
seen as an option for distributing quota shares and for other uses;
they were not viewed as one of the principal methods for sharing IFQ
costs. For this reason, we did not include auctions in our discussion.
7. The purpose of appendix III is to provide additional background
information about cost-sharing programs for fisheries management in
Australia, Canada, and New Zealand. We did not review the legal
circumstances and options available to each country because an audit of
each country's cost-sharing program was beyond the scope of this
report.
8. The scope of our work did not include an evaluation of the IFQ cost
recovery provision of the Magnuson-Stevens Act. Therefore, we think
that it would be premature to make a recommendation to Congress at this
time.
[End of section]
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Stephen D. Secrist, (415) 904-2236:
Staff Acknowledgments:
In addition to those named above, Allen T. Chan, Nancy L. Crothers,
Robert G. Crystal, Doreen S. Feldman, Curtis L. Groves, Julian P.
Klazkin, Susan J. Malone, Keith W. Oleson, and Rebecca A. Sandulli made
key contributions to this report.
(360440):
FOOTNOTES
[1] GAO, Individual Fishing Quotas: Better Information Could Improve
Program Management, GAO-03-159 (Washington, D.C.: Dec. 11, 2002).
[2] GAO, Individual Fishing Quotas: Methods for Community Protection
and New Entry Require Periodic Evaluation, GAO-04-277 (Washington,
D.C.: Feb. 24, 2004).
[3] Pub. L. No. 94-265 (1976) (codified as amended at 16 U.S.C. § 1801
et seq.)
[4] "Federal waters" refers to those fishing areas covered by the
Magnuson-Stevens Act in which the United States claims exclusive
fishery management authority.
[5] Pub. L. No. 104-297, § 109(c) (1996), 16 U.S.C. § 1854(d).
[6] According to NMFS data, there were a total of 120 quota holders in
the two fisheries. However, we reported in 2002 that there were fewer
quota holders than NMFS data indicated, because different quota holders
of record are often part of a single corporation or family business
that, in effect, controlled many holdings. See GAO-03-159.
[7] The halibut and sablefish estimates exclude the cost of the
sablefish stock assessment performed by the NMFS Alaska Fisheries
Science Center; enforcement activities performed by the U.S. Coast
Guard and by the Alaska State Troopers under a joint enforcement
agreement with NMFS; and legal work performed by NOAA's Alaska Regional
Counsel and General Counsel for Enforcement and Litigation.
[8] The surfclam/ocean quahog estimates exclude the cost of the
surfclam and ocean quahog stock assessments performed by the NMFS
Northeast Fisheries Science Center and enforcement activities performed
by the U.S. Coast Guard and state agencies that have entered into joint
enforcement agreements with NMFS.
[9] 16 U.S.C. § 1854(d)(2)(A), (B).
[10] Pub. L. No. 104-297, § 109(d) (1996), 16 U.S.C. § 1854 note.
[11] The Federal Financial Management Improvement Act reflects a need
for agencies to have systems that can generate reliable, useful, and
timely information with which to make fully informed decisions and to
ensure accountability on an ongoing basis (GAO, Financial Management:
Improved Financial Systems Are Key to FFMIA Compliance, GAO-05-20
(Washington, D.C.: Oct. 1, 2004)), and the Statement of Federal
Financial Accounting Standards No. 4, Managerial Cost Accounting
Standards (SFFAS No. 4), provides good guidance for capturing costs of
activities.
[12] As described in SFFAS No. 4, full cost includes (1) the costs of
resources consumed directly or indirectly and (2) the costs of
identifiable supporting services provided by other components within
the entity and by other entities.
[13] In the United States, the sole approach provided in the Magnuson-
Stevens Act is user fees. According to NMFS, quota set-asides and
devolution of services are not authorized by existing law.
[14] The Australian fishing zone stretches from the coast to 200 miles
offshore and includes both federal and state waters.
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