Food-Related Services

Opportunities Exist to Recover Costs by Charging Beneficiaries Gao ID: RCED-97-57 March 20, 1997

The federal government spent nearly $1.6 billion in fiscal year 1995 to provide food-related services, such as testing, grading, and approving agricultural commodities and products. Although the government recovered about $400 million of this expenditures through user fees, GAO has identified more than $700 million in additional fees that could have been assessed. In some cases, the persons or companies benefitting from these services paid user fees for all of part of the cost of providing the service. In other cases, no user fees were charged. This report identifies opportunities to increase the share of funding by beneficiaries for food-related services now provided by the federal government. GAO discusses (1) the types of food-related services provided by federal agencies; (2) the extent to which beneficiaries now pay for these services through user fees; and (3) potential opportunities to recover more of the service costs through user fees, as well as arguments for and against doing so.

GAO noted that: (1) federal agencies provide individuals, firms, and industries such food-related services as: (a) premarket reviews, including approving new animal drugs and food additives for use and grading grain and other commodities for quality; (b) compliance inspections of meat and poultry and domestic foods and processing facilities to ensure adherence to safety regulations; (c) import inspections and export certifications to ensure that food products in international trade meet specified standards; and (d) standard setting and other support services essential to these functions; (2) about one-quarter of the $1.6 million spent by the federal government in fiscal year (FY) 1995 on food-related services was funded through user fees; (3) the premarket service of quality grading of grains and agricultural commodities was the primary food-related service funded through user fees; (4) nearly three-quarters of the cost of food-related services was funded by general fund appropriations rather than user fees; (5) compliance activities, such as the inspection of meat and poultry, were the primary food-related activities funded through general fund appropriations; (6) on the basis of its review of selected food-related services, GAO determined that potentially about $723 million in additional user fees could have been charged for services provided in FY 1995; (7) according to the Office of Management and Budget's criteria, additional user fees could have been assessed in three principal areas; (8) additional user fees could have been charged for some federal services by including the full costs of providing the service, such as the cost of setting standards, in the fee calculations; (9) user fees currently charged for certain food-related services, such as agricultural inspections at the nation's borders and ports of entry, could have been consistently applied to similar types of services that are provided without charge; (10) user fees could have been assessed on certain services, such as the inspection of meat and poultry, that are provided to identifiable beneficiaries without charge; and (11) although the arguments for and against user fees vary with the agency and service in question, the arguments center on who benefits from the service, the general public or specific beneficiaries, and the impact the user fee would have on producers or consumers.

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