The Congress Should Consider Exploring Opportunities To Expand and Improve the Application of User Charges by Federal Agencies

Individuals and organizations benefit from goods, services, and privileges provided by Federal agencies. Currently, about 3 percent of the total receipts of the Federal Government is derived from charges for these benefits. Charging for these benefits places the burden of their costs on the beneficiaries rather than the taxpayers in general, can help reduce general Federal tax collections by partially substituting for taxes and by reducing the demand for goods and services whose production is currently financed by general tax receipts, and can reduce the costs of complying with certain types of Federal regulations. Full-cost pricing ensures that products whose costs exceed their benefits will not be produced and, except in certain cases, prices should reflect supply and demand levels and fair market values. Previous GAO studies on particular user charges have revealed inconsistencies within and across agencies, failures to collect the total costs of providing special benefits, and failure on the part of the Government to earn the fair market value on the leases of some of its properties. In order to assist Congress in assessing current user charge policy, GAO presented guidelines for pricing goods, services, and privileges that the Federal Government provides to identifiable recipients.

Goods and services provided by the Government fall into two general categories: produced and nonproduced. The principles which apply to the two types differ accordingly. Produced goods and services are those for which the supply is not fixed; their supply can be adjusted by the Government's making additional expenditures on some production processes. When identifiable individuals are the recipients of produced goods and services, charges should be levied which will cover the production costs incurred on behalf of the recipient. Consistent with this philosophy, incremental production costs should be reflected when possible. When nonproduced goods are controlled by the Government but are used for the benefit of identifiable individuals, charges should be levied which will equate the amount of the goods desired at those charges with the supply; such charges may either be determined in advance or be established through a bidding mechanism. Certain social goals might, in particular situations, warrant deviation from these principles. For example, it might be appropriate to encourage the consumption of some goods, such as food, shelter, and education, by charging less than their full cost or fair market value. Similarly, it might be appropriate to assure low-income individuals the opportunity to benefit from certain Government-provided goods and services by reducing charges. In general, it should be recognized that charges may only be levied as permitted by law and should not be imposed when the administrative costs of doing so would exceed the revenues collected.

Recommendations

Our 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.

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