OMB Circular A-25

Circular No. A-25 -- User Charges

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Circular No. A-25
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(Transmittal Memorandum No. 1)
MEMORANDUM FOR HEADS OF EXECUTIVE DEPARTMENTS AND
ESTABLISHMENTS
SUBJECT: User charges
1. Purpose
2. Rescission
3. Authority
4. Coverage
5. Objectives
6. General Policy
7. Implementation
8. Agency Repsonsibility
9. Disposition of Collections
10. New Activities
11. Inquiries
1. Purpose: The Circular establishes Federal policy regarding fees assessed for
Government services and for sale or use of Government goods or resources. It
provides information on the scope and types of activities subject to user charges and
on the basis upon which user charges are to be set. Finally, it provides guidance for
agency implementation of charges and the disposition of collections.
2. Rescission: This rescinds Office of Management and Budget Circular No. A-25,
dated September 23, 1959, and Transmittal Memoranda 1 and 2.
3. Authority: Title V of the Independent Offices Appropriations Act of 1952 (31 U.S.C.
9701); 31 U.S.C. 1111; and Executive Orders No. 8248 and No. 11,541.
4. Coverage:
a. The provisions of this Circular cover all Federal activities that convey special
benefits to recipients beyond those accruing to the general public. The Circular does
not apply to the activities of the legislative and judicial branches of Government, or to
mixed-ownership Government corporations, as defined in 31 U.S.C. 9701.
b. The provisions of the Circular shall be applied by agencies in their assessment of
user charges under the IOAA. In addition, this Circular provides guidance to agencies
regarding their assessment of user charges under other statutes. This guidance is
intended to be applied only to the extent permitted by law. Thus, where a statute
prohibits the assessment of a user charge on a service or addresses an aspect of the
user charge (e.g., who pays the charge; how much is the charge; where collections are
deposited), the statute shall take precedence over the Circular. In such cases (e.g.,
sale or disposal under Federal surplus property statutes; or fringe benefits for military

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Circular No. A-25 -- User Charges

personnel and civilian employees), the guidance provided by the Circular would apply
to the extent that it is not inconsistent with the statute. The same analysis would apply
with regard to executive orders that address user charges.
c. In any case where an Office of Management and Budget circular provides guidance
concerning a specific user charge area, the guidance of that circular shall be deemed
to meet the requirements of this Circular. Examples of such guidance include the
following: OMB Circular No. A-45, concerning charges for rental quarters; OMB
Circular No. A-130, concerning management of Federal information resources; and
OMB Circular No. A-97, concerning provision of specialized technical services to State
and Local governments.
5. Objectives: It is the objective of the United States Government to:
a. ensure that each service, sale, or use of Government goods or resources provided
by an agency to specific recipients be self-sustaining;
b. promote efficient allocation of the Nation's resources by establishing charges for
special benefits provided to the recipient that are at least as great as costs to the
Government of providing the special benefits; and
c. allow the private sector to compete with the Government without disadvantage in
supplying comparable services, resources, or goods where appropriate.
6. General policy: A user charge, as described below, will be assessed against each
identifiable recipient for special benefits derived from Federal activities beyond those
received by the general public. When the imposition of user charges is prohibited or
restricted by existing law, agencies will review activities periodically and recommend
legislative changes when appropriate. Section 7 gives guidance on drafting legislation
to implement user charges.
a. Special benefits
1. Determining when special benefits exist. When a service (or privilege) provides
special benefits to an identifiable recipient beyond those that accrue to the
general public, a charge will be imposed (to recover the full cost to the Federal
Government for providing the special benefit, or the market price). For
example, a special benefit will be considered to accrue and a user charge will
be imposed when a Government service:
(a) enables the beneficiary to obtain more immediate or substantial
gains or values (which may or may not be measurable in monetary
terms) than those that accrue to the general public (e.g., receiving a
patent, insurance, or guarantee provision, or a license to carry on a
specific activity or business or various kinds of public land use); or
(b) provides business stability or contributes to public confidence in the
business activity of the beneficiary (e.g., insuring deposits in
commercial banks); or
(c) is performed at the request of or for the convenience of the recipient,
and is beyond the services regularly received by other members of the
same industry or group or by the general public (e.g., receiving a
passport, visa, airman's certificate, or a Custom's inspection after
regular duty hours).
2. Determining the amount of user charges to assess.
(a) Except as provided in Section 6c, user charges will be sufficient to
recover the full cost to the Federal Government (as defined in Section
6d) of providing the service, resource, or good when the Government is
acting in its capacity as sovereign.

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Circular No. A-25 -- User Charges

(b) Except as provided in Section 6c, user charges will be based on
market prices (as defined in Section 6d) when the Government, not
acting in its capacity as sovereign, is leasing or selling goods or
resources, or is providing a service (e.g., leasing space in federally
owned buildings). Under these business- type conditions, user charges
need not be limited to the recovery of full cost and may yield net
revenues.
(c) User charges will be collected in advance of, or simultaneously with,
the rendering of services unless appropriations and authority are
provided in advance to allow reimbursable services.
(d) Whenever possible, charges should be set as rates rather than fixed
dollar amounts in order to adjust for changes in costs to the
Government or changes in market prices of the good, resource, or
service provided (as defined in Section 6d).
3. In cases where the Government is supplying services, goods, or resources that
provide a special benefit to an identifiable recipient and that also provide a
benefit to the general public, charges should be set in accordance with
paragraph (2) of Section 6a. Therefore, when the public obtains benefits as a
necessary consequence of an agency's provision of special benefits to an
identifiable recipient (i.e., the public benefits are not independent of, but merely
incidental to, the special benefits), an agency need not allocate any costs to the
public and should seek to recover from the identifiable recipient either the full
cost to the Federal Government of providing the special benefit or the market
price, whichever applies.
4. No charge should be made for a service when the identification of the specific
beneficiary is obscure, and the service can be considered primarily as
benefiting broadly the general public.
b. Charges to the direct recipient. Charges will be made to the direct recipient of the
special benefit even though all or part of the special benefits may then be passed to
others.
c. Exceptions
1. Agency heads or their designee may make exceptions to the general policy if
the provision of a free service is an appropriate courtesy to a foreign
government or international organization; or comparable fees are set on a
reciprocal basis with a foreign country.
2. Agency heads or their designee may recommend to the Office of Management
and Budget that exceptions to the general policy be made when:
(a) the cost of collecting the fees would represent an unduly large part
of the fee for the activity; or
(b) any other condition exists that, in the opinion of the agency head or
his designee, justifies an exception.
3. All exceptions shall be for a period of no more than four years unless renewed
by the agency heads or their designee for exceptions granted under Section 6c
(1) or the Office of Management and Budget for exceptions granted under
Section 6c(2) after a review to determine whether conditions warrant their
continuation.
4. Requests for exceptions and extensions under paragraphs (2) and (3) of
Section 6c shall be submitted to the Director of the Office of Management and
Budget.
d. Determining full cost and market price

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Circular No. A-25 -- User Charges

1. ``Full cost'' includes all direct and indirect costs to any part of the Federal
Government of providing a good, resource, or service. These costs include, but
are not limited to, an appropriate share of:
(a) Direct and indirect personnel costs, including salaries and fringe
benefits such as medical insurance and retirement. Retirement costs
should include all (funded or unfunded) accrued costs not covered by
employee contributions as specified in Circular No. A-11.
(b) Physical overhead, consulting, and other indirect costs including
material and supply costs, utilities, insurance, travel, and rents or
imputed rents on land, buildings, and equipment. If imputed rental costs
are applied, they should include:
(i) depreciation of structures and equipment, based on official
Internal Revenue Service depreciation guidelines unless better
estimates are available; and
(ii) an annual rate of return (equal to the average long- term
Treasury bond rate) on land, structures, equipment and other
capital resources used.
(c) The management and supervisory costs.
(d) The costs of enforcement, collection, research, establishment of
standards, and regulation, including any required environmental impact
statements.
(e) Full cost shall be determined or estimated from the best available
records of the agency, and new cost accounting systems need not be
established solely for this purpose.
2. "Market price" means the price for a good, resource, or service that is based on
competition in open markets, and creates neither a shortage nor a surplus of
the good, resource, or service.
(a) When a substantial competitive demand exists for a good, resource,
or service, its market price will be determined using commercial
practices, for example:
(i) by competitive bidding; or
(ii) by reference to prevailing prices in competitive markets for
goods, resources, or services that are the same or similar to
those provided by the Government (e.g., campsites or grazing
lands in the general vicinity of private ones) with adjustments as
appropriate that reflect demand, level of service, and quality of
the good or service.
(b) In the absence of substantial competitive demand, market price will
be determined by taking into account the prevailing prices for goods,
resources, or services that are the same or substantially similar to those
provided by the Government, and then adjusting the supply made
available and/or price of the good, resource, or service so that there will
be neither a shortage nor a surplus (e.g., campsites in remote areas).
7. Implementation:
a. The general policy is that user charges will be instituted through the promulgation of
regulations.
b. When there are statutory prohibitions or limitations on charges, legislation to permit
charges to be established should be proposed. In general, legislation should seek to
remove restraints on user charges and permit their establishment under the guidelines

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Circular No. A-25 -- User Charges

provided in this Circular. When passage of this general authority seems unlikely, more
restrictive authority should be sought. The level of charges proposed should be based
on the guidelines in Section 6. When necessary, legislation should:
1. define in general terms the services for which charges will be assessed and the
pricing mechanism that will be used;
2. specify fees will be collected in advance of, or simultaneously with, the
provision of service unless appropriations and authority are provided in
advance to allow reimbursable services;
3. specify where collections will be credited (see Section 9). Legislative proposals
should not normally specify precise charges. The user charge schedule should
be set by regulation. This will allow administrative updating of fees to reflect
changing costs and market values. Where it is not considered feasible to
collect charges at a level specified in Section 6, charges should be set as close
to that level as is practical.
c. Excise taxes are another means of charging specific beneficiaries for the
Government services they receive. New user charges should not be proposed in cases
where an excise tax currently finances the Government services that benefit specific
individuals. Agencies may consider proposing a new excise tax when it would be
significantly cheaper to administer than fees, and the burden of the excise tax would
rest almost entirely on the user population (e.g., gasoline tax to finance highway
construction). Excise taxes cannot be imposed through administrative action but rather
require legislation. Legislation should meet the same criteria as in Section 7b;
however, it is necessary to state explicitly the rate of the tax. Agency review of these
taxes must be performed periodically and new legislation should be proposed, as
appropriate, to update the tax based on changes in cost. Any excise tax proposals
must be approved by the Assistant Secretary for Tax Policy at the Department of the
Treasury.
d. When developing options to institute user charges administratively, agencies should
review all sources of statutory authority in addition to the Independent Offices
Appropriations Act that may authorize implementation of such charges.
e. In proposing new charges or modifications to existing ones, managers of other
programs that provide special benefits to the same or similar user populations should
be consulted. Joint legislative proposals should be made, and joint collection efforts
designed to ease the burden on the users should be used, whenever possible.
f. Every effort should be made to keep the costs of collection to a minimum. The
principles embodied in Circular No. A-76 (Performance of Commercial Activities)
should be considered in designing the collection effort.
g. Legislative proposals must be submitted to the Office of Management and Budget in
accordance with the requirements of Circular No. A-19. To ensure the proper
placement of user fee initiatives in the budget account structure, agencies are
encouraged to discuss proposals with OMB at an early stage of development.
8. Agency responsibility: Agencies are responsible for the initiation and adoption of
user charge schedules consistent with the policies in this Circular. Each agency will:
a. Identify the services and activities covered by this Circular;
b. Determine the extent of the special benefits provided;
c. Apply the principles specified in Section 6 in determining full cost or market price, as
appropriate;
d. Apply the guidance in Section 7 either to institute charges through the promulgation
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Circular No. A-25 -- User Charges

of regulations or submit legislation as appropriate;
e. Review the user charges for agency programs biennially, to include: (1) assurance
that existing charges are adjusted to reflect unanticipated changes in costs or market
values; and (2) a review of all other agency programs to determine whether fees
should be assessed for Government services or the user of Government goods or
services. Agencies should discuss the results of the biennial review of user fees and
any resultant proposals in the Chief Financial Officers Annual Report required by the
Chief Financial Officers Act of 1990;
f. Ensure that the requirements of OMB Circular No. A- 123 (Internal Control Systems)
and appropriate audit standards are applied to collection;
g. Maintain readily accessible records of:
●

the services or activities covered by this Circular;

●

the extent of special benefits provided;

●

the exceptions to the general policy of this Circular;

●

●

●

the information used to establish charges and the specific method(s) used to
determine them; and
the collections from each user charge imposed.
Maintain adequate records of the information used to establish charges and
provide them upon request to OMB for the evaluation of the schedules and
provide data on user charges to OMB in accordance with the requirements in
Circular No. A-11.

9. Disposition of collections:
a. Unless a statute provides otherwise, user charge collections will be credited to the
general fund of the Treasury as miscellaneous receipts, as required by 31 U.S.C.
3302.
b. Legislative proposals to permit the collections to be retained by the agency may be
appropriate in certain circumstances. Proposals should meet the guidelines in Section
7b.
Proposals that allow agency retention of collections may be appropriate when a fee is
levied in order to finance a service that is intended to be provided on a substantially
self-sustaining basis and thus is dependent upon adequate collections.
1. Generally, the authority to use fees credited to an agency's appropriations
should be subject to limits set in annual appropriations language. However, it
may be appropriate to request exemption from annual appropriations control, if
provision of the service is dependent on demand that is irregular or
unpredictable (e.g., a fee to reimburse an agency for the cost of overtime pay
of inspectors for services performed after regular duty hours).
2. As a normal rule, legislative proposals that permit fees to be credited to
accounts should also be consistent with the full-cost recovery guidelines
contained in this Circular. Any fees in excess of full- cost recovery and any
increase in fees to recover the portion of retirement costs which recoups all
(funded or unfunded) accrual costs not covered by employee contributions
should be credited to the general fund of the Treasury as miscellaneous
receipts.
10. New activities: Whenever agencies prepare legislative proposals for new or
expanded Federal activities that would provide special benefits, the policies and
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Circular No. A-25 -- User Charges

criteria set forth in this Circular will apply.
11. Inquiries: For information concerning this Circular, consult the Office of
Management and Budget examiner responsible for the agency's budget estimates.
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