OMB Circular A-25 — User Charges & Federal Fee Policy

OMB Circular A-25 ("User Charges," revised July 8, 1993) establishes the government-wide policy for when and how federal agencies must charge fees for the goods, services, and regulatory privileges they provide. The core principle: when the federal government provides a special benefit to an identifiable recipient — a benefit beyond what the general public receives — the recipient should pay for the full cost of that benefit rather than having it subsidized by general taxpayers. A-25 sets the standard for calculating those costs and for the exceptions that Congress or policy priority may justify.

The circular addresses a recurring tension in federal finance: agencies prefer not to charge fees because fees create friction and can reduce uptake of programs, but uncollected fees represent either taxpayer subsidies for private beneficiaries or revenue that agencies are legally required to collect and aren't. OMB A-25 tilts the default toward full-cost recovery, with explicit processes for justifying below-cost fees or waivers.

Legal Authority

• 31 U.S.C. § 9701 — Independent Agencies Appropriations Act (31 U.S.C. § 9701); authorizes the head of each agency to establish fees to recover the costs of services rendered; establishes the "full cost" standard; requires amounts collected be deposited in Treasury and available only as provided by appropriations acts unless otherwise authorized
• 31 U.S.C. § 3302 — Miscellaneous Receipts Act; requires all money received for government except appropriations to be deposited in Treasury; agencies cannot retain fees without specific statutory authority; shapes how fee collections are handled in budget accounting
• OMB Circular A-25 (July 8, 1993) — Establishes when user charges are required (services that confer special benefits on identifiable recipients), the full cost standard, criteria for below-cost fees or waivers, and the process for setting and revising fees

Key Mechanics

A-25 requires federal agencies to charge a user fee whenever the government provides a service, good, or regulatory privilege that confers a "special benefit" on an identifiable recipient — a benefit beyond what the general public receives. The fee must recover the full cost of providing the service: direct costs (labor, materials, overhead) plus indirect costs (management, utilities, depreciation). Agencies must calculate full cost using cost accounting methodologies and review fees biennially to ensure they remain current. Exceptions are permitted when: (1) Congress has specifically directed below-cost fees; (2) the service has significant public benefit beyond the direct recipient (externalities that justify taxpayer contribution); or (3) collecting the full cost would be impractical or create access barriers to essential government functions. Fee waivers may be granted on a case-by-case basis for specific public interest reasons. Without explicit statutory authority to retain fee receipts, agencies must deposit all collections in the Treasury general fund (not retain them for program use); many fee statutes specifically authorize retention or appropriation of receipts. The Miscellaneous Receipts Act (31 U.S.C. § 3302) enforcement means that unauthorized fee retention is a budget violation. Common examples of A-25-governed fees: passport application fees (State Dept), FOIA request fees, patent application fees (USPTO), SEC filing fees, FAA certificate fees, and USCIS immigration petition fees.

Overview

What This Circular Requires

When Fees Are Required

A-25 requires agencies to charge fees whenever they provide a specific service or product to identifiable recipients who receive a benefit beyond that accruing to the general public. This covers three main categories:

Services provided to specific recipients: Permit issuance, license processing, inspection and certification, loan guarantee processing, export licenses, patent examination, trademark registration, copyright registration, visa processing, park entry fees, spectrum licensing.

Sale of government products: Publication sales, data products, maps, images, use of government property.

Regulatory privileges: Fees for access to spectrum, grazing on public lands, offshore mineral extraction, or other uses of government-controlled resources where private parties receive an economic benefit.

The "special benefit" test distinguishes A-25 charges from general tax revenues. A federal publication that informs the general public about government programs provides a general benefit — charging is optional. A customs inspection that clears a specific importer's shipment provides a special benefit to that importer — charging is required.

Full Cost Recovery Standard

The default under A-25 is full cost recovery — fees must cover the full cost of providing the service, including:

• Direct costs: Labor, materials, equipment depreciation, rent
• Indirect costs: Administrative overhead allocated to the service (financial management, HR, IT support, legal)
• Overhead costs: Agency-wide costs such as senior leadership, facilities, and support services properly allocated
• Capital costs: Depreciation or use-of-capital charges for assets used in service delivery

This is stricter than marginal cost pricing (charging only the incremental cost of one more unit) and stricter than direct-cost-only pricing. A-25 full cost accounting requires agencies to identify and allocate overhead — something that requires cost accounting systems that many agencies historically lacked.

Agencies must also update fee schedules at least biennially and publish proposed fee changes in the Federal Register for public comment. Fees that haven't been updated in years are presumptively too low: they were set at full cost at some point but inflation and cost growth have eroded real cost recovery.

Market Rate Alternative

For services where there is a private-sector market analog — comparable services offered commercially — A-25 allows agencies to charge the market rate rather than calculated full cost, if the market rate is higher. This prevents the government from providing below-market services that crowd out private providers. An agency providing commercial-scale data processing could charge its full cost (if lower than market) or market rates; either satisfies A-25.

Below-Cost Fees and Waivers

A-25 permits below-cost fees and fee waivers when:

• Statute requires: Congress has explicitly set a below-cost fee or prohibited fee collection
• Public policy justification: A documented public policy reason justifies subsidy — public health programs, services to low-income populations, or educational/non-profit recipients where the public benefit from their activity outweighs the cost of the subsidy
• The cost of fee collection exceeds the fee: Administrative cost-effectiveness — collecting a $2 fee that costs $5 to process is a net loss

Agencies must document waivers and below-cost fees in their budget justifications to Congress. A-25 waivers are not self-implementing; they require affirmative agency decision with a documented rationale.

FOIA Fee Schedules

The Freedom of Information Act has its own fee framework (5 U.S.C. § 552(a)(4)(A)) that intersects with A-25. FOIA fees for document search and duplication are governed by both A-25's cost recovery principle and FOIA's special fee waiver categories for news media, educational institutions, and non-commercial scientific institutions. A-25's full-cost standard applies to FOIA fees where FOIA does not provide an exemption.

Key Provisions

• Section 6(a) — Agencies must charge fees for services providing special benefits to identifiable recipients; no below-cost fees without documented justification
• Section 6(b) — Full cost is the standard; includes direct, indirect, and overhead costs
• Section 6(c) — Market rate may be charged in lieu of calculated full cost where a private market exists
• Section 6(d) — Below-cost fees and waivers require affirmative agency action with documented public interest rationale
• Section 8 — Fee schedules must be reviewed at least biennially; agencies must publish changes in Federal Register
• Section 9 — All collections are subject to the Miscellaneous Receipts Act unless a specific appropriation permits retention

How It Affects You

If you work at a federal agency (CFO, budget office, program office): A-25 creates a compliance obligation for every fee-charging program in your agency. The biannual review requirement is the most commonly missed element — agencies often set fees correctly at one point and then let years pass without updating them. Your budget justification to Congress must document any below-cost fees or waivers. When designing a new service, conduct an A-25 cost analysis before setting the initial fee: use-of-capital charges and overhead allocation are the components most likely to be underestimated. Full cost recovery also means your working capital fund or revolving fund needs accurate cost accounting — standard agency accounting systems often lack the cost object granularity A-25 requires.

If you are a federal contractor providing support services: A-25's full cost principle shapes how agencies budget for services you provide; the agency's cost model for your contract may flow directly into the fee schedule for the service you're helping deliver. Understanding A-25 helps you understand why agencies have cost accounting requirements in contracts for fee-funded programs — those costs must be allocable and auditable for the fee schedule to be defensible.

If you are a business or individual paying federal fees: A-25 means federal fees are supposed to reflect actual costs, not arbitrary charges. If a fee seems disproportionate to the service provided, the agency is required to have a cost justification on file — that justification is disclosable under FOIA. Biannual review requirements mean fee increases are predictable; watch Federal Register notices from agencies you do business with. Fee waivers are available for non-commercial, educational, or public interest requesters in many programs — ask before paying.

If you are a researcher or journalist: Federal fee schedules and their cost justifications are public record and FOIA-accessible. Agencies that haven't updated fee schedules in years may be providing implicit subsidies to commercial users; this is a recurring GAO finding. The contrast between high-volume commercial users and low-volume public interest requesters raises policy questions about who bears the cost of government services and data access.

State and Local Government Implications

State and local governments frequently receive fee waivers or reduced rates under A-25 when they act as agents of federal programs (as grantees or contractors) or when their activities provide public benefits that justify subsidy. Intergovernmental service agreements are generally exempt from A-25's full-cost charging requirement because they represent government-to-government cost sharing rather than commercial service provision.

Recent Developments

• 1993 — Major revision of A-25 to strengthen full-cost recovery standard and clarify the special benefit test
• Ongoing — Agencies inconsistently comply with biannual review requirements; OMB's Budget review process periodically flags large fee-funded programs that appear below-cost
• Federal Register practice — Agencies routinely publish fee schedule updates as final rules or interim final rules; A-25's requirement for biannual review creates a predictable Federal Register update cycle for regulated industries
• FY2024-2025 — DOGE-driven agency restructuring has in some cases affected fee-funded programs where staffing reductions affect service capacity; A-25 requires that fee levels reflect actual service delivery costs, which change when staff levels change