Magazine article CMA - the Management Accounting Magazine

New Emphasis on User Fees

Magazine article CMA - the Management Accounting Magazine

New Emphasis on User Fees

Article excerpt

The federal government will collect an estimated $3 billion plus in user fees this year for anything from passports and visas to park camping fees, according to Michael Marion, senior policy adviser, Program Branch of the Treasury Board. Indeed, the current update to the "Multi-Year Operational Plan," the government's three-year strategic financial plan, will also ask departments to cost out their user fee plans.

Yet an estimated $1 billion more could still be justifiably collected for services that are now free. Free, you say--but we, the public, have already paid high taxes, why should we pay twice?

But wait, let's think back to our basic costing concept of allocative efficiency! If the general public all received equal "free" amounts of services, there would be no need for user fees. In practice, though, free services may be used disproportionately by certain sectors of the public, including corporations and special interest groups. Moreover, if services are free, some people also waste them.

If fair user charges could be calculated for each service and users paid them, we would have accomplished several things. Firstly, those who benefit from each service would willingly pay a fair price (and insist on quality service). Secondly, those who didn't use the services wouldn't pay. Thirdly, because costs are being recovered for needed services, less would have to be levied in general taxes (reducing the federal government's budget deficit).

Although governments and municipalities have been collecting certain user fees for years, such as public library fines, the federal government has recently realized that a new approach is needed. Many services have no fee and those that do, do not reflect the full costs, are improperly set, or cost too much to collect. Federal government financial officers also lacked incentive to collect fees as such monies had to be given up to the general "consolidated revenue fund" rather than being used to reduce the departmental program's budget or to enhance services.

So the somewhat fractured legislation and regulations (which may include parts of the Financial Administration Act and specific Departmental Acts and Regulations) governing whether services can be charged for, at full cost or otherwise, have been revisited by the Treasury Board. In line with the Public Service 2000 initiatives (a policy to revitalize public service), departments are now encouraged to update their user fee policies and practices. …

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