nan] Treasury Board of Canada Secretariat du Conseil du Tresor Secretariat du Canada Comptroller General of Canada ContrOleur general du Canada Sitin?smda' PROTECTED I PROTEGE - For Decision MEMORANDQM TQ THE PRESIDENT MODERNIZING THE MANAGEMENT OF USER FEES SUMMARY The purpose of this memo is to provide an overview of key' Issues on your mandate letter commitment related to the management of user fees, speci?cally. WW {theachallenges arising from"the?Us?e?r Fees Act; the strategic a recommended solution :7 A brie?ng is proposed between departmental officials and yourself as the key next step to progress this item. TIME FRAME Iherefore, departmental of?cials {like to- -discuss _yo_ur_ preferred approach .J . Canaa Background User fees are de?ned as an amount paid for a government service, the use of a facility or. several other government sanctioned approvals permits, licences, etc. Fees are for- services or goods that confer a direct bene?t to the fee payer above those enjoyed by taxpayers. 000001 PROTECTED I PROTEGE 2- In response to industry and parliamentary concerns, the User Fees Act (UFA) (2004) was enacted with all-party support. The intent of the legislation was to provide greater transparency in how user fees were set, greater oversight and greater accountability to stakeholders. Analysis Since implementation, ?ve signi?cant issues have arisen: 1. The scope of the fees that are subject to the Act does not align with the intent of the UFA: currently 84 percent of existing user fees have not been revised and, therefore, are not subject to the UFA: 2. The subsection of the Act that causes a reduction in fees when performance standards are not met results in a disincentive to amend fees; 3. Signi?cant time and effort Is required to prepare proposals to amend or create fees; 4. The growing gap in service delivery costs versus fee revenue amounts to an increase-in public subsidies; and 5. Timelines identi?ed in the Act for tabling and reporting have proven to be problematic. As a result. medemization of the management of user fees has been limited across government. Since 2004, an average of 2.4 fee proposals per year have beenrput forward versus 10 proposals per year prior to the'UFA coming into force. In addition, 25 percent of departments (10 out of 41) preparing fee proposals have requested an exemption from the UFA. Only three have been granted. Furthermore. while fees have not increased over time, costs have. This resulted in an increase in the rate of tax payer subsidies for government services that bene?t private interests. 000002 5.21 (1 PROTECTED I PROTEGE 3 . Options Three strategic Options are proposed to strengthen the management regime around user fee activities: 1. ?Reebi?n The UFA was supported all parties atthe time of its tabling in Parliament; Improvements to user fee management practices will only be achieved by addressing the key challenges, both with the UFA and with the complementary guidance and ?policy developed by 000003 - . .PROTECTEDBIPROTEGEB 4: "(Tab 1.). Before finalizing the decision around the best approach to manage user fees, the following are proposed: 0 Provide you with a full brie?ng on the issues related to user fees; 0 DiScuss which optIOn will provide the best opportunities to achieve mandate letter commitments; 0 COMM your preferred option to resolve the issue; and Con?rm the wayahead. Please ?nd attached a pre'Sentation that could be used to support a follow up brie?ng on this subject (Tab_2). Bill Matt ws Yes. please arrange a meeting with my of?ce. No brie?ng - Scott Boson Date Roger Ermuth, Assistant Comptroller General. Financial Management Sector (613-369-31 19) Attachments: (2): Web 2: 000004 Pages 5 to I a 6 are withheld pursuant to section sont retenues en vertu de l'article of the Access to Information Act de la Loi sur l'acces a l'information PROTECTED PROTEGE EWSWG of Canada ??gt?aarigtadu Conseil du Tr?sor ma 3 Roger Ermuth June 21, 2016 000007 PROTECTED PROTEGE Objective To provide an overview of the key issues and propose options to modernize the administration of user fees and. other fees charged by the Government 000008 PROTECTED PROTEGE A Context. he User fees are generally defined as an amount that is paid for: - A service; the use of a facility; or the cost of regulating an activity beyond those enjoyed by general taxpayers. 0 User fees can be perceived as a tax; and Private interests can be subsidized when there' Is a public benefit In providing the service. In the early 20005,.the pharmaceutical industry lobbied the Government for an improved regime for user fees: Their position was government did not provide timely service; ?6 They expressed a willingness to pay for improved service. 000009 PROTECTED PROTEGE Background In 2004, the User Fees Act (UFA) v?vas adopted by Parliament: Originated from a Private Member?s bill; and 0 Received unanimous support from all parties. Main objectiVes of the legiSlation were: Greater transparency in the setting of fees; - Role for users and parliamentariansin the setting of fees; Oversight for the new/amended fees; and Accountability to users for departmental performance. 000010 Scope of what is included in the UFA: Interpretation of the definition of what fees are subject to the i" Inclusion of fees that were not intended to be subject to the and - Legal interpretation that only neW/amended fees subject to-the UFA. Performance regime that reduces fees if service standards are missed Thetime/effort to prepare user fee proposals/amendments Growing gap in the coSt of services versus fees recovered (public subsidy) Timing issues: Requirement to present user'feeinformation in both houses of Parliament; Timelines associated with the appeals process; and Timeline for the annual tabling of results in Parliament, 00001 1 PRO ECTEDB PR TEGEB As a rate of public subsidy of privatem eres 'ncresed Where fees have been Health $400,000 . 1 2-1121 . .. A - $200,000 9 $100,000 - 200405 2013-14 2004~05 2013-14 I Revenue ($000) {$000) I Revenue (5000) ($000) ..t.he cost/reven ue ratio has remained stable. Where fees, have not been 5/ Canadian Food Inspection Agency - Transport $1,000,0000 $250,000 200,000 .. 5800,0000 59541.0 5600,0000 . .. $150900 5400,0000 3 $100,000 5200,0000 $50900 5' 2004415 2013-14 200405 2013-14 Revenue ($000) Cost ($000) ?3 Revenue ($000) Cost ($000) - public subsidy has increased or changed in an unpredictable manner 000012 PROTECTED I PROTEGE As a reSuIt.,. Modernization has been limited 84% of user feesare not subject to the Act: Legal interpretation that fees only subject to Act when created or amended. 0 9 Since 2004, an average of 2.4 fees/year have been amended or created: - Prior to the UFA, an average of 10 fees per Year were amended or created. 25% (10 of 41) of departments with user fees have requested exemptions from the UFA: 3 have been grantedexemption from the UFA. n??u ?v.19, . The UFA has not achIeved its objectIve of strengthenlng the management regIme around user fees. 7 ?a . .. rues-.. ll 000013 . Options forAddressing Challenges Related 000014 - PROTECTED Recommendation 9 This approach will}: 0 Provide support to good management practices, while reducing administrative burden; and Reinforce a service culture by emphasizing the accountability of departments to users. AnnexA 000015 PROTECTED I PROTEGE Next Steps .. Confirm direction on the preferred approach; - Develop detailed proposal for apPFOVal; Engage/consult with departmental stakeholders, Finance, Privy C-ounCil Office, Department of Justice and other key User fee departments - Engage with Parliament stakeholders (see Annex and 10 000016 PROTECTED PROTEGE Annex A: - Annex 3: Proposed Parliamentary Engagement Strategy 7 - . {Talk i _11 ?in. a [_f?itad?uu??li . 000017 . - PROTECTED PROTEGE i Annex A: [Scope 000018 Annex - GEE- 6 13 000019 - RAPROTEGE Annex A: 7 14 000020 PROTECTED I - TI ng 15 000021 69(1)(g)reif) .. s. 21 PROTECTED PROTEGE 821(1)(b) Annex Proposed Parliamentary Engagement Strategy Work with the House Leader on approach to engage Parliamentarians; 1-. 15? 000022