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Department of the Interior

Effective Date: 5/13/82

Series: Financial Management

Part 346: Cost Recovery

Chapter 2: Guidelines for Identifying Recoverable Programs

Originating Office: Office of Financial Management

2.1 Purpose. The general guidelines set forth in this Chapter are provided to assist the bureaus and offices in determining (a) when a recoverable service is rendered, and (b) the measure of the recoverable cost of rendering the service (referred to as value to the recipient). These areas have been the subject of several court decisions. The discussion in this Chapter is a compilation and interpretation of the guidance in those court decisions.

2.2 Policy. The determination of service rendered and the measure of the cost of rendering the service must be applied on a program-by-program basis to all cost recoverable activities authorized by the Independent Offices Appropriation Act (IOAA) as well as any other similar legislative authority.

2.3 Service Rendered. A service is rendered when there is a special benefit or privilege bestowed to an identifiable recipient above and beyond those that accrue to the public at large.

A. Benefit. A benefit is essentially any good or service provided by a bureau or office. It could be a complicated land use authorization or simply a copy of a document. There are three types of benefits:

(1) Private benefit - benefits only the recipient.

(2) Public benefit - benefits only the public or some independent public interest.

(3) Incidental public benefit - a public benefit in conjunction with a private benefit.

B. Guidelines. When benefits accrue to the recipient (private), there may also be incidental public benefits. For example, environmental studies that must be performed to grant a permit are an integral part of the permit granting process and bestow a special benefit on the permit recipient; however, the studies also have obvious incidental public benefits. It is not necessary to segregate the private and public benefits. A bureau or office "may recover the full cost of providing a service to a private beneficiary, regardless of whether that service may also benefit the public" (Mississippi Power & Light Co. v. Nuclear Regulatory Commission, 601 F.2d 223 (5th Cir. 1979), cert. denied, 444 U.S. 1102 (1980)).

(1) The cost of providing private benefits may be recoverable. The cost of providing public benefits, where there is no identifiable recipient or where the ultimate beneficiary is obscure, is not recoverable. However, the cost of providing public benefits incident to a private benefit may be recoverable and need not be separated from the private benefit.

(2) A special benefit or privilege accrues when a Government-rendered service:

(a) Enables the beneficiary to obtain more immediate or substantial gains or values. Examples include special land use authorizations and preference rights for goods or resources.

(b) Is performed at the request of the recipient and is above and beyond the services regularly received by other members of the same industry or group, or of the general public. This is the most common instance when cost recovery is appropriate. Examples include requests for copies of documents or other special services.

C. Recipient. The recipient of the benefit must be clearly identifiable. Cost recovery is not applicable where the ultimate beneficiary is obscure. The identifiable recipient can be an individual, organization, unit of government, business entity, or a combination of these. When there is an application or request for a service or privilege, the recipient is easily identifiable. When benefits are provided by a bureau or office motion or initiative, the ultimate beneficiary is usually obscure, and recovery of costs would not ordinarily be sought.

2.4 Measuring Cost.

A. General. In setting "fair and equitable" fees, the IOAA states that each agency must consider "direct and indirect costs to the Government, value to the recipient, public policy or interest served, and other pertinent facts." The Supreme Court indicated that consideration of public policy or interest served and other pertinent facts would be unconstitutional because it infringes on Congress' taxing authority (National Cable Television Association v. United States, 415 U.S. 336 (1974)). Therefore, under the IOAA and any other similar legislative authority, direct and indirect cost and value to the recipient are the only two factors that must be considered in determining "fair and equitable" costs.

B. Value to the Recipient. Direct and indirect costs are discussed in detail in 346 DM 3. Before those costs can be identified for recovery, each bureau or office must consider value to the recipient, which is the measure of the recoverable cost of rendering the service.

(1) The charge for the benefit must be "measurable" in accordance with Office of Management and Budget Circular No. A-25. The Fifth Circuit Court of Appeals ruled that the IOAA allows "only specific charges for specific services rendered to identifiable recipients" (Mississippi Power & Light Co. v. Nuclear Regulatory Commission, 601 F.2d 223 (5th Cir. 1979), cert. denied, 444 U.S. 1102 (1980)). In this instance, the Court ruled that regulatory agencies cannot recoup the full costs of the agency, but only those costs (direct and indirect) that result in benefit to the recipient. "Costs of generic activities," such as "programmatic (environmental) statements prepared by (an agency) on its own instigation in support of a general agency program expected to have a significant benefit both for the public and for private recipients as yet unidentified," are not recoverable. In other words, each dollar recovered must be supported and must relate directly to a special benefit to an immediately identifiable recipient.

(2) The fee or charge must be related to "the value of the direct and indirect services which the agency confers (and not) the value the party may immediately or eventually derive..." from the benefit. A fee or charge "cannot be justified by the revenues received or profits (earned by the beneficiary), but must be reasonably related to those attributable direct and indirect costs which the agency actually incurs" (National Cable Television Association v. FCC, 554 F.2d 1094 (D.C. Cir. 1976)).

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5/13/82 #3564

Replaces 5/13/82 #2411