Year-End Spending:

Reforms Underway But Better Reporting and Oversight Needed

AIMD-98-185: Published: Jul 31, 1998. Publicly Released: Jul 31, 1998.

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Paul L. Posner
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Pursuant to a congressional request, GAO reviewed the: (1) actions taken to correct problems with federal yearend spending practices and the award of government contracts; and (2) quarterly obligation data for selected departments and agencies to determine if fourth quarter obligations were higher than obligations in earlier quarters of the fiscal year (FY).

GAO noted that: (1) changes in the budget environment and procurement reforms have affected the opportunity and need to obligate funds quickly at yearend; (2) agencies spend far less today than they did in 1980 on providing goods and services directly, as payments to individual beneficiaries and grants to state and local governments have increased; (3) this trend, combined with limits on discretionary spending, has significantly changed the budget environment for most agencies; (4) at the same time, Congress has made funds available for longer periods for many agencies, which reduces the pressure to spend funds at the end of each year; (5) in addition, systemic procurement reforms addressed most of the issues raised in the Subcommittee on Oversight of Government Management, Senate Committee on Governmental Affairs' report although problems persist in certain agencies and with some procurements; (6) GAO's work and that of others indicates that today, there are more safeguards against unplanned yearend spending and, in most discretionary programs, fewer resources available for low-priority purchases than in 1980; (7) despite these changes, it is difficult to assess the patterns of spending during the year because reported quarterly budget execution data are not reliable; (8) without complete and timely information for oversight, the Office of Management and Budget (OMB) and other decisionmakers do not have an accurate assessment of the financial status of federal programs during the year; (9) even at yearend, there are significant differences in three comparable sets of data that agencies report to OMB and the Department of the Treasury; (10) although OMB officials stated that a new system they have built jointly with Treasury to collect yearend data starting in FY 1999 should resolve or greatly alleviate the differences in yearend budget data, more work is needed to assure compliance with the requirement for quarterly data; and (11) agencies' failure to report and reconcile budget execution information mirrors broader financial management problems found in GAO's financial audit of the FY 1997 Consolidated Financial Statements of the United States government.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FACTS II has been fully implemented as of year-end 2001, with 96 percent of all appropriations accounts covered. FACTS II, which is used to report quarterly and year-end budget execution and accounting data, ensures that this data is monitored and reported consistently. Agencies demonstrated that they are complying with requirements to report quarterly information timely by providing information for 90 percent of all accounts government-wide for the first quarter of fiscal year 2002.

    Recommendation: To improve oversight of agencies' execution of the budget, OMB should reemphasize compliance with the OMB Circular A-34 requirement that agencies provide quarterly data no later than 20 days after the close of a calendar quarter, and examine quarterly reporting by agencies that varies significantly from planned or historical rates.

    Agency Affected: Executive Office of the President: Office of Management and Budget

  2. Status: Closed - Implemented

    Comments: The Federal Agencies' Centralized Trial Balance System (FACTS) II allows agencies to report a unified set of accounting data that fulfills all budget execution reporting requirements. As of year-end 2001, FACTS II was fully implemented with data for 96 percent of all appropriations accounts reported. Since fiscal year (FY) 1999, OMB has reported annually on progress agencies have made in reconciling differences in formulation and execution data, in this case for FY 1997 data. The latest report, published in May 2002, shows significant progress with absolute differences of 1 percent government-wide for obligations and outlays for FY 2001. Although differences of 22 percent were reported for obligated balances, 95 percent of these differences occurred in four agencies and were limited to four accounts.

    Recommendation: OMB should continue its efforts to integrate budget and accounting reporting at yearend and report periodically on progress made.

    Agency Affected: Executive Office of the President: Office of Management and Budget


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