Government Agencies Need Effective Planning To Curb Unnecessary Year-End Spending
PSAD-80-67: Published: Jul 28, 1980. Publicly Released: Aug 6, 1980.
- Full Report:
The problems associated with yearend surges in government spending are of concern to both Congress and the President. In fiscal year 1979, major civilian agencies spent about $336 billion, and spent 21 percent of that in the last 2 months of the fiscal year. A review was undertaken to determine the extent and causes of yearend spending in these agencies and departments, and possible legislative controls to reduce the practice.
Among the reasons given by agencies for yearend spending surges that may adversely affect procurement effectiveness were: the lack of an effective advance procurement system; the philosophy that all available funds must be spent before the end of the fiscal year; concern that a manager's performance is evaluated partly on spending ability; and the appropriation, budgeting, and program planning delays. Techniques and procurement processing shortcuts to quickly spend excess funds at yearend included: noncompetitive or sole source contract awards, contract modifications, incremental funding of existing contracts beyond current needs, and prime contract awards to the Small Business Administration long before the agency was prepared to award the subcontract to the minority firm. Waste is likely to result when the main objective is to spend all available excess funds at the end of the fiscal year. The review disclosed (1) noncompliance with laws and regulations, including recording obligations lacking legal sufficiency; (2) obligating expired appropriations; (3) a top agency official awarding contracts over the objections of contracting personnel; and (4) possible procurements exceeding current bonafide needs. It was noted that the most advantageous costs or services may not result under yearend procurement surges because of premature contract award, delayed price negotiations, and inadequate work statements or specifications. Agency officials expressed concern about the adverse impact of yearend spending on the personnel and operation of the program and contracting offices.
Recommendation for Executive Action
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Recommendation: The Secretaries of the Departments of Health and Human Services (HHS), Housing and Urban Development, the Interior, and Education and the Administrator of the Environmental Protection Agency should direct their budgeting, programming, and procurement offices to develop or improve: an advance procurement planning system tied in with the budgetary apportionment system; a system for monitoring the procurement planning system; the agencies' obligation reporting system to provide timely and reliable data reporting of obligations; and a system to check that all required procurement procedures are followed. These officials should: specify that performance of program and procurement managers will be evaluated on the quality of procurement rather than their ability to spend funds; eliminate the practice of spending all available funds by the end of the fiscal year; and require program managers to initiate procurement requests before appropriations are approved or even before the beginning of the fiscal year. They should also set up a system to ensure that: binding agreements support obligations; procurements of goods and services are made only when a bonafide need exists in the year purchased; and the practice of making awards under section 8(a) of the Small Business Act before a subcontractor is identified and ready to receive an award is not used as a device to prolong availability of funds. These officials should determine the causes for continued high yearend spending surges and take action to smooth out their department's or agency's spending patterns. The Director, Office of Management and Budget (OMB) should insure that all agencies set up advance procurement planning systems linked with the budgetary and apportionment process to curtail yearend spending surges. To improve their department's consulting services spending patterns, the Secretaries of Education and HHS should continue to review consulting services and fully implement the data reporting and other requirements directed by OMB Circular A-120. Agencies covered by the followup review of research and development contract awards should develop and implement annual procurement plans for research and development projects to spread contract awards throughout the fiscal year. The Federal Railroad Administration and the Secretary of Transportation should develop and implement procedures for evaluating the quality and usefulness of products received under research and development contracts.