The Office of Management and Budget has directed agencies to take full advantage of the funding flexibilities they have under the law as they implement the automatic budget cuts, known as sequestration, that went into effect March 1.

In an April 4 memo, OMB Controller Danny Werfel also directed agency and department leaders to be mindful of certain types of performance awards and to work with agency inspectors general before making cuts to IG offices.

Many agencies’ hands are tied when it comes to implementing the cuts because of their across-the-board nature.

“However, depending on an agency’s account structure and any existing flexibilities provided by law, some agencies may have a limited ability to realign funds to protect mission priorities,” Werfel wrote.

In fact, the 2013 appropriations bill passed by Congress last month blunted some of the impact of the cuts by shifting funding priorities and, in some cases, granting new increases.

That led the Defense Department to reduce the number of days it said it will need to furlough its civilian workers — from 22 days to 14. Customs and Border Protection, which was preparing to furlough its entire 60,000-member workforce, announced it would postpone implementation of furloughs, altogether, because of flexibilities granted in the funding bill.

“Agencies with reprogramming or transfer authority should continue to examine whether the use of these authorities would allow the agency to minimize the negative impact of sequestration on core mission priorities,” Werfel wrote in the memo.

He told agencies to consider long-term mission goals when making decisions about how to implement the cuts.

“For example, agencies should avoid taking steps that would unduly compromise the ability to perform needed deferred maintenance on facilities, invest in critical operational functions and support, conduct program integrity and fraud mitigation activities, and pursue information technology or other infrastructure investments that are essential to support the long-term execution of the agency’s mission,” he wrote.

Some incentive payments allowed, but should be limited

OMB has already directed agencies to hold off on issuing discretionary monetary awards, such as annual performance awards, while sequestration is in place — unless they’re legally required.

However, Werfel pointed out that several types of incentives fall outside the scope of earlier OMB guidance. These include quality step increases; recruitment, retention and relocation (3Rs) incentives; and student-loan repayment programs.

“While these items are permitted, in light of current budgetary constraints, they should be used only on a highly limited basis and in circumstances where they are necessary and critical to maintaining the agency’s mission,” Werfel wrote.

IG funding not exempt

The memo reiterated that funding for agencies’ independent inspector general offices is subject to sequestration.

“To the extent an agency has discretion in implementing reductions to IG funding due to sequestration, agency heads should be mindful of the independence of the Office of Inspector General and should consult with the IG on a pre-decisional basis on matters that may impact IG funding,” the memo stated.

In fact, in cases where IG funding is its own budget line-item (and not “intermingled” with other types of funding), the IGs themselves should be granted the discretion to implement the cuts, Werfel said.

Werfel said the administration continues to urge Congress to eliminate sequestration “as part of a balanced agreement on deficit reduction.”

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