Endless CRs, appropriations problems drive end of year spending surge

Agencies spend more on contracts in September than any other month of the year, as part of a governmentwide push to spend every last dollar before the fiscal ye...

As Congress scrambled to pass a short-term continuing resolution to keep the government open past the Sept. 30 deadline, agencies were running their own race against the clock — a last minute push to spend the rest of their budgets before the fiscal year ends.

It’s the uncertainty agencies face in the annual appropriations process, that prompts them to spend more on contracts than any other month in the year.

“End of year and wasteful are not synonymous,” said Philip Joyce, senior associate dean at the University of Maryland’s School of Public Policy, during his testimony to the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Spending Oversight and Emergency Management on Sept. 30.  “In the current fiscal environment, end of year spending practices are an entirely understandable, even reasonable response to the dysfunction and unpredictability of the appropriations process.”

Between 2003 and 2013, agencies spent 16.9 percent of their obligated contracting budgets in the month of September, said Jason Fichtner, a senior research fellow at George Mason University’s Mercatus Center. But if departments spread contract spending evenly over all 12 months, they would spend roughly 8.3 percent of their budgets each month.

Too often, agencies spend the last of their budgets on equipment they don’t need, out of fear that Congress won’t maintain the same level of funding if they end the year with a surplus.

Dean Sinclair, a former executive director within the State Department, told the committee an ambassador to an African country once ordered a truckload of flower pots for the embassy with leftover money from the department’s facilities budget at the end of the fiscal year. Four of the flower pots were placed around the embassy and the rest were left to rot behind the building.

Subcommittee Chairman Sen. Rand Paul (R-Ky.) said he found old cartridges stacked to the ceiling for an out of date printer that a previous subcommittee chairman ordered in an end of year spending binge.

“End of the year spending won’t balance the budget,” Paul said. “It is a phenomenon and we should fix it. We don’t fix anything around here with a continuing resolution. We never examine bad spending or good spending. And nothing gets better.”

Congress has finished the appropriations process on schedule just four times in the past 40 years, Joyce said. And fiscal 2016 is no different. Congress narrowly avoided a shutdown on the last day of fiscal 2015 before it passed a short-term continuing resolution to keep the government open through Dec. 11.

Joyce said late appropriations mean agencies can make mistakes more easily. Contracting costs often go up, because contractors might demand a risk premium when working with government.

“It’s a good thing to avoid government shutdowns,” he said. “Government by CR is no prize either, in the sense that it creates a lot of uncertainty, and that uncertainty causes waste.”

Bonuses for Cost-Cutters Act, rollover funding as potential fixes

One possible solution is to give federal employees a cash bonus when they uncover waste at their agencies.

Paul, along with Sen. Mark Warner (D-Va.), re-introduced the Bonuses for Cost-Cutters Act of 2015 in May. The bill would let an agency’s inspector general pay an award of up to $10,000 to a federal employee who finds extra or unneeded costs.

“People respond best to incentives that actually have to do with themselves,” he said.

Paul also proposed a similar idea of offering incentives to contractors who finish a project early and under budget.

Fichtner said incentives for employees could work, but he also proposed adding a new standard for senior executives in their performance evaluations, which would measure how well managers spend their budgets.

“One of the things you want to do is make sure incentives align,” Fichtner said. “If you give the employees an incentive but the management does not have an incentive to roll over authority, then basically, they might look at their employee poorly and say, hey, you just gave money back, Congress is going to take it away next year and you’ve ruined my career.”

Managers could also carry over money they don’t spend from one fiscal year to the next, with some limitations. Fichtner suggested a pilot program with a select group of agencies. Department managers could submit a request to Congress to rollover a specific dollar amount to the next fiscal year, with oversight from the Government Accountability Office.

The Health and Human Services and State departments would do well to try a  pilot like this, Fichtner said. State and HHS spent about 39 percent and 29 percent of their contracting budgets in 2013, respectively, in September.

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