Based on the authority provided in  legislation, agencies obligate and expend funds. Sequestration. However, there  are some categories of activities that are permitted to continue during an  appropriations lapse. Selected Agencies Vary in Their Management of Unobligated Balances, Including Use of Balances to Mitigate Effects of the 2013 Sequestration and Government Shutdown

		In Reviewed Accounts, Agencies Generally Addressed Key Questions for Evaluating Unobligated Balances

As described earlier in this report, in September 2013 we identified four  key questions for evaluating balances in budget accounts, including  unobligated balances or the portion of the available budget authority that  has not yet been obligated, to help agencies more effectively manage  public funds. Mission Activities and Goals and Unobligated Balances  Western Area Power Administration (WAPA) Construction, Rehabilitation,  Operation and Maintenance (CROM). International Narcotics Control and Law Enforcement (INCLE). Factors Affecting Size and Composition of Unobligated Balances  Science. For Reviewed Accounts, Agencies Actively Estimate and Manage Unobligated Balances; However, for Two of the Accounts, Balances Exceeded Target Levels

Of the four key questions, agency management of balances is especially  important in that it highlights how ongoing, routine estimation, and agency  management of unobligated balances throughout the year is critical to  help ensure the effective use of program resources. Our work shows that  actively managing unobligated balances involves (1) regular review of  unobligated balances, including ongoing monitoring and tracking,  throughout the year; (2) tracking the appropriation year of the balances;  (3) estimating projected annual unobligated balances and identifying the  amount of unobligated balances that may be necessary to retain the  following year; and (4) recognizing how unobligated balances may result  from, or be affected by, events outside of an agency’s control. For Reviewed Accounts, Officials Reported Having a Process to Regularly Review Unobligated Balances throughout the Year

For all of the eight accounts we reviewed, agency officials reported  having a process for managing unobligated balances throughout the year,  including ongoing monitoring and tracking of the balances. It is important to track the year  of appropriation for accounts with multi-year budget authority to obligate  the authority in the order appropriated to maximize resources for program  implementation and prevent budget authority that otherwise could have  been used from expiring. Although officials in the five reviewed accounts with two-year funds said  they track the appropriation year of funds to help ensure effective use of  current budget authority within the appropriation’s period of availability, all  of the accounts had unobligated balances that expired during fiscal years  2012 through 2014. Additionally, for the Consular and Border Security Programs (CBSP)  within the D&CP account, State officials said they have a target to  carryover approximately 25 percent of projected program  expenditures for the next year to manage complex global visa and  passport operations. This exceeded the 25 percent target of approximately $850 million by  approximately $440 million. Officials said  that the plan is awaiting clearance by leadership and they anticipate  that it will be finalized by June 2016. According to officials, these steps included  decreasing fees or delaying fee increases when unobligated balances  were adequate to cover costs; realigning spending, consistent with  authorities, to better coincide with actual costs; and improving internal  coordination to better track and model revenues and obligations. WAPA officials reported that they developed a  strategy in fiscal year 2013 for managing unobligated balances in the  annual expense fund within the CROM account. WAPA officials also  reported that they are considering other strategies for reducing  unobligated balances to required targets. Without a finalized and fully implemented strategy for reducing  unobligated balances in excess of the agencies’ predetermined targets for  necessary balances for the identified programs or activities in these two  accounts, Energy and State are missing opportunities to actively manage  unobligated balances. Agency officials for four of the eight reviewed accounts— Energy’s EERE and WAPA CROM accounts, State’s D&CP account, and  USPTO’s S&E account—reported using unobligated balances to mitigate  the effects of sequestration in fiscal year 2013. Six of Eight Reviewed Accounts Used Unobligated Balances to Fund Activities during the October 2013 Government Shutdown

In the event of a government shutdown, OMB is responsible for ensuring  agencies have taken the essential actions needed to manage the  shutdown effectively. Specifically, agency officials managing Energy’s WAPA CROM account  and State’s CBSP within the D&CP account are not taking sufficient steps  to ensure that the accounts only carryover the necessary unobligated  balances into the next year. Agency Comments

We provided a draft of this report to the Secretaries of Commerce,  Energy, and State; and the Administrator of NASA for comment. Appendix I: Objective, Scope, and Methodology

Our objective was to evaluate how selected agencies managed and used  unobligated balances in reviewed accounts, focusing on fiscal years 2012  through 2014, which covers the fiscal year 2013 sequestration and fiscal  year 2014 government shutdown. For this review, we  selected a nongeneralizable sample of four agencies—the National  Aeronautics and Space Administration (NASA) and the Departments of  State (State), Commerce (Commerce) and Energy (Energy).
Why GAO Did This Study

Both the 2013 sequestration and government shutdown highlighted the importance of actively managing public funds. Effective management of unobligated balances that are carried over for use in the next fiscal year presents agencies with an opportunity to better respond to unexpected events in the future. GAO was asked to review how balances have changed since 2012. This report evaluates how selected agencies managed and used unobligated balances in reviewed accounts, focusing on fiscal years 2012 through 2014, which covers the 2013 sequestration and shutdown.
GAO selected a nongeneralizable sample of eight accounts from four agencies for this review—Commerce, Energy, NASA, and State—based on their use of balances to address sequestration and large or significant changes in the balances. GAO analyzed data on the size and composition of unobligated balances, reviewed agency documentation on managing the balances, and interviewed budget officials responsible for the accounts.

What GAO Found

GAO found that the selected agencies—the Departments of Commerce, Energy, and State, and the National Aeronautics and Space Administration (NASA)—generally managed and tracked unobligated balances to ensure the effective use of program resources in the eight reviewed accounts. Agency estimation and management of unobligated balances in the reviewed accounts involved the following activities:
Regular review of unobligated balances . Agency officials for all of the eight reviewed accounts reported having a process for managing unobligated balances throughout the year. For example, officials managing NASA's Science account reported that they monitor unobligated balances monthly by considering obligations from the prior months.
Tracking the appropriation year of unobligated balances . Officials reported that agencies tracked the year of appropriation for the five reviewed accounts that receive multi-year budget authority. This action is important to help ensure that the agency obligates the authority in the order appropriated to maximize resources. All five accounts had balances that expired during fiscal years 2012 through 2014; however, there can be various reasons for an agency to not obligate funds late in the fiscal year, and in some cases, special authority expands the use of certain budget authority. For example, for State's Diplomatic and Consular Programs (D&CP) and International Narcotics Control and Law Enforcement accounts, State has the authority to use expired funds beyond their initial period of availability for specific purposes and to extend the availability of certain funds.
Estimating and identifying needed unobligated balances . Officials managing three of the eight reviewed accounts identified a need to retain unobligated balances to sustain agency operations and manage financial risk. For example, officials responsible for managing Energy's Western Area Power Administration (WAPA) Construction, Rehabilitation, Operation and Maintenance (CROM) account said that two of the account's four use categories have a target to carryover equal to or up to 25 percent of funds against unexpected environmental factors that could introduce financial risk to their mission of marketing hydroelectric power. However, in fiscal year 2014, the balance for one category exceeded its target by approximately $40 million. WAPA officials reported that they have drafted a strategy to manage excess balances, but the strategy has not been fully implemented. Similarly, in fiscal year 2014, within State's D&CP account, officials reported exceeding the target to carryover about 25 percent of projected program expenditures for the next year to manage complex global visa and passport operations for the Consular and Border Security Programs (CBSP) by approximately $440 million. State officials said that they have developed a draft strategy for reducing excess unobligated balances. Officials said that they plan to finalize the strategy by June 2016. In the meantime, they reported taking steps to reduce unobligated balances for CBSP. These steps include decreasing fees or delaying fee increases when unobligated balances were adequate to cover costs.
In accordance with Office of Management and Budget guidance, the selected agencies used unobligated balances in four of the reviewed accounts to mitigate the effects of the 2013 sequestration. The agencies also used unobligated balances to fund operations in six of the accounts during the October 2013 government shutdown.

What GAO Recommends

GAO is recommending that Energy finalize and implement a strategy and that State finalize its strategy and continue efforts to ensure more effective management of unobligated balances in the WAPA CROM account and CBSP within the D&CP account, respectively. Energy and State concurred with GAO's recommendations. Commerce, Energy, and State provided technical comments which GAO incorporated; NASA had no comments.