In its 1980 report, the Subcommittee recognized that higher fourth quarter obligations may not indicate a problem with wasteful spending. The source of this information was Treasury’s Financial Management Service (FMS) Standard Form (SF) 225 - Report on Obligations. Potential for Improper Year-End Spending Has Been Constrained

Changes in the budget environment and procurement reforms have reduced the potential magnitude of problems with year-end spending. Changes in the Budget Environment Affect Year-End Spending

Fewer funds, which have been made available for more than 1 year, reduce the opportunity and need to spend funds quickly at year-end for many agencies. Increasingly, federal government spending is made up of direct payments to individuals or grants to states not subject to year-end spending pressures. At the same time, appropriators have made funds available for more than 1 year. Procurement Changes Address the Subcommittee’s Concerns

OMB officials stated that in their view, improper or unnecessary contracts associated with the rush to spend funds at year-end are far less of a problem than they once were due to open competition requirements, improved agency procurement planning, and fewer available resources. Additionally, there were significant differences in the three sets of data that agencies reported for fiscal year 1997. OMB told us that the OMB and FMS project to merge these separate year-end reporting requirements will resolve or greatly alleviate the differences in year-end reporting data. Agencies’ failure to report and reconcile budget execution information is another example of the broader financial management concerns we raised in our financial audit of the fiscal year 1997 Consolidated Financial Statements of the United States Government. Although agencies have the primary responsibility for ensuring that their budgets are executed and accounted for properly, our study revealed that the ability of Congress and OMB to oversee the rate and timing of federal spending across agencies is limited in the absence of complete and accurate reporting. In addition, it points to inadequate central oversight of the financial status of the federal government because of agencies’ widespread reporting noncompliance. Even at year-end, budget execution data reported to OMB and year-end accounting data provided to Treasury do not agree for many agencies. Recommendation

To improve oversight of agencies’ execution of the budget, we recommend that the Office of Management and Budget 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. We periodically report on agencies’ progress in correcting deficiencies and on where additional actions need to be taken. Additional copies are $2 each.
Why GAO Did This Study

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).

What GAO Found

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.