In addition, according to NIH officials, the clinical trials registry was  initially closed because of the shutdown but was reopened during the  shutdown. To lessen the impact of the closure, the academy revised  its academic calendar to allow eligible students to graduate as previously  scheduled. Ongoing Communication Internally and with OMB Staff and OPM Officials

Officials at the selected departments commented that communication  within their departments and with OMB and OPM was very important to  the preparation for and implementation of the shutdown. For example, the number of employees furloughed at HHS  changed according to the circumstances for each day of the shutdown,  according to HHS officials. Selected Components, Grant Recipients, and Contractors Faced Challenges Related to Grants and Contracts during the Shutdown

		Planning Helped Selected Components Manage the Shutdown’s Effects on Grants and Contracts, but Grant Recipients and Contractors Faced Other Challenges

The effects of the shutdown on contracts and grants management were  more pronounced at the component level than at the department level for  the three selected departments we reviewed. NIH had to reschedule the review  process for over 13,700 grant applications. According to FTA officials,  this had a minimal effect because FTA’s grant processing system is  typically offline and unavailable in early October for end-of-year closeout  processing and no new grant awards are processed. FTA does, however, normally  make payments on existing grants in early October, but no payments  were made during the shutdown because employees were furloughed. For example, EM did not furlough any federal contracting  employees during the shutdown because most of its programs were  exempt at the beginning of the shutdown and the agency had multi-year  appropriations available, but several EM contractors that operate and  maintain EM facilities experienced reductions because EM issued stop  work orders. NIH officials reported that  contracting activity and programs returned to normal levels of activity  within 1 month, and EM officials reported that some programs required 4  months to return to pre-shutdown levels of contract activity. In January 2014, the Bureau of Economic Analysis (BEA), the agency  whose national economic statistics provide a comprehensive view of the  U.S. economy in the form of summary measures such as GDP, estimated  the direct effect of the shutdown on the real GDP growth in the fourth  quarter of 2013 to be a reduction of 0.3 percentage points, which is within  the range of estimates provided by the economic forecasters that we  identified. Other Economic Effects of the Shutdown

The economic forecasters we interviewed believed the other economic  effects of the shutdown to be minimal and they generally limited their  analyses to the effect of the shutdown on direct effects of government  spending, specifically real federal compensation, as discussed earlier. Among other factors, the selected  departments were aided in managing the uncertainties of the shutdown  by their experience with preparing for prior potential shutdowns. A-11, we recommend that the Director  of OMB instruct agencies to document lessons learned in planning for  and implementing a shutdown, as well as resuming activities following a  shutdown, should a funding gap longer than five days occur in the future. On September 19, 2014, OMB staff did not state whether they  agreed or disagreed with the recommendation. This report describes (1) how the shutdown of the federal government  affected selected agencies’ operations and services, including the  immediate and potential longer-term effects; (2) what is known about how  the shutdown affected federal contracting and grants, including the  immediate and potential longer-term effects, as reported by the selected  agencies and associations with expertise in grants and contracts; and (3)  what economic studies or reports state about the effect of the government  shutdown on national economic activity. For this review, we selected three departments and three departmental  components to serve as nongeneralizable case studies: the Department  of Energy (DOE) and its Office of Environmental Management (EM); the  Department of Health and Human Services (HHS) and its National  Institutes of Health (NIH); and the Department of Transportation (DOT)  and its Federal Transit Administration (FTA). These departments and  components were selected based on the following criteria: (1) having  grants or contracts valued over $1 billion in fiscal year 2013, as reported  on USASpending.gov; (2) the percentage of federal employees expected  to be furloughed as reflected in the department contingency plans; and  (3) the potential for longer-term effects from the shutdown on operations,  grants, or contracts based on our determination using department  contingency plans, the dollar value of grants and contracts programs in  fiscal year 2013, and background research (including the Office of  Management and Budget’s (OMB) report on the shutdown).
Why GAO Did This Study

The federal government partially shut down for 16 days in October 2013 because of a lapse in appropriations. According to OMB, about 850,000 federal employees were furloughed for part of this time. GAO was asked to describe the effects of the shutdown. This report describes (1) how the shutdown affected selected agencies' operations and services, including immediate and potential longer-term effects; (2) what is known about how the shutdown affected federal contracting and grants, as reported by the selected agencies and associations with expertise in grants and contracts; and (3) what economic studies or reports state about the effect of the shutdown on national economic activity.
GAO selected three departments for review—DOE, HHS, and DOT—based on the value of grants and contracts, the percentage of employees expected to be furloughed, and the potential for longer-term effects. GAO reviewed department contingency plans and other documents; economic forecasters' analyses; and interviewed officials from the selected departments and components, BEA, OMB, OPM, associations, and economic forecasters.

What GAO Found

The 2013 shutdown impacted some operations and services at the three departments that GAO reviewed: Energy (DOE), Health and Human Services (HHS), and Transportation (DOT). For example, at HHS's National Institutes of Health (NIH), initial closure of the clinical trials registry prevented new trial registrations for patients, before NIH recalled a small number of employees to reopen the registry. Similarly, DOT's Merchant Marine Academy closed and required a change to the academic calendar to allow eligible students to graduate on time. However, officials at these departments said that longer-term effects are difficult to assess in isolation from other budgetary events, such as sequestration.
Because of employee furloughs and payment or work disruptions, the three departments, their components, grant recipients, and contractors faced delays and disruptions in grant and contract activities during the shutdown, including the following examples:
Within HHS, grants management activities at NIH effectively ceased with employee furloughs, although most current grant recipients were able to draw down funds. NIH had to reschedule the review process for over 13,700 grant applications because of the shutdown. After the shutdown, NIH completed the process to meet the next milestone in January 2014.
Grants activities at DOT's Federal Transit Administration (FTA) effectively ceased with grants management officials furloughed and no payments made on existing grants. FTA officials said that no new grant awards were processed because of the shutdown, but the effect was minimal because the grant processing system is typically unavailable in early October for fiscal year closeout activities.
At DOE's Office of Environmental Management (EM), contract activities generally continued because of the availability of multi-year funding, but more than 1,700 contractor employees who operate and maintain EM facilities were laid off or required to use leave because EM issued stop work orders. EM officials reported some programs required 4 months to return to pre-shutdown levels of contract activity.
Researchers' analyses of the economic effects of the shutdown have been limited to predicting its effect on real gross domestic product (GDP) in the fourth quarter of 2013. In January 2014, the Bureau of Economic Analysis (BEA) estimated the direct effect of the shutdown on real GDP growth to be a reduction of 0.3 percentage points. Economic forecasters GAO interviewed believed the other economic effects to be minimal at the economy-wide level.
The selected departments were aided in managing the uncertainties of the shutdown by their experience with preparing for prior potential shutdowns, funding flexibilities (such as multi-year funding), and ongoing communications internally and with Office of Management and Budget (OMB) staff and Office of Personnel Management (OPM) officials. OMB staff addressed questions from agencies on how to communicate about the shutdown with their employees, but did not direct agencies to document lessons learned from how they planned, managed, and implemented the shutdown for future reference.

What GAO Recommends

GAO recommends that OMB instruct agencies to document lessons learned in planning for and implementing a shutdown, as well as resuming activities following a shutdown should a funding gap longer than five days occur in the future. OMB staff did not state whether they agreed or disagreed with the recommendation.