An increasingly constrained budget environment underscores the importance of managing federal agency budgets prudently, and developing strategies to address uncertainty in the federal budget process.
Congress passes laws that authorize agencies to spend federal dollars (“incur an obligation”). Various laws provide mandatory budget authority, while appropriations acts provide discretionary budget authority.
Mandatory budget authority
Discretionary budget authority
Provided by various laws
Provided by appropriations acts
Generally driven by eligibility rules and benefit formulas
Informed by agency budget estimates and congressional priorities
Supports programs such as Medicare, Social Security, and various veterans’ programs
|Supports agency programs and operations such as most spending on defense, education, housing, and energy|
Mandatory spending has increased from roughly 51 percent of total federal spending in fiscal year 1997 to 63 percent in 2017. According to the Congressional Budget Office, this growth is projected to continue for the next several decades.
Composition of Total Federal Spending
Note: Net interest is primarily interest paid on debt held by the public. It is part of current outlays (spending) by the government and appears as an outlay in the budget.
As growth in mandatory spending crowds out resources for discretionary spending, careful management of agency budgets is even more vital to ensuring that agencies can continue to effectively achieve their missions and deliver services to the public.
Federal agencies also face considerable disruptions and ongoing uncertainty in the federal appropriations process, which creates additional challenges in managing their budgets.
- Continuing resolutions. As of fiscal year 2019, in all but 4 of the last 43 years, Congress enacted continuing resolutions (CRs) to allow agencies to continue operations until final appropriations decisions are made after the start of the fiscal year. Operating under CRs has sometimes resulted in inefficiencies—such as delays in hiring and increased work from issuing multiple repetitive grants and contracts for the duration of each CR within the fiscal year. When operating under a CR for a prolonged period, agencies also faced additional challenges when their final budget for the year was enacted. These challenges included less time to hire new staff, delayed review of grant applications, and delayed implementation of programs.
- Lapses in appropriations. When appropriations expire and neither new appropriations nor CRs are enacted, a funding gap may occur and portions of the government may shut down. In October 2013, the federal government partially shut down for 16 days and about 850,000 employees were furloughed for part of this time. This affected operations, grants, and contractors to varying degrees. However, agencies found it difficult to assess the long-term effects of the shutdown in isolation from other budgetary effects, such as sequestration and other reductions. More recently, the federal government partially shut down for 35 days in fiscal year 2019, which affected 800,000 employees at various federal agencies, according to the Congressional Budget Office. About 300,000 of those employees were furloughed for part of this time and not permitted to work, while the others were designated to perform excepted functions and required to work during the shutdown. Neither furloughed nor excepted employees received a paycheck during the shutdown; however, Congress enacted legislation during the shutdown to authorize both groups to be compensated at their standard rates of pay following the end of the lapse of appropriations. This lapse in appropriations delayed about $18 billion in discretionary spending according to the Congressional Budget Office.
- Sequestration. Automatic, across-the-board spending reductions to both mandatory and discretionary spending known as sequestration were triggered in March 2013 after Congress and the President did not enact legislation to reduce the deficit by an additional $1.2 trillion. Agencies had only 7 months to absorb the cuts, resulting in a range of immediate and long-term effects. Since 2013, sequestration of mandatory spending has occurred each year, resulting in smaller and delayed direct payments to program beneficiaries, reduced services, and reduced tax credits, among other things. Under current law, sequestration of mandatory spending will continue through 2027. Another sequestration of discretionary spending may also occur in the future if spending caps are exceeded.
Duration and Number of Continuing Resolutions and Other Budget Disruptions by Fiscal Year
Notes: Figure excludes continuing resolutions enacted in February 2007, April 2011, and March 2013 that provided funding for the remainder of the fiscal year.
aThe fifth CR, P.L. 108-185, amended the original CR with substantive provisions but did not extend the CR period.
bThe federal government partially shut down for 16 days in fiscal year 2014; 3 days in fiscal year 2018; and 35 days in fiscal year 2019 because of a lapse in appropriations.
- Managing declining resources. Agencies must effectively manage the limited resources they have available in order to achieve their missions and deliver services to the public. GAO developed a framework that outlines three key themes to guide agency officials in managing declining resources. This framework includes examples that provide specific strategies for leading from the top, using data analytics to guide decision making, and reducing costs.
Overview of Framework for Examining Agencies' Efforts to Manage Declining Resources
In conjunction with the annual appropriations process, agencies may have other mechanisms to collect and use funds.
- Unobligated balances from multi-year and no-year accounts. Sometimes agencies may carry forward funds received in prior years that remain available to use for the same purpose in a future year. Reviewing these balances and answering key questions about them could provide insights into why a balance exists, what size balance is appropriate, and what opportunities (if any) for savings exist. Actively managing these balances could help agencies better respond to unexpected events, such as disruptions in funding.
- Revolving funds. Agencies contribute to intragovernmental revolving funds to pay for business-like activities within or among federal agencies. Shared services—where agencies consolidate their service needs (such as payroll)—to save money or improve efficiency—may be supported through these types of funds. Following key operating principles, like clearly delineating roles and responsibilities and measuring the performance of the funds, can help agencies effectively manage these revolving funds.
- Budgeting for capital. Federally owned capital, such as buildings and ships, require significant amounts of funds to purchase and maintain. Alternative funding mechanisms—like operating leases and public-private partnerships—can help agencies meet their capital needs in the short term but may be a more expensive way to acquire capital over the long term. Changes to the government’s budgetary structure itself might provide a more consistent way to meet capital needs, while helping Congress and federal agencies make more prudent long-term fiscal decisions. Alternative budgetary structure options, such as a government-wide capital acquisition fund, could improve the transparency of costs and benefits.
- User fees. According to the President’s budget, the federal government collected over $300 billion in user fees in fiscal year 2017 for providing certain goods and services. For example, Congress has enacted authority for the government to charge fees for people to enter some national parks, and to collect and obligate fees to fund some regulatory activities. Well-designed user fees can help pay for programs while reducing taxpayer burden. Certain fee design options, such as maintaining a reserve when authorized, can help buffer against revenue instability (i.e., fluctuations in fee collections). An agency’s authority to collect and obligate fees, as well as its latitude to shape a fee’s design, depends on the specific legal authority under which the fee is collected.
GAO-19-221: Published: Mar 7, 2019. Publicly Released: Mar 7, 2019.
Federal agencies collect hundreds of billions of dollars annually in fees, fines, and penalties, such as national park entry fees and penalties for violations of federal telemarketing law. Government-wide data could help Congress identify trends in collections and significant changes that could be an indication of an agency’s performance. Currently, there is no comprehensive, government-wide re...
GAO-19-36: Published: Nov 29, 2018. Publicly Released: Dec 11, 2018.
Not all federal funding is reviewed each year as part of the annual appropriations process. For example, Congress can make a law that allows an agency to collect fees for services, such as copyright registration fees, and use that money without further congressional action. This report updates our inventory of this type of federal funding and helps provide visibility into spending authority that...
GAO-18-368T: Published: Feb 6, 2018. Publicly Released: Feb 6, 2018.
In all but 4 of the last 40 years, Congress has passed continuing resolutions (CR) to keep agencies running between budgets. Without appropriations or a CR, the government may partially shut down. We testified that CRs, possible shutdowns, or both create uncertainty and inefficiency for agencies. For example, our past work found that agencies have reported delays and rework in contracts, grants,...
GAO-16-263: Published: Apr 14, 2016. Publicly Released: Apr 14, 2016.
GAO found that in fiscal year 2014, total mandatory budget authority government-wide was approximately $2.9 trillion spread across roughly 443 accounts. The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), as amended, required the Office of Management and Budget (OMB) to apply a range of sequestration rates to non-exempt mandatory spending. This resulted in estimated reductions...
GAO-13-820: Published: Sep 30, 2013. Publicly Released: Sep 30, 2013.
GAO identified six key fee design decisions related to how fees are set, used, and reviewed that, in the aggregate, enable Congress to design fees that strike the desired balance between agency flexibility and congressional control. For example, narrowly limiting the activities for which fees may be used heightens congressional control over the funds; however, doing so can also reduce an agency's...
GAO-13-798: Published: Sep 30, 2013. Publicly Released: Sep 30, 2013.
Carryover balances in fiscal year 2012 were $2.2 trillion, of which about $800 billion had not yet been obligated. Answering key questions during review of carryover balances provides insights into why a balance exists, what size balance is appropriate, and what opportunities (if any) for savings exist. Given that a single account may support a single program or multiple programs--or that multiple...