About 1.6 percent of the total available budget authority government-wide was cancelled from fiscal year 2009 to fiscal year 2019, averaging $23.9 billion per year… Most cancellations were due to:
- Actual program needs being less than estimated
- Agencies not having authority to redirect funds
- Unpredictable program costs
That was from the GAO’s report, “A Few Agencies and Program-Specific Factors Explain Most Unused Funds.” My first thought looking at this was: No kidding!
Predictable costs and authority to redirect funds are substitutes in some ways. If programs were predictable, and every program executed to its baseline cost estimate, then why would you let agencies redirect funds? The future was known, and so it would be silly not to optimize the program portfolio. Deviation from plan would signal fraud, waste, and abuse rather than learning, pivoting, and improving.
If programs are unpredictable due to technology, enemy threats, or otherwise, then agencies require the ability to redirect funds between programs (but not necessarily appropriations).
… the Air Force reported its appropriations for procurement sometimes come with narrow purpose limitations, focusing on the production or acquisition of specific components or systems. In some cases, the narrow purpose does not allow for the funds to be redirected to other areas, such as with cyberspace, supplemental, and OCO funds. In other instances, if those systems or components cost less than the appropriated amount, the Air Force may be able to redirect the funds toward other priorities. However, DOD reported it is limited to changes within 20 percent of the base amount appropriated for procurement accounts.
Not true! For RDT&E and Procurement accounts, changes are 20 percent or $10 million, whichever is less! So any program that is more than $50M cannot use the 20 percent rule, but instead is limited to $10 million.
Here’s a bit more:
When costs are more difficult to estimate, such as with contracts and acquisitions, there is a greater chance that final costs will not match the initial obligation… Personnel costs are easier for agencies to predict since they are obligated and outlayed consistently throughout the year at the conclusion of each pay period, which makes cancelled appropriations less likely.
Again, that should be obvious. But budgeting to personnel costs is budgeting to inputs rather than outputs. And the entire intent of the PPBE program budget concept is that budget line items reflect outputs, objectives, and programs rather than inputs, organizations, and objects of expenditure (like “contracts” or “facilities” in general).
The canceled funds of 1.6% is a bigger deal than it appears at first. Imagine all the dollars that could have gone to higher valued uses, but continued down the same path with cost growth and poor delivery of outcomes.
The real impact of this inflexibility in the budget is orders of magnitude greater than 1.6%. But that’s hard to measure because it is (1) a counterfactual; and (2) based on capabilities, outcomes, and value rather than money costs.
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