Yearend Spending by Federal Agencies

There are many reasons why Federal agencies have a yearend surge in expenditures, not all of them are avoidable or wasteful. Some yearend obligations are illusions and do not represent the actual expenditure of funds. Certain agencies have prerecorded future obligations to prevent funds from lapsing, give the appearance of greater achievement than has actually transpired, or recognize potential liabilities that are at the best speculative. A certain amount of wasteful yearend spending occurs when an agency finds itself with substantial amounts of unobligated funds at the close of the fiscal year. Waste occurs through funding of low-priority projects, stimulating demand for unplanned products or services and shortcutting the procurement process. Premature funding of existing contracts beyond current period needs and awarding Small Business Act contracts months before a subcontractor, who will actually provide the supply or service, has been selected also occur. GAO believes a significant amount of yearend contracts and grants is awarded for the purpose intended, but poor planning causes a bunching up of procurement at the end of the year. There are many legislative proposals to place limits on the percentage of total expenditures during the last several months of the fiscal year. While such measures will not necessarily prevent wasteful expenditures, they will stimulate better planning and contribute to more prudent contract and grant activity.