How Much Does the Federal Government Spend on Economic Modeling Activities?

Pursuant to a congressional request, GAO identified fiscal year (FY) 1978 and FY 1980 federal payments for economic modeling services from each of four private economic forecasting firms. Subsequently, GAO was asked to identify total federal expenditures for both internal and external modeling activities. Due to time constraints, it was agreed that GAO would obtain unverified data from 24 federal agencies and departments and from the forecasting firms. Economic modeling activities were defined as periodic forecasts, economically related simulations of all types, and special projects involving single and multiple equation regressions. The figures represent best estimates based on available information of the modeling expenditures for each agency, department, and firm and their individual interpretations of what constitutes modeling activities.

GAO found that combined payments received from the federal government by the four companies totaled approximately $1.8 million for FY 1978 and $3.3 million for FY 1980. The figures represent varying amounts of service, from subscription fees only to complete costs of model access, consulting, and computer time sharing. The 24 federal departments and agencies reported that in FY 1978 they had spent approximately $20 million on internal activities and $20.5 million on external activities. In FY 1980, the figures were approximately $27 million for internal and $23 million for external activities. Inconsistencies noted in their responses indicated that the reported internal and external figures are far from accurate. In some cases, they included costs not directly attributable to modeling activities. In other cases, total costs were not available due to rough estimates, poor recordkeeping, and incomplete reporting. GAO attempted to clear up as many inconsistencies as possible by responding to the inquiries of agencies and contractors and by following up with questions about the responses received. GAO concluded that, since the information obtained from all parties are only best estimates based on available information, care should be exercised in interpreting the information.