Agencies are again operating under a CR. Here are some suggestions to help budget officers avoid disrupting agency operations during the CR period.
There have been three recent papers on CRs:
* Continuing Resolutions: Uncertainty Limited Management Options and Increased Workload in Selected Agencies, GAO, #09-879, Sep 2009
* Interim Continuing Resolutions: Potential Impacts on Agency Operations, CRS, #RL34700, Sep 2009 (Originally published Oct 2008)
* Continuing Resolutions: Latest Action and Brief Overview of Recent Practices, CRS, #RL30343, Oct 2009
The GAO paper examines the effect of CRs on agency operations and actions agencies take to mitigate those effects. The first CRS paper analyzes potential impacts that CRs might have on agency operations, while the second CRS paper provides detailed, objective information on CRs, including historical data.
All of these papers contain good information. However, because it was not their purpose, they do not go far enough in laying out a comprehensive plan for agency operations under a CR. For example, in the GAO paper, all selected agencies reported that CRs limited management options and resulted in inefficiencies. However, GAO also reported that these agencies were largely unable to identify any specific foregone opportunities or to provide documents confirming cost increases resulting from a CR. So, what did agencies do to avoid disrupting operations and increasing costs until they had an appropriation?
Whenever you talk about CRs, a key question relates to the purpose of a CR. The basic answer is that the Administration and Congress want agencies to continue normal operations until a final appropriation is available, but to operate in a manner that does not compromise potential final funding levels. If this were the only answer, agencies could manage operations under a CR with minimal problems. However, because a CR is basically an admission that the Administration or Congress has not done its job timely, there can be political complications. The Administration may want agencies to identify and publicize problems to push Congress toward a resolution of the appropriations impasse under the Administration's terms. The Congress might want something similar if the President's veto of an appropriations bill created the need for a CR. Agencies can also be culprits by using the CR as convenient cover for poor planning/management or a desire not to support some activity.
With the proper foresight, agencies should generally be able to operate under a CR for a month or so with little or no impact. When CRs stretch into January, there will always be problem, but again, with proper foresight, agencies can alleviate, though not eliminate, the impact.
Agency budget officers are key players in agency operations under a CR. They allocate funding to the various programs and offices in their agencies; in essence, they tell the agency operations how much funding is available. From an agency budget officer's perspective, there are two keys to effective operations under a CR: planning and execution. Following the guidelines below, budget officers can help their agencies through a CR period with minimal impact on on-going operations, which is, after all, what the Administration and Congress supposedly intended.
Starting each fiscal year under a CR is the new normal for agencies, even when the Administration and the Congress are controlled by the same party. If CRs are inevitable, good budget officers plan for them in these areas:
- Move the obligation of annual recurring contracts out of the first quarter
- Do not schedule new starts for the first quarter
- Monitor how much funding your appropriation will ultimately include
- Conserve multi-year and no-year funds if you can
- Use year-end funds to anticipate obligations, where allowable
Annual Recurring Contracts. In general, appropriations are available to finance bona fide needs of the current fiscal year. However, an exception allows the obligation of annual recurring contracts for 12 months at any point in a fiscal year. Previously, agencies renewed many annual recurring contracts in October. In the case of a CR, obligating the full amount of an annual contract in October could cause problems. Besides being good for managing operations under a CR, spreading out the renewal dates of annual recurring contracts also helps to level out the procurement workload. Many agencies now obligate their annual recurring contracts in the March/April/May timeframe.
First Quarter New Starts. CRs usually contain a prohibition on new starts, programs planned for the new year that did not exist in the prior year. While there may be other reasons not to plan new starts for the Oct-Dec quarter, the likelihood of a CR should provide all the justification you need. If there are no new starts planned in the first quarter, the CR prohibition will not be a problem. Even in those cases where a new start "must" begin in the first quarter, it would be a good idea to have a contingency plan to allow a slow ramp-up for that program in the first quarter.
Monitor the Appropriation. By the time a CR is necessary, the Appropriations Committees have already completed most of their work in both the House and the Senate. By carefully monitoring the mark-ups, budget officers will have a reasonably good idea about how much funding their agencies will ultimately receive. The CR necessarily creates uncertainty about when the appropriation will be available, but monitoring the Appropriations Committees can lessen the uncertainty about how much will ultimately be available, and that can provide valuable information for managing agency operations during the CR.
Conserve Multi-Year Funds. Some agencies have both single-year and multi-year appropriations available to them. Some single-year appropriations have pockets of multi-year funds contained within them. If these multi-year funds can be used for regular operations and are not expiring, then conserving them in the prior fiscal year for emergencies like a CR in the new fiscal year can provide real flexibility for an agency.
Anticipate New Obligations. Some might call this "pre-financing," which could be seen as a violation of the bona fide need rule. However, if there are obligations that you could legitimately make in either September or October (e.g., training or contracts), it would be wise to make the obligation in September if funds are available, precluding the need to obligate them in October when you are operating under a CR. Most budget officers have already identified these possible obligations to ensure full and effective use of their current year funds (e.g., obligate them if you have the funds) and to avoid anti-deficiency violations (e.g., defer them if you do not have the funds).
If budget officers have planned adequately for a CR, they will be in a good position to support agency operations as they execute the CR. There are three general areas to consider in CR execution:
- Guidance to agency program managers
- Allocating available funding
- Managing the risk of exceeding CR fund limits
Guidance to Managers. Even if program managers have dealt with CRs for years, the budget officer needs to prepare them again. This should start in early September as a part of the year-end guidance or a complement to it. The budget officer reminds the program managers that a CR is possible ("the agency has started five of the last six fiscal years with a CR"), and program managers should beginning planning immediately for what they will do in October under a CR. Perhaps they can obligate something in September or they can plan to move a planned October obligation to December.
The budget officer also needs to send out guidance to the program managers on September 30 or when the President signs the CR. That guidance document will need to be very positive ("we have planned for this and we can generally manage business-as-usual for now"). Budget officers will have checked the language of the CR to see if there are any provisions that relate uniquely to their agencies. Where appropriate, these will be identified in the guidance. The guidance will restate the no new starts prohibition and specify any new starts that were included in the President's Budget. The guidance should encourage program managers to talk to the budget office if they have questions about whether something is a new start.
Probably the most controversial issue to be addressed is the interpretation of "most limited funding action." This is a standard section in CRs; it is Section 110 in the FY 2010 CR, "This joint resolution shall be implemented so that only the most limited funding action of that permitted in the joint resolution shall be taken in order to provide for continuation of projects and activities." Some budget officers and program managers use this section to justify stopping any discretionary activity during the CR period, but that seems like an illogical reading of Congressional intent. If on-going programs previously included travel, training, contracts, and hiring, it is reasonable to assume that Congress intended for those activities to continue. It is probably best for budget officers not to leave interpretation of this section up to individual program managers. Budget officers could offer something like "It should be business-as-usual for now, recognizing that we do not yet have an appropriation."
Allocating Funding. If the budget officers have been monitoring Congressional action on their appropriations, they should have a fairly good idea of what their funding levels will be when an appropriation is finally passed. During August and September, they should have been preparing annual operating plans based on these estimates. Budget officers should give these annual operating plans to program managers as their funding allocations. While the agency may receive a specific dollar allocation from OMB (e.g., 31/365th of prior year levels), allocating this number down to program managers creates more confusion than guidance. Program managers should spend October executing their programs as if there will be more funding available for future months. Telling program managers that they have funding of less than 1/12th of their expected annual budgets for October often makes people do crazy things, which is not what Congress intended. Financial systems may need specific funding levels input, but this should only be done only at the highest level.
Managing Risk. There are two primary risks to discuss here. The first risk is that an agency would initiate a new start. Given the obvious nature of this action, this risk appears to be low. The second risk is that an agency's obligations would exceed the CR apportionment. While this seems to be a greater possibility, especially when the budget officer has made no specific CR funding allocations to the program managers, it begs the question of the likelihood of an anti-deficiency violation under a CR. Most CRs do not end on the last day of the month, when agencies typically accrue unpaid payroll and other costs and the financial system creates a retrievable picture of obligations. In most real-time financial systems, you can retrieve obligations as of October 31st, but you cannot retrieve obligations of October 20th after that date. In agencies with significant percentages of their budget in labor costs, obligations spike each time a payroll posts and at the end of month when the unpaid payroll is accrued.
Budget officers who issue business-as-usual guidance and no specific funding allocations (other than annual ones) to their program managers must still manage risk. Here is their checklist:
- Know the day and time when payroll will post to the financial system
- Stay in touch with program managers and Procurement to know the timing of large contract, grant, etc. obligations in the financial system
- Have a list of planned obligations which could be deferred or reversed if needed
- Check the agency status of funds daily and even more often if obligations begin to approach the CR apportionment level; include review by major sub-organization to identify potential problems early
- Determine whether you can obtain additional apportionment from OMB, if needed
The next consideration of risk management is a recognition of the difference between when on obligation occurs and when it is recorded in the financial system. A travel obligation occurs when a manager authorizes the travel, orally or in writing. However, in agencies that do not record travel authorizations in their financial systems, the travel obligation is not recorded until the travelers file their vouchers. Labor cost obligations occur each day that employees work or take leave. However, labor cost obligations are recorded only when the payroll is posted to the financial system, usually about three weeks after the beginning of the pay period. In theory, you could accrue labor costs at any time, even daily, but it is usually done only at the end of a month. If a CR were scheduled to end on the 21st and payroll was scheduled to post on the 22nd, this information would give the budget officer some flexibility. The budget officer might even want to check with the accounting office to ensure that payroll is not posted earlier than planned.
As you can imagine, there is room for some mischief here, but it probably does not violate the Congressional intent of the CR. Is there some sort of legal, accounting, or ethical violation associated with recorded an obligation tomorrow rather than today?
There are a couple of related points that deserve some mention here:
Limited Funding Actions. It would be good if Congress could eliminate or reword this section of the CR. It is clearly too vague to provide any useful guidance.
Impact Statements. With the increased emphasis on transparency, it would probably be a good thing for agencies to publicize the changes they are making to agency operations to comply with the CR. For a short-term CR, we could hope that this would only be a list of new programs that would not be started; most agency operations would not be impacted. We do not need the situation that GAO identified, where agencies said they had problems and increased costs because of the CR, but could not provide any evidence of them.
Automatic CR. Some argue that an automatic CR would eliminate the drama and uncertainty that accompanies the start of the fiscal year. However, by their nature, CRs introduce uncertainty about funding levels and the timing of availability, not something to be encouraged. With an automatic CR, would there be any motivation left for Congress to pass appropriation bills on time?
With proper planning and sound risk management during execution, agencies can operate under a CR with a minimum of disruption, as long as the CR period does not stretch much beyond six weeks. In the case of a longer CR, there will almost certainly be disruptions to business-as-usual.