[House Document 107-269]
[From the U.S. Government Publishing Office]
107th Congress, 2d Session - - - - - - - - - - - House Document 107-269
DEFERRALS OF BUDGET AUTHORITY
__________
COMMUNICATION
from
THE COMPTROLLER GENERAL,
THE GENERAL ACCOUNTING OFFICE
transmitting
A REPORT OF DEFERRALS OF BUDGET AUTHORITY FOR INFORMATION TECHNOLOGY
AND BUSINESS MANAGEMENT SYSTEMS THAT SHOULD HAVE BEEN, BUT WERE NOT,
REPORTED TO THE CONGRESS BY THE PRESIDENT, PURSUANT TO 2 U.S.C. 685
October 1, 2002.--Referred to the Committee on Appropriations and
ordered to be printed
__________
U.S. GOVERNMENT PRINTING OFFICE
19-012 WASHINGTON : 2002
U.S. General Accounting Office,
Washington, DC, September 19, 2002.
Hon. J. Dennis Hastert,
Speaker of the House of Representatives,
Washington, DC.
Dear Mr. Speaker: On July 19, 2002, the Office of
Management and Budget issued a memorandum, OMB Memorandum M-02-
12 of July 19, 2002 (``Reducing Redundant IT Infrastructure
Related to Homeland Security''), directing the component
agencies of the proposed Department of Homeland Security
(DHS)\1\ to consolidate redundant information technology (IT)
spending. Citing its authority in section 5113 of the Clinger-
Cohen Act of 1996, Pub. L. No. 104-106 (January 3, 1996), 40
U.S.C. Sec. 1413, OMB specifically directed the agencies to:
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\1\ These component agencies were identified as the Department of
Agriculture, the Department of Defense (National Communications
System), the Department of Justice, the Department of Transportation,
the Department of Treasury, and the Federal Emergency Management
Agency.
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Cease temporarily all IT infrastructure system
development and planned modernization efforts above $500,000
pending an expedited review of all proposed DHS component
agencies' investments.
Identify any current or planned spending on IT
infrastructure not included in Attachment A to the memo.
Participate in the Homeland Security IT Investment
Review Group led by the Office of Homeland Security (OHS) and
OMB.
According to the memorandum, at the current time the
affected agencies are in various stages of purchasing a number
of different systems. The Review Group will look at all systems
slated for the fiscal year 2002 and 2003 budget cycles across
the component agencies of the proposed DHS, make
recommendations for reducing costs, and track resulting
savings. After these reviews have been completed, OMB will work
with the agencies on further funding of IT development
programs. The memorandum states that this action will affect
the spending of at least $360 million in fiscal year 2002 and
is projected to affect at least $780 million in fiscal year
2003.
Subsequently, OMB issued Memorandum M-02-13 (``Review and
Consolidation of Business Management Systems for the Proposed
Department of Homeland Security'') to the heads of the
component agencies of the proposed DHS on July 30, 2002. This
memorandum provides for a similar withholding of funding for
and review of business management systems, such as those for
financial management, procurement, and human resources.
In a letter dated August 20, 2002,\2\ OMB responded to our
request for information regarding the actions detailed in the
July 19 memorandum.\3\ OMB cited to the memorandum as part of
its on-going efforts to achieve ``savings, efficiency and
productivity'' in the government's use of its IT resources. We
commend OMB on their efforts to achieve economies through
better management of the IT and business management resources
involved here. That is, in fact, what we have encouraged OMB to
do through a number of our reports and testimonies. At the same
time, while the purpose of OMB's actions may be fully
appropriate, this does not relieve OMB from their
responsibility to report under the Impoundment Control Act.
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\2\ Letter from Philip J. Perry, General Counsel, OMB, to Susan A.
Poling, Managing Associate General Counsel, GAO, August 20, 2002.
\3\ Although our initial correspondence to OMB was prepared before
the July 30 memorandum was available and so did not address it, we
believe that similar considerations apply to the funds being withheld
under its authority.
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The purpose of this letter is to report deferrals of budget
authority for information technology and business management
systems resulting from the above referenced memoranda that, in
our view, should have been, but were not, reported to the
Congress by the President pursuant to the Impoundment Control
Act of 1974 (Acts), 2 U.S.C. Sec. 681 et seq. The Act
authorizes such deferrals but requires they be reported to
Congress. Section 1015(a) of the Act, 2 U.S.C. Sec. 686(a),
requires the Comptroller General to report to the Congress
whenever he finds that any officer or employee of the United
States has ordered, permitted, or approved a reserve or
deferral of budget authority, and the President has not
transmitted a special impoundment message with respect to such
reserve or deferral.
The July 19 and 30 memoranda establish, and OMB's letter to
us confirms, that the administration is indeed withholding
funds from obligation. A withholding such as this to achieve
savings, is authorized by the Impoundment Control Act, but must
be reported nonetheless. The Act defines ``deferral of budget
authority'' to include:
(A) withholding or delaying the obligation or
expenditure of budget authority (whether by
establishing reserves or otherwise) provided for
projects or activities; or
(B) any other type of Executive action or inaction
which effectively precludes the obligation or
expenditure of budget authority * * *
2 U.S.C. Sec. 682(1).
The Act authorizes deferrals under the following
circumstances:
(1) to provide for contingencies;
(2) to achieve savings made possible by or through
changes in requirements or greater efficiency of
operations; or
(3) as specifically provide by law.
2 U.S.C. Sec. 684(b).
OMB issued the July 19, 2002 memorandum directing the
component agencies of the proposed DHS to ``pause (`cease
temporarily') in their IT infrastructure development and
modernization efforts that exceed $500,000, so as to enable the
Executive Branch to undertake an `expedited review' of homeland
security IT investments.'' OMB cites to GAO reports and
testimonies in which we have emphasized the importance of
making wise IT investments to ensure that resources are not
``wasted through the acquisition or retention of systems that
are redundant, are not interoperable, or are otherwise not
well-designed to enable an agency to carry out its mission in a
cost-effective manner.'' OMB states that the goal of the
``pause'' in spending and review of the homeland security IT
investments is ``to identify redundant IT investments which, if
avoided, could potentially save the taxpayers $100-200 million
(based on a preliminary analysis) over the next two years.'' We
believe that a similar savings and efficiency justification
applies to the business management funds being withheld for
review under the July 30 OMB memorandum. This withholding fits
the Act's definition of ``deferral,'' but is authorized under 2
U.S.C. Sec. 684(b)(2). While the Act permits withholdings to
achieve savings, it nevertheless requires that such deferrals
be reported to the Congress.\4\
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\4\ Whenever there is a proposed deferral of budget authority,
whether or not it would be authorized under 2 U.S.C. Sec. 684(b), the
Impoundment Control Act requires the President to transmit to the House
of Representatives and the Senate a special message specifying:
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(1) the amount of the budget authority proposed to be
deferred;
(2) any account, department, or establishment of the
Government to which such budget authority is available for
obligation, and the specific projects or governmental functions
involved;
(3) the period of time during which the budget authority is
proposed to be deferred;
(4) the reasons for the proposed deferral, including any
legal authority invoked to justify the proposed deferral;
(5) to the maximum extent practicable, the estimated fiscal,
economic, and budgetary effect of the proposed deferral; and
(6) all facts, circumstances, and consideration relating to
or bearing upon the proposed deferral and the decision to
effect the proposed deferral * * *
2 U.S.C. Sec. 684(a).
We do not agree with OMB's position that the withholding of
these funds is not an impoundment. In its August 20, 2002
letter to us, OMB stated that ``OMB was not directing agencies
to impound budgetary authority,'' but offered little support
for that position. OMB did not analyze the withholding ordered
by the memoranda in the context of the Impoundment Control Act,
as we have; rather, OMB argued only that it was carrying out
its responsibilities in section 5113 of the Clinger-Cohen Act
of 1996, 40 U.S.C. Sec. 1413, ``to issue `clear and concise
direction' to agencies,'' which includes ``guidance for
undertaking efficiently and effectively inter-agency and
Government-wide investments in information technology to
improve the accomplishment of missions that are common to the
executive agencies.'' We agree that in issuing the July 19 and
July 30 memoranda, OMB is providing guidance to achieve
efficient and effective interagency IT investments. We do not
view OMB's responsibilities under the Clinger-Cohen Act and the
Impoundment Control Act to be incompatible, however. Indeed,
OMB easily can accommodate both laws. The Impoundment Control
Act does not affect OMB's decision to withhold IT budget
authority to achieve the economies and efficiencies envisioned
by the Clinger-Cohen Act, but it does require that the
Executive report to the Congress any decision to withhold the
budget authority.
In this regard, we view OMB's moratorium on the proposed
DHS component agencies' IT and business management resources in
the same light as the General Services Administration (GSA)'s
order halting program-wide contracting activities that we
reported as an authorized, but unreported, deferral on November
5, 1993. B-255338.2, November 5, 1993. On September 9, 1993,
then-Commissioner of the Public Buildings Service Kenneth R.
Kimbrough instructed all assistant regional administrators to
cease all contracting activities on approximately 188 new
public building projects not yet under construction to allow
for a review of the projects on the basis of merit and cost.
GSA directed the review to take a comprehensive look at all the
new building projects to assure that the need and costs were
justified. We concluded that while the directive to suspend
contract awards clearly reflected a decision to delay the
obligation or expenditure of budget authority provided for the
projects, the deferral was authorized to achieve savings under
2 U.S.C. Sec. 684(b)(2). Thus, GSA's order relating to the
specified projects constituted a reportable, but authorized,
deferral under the Impoundment Control Act. See also B-
237297.7, June 28, 1990.
As in the GSA impoundment report, the deferral of IT and
business management funding here is clearly authorized to
``achieve savings made possible by or through changes in
requirements or greater efficiency of operations.'' 2 U.S.C.
Sec. 684(b)(2). Nevertheless, the deferral of the funding
withheld under the direction of both the July 19 and July 30
OMB memoranda must be reported to Congress immediately as
specified in 2 U.S.C. Sec. 684(a), particularly since, to the
extent fiscal year 2002 funds are involved, those funds are
only available for obligation until September 30, 2002. Because
OMB has not reported the deferrals, we are reporting to the
Congress, in accordance with section 1015(a) of the Impoundment
Control Act, 2 U.S.C. Sec. 686(a), the deferral of budget
authority represented by the withholding of IT and business
management funding covered by the July 19 and July 30, 2002 OMB
memoranda.
OMB did not provide the documentation we requested, such as
applicable apportionment schedules for the agencies affected,
so we are unable to identify with certainty the specific funds
involved, the amount, or their character, e.g., annual or
multiple-year. A special message filed in accordance with the
Impoundment Control Act would have contained such detailed
information. To the extent fiscal year 2002 funds are involved
here, such funds are only available until the end of this
fiscal year, September 30, 2002. Therefore, the review and
decisions regarding these funds at such a late date effectively
puts these funds in jeopardy of expiring.\5\ This could create
a situation in which the time remaining in the fiscal year
would be insufficient to prudently obligate the funds, thus
leading to a de facto rescission. See B-237927.3, March 6,
1990.
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\5\ For deferrals of fiscal year funds, the Impoundment Control Act
requires the Executive to release the funds with adequate time
remaining in the fiscal year to ensure prudent obligation before the
funds expire at the end of the fiscal year.
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2 U.S.C. Sec. 684(a).
Sincerely yours,
David M. Walker,
Comptroller General of the United States.