Agencies across the federal government with unspent on the books during the final weeks of the fiscal year often go into “use it now or lose it” mode in a concerted effort to spend as much as they can before Sept. 30.
The practice was highlighted in a recent inspector general report that faulted the Appalachian Regional Commission, a federal grant-writing agency focused on economic development, for awarding a flurry of end-of-the-fiscal-year grants in 2014 in an apparent attempt to spend its leftover funds before Congress examined its budget again.
The commission spent more than 75 percent of its development grant funding in the last quarter of 2014, with much of that sum being spent in the final month of the fiscal year, the inspector general said.
Those “extraordinary year-end efforts to approve grants and avoid large balances of un-obligated funds” raise questions as to whether the commission had too few projects to justify its budget.
But the obscure Appalachian commission is not unique in such spending sprees. Federal agencies have been doing it for many years and along the way they’ve come up with some creative techniques for beating the fiscal clock.
Jason Fichtner, senior research fellow at the Mercatus Center at George Mason University, said agencies are encouraged to burn through their appropriations by the fact that they run the risk of having their budgets cut if they leave money unspent.
“Generally speaking, the problem is that the federal budget process has perverse incentives,” Fichtner said.
A September 2014 study by Fichtner and Robert Greene of the Mercatus Center discovered spending surges at the end of recent fiscal years among a number of federal agencies.
Fichtner and Greene found the Department of State was consistently the worst offender, spending more than 35 percent of its budget in September every year between 2010 and 2013, the most recent year for which complete data is available. Democratic presidential nominee Hillary Clinton was Secretary of State through most of those years.
At the close of fiscal year 2014, the pattern appeared unchanged under Clinton’s successor, former Sen. John Kerry of Massachusetts.
For example, on September 23 and 29, the agency spent $19,532 on books from Barnes and Noble to hand out as Christmas gifts three months later, according to USASpending.gov.
The State Department poured more than $1.5 million into 73 contracts with the same company, Bernhardt Furniture, to buy furniture for a number of its buildings in September 2014 alone. It relied on dozens of additional companies for even more furniture buys that month.
The purchases included glass-top coffee tables, fabric and leather armchairs, credenzas and pedestal desks.
Other last-minute buys included $44,637 worth of workout equipment from Body Builders Discount Outlet, $57,769 worth of iPads or their parts, and $26,315 worth of brand-name North Face parkas.
“It is unclear why the Department of State consistently spends a high level of contract expenditures during the last month of the fiscal year,” Fichtner and Greene wrote in their report. “This spending may not be wasteful, if the department is delaying spending throughout the fiscal year to ensure that it has enough funds to cover necessary end-of-year spending.”
The researchers cited reports that the agency had made extravagant year-end purchases in the past, such as a contract for a $1 million granite sculpture in September 2013 and $5 million worth of high-end glass stemware for American embassies.
Fichtner said the rush of year-end spending is not inherently wasteful, and that his study reveals only a correlation between a spike in spending and the end of the fiscal year.
Some agencies are more prone to the practice than others, he said. According to the study, the Department of Energy typically spends a higher proportion of its funds at the outset of the fiscal year, rather than the end. However, this is not a common tactic, as most agencies make more purchases during the last quarter.
