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United States Government Accountability Office: 
GAO: 

Report to the Chairman, Committee on the Budget, House of 
Representatives: 

September 2013: 

Budget Issues: 

Key Questions to Consider When Evaluating Balances in Federal Accounts: 

GAO-13-798: 

GAO Highlights: 

Highlights of GAO-13-798, a report to the Chairman, Committee on the 
Budget, House of Representatives. 

Why GAO Did This Study: 

Given the fiscal pressures facing the nation, examination of balances 
carried forward into future fiscal years (carryover balances) provides 
an opportunity to identify areas where the federal government can 
improve and maximize the use of resources. GAO was asked to review 
issues related to federal carryover balances. GAO’s objectives were to 
(1) identify key questions for congressional committees, managers, and 
other reviewers to consider when evaluating carryover balances, 
including whether to reduce them, and (2) describe how answering these 
key questions provides insight into why carryover balances may exist 
in selected accounts. 

GAO reviewed carryover balances from fiscal years 2007 through 2012 in 
eight selected accounts from the Departments of Defense (DOD), Health 
and Human Services (HHS), Housing and Urban Development (HUD), and 
Treasury. Account selection was based on several characteristics, 
including the average size of the balance, budget function, type of 
account, agency, and whether the account was composed of mandatory or 
discretionary funds. 

What GAO Found: 

Carryover balances in fiscal year 2012 were $2.2 trillion, of which 
about $800 billion had not yet been obligated. Answering key questions 
during review of carryover balances provides insights into why a 
balance exists, what size balance is appropriate, and what 
opportunities (if any) for savings exist. Given that a single account 
may support a single program or multiple programs—or that multiple 
accounts may support a single program—these questions can be applied 
when evaluating balances at either the account or program level. 
Examination of balances may assist decision makers in identifying 
opportunities to achieve budgetary savings or redirecting resources to 
other priorities. However, the complexity of the federal budget is 
such that a case-by-case analysis is needed to understand how best to 
achieve these financial benefits. 

What mission and goals is the account or program supporting? 
Understanding the mission activities, goals, and programs the account 
supports provides information about whether a program needs to 
maintain a balance to operate smoothly, what size balance is 
appropriate, and whether opportunities for savings exist. Accounts GAO 
reviewed maintained balances to support activities such as long-term 
acquisition of military aircraft and public health emergency 
preparedness. 

What are the sources and fiscal characteristics of the funding? The 
sources and fiscal characteristics of the funding present different 
issues in changing the size of carryover balances. Accounts such as 
Treasury’s Exchange Stabilization Fund, receive “such sums as may be 
necessary” and may require programmatic changes to effectively reduce 
balances. In such cases, simply reducing balances may have no economic 
benefit and could impose unnecessary administrative costs. If funds 
are discretionary, such as with HUD’s Homeless Assistance Grants, 
balances can be controlled through appropriations acts. 

What factors affect the size or composition of the carryover balances? 
Understanding factors within and outside an agency’s control that 
affect its “spendout rate” provides insight to the composition of the 
carryover balance as a whole. Funds in accounts that support 
activities such as certain procurement or disaster relief may be 
obligated fairly quickly, but are expended over a longer period as 
milestones are met or as grantees draw down funds. Accounts with quick 
spendout rates, such as those that provide cash payments to government-
sponsored enterprises, disburse funds soon after obligation. 

How does the agency estimate and manage carryover balances? 
Understanding an agency’s processes for estimating and managing 
balances provides information to assess how effectively agencies 
anticipate program needs and ensure the most efficient use of 
resources. For the mandatory accounts GAO reviewed, such as the 
Federal Housing Administration’s Mutual Mortgage Insurance Capital 
Reserve account, agencies focused on future needs of the account and 
relied on economic indicators and historical trends to estimate future 
balances. For discretionary accounts GAO reviewed, such as the U.S. 
Army Corps of Engineers’ Construction account, agencies used 
historical data combined with current variables to estimate carryover 
balances. 

What GAO Recommends: 

GAO is not making any recommendations. DOD, HHS, HUD, and Treasury 
generally agreed with our findings and provided technical comments 
that were incorporated as appropriate. HHS provided comments stating 
that conclusions drawn from the report may not apply across the board 
to all accounts. 

View [hyperlink, http://www.gao.gov/products/GAO-13-798]. For more 
information, contact Susan J. Irving, Director for Federal Budget 
Analysis, (202) 512-6806 or irvings@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Objectives, Scope, and Methodology: 

Four Key Questions to Consider When Evaluating Carryover Balances: 

Selected Agencies Managed Balances According to Mission, Funding, 
Operations, and Estimated Demand for Services: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Overview of Carryover Balances across Federal Accounts in 
Fiscal Years 2007 through 2012: 

Appendix II: Guide for Evaluating Carryover Balances: 

Appendix III: Case Illustrations of Federal Accounts with Carryover 
Balances: 

Appendix IV: Comments from the Department of Health and Human Services: 

Appendix V: Glossary of Budget Terms: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Case Illustration Accounts: 

Table 2: Eight Selected Accounts for Further Review: 

Table 3: Top Ten Largest Unobligated Balances, Fiscal Year 2012: 

Figures: 

Figure 1: Overview of How an Account Accumulates a Carryover Balance: 

Figure 2: Mandatory Accounts Represented an Increasing Share of 
Unobligated Balances, Fiscal Years 2007-2012: 

Figure 3: Three National Priorities Accounted for the Largest Share of 
Unobligated Balances, Fiscal Years 2007-2012: 

Figure 4: Unobligated Balances Were Concentrated around Eight 
Agencies, Fiscal Years 2007-2012: 

Figure 5: Carryover Balances in the Army’s Aircraft Procurement 
Account, Fiscal Years 2007-2012: 

Figure 6: Estimated vs. Actual Unobligated Balances in the Army’s 
Aircraft Procurement Account, Fiscal Years 2007-2012: 

Figure 7: Carryover Balances in U.S. Army Corps of Engineers-Civil 
Works Construction Account, Fiscal Years 2007-2012: 

Figure 8: Estimated vs. Actual Unobligated Balances in the U.S. Army 
Corps of Engineers-Civil Works Construction Account, Fiscal Years 2007-
2012: 

Figure 9: Carryover Balances in the Public Health and Social Services 
Emergency Fund, Fiscal Years 2007-2012: 

Figure 10: Estimated vs. Actual Unobligated Balances in the Public 
Health and Social Services Emergency Fund, Fiscal Years 2007-2012: 

Figure 11: Carryover Balances in the Community Development Fund, 
Fiscal Years 2007-2012: 

Figure 12: Estimated vs. Actual Unobligated Balances in the Community 
Development Fund, Fiscal Years 2007-2012: 

Figure 13: Carryover Balance in the FHA-Mutual Mortgage Insurance 
Capital Reserve Account, Fiscal Years 2007-2012: 

Figure 14: Estimated vs. Actual Unobligated Balances in the FHA-Mutual 
Mortgage Insurance Capital Reserve Account, Fiscal Years 2007-2012: 

Figure 15: Carryover Balances in the Homeless Assistance Grants 
Account, Fiscal Years 2007-2012: 

Figure 16: Estimated vs. Actual Unobligated Balances in the Homeless 
Assistance Grants Account, Fiscal Years 2007-2012: 

Figure 17: Carryover Balances in the Exchange Stabilization Fund, 
Fiscal Years 2007-2012: 

Figure 18: Estimated vs. Actual Unobligated Balances in the Exchange 
Stabilization Fund, Fiscal Years 2007-201: 

Figure 19: Carryover Balances in the GSE Purchase Agreements Account, 
Fiscal Years 2007-2012: 

Figure 20: Estimated vs. Actual Unobligated Balances in the GSE 
Purchase Agreements Account, Fiscal Years 2007-2012: 

Abbreviations: 

APA: Aircraft Procurement, Army: 

CDBG: Community Development Block Grant: 

CDF: Community Development Fund: 

Corps: U.S. Army Corps of Engineers: 

CR: continuing resolution: 

DOD: Department of Defense: 

DOT: Department of Transportation: 

ESF: Exchange Stabilization Fund: 

Fannie Mae: Federal National Mortgage Association: 

FDIC: Federal Deposit Insurance Corporation: 

FHA: Federal Housing Administration: 

FHFA Federal Housing Finance Agency: 

Freddie Mac: Federal Home Loan Mortgage Corporation: 

GSE: Government Sponsored Enterprise: 

HAG: Homeless Assistance Grants: 

HERA: Housing and Economic Recovery Act: 

HHS: Department of Health and Human Services: 

HUD: Department of Housing and Urban Development: 

IMF: International Monetary Fund: 

MMI: Fund Mutual Mortgage Insurance Fund: 

NSP: Neighborhood Stabilization Program: 

NSSE: National Special Security Events: 

OMB: Office of Management and Budget: 

PHSSEF: Public Health and Social Services Emergency Fund: 

SDR: Special Drawing Rights: 

TARP: Troubled Asset Relief Program: 

Treasury: Department of the Treasury: 

USSGL: U.S. Standard General Ledger: 

[End of section] 

GAO:
United States Government Accountability Office: 
441 G St. N.W. 
Washington, DC 20548: 

September 30, 2013: 

The Honorable Paul Ryan:
Chairman: 
Committee on the Budget: 
House of Representatives: 

Dear Mr. Ryan, 

Given the fiscal pressures facing the nation, the need to identify 
opportunities for savings, find ways to better leverage resources, and 
increase accountability has become even more critical to the success 
of federal agencies and the programs they administer. Congress needs 
pertinent and reliable information to adequately assess agencies’ 
progress and to ensure accountability for results. One area that 
managers and other decision makers look to when seeking potential 
savings are carryover balances: balances in individual agency accounts 
that are carried forward into future fiscal years. Carryover balances 
amounted to $2.2 trillion in fiscal year 2012, of which almost $800 
billion had not yet been obligated.[Footnote 1] Examination of these 
balances may assist decision makers in identifying opportunities to 
achieve budgetary savings or in redirecting resources toward other 
priorities. However, the complexity of the federal budget is such that 
a case-by-case analysis is needed to understand how best to achieve 
these financial benefits. 

You asked us to review the size and management of carryover balances 
in various types of appropriations accounts. Our objectives were to: 
(1) identify key questions to consider when evaluating carryover 
balances, including whether to reduce them, and (2) describe how 
answering these key questions provides insight into why carryover 
balances existed in selected accounts during fiscal years 2007 through 
2012, and how agencies estimated and managed these balances. In 
addition, we analyzed the size and composition of carryover balances 
in the federal budget from fiscal years 2007 through 2012. This 
information is provided in appendix I. 

Background: 

Although federal funding may be available to obligate for one-year, 
multiple years, or until expended (no-year), only accounts with multi-
year or no-year funds may carry over amounts that remain legally 
available for new obligations from one fiscal year to the next. 
Carryover balances are composed of two elements: (1) unobligated funds 
and (2) obligated funds for which payment has not yet been made. While 
attention is focused on the unobligated portion, looking at both 
elements provides a fuller reflection of what is happening in an 
account. It also provides insights into opportunities for potential 
budgetary savings. 

Federal spending is categorized as “discretionary” or “mandatory.” 
This distinction refers to the way budget authority is provided. 
Discretionary spending is controlled through annual appropriations 
acts (plus in some cases supplemental appropriations acts), which may 
provide multi-year or no-year funds.[Footnote 2] Under certain legal 
authorities, some discretionary accounts are funded entirely, or in 
part, through the collection of user fees, interagency transactions, 
or dedicated excise taxes. Specifically, the level of discretionary 
funding in an account is provided by, and controlled through, the 
annual appropriations process. 

In contrast, mandatory spending accounts, which include “entitlements,”
receive budget authority through laws other than appropriations acts. 
Many mandatory programs receive budget authority for an unspecified 
amount made available as the result of previously enacted legislation, 
with no need for further legislative action. For example, Medicare, 
veterans’ pensions, Social Security, and federal crop insurance are 
mandatory programs. By statute, funding to these programs is driven by 
eligibility rules and benefit formulas, which means that funds are 
made available as needed to provide benefits to those who are eligible 
and wish to participate. Over the last several years, mandatory 
accounts have represented an increasing share of total unobligated 
balances across the federal government. 

Figure 1 shows how budget authority is provided and how authorized 
funds may accumulate, ultimately leading to a carryover balance. 

Figure 1: Overview of How an Account Accumulates a Carryover Balance: 

[Refer to PDF for image: illustration] 

Discretionary sources: 

Annual appropriations: Congress provides new budget authority to 
agency accounts to enter into financial obligations that will result 
in immediate or future outlays of federal funds. 

Supplemental appropriations: 
Congress provides additional budget authority to agency accounts in 
cases where the need for funds is too urgent to be postponed until 
enactment of the annual appropriation bill. 

Other sources: 
Some agencies have legal authority to collect funds from other sources 
(e.g., user fees, interagency transactions, and excise taxes), which 
are available for obligation by the agency without further 
appropriation by Congress. 

Prior year unexpended funds carried forward: 
Agencies with multi-year or no-year funds may carryover prior year 
unexpended balances. 

Mandatory sources: 

Accounts receive budget authority through laws other than 
appropriation acts. 

Other sources: 
Some agencies have legal authority to collect funds from other sources 
(e.g., interest and earnings on investments), which are available for 
obligation by the agency without further appropriation by Congress. 

Prior year unexpended funds carried forward: 
Agencies may carryover prior year unexpended balances. 

Total available budget authority in the account: 
Unobligated balance: The balance of budget authority that has not yet 
been obligated; 
Obligated balance (Unliquidated obligations): The amount of 
obligations, or legal liabilities, incurred for which payments ha not 
yet been made: 
* Liquidated funds: The liquidation of obligations through the 
disbursement of funds. 

Carryover balance: 
Sum of obligated and unobligated balances. 

Source: GAO. 

[End of figure] 

In any given year, the total budgetary resources available in an 
account consist of unobligated funds carried forward from previous 
years, if applicable, plus funds newly available for obligation in 
that fiscal year. Based on the level of total available budget 
authority in the account, agencies may then obligate funds throughout 
the fiscal year. An obligation is a definite commitment that creates a 
legal liability of the federal government for the payment of goods and 
services. For example, an agency incurs an obligation when it places 
an order, signs a contract, awards a grant or purchases a service. 
Payment may be made immediately or in the future. Only when funds are 
actually disbursed for payment—that is, the obligation is liquidated—
does an obligation become an outlay. The total carryover balance in a 
given account consists of two parts: 

* Obligated balance: the amount of funds which have been obligated but 
for which payment (outlay) has not yet been made; these funds are 
obligated but unliquidated. 

* Unobligated balance: the amount of funds still legally available for 
obligation that have not yet been obligated. 

The two components represent different phases of budget execution and 
present different opportunities for budgetary savings. 

For a detailed glossary of budget terms, see appendix V. 

Objectives, Scope, and Methodology: 

For our first objective, to identify key questions to consider when 
evaluating balances, we identified common themes and factors that 
generally contribute to fluctuations in carryover balances.[Footnote 
3] We developed the list of questions from our analysis of government-
wide guidance on budget preparation, budget execution, and internal 
controls. In addition, we met with federal budget specialists, agency 
officials responsible for managing the eight accounts selected as part 
of our second objective, and staff within the Office of Management and 
Budget (OMB) to obtain their views on the use of these questions to 
guide the examination of carryover balances. All agreed that the 
questions were reasonable. Our prior work on federal budgeting, user 
fees, budget triggers, and managing under continuing resolutions also 
informed the development of the key questions. 

Our second objective was to describe how answering these key questions 
provides information about why carryover balances were reported in 
selected accounts during fiscal years 2007 through 2012, and how 
agencies estimated and managed these balances. To do this, we selected 
a nongeneralizable sample of eight accounts with multi-year or no-year 
funds to use as case illustrations. To start our selection process, we 
collected and compared end-of-year actual unexpired unobligated 
balances plus obligated balances for which payment had not yet been 
made. We queried this data from OMB’s MAX database for all accounts in 
the federal budget for fiscal years 2007 through 2012. We found the 
data to be sufficiently reliable for the purpose of our report. 
[Footnote 4] We identified the 100 accounts with the largest average 
unobligated balance during fiscal years 2007 through 2012.[Footnote 5] 
From that list of 100 accounts, we selected eight accounts 
representing a variety of characteristics, including the size of the 
average unobligated balance, budget function, type of account, agency, 
and whether the account was composed of mandatory funds, discretionary 
funds, or a combination of both. We reviewed the selected agencies’ 
estimates as they were reported in the President’s Budget Appendices 
for fiscal years 2007 through 2012. Table 1 lists the selected 
accounts. For the purpose of this report, we did not seek to identify 
specific savings related to the selected accounts. 

Table 1: Case Illustration Accounts: 

Account name and department: Government Sponsored Enterprise Preferred 
Stock Purchase Agreements (Dept. of the Treasury); 
Designation: Mandatory; 
Budget subfunction: Mortgage Credit, 371; 
Average unobligated balance, fiscal years 2007-2012: $239.95 billion. 

Account name and department: Exchange Stabilization Fund (Dept. of the 
Treasury); 
Designation: Mandatory; 
Budget subfunction: International Financial Programs, 155; 
Average unobligated balance, fiscal years 2007-2012: $48.23 billion. 

Account name and department: Federal Housing Administration-Mutual 
Mortgage Insurance Capital Reserve (Dept. of Housing and Urban 
Development); 
Designation: Mandatory; 
Budget subfunction: Mortgage Credit, 371; 
Average unobligated balance, fiscal years 2007-2012: $10.74 billion. 

Account name and department: U.S. Army Corps of Engineers-Civil Works, 
Construction (Dept. of Defense); 
Designation: Discretionary; 
Budget subfunction: Water Resources, 301; 
Average unobligated balance, fiscal years 2007-2012: $4.32 billion. 

Account name and department: Community Development Fund (Dept. of 
Housing and Urban Development); 
Designation: Split; 
Budget subfunction: Community Development, 451; 
Average unobligated balance, fiscal years 2007-2012: $4.27 billion. 

Account name and department: Public Health and Social Services 
Emergency Fund (Dept. of Health and Human Services); 
Designation: Discretionary; 
Budget subfunction: Health Care Services, 551; 
Average unobligated balance, fiscal years 2007-2012: $3.35 billion. 

Account name and department: Army Aircraft Procurement (Dept. of 
Defense); 
Designation: Discretionary; 
Budget subfunction: Dept of Defense-Military, 051; 
Average unobligated balance, fiscal years 2007-2012: $2.65 billion. 

Account name and department: Homeless Assistance Grants (Dept. of 
Housing and Urban Development); 
Designation: Discretionary; 
Budget subfunction: Housing Assistance, 604; 
Average unobligated balance, fiscal years 2007-2012: $1.97 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Split accounts contain both mandatory and discretionary funds. 

[End of table] 

Although these eight accounts represent less than 1 percent of the 
total number of accounts in the federal budget, they represent 
approximately 34 percent of unobligated balances across the federal 
government. To determine what factors contributed to carryover 
balances in these accounts and how the selected agencies managed them, 
we reviewed agency budget reports and guidance, congressional budget 
justifications, and financial and annual reports. We also interviewed 
agency officials to obtain their explanations and discuss the 
practices and procedures they use to estimate and manage balances. 

We conducted our review from November 2012 through September 2013 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Four Key Questions to Consider When Evaluating Carryover Balances: 

To assist congressional and agency-level decision makers as well as 
other reviewers in their evaluation of agencies’ carryover balances, 
we identified four overarching key questions to consider: 

* What mission and goals is the account or program supporting? 

* What are the sources and fiscal characteristics of the funding? 

* What factors affect the size or composition of the carryover balance? 

* How does the agency estimate and manage carryover balances? 

Each of the four key questions leads to a set of second-tier, more 
specific questions that can help frame the analysis of carryover 
balances. Answering each of the four overarching questions and their 
second-tier questions provides insight into why a carryover balance 
exists, what size balance is appropriate, and what opportunities, if 
any, for savings exist. In addition, it may provide opportunities for 
enhanced oversight of agencies’ management of federal funds and 
identify areas where the federal government can improve and maximize 
its use of resources. These questions can be applied when evaluating 
carryover balances at either the account or program level. A single 
account may support a single program or multiple programs. Conversely, 
a single program may be supported by multiple accounts. Further, the 
balance in a single year may reflect events particular to that year 
and so present an incomplete or possibly misleading view of what is 
happening in a given account or program over time. Therefore, a longer 
view is preferable. 

Since the many accounts that make up the federal budget vary greatly 
and individual accounts have their own unique characteristics, we do 
not suggest that the following set of questions represents all the 
questions that could be considered when evaluating carryover balances. 
As congressional committees, managers, and other reviewers apply these 
evaluative questions, additional questions may arise. In some cases, 
however, a few of the questions may provide sufficient information to 
understand the nature of the balance. The following sections discuss 
the questions in more detail. In addition, all of the questions are 
presented as an evaluative guide in appendix II. 

What Mission and Goals Is the Account or Program Supporting? 

Understanding the mission activities, goals,[Footnote 6] and programs 
the account supports provides information about whether a program 
needs to maintain a balance to operate smoothly, what size balance is 
appropriate, and whether opportunities for savings exist. Such context 
can inform assessments of whether, and how, to reduce carryover 
balances and what effect a reduction would have on the agency’s 
ability to carry out its mission. For example, an account established 
to provide stability in the financial or housing market needs a 
balance to ensure the agency has sufficient resources to respond 
quickly to adverse events. Similarly, we have previously reported on 
agency intragovernmental revolving funds for which a balance is needed 
to maintain price stability for customer agencies or to ensure that 
the providing agency has funding available to complete services or 
work being performed for customer agencies that cross fiscal years. 
[Footnote 7] 

Text box: 

Examples of specific questions to understand how the mission affects 
balances include: 

* What are the primary mission and goals the account or program is 
intended to achieve? 

* What is the nature and purpose of the balance and how does it 
support the mission and goals (e.g., counter economic crisis, sustain 
business-like activities, emergency funding needs)? 

* Have there been changes to the program or mission that may affect 
balances (e.g., additional responsibilities, major reorganization)? 

* What type of activity (e.g., grants, procurement, direct services) 
is the account used for to achieve the agency’s mission and goals? 
What are the implications of carryover balances? 

* What programs are funded by the account and how much does each 
contribute, if at all, to the carryover balance (i.e., does a large 
portion of the balance result from any particular programs)? 

* Is it a new account or program or have the program goals and 
objectives changed? How has this affected the agency’s ability to 
obligate funds? 

[End of text box] 

What Are the Sources and Fiscal Characteristics of the Funding? 

The sources and fiscal characteristics of the funding influence what 
opportunities may exist for budgetary savings. Discretionary and 
mandatory funds present different issues in changing the size of any 
balance. Since discretionary accounts are controlled by the annual 
appropriations process, the size of any carryover balance can also be 
controlled through that process. Mandatory funding is budget authority 
provided in laws other than appropriations acts, such as authorizing 
acts. In such cases, to change or reduce the size of carryover 
balances, changes need to be made to authorizing language affecting 
program or eligibility requirements, for example. Moreover, since 
mandatory funds are often provided in “such sums as may be necessary” 
to make payments to those eligible, reducing the balance in such an 
account may have no practical or economic benefit and instead could 
impose unnecessary administrative costs. In other words, the action or 
effort to rescind a portion of mandatory balances would be countered 
by the action or effort to restore those funds because individuals are 
entitled to payments. 

The time limits imposed upon the funds (period of availability for new 
obligation) are important to evaluating carryover balances. If an 
account receives multi-year or no-year appropriations, some accounts 
or programs should be expected to have carryover balances. Similarly, 
if an account receives multi-year supplemental appropriations late in 
the fiscal year or for long-term projects, there is an increased 
likelihood, and perhaps expectation, for a carryover balance in the 
account. Nevertheless, a growing carryover balance over a number of 
years may indicate challenges in executing a program as planned. 

Accounts that receive funding primarily from outside sources, such as 
fees, have their own unique considerations. For example, an account 
that is fully funded through user fees that are available without 
further Congressional action may retain an unobligated balance to 
mitigate cyclical changes in fee revenue, thereby increasing assurance 
that sufficient funds will be available to support related mission 
activities. We are separately reporting on agencies’ management of 
user fees and the identification and management of unobligated 
balances in fee-funded agencies.[Footnote 8] 

Text box: 

Examples of specific questions to understand how the sources and 
fiscal characteristics of the funding affect balances include: 

* Are the account or program funds mandatory, discretionary, or a 
combination of both? 
- In accounts or programs that receive both mandatory and 
discretionary funds, what portion of each are unobligated each year? 

* What is the expected period over which funds will be obligated and 
liquidated (i.e., multiple years versus single year)? 
- If multiple years, what drives the timing of the obligation and 
liquidation of funds (e.g., contract award period, grant cycle)? 

* Did the account receive supplemental appropriations? 
- If so, when were the supplemental appropriations acts enacted? How 
much of the balance is attributed to supplemental appropriations? 

* To what extent is the activity funded by fees or dedicated taxes 
versus general revenues? 
- Does the account or program have the authority to use the fees or 
taxes without additional congressional action? 

[End of text box] 

What Factors Affect the Size or Composition of the Carryover Balance? 

Some factors are within an agency’s control and some are not. The rate 
at which obligations are incurred and subsequently liquidated in a 
fiscal year—that is, the rate at which budget authority becomes 
outlays—can vary with the nature of the activity. Understanding what 
drives this “spendout rate” provides information on the size of the 
unobligated portion of the balance versus the obligated portion; this 
in turn provides insight into the composition of the carryover balance 
as a whole. For example, for an account that funds procurement or 
grant activities, if the timing of the procurement cycle or grant 
award cycle differs from the fiscal year, the account is likely to 
have a slower spendout rate. As a result, the account may have a 
larger share of unobligated funds reported at the end of the fiscal 
year, which are then quickly obligated early in the following fiscal 
year. Alternatively, it could have a large obligated portion of the 
balance, which is expended over time. 

External events beyond agencies’ control—-such as natural disasters or 
economic crises—-can dramatically affect carryover balances. For 
example, if an agency receives a sudden inflow of funds late in the 
fiscal year from an emergency supplemental appropriation, the size of 
the unobligated balance carried forward to the next fiscal year may be 
greater than otherwise estimated. 

Text box: 

Examples of specific questions to understand what affects the size and 
composition of balances include: 

* How has the account’s balance changed over time? How has the 
composition of the carryover balance (i.e., the unobligated and 
obligated portions) changed over time? 
- Has the agency’s rate of obligation significantly slowed or 
increased as a result of certain factors (e.g., application or review 
periods, regulatory issuance)? 

* What portion of unobligated funds has the agency labeled as 
committed for specific uses? 

* What conditions or external events have occurred outside the 
agency’s control (e.g., events that led to changes in program demand)? 
- Were there any changes to accounting, regulatory, or statutory 
requirements related to the account’s balance (e.g., bid protests, 
receipt of supplemental appropriations, continuing resolutions)? 

* Are there questions about the agency’s ability or capacity to carry 
out the program due to previously reported weaknesses (e.g., excessive 
risks, poor performance, unmet objectives)? 

* Are interim milestones being met to ensure projects are carried out 
on schedule? 
- Are there known production issues that could lead to delays? 

* What opportunities exist to deobligate unliquidated balances (e.g., 
up-front obligations to contractors, grants to states)? 

[End of text box] 

How Does the Agency Estimate and Manage Carryover Balances? 

Understanding an agency’s processes for estimating and managing 
carryover balances provides information to assess how effectively 
agencies anticipate program needs and ensure the most efficient use of 
resources. If an agency does not have a robust strategy in place to 
manage carryover balances, or is unable to adequately explain or 
support the reported carryover balance, then a more in-depth review is 
warranted. In those cases, balances may either fall too low to 
efficiently manage operations or rise to unnecessarily high levels, 
producing potential opportunities for those funds to be used more 
efficiently elsewhere. 

Text box: 

Examples of specific questions to understand how agency estimation and 
management practices affect balances include: 

* What assumptions or factors did the agency incorporate into its 
estimate of the account’s carryover balance (e.g., historical 
experience, demand models)? 

* To what extent and how often does the agency revisit or adjust 
estimates of unobligated balances to reflect historical data or other 
information? 

* Does the agency have a routine mechanism for reviewing its 
obligations and determining whether there are opportunities to 
deobligate funds (e.g., written procedures or ad hoc processes)? 

* What is the agency’s timeline for obligating and expending funds in 
the account? 
- Does the agency or program tend to under-execute its budget? 
- What is the spendout rate after funds have been obligated? 

* Has the agency followed its own procedures for ensuring fiscally 
responsible management of balances? 

[End of text box] 

Selected Agencies Managed Balances According to Mission, Funding, 
Operations, and Estimated Demand for Services: 

To provide context and perspective in terms of an individual account 
or program, we selected a nongeneralizable sample of eight accounts 
and conducted further analysis of their carryover balances (see table 
2). Our analysis is framed in the context of the four key overarching 
questions presented in the previous section. For the purpose of this 
report, we did not seek to identify specific savings related to the 
selected accounts. Detailed information on our analysis of each of the 
eight accounts is presented in appendix III. 

Table 2: Eight Selected Accounts for Further Review 

Account name (department): Government Sponsored Enterprise Preferred 
Stock Purchase Agreements (Dept. of the Treasury); 
Designation: Mandatory. 

Account name (department): Exchange Stabilization Fund (Dept. of the 
Treasury); 
Designation: Mandatory. 

Account name (department): Federal Housing Administration-Mutual 
Mortgage Insurance Capital Reserve (Dept. of Housing and Urban 
Development); 
Designation: Mandatory. 

Account name (department): Community Development Fund (Dept. of 
Housing and Urban Development); 
Designation: Split. 

Account name (department): U.S. Army Corps of Engineers Civil Works-
Construction (Dept. of Defense); 
Designation: Discretionary. 

Account name (department): Public Health and Social Services Emergency 
Fund (Dept. of Health and Human Services); 
Designation: Discretionary. 

Account name (department): Army Aircraft Procurement (Dept. of 
Defense); 
Designation: Discretionary. 

Account name (department): Homeless Assistance Grants (Dept. of 
Housing and Urban Development); 
Designation: Discretionary. 

Source: GAO analysis of OMB MAX data. 

Note: Split accounts contain both mandatory and discretionary funds. 

[End of table] 

Carryover Balances Supported Programmatic Mission: 

The accounts in our review contained carryover balances so that they 
could support the agency’s ability to carry out its mission. The eight 
accounts we reviewed received multi-year or no-year funds and 
supported a wide variety of missions, such as homeless assistance, 
aquatic ecosystem restoration, disaster recovery, financial market 
stability, and military readiness. Accordingly, the specific types of 
activities funded through the accounts varied as well, including 
construction projects, procurement, grants, and emergency 
preparedness.[Footnote 9] Over the fiscal year 2007 through 2012 
period, each of the accounts had a carryover balance that was tied to 
the manner in which the agency went about fulfilling its related 
mission responsibilities. 

For example, the Mutual Mortgage Insurance Capital Reserve account 
maintains a balance for unexpected insurance claim expenses and was 
established to hold reserve funds to meet Federal Housing 
Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund) 
statutory capital reserve requirement. Under the MMI Fund, FHA insures 
a variety of mortgages for home purchases and refinancing to meet the 
housing needs of traditionally underserved borrowers.[Footnote 10] The 
carryover balance in the capital reserve account is composed entirely 
of unobligated funds and is affected by changes in the anticipated 
performance of FHA-insured mortgages. Consequently, the housing crisis 
that started in 2007 had a significant effect on the size of the 
account’s unobligated balance. During the housing crisis, the balance 
was drawn down as more pessimistic forecasts of economic conditions—
house prices, in particular—resulted in higher projected insurance 
claims. In fiscal year 2007, the unobligated balance was approximately 
$21 billion, but the balance had decreased to $3.3 billion by fiscal 
year 2012. 

Alternatively, the Government Sponsored Enterprise (GSE) Preferred 
Stock Purchase Agreements account was established to preserve 
liquidity in the housing market through two GSEs: (1) the Federal 
National Mortgage Association (Fannie Mae) and (2) the Federal Home 
Loan Mortgage Corporation (Freddie Mac). The account maintains a 
carryover balance composed entirely of unobligated funds, which is 
designed such that the Department of the Treasury (Treasury) has the 
authority to transfer sums as needed to the GSEs to ensure their 
positive net worth; that is, when the two GSEs’ liabilities exceed 
assets. Such payments are made on a quarterly basis if needed and 
decrease the account balance accordingly. Created in 2008, the account’
s unobligated balance peaked in 2009 at $304 billion, after Congress 
authorized an increase to the allowable funding commitment Treasury 
could provide to the GSEs. Subsequently, the balance gradually 
declined through 2012.[Footnote 11] 

Sources and Fiscal Characteristics of Funding Affected Timing and Use 
of Balances: 

The sources of funding and their fiscal characteristics across our 
sample of accounts varied. Three accounts were made up of solely 
mandatory amounts, four consisted solely of discretionary funds, and 
one account was split: it had a combination of both mandatory and 
discretionary funds. Accounts in our review that received 
discretionary funds were funded by annual appropriations and 
supplemental appropriations. The period of availability of funds 
included multi-year and no-year money provided through annual or 
supplemental appropriations, or both. 

The sources and fiscal characteristics of funding for an account or 
program affect the timing of when funds are obligated and disbursed, 
and provide insight into why amounts may be carried forward from one 
fiscal year to the next. For example, in some cases where an account 
received supplemental appropriations, the level of carryover funds was 
significantly affected by the timing of that supplemental 
appropriation. For example, the Community Development Fund (CDF) 
account, which primarily supports the Community Development Block 
Grant (CDBG) program, received a large supplemental appropriation on 
September 30, 2008, to provide disaster relief to areas affected by 
hurricanes, floods, and other natural disasters. The receipt of 
supplemental funds at the end of the fiscal year caused a significant 
spike in the account’s carryover balance for that year. 

Additionally, the timing of final appropriations decisions had a 
significant effect on the size of unobligated balances in certain 
accounts. When continuing resolutions (CR) are enacted in lieu of 
annual appropriations bills, it creates uncertainty about both the 
timing and level of funding that ultimately will be available. For 
example, agencies are directed to operate at a conservative rate of 
spending while CRs are in effect, thus compressing the time period to 
obligate funds once final appropriations decisions are made. We have 
previously reported that this also limits an agency’s management 
options.[Footnote 12] In addition to affecting the rate of 
obligations, agencies may be uncertain how Congress will ultimately 
choose to direct funds until final appropriations decisions are made. 
For example, the U.S. Army Corps of Engineers develops and presents 
construction plans for specific projects as part of its annual budget 
request. Corps officials reported that in some cases, committee 
reports accompanying appropriations acts included language directing 
the Corps to carry out additional construction projects than those 
which already had work plans developed. Consequently, Corps officials 
said obligating the funds to support these additional priorities was 
delayed while they developed the necessary work plans. 

Agency Operations Affected the Size and Composition of Carryover 
Balances: 

For each of the accounts in our review, the way an agency or program 
operates affected the size and composition of carryover balances. 
During fiscal years 2007 through 2012, the size of the carryover 
balances in each of the eight accounts we reviewed ranged from a low 
of $2.5 billion in the U.S. Army Corps of Engineers-Civil Works 
Construction account to $304 billion in Treasury’s GSE Preferred Stock 
Purchase Agreements account. Depending on the needs of the program and 
the way the agency managed the funding, the portion of the carryover 
balance attributed to unobligated versus obligated also varied across 
the eight accounts. For example, the GSE purchase agreement account, 
which was created in 2008, had a large unobligated balance and no 
obligated balance. The account made direct quarterly payments to 
Fannie Mae and Freddie Mac as needed. The spendout rate was very quick—
that is, funds were disbursed soon after obligation—which resulted in 
the agency reporting no obligated balance in the account by year end. 
Accordingly, the remaining unobligated balance represents the cash 
balance in the account. 

In contrast, the carryover balance in Army’s Aircraft Procurement 
account was largely made up of unliquidated obligations. This was due, 
in part, to the nature of the procurement cycle, which results in a 
slower spendout rate. As the agency entered into a contract, funds 
were obligated up front to reflect the government’s liability. 
However, funds were disbursed only as work was completed according to 
the terms of the contract. 

In the case of the grant accounts we reviewed, the size of the 
carryover balance depended on the particular grant cycle. For example, 
the carryover balance in the Department of Housing and Urban Development
’s (HUD) Homeless Assistance Grants account contained a relatively 
smaller portion of unobligated funds compared to obligated funds. The 
unobligated balance resulted from the timing of the grant award 
process, which is done on a calendar year rather than fiscal year 
basis. Consequently, while a portion of funds are unobligated at the 
end of the fiscal year, the agency plans to award grants at a later 
date during the current or next calendar year, likely during a new 
fiscal year, at which point the available multi-year funds will be 
obligated. The size of the obligated but unliquidated balance depends 
on the rate at which the grantees draw down, or spend, the funds. 

Some accounts experienced a dramatic spike in their balances while 
others remained relatively steady. For example, when the Exchange 
Stabilization Fund (ESF) received almost $50 billion in allocations 
from the International Monetary Fund (IMF) over a one-month period 
late in fiscal year 2009, the unobligated balance spiked. Treasury 
officials said the new allocations were an important element of the 
response to the global economic crisis. In addition, beginning in 
fiscal year 2010, the size of the obligated portion of the balance in 
the account grew dramatically after Treasury implemented a budgetary 
reporting change that resulted in significant adjustments to ESF 
account balances for fiscal years 2010 through 2012. 

Estimation and Management of Carryover Balances Differed between 
Mandatory and Discretionary Accounts: 

The methods by which agencies in our sample estimated future carryover 
balances depended, in part, on whether the account was mandatory or 
discretionary. In the case of mandatory accounts, agencies focused on 
future needs of the account and relied on economic indicators as well 
as historical trends to estimate future balances of the account, 
including carryover balances. For example, budget-year estimates of 
carryover balances in the GSE Preferred Stock Purchase Agreements 
account are derived from the projected draws—payments to the two GSEs—
from year to year. To do this, Treasury annually prepares a series of 
long-range forecasts to determine the estimated amount of contingent 
liability to the GSEs under the purchase agreements. Based on the size 
of the projected payments, Treasury estimates the amount of budget 
authority that will be carried over into the next fiscal year. 

Similarly, estimated future carryover balances for the Exchange 
Stabilization Fund (ESF) represent projected net interest earnings on 
investments. The estimates are subject to considerable variation, 
depending on changes in the amount and composition of assets and the 
interest rates applied to investments. 

Among the eight accounts we reviewed, the discretionary accounts used 
historical data combined with current variables to estimate carryover 
balances. For example, when estimating the carryover amounts in HUD’s 
Homeless Assistance Grants (HAG) account, officials said they look at 
the composition of the balance over recent years, including factors 
such as historical rates of obligations and outlays. Additionally, 
officials estimate balances based on experience of which programs are 
likely to request renewals. Estimating the use of the program based on 
historical trends helps officials estimate both the unobligated and 
obligated portion of carryover balances. 

Concluding Observations: 

Given the fiscal pressures facing the nation, examination of carryover 
balances provides an opportunity for enhanced oversight of agencies’ 
management of federal funds. It also may help identify areas where the 
federal government can improve and maximize the use of resources. The 
increase in the size of total end-of-year carryover balances across 
the federal government between fiscal years 2007 through 2012 may 
raise questions. Is the balance in an account or program appropriate? 
Does an account or program with a significant or growing balance need 
these funds? Do the balances indicate there are opportunities to 
reduce or rescind balances and direct those resources towards other 
programs or priorities? 

There is no single answer to these questions—they depend on the 
characteristics of the specific account or program in question. The 
answer requires an analysis of the mission, funding, composition, and 
agency management of carryover balances. Understanding the mission 
activities and goals supported by the account or program in question 
enhances the ability of decision makers and reviewers to see the trade-
offs or risks involved in deciding to reduce a carryover balance and 
the consequential effect on the agency’s ability to achieve its 
mission. Understanding the details of the fiscal characteristics and 
source of funding for the account or program can highlight the 
boundaries where real savings opportunities exist versus those that 
would have no real economic benefit. 

Careful examination can also provide information about changes in 
factors affecting budget execution in the relevant area. Not all 
factors affecting the size and composition of balances are within an 
agency’s control. Nevertheless, taking into consideration the agency’s 
processes for estimating carryover balances and its ability to 
effectively manage balances throughout the year can draw attention to 
good practices as well as areas where execution could be improved. 
Given the complex characteristics of the various accounts and programs 
that constitute the federal budget, the most effective way to identify 
real opportunities for savings from carryover balances is to analyze 
them on an account-by-account or program-by-program basis. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretaries of Defense, 
Health and Human Services, Housing and Urban Development, and the 
Treasury for review and comment. All four departments generally agreed 
with our findings and provided technical comments that were 
incorporated as appropriate. HHS provided comments that are discussed 
below and reprinted in appendix IV. 

The comments submitted by the HHS Assistant Secretary for Legislation 
stressed the need to recognize that our audit focused on a select 
number of federal accounts, which may or may not be representative of 
all government accounts with carryover balances. Furthermore, HHS said 
that any conclusions drawn from the report may not apply across the 
board to all accounts with multi-year or no-year funds. As stated in 
multiple sections of our report, including the objectives, scope, and 
methodology section, we selected a nongeneralizable sample of eight 
accounts with multi-year or no-year funds to use as case illustrations 
to answer the four key overarching questions we identified in this 
report. Our draft report called attention to the varied and unique 
characteristics among the many accounts that make up the federal 
budget and the need to analyze balances on an account-by-account or 
program-by-program basis. Furthermore, we state that the list of 
evaluative questions we identified is not intended to represent all of 
the questions that could be considered when evaluating carryover 
balances. 

HHS emphasized that the Public Health and Social Services Emergency 
Fund has complexities and authorities that may differ from other 
federal accounts. The agency stated that looking at trends over time 
in an account may not be the correct approach to overcome these 
complexities when trying to determine spend rates or reasons for 
fluctuations in spend rates. As noted above, multiple sections of the 
report cite the variety and uniqueness of the many accounts in the 
federal budget. Furthermore, as stated in the report, we deliberately 
chose a selection of accounts representing a variety of 
characteristics to give a sense of the range of issues that may be 
involved when evaluating carryover balances. We also emphasize that 
reviewing the carryover balance in an account for just a single year 
may reflect events particular to that year and so present an 
incomplete or possibly misleading view of what is happening in a given 
account or program. We still consider a longer view—that is, reviewing 
balances over multiple years—to be the more preferable approach. 

We are sending copies of this report to the Secretaries of Defense, 
Health and Human Services, Housing and Urban Development, and the 
Treasury. We are also sending copies of this report to relevant 
congressional committees. In addition, the report is available at no 
charge on GAO’s website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact Susan J. Irving at (202) 512-6806 or irvings@gao.gov. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who have made 
contributions to this report are listed in appendix VI. 

Sincerely, 

Signed by: 

Susan J. Irving: 
Director for Federal Budget Analysis: 
Strategic Issues: 

[End of section] 

Appendix I: Overview of Carryover Balances across Federal Accounts in 
Fiscal Years 2007 through 2012: 

The size of the overall carryover balances in the federal budget 
increased significantly from 2007 through 2012 with the unobligated 
portion representing approximately one-third of that total balance 
throughout the period. Specifically, the sum of total carryover 
balances across the federal government was $1.5 trillion in fiscal 
year 2007, of which $471 billion— approximately 30 percent—was 
unobligated. At the end of fiscal year 2012, the sum of total 
carryover balances across all accounts was $2.2 trillion, of which 
$788 billion—-approximately 35 percent—was unobligated.[Footnote 13] 

The number of accounts with carryover balances also increased from 
fiscal years 2007 through 2012 with the majority of them reporting 
unobligated balances each year. Specifically, the number of accounts 
that reported carryover balances in fiscal year 2007 was 1,178, of 
which 895 reported unobligated balances, or approximately 76 percent. 
At the end of fiscal year 2012, the number of accounts that reported 
carryover balances was 1,274, of which nearly 1,000 reported 
unobligated balances, or approximately 78 percent.[Footnote 14] 
Included in these numbers are some newly established accounts that 
were created by significant legislation during the federal 
government’s response to the economic downturn and the housing crisis, 
such as the Housing and Economic Recovery Act of 2008, the Emergency 
Economic Stabilization Act of 2008,[Footnote 15] and the 2009 American 
Recovery and Reinvestment Act. 

The nature of the funds—whether they are mandatory, discretionary, or 
split[Footnote 16]-—influences what opportunities may exist for 
budgetary savings. For example, if the funds are primarily mandatory, 
programmatic changes are often necessary to change or reduce the size 
of carryover balances. Focusing only on the unobligated portion of 
carryover balances, figure 1 shows that mandatory accounts represented 
an increasing share of the federal government’s unobligated balances. 
[Footnote 17] Specifically, in fiscal year 2007, 23 percent of the 
total unobligated funds in federal accounts were attributed to 
mandatory accounts. By the end of fiscal year 2012, almost 48 percent 
of unobligated balances resided in mandatory accounts. 

The 10 largest unobligated balances reported at the end of fiscal year 
2012 were in accounts with mandatory or split funding (see table 3). 
The combined balances in those 10 accounts represented 58 percent of 
the total unobligated balances government-wide that year. 

Table 3: Top Ten Largest Unobligated Balances, Fiscal Year 2012 

 

 

Account name (department): 1. Government Sponsored Enterprise (GSE) 
Preferred Stock Purchase Agreements (Treasury); 
Designation: Mandatory; 
Amount: $212.515 billion. 

Account name (department): 2. Exchange Stabilization Fund (Treasury); 
Designation: Mandatory; 
Amount: $44.092 billion. 

Account name (department): 3. Employees Life Insurance Fund (OPM); 
Designation: Split; 
Amount: $40.326 billion. 

Account name (department): 4. Deposit Insurance Fund (FDIC); 
Designation: Split; 
Amount: $37.455 billion. 

Account name (department): 5. Federal-aid Highways (Dept. of 
Transportation); 
Designation: Split; 
Amount: $30.018 billion. 

Account name (department): 6. U.S. Quota, International Monetary Fund 
(Treasury); 
Designation: Mandatory; 
Amount: $21.921 billion. 

Account name (department): 7. Grants to States for Medicaid (Dept. of 
Health and Human Services); 
Designation: Mandatory; 
Amount: $21.091 billion. 

Account name (department): 8. Employees and Retired Employees Health 
Benefits Fund (OPM); 
Designation: Split; 
Amount: $18.510 billion. 

Account name (department): 9. Pension Benefit Guaranty Corporation 
Fund (Dept. of Labor); 
Designation: Split; 
Amount: $15.582 billion. 

Account name (department): 10. Aircraft Procurement, Air Force (Dept. 
of Defense); 
Designation: Split; 
Amount: $14.876 billion. 

Designation: Total; 
Amount: $456.386 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Split accounts contain both mandatory and discretionary funds. 

[End of table] 

As shown in figures that follow, during fiscal years 2007 through 
2012, unobligated balances were concentrated in mandatory accounts and 
centered on three national priorities and eight agencies. The GSE 
Preferred Stock Purchase Agreements account, which was created in 
2008,[Footnote 18] held by far the largest unobligated balance and 
affected the composition of balances across the federal government 
accordingly. 

Figure 2: Mandatory Accounts Represented an Increasing Share of 
Unobligated Balances, Fiscal Years 2007-2012 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007: 
Discretionary: 25.54%; 
Split: 51.34%; 
Mandatory: 23.11%. 

Fiscal year 2008: 
Discretionary: 18.53%; 
Split: 37.34%; 
Mandatory: 44.13%. 

Fiscal year 2009: 
Discretionary: 20.79%; 
Split: 28.98%; 
Mandatory: 50.23%. 

Fiscal year 2010: 
Discretionary: 18.06%; 
Split: 32.42%; 
Mandatory: 49.52%. 

Fiscal year 2011: 
Discretionary: 17.11%; 
Split: 33.97%; 
Mandatory: 48.91%. 

Fiscal year 2012: 
Discretionary: 16.82%; 
Split: 34.97%; 
Mandatory: 48.21%. 

Source: GAO analysis of OMB MAX data. 

Note: Split accounts contain both mandatory and discretionary funds. 
During this period there were 14 additional accounts with reported 
unobligated balances. We do not include them here because the sum of 
the balances in those 14 accounts represented less than 0.01 percent 
of the total unobligated balances government-wide. 

[End of table] 

The three largest mandatory accounts on average were Treasury’s 

* GSE Preferred Stock Purchase Agreement account, 
* Exchange Stabilization Fund, and; 
* Troubled Asset Relief Program (TARP) Housing Programs. 

Split accounts with both mandatory and discretionary funds made up 
roughly half of the unobligated balances government-wide in fiscal 
year 2007, but decreased to one-third by fiscal year 2012. The three 
largest split accounts on average were the: 

* Office of Personnel Management’s Employee Life Insurance Fund, 
* Federal Deposit Insurance Corporation’s (FDIC) Deposit Insurance 
Fund, and; 
* Department of Transportation’s (DOT) Federal-aid Highways account. 

Discretionary accounts made up the smallest portion of unobligated 
balances across the federal budget. The three largest discretionary 
accounts on average were the: 

* Department of Education’s State Fiscal Stabilization Fund 
established under the American Recovery and Reinvestment Act, 
* Department of Defense’s (DOD) Navy Shipbuilding and Conversion 
account, and; 
* DOT’s Capital Assistance for High Speed Rail Corridors and Intercity 
Rail Service, established under the American Recovery and Reinvestment 
Act. 

Each federal account is assigned to a budget function, which 
identifies the national priority supported by the account.[Footnote 
19] As shown in figure 3, the majority of unobligated balances were 
attributed to three national priorities: commerce and housing credit 
(function 370), national defense (function 050), and international 
affairs (function 150). In general throughout this period, commerce 
and housing credit accounted for the largest share of unobligated 
balances government-wide, growing from 21 percent in fiscal year 2007 
to 37 percent at the end of fiscal year 2012. 

Three accounts contributed significantly to the share of unobligated 
balances attributed to commerce and housing credit: the GSE Preferred 
Stock Purchase Agreements account (newly created in fiscal year 2008), 
the Deposit Insurance Fund account, and the MMI Capital Reserve 
account. 

Figure 3: Three National Priorities Accounted for the Largest Share of 
Unobligated Balances, Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007; 
050 National Defense: 19.16%; 
150 International Affairs: 15.24%; 
300 Natural Resources and Environment: 3.98%; 
370 Commerce and Housing Credit: 20.54%; 
400 Transportation: 9.96%; 
550 Health: 5.01%; 
600 Income Security: 13.24%; 
All other: 12.87%. 

Fiscal year 2008; 
050 National Defense: 15.86%; 
150 International Affairs: 8.85%; 
300 Natural Resources and Environment: 3.47%; 
370 Commerce and Housing Credit: 40.99%; 
400 Transportation: 6.72%; 
550 Health: 3.99%; 
600 Income Security: 8.8%; 
All other: 11.32%. 

Fiscal year 2009; 
050 National Defense: 11.07%; 
150 International Affairs: 14.4%; 
300 Natural Resources and Environment: 3.23%; 
370 Commerce and Housing Credit: 38.99%; 
400 Transportation: 5.83%; 
550 Health: 4.7%; 
600 Income Security: 8.31%; 
All other: 13.47%. 

Fiscal year 2010; 
050 National Defense: 14.6%; 
150 International Affairs: 11.74%; 
300 Natural Resources and Environment: 2.78%; 
370 Commerce and Housing Credit: 39.59%; 
400 Transportation: 6.8%; 
550 Health: 7.33%; 
600 Income Security: 7.08%; 
All other: 10.08%. 

Fiscal year 2011; 
050 National Defense: 15.57%; 
150 International Affairs: 13.35%; 
300 Natural Resources and Environment: 2.42%; 
370 Commerce and Housing Credit: 38.52%; 
400 Transportation: 6.02%; 
550 Health: 7%; 
600 Income Security: 7.44%; 
All other: 9.68%. 

Fiscal year 2012; 
050 National Defense: 13.64%; 
150 International Affairs: 13.98%; 
300 Natural Resources and Environment: 2.34%; 
370 Commerce and Housing Credit: 37.1%; 
400 Transportation: 6.33%; 
550 Health: 8.32%; 
600 Income Security: 8.47%; 
All other: 9.83%. 

Source: GAO analysis of OMB MAX data. 

Note: “All other” is composed of 12 other budget functions. Budget 
functions are coded with a three-digit number that directly correlates 
to a specific national priority. 

[End of figure] 

The economic downturn and housing crisis and the government’s response 
to it was also a major determinant of which agencies accounted for the 
majority of unobligated balances in fiscal years 2007 through 2012. As 
shown in figure 4, the share of unobligated balances held by Treasury, 
which manages the GSE Preferred Stock Purchase Agreement account, grew 
from 8 percent in fiscal year 2007 to 33 percent in fiscal year 2012. 
For most of the period, Treasury held the largest share of unobligated 
balances. DOD held the second largest share of unobligated balances 
over the period. Together these two (plus six other agencies that 
accounted for considerably smaller shares) represented approximately 
80 percent of unobligated balances throughout the period. If the GSE 
Preferred Stock Purchase Agreement account was excluded from the 
breakdown shown in figure 4, DOD would represent the largest share of 
unobligated balances during the period. 

Figure 4: Unobligated Balances Were Concentrated around Eight 
Agencies, Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007; 
Department of Defense: 21.05%; 
Department of State and International Assistance Programs: 7.91%; 
Department of Health and Human Services: 2.3%; 
Federal Deposit Insurance Corporation: 10.94%; 
Department of Housing and Urban Development: 8.09%; 
Department of Treasury: 7.68%; 
Department of Transportation: 9.8%; 
Office of Personnel Management: 9.77%; 
All other: 22.47%. 

Fiscal year 2008; 
Department of Defense: 17.53%; 
Department of State and International Assistance Programs: 3.63%; 
Department of Health and Human Services: 2.27%; 
Federal Deposit Insurance Corporation: 5.24%; 
Department of Housing and Urban Development: 6.98%; 
Department of Treasury: 34.68%; 
Department of Transportation: 6.6%; 
Office of Personnel Management: 6.85%; 
All other: 16.22%. 

Fiscal year 2009; 
Department of Defense: 12.73%; 
Department of State and International Assistance Programs: 5.65%; 
Department of Health and Human Services: 3.79%; 
Federal Deposit Insurance Corporation: 3.01%; 
Department of Housing and Urban Development: 3.42%; 
Department of Treasury: 41.32%; 
Department of Transportation: 5.7%; 
Office of Personnel Management: 4.87%; 
All other: 19.51%. 

Fiscal year 2010; 
Department of Defense: 15.76%; 
Department of State and International Assistance Programs: 6.71%; 
Department of Health and Human Services: 5.79%; 
Federal Deposit Insurance Corporation: 5.37%; 
Department of Housing and Urban Development: 1.88%; 
Department of Treasury: 34.19%; 
Department of Transportation: 6.63%; 
Office of Personnel Management: 5.83%; 
All other: 17.85%. 

Fiscal year 2011; 
Department of Defense: 16.58%; 
Department of State and International Assistance Programs: 6.4%; 
Department of Health and Human Services: 5.06%; 
Federal Deposit Insurance Corporation: 5.56%; 
Department of Housing and Urban Development: 1.75%; 
Department of Treasury: 33.9%; 
Department of Transportation: 5.84%; 
Office of Personnel Management: 6.74%; 
All other: 18.17%. 

Fiscal year 2012; 
Department of Defense: 14.67%; 
Department of State and International Assistance Programs: 8.3%; 
Department of Health and Human Services: 6.02%; 
Federal Deposit Insurance Corporation: 5.35%; 
Department of Housing and Urban Development: 1.38%; 
Department of Treasury: 33.18%; 
Department of Transportation: 5.93%; 
Office of Personnel Management: 7.53%; 
All other: 17.65%. 

Source: GAO analysis of OMB MAX data. 

Note: “All other” is composed of more than 100 departments/agencies 
such as the Department of Homeland Security and Social Security 
Administration. The Department of State and International Assistance 
Programs category includes other entities such as the U.S. Agency for 
International Development, the Millennium Challenge Corporation, and 
the Peace Corps. 

[End of figure] 

[End of section] 

Appendix II: Guide for Evaluating Carryover Balances: 

We developed four key overarching questions to consider in evaluating 
both obligated and unobligated balances. Each of these leads to a set 
of second-tier, more specific questions to help frame the analysis of 
carryover balances. We developed this list of questions from our 
analysis of government-wide guidance on budget preparation, budget 
execution, and internal controls. In addition, we met with federal 
budget specialists, agency officials responsible for managing the 
eight accounts selected as part of our review, and staff within the 
Office of Management and Budget (OMB) to obtain their views on the use 
of these questions to guide the examination of carryover balances. Our 
prior work on federal budgeting, user fees, budget triggers, and 
managing under continuing resolutions also informed the development of 
these key questions. 

Answering each of the four overarching questions provides insight into 
why the balance exists, what size balance is appropriate, and what 
opportunities, if any, for savings exist. In addition, it may provide 
opportunities for enhanced oversight of agencies’ management of 
federal funds and identify areas where the federal government can 
improve and maximize its use of resources. These questions can be 
applied when evaluating carryover balances at either the account or 
program level. A single account may support a single program or 
multiple programs. Conversely a single program may be supported by 
multiple accounts. Further, the balance in a single year may reflect 
events particular to that year and so present an incomplete or 
possibly misleading view of what is happening in a given account or 
program. Therefore, a longer view is preferable. 

Since the many accounts that make up the federal budget vary greatly 
and individual accounts have their own unique characteristics, we do 
not suggest that the following set of questions represents all the 
questions that could be considered when evaluating carryover balances. 
As congressional committees, managers, and other reviewers apply these 
evaluative questions, additional questions may arise. In some cases, 
however, a few of the questions may provide sufficient information to 
understand the nature of the balance. 

Key question: 


Key question: What mission and goals is the account or program 
supporting? 
Understanding the mission activities, goals, and programs the account 
supports provides insight into whether a program needs to maintain a 
balance to operate smoothly, what size balance is appropriate, and 
whether opportunities for savings exist. Such context can inform 
assessments of whether and how to reduce carryover balances, and what 
effect this would have on the agency’s ability to carry out its 
mission. For example, an account established to provide stability in 
the financial or housing market needs a balance to ensure the agency 
has sufficient resources to respond quickly to adverse events. 
Subset of questions: 
What are the primary mission and goals the account or program is 
intended to achieve? 
What is the nature and purpose of the balance and how does it support 
the mission and goals (e.g., counter economic crises, sustain business-
like activities, meet emergency funding needs)? 
Have there been changes to the program or mission that may affect 
balances (e.g., additional responsibilities, major reorganization)? 
What type of activity (e.g., grants, procurement, direct services) is 
the account used for to achieve the agency’s mission and goals? What 
are the implications of carryover balances? 
What programs are funded by the account and how much does each 
contribute, if at all, to the carryover balance (e.g., does a large 
portion of the balance result from any particular programs)? 
Is it a new account or program or have the program goals and 
objectives changed? 
* How has this affected the ability to obligate funds? 

Key question: What are the sources and fiscal characteristics of the 
funding? 
The sources and fiscal characteristics of the funds influence what 
opportunities may exist for savings. If funds are primarily mandatory, 
opportunities are more limited as programmatic changes would generally 
be required to reduce balances. In such cases, reducing an account’s 
balance may have no economic benefit and instead could impose 
unnecessary administrative costs. If funds are discretionary, balances 
can be controlled by the annual appropriations process. 
Some accounts or programs may be expected to have carryover balances 
if the agency has multi-year or no-year funds. Supplemental 
appropriations enacted late in the fiscal year (or for long-term 
projects) may also increase the likelihood, and perhaps expectation, 
for a carryover balance. However, a growing carryover balance over a 
number of years may indicate problems executing a program as planned. 
Accounts that receive funding primarily from outside sources, such as 
fees, have their own unique considerations.[Footnote 20]
Subset of questions: 
Are the account or program funds mandatory, discretionary or a 
combination of both? 
* In accounts or programs that receive both mandatory and 
discretionary funds, what portion of each are unobligated each year? 

For unobligated funds, what is the expected period over which funds 
will be obligated and liquidated (i.e., multiple years versus single 
year)? 
* If over multiple years, what drives the timing of the obligation and 
liquidation of funds (e.g., contract award period, grant cycle)? 
Did the account receive supplemental appropriations? 
* If so, when were the supplemental appropriations acts enacted? How 
much of the balance is attributed to supplemental appropriations? 
To what extent is the activity funded by fees or taxes (e.g., fuel 
taxes) versus general revenues? 
* Does the account or program have the authority to use the fees or 
taxes without additional congressional action? 

Key question: What factors affect the size or composition of the 
carryover balance? 
It is important to consider which factors were within the agency’s 
control and which were not. Agencies or programs may operate in a way 
that contributes to a faster or slower spendout rate for a particular 
account. Understanding the spendout rate can help to identify what 
drives the size of the unobligated and obligated portions of the 
balance. 
In addition, external events beyond agencies’ control—such as natural 
disasters or economic crises—can dramatically affect carryover 
balances. For example, if an agency receives a sudden inflow of funds 
late in the fiscal year from a supplemental appropriation, the size of 
the unobligated balance carried forward to the next fiscal year may be 
greater than otherwise estimated. 
Subset of questions: 
How has the account’s balance changed over time? How has the 
composition of the carryover balance (i.e., the unobligated and 
obligated portions) changed over time? 
* Has the agency’s rate of obligation significantly slowed or 
increased as a result of certain factors (e.g., application or review 
periods, regulatory issuance)? 
What portion of unobligated funds has the agency labeled as committed 
for specific uses? 
What conditions or external events have occurred outside the agency’s 
control (e.g., events that led to changes in program demand)? 
* Were there any changes to accounting, regulatory, or statutory 
requirements related to the account’s balance (e.g., bid protests, 
receipt of supplemental appropriations, continuing resolutions)? 
Are there questions about the agency’s ability or capacity to carry 
out the program due to previously reported weaknesses (e.g., excessive 
risks, poor performance, unmet objectives)? 
Are interim milestones being met to ensure projects are carried out on 
schedule? 
* Are there known production issues that could lead to delays? 
What opportunities exist to deobligate unliquidated balances (e.g., up-
front obligations to contractors, grants to states)? 

Key question: How does the agency estimate and manage carryover 
balances? 
Understanding an agency’s processes for estimating and managing 
carryover balances provides information to assess how effective 
agencies are in anticipating program needs and ensuring the most 
efficient use of resources. If an agency does not have a robust 
strategy in place to manage carryover balances or is unable to 
adequately explain or support the reported carryover balance, then a 
more in-depth review is warranted with the potential to identify 
opportunities for budgetary savings. 
Subset of questions: 
What assumptions or factors did the agency incorporate into its 
estimate of the account’s carryover balance (e.g., historical 
experience, demand models)? 
To what extent and how often does the agency revisit or adjust 
estimates of unobligated balances to reflect historical data or other 
information? 
Does the agency have a routine mechanism for reviewing its obligations 
and determining whether there are opportunities to deobligate funds 
(e.g., written procedures or ad hoc processes)? 
What is the agency’s timeline for obligating and expending funds in 
the account? 
* Does the agency or program tend to under-execute its budget? * What 
is the spendout rate after funds have been obligated? 
Has the agency followed its own procedures for ensuring fiscally 
responsible management of balances? 

Source: GAO analysis. 

[End of table] 

[End of section] 

Appendix III: Case Illustrations of Federal Accounts with Carryover 
Balances: 

As part of our review, we selected a nongeneralizable sample of eight 
accounts and analyzed their end-of-year carryover balances for fiscal 
years 2007 through 2012. These eight accounts serve as case 
illustrations to better understand why carryover balances existed and 
the types of factors that affected the size of the balances. We 
selected accounts based on several characteristics including the size 
of the average unobligated balance, budget function, type of account, 
agency, and whether the account was composed of mandatory or 
discretionary funds. 

Our analysis is presented in terms of the four overarching key 
questions we developed in our evaluative guide outlined in appendix 
II. Because of the variation in the size of the accounts, the graphics 
depicted in each case illustration are scaled to the size of the 
individual account; as a result, the graphics cannot be directly 
compared to one another. Further, the second figure in each case 
illustration includes both actual unobligated balances as well as two 
sets of estimates: budget year and current year. The budget year (BY) 
is a term used in the budget formulation process to refer to the 
fiscal year for which the budget is being considered. For example, 
estimates for the fiscal year 2012 budget year were reported during 
fiscal year 2011. Current year (CY) is a term used in the budget 
formulation process to refer to the fiscal year immediately preceding 
the budget year under consideration; such that for fiscal year 2012, 
current year estimates were reported part way through 2012. 

The eight accounts we reviewed as case illustrations were: 

* Department of Defense: Army Aircraft Procurement; 
* Department of Defense: U.S. Army Corps of Engineers-Civil Works, 
Construction; 
* Department of Health and Human Services: Public Health and Social 
Services Emergency Fund; 
* Department of Housing and Urban Development: Community Development 
Fund; 
* Department of Housing and Urban Development: Federal Housing 
Administration-Mutual Mortgage Insurance Capital Reserve; 
* Department of Housing and Urban Development: Homeless Assistance 
Grants; 
* Department of the Treasury: Exchange Stabilization Fund; 
* Department of the Treasury: Government Sponsored Enterprise (GSE) 
Preferred Stock Purchase Agreements. 

Account Name: Aircraft Procurement, Army (APA); 
Agency: Department of Defense; 
National Priority: Department of Defense-Military (Budget Subfunction 
051). 

What Mission and Goals Is the Account or Program Supporting? 

The Army uses the Aircraft Procurement account for construction, 
procurement, production, modification, and modernization of aircraft 
equipment. The Army purchases and maintains aircraft in order to 
support activities such as combat missions and operations. For 
example, the Army has a contract to develop an unmanned aircraft 
system, which will be able to carry four aircraft as well as other 
necessary equipment. 

What Are the Sources and Fiscal Characteristics of the Funding? 

APA receives annual and supplemental appropriations that are available 
for obligation for three years. All funds in the account are 
discretionary. 

What Factors Affect the Size or Composition of the Carryover Balance? 

As shown in figure 5, carryover balances increased steadily from 
approximately $7 billion in fiscal year 2007 to $13 billion in fiscal 
year 2011 before then decreasing slightly at the end of fiscal year 
2012. The majority of the carryover balance was composed of 
unliquidated obligations. 

Figure 5: Carryover Balances in the Army’s Aircraft Procurement 
Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007: 
Unobligated balance: $1.580 billion; 
Obligated balance: $5.187 billion. 

Fiscal year 2008: 
Unobligated balance: $1.461 billion; 
Obligated balance: $7.168 billion. 

Fiscal year 2009: 
Unobligated balance: $2.280 billion; 
Obligated balance: $7.440 billion. 

Fiscal year 2010: 
Unobligated balance: $3.544 billion; 
Obligated balance: $7.299 billion. 

Fiscal year 2011: 
Unobligated balance: $4.374 billion; 
Obligated balance: $8.347 billion. 

Fiscal year 2012: 
Unobligated balance: $2.686 billion; 
Obligated balance: $9.154 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

According to DOD officials, the majority of the carryover balance is 
obligated but unliquidated due to the nature of the procurement 
process for aircraft, which can take many years. Once the Army 
identifies a requirement and receives appropriations to fund that 
requirement, it issues a request for proposals to develop a product to 
meet the requirement. After the request for proposal is issued, 
awarding a contract generally takes three to nine months. Once a 
contract is in place and funds are obligated, the agency periodically 
disburses funds to the contractor as milestones are reached. The 
majority of the payment is made upon delivery. 

DOD officials said a portion of unobligated funds are committed 
(reserved) for specific projects. However, balances that are 
considered “committed” are not officially obligated until a contract 
is awarded. For example, in 2011 the subaccount dedicated to 
modifications of aircraft had an unobligated balance of about 
$420,000, of which approximately $355,000, or about 85 percent, was 
already “committed” to specific projects. 

In 2009, several events contributed to a delay in the contracting 
cycle that resulted in higher unobligated balances for 2010 and 2011. 
A 2009 executive policy memo directed DOD to issue new guidance 
regarding sole-source contracting. In anticipation of the guidance, 
APA officials chose to wait to award any further contracts. 
Additionally that year, we identified issues with the Defense Contract 
Audit Agency, including with the independence of their auditors. 
[Footnote 21] As a result of these two factors, APA reviewed and 
revised its processes, which delayed the contracting timeline that 
year from approximately 3 to 9 months to 9 to 18 months. 

How Does the Agency Estimate and Manage Carryover Balances? 

DOD estimates carryover balances for the Army Aircraft Procurement 
account using a formula based on historical data. The agency first 
determines the average obligation rate over the previous five years. 
Using this weighted average, officials then apply that rate against 
current obligated balances in the account to estimate the amount of 
unobligated funds and unliquidated obligations that will carry forward 
to the next fiscal year. 

As shown in figure 6, actual unobligated balances have steadily risen, 
while estimates have remained fairly steady. Further, actual 
unobligated balances were higher than estimates for all years, with 
the greatest differences occurring in 2010 through 2012. This suggests 
that the agency’s model for estimating unobligated balances was fairly 
accurate for 2007 and 2008, and generally underestimated unobligated 
balances for years 2009 through 2012. 

Figure 6: Estimated vs. Actual Unobligated Balances in the Army’s 
Aircraft Procurement Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $682 million; 
Estimated unobligated balance (CY): $917 million; 
Actual unobligated balance: $1.580 billion. 

Fiscal year 2008: 
Estimated unobligated balance (BY): $878 million; 
Estimated unobligated balance (CY): $1.263 billion; 
Actual unobligated balance: $1.461 billion. 

Fiscal year 2009: 
Estimated unobligated balance (BY): $1.013 billion; 
Estimated unobligated balance (CY): $1.056 billion; 
Actual unobligated balance: $2.280 billion. 

Fiscal year 2010: 
Estimated unobligated balance (BY): $1.050 billion; 
Estimated unobligated balance (CY): $1.288 billion; 
Actual unobligated balance: $3.544 billion. 

Fiscal year 2011: 
Estimated unobligated balance (BY): $1.486 billion; 
Estimated unobligated balance (CY): $1.604 billion; 
Actual unobligated balance: $4.374 billion. 

Fiscal year 2012: 
Estimated unobligated balance (BY): $1.413 billion; 
Estimated unobligated balance (CY): $1.404 billion; 
Actual unobligated balance: $2.686 billion. 

Source: GAO analysis of OMB data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Construction; 
Agency: U.S. Army Corps of Engineers-Civil Works; 
National Priority: Water Resources (Budget Subfunction 301). 

What Mission and Goals Is the Account or Program Supporting? 

The U.S. Army Corps of Engineers’ (Corps) Construction account funds 
three main mission areas: flood and storm damage reduction, commercial 
navigation, and aquatic ecosystem restoration within the United 
States. The Corps engages in projects in waterways throughout the 
nation, such as in Ohio, Pennsylvania, Illinois, and Kentucky. While 
some projects are short term, others are long term and may involve a 
series of steps, such as rehabilitating a dam over time. The account 
allocates funding by project based on Congressional direction 
generally provided in committee reports accompanying the Corps’ 
appropriations, as well as various performance-based guidelines, 
including projects with very high economic and environmental returns 
and those close to completion. 

What Are the Sources and Fiscal Characteristics of the Funding? 

The Construction account receives funding through both annual and 
supplemental appropriations. Annual appropriations are allocated by 
projects. All funds in the account are discretionary and are typically 
available until expended. In addition, the account receives transfers 
from other sources including the Inland Waterways Trust Fund and the 
Harbor Maintenance Trust Fund. The account also receives funds from 
other federal agencies including the Department of Homeland Security 
and the Department of Veterans’ Affairs for specific construction 
projects. 

What Factors Affect the Size or Composition of the Carryover Balance? 

As shown in figure 7, during fiscal years 2007 through 2012 carryover 
balances peaked at nearly $10 billion in fiscal year 2009 before 
gradually decreasing to $5 billion in fiscal year 2012. The majority 
of the carryover balance was unobligated funds. 

Figure 7: Carryover Balances in U.S. Army Corps of Engineers-Civil 
Works Construction Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007: 
Unobligated balance: $2.408 billion; 
Obligated balance: $85 million. 

Fiscal year 2008: 
Unobligated balance: $4.331 billion; 
Obligated balance: $451 million. 

Fiscal year 2009: 
Unobligated balance: $7.506 billion; 
Obligated balance: $2.371 billion. 

Fiscal year 2010: 
Unobligated balance: $4.470 billion; 
Obligated balance: $3.537 billion. 

Fiscal year 2011: 
Unobligated balance: $3.857 billion; 
Obligated balance: $2.235 billion. 

Fiscal year 2012: 
Unobligated balance: $3.345 billion; 
Obligated balance: $1.750 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

A portion of the carryover balance is a result of no-year supplemental 
appropriations. Corps officials said that, in some cases, supplemental 
funds were not intended to be obligated immediately because they fund 
long-term projects. For example, between fiscal years 2006 and 2009, 
the Construction account received approximately $5 billion to aid in 
disaster recovery following Hurricane Katrina, a portion of which had 
still not been expended in 2012. In fiscal years 2009 through 2012, 
the size of the obligated portion of the balance was larger than in 
previous years as the Corps had the opportunity to obligate funds from 
supplemental appropriations it received. 

Further, officials cited delays in final appropriations execution 
decisions as a contributing factor to increased unobligated balances 
at the end of each fiscal year. The Corps develops and presents 
construction plans for specific projects as part of its annual budget 
request. In some cases, committee reports accompanying appropriations 
acts included language directing the Corps to carry out additional 
construction work beyond that for which the agency had already 
developed work plans. Consequently, Corps officials said obligating 
the funds to support this additional work was delayed until they 
developed the necessary work plans. 

How Does the Agency Estimate and Manage Carryover Balances? 

Corps officials said that carryover on individual projects is 
influenced by factors such as real estate and environmental 
considerations, including whether a project will affect local water 
quality. Officials also use ten-year historical averages of the account’
s obligations and outlays to identify possible trends that may affect 
balances going forward. To manage carryover balances, officials said 
they adjust work plans consistent with Congressional direction. 

As shown in figure 8, the actual unobligated balance was larger than 
what the agency initially estimated each year during fiscal years 2007 
through 2012. While in some cases, current year estimates were closer 
to actuals, the graph of estimated balances below suggests that the 
agency’s estimation process generally underestimated the amount of 
unobligated funds that would be carried over each year. Agency 
officials said that in some cases, this was due to supplemental 
appropriations that were received after budget estimates were reported. 

Figure 8: Estimated vs. Actual Unobligated Balances in the U.S. Army 
Corps of Engineers-Civil Works Construction Account, Fiscal Years 2007-
2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $1.510 billion; 
Estimated unobligated balance (CY): $1.627 billion; 
Actual unobligated balance: $2.408 billion. 

Fiscal year 2008: 
Estimated unobligated balance (BY): $386 million; 
Estimated unobligated balance (CY): $1.323 billion; 
Actual unobligated balance: $4.331 billion. 

Fiscal year 2009: 
Estimated unobligated balance (BY): $3.170 billion; 
Estimated unobligated balance (CY): $6.572 billion; 
Actual unobligated balance: $7.506 billion. 

Fiscal year 2010: 
Estimated unobligated balance (BY): $2.858 billion; 
Estimated unobligated balance (CY): $4.934 billion; 
Actual unobligated balance: $4.470 billion. 

Fiscal year 2011: 
Estimated unobligated balance (BY): $1.167 billion; 
Estimated unobligated balance (CY): $1.405 billion; 
Actual unobligated balance: $3.857 billion. 

Fiscal year 2012: 
Estimated unobligated balance (BY): $203 million; 
Estimated unobligated balance (CY): $2.469 billion; 
Actual unobligated balance: $3.345 billion. 

Source: GAO analysis of OMB data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Public Health and Social Services Emergency Fund 
(PHSSEF); 
Agency: Department of Health and Human Services; 
National Priority: Health Care Services (Budget Subfunction 551). 

What Mission and Goals Is the Account or Program Supporting? 

The Department of Health and Human Services’ (HHS) Public Health and 
Social Services Emergency Fund (PHSSEF) provides resources to support 
a comprehensive program to prepare for the public health and medical 
consequences of bioterrorism or other public health emergencies. Funds 
in this account support several offices and programs tasked with 
emergency preparedness including the Office of the Assistant Secretary 
for Preparedness and Response (ASPR), which receives the largest share 
of appropriations in the account. Within ASPR, the largest programs 
are the Hospital Preparedness Program and the Biomedical Advanced 
Research and Development Authority. Other programs and offices that 
PHSSEF supports include HHS’ Cybersecurity program, the Medical 
Reserve Corps, and Pandemic Influenza. In addition, the account 
includes the balance of the Special Reserve Fund, which supports the 
procurement of biodefense countermeasures as part of the Project 
BioShield Act.[Footnote 22] 

What Are the Sources and Fiscal Characteristics of the Funding? 

The account receives annual appropriations, supplemental 
appropriations, and transfers from other accounts outside of HHS. 
Annual appropriations primarily support ASPR and consist of a mix of 
both one-year and multi-year funds. Supplemental appropriations were 
provided for preparedness and response to pandemic influenza in 2009 
and emergency relief and reconstruction aid related to the earthquake 
in Haiti in 2010. Those funds are available until expended (no-year 
funds). In addition, the account received a transfer of funds from the 
Department of Homeland Security for Project BioShield activities and 
reimbursements from the Federal Emergency Management Agency. All funds 
in the account are discretionary. 

What Factors Affect the Size or Composition of Carryover Balances? 

As shown in figure 9, the actual carryover balance dramatically 
increased in fiscal year 2009, to approximately $11 billion, and 
subsequently declined through 2012. In most years, the obligated 
portion of the balance was greater than the unobligated portion. 
However, in fiscal year 2010, with the receipt of supplemental 
appropriations, the unobligated balance was almost twice as large as 
the obligated portion of the balance. 

Figure 9: Carryover Balances in the Public Health and Social Services 
Emergency Fund, Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007: 
Unobligated balances: $2.088 billion; 
Obligated balances: $3.259 billion. 

Fiscal year 2008: 
Unobligated balances: $1.062 billion; 
Obligated balances: $3.091 billion. 

Fiscal year 2009: 
Unobligated balances: $4.561 billion; 
Obligated balances: $6.567 billion. 

Fiscal year 2010: 
Unobligated balances: $6.617 billion; 
Obligated balances: $3.374 billion. 

Fiscal year 2011: 
Unobligated balances: $3.414 billion; 
Obligated balances: $4.321 billion. 

Fiscal year 2012: 
Unobligated balances: $2.349 billion; 
Obligated balances: $4.214 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Agency officials said that carryover balances in the account were 
primarily the result of no-year supplemental appropriations. For 
example, in fiscal years 2009 and 2010, balances reflect supplemental 
appropriations to address the H1N1 pandemic influenza outbreak and 
emergency relief after the 2010 earthquake in Haiti. In addition, 
funds transferred from DHS for Project BioShield activities 
contributed to the carryover balance. 

In addition, some of the multiple programs that PHSSEF supports have 
slower spendout rates than others. For example, agency officials 
explained that funds supporting Project BioShield activities were 
available for obligation at intervals over a ten-year period during 
fiscal years 2004 to 2013. They said the intent of the funding method 
was to provide procurement funds with availability over a long period 
of time to encourage industry to engage in the advanced development of 
countermeasures. As a result, some portion of unobligated funds would 
be carried forward each year. Once HHS has entered into a contract for 
the procurement of a specific countermeasure, agency officials said it 
may take years to progress through contractual milestones, thereby 
contributing to the size of the obligated portion of the carryover 
balance in any given year. 

In contrast, agency officials said the spendout rate of PHSSEF funds 
supporting National Special Security Events (NSSE) is relatively 
shorter. Planned events which require HHS support include the 
Presidential Inauguration and July 4th celebrations on the National 
Mall. An example of an unplanned event is when HHS used PHSSEF funds 
to provide mental health response teams to Sandy Hook Elementary 
students, families, and staff after the school shooting in December 
2012. HHS officials said the obligation of these funds for NSSE 
purposes is somewhat sporadic, but once obligated, funds are quickly 
disbursed. 

How Does the Agency Estimate and Manage Carryover Balances? 

Agency officials said the Office of Budget works with program and 
budget offices to obtain information to incorporate into budget year 
estimates of carryover balances. These balances are informed by prior 
year actuals and take into account any planned procurement, other 
contract actions, and grant awards. 

As shown in figure 10, during fiscal years 2007 through 2012, actual 
unobligated balances in the account were higher than budget-year 
estimates in most years with the largest differences occurring in 
fiscal years 2009 and 2010. Agency officials said emergency 
supplemental appropriations contributed to higher than expected 
unobligated balances in 2009 and 2010. Specifically, supplemental 
appropriations were provided to address the influenza pandemic in 2009 
and to respond to the earthquake in Haiti in 2010. Both events were 
unexpected and accordingly, were not included in the agency’s initial 
estimates of the unobligated balance. In addition, HHS officials said 
obligations slowed in fiscal year 2010 when the influenza pandemic 
proved to be less severe than originally anticipated. In both 2011 and 
2012 unobligated balances were lower than budget-year estimates. 

Figure 10: Estimated vs. Actual Unobligated Balances in the Public 
Health and Social Services Emergency Fund, Fiscal Years 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $17 million; 
Estimated unobligated balance (CY): $10 million; 
Actual unobligated balance: $2.088 billion. 

Fiscal year 2008: 
Estimated unobligated balance (BY): $10 million; 
Estimated unobligated balance (CY): $10 million; 
Actual unobligated balance: $1.062 billion. 

Fiscal year 2009: 
Estimated unobligated balance (BY): $10 million; 
Estimated unobligated balance (CY): $0; 
Actual unobligated balance: $4.561 billion. 

Fiscal year 2010: 
Estimated unobligated balance (BY): $728 billion; 
Estimated unobligated balance (CY): $5.062 billion; 
Actual unobligated balance: $6.617 billion. 

Fiscal year 2011: 
Estimated unobligated balance (BY): $4.395 billion; 
Estimated unobligated balance (CY): $4.700 billion; 
Actual unobligated balance: $3.414 billion. 

Fiscal year 2012: 
Estimated unobligated balance (BY): $3.431 billion; 
Estimated unobligated balance (CY): $1.322 billion; 
Actual unobligated balance: $2.349 billion. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Community Development Fund (CDF); 
Agency: Department of Housing and Urban Development; 
National Priority: Community Development (Budget Subfunction 451). 

What Mission and Goals Is the Account or Program Supporting? 

The Community Development Fund (CDF) primarily supports programs 
targeted for low to moderate income individuals and families that 
include activities such as job creation. The Department of Housing and 
Urban Development (HUD) uses the funds in this account to distribute 
grant assistance through several programs, the largest of which is the 
Community Development Block Grant (CDBG). CDBG provides formula grants 
to units of general local government and states to support activities 
such as public infrastructure improvements, housing, rehabilitation, 
and public service activities including child care. 

CDF also supports other programs such as Section 108 loan guarantees, 
[Footnote 23] the Neighborhood Stabilization Program (NSP)[Footnote 
24] and disaster recovery programs. CDF has received large 
supplemental appropriations for various disaster recovery efforts such 
as those following Hurricane Katrina and Hurricane Wilma. 

What Are the Sources and Fiscal Characteristics of the Funding? 

CDF receives annual CDBG appropriations for grants to state and local 
governments which are available for obligation for three years. HUD 
officials said that CDBG funds are distributed through formulas, with 
approximately 70 percent allocated to entitlement communities and 30 
percent to non-entitlement communities. According to HUD, entitlement 
communities are defined by statute, as cities with populations greater 
than 50,000 people or urban counties with populations of 200,000 or 
more. 

CDF also receives supplemental appropriations for its disaster 
recovery programs, which have varying periods of availability 
depending on the legislation. In addition, HUD officials said funds 
supporting NSP1 and NSP3 are mandatory and all CDBG funds are 
discretionary. 

What Factors Affect the Size or Composition of the Carryover Balance? 

During fiscal years 2007 through 2012, the size of the carryover 
balance in the CDF account ranged from approximately $16 billion to 
about $29 billion. As shown in figure 11, the obligated but unexpended 
portion of the balance remained fairly steady over the six year 
period. The unobligated portion peaked in 2008 and subsequently 
decreased for the remainder of the period. 

Figure 11: Carryover Balances in the Community Development Fund, 
Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year: 2007: 
Unobligated balances: $762 million; 
Obligated balances: $197.68 billion. 

Fiscal year: 2007: 
Unobligated balances: $13.114 billion; 
Obligated balances: $15.672 billion. 

Fiscal year: 2008: 
Unobligated balances: $7.969 billion; 
Obligated balances: $17.348 billion. 

Fiscal year: 2009: 
Unobligated balances: $2.000 billion; 
Obligated balances: $20.763 billion. 

Fiscal year: 2010: 
Unobligated balances: $1.040 billion; 
Obligated balances: $18.135 billion. 

Fiscal year: 2012: 
Unobligated balances: $733 billion; 
Obligated balances: $15.036 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Supplemental appropriations contributed to larger than anticipated 
unobligated balances in fiscal years 2008 and 2009. Although officials 
said they make an effort to obligate supplemental appropriations 
quickly, if funds are received late in the fiscal year, it is more 
likely that a portion of the unobligated funds will carry over into 
the next fiscal year. For example, in 2008, HUD received a 
supplemental appropriation on September 30th to provide disaster 
relief to areas affected by hurricanes, floods, and other natural 
disasters. The timing of the appropriation led to a large increase in 
the unobligated balance carried over into the next fiscal year. In 
2009, additional supplemental appropriations were enacted. 

HUD officials said they typically obligate funds quickly; however, the 
rate of expenditure may be slow, resulting in a large obligated, 
unexpended balance from year to year. This is because once funds are 
obligated, the time it takes to expend funds depends on the rate at 
which grantees are drawing down their grant money. In the case of 
supplemental funds, the increased amount of grants may be a challenge 
for grantees to disburse. For example, HUD officials said that in one 
instance, a grantee that typically received a couple hundred thousand 
dollars per year received approximately $18 million in grant funds. 
Such a dramatic increase in the amount of grant funding posed 
administrative challenges for the grantee, which contributed to a 
slower spendout rate. 

How Does the Agency Estimate and Manage Carryover Balances? 

Estimates of carryover balances are determined through a review of 
prior year balances in the account. For example, when estimating the 
portion of the balance attributed to the traditional CDBG program, 
officials said they look at the composition of carryover balances from 
recent years, including whether the balances are composed of funds in 
their first year, second year, or third year of availability. They 
also consider historical rates of obligations and outlays. For the 
portion of the balance attributed to disaster recovery grants, it is 
more difficult to estimate carryover because estimating the timing and 
size of supplemental appropriations for disaster recovery are beyond 
the agency’s control. 

As shown in figure 12, actual unobligated balances were larger than 
estimated during fiscal years 2007 through 2012, with the largest 
difference occurring in 2008. Although the budget-year estimate of the 
unobligated balance for fiscal year 2007 was fairly close to the 
actual, the agency generally underestimated the amount of unobligated 
funds that would be carried over each year. For example, in 2008 and 
2009, as discussed above, the agency unexpectedly received supplemental 
appropriations that caused the actual balance to be considerably 
higher than the previous estimates. 

Figure 12: Estimated vs. Actual Unobligated Balances in the Community 
Development Fund, Fiscal Years 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $900 million; 
Estimated unobligated balance (CY): $0; 
Actual unobligated balance: $762 billion. 

Fiscal year 2007: 
Estimated unobligated balance (BY): $0; 
Estimated unobligated balance (CY): $268; million 
Actual unobligated balance: $13.114 billion. 

Fiscal year 2007: 
Estimated unobligated balance (BY): $63 million; 
Estimated unobligated balance (CY): $2.870 million; 
Actual unobligated balance: $7.969 billion. 

Fiscal year 2007: 
Estimated unobligated balance (BY): $871 million; 
Estimated unobligated balance (CY): $578 million; 
Actual unobligated balance: $2.000 billion. 

Fiscal year 2007: 
Estimated unobligated balance (BY): $578 million; 
Estimated unobligated balance (CY): $441 million; 
Actual unobligated balance: $2.191 billion. 

Fiscal year 2007: 
Estimated unobligated balance (BY): $90 million; 
Estimated unobligated balance (CY): $100 million; 
Actual unobligated balance: $733 million. 

Source: GAO analysis of OMB data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Federal Housing Administration Mutual Mortgage Insurance 
(MMI) Capital Reserve Account; 
Agency: Department of Housing and Urban Development; 
National Priority: Mortgage Credit (Budget Subfunction 371). 

What Mission and Goals Is the Account or Program Supporting? 

The MMI Capital Reserve account supports the Federal Housing 
Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund). 
Under the MMI Fund, FHA insures a variety of mortgages for home 
purchases and refinancing to meet the housing needs of traditionally 
underserved borrowers.[Footnote 25] FHA has played a prominent role in 
the single-family mortgage market and accounted for more than 25 
percent of the home purchase mortgages originated in fiscal year 2012. 

Like other federal credit agencies, FHA estimates and re-estimates the 
net lifetime costs—-known as credit subsidy costs—-of the mortgages it 
insures. When the present value of estimated cash inflows (such as 
borrower insurance premiums) exceed the present value of expected cash 
outflows (such as insurance claims), negative subsidies are generated. 
These negative subsidies are held in the MMI Capital Reserve account 
as an unobligated balance. When FHA experiences unanticipated 
increases in estimated credit subsidy costs (upward re-estimates), 
balances in the MMI Capital Reserve account help to cover these 
increases. 

What Are the Sources and Fiscal Characteristics of the Funding? 

The MMI Capital Reserve account accumulates negative subsidies 
resulting from FHA’s single-family mortgage insurance activities. It 
also earns interest and realizes gains on investment in nonmarketable 
Treasury securities. In the event the MMI Capital Reserve account is 
depleted, FHA is authorized to draw on permanent and indefinite budget 
authority to cover additional increases in estimated credit subsidy 
costs. 

The MMI Capital Reserve account contains only mandatory funds, and 
those funds are available until expended. 

What Factors Affect the Size or Composition of the Carryover Balance? 

As shown in figure 13, carryover balances declined during the 6 years 
we reviewed, with a steep decline in 2009 and 2010. Because the 
spendout rate in this account is very quick, and in effect obligations 
are equivalent to outlays, nearly all of the carryover balances are 
unobligated. 

Figure 13: Carryover Balance in the FHA-Mutual Mortgage Insurance 
Capital Reserve Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: line graph] 

Fiscal year 2007: 

Fiscal year 2007: 
Unobligated balance: $22.395 billion. 

Fiscal year 2008: 
Unobligated balance: $19.085 billion. 

Fiscal year 2009: 
Unobligated balance: $10.605 billion. 

Fiscal year 2010: 
Unobligated balance: $4.375 billion. 

Fiscal year 2011: 
Unobligated balance: $4.685 billion. 

Fiscal year 2012: 
Unobligated balance: $3.309 billion. 

Note: Balances shown here are end-of-year. In fiscal years 2007 
through 2012, HUD reported negative obligated balances for the 
account. HUD officials said the negative balance represented 
outstanding receipts that had not yet been collected or fully 
processed by the end of the fiscal year. For presentation purposes, we 
do not show the obligated balance here. 

Source: GAO analysis of OMB data. 

[End of figure] 

The MMI Capital Reserve account maintains balances to cover unexpected 
insurance claim expenses, so when FHA experiences financial stress, 
the account balance decreases. For example, when the MMI Fund 
experiences higher-than-expected mortgage defaults (resulting in 
higher claims), there will be an upward re-estimate of credit subsidy 
costs. When there is an upward re-estimate, the MMI Capital Reserve 
account is the first source of funds used to cover the higher costs, 
thus lowering balances in the account. During the housing crisis that 
began in 2007, more pessimistic forecasts of economic conditions—house 
prices, in particular—resulted in higher projected insurance claims. 
As a result, balances in the MMI Capital Reserve account fell 
dramatically. From 2009 through 2012, FHA has submitted upward credit 
subsidy re-estimates ranging from about $6.8 to $10.5 billion 
annually. If upward re-estimates were to deplete the balance in the 
MMI Capital Reserve Account, FHA would need to draw on permanent, 
indefinite budget authority to have sufficient reserves for all future 
insurance claims on its existing portfolio. 

How Does the Agency Estimate and Manage Carryover Balances? 

The MMI Fund is reviewed from actuarial, financial and budgetary 
perspectives each year, which helps officials estimate carryover 
balances. From the actuarial perspective, FHA is statutorily required 
to ensure that the MMI Fund maintains a 2-percent capital ratio 
(discussed in more detail below). For its financial statements, FHA 
calculates the liability for loan guarantees, which represents the net 
present value of future cash flows on FHA’s existing portfolio. From a 
budgetary perspective, FHA must follow the Federal Credit Reform Act 
of 1990, which requires the agency to estimate and re-estimate the net 
lifetime costs of the mortgages it insures. 

The MMI Capital Reserve account holds funds to help FHA meet the 
statutory 2-percent capital ratio requirement for the MMI Fund and, as 
previously noted, maintains balances for unexpected claim expenses. 
[Footnote 26] The capital ratio is defined as the MMI Fund’s economic 
value divided by the total insurance-in-force.[Footnote 27] The 
balance in the MMI Capital Reserve account is one component of the 
economic value, along with the balance in the MMI Financing Account 
(which maintains balances to cover estimated credit subsidy costs) and 
the net present value of future cash flows. However, as a result of 
the economic downturn and housing crisis, the fund did not meet this 
requirement from 2009 through 2012. To help increase balances in the 
MMI Capital Reserve account and bring the MMI Fund back into 
compliance, FHA has implemented policy changes, including increases in 
borrower insurance premiums and enhanced underwriting requirements. 

As shown in figure 14, actual unobligated balances were lower than 
originally estimated for all years. Current year estimates were very 
close for almost all years during the period. This shows that the 
agency’s process for estimating unobligated balances assumed an 
accurate trend in most years, but tended to overestimate future 
balances, especially in fiscal year 2012. 

Figure 14: Estimated vs. Actual Unobligated Balances in the FHA-Mutual 
Mortgage Insurance Capital Reserve Account, Fiscal Years 2007-2012 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $23.115 billion; 
Estimated unobligated balance (CY): $22.450 billion; 
Actual unobligated balance: $22.395 billion. 

Fiscal year 2008: 
Estimated unobligated balance (BY): $23.569 billion; 
Estimated unobligated balance (CY): $19.156 billion; 
Actual unobligated balance: $19.085 billion. 

Fiscal year 209: 
Estimated unobligated balance (BY): $20.110 billion; 
Estimated unobligated balance (CY): $10.070 billion; 
Actual unobligated balance: $10.605 billion. 

Fiscal year 2010: 
Estimated unobligated balance (BY): $12.371 billion; 
Estimated unobligated balance (CY): $3.512 billion; 
Actual unobligated balance: $4.375 billion. 

Fiscal year 2011: 
Estimated unobligated balance (BY): $5.722 billion; 
Estimated unobligated balance (CY): $8.002 billion; 
Actual unobligated balance: $4.685 billion. 

Fiscal year 2012: 
Estimated unobligated balance (BY): $13.765 billion; 
Estimated unobligated balance (CY): $0; 
Actual unobligated balance: $3.309 billion. 

Source: GAO analysis of OMB data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Homeless Assistance Grants (HAG); 
Agency: Department of Housing and Urban Development; 
National Priority: Housing Assistance (Budget Subfunction 604). 

What Mission and Goals Is the Account or Program Supporting? 

The Homeless Assistance Grants (HAG) account funds two primary grant 
programs: the Continuum of Care program and the Emergency Solutions 
Grant program. The Continuum of Care program is HUD’s largest and 
broadest targeted program to provide funds to address homelessness and 
the Emergency Solutions Grant Program includes funds for a variety of 
activities such as rapid re-housing. Grants through the Continuum of 
Care program are awarded through a national competition. An average of 
87 percent of those funds per year goes to renew existing projects. 
The process to register, compete, and award grants is done on a 
calendar year basis and generally takes about seven months. The grant 
competition cycle begins after the agency receives a final annual 
appropriation. Once grants are awarded, funds are obligated and 
disbursed to grantees. 

The 2009 Homeless Emergency Assistance and Rapid Transition to 
Rehousing Act (HEARTH)[Footnote 28] resulted in several changes to 
HAG, including the consolidation of three grant programs[Footnote 29] 
into the Continuum of Care program and allocation of funds to specific 
grant programs. 

What are the Sources and Fiscal Characteristics of the Funding? 

Funds in the HAG account are discretionary, provided through annual 
appropriations, and available for obligation for three years. In 
addition, in June 2008, the account received one multi-year 
supplemental appropriation of $50 million for aid to the State of 
Louisiana for the provision of 3,000 units of permanent supportive 
housing.[Footnote 30] 

What Factors Affect the Size or Composition of the Carryover Balance? 

The carryover balance in the HAG account ranged from $4 billion to 
$5.6 billion during fiscal years 2007 through 2012. As shown in figure 
15, unobligated balances remained steady over the six year period. In 
2009, there was an increase in the obligated balance that subsequently 
decreased in later years. 

Figure 15: Carryover Balances in the Homeless Assistance Grants 
Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007; 
Unobligated balances: $1.662 billion; 
Obligated balances: $2.360 billion. 

Fiscal year 2008; 
Unobligated balances: $1.694 billion; 
Obligated balances: $2.377 billion. 

Fiscal year 2009; 
Unobligated balances: $2.086 billion; 
Obligated balances: $3.536 billion. 

Fiscal year 2010; 
Unobligated balances: $2.170 billion; 
Obligated balances: $3.130 billion. 

Fiscal year 2011; 
Unobligated balances: $2.191 billion; 
Obligated balances: $2.517 billion. 

Fiscal year 2012; 
Unobligated balances: $2.023 billion; 
Obligated balances: $2.474 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

A portion of the unobligated balance results from the timing of the 
grant competition and award process, which is done by calendar year 
rather than fiscal year. For HAG, the typical grant competition cycle 
involves several phases. First, once the agency has received its 
annual appropriations, it then opens a program registration period. 
After the agency reviews registrations, it opens the grant application 
process. Following the final application review, grants are awarded at 
a later date during the current or next calendar year (likely during a 
new fiscal year). 

At that point the available multi-year funds will be obligated. 
Because grant awards are typically made after the end of the fiscal 
year, unobligated balances are carried over from one fiscal year to 
the next. 

Officials said the increase in the obligated, unexpended balance that 
occurred in 2009 and 2010 was the result of two events. In 2009, the 
account received $1.5 billion for HUD’s Homelessness Prevention and 
Rapid Re-housing Program, which contributed to the increase in the 
obligated balance. In addition, the agency implemented a change in its 
process to review renewal grants. This change in process, which 
started in 2008, involved transitioning from a paper-based system to 
an electronic-based system. Officials said launching the new system 
caused a delay in awarding and disbursing grants, which resulted in an 
increased carryover balance. 

How Does the Agency Estimate and Manage Carryover Balances? 

Renewal grants account for the largest share of grant funding in the 
account and are typically funded before new grant applications are 
considered. Accordingly, HUD officials develop estimates of the account’
s carryover balance based on the historical rate of grant renewal from 
previous years. This helps the agency project the number of grants 
that will likely be renewed in the future, thereby informing HUD’s 
estimate of the amount of funds that will be carried forward from one 
fiscal year to the next. 

As shown in figure 16, from 2007 through 2010 actual unobligated 
balances were slightly higher than initial estimates. From 2009 
through 2012, the actual unobligated balance remained fairly steady 
while agency estimates predicted more fluctuation. The largest 
difference between the estimated and actual unobligated balance was in 
2012. Generally speaking, it appears that the agency’s process for 
estimating unobligated balances was fairly accurate during the time 
period. 

Figure 16: Estimated vs. Actual Unobligated Balances in the Homeless 
Assistance Grants Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $1.397 billion; 
Estimated unobligated balance (CY): $1.372 billion; 
Actual unobligated balance: $1.662 billion. 

Fiscal year 2008: 
Estimated unobligated balance (BY): $1.328 billion; 
Estimated unobligated balance (CY): $1.328 billion; 
Actual unobligated balance: $1.694 billion. 

Fiscal year 2009: 
Estimated unobligated balance (BY): $1.496 billion; 
Estimated unobligated balance (CY): $1.562 billion; 
Actual unobligated balance: $2.086 billion. 

Fiscal year 2010: 
Estimated unobligated balance (BY): $1.612 billion; 
Estimated unobligated balance (CY): $2.399 billion; 
Actual unobligated balance: $2.170 billion. 

Fiscal year 2011: 
Estimated unobligated balance (BY): $2.746 billion; 
Estimated unobligated balance (CY): $2.348 billion; 
Actual unobligated balance: $2.191 billion. 

Fiscal year 2012: 
Estimated unobligated balance (BY): $2.797 billion; 
Estimated unobligated balance (CY): $1.967 billion; 
Actual unobligated balance: $2.023 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Exchange Stabilization Fund (ESF); 
Agency: Department of the Treasury; 
National Priority: International Financial Programs (Budget 
Subfunction 155). 

What Mission and Goals Is the Account or Program Supporting? 

The Exchange Stabilization Fund (ESF) account was established by the 
Gold Reserve Act of 1934, to be operated under the exclusive control 
of the Secretary of the Treasury with approval of the President. The 
primary purpose of the fund is to stabilize international financial 
markets, consistent with U.S. obligations in the International 
Monetary Fund (IMF). To carry out this purpose, the Secretary is 
authorized to purchase, sell, or deal in gold, foreign currencies, and 
other instruments of credit and securities. The ESF holds 
international reserve assets of the United States, including U.S. 
dollars, foreign exchange, and Special Drawing Rights (SDR).[Footnote 
31] If the maturity on an ESF loan or credit to a foreign entity or 
government will extend beyond six months, the President must give 
Congress a written statement that unique or emergency circumstances 
exist. 

What Are the Sources and Fiscal Characteristics of the Funding? 

The account received a $2 billion appropriation in 1934 when the fund 
was created. The Bretton Woods Agreements Act of 1945 directed the 
Treasury Secretary to pay $1.8 billion from the ESF to the IMF for the 
initial U.S. quota subscription in the IMF, thereby reducing ESF’s 
appropriated amount to $200 million. Since that time, the major 
sources of the fund’s income have been (1) gains (or losses) due to 
changes in exchange rates, (2) SDR allocations, and (3) earnings on 
investments held by the fund including interest earned on fund 
holdings of U.S. Government securities or interest on loans or credits 
to foreign governments. Amounts in the ESF, which is a public 
enterprise revolving fund,[Footnote 32] are available until expended 
and may not be used to pay administrative expenses. 

What Factors Affect the Size or Composition of the Carryover Balance? 

As shown in figure 17, the actual total carryover balance increased 
dramatically in fiscal year 2009 and remained at that level through 
fiscal year 2012. The obligated portion of the balance held steady in 
fiscal years 2007 through 2009. By the end of fiscal year 2010, the 
obligated portion of the total carryover balance had grown 
significantly. The unobligated balance stayed fairly steady throughout 
fiscal years 2007 to 2012 with the exception of a dramatic spike in 
fiscal year 2009. 

Figure 17: Carryover Balances in the Exchange Stabilization Fund, 
Fiscal Years 2007-2012: 

[Refer to PDF for image: stacked line graph] 

Fiscal year 2007: 
Unobligated balance: $33.566 billion; 
Obligated balance: $14.135 billion. 

Fiscal year 2008: 
Unobligated balance: $35.272 billion; 
Obligated balance: $14.135 billion. 

Fiscal year 2009: 
Unobligated balance: $88.196 billion; 
Obligated balance: $14.135 billion. 

Fiscal year 2010: 
Unobligated balance: $43.602 billion; 
Obligated balance: $60.186 billion. 

Fiscal year 2011: 
Unobligated balance: $44.641 billion; 
Obligated balance: $60.385 billion. 

Fiscal year 2012: 
Unobligated balance: $44.092 billion; 
Obligated balance: $59.671 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Treasury officials said the largest single factor affecting the 
obligated balance is attributed to changes made to ESF’s budgetary 
reporting in fiscal year 2010. According to Treasury officials, prior 
to fiscal year 2010, the U.S. Standard General Ledger (USSGL) did not 
support the budgetary transactions of the ESF, thereby making it 
impossible to do ESF reporting using government-wide automated 
standards. The USSGL Board established a standard ledger account 
specifically for the ESF as a step toward correcting the budgetary 
reporting. Treasury’s implementation of this reporting change resulted 
in significant adjustments to ESF account balances and caused the size 
of the obligated balance to grow as a share of the total carryover 
balance in fiscal years 2010 through 2012. 

The spike in the unobligated balance in 2009 is almost entirely 
attributed to approximately $50 billion of new SDR allocations and one 
transaction that occurred over a one-month period. Pursuant to 
decisions made by the IMF membership, the IMF provided general and 
special SDR allocations[Footnote 33] to its members, including 
approximately $47.3 billion to the United States. As noted earlier, 
SDRs are held in the ESF. Treasury officials said the general 
allocation was an important element of the response to the global 
economic crisis. Further, they said the IMF general allocation 
provided an additional reserve buffer for IMF member countries that 
was critical to stopping the capital drain from emerging market 
countries and restoring global market confidence. In addition, 
Treasury monetized $3 billion of its ESF SDRs in a transaction 
authorized under the Special Drawing Rights Act.[Footnote 34] 

How Does the Agency Estimate and Manage Carryover Balances? 

Treasury officials said they do not estimate carryover or unobligated 
balances for the ESF as they do in other accounts (e.g., salaries and 
expenses). The balances represent investments and the unobligated 
balance is calculated from ESF’s balance sheet: assets minus 
liabilities. 

Account estimates reported in the President’s Budget each fiscal year 
are based on projected net interest earnings on ESF assets. The 
estimates are subject to considerable variance, depending on changes 
in the amount and composition of assets and the interest rates applied 
to investments. The estimates make no attempt to forecast gains or 
losses on SDR valuation or foreign currency valuation. 

As shown in figure 18, the nearly $50 billion of SDR-related 
transactions in fiscal year 2009 led to an actual unobligated balance 
in the ESF that was much larger than was estimated in fiscal year 2007 
when the President’s fiscal year 2009 budget was developed. Moreover, 
these transactions had a direct impact on Treasury’s estimates of the 
unobligated balance in subsequent years. Treasury officials said the 
general timing of those transactions was concurrent with the agency’s 
development of its fiscal year 2010 mid-year estimate and fiscal year 
2011 budget-year estimate for the account. Generally, in proportion to 
the size of the account, Treasury’s process for estimating the 
unobligated balance was relatively accurate. 

Figure 18: Estimated vs. Actual Unobligated Balances in the Exchange 
Stabilization Fund, Fiscal Years 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated unobligated balance (BY): $25.324 billion; 
Estimated unobligated balance (CY): $30.98 billion; 
Actual unobligated balance: $33.566 billion. 

Fiscal year 2008: 
Estimated unobligated balance (BY): $31.938 billion; 
Estimated unobligated balance (CY): $34.988 billion; 
Actual unobligated balance: $35.272 billion. 

Fiscal year 2009: 
Estimated unobligated balance (BY): $36.504 billion; 
Estimated unobligated balance (CY): $34.863 billion; 
Actual unobligated balance: $88.196 billion. 

Fiscal year 2010: 
Estimated unobligated balance (BY): $36.832 billion; 
Estimated unobligated balance (CY): $90.916 billion; 
Actual unobligated balance: $43.602 billion. 

Fiscal year 2011: 
Estimated unobligated balance (BY): $91.339 billion; 
Estimated unobligated balance (CY): $43.89 billion; 
Actual unobligated balance: $44.641 billion. 

Fiscal year 2012: 
Estimated unobligated balance (BY): $44.182 billion; 
Estimated unobligated balance (CY): $44.933 billion; 
Actual unobligated balance: $44.092 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. 

[End of figure] 

Account Name: Government Sponsored Enterprise (GSE) Preferred Stock 
Purchase Agreements; 
Agency: Department of the Treasury; 
National Priority: Mortgage Credit (Budget Subfunction 371). 

What Mission and Goals Is the Account or Program Supporting? 

In 2008, the Housing and Economic Recovery Act (HERA)[Footnote 35] 
established the Federal Housing Finance Agency (FHFA). FHFA placed two 
Government Sponsored Enterprises (GSE)[Footnote 36]—-the Federal 
National Mortgage Association (Fannie Mae) and the Federal Home Loan 
Mortgage Corporation (Freddie Mac)-—into conservatorship. Treasury 
then entered into agreements with Fannie Mae and Freddie Mac to 
provide capital through investments in senior preferred stock to 
ensure that each company maintained a positive net worth. Treasury 
disburses funds to the GSEs if, at the end of any quarter, the 
liabilities of either GSE exceed its assets. 

Amendments to the agreements in 2009 changed the maximum allowable 
funding commitment, which is reflected in the unobligated balances. 
Initially in 2008, Treasury was authorized to purchase up to $100 
billion of securities and investments in each GSE for a total of $200 
billion. The first amendment in May 2009 increased the allowable 
investment level to $200 billion for each GSE. In December 2009, the 
second amendment changed the investment level so it was based on a 
formulaic cap that would automatically adjust upwards quarterly by the 
cumulative amount of any losses realized by either GSE and downward by 
the cumulative amount of any gains, but not below $200 
billion.[Footnote 37] 

What Are the Sources and Fiscal Characteristics of the Funding? 

HERA established temporary authority for the GSE Purchase Agreements 
account and granted the Treasury Secretary temporary authority to 
purchase obligations and securities. The Secretary has complete 
discretion over the terms, conditions, and amounts of the purchases, 
provided that he or she (1) designates the actions as necessary, (2) 
takes specific considerations into account, and (3) reports on these 
matters to Congress. Any funds expended under this authority are 
deemed as appropriated in such sums as needed.[Footnote 38] 

What Factors Affect the Size or Composition of the Carryover Balance? 

As shown in figure 19, the actual total carryover balance in the 
account grew significantly from fiscal years 2007 through 2009 and 
subsequently declined through fiscal year 2012. 

The spendout rate in this account is very quick, which results in the 
agency reporting no obligated balance in the account by year-end. In 
effect, the actual payments to the GSEs are equal to the amount of 
obligations incurred and outlays reported in the President’s Budget 
Appendix. Treasury officials said the unobligated portion of the 
balance represents the cash balance in the account. 

Figure 19: Carryover Balances in the GSE Purchase Agreements Account, 
Fiscal Years 2007-2012: 

[Refer to PDF for image: line graph] 

Fiscal year: 2007; 
Unobligated balance: $0. 

Fiscal year: 2008; 
Unobligated balance: $200 billion. 

Fiscal year: 2009; 
Unobligated balance: $304.4 billion. 

Fiscal year: 2010; 
Unobligated balance: $251.8 billion. 

Fiscal year: 2011; 
Unobligated balance: $231.034 billion. 

Fiscal year: 2012; 
Unobligated balance: $212.515 billion. 

Source: GAO analysis of OMB MAX data. 

Note: Balances shown here are end-of-year. The account was established 
in 2008 under HERA, which means that there were no balances to report 
prior to 2008. 

[End of figure] 

The carryover balance is generally driven by the size of the 
apportionment[Footnote 39] to the account and the amount of purchases 
made by the account. For example, the account started with a $200 
billion balance in budget authority when it was created under HERA in 
2008. In 2009, the maximum allowable funding commitment was increased 
by an additional $200 billion for the account. Treasury also made its 
first payments to the GSEs equal to $95.6 billion. As shown in figure 
19, this translated into an unobligated balance of $304.4 billion at 
the end of fiscal year 2009. Prior to making payments to the GSEs, 
Treasury received an apportionment of its budget authority from OMB at 
the beginning of the fiscal year for the unobligated balance brought 
forward in the account. 

The gradual decline in the unobligated balance reflects Treasury’s 
subsequent payments to the GSEs in fiscal years 2010 through 2012, 
bringing the balance down to $212.5 billion by the close of fiscal 
year 2012.[Footnote 40] 

How Does the Agency Estimate and Manage Carryover Balances? 

Budget year estimates of the unobligated balance are derived from the 
estimated draws on the account from year to year. To do this, Treasury 
annually prepares a series of long-range forecasts to determine the 
estimated amount of contingent liability to the GSEs under the 
purchase agreements. These projections inform the agency’s estimation 
of payments to the GSEs for a given year. Based on the size of the 
estimated payments, Treasury estimates the amount of budget authority 
that will be carried over into the next year. By the time the agency 
develops current year estimates, agency officials said they typically 
know what the size of the payment request will be, thereby 
contributing to a more accurate estimate of the unobligated balance 
that is carried forward. This informs apportionment decisions to 
ensure there are sufficient funds to cover the payments to the GSEs. 

As shown in figure 20, there were no estimated unobligated balances in 
fiscal years 2007 through 2009. This is attributed to the timing of 
the President’s budget preparation for each of those years, and to the 
creation of the Purchase Agreement account. The account was 
established after the enactment of HERA in 2008, which meant that the 
account’s estimates were issued for the first time in the President’s 
fiscal year 2010 budget. Similarly, there were no actual unobligated 
balances to report prior to 2008. During fiscal years 2010 through 
2012, Treasury’s estimates of the unobligated balance in the account 
were slightly lower than, but fairly close to, the actual balance at 
year-end. In proportion to the size of this account, this suggests 
that the agency’s estimation process for this account was relatively 
accurate in those years. 

Figure 20: Estimated vs. Actual Unobligated Balances in the GSE 
Purchase Agreements Account, Fiscal Years 2007-2012: 

[Refer to PDF for image: multiple line graph] 

Fiscal year 2007: 
Estimated Unobligated Balance (BY): $0; 
Estimated Unobligated Balance (CY): $0; 
Actual Unobligated Balance: $0. 

Fiscal year 2008: 
Estimated Unobligated Balance (BY): $0; 
Estimated Unobligated Balance (CY): $0; 
Actual Unobligated Balance: $200 billion. 

Fiscal year 2009: 
Estimated Unobligated Balance (BY): $0; 
Estimated Unobligated Balance (CY): $294.1 billion; 
Actual Unobligated Balance: $304.4 billion 

Fiscal year 2010: 
Estimated Unobligated Balance (BY): $252.807 billion; 
Estimated Unobligated Balance (CY): $235.4 billion; 
Actual Unobligated Balance: $251.8 billion. 

Fiscal year 2011: 
Estimated Unobligated Balance (BY): $212.4 billion; 
Estimated Unobligated Balance (CY): $204.3 billion; 
Actual Unobligated Balance: $231.03 billion. 

Fiscal year 2012; 
Estimated Unobligated Balance (BY): $175.6 billion; 
Estimated Unobligated Balance (CY): $191.29 billion; 
Actual Unobligated Balance: $212.52 billion. 

Source: GAO analysis of OMB data. 

Note: Balances shown here are end-of-year. Because the account was 
created in 2008, its budget estimates were issued for the first time 
in the President’s fiscal year 2010 budget. 

[End of figure] 

Appendix IV: Comments from the Department of Health and Human Services 

Department of Health & Human Services: 
Office of The Secretary:
Assistant Secretary for Legislation: 
Washington, DC 20201: 

September 6, 2013: 

Carol Henn, Assistant Director: 
Strategic Issues: 
U.S. Government Accountability Office: 
441 G Street NW: 
Washington, DC 20548: 

Dear Ms. Henn, 

Attached are comments on the U.S. Government Accountability Office's 
(GAO) report entitled, "Budget Issues: Key Questions to Consider When 
Evaluating Balances in Federal Accounts" (GAO-13-798). 

The Department appreciates the opportunity to review this report prior 
to publication. 

Sincerely, 

Signed by: 

Jim R. Esquea: 
Assistant Secretary for Legislation: 

Attachment: 

General Comments Of The Department Of Health And Human Services (HHS) 
On The Government Accountability Office's (GAO) Draft Report Entitled, 
"Budget Issues: Key Questions To Consider When Evaluating Balances In 
Federal Accounts" (GAO-13-798): 

The Department appreciates the opportunity to review and comment on 
this draft report. 

HHS believes it is important to note that GAO chose to audit only a 
select number of accounts, which mayor may not be representative of 
all government accounts with carry forward balances, so any 
conclusions drawn from the report may not apply across the board to 
all multi-year or no-year accounts. GAO chose to audit only the HHS 
PHSSEF fund, which has complexities and authorities that may differ 
from other Federal accounts. While the report acknowledges some of
these complexities, such as the impact of disasters and supplemental 
appropriations upon spend rates, it may not be a correct approach to 
look at trends over time to overcome these complexities when trying to 
determine spend rates or reasons for fluctuations in spend rates. 

[End of section] 

Appendix V: Glossary of Budget Terms: 

Appropriation: Budget authority to incur obligations and to make 
payments from the Treasury for specified purposes. An appropriation 
act is the most common means of providing appropriations; however, 
authorizing and other legislation itself may provide appropriations. 

Annual appropriation: An act appropriating funds enacted annually by 
Congress to provide budget authority to incur obligations and make 
payments from the Treasury for specified purposes. 

Supplemental appropriation: An act appropriating funds in addition to 
those already enacted in an annual appropriation act. Supplemental 
appropriations provide additional budget authority usually in cases 
where the need for funds is too urgent to be postponed until enactment 
of the regular appropriation bill. Supplemental appropriations may 
sometimes include items not appropriated in the regular bills due to a 
lack of timely authorizations. 

Availability: Budget authority that is available for incurring new 
obligations. 

Budget authority: Authority provided by federal law to enter into 
financial obligations that will result in immediate or future outlays 
involving federal government funds. 

Budget function: The functional classification system is a way of 
grouping budgetary resources so that all budget authority and outlays 
of on-budget and off-budget federal entities and tax expenditures can 
be presented according to the national needs being addressed. National 
needs are grouped in 17 broad areas to provide a coherent and 
comprehensive basis for analyzing and understanding the budget. 

Budget year: A term used in the budget formulation process to refer to 
the fiscal year for which the budget is being considered, that is, 
with respect to a session of Congress, the fiscal year of the 
government that starts on October 1 of the calendar year in which that 
session of Congress begins. 

Carryover balance (unexpended balance): The sum of the obligated and 
unobligated balances. 

Commitment: An administrative reservation of allotted funds, or of 
other funds, in anticipation of their obligation. 

Continuing resolution: An appropriation act that provides budget 
authority for federal agencies, specific activities (or both) to 
continue in operation when Congress and the President have not 
completed action on the regular appropriation acts by the beginning of 
the fiscal year. 

Current year: A term used in the budget formulation process to refer 
to the fiscal year immediately preceding the budget year under 
consideration. 

Deobligate: A cancellation or downward adjustment of previously 
incurred obligations made by an agency. Deobligated funds may be 
reobligated within the period of availability of the appropriation. 

Discretionary spending: Outlays from budget authority that is provided 
in, and controlled by, appropriations acts. 

Expended funds: Funds that have actually been disbursed or outlaid. 

Mandatory spending: Budget authority that is provided in laws other 
than appropriation acts and the outlays that result from such budget 
authority. Mandatory spending includes entitlement authority (for 
example, Food Stamp, Medicare and veterans’ pension programs), payment 
of interest on the public debt, and nonentitlements such as payments 
to states from Forest Service receipts. 

Obligated balance (obligated funds): The amount of obligations already 
incurred for which payment has not yet been made. Technically, the 
obligated balance is the unliquidated obligations. Budget authority 
that is available for a fixed period expires at the end of its period 
of availability, but the obligated balance of the budget authority 
remains available to liquidate obligations for five additional fiscal 
years. At the end of the fiscal year, the account is closed and any 
remaining balance is canceled. Budget authority available for an 
indefinite period may be canceled, and its account closed if (1) it is 
specifically rescinded by law or (2) the head of the agency concerned 
(or the President) determines that the purposes for which the 
appropriation was made have been carried out and disbursements have 
not been made from the appropriation for 2 consecutive years. 

Obligation: An obligation is a definite commitment that creates a 
legal liability of the government for the payment of goods and 
services ordered or received, or a legal duty on the part of the 
United States that could mature into a legal liability by virtue of 
actions of another party. 

Spendout rate: The rate at which budget authority becomes outlays in a 
fiscal year. It is usually presented as an annual percentage. 

Unexpended balance: The sum of the obligated and unobligated balances. 

Unobligated balance (unobligated funds): The portion of obligational 
authority that has not yet been obligated. For an appropriation 
account that is available for a fixed period, the budget authority 
expires after the period of availability ends but its unobligated 
balance remains available for 5 additional fiscal years for recording 
and adjusting obligations properly chargeable to the appropriations 
period of availability. For example, an expired, unobligated balance 
remains available until the account is closed to record previously 
unrecorded obligations or to make upward adjustments in previously 
under recorded obligations (such as contract modifications properly 
within scope of the original contract). At the end of the fifth fiscal 
year, the account is closed and any remaining balance is canceled. For 
a no-year account, the unobligated balance is carried forward 
indefinitely until (1) specifically rescinded by law or (2) the head 
of the agency concerned (or the President) determines that the 
purposes for which the appropriation was made have been carried out 
and disbursements have not been made from the appropriation for 2 
consecutive years. 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments 

GAO Contact: 

Susan J. Irving, (202) 512-6806 or irvings@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, Carol M. Henn, Assistant 
Director, Leah Q. Nash and Mary C. Diop made major contributions to 
this report. Also contributing to this report were Rob Gebhart,Tara 
Jayant, Kate Lenane, Felicia Lopez, John Mingus Jr., Robert Robinson, 
and Cindy Saunders. In addition, the following individuals provided 
programmatic expertise: Marcia Crosse, Shana R. Deitch, Cheryl 
Goodman, Marshall Hamlett, Vondalee R. Hunt, Thomas Melito, Paul 
Schmidt, Mathew J. Scire, William B. Shear, Andrea P. Smith, Bruce 
Thomas, and Steve Westley. 

[End of section] 

Footnotes: 

[1] An obligation is a definite commitment that creates a legal 
liability of the government for the payment of goods and services 
ordered or received, or a legal duty on the part of the United States 
that could mature into a legal liability by virtue of actions of 
another party. 

[2] Funds are available for obligation on a one-year, multi-year, or 
no-year (until expended) basis. Such time limitations are referred to 
as the period of availability. 

[3] For the purpose of this report, we focused on multi-year and no-
year accounts where the unobligated balance is carried forward and is 
legally available for new obligations. We did not focus on the 
unobligated balance of fiscal year funds that are in expired status 
and generally are not available for new obligations. 

[4] To determine the reliability of the data, the team cross-checked 
the MAX data against the numbers reported in the corresponding 
President’s Budget Appendices. Data reported in MAX and the Budget 
Appendix are subject to rigorous review and checks through OMB to help 
ensure consistency of the data. Accordingly, such data were considered 
reliable for the purpose of this report. 

[5] Although the period over which we reviewed the accounts is fiscal 
years 2007 through 2012, at the time that we chose our 
nongeneralizable sample, actual data for 2012 was not yet available. 
Therefore, our selection of accounts was based on data from fiscal 
years 2007 through 2011. We included the size of the average 
unobligated balance as one of the selection criteria because it is the 
portion of the balance that frequently raises questions. 

[6] Agencies are required to develop long-term and annual goals and 
measure and report on progress towards those goals on an annual basis. 
This is a requirement under the Government Performance Results Act of 
1993, (GPRA), Pub. L. No. 103-62, 107 Stat. 285 (1993), which was 
recently amended and expanded by the GPRA Modernization Act of 2010, 
Pub. L. No. 111-352, 124 Stat. 3866 (2011). GAO, Managing for Results: 
Opportunities for Congress to Address Government Performance Issues, 
[hyperlink, http://www.gao.gov/products/GAO-12-215R] (Washington, 
D.C.: Dec. 9, 2011). Also see GAO, Managing for Results: Executive 
Branch Should More Fully Implement the GPRA Modernization Act to 
Address Pressing Government Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-13-518] (Washington, D.C.: June 26, 
2013). 

[7] GAO, Intragovernmental Revolving Funds: Commerce Departmental and 
Census Working Capital Funds Should Better Reflect Key Operating 
Principles, [hyperlink, http://www.gao.gov/products/GAO-12-56] 
(Washington, D.C.: Nov. 18, 2011). Also see GAO, Air Force Working 
Capital Fund: Budgeting and Management of Carryover Work and Funding 
Could Be Improved, [hyperlink, http://www.gao.gov/products/GAO-11-539] 
(Washington, D.C.: July 7, 2011). 

[8] GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). Also see Federal User Fees: Fee Design Options and Implications 
for Managing Revenue Instability, [hyperlink, 
http://www.gao.gov/products/GAO-13-820] (Washington, D.C.: Sept. 30, 
2013). 

[9] An individual account may support an entire program, a portion of 
a program, or multiple programs. 

[10] FHA also insures reverse mortgages that permit persons 62 and 
older to convert their home equity into cash advances. 

[11] As part of the purchase agreements with the GSEs, Treasury was 
entitled to receive cumulative cash dividends on the senior preferred 
stock from the date of initial issuance through December 31, 2012. 
These amounts were deposited in the General Fund. 

[12] GAO, Continuing Resolutions: Uncertainty Limited Management 
Options and Increased Workload in Selected Agencies, [hyperlink, 
http://www.gao.gov/products/GAO-09-879] (Washington, D.C.: Sept. 24, 
2009). 

[13] We analyzed the size, composition, and distribution of carryover 
balances across all accounts in the federal budget and how they 
changed during fiscal years 2007 through 2012. To do this, we 
collected and compared agencies’ end-of-year actual unobligated 
balances plus their obligated balances for which payment had not yet 
been made. These data were queried from the Office of Management and 
Budget’s (OMB) MAX database. To determine the reliability of the data, 
we cross-checked the MAX data against the numbers reported in the 
corresponding President’s Budget Appendices. Data reported in MAX and 
the Budget Appendix are subject to rigorous review and checks through 
OMB to help ensure consistency of the data. Accordingly, such data 
were considered reliable for the purpose of this report. 

[14] According to the President’s Fiscal Year 2014 Budget Appendix, 
there were roughly 2,000 accounts that comprised the federal budget. 

[15] Enactment of the Emergency Economic Stabilization Act authorized 
the establishment of the Troubled Asset Relief Program (TARP). 

[16] Split accounts contain both mandatory and discretionary funds. 

[17] Federal accounts are designated as mandatory, discretionary, or 
split. As defined earlier, mandatory refers to budget authority that 
is provided in laws other than appropriations acts. This includes 
funding for entitlement programs such as Medicare and veterans’ 
pension programs. Discretionary refers to budget authority that is 
provided in and controlled by annual appropriations acts. Split 
accounts include both mandatory and discretionary funds. 

[18] Enactment of the Housing and Economic Recovery Act (HERA) placed 
two GSEs—-(1) the Federal National Mortgage Association (Fannie Mae) 
and (2) the Federal Home Loan Mortgage Corporation (Freddie Mac)-—into 
conservatorship and authorized the Department of Treasury to provide 
necessary funding to maintain liquidity. 

[19] Budget function is a classification according to national 
priority or major purpose served (e.g. agriculture, transportation, 
income security). Each federal activity is placed into a single 
functional classification that best defines the activity’s most 
important purpose, even though many activities serve more than one 
purpose. Major functions are further divided into subfunctions. 

[20] If fees are the primary source of funding, see questions to 
consider in GAO, Federal User Fees: Fee Design Options and 
Implications for Managing Revenue Instability, [hyperlink, 
http://www.gao.gov/products/GAO-13-820] (Washington, D.C.: Sept. 30, 
2013). 

[21] GAO, DCAA Audits: Widespread Problems with Audit Quality Require 
Significant Reform. [hyperlink, 
http://www.gao.gov/products/GAO-09-468] (Washington, D.C.: Sept. 23, 
2009). 

[22] In 2004, Congress passed the Project BioShield Act (Pub. L. No. 
108-276) to provide the federal government with new authorities 
related to the development, procurement, and use of medical 
countermeasures against chemical, biological, radiological, and 
nuclear (CBRN) terrorism agents. The act has three main provisions: 
(1) the creation of a government-market guarantee by permitting the 
HHS Secretary to obligate funds to purchase countermeasures while they 
still need several more years of development, (2) the establishment of 
a process through which the HHS Secretary may temporarily allow the 
emergency use of countermeasures that lack Food and Drug 
Administration (FDA) approval, and (3) the provision of expedited 
procedures for HHS to spend CBRN terrorism-related funds, including 
procuring products, hiring experts, and awarding research grants. The 
balance in the Special Reserve Fund from fiscal year 2004 
appropriations will no longer be available for obligation after 
September 30, 2013. 

[23] The Section 108 Loan Guarantee Program provides communities with 
a source of financing for economic development, housing 
rehabilitation, public facilities, and large-scale physical 
development projects. 

[24] The Neighborhood Stabilization Program was established for the 
purpose of stabilizing communities that have suffered from housing 
foreclosures and abandonment. The first phase of this program (NSP1) 
provided $3.92 billion in grant funds. The American Recovery and 
Reinvestment Act of 2009 (Pub. L. No. 111-5) provided an additional $2 
billion in NSP funds (referred to as NSP2) and changed several aspects 
of the program. Later, the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. No. 111-203) provided an additional $1 billion 
in funding for the program (referred to as NSP3). 

[25] FHA also insures reverse mortgages that permit persons 62 and 
older to convert their home equity into cash advances. 

[26] The Omnibus Budget Reconciliation Act of 1990 (Pub. L. No. 101-
508) required the Secretary of Housing and Urban Development to take 
steps to ensure that the MMI Fund attained a capital ratio of at least 
2 percent by November 2000 and maintained at least a 2 percent ratio 
at all times thereafter. 

[27] The economic value of the fund is the sum of existing capital 
resources plus the net present value of future cash flows. The 
unamortized insurance-in-force is generally understood as the initial 
insured loan balances. However, a legislative provision defines 
unamortized insurance-in-force as the remaining obligation on 
outstanding mortgages, a definition generally understood to mean the 
amortized insurance-in-force. 

[28] Pub. L. No. 111-22. 

[29] The Continuum of Care program is currently composed of the (1) 
Shelter Plus Care, (2) Supportive Housing, and (3) Section 8 Moderate 
Rehabilitation Single Room Occupancy programs. 

[30] Pub. L. No. 110-252. 

[31] The SDR is an international reserve asset and the unit of account 
of the IMF. Its value comprises a weighted average of the value of a 
basket of four currencies, of which the U.S. dollar has the largest 
share. Under the Special Drawing Rights Act of 1968, the Secretary of 
the Treasury may engage in SDR-related transactions including SDR 
allocations from the IMF, purchases of SDRs from other IMF member 
countries, and monetizations. 

[32] A public enterprise revolving fund is a type of revolving fund 
that conducts cycles of businesslike operations, mainly with the 
public, in which it charges for the sale of products or services and 
uses the proceeds to finance its spending, usually without requirement 
for annual appropriations. Most government corporations are financed 
by public enterprise funds. 

[33] Under its Articles of Agreement, the IMF may allocate SDRs to 
member countries in proportion to their IMF quotas. General 
allocations of SDRs have to be based on a long-term global need to 
supplement existing reserve assets. An amendment to the Articles of 
Agreement in August 2009 provided for a one-time special allocation. 
The purpose of the amendment was to enable all IMF members to 
participate in the SDR system on an equitable basis. 

[34] When the Secretary of the Treasury monetizes SDRs, he is 
converting SDRs (an international reserve asset) into more readily 
usable US dollars. The Secretary issues SDR certificates to the 
Federal Reserve banks against SDRs held by the ESF. In turn, the 
Federal Reserve banks purchase these SDR certificates with US dollars. 
The US dollar proceeds of the monetization are held in the ESF and may 
be used only for financing the acquisition of more SDRs or for other 
statutorily authorized purposes of the ESF. 

[35] Pub. L. No. 110-289. 

[36] GSEs are federally chartered, privately owned financial 
institutions designed to facilitate the flow of investment funds to 
specific economic sectors. GSEs typically receive financing from 
private investment, and the credit markets perceive that GSEs have 
implied federal financial backing. GSEs issue capital stock and short- 
and long-term debt instruments, issue mortgage-backed securities, fund 
designated activities, and collect fees for guarantees and other 
services. 

[37] Beginning on January 1, 2013, the remaining funding commitment is 
fixed and will remain available to be drawn per the terms of the 
agreement. 

[38] As part of the purchase agreements with the GSEs, Treasury was 
entitled to receive cumulative cash dividends on the senior preferred 
stock from the date of initial issuance through December 31, 2012. 
These amounts were deposited in the General Fund. 

[39] Apportionment is the action by which the Office of Management and 
Budget (OMB) distributes amounts available for obligation, including 
budgetary reserves established pursuant to law, in an appropriation or 
fund account. An apportionment divides amounts available for 
obligation by specific time periods (usually quarters), activities, 
projects, objects, or a combination thereof. The amounts so 
apportioned limit the amount of obligations that may be incurred. 

[40] Subsequent to 2009, payments to the GSEs were smaller: $52.6 
billion in 2010, $20.8 billion in 2011, and $18.5 billion in 2012. 

[End of section] 

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