[House Document 107-269]
[From the U.S. Government Publishing Office]



107th Congress, 2d Session - - - - - - - - - - - House Document 107-269 


 
                     DEFERRALS OF BUDGET AUTHORITY

                               __________

                             COMMUNICATION

                                  from

                        THE COMPTROLLER GENERAL,

                     THE GENERAL ACCOUNTING OFFICE

                              transmitting

A REPORT OF DEFERRALS OF BUDGET AUTHORITY FOR INFORMATION TECHNOLOGY 
  AND BUSINESS MANAGEMENT SYSTEMS THAT SHOULD HAVE BEEN, BUT WERE NOT, 
  REPORTED TO THE CONGRESS BY THE PRESIDENT, PURSUANT TO 2 U.S.C. 685




   October 1, 2002.--Referred to the Committee on Appropriations and 
                         ordered to be printed
                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
19-012                    WASHINGTON : 2002


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

                                  
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