    Budget Issues: Fiscal Year 1996 Agency Spending by Budget Function
    (Letter Report, 05/13/97, GAO/AIMD-97-95).

    Pursuant to a congressional request, GAO provided information on federal
    spending by budget function and subfunction for fiscal year 1996.

    GAO noted that: (1) most federal departments and agencies address more
    than one mission area; in fact, most made obligations in 1996 to three
    or more budget functions; (2) if the analysis is continued to
    subdepartments and subfunctions, the picture is often more complex; (3)
    for example, the Department of Health and Human Services has about a
    dozen subdepartments addressing eight missions ranging from Health Care
    Services to Training and Employment; (4) the Department of the Interior
    has over a dozen subdepartments addressing 11 missions ranging from
    Recreational Resources to General Purpose Fiscal Assistance to
    Elementary, Secondary, and Vocational Education; (5) focusing on the
    missions of government, rather than federal organizations, produces a
    similarly intricate picture; (6) excluding Social Security, Medicare,
    and Net interest, 6 of the remaining 15 budget functions are addressed
    by six or more executive branch departments and major agencies; (7) for
    example, seven major federal organizations made obligations in 1996 to
    the Natural Resources and Environment mission area and seven to
    community and Regional Development; (8) lastly, in nominal dollar terms,
    the significance of a department to a mission area, or of a mission area
    to a department, varies considerably; (9) spending for the
    Transportation mission area, for example, is almost entirely within the
    Department of Transportation, which is also associated with that mission
    area almost exclusively; (10) however, the Department of Agriculture,
    with nearly two dozen subdepartments addressing 16 different
    subfunctions, presents a different picture; (11) the Department is
    responsible for almost all spending in the Agriculture function, but
    half of the Department's obligations are associated with a different
    function and subfunction (Food and Nutrition Assistance within Income
    Security); (12) the function classifications can in some cases aggregate
    very different activities; (13) a specific function or subfunction may
    not fully encompass a set of logically related activities; (14)
    subfunctions are based on a variety of organizing themes; (15) some are
    based on divisible segments of broad mission areas, some on a set of
    related activities, and some on common functions; and (16) although each
    federal activity is placed in a function that best defines its most
    important purpose, there is discretion when coding an individual budget*

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  AIMD-97-95
         TITLE:  Budget Issues: Fiscal Year 1996 Agency Spending by Budget
                 Function
          DATE:  05/13/97
       SUBJECT:  Budget functions
                 Federal agencies
                 Agency missions
                 Budget obligations
                 Mission budgeting
                 Identification codes

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    Cover
    ================================================================ COVER

    Report to the Honorable
    Richard K.  Armey, Majority Leader, House of Representatives

    May 1997

    BUDGET ISSUES - FISCAL YEAR 1996
    AGENCY SPENDING BY BUDGET FUNCTION

    GAO/AIMD-97-95

    Fiscal Year 1996 Spending

    (935232)

    Abbreviations
    =============================================================== ABBREV

      DOC - Department of Commerce
      DOD - Department of Defense
      DOE - Department of Energy
      DOI - Department of the Interior
      DOJ - Department of Justice
      DOL - Department of Labor
      DOS - Department of State
      DOT - Department of Transportation
      EOP - Executive Office of the President
      EPA - Environmental Protection Agency
      FAP - Funds Appropriated to the President
      GSA - General Services Administration
      HHS - Department of Health and Human Services
      HUD - Department of Housing and Urban Development
      NASA - National Aeronautics and Space Administration
      OPM - Office of Personnel Management
      SBA - Small Business Administration
      USDA - Department of Agriculture
      VA - Department of Veterans Affairs

    Letter
    =============================================================== LETTER

    B-276984

    May 13, 1997

    The Honorable Richard K.  Armey
    Majority Leader
    House of Representatives

    Dear Mr.  Armey:

    This report responds to your office's request for information on
    federal spending by budget function and subfunction for fiscal year
    1996.  In the following appendixes, we display agency spending in
    terms of gross obligations\1 reported against the broad federal
    mission areas described by budget function classifications.  As we
    have suggested in previous products and testimony,\2

    examining patterns of spending according to budget functions provides
    a starting point for discussions of government restructuring and can
    be useful in identifying possible program overlap by focusing on
    which federal agencies are associated with which federal mission
    areas.

    Appendix I provides a brief description of each budget function and
    subfunction.  Appendix II provides a series of tables that classify
    department and agency spending by subdepartment\3 and by subfunction;
    appendix III summarizes spending for each budget function and
    subfunction by federal departments and subdepartments.  We compiled
    the information presented in appendixes II and III from automated
    information collected and maintained by the Office of Management and
    Budget as part of its process to develop the President's fiscal year
    1998 budget.  We did not independently verify reported data, although
    we did reconcile total obligations for departments and agencies to
    published sources.

    Appendixes II and III provide first-level observations on who does
    what within the enormous complexity of federal missions and
    organizations.  This perspective can be augmented by linking these
    department and subdepartment summaries to the account-level detail
    provided in our recent product, Compendium of Budget Accounts:
    Fiscal Year 1998 (GAO/AIMD-97-65, April 1997).  And, for additional
    detail, the budget account summaries in the compendium can be further
    linked to the Budget of the United States Government, Fiscal Year
    1998 - Appendix, and to agency budget justifications provided to the
    Congress.  In this manner, a reader can "drill down" as needed to
    inquire into any particular spending pattern within any function,
    subfunction, or agency.

    The budget function classification system provides a comprehensive
    and consistent means to capture federal spending according to area of
    national need.  Because of this, budget functions are the categories
    used by the Congress in its concurrent resolution on the budget and
    will likely be the classification system used to summarize federal
    spending in governmentwide financial statements, which are required
    by the Chief Financial Officers Act of 1990 (as expanded by the
    Government Management Reform Act of 1994), and in the February 1998
    governmentwide performance plan, which is required by the Government
    Performance and Results Act of 1993.  Some of the patterns disclosed
    by arraying spending by function include the following.

      Most federal departments and agencies address more than one mission
         area; in fact, most made obligations in 1996 to three or more
         budget functions.  If the analysis is continued to
         subdepartments and subfunctions, the picture is often more
         complex.  For example, the Department of Health and Human
         Services has about a dozen subdepartments addressing eight
         missions ranging from Health Care Services to Training and
         Employment.  The Department of the Interior has over a dozen
         subdepartments addressing 11 missions ranging from Recreational
         Resources to General Purpose Fiscal Assistance to Elementary,
         Secondary and Vocational Education.

      Focusing on the missions of government, rather than federal
         organizations, produces a similarly intricate picture.
         Excluding Social Security, Medicare, and Net Interest, 6 of the
         remaining 15 budget functions are addressed by six or more
         executive branch departments and major agencies.  For example,
         seven major federal organizations made obligations in 1996 to
         the Natural Resources and Environment mission area and seven to
         Community and Regional Development.

      Lastly, in nominal dollar terms, the significance of a department
         to a mission area, or of a mission area to a department, varies
         considerably.  Spending for the Transportation mission area, for
         example, is almost entirely within the Department of
         Transportation, which is also associated with that mission area
         almost exclusively.  However, the Department of Agriculture,
         with nearly two dozen subdepartments addressing 16 different
         subfunctions, presents a different picture.  The Department is
         responsible for almost all spending in the Agriculture function,
         but half of the Department's obligations are associated with a
         different function and subfunction (Food and Nutrition
         Assistance within Income Security).

    Care must be exercised in drawing specific conclusions from the
    information contained in the enclosed tables.  All of these data are
    reported as part of the annual executive budget formulation process;
    none of the data are audited.  Additional limitations to note include
    the following.

      The function classifications can in some cases aggregate very
         different activities.  For example, the Income Security function
         involves 15 federal organizations, but these organizations are
         not all dealing with the same type of "Income Security." Income
         Security actually involves three broad subfunctions:  (1)
         retirement and disability, addressed by nine different federal
         entities, many of which administer separate employee pension
         programs; (2) cash assistance, provided by five federal
         organizations; and (3) housing, food, and nutrition assistance
         programs, concentrated in two major departments spread across
         seven components with some small participation by two
         independent agencies.

      A specific function or subfunction may not fully encompass a set of
         logically related activities.  For example, the Commerce and
         Housing Credit function does not include the Housing Assistance
         subfunction, which is in Income Security.  Similarly, the Income
         Security function does not include, for example, Social Security
         or Income Security for Veterans.

      Subfunctions are based on a variety of organizing themes.  Some are
         based on divisible segments of broad mission areas (e.g., Water
         Transportation), some on a set of related activities (e.g.,
         Health Care Services), and some on common functions (e.g.,
         Central Fiscal Operations).

      Although each federal activity is placed in a function that best
         defines its most important purpose, there is discretion when
         coding an individual budget account against the function
         categories.  If the account finances activities in two or more
         subfunctions within a single function, the general function code
         is used; if the account is associated with two or more
         functions, a general multi-function code is used.\4

    We are sending copies of this report to the Chairmen and Ranking
    Minority Members of the Senate Committee on Appropriations; Senate
    Committee on the Budget; Senate Committee on Governmental Affairs;
    House Committee on Appropriations; House Committee on the Budget;
    House Committee on Government Reform and Oversight; and other
    interested parties.  We will also make copies available to others on
    request.

    We will continue to work with your office to provide timely
    information and assistance as you analyze these data.  If you have
    any questions, please call me at (202) 512-9573.  The major authors
    of this correspondence were Michael J.  Curro, Assistant Director,
    who can be reached at (202) 512-2991; Laura Hamilton; and John
    Mingus.

    Sincerely yours,

    Paul L.  Posner
    Director, Budget Issues

    --------------------
    \1 Obligations reflect orders placed, contracts awarded, services
    received, and other similar transactions during a fiscal year.  As an
    expression of an agency's total financial commitments for a given
    period, gross obligations portray the relative size of an
    organization, without regard to the type of underlying budgetary
    resource or when resulting outlays may occur.  When aggregated,
    however, gross obligations may overstate both department and
    governmentwide totals.  For example, an agency's obligations may
    include commitments made to another agency, which may then be
    reobligated by the receiving agency in the same fiscal year.

    \2 This report updates a series of products we prepared for the
    Chairman, Senate Committee on Governmental Affairs, in 1995.  See
    Government Restructuring:  Identifying Potential Duplication in
    Federal Missions and Approaches (GAO/T-AIMD-95-161, June 7, 1995);
    Budget Function Classification:  Agency Spending by Subfunction and
    Object Category, Fiscal Year 1994 (GAO/AIMD-95-116FS, May 10, 1995);
    and Budget Function Classification:  Agency Spending and Personnel
    Levels for Fiscal Years 1994 and 1995 (GAO/AIMD-95-115FS, April 11,
    1995).

    \3 In this report, the term "subdepartment" generally refers to
    second-tier organizational structures, such as bureaus,
    administrations and services, and to individual independent agencies,
    such as the U.S.  Postal Service or the Federal Maritime Commission.

    \4 Where an account's obligations were reported to more than one
    function, we allocated the obligations on the same percentage basis
    as reported for the account's gross budget authority; for accounts
    lacking gross budget authority, we allocated the obligations on the
    same percentage basis as reported for the account's gross outlays.

    DESCRIPTION OF BUDGET FUNCTIONS
    =========================================================== Appendix I

    Function                      Description           Subfunction
    ----------------------------  --------------------  ----------------------------
    National Defense (050)        Common defense and    Department of Defense--
                                  security of the       Military (051)
                                  United States,
                                  including raising,    Atomic Energy Defense
                                  equipping, and        Activities (053)
                                  maintaining of armed
                                  forces; development   Defense-related Activities
                                  and utilization of    (054)
                                  weapons systems;
                                  direct compensation
                                  and benefits paid to
                                  active military and
                                  civilian personnel;
                                  defense research,
                                  development,
                                  testing, and
                                  evaluation; and
                                  procurement,
                                  construction,
                                  stockpiling, and
                                  other activities
                                  undertaken to
                                  directly foster
                                  national security.

    International Affairs (150)   Maintaining peaceful  International Development
                                  relations, commerce,  and Humanitarian Assistance
                                  and travel between    (151)
                                  the United States
                                  and the rest of the   International Security
                                  world and promoting   Assistance (152)
                                  international
                                  security and          Conduct of Foreign Affairs
                                  economic development  (153)
                                  abroad.
                                                        Foreign Information and
                                                        Exchange Activities (154)

                                                        International Financial
                                                        Programs (155)

    General Science, Space and    Resources allocated   General Science and Basic
    Technology (250)              to science and        Research (251)
                                  research activities
                                  of the federal        Space Flight, Research, and
                                  government that are   Supporting Activities (252)
                                  not an integral part
                                  of the programs
                                  conducted under any
                                  other function.

    Energy (270)                  Promoting an          Energy Supply (271)
                                  adequate supply and
                                  appropriate use of    Energy Conservation (272)
                                  energy to serve the
                                  needs of the          Emergency Energy
                                  economy.              Preparedness (274)

                                                        Energy Information, Policy,
                                                        and Regulation (276)

    Natural Resources and         Developing,           Water Resources (301)
    Environment (300)             managing, and
                                  maintaining the       Conservation and Land
                                  nation's natural      Management (302)
                                  resources and
                                  environment.          Recreational Resources
                                                        (303)

                                                        Pollution Control and
                                                        Abatement (304)

                                                        Other Natural Resources
                                                        (306)

    Agriculture (350)             Promoting the         Farm Income Stabilization
                                  economic stability    (351)
                                  of agriculture and
                                  the nation's          Agricultural Research and
                                  capability to         Services (352)
                                  maintain and
                                  increase
                                  agricultural
                                  production.

    Commerce and Housing Credit   Promotion and         Mortgage Credit (371)
    (370)                         regulation of
                                  commerce and the      Postal Service (372)
                                  housing credit and
                                  deposit insurance     Deposit Insurance (373)
                                  industries, which
                                  pertain to            Other Advancement of
                                  collection and        Commerce (376)
                                  dissemination of
                                  social and economic
                                  data (unless they
                                  are an integral part
                                  of another function,
                                  such as health);
                                  general purpose
                                  subsidies to
                                  business, including
                                  credit subsidies to
                                  the housing
                                  industry; and the
                                  postal service fund
                                  and general fund
                                  subsidies of that
                                  fund.

    Transportation (400)          Providing for the     Ground Transportation (401)
                                  transportation of
                                  the general public    Air Transportation (402)
                                  and/or its property,
                                  whether local or      Water Transportation (403)
                                  national and
                                  regardless of the     Other Transportation (407)
                                  particular mode of
                                  transportation.
                                  Included are
                                  construction of
                                  facilities; purchase
                                  of equipment;
                                  research, testing,
                                  and evaluation;
                                  provision of
                                  communications
                                  related to
                                  transportation;
                                  operating subsidies
                                  for transportation
                                  facilities and
                                  industries; and
                                  regulatory
                                  activities directed
                                  specifically toward
                                  the transportation
                                  industry rather than
                                  toward business.

    Community and Regional        Development of        Community Development (451)
    Development (450)             physical facilities
                                  or financial          Area and Regional
                                  infrastructures       Development (452)
                                  designed to promote
                                  viable community      Disaster Relief and
                                  economies.            Insurance (453)

    Education, Training,          Promoting the         Elementary, Secondary, and
    Employment, and Social        extension of          Vocational Education (501)
    Services (500)                knowledge and
                                  skills, enhancing     Higher Education (502)
                                  employment and
                                  employment            Research and General
                                  opportunities,        Education Aids (503)
                                  protecting workplace
                                  standards, and        Training and Employment
                                  providing services    (504)
                                  to the needy.
                                                        Other Labor Services (505)

                                                        Social Services (506)

    Health (550)                  Programs other than   Health Care Services (551)
                                  Medicare whose basic
                                  purpose is to         Health Research and Training
                                  promote physical and  (552)
                                  mental health,
                                  including the         Consumer and Occupational
                                  prevention of         Health and Safety (554)
                                  illness and
                                  accidents.

    Medicare (570)                Federal hospital      Medicare (571)
                                  insurance and
                                  federal
                                  supplementary
                                  medical insurance,
                                  along with general
                                  fund subsidies of
                                  these funds and
                                  associated
                                  offsetting receipts.

    Income Security (600)         Support payments      General Retirement and
                                  (including            Disability Insurance
                                  associated            (excluding Social Security)
                                  administrative        (601)
                                  expenses) to persons
                                  for whom no current   Federal Employee Retirement
                                  service is rendered.  and Disability (602)
                                  Included are
                                  retirement,           Unemployment Compensation
                                  disability,           (603)
                                  unemployment,
                                  welfare, and similar  Housing Assistance (604)
                                  programs, except for
                                  social security and   Food and Nutrition
                                  income security for   Assistance (605)
                                  veterans, which are
                                  in other functions.   Other Income Security (609)

    Social Security (650)         Federal old age and   Social Security (651)
                                  survivors and
                                  disability insurance
                                  trust funds, along
                                  with general fund
                                  subsidies of these
                                  funds and associated
                                  offsetting
                                  collections.

    Veterans Benefits and         Programs providing    Income Security for Veterans
    Services (700)                benefits and          (701)
                                  services, the
                                  eligibility for       Veterans Education,
                                  which is related to   Training, and Rehabilitation
                                  prior military        (702)
                                  service, but the
                                  financing of which    Hospital and Medical Care
                                  is not an integral    for Veterans (703)
                                  part of the costs of
                                  national defense.     Veterans Housing (704)

                                                        Other Veterans Benefits and
                                                        Services (705)

    Administration of Justice     Programs to provide   Federal Law Enforcement
    (750)                         judicial services,    Activities (751)
                                  police protection,
                                  law enforcement       Federal Litigative and
                                  (including civil      Judicial Activities (752)
                                  rights),
                                  rehabilitation and    Federal Correctional
                                  incarceration of      Activities (753)
                                  criminals, and the
                                  general maintenance   Criminal Justice Assistance
                                  of domestic order.    (754)

    General Government (800)      General overhead      Legislative Functions (801)
                                  cost of the federal
                                  government,           Executive Direction and
                                  including             Management (802)
                                  legislative and
                                  executive             Central Fiscal Operations
                                  activities;           (803)
                                  provision of central
                                  fiscal, personnel,    General Property and Records
                                  and property          Management (804)
                                  activities; and
                                  provision of          Central Personnel Management
                                  services that cannot  (805)
                                  reasonably be
                                  classified in any     General Purpose Fiscal
                                  other major           Assistance (806)
                                  function.
                                                        Other General Government
                                                        (808)

                                                        Deductions for Offsetting
                                                        Receipts (809)

    Net Interest (900)            Transactions which    Interest on the Public Debt
                                  directly give rise    (901)
                                  to interest payments
                                  or income (lending)   Interest Received by On-
                                  and the general       Budget Trust Funds (902)
                                  shortfall or excess
                                  of outgo over income  Interest Received by Off-
                                  arising out of        Budget Trust Funds (903)
                                  fiscal, monetary,
                                  and other policy      Other Interest (908)
                                  considerations and
                                  leading to the
                                  creation of
                                  interest-bearing
                                  debt instruments
                                  (normally the public
                                  debt).

    Undistributed Offsetting      Offsetting receipts   Employer Share, Employee
    Receipts (950)                that are not          Retirement (on Budget)
                                  included as           (951)
                                  deductions from
                                  outlays in the        Employer Share, Employee
                                  applicable function   Retirement (off Budget)
                                  or subfunction,       (952)
                                  above, and are thus
                                  "undistributed."      Rents and Royalties on the
                                                        Outer Continental Shelf
                                                        (953)

                                                        Sales of Major Assets (954)

                                                        Other Undistributed
                                                        Offsetting Receipts (959)
    --------------------------------------------------------------------------------
    Note:  Subfunction code 999 is assigned to those budget accounts
    whose activities are associated with two or more functions.

    FISCAL YEAR 1996 FEDERAL SPENDING
    BY DEPARTMENT AND AGENCY

    ========================================================== Appendix II

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    FISCAL YEAR 1996 FEDERAL SPENDING
    BY BUDGET FUNCTION AND SUBFUNCTION

    ========================================================= Appendix III

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