In 1978, officials at a federal Young Adult Conservation Corps camp in Missouri, rushing to use up all appropriated funds before the fiscal year ended on Sept. 30, went on a $1.1 million buying spree, according to an Interior Department report.
Heeding an order to spend all the money before year's end, the officials purchased -- for the use of 136 YACC enrollees at a single location -- 1,072 pairs of chaps, 3,736 pairs of work gloves, 112 stepladders, 54 wheelbarrows and 1,509 desk calendars, among other things.
"To support 14 scheduled enrollees at another location," the report said, the camp bought "10 stepladders, 10 magnetic compasses, 112 iodine kits, 1,200 bars of soap, 24 grass-cutting shears and 30 axes."
Among other purchases: 10,000 fenceposts; $49,000 in spare parts for 126 lawn-trimmers that only cost $27,000 themselves; and $34,000 in spare parts for 64 lawnmowers.
Officials said the purchasers figured they'd stock up for future years.
In another case, the Office of Education on Sept. 29, 1978 -- one day before the end of the fiscal year -- rushed through a $36,828 noncompetitive contract to an organization called Conserva Inc. for guidelines on vocational training which were needed, it was said, by Sept. 30.
But, according to a General Accounting Office study of how federal agencies ram through year-end spending proposals lest the money revert to the Treasury, the contract was then "extended for 11 months (so) there appeared to be no need for a hurried-up award."
These are just two examples of what congressional investigators and the General Accounting Office have called "hurry-up spending," the year-end "use it or lose it" syndrome.
As the last month or so of the year approaches, federal agencies find they haven't used up all their money. They don't want to "waste" it by letting it revert to the Treasury -- especially since they fear Congress will take this as a sign they can do with less money the following year. So they just spend it -- often bypassing normal competitive bidding and audit procedures, paying more than they need to, or frittering it away on questionable items.
No one claims all year-end spending is wasteful, but a part is.
"Every year at this time, agencies throughout the government begin their stampede to spend whatever funds remain in their budgets before the clock strikes midnight on Sept. 30," declared Rep. Herb Harris (D-Va.) recently.
Harris and Sens. Carl Levin (D-Mich.), William Cohen (R-Maine) and Warren Magnuson (D-Wash.), the Senate Appropriations Committee chairman, have been probing year-end spending and want to curb it. Harris has slapped amendments on money bills to limit obligations for any agency in the last two months of the year to 20 percent of its yearly total; Magnuson, 30 percent in the last three months.
A recent GAO report calculated that in the year ended last Sept. 30, when 16 selected federal civilian agencies obligated $365 billion, more than $78 billion -- over one-fifth -- was in August and September alone. m
The Department of Housing and Urban Development incurred 46 percent of its obligations in August and September; the Environmental Protection Agency, 42 percent. In the last three days, a Friday, Saturday and Sunday, Health, Education and Welfare committed $135 million in contract funds.
For years the Office of Management and Budget has been trying to control year-end spending sprees. On June 25, 1980, for example, it sent around a memo on "controlling year-end buying," directing department and agency heads: "Purchases are not made to avoid what otherwise would be an outlay shortfall; grants are subjected to rigorous review and . . . not made just to keep funds from lapsing."
OMB's concern is not exactly new. As long ago as Sept. 1, 1921, the Federal Bureau of the Budget sent around a circular inveighing against year-end "hurry-up" spending abuses.
The files are full of stories. Magnuson, at a hearing, produced a Sept. 8, 1978, memorandum by an aide to then-Commissioner of Education Ernest L. Boyer: "We have been able to identify $2,094,000 from our $131,950,700 S&E account for fiscal year 1978 which we are now able to declare surplus. These funds can be made available to you to allocate as you see fit."
It suggested, among other things, using $60,000 to remodel the commissioner's office and hiring an outside educational organization to organize a conference of educational organizations so they could exchange ideas (this was actually done).
The memo ascribed nearly all the "surplus" to an urgent supplemental appropriation of $2.8 million for extra mail costs that went largely unspent.
The GAO reported that on Sept. 30, 1979 -- the last day of the fiscal year and a Sunday -- Mary Berry, acting commissioner of education, signed 17 contracts, totalling $6.3 million over the objections of procurement officials.
Seven were sole-source (noncompetitive) contracts.One, the GAO said, was for $423,000 to the University of Rhode Island for a teacher professional development program. It had been sent to HEW's negotiator of contracts only five days earlier with instructions to work out contract details by Sept. 30, but he objected, said there was insufficient information for him to go on, questioned whether the cost was reasonable and said the proposal was extremely vague. The acting commissioner nevertheless signed it. p
A contract for $110,050 to the National Council of Negro Women was sent to the negotiator Sept. 28 with instructions to get it out by Sept. 30.
The GAO declared that in some agencies, "procurement personnel are literally chained to the desks writing purchase orders at year-end," a situation that causes very heavy overtime.
Although the year-end spending phenomenon is clearly costly, there is considerable dispute as to how big a problem it really is. Out of the billions spent in the last quarter of a year, how much is actually waste and needless spending?
Some believe that while fair savings can be achieved by tightening procedures, the real loss and waste from year-end spending isn't nearly as big as Harris, in a highly publicized series of hearings and reports, has led people to believe.
Harris has repeatedly said that if his proposed 20 percent limit on August-September spending had been in effect in fiscal 1979, "it would have saved $13.2 billion" in just seven civilian agencies.
However, many others consider these figures inflated and overblown, because much last-minute spending is actually legitimate.
Sen. Cohen has estimated annual last-minute waste and overpayment -- as distinct from late action on legitimate items -- at about $2 billion for all civilian and military agencies.
Harris, asked about the difference between his $13.2 billion and the much lower estimates by Cohen and others, now says, "I've never implied all that $13.2 billion is waste." But he said he believes as much as $4 billion to $8 billion might be.
Several government financial experts, however, said they believe even these Harris figures are too high and Cohen's $2 billion-or-so estimate is closer to the mark.
The GAO itself points out that much of the last-minute spending is perfectly legitimate. Only when it involves paying too much or buying unneeded things is it really wasteful.
In addition, payments to some big state-aid programs are made quarterly, so ones in September may look like an ill-advised "September surge" when in fact they are routine.
Moreover, a slowup sometimes saves money.
In the first 10 months of fiscal 1980, HUD made obligations for only 107,000 of the 250,000 low-income housing units authorized for 1980.
It was blocked by the sky-high jump in interest rates. Had it put units under subsidy contracts then, the eventual government interest outlays would have come to billions more. Now, bond rates have dropped and the government will save money.
An OMB analysis of the fiscal 1978 "September surge" puts the matter in perspective.
Government-wide, that surge amounted to $42 billion -- that is, obligations in the last month of fiscal 1978 were $42 billion over August's. But OMB estimated that three-fifths of this involved "no year" authority: Congress had specified that this money didn't revert to the Treasury on Sept. 30 if unspent; it carried over to the next year.
Therefore, there's no reason to think it was rushed out just to avoid reversion to the Treasury.
Another fifth involved government payments to retirement funds that would have to be paid in any case.
That left 18 percent -- $7.8 billion -- which otherwise would go back to the Treasury, but a large portion of that was for forest fire controls, child-feeding programs, pest control and other clearly legitimate spending.
OMB declined to speculate on how much money is actually wasted yearly by "use it or lose it" spenders, but clearly it considers $13 billion exaggerated. Some observers consider Cohen's $2 billion a bit high.
Cohen and Levin don't believe a year-end cap will work -- although Magnuson is now trying to put his 30-percent last-quarter limit on every fiscal 1981 bill. They contend the year-end surge would simply come earlier, in the last month before the cap. They favor limiting noncompetitive contracts, auditing and other improvements. OMB so far has opposed percentage caps.
The $2 billion Cohen estimate, OMB's 1978 year-end analysis and estimates by other financial experts suggest that the year-end spending surge is less wasteful by far than Harris has indicated, but still a significant problem.
After all, as the late Sen. Everett McKinley Dirksen (R-Ill.) remarked, "A billion here, a billion there -- pretty soon you're talking about real money."