OMB Expands Sequestration Guidance, Increasing Scrutiny of Expenses

By Charles S. Clark

February 28, 2013

With just a day to go before the onset of sequestration, the Office of Management and Budget on Wednesday evening supplied federal agency heads with expanded guidance on how to begin implementing across-the-board spending cuts.

Unless Congress and the president achieve a new budget deal by Friday, wrote Controller Danny Werfel in a Feb. 27 memorandum, agencies must now execute $85 billion in cuts over seven months, which translates to about 9 percent for nondefense programs and 13 percent for defense programs. “These reductions will result in significant and harmful impacts to national security and domestic priorities,” he said.

Detailed instructions addressed processes for planning, communication, adjustments to acquisition, protecting recipients of financial aid and “increased scrutiny of certain activities.” That last category directs managers to employ “risk management strategies and internal controls” to scrutinize spending on hiring new personnel; issuing “discretionary monetary awards to employees, which should occur only if legally required until further notice;” and incurring obligations for new training, conferences, and travel (including agency-paid travel for non-agency personnel).

In light of reduced funding, Werfel wrote, managers should be “actively and continuously communicating with affected stakeholders -- including states, localities, tribal governments, federal contractors, federal grant recipients and federal employees."

Similarly, leaders “should identify the number of employees who will be furloughed, the length of expected furloughs, the timing of when furlough notices will be issued, and the manner in which furloughs will be administered. In some cases, agencies may not be able to ascertain all of this information prior to March 1,” the memo said.

Agencies must allow employees' “exclusive representatives to have pre-decisional involvement in these matters to the fullest extent practicable and permitted under the law,” Werfel said. If furloughs are in the offing, agencies have a duty to notify employees’ exclusive representatives and, upon request, “bargain over any negotiable impact and implementation proposals the union may submit, unless the matter of furloughs is already covered by a collective bargaining agreement.”

Agencies should “identify any major contracts that they plan to cancel, re-scope or delay as well as any grants that they plan to cancel, delay, or for which they plan to change the payment amount,” the memo said. “Agencies should only enter into new contracts or exercise options when they support high-priority initiatives or where failure to do so would expose the government to significantly greater costs in the future. Agencies may also consider de-scoping or terminating for convenience contracts that are no longer affordable within the funds available.”

In light of sequestration, agencies “may also consider delaying awarding of new financial assistance obligations, reducing levels of continued funding, and renegotiating or reducing the current scope of assistance,” the guidance said. “Agencies may be forced to reduce the level of assistance provided through formula funds or block grants."

Overall planning under sequestration, Werfel said, “must be guided by the principle of protecting the agency's mission to serve the public to the greatest extent practicable.”

By Charles S. Clark

February 28, 2013