Agencies Detail How Sequestration Disrupted Government in 2013

Mandatory across-the-board cuts to agency budgets in fiscal 2013, though uncertain for much of the year, reduced or delayed operations, benefit payments, grants and long-term program investment, a detailed audit found.

A 217-page agency-by-agency report by the Government Accountability Office released Thursday recommended that the Office of Management and Budget publish new criteria to determine which accounts, programs, projects, and activities are exempt from the sequestration that began in March 2013 under the basic framework of the 2011 Budget Control Act.

“Sequestration reduced or delayed some services to the public, including benefit payments, and disrupted agency operations, despite actions taken by agencies to minimize sequestration’s effects,” GAO wrote in a March 6 letter to House Budget Committee Chairman Paul Ryan, R-Wis. “Agencies reported that the actual effects of these and other reductions on services to the public remain difficult to measure in part because the recipients may have some discretion on how the reductions are implemented or may use other sources of funding to temporarily offset a decline in federal funding.”

GAO reviewed information from chief financial officers at major agencies (the Veterans Affairs Department was exempt from sequestration), and summarized sequestration’s impact on limiting hiring, furlough of employees, delays in grants and reductions in services to the public. The report, however, warned that many of the effects of the budget cuts may not be known for years for reasons including “the timing of when funds are disbursed (such as grant cycles that start late in the fiscal year), challenges in isolating the effects from other factors, and the lack of currently available performance data for some programs.”

According to the watchdog, the impact of the sequester’s $85 billion cut in fiscal 2013 -- 13 percent for defense spending and 9 percent for nondefense spending spread over seven months -- resulted in:

• 19 agencies curtailing hiring;
• 16 agencies scaling back or delaying contracts or grants for core mission activities;
• 19 agencies reducing employee training;
• 20 agencies reducing employee travel; and
• Seven agencies furloughing a total of more than 770,000 employees from one to seven days.

Examples of cuts in services included the Labor Department’s estimate that long-term unemployed workers would receive 11 percent less in Emergency Unemployment Compensation benefits in fiscal 2013; 42,000 people, according to the Housing and Urban Development Department, who did not receive rental housing assistance due to sequestration; the Agriculture Department’s estimate that 142,000 people did not receive aid under the Women, Infants, and Children Farmers Market Nutrition Programs; and the Health and Human Services Department’s report that 57,000 fewer people were served under its Head Start program.

In foregone revenue, the Treasury Department estimated that the Internal Revenue Service will likely collect billions less  due to fewer tax return reviews and diminished fraud detection, while the Interior Department reported was unable to collect proceeds from missed oil and gas leases to drilling companies.

The Office of Personnel Management, GAO said, missed its agency priority goal of finalizing 90 percent of all incoming federal retirement claims within 60 days of receipt by July 2013, and agency monitoring activities were hampered. For example, the Social Security Administration missed program savings because it was unable to perform disability benefits eligibility reviews.

“The uncertainty over if and when sequestration would occur also affected agencies’ ability to provide timely communication to program partners and recipients of federal funding such as contractors, grantees, and state and local governments,” the watchdog said. And the cuts weakened morale, “a notable decline” as captured in the annual Federal Employee Viewpoint Survey, which, agency officials said, could harm long-term recruiting.

GAO also noted that OMB did not issue formal guidance to agencies on how to handle sequestration until it was required to do so under the Sequestration Transparency Act passed in August 2012.

The auditors recommended that OMB publish such criteria and “direct agencies to record their decisions and principles used to implement sequestration for potential future application.” OMB agreed.

J. David Cox Sr., president of the American Federation of Government Employees, said the report was evidence that “Congress needs to take GAO’s findings to heart and come together to end sequestration before more harm can be done….Slashing budgets without regard to the impact on citizens and the employees who deliver the programs and services those citizens rely on is a vicious and destructive way to govern,” he said in a statement.

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