Financial Management: DOE and NNSA Have Opportunities to Improve Management of Carryover Balances
Fast Facts
Most federal funding can only be used for a certain amount of time. But the Department of Energy (DOE) receives billions of dollars annually that are not time-limited and can be carried over each year.
In 1996, we reported concerns that DOE carried over more than it needed to—tying up resources. In response, DOE developed thresholds to monitor programs' carryover balances.
This report examines two DOE organizations' carryover balances and how thresholds are used to monitor them. We found DOE could improve documentation and guidance for using thresholds to mitigate excess carryover.
Our recommendations address these and other issues we found.
Highlights
What GAO Found
The Department of Energy's (DOE) Office of Environmental Management (EM) and the National Nuclear Security Administration (NNSA) oversee the cleanup of DOE's legacy sites and the operation of the nuclear security enterprise, respectively. Most funds that Congress appropriates to EM and NNSA remain available for obligation until they are expended (costed). Balances not obligated or costed can generally be carried over to future fiscal years, but these carryover balances can accumulate beyond the minimum needed to support programs, tying up resources that could be put to other uses.
GAO reviewed five areas related to EM's and NNSA's management of carryover balances:
Budget structures and budget execution processes. EM and NNSA execute funds consistent with congressional direction that structures their appropriations into programs, projects, and activities (PPA). However, the increasing duration of continuing resolutions has affected EM's and NNSA's ability to efficiently execute funds and has contributed to carryover balances accumulating beyond what might be expected.
Amounts and ages of carryover balances at the end of fiscal year 2021. EM had about $3.2 billion in total carryover balances, and NNSA had about $10.9 billion. While the majority of these balances were made available until expended, only 1.4 percent of the total $14.1 billion was appropriated more than 5 years ago, indicating that EM and NNSA have generally ensured that older funds were spent before newer funds.
Practices for identifying uncosted balances that warrant greater scrutiny, and the amounts of these balances at the end of fiscal year 2021. DOE and NNSA have used benchmarks, or thresholds, since 1996 to monitor uncosted balances for operating activities. DOE documents state that year-end balances exceeding these thresholds warrant greater scrutiny. At the end of fiscal year 2021, EM and NNSA had about $3.5 billion in such uncosted balances. EM and NNSA also had $3.1 billion in uncosted balances for line-item construction projects. However, according to DOE, line-item construction projects are not subject to the thresholds and should be examined on a case-by-case basis.
Drivers of uncosted balances in excess of thresholds, and actions taken to manage these balances. A number of drivers contribute to uncosted balances in excess of thresholds. Some drivers, such as continuing resolutions or larger-than-requested appropriations, may fully explain an excess balance. However, others, such as unanticipated changes in work scope or program execution challenges or delays, may not fully explain an excess balance. EM and NNSA periodically review these balances and have sometimes taken actions to manage them, such as seeking to reprogram excess funds to PPAs with greater need, reducing future fiscal years' budget requests, and modifying contract scope.
Limitations to thresholds, and guidance used to manage excess uncosted balances. GAO identified 5 limitations:
- Thresholds, and how they should be applied, are not clearly documented, leading to instances of inconsistent application.
- Bases for two thresholds developed after 1996 are not well justified, affecting whether they are reliable indicators.
- EM and NNSA have not periodically reviewed thresholds to ensure that underlying assumptions—for example, that appropriations will be timely—have not changed, affecting their reliability.
- EM and NNSA have not documented a process to guide assessments of, and justifications for, balances in excess of thresholds, so it is unclear whether the agencies consistently determine that balances in excess of thresholds are warranted.
- No guidance exists on how staff should use information about excess uncosted balances during the budget formulation process to ensure that DOE plans to cost excess balances or redirect funds to areas of need.
The thresholds serve as tools to monitor DOE’s financial performance. Therefore, it is important that the thresholds operate effectively as indicators in identifying balances that warrant greater scrutiny and that DOE clearly documents guidance for their use.
Why GAO Did This Study
Congress has required DOE to publicly report on carryover balances and has shown interest in understanding how DOE identifies and monitors these balances. A committee report accompanying the Senate bill for the National Defense Authorization Act for Fiscal Year 2021 included a provision for GAO to review EM's and NNSA's management of carryover balances.
GAO examined DOE and NNSA budget execution and financial management documents and analyzed financial data as of the end of fiscal year 2021 for each EM appropriation account and NNSA's Weapons Activities and Defense Nuclear Nonproliferation appropriation accounts. GAO interviewed agency officials about how EM and NNSA manage excess uncosted balances and consider them when developing future funding requests.
Recommendations
GAO is making seven recommendations, including that DOE and NNSA better document their thresholds—including definitions, bases, and purpose—to ensure that they are applied consistently throughout the department, and that DOE develop guidance on how to evaluate uncosted balances and consider them when developing future funding requests. DOE and NNSA concurred with GAO’s recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Energy |
Priority Rec.
The DOE Chief Financial Officer should document DOE's and NNSA's percentage target thresholds to more clearly describe how the thresholds should be applied to uncosted balances and better define the purpose of the percentage targets to ensure that EM, NNSA, and other departmental elements apply the thresholds consistently. (Recommendation 1) |
DOE concurred with the recommendation. At the time of our report, DOE stated that the department would establish a working group to provide recommendations regarding the appropriate use of uncosted balance thresholds as a budget execution metric, including how thresholds are established, reviewed, and used in DOE's budget formulation process. As of July 2024, DOE reported that the working group provided recommendations to the department that are under review. Revised metrics based on these recommendations will be included in DOE's revision to its existing policy, which officials estimate will be completed in September 2024. To fully address this recommendation, DOE should document DOE's and NNSA's percentage target thresholds to more clearly describe how the thresholds should be applied to uncosted balances and better define the purpose of the percentage targets to ensure that EM, NNSA, and other departmental elements apply the thresholds consistently. When we confirm the final action taken in response to this recommendation, we will provide updated information.
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| Department of Energy | The DOE Chief Financial Officer, with input from other departmental elements, should either document the basis of support for the 40 percent target threshold that DOE uses to identify and assess uncosted carryover balances in EM and NNSA programs related to the DOE-wide costing category for grants and cooperative agreements or revise the threshold, and then document the methodology and analysis supporting the department's decisions. (Recommendation 2) |
DOE concurred with GAO's recommendation. At the time of our report, DOE stated that the department would establish a working group to provide the Office of the Chief Financial Officer options to address the recommendation. As of July 2024, DOE reported that the working group provided recommendations to the department that are under review. Revised metrics based on these recommendations will be included in DOE's revision to its existing policy, which officials estimate will be completed in September 2024. When we confirm the final action taken in response to this recommendation, we will provide updated information.
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| National Nuclear Security Administration | The NNSA Associate Administrator for Management and Budget, with input from pertinent NNSA program offices, should either document the basis of support for the 45 percent threshold that NNSA uses to identify and assess uncosted carryover balances related to the NNSA-specific costing category for weapon modernization programs or revise the threshold, and document the methodology and analysis supporting the agency's decisions. (Recommendation 3) |
NNSA concurred with GAO's recommendation. As of July 2024, NNSA's proposed action to address the recommendation remains under departmental review. When we confirm the final action taken in response to this recommendation, we will provide updated information.
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| Department of Energy | The DOE Chief Financial Officer, with input from other departmental elements, should periodically reassess the four target thresholds that DOE uses to identify and assess uncosted carryover balances in EM and NNSA programs to ensure that they reflect the current budgetary environment, including with respect to any assumptions made about the duration of continuing resolutions, and either revalidate or revise the thresholds. (Recommendation 4) |
DOE concurred with GAO's recommendation. At the time of our report, DOE stated that the department would establish a working group to provide the Office of the Chief Financial Officer options to address the recommendation. As of July 2024, DOE reported that the working group provided recommendations to the department that are under review. Revised metrics based on these recommendations will be included in DOE's revision to its existing policy, which officials estimate will be completed in September 2024. When we confirm the final action taken in response to this recommendation, we will provide updated information.
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| National Nuclear Security Administration | The NNSA Associate Administrator for Management and Budget, with input from relevant NNSA program offices, should periodically reassess the target threshold that NNSA uses to identify and assess uncosted carryover balances related to its weapon modernization programs to ensure that it reflects the current budgetary environment, including with respect to any assumptions made about the duration of continuing resolutions, and either revalidate or revise the threshold. (Recommendation 5) |
NNSA concurred with GAO's recommendation. As of July 2024, NNSA's proposed action to address the recommendation remains under departmental review. When we confirm the final actions taken in response to this recommendation, we will provide updated information.
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| Department of Energy | The DOE Chief Financial Officer should develop guidance that clearly documents the process that DOE and NNSA staff should use when assessing excess uncosted balances and the sufficiency of their justifications, including describing how to make and document determinations about the sufficiency of the justifications. (Recommendation 6) |
DOE concurred with GAO's recommendation. At the time of our report, DOE stated that the department would establish a working group to provide the Office of the Chief Financial Officer options to address the recommendation. As of July 2024, DOE reported that the working group provided recommendations to the department that are under review. Revised metrics based on these recommendations will be included in DOE's revision to its existing policy, which officials estimate will be completed in September 2024. When we confirm the final action taken in response to this recommendation, we will provide updated information.
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| Department of Energy | The DOE Chief Financial Officer should develop guidance, such as in DOE Order 130.1A, or other relevant programming guidance documents, that clearly documents the steps that DOE and NNSA should take in the annual planning, programming, budgeting, and evaluation process to evaluate and consider excess uncosted balances when developing future funding requests. (Recommendation 7) |
DOE concurred with GAO's recommendation. At the time of our report, DOE stated that the department would establish a working group to provide the Office of the Chief Financial Officer options to address the recommendation. As of July 2024, DOE reported that the working group provided recommendations to the department that are under review. Revised metrics based on these recommendations will be included in DOE's revision to its existing policy, which officials estimate will be completed in September 2024. When we confirm the final action taken in response to this recommendation, we will provide updated information.
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