Use It or Lose It Budgeting

I ran across an article that mentioned the Department of Homeland Security “expects to obligate more than half of its annual contracting budget in the remaining four and a half months of the current fiscal year.”

I have read, seen, heard, and experienced the “use it or lose it” mentality throughout the government. As a former government employee, I experienced how leave works at the end of the year.  Why do you think so many government buildings are half-empty or more throughout December?  As I read the article, my first thought was “So what?”  Then I began to think of my own finances and those of the everyday taxpayers that fund government agencies.

 

This is where the accountant in me really starts to work in overdrive – excuse the financial “rant” that is to come.  Let’s think of a few scenarios for our personal finances. How do you decide to spend your money if you are like the government? When do you decide to spend the money?

Scenario 1 (Taxpayer like Government): You receive your full salary, that you determined was “enough” to sustain you, before you actually do work and manage your life. Your work-life balance now consists of agreements for your children to participate in their sport of choice that you have to sign on to 3 months before it starts, but only after you have received offers from at least 2 different youth organizations or decided on a sole source provider. The quality of your meals will decrease. On the positive side, you don’t have to save money! This is extremely helpful at Christmastime because the end of the year represents the “use it or lose it” time. The rules now dictate that the $25,000 you have left over will disappear as the ball drops in Time’s Square if you don’t spend it on something. Better yet, if you spend more than you actually thought would get you through this year, you can go back to your boss and demand more money next year. Better still, you can simply let your children or grandchildren make the money for you when they demand their salaries 15 – 30 years from now.

Scenario 2 (Taxpayer salary, government schedule): You receive a bi-weekly (or some other periodic) salary. In order to spend your money, you have to ensure you make arrangements well in advance of the need. You should plan for Christmas in September (or sooner) to ensure that the contract you enter into will deliver in time. You have nothing to worry about for real-time discretionary spending, but when the bills and payments come due on the contract items, you struggle because you have not adequatedly planned for the overruns. You try to save money, but as soon as you feel like you have, the cost of the contract(s) come due and your savings is depleted.

I could go on… but…

Scenario 3 (Real Life): You get your salary, manage your bills, and attempt to save for the future. You don’t have the option of increasing your salary simply by telling your boss you think you need more money next year. If you find you have $5,000 “left over” at the end of the year, that is a good thing! You take out a portion of it and buy that HDTV you have been looking at, but most likely you pay down bills (debt) or put it away in savings, right?

I don’t mean to sound like I am beating up on the government, I certainly enjoy everything that is provided by the institution.  However, I certainly believe the year-end bonanza that has become government contracting and spending should be looked at when articles and quotes like this come out time after time.  If, as is the case for the DHS, an agency has “about $8B to go” according to the DHS director of the DHS OSDBU, the goal for the agency should be to see how much can be given back to the deficit (debt) not to see how close it can get to that mark.

About Marty Herbert

With 13 years of government contract administration, analysis, finance, and audit experience, I have established a firm baseline in ethics and a specialization in government contracts that has prepared me to become a subject matter expert in my field. I am currently working on enhancing government contracts management and compliance through workflow tools and product offerings - attempting to make the process proactive as opposed to reactive.
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