BUDGET ISSUES

Key Questions to 

Consider When 

Evaluating Balances in 

Federal Accounts

Report to the Chairman, Committee on 

the Budget, House of Representatives

September 2013

GAO-13-798

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-798, a report to the

Chairman, Committee on the Budget, House 

of Representatives

September 2013

BUDGET ISSUES

Key Questions to Consider When Evaluating 

Balances in Federal Accounts

Why GAO Did This Study

Given the fiscal pressures facing the 

nation, examination of balances

carried forward into future fiscal 

years (carryover balances) provides 

an opportunity to identify areas 

where the federal government can 

improve and maximize the use of 

resources. GAO was asked to review 

issues related to federal carryover 

balances. GAO’s objectives were to

(1) identify key questions for 

congressional committees, 

managers, and other reviewers to

consider when evaluating carryover 

balances, including whether to 

reduce them, and (2) describe how 

answering these key questions 

provides insight into why carryover 

balances may exist in selected 

accounts. 

GAO reviewed carryover balances 

from fiscal years 2007 through 2012

in eight selected accounts from the 

Departments of Defense (DOD), 

Health and Human Services (HHS), 

Housing and Urban Development 

(HUD), and Treasury. Account

selection was based on several 

characteristics, including the average

size of the balance, budget function, 

type of account, agency, and 

whether the account was composed 

of mandatory or discretionary funds.

GAO is not making any 

recommendations. DOD, HHS, HUD, 

and Treasury generally agreed with 

our findings and provided technical 

comments that were incorporated as 

appropriate. HHS provided 

comments stating that conclusions 

drawn from the report may not apply 

across the board to all accounts.

What GAO Found

Carryover balances in fiscal year 2012 were $2.2 trillion, of which about $800 

billion had not yet been obligated. Answering key questions during review of

carryover balances provides insights into why a balance exists, what size 

balance is appropriate, and what opportunities (if any) for savings exist. Given 

that a single account may support a single program or multiple programs—or that 

multiple accounts may support a single program—these questions can be 

applied when evaluating balances at either the account or program level. 

Examination of balances may assist decision makers in identifying opportunities 

to achieve budgetary savings or redirecting resources to other priorities. 

However, the complexity of the federal budget is such that a case-by-case 

analysis is needed to understand how best to achieve these financial benefits.

What mission and goals is the account or program supporting?

Understanding the mission activities, goals, and programs the account supports 

provides information about whether a program needs to maintain a balance to 

operate smoothly, what size balance is appropriate, and whether opportunities 

for savings exist. Accounts GAO reviewed maintained balances to support 

activities such as long-term acquisition of military aircraft and public health 

emergency preparedness.

What are the sources and fiscal characteristics of the funding? The sources 

and fiscal characteristics of the funding present different issues in changing the 

size of carryover balances. Accounts such as Treasury’s Exchange Stabilization 

Fund, receive “such sums as may be necessary” and may require programmatic 

changes to effectively reduce balances. In such cases, simply reducing balances

may have no economic benefit and could impose unnecessary administrative 

costs. If funds are discretionary, such as with HUD’s Homeless Assistance 

Grants, balances can be controlled through appropriations acts. 

What factors affect the size or composition of the carryover balances?

Understanding factors within and outside an agency’s control that affect its

“spendout rate” provides insight to the composition of the carryover balance as a 

whole. Funds in accounts that support activities such as certain procurement or 

disaster relief may be obligated fairly quickly, but are expended over a longer 

period as milestones are met or as grantees draw down funds. Accounts with 

quick spendout rates, such as those that provide cash payments to governmentsponsored enterprises, disburse funds soon after obligation.

How does the agency estimate and manage carryover balances?

Understanding an agency’s processes for estimating and managing balances 

provides information to assess how effectively agencies anticipate program 

needs and ensure the most efficient use of resources. For the mandatory 

accounts GAO reviewed, such as the Federal Housing Administration’s Mutual 

Mortgage Insurance Capital Reserve account, agencies focused on future needs 

of the account and relied on economic indicators and historical trends to estimate 

future balances. For discretionary accounts GAO reviewed, such as the U.S. 

Army Corps of Engineers’ Construction account, agencies used historical data 

combined with current variables to estimate carryover balances.

View GAO-13-798. For more information, 

contact Susan J. Irving, Director for Federal 

Budget Analysis, (202) 512-6806 or 

irvings@gao.gov.
Page i GAO-13-798 Budget Issues

Letter 1

Background 2

Objectives, Scope, and Methodology 4

Four Key Questions to Consider When Evaluating Carryover 

Balances 7

Selected Agencies Managed Balances According to Mission, 

Funding, Operations, and Estimated Demand for Services 12

Concluding Observations 17

Agency Comments and Our Evaluation 18

Appendix I Overview of Carryover Balances across Federal Accounts in 

Fiscal Years 2007 through 2012 20

Appendix II Guide for Evaluating Carryover Balances 26

Appendix III Case Illustrations of Federal Accounts with Carryover 

Balances 29

Appendix IV Comments from the Department of Health and Human 

Services 64

Appendix V Glossary of Budget Terms 66

Appendix VI GAO Contact and Staff Acknowledgments 69

Tables

Table 1: Case Illustration Accounts 6

Table 2: Eight Selected Accounts for Further Review 12

Table 3: Top Ten Largest Unobligated Balances, Fiscal Year 2012 21

Contents
Page ii GAO-13-798 Budget Issues

Figures

Figure 1: Overview of How an Account Accumulates a Carryover 

Balance 3

Figure 2: Mandatory Accounts Represented an Increasing Share of 

Unobligated Balances, Fiscal Years 2007-2012 22

Figure 3: Three National Priorities Accounted for the Largest Share 

of Unobligated Balances, Fiscal Years 2007-2012 24

Figure 4: Unobligated Balances Were Concentrated around Eight 

Agencies, Fiscal Years 2007-2012 25

Figure 5: Carryover Balances in the Army’s Aircraft Procurement 

Account, Fiscal Years 2007-2012 31

Figure 6: Estimated vs. Actual Unobligated Balances in the Army’s 

Aircraft Procurement Account, Fiscal Years 2007-2012 33

Figure 7: Carryover Balances in U.S. Army Corps of Engineers-Civil 

Works Construction Account, Fiscal Years 2007-2012 35

Figure 8: Estimated vs. Actual Unobligated Balances in the U.S. 

Army Corps of Engineers-Civil Works Construction 

Account, Fiscal Years 2007-2012 37

Figure 9: Carryover Balances in the Public Health and Social 

Services Emergency Fund, Fiscal Years 2007-2012 39

Figure 10: Estimated vs. Actual Unobligated Balances in the Public 

Health and Social Services Emergency Fund, Fiscal Years 

2007-2012 41

Figure 11: Carryover Balances in the Community Development 

Fund, Fiscal Years 2007-2012 43

Figure 12: Estimated vs. Actual Unobligated Balances in the 

Community Development Fund, Fiscal Years 2007-2012 45

Figure 13: Carryover Balance in the FHA-Mutual Mortgage 

Insurance Capital Reserve Account, Fiscal Years 2007-

2012 47

Figure 14: Estimated vs. Actual Unobligated Balances in the FHAMutual Mortgage Insurance Capital Reserve Account, 

Fiscal Years 2007-2012 49

Figure 15: Carryover Balances in the Homeless Assistance Grants 

Account, Fiscal Years 2007-2012 51

Figure 16: Estimated vs. Actual Unobligated Balances in the 

Homeless Assistance Grants Account, Fiscal Years 2007-

2012 53

Figure 17: Carryover Balances in the Exchange Stabilization Fund, 

Fiscal Years 2007-2012 56

Figure 18: Estimated vs. Actual Unobligated Balances in the 

Exchange Stabilization Fund, Fiscal Years 2007-2012 58
Page iii GAO-13-798 Budget Issues

Figure 19: Carryover Balances in the GSE Purchase Agreements 

Account, Fiscal Years 2007-2012 61

Figure 20: Estimated vs. Actual Unobligated Balances in the GSE 

Purchase Agreements Account, Fiscal Years 2007-2012 63

Abbreviations 

APA Aircraft Procurement, Army

CDBG Community Development Block Grant 

CDF Community Development Fund

Corps U.S. Army Corps of Engineers

CR continuing resolution 

DOD Department of Defense

DOT Department of Transportation 

ESF Exchange Stabilization Fund

Fannie Mae Federal National Mortgage Association

FDIC Federal Deposit Insurance Corporation

FHA Federal Housing Administration

FHFA Federal Housing Finance Agency

Freddie Mac Federal Home Loan Mortgage Corporation

GSE Government Sponsored Enterprise

HAG Homeless Assistance Grants

HERA Housing and Economic Recovery Act

HHS Department of Health and Human Services 

HUD Department of Housing and Urban Development

IMF International Monetary Fund

MMI Fund Mutual Mortgage Insurance Fund

NSP Neighborhood Stabilization Program

NSSE National Special Security Events 

OMB Office of Management and Budget

PHSSEF Public Health and Social Services Emergency Fund

SDR Special Drawing Rights

TARP Troubled Asset Relief Program

Treasury Department of the Treasury 

USSGL U.S. Standard General Ledger

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Page 1 GAO-13-798 Budget Issues

441 G St. N.W.

Washington, DC 20548

September 30, 2013

The Honorable Paul Ryan

Chairman

Committee on the Budget

House of Representatives

Dear Mr. Ryan,

Given the fiscal pressures facing the nation, the need to identify 

opportunities for savings, find ways to better leverage resources, and 

increase accountability has become even more critical to the success of 

federal agencies and the programs they administer. Congress needs 

pertinent and reliable information to adequately assess agencies’

progress and to ensure accountability for results. One area that managers 

and other decision makers look to when seeking potential savings are 

carryover balances: balances in individual agency accounts that are 

carried forward into future fiscal years. Carryover balances amounted to 

$2.2 trillion in fiscal year 2012, of which almost $800 billion had not yet 

been obligated.

1

You asked us to review the size and management of carryover balances 

in various types of appropriations accounts. Our objectives were to: (1) 

identify key questions to consider when evaluating carryover balances, 

including whether to reduce them, and (2) describe how answering these 

key questions provides insight into why carryover balances existed in 

selected accounts during fiscal years 2007 through 2012, and how 

agencies estimated and managed these balances. In addition, we 

analyzed the size and composition of carryover balances in the federal 

budget from fiscal years 2007 through 2012. This information is provided 

in 

Examination of these balances may assist decision 

makers in identifying opportunities to achieve budgetary savings or in 

redirecting resources toward other priorities. However, the complexity of 

the federal budget is such that a case-by-case analysis is needed to 

understand how best to achieve these financial benefits.

appendix I.

 1 An obligation is a definite commitment that creates a legal liability of the government for 

the payment of goods and services ordered or received, or a legal duty on the part of the 

United States that could mature into a legal liability by virtue of actions of another party.
Page 2 GAO-13-798 Budget Issues

Although federal funding may be available to obligate for one-year, 

multiple years, or until expended (no-year), only accounts with multi-year 

or no-year funds may carry over amounts that remain legally available for 

new obligations from one fiscal year to the next. Carryover balances are 

composed of two elements: (1) unobligated funds and (2) obligated funds

for which payment has not yet been made. While attention is focused on 

the unobligated portion, looking at both elements provides a fuller 

reflection of what is happening in an account. It also provides insights into 

opportunities for potential budgetary savings.

Federal spending is categorized as “discretionary” or “mandatory.” This 

distinction refers to the way budget authority is provided. Discretionary 

spending is controlled through annual appropriations acts (plus in some 

cases supplemental appropriations acts), which may provide multi-year or 

no-year funds.2

In contrast, mandatory spending accounts, which include “entitlements,”

receive budget authority through laws other than appropriations acts. 

Many mandatory programs receive budget authority for an unspecified 

amount made available as the result of previously enacted legislation, 

with no need for further legislative action. For example, Medicare, 

veterans’ pensions, Social Security, and federal crop insurance are 

mandatory programs. By statute, funding to these programs is driven by 

eligibility rules and benefit formulas, which means that funds are made 

available as needed to provide benefits to those who are eligible and wish 

to participate. Over the last several years, mandatory accounts have 

represented an increasing share of total unobligated balances across the 

federal government.

Under certain legal authorities, some discretionary 

accounts are funded entirely, or in part, through the collection of user 

fees, interagency transactions, or dedicated excise taxes. Specifically, the 

level of discretionary funding in an account is provided by, and controlled 

through, the annual appropriations process.

Figure 1 shows how budget authority is provided and how authorized 

funds may accumulate, ultimately leading to a carryover balance.

 2 Funds are available for obligation on a one-year, multi-year, or no-year (until expended) 

basis. Such time limitations are referred to as the period of availability.

Background
Page 3 GAO-13-798 Budget Issues

Figure 1: Overview of How an Account Accumulates a Carryover Balance
Page 4 GAO-13-798 Budget Issues

In any given year, the total budgetary resources available in an account 

consist of unobligated funds carried forward from previous years, if 

applicable, plus funds newly available for obligation in that fiscal year. 

Based on the level of total available budget authority in the account, 

agencies may then obligate funds throughout the fiscal year. An 

obligation is a definite commitment that creates a legal liability of the 

federal government for the payment of goods and services. For example, 

an agency incurs an obligation when it places an order, signs a contract, 

awards a grant or purchases a service. Payment may be made 

immediately or in the future. Only when funds are actually disbursed for 

payment—that is, the obligation is liquidated—does an obligation become 

an outlay. The total carryover balance in a given account consists of two 

parts:

• Obligated balance: the amount of funds which have been obligated 

but for which payment (outlay) has not yet been made; these funds 

are obligated but unliquidated.

• Unobligated balance: the amount of funds still legally available for 

obligation that have not yet been obligated.

The two components represent different phases of budget execution and 

present different opportunities for budgetary savings.

For a detailed glossary of budget terms, see appendix V.

For our first objective, to identify key questions to consider when 

evaluating balances, we identified common themes and factors that 

generally contribute to fluctuations in carryover balances.3

 3 For the purpose of this report, we focused on multi-year and no-year accounts where the 

unobligated balance is carried forward and is legally available for new obligations. We did 

not focus on the unobligated balance of fiscal year funds that are in expired status and 

generally are not available for new obligations.

We developed 

the list of questions from our analysis of government-wide guidance on 

budget preparation, budget execution, and internal controls. In addition, 

we met with federal budget specialists, agency officials responsible for 

managing the eight accounts selected as part of our second objective, 

and staff within the Office of Management and Budget (OMB) to obtain 

their views on the use of these questions to guide the examination of 

carryover balances. All agreed that the questions were reasonable. Our 

Objectives, Scope, 

and Methodology
Page 5 GAO-13-798 Budget Issues

prior work on federal budgeting, user fees, budget triggers, and managing 

under continuing resolutions also informed the development of the key 

questions.

Our second objective was to describe how answering these key questions 

provides information about why carryover balances were reported in 

selected accounts during fiscal years 2007 through 2012, and how 

agencies estimated and managed these balances. To do this, we 

selected a nongeneralizable sample of eight accounts with multi-year or 

no-year funds to use as case illustrations. To start our selection process, 

we collected and compared end-of-year actual unexpired unobligated 

balances plus obligated balances for which payment had not yet been 

made. We queried this data from OMB’s MAX database for all accounts in 

the federal budget for fiscal years 2007 through 2012. We found the data 

to be sufficiently reliable for the purpose of our report.4 We identified the 

100 accounts with the largest average unobligated balance during fiscal 

years 2007 through 2012.5 From that list of 100 accounts, we selected 

eight accounts representing a variety of characteristics, including the size 

of the average unobligated balance, budget function, type of account, 

agency, and whether the account was composed of mandatory funds, 

discretionary funds, or a combination of both. We reviewed the selected 

agencies’ estimates as they were reported in the President’s Budget 

Appendices for fiscal years 2007 through 2012. Table 1 lists the selected 

accounts. For the purpose of this report, we did not seek to identify 

specific savings related to the selected accounts.

 4 To determine the reliability of the data, the team cross-checked the MAX data against 

the numbers reported in the corresponding President’s Budget Appendices. Data reported 

in MAX and the Budget Appendix are subject to rigorous review and checks through OMB

to help ensure consistency of the data. Accordingly, such data were considered reliable 

for the purpose of this report.

5 Although the period over which we reviewed the accounts is fiscal years 2007 through

2012, at the time that we chose our nongeneralizable sample, actual data for 2012 was 

not yet available. Therefore, our selection of accounts was based on data from fiscal years 

2007 through 2011. We included the size of the average unobligated balance as one of 

the selection criteria because it is the portion of the balance that frequently raises 

questions.
Page 6 GAO-13-798 Budget Issues

Table 1: Case Illustration Accounts

Dollars in Billions

Account name and department Designation Budget subfunction

Average unobligated 

balance, fiscal years 

2007-2012

Government Sponsored Enterprise Preferred Stock 

Purchase Agreements

(Dept. of the Treasury)

Mandatory Mortgage Credit, 371 $239.95 

Exchange Stabilization Fund

(Dept. of the Treasury)

Mandatory International Financial 

Programs, 155

$48.23 

Federal Housing Administration-Mutual Mortgage 

Insurance Capital Reserve

(Dept. of Housing and Urban Development)

Mandatory Mortgage Credit, 371 $10.74 

U.S. Army Corps of Engineers-Civil Works, Construction

(Dept. of Defense)

Discretionary Water Resources, 301 $4.32 

Community Development Fund

(Dept. of Housing and Urban Development)

Split Community 

Development, 451

$4.27 

Public Health and Social Services Emergency Fund

(Dept. of Health and Human Services)

Discretionary Health Care Services, 

551

$3.35 

Army Aircraft Procurement

(Dept. of Defense)

Discretionary Dept of DefenseMilitary, 051$2.65 

Homeless Assistance Grants

(Dept. of Housing and Urban Development)

Discretionary Housing Assistance, 

604

$1.97 

Source: GAO analysis of OMB MAX data.

Note: Split accounts contain both mandatory and discretionary funds.

Although these eight accounts represent less than 1 percent of the total 

number of accounts in the federal budget, they represent approximately 

34 percent of unobligated balances across the federal government. To 

determine what factors contributed to carryover balances in these 

accounts and how the selected agencies managed them, we reviewed 

agency budget reports and guidance, congressional budget justifications, 

and financial and annual reports. We also interviewed agency officials to 

obtain their explanations and discuss the practices and procedures they 

use to estimate and manage balances.

We conducted our review from November 2012 through September 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 
Page 7 GAO-13-798 Budget Issues

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

To assist congressional and agency-level decision makers as well as 

other reviewers in their evaluation of agencies’ carryover balances, we 

identified four overarching key questions to consider:

• What mission and goals is the account or program supporting?

• What are the sources and fiscal characteristics of the funding?

• What factors affect the size or composition of the carryover balance?

• How does the agency estimate and manage carryover balances?

Each of the four key questions leads to a set of second-tier, more specific 

questions that can help frame the analysis of carryover balances. 

Answering each of the four overarching questions and their second-tier 

questions provides insight into why a carryover balance exists, what size 

balance is appropriate, and what opportunities, if any, for savings exist. In 

addition, it may provide opportunities for enhanced oversight of agencies’

management of federal funds and identify areas where the federal 

government can improve and maximize its use of resources. These 

questions can be applied when evaluating carryover balances at either 

the account or program level. A single account may support a single 

program or multiple programs. Conversely, a single program may be 

supported by multiple accounts. Further, the balance in a single year may 

reflect events particular to that year and so present an incomplete or 

possibly misleading view of what is happening in a given account or 

program over time. Therefore, a longer view is preferable.

Since the many accounts that make up the federal budget vary greatly 

and individual accounts have their own unique characteristics, we do not 

suggest that the following set of questions represents all the questions 

that could be considered when evaluating carryover balances. As 

congressional committees, managers, and other reviewers apply these 

evaluative questions, additional questions may arise. In some cases, 

however, a few of the questions may provide sufficient information to 

understand the nature of the balance. The following sections discuss the 

questions in more detail. In addition, all of the questions are presented as 

an evaluative guide in appendix II.

Four Key Questions to 

Consider When 

Evaluating Carryover 

Balances
Page 8 GAO-13-798 Budget Issues

Understanding the mission activities, goals,6 and programs the account 

supports provides information about whether a program needs to 

maintain a balance to operate smoothly, what size balance is appropriate, 

and whether opportunities for savings exist. Such context can inform 

assessments of whether, and how, to reduce carryover balances and 

what effect a reduction would have on the agency’s ability to carry out its 

mission. For example, an account established to provide stability in the 

financial or housing market needs a balance to ensure the agency has 

sufficient resources to respond quickly to adverse events. Similarly, we 

have previously reported on agency intragovernmental revolving funds for 

which a balance is needed to maintain price stability for customer 

agencies or to ensure that the providing agency has funding available to 

complete services or work being performed for customer agencies that 

cross fiscal years.7

 6 Agencies are required to develop long-term and annual goals and measure and report 

on progress towards those goals on an annual basis. This is a requirement under the 

Government Performance Results Act of 1993, (GPRA), Pub. L. No. 103-62, 107 Stat. 285 

(1993), which was recently amended and expanded by the GPRA Modernization Act of 

2010, Pub. L. No. 111-352, 124 Stat. 3866 (2011). GAO, Managing for Results: 

Opportunities for Congress to Address Government Performance Issues, GAO-12-215R

(Washington, D.C.: Dec. 9, 2011). Also see GAO, Managing for Results: Executive Branch 

Should More Fully Implement the GPRA Modernization Act to Address Pressing 

Government Challenges, GAO-13-518 (Washington, D.C.: June 26, 2013).

7 GAO, Intragovernmental Revolving Funds: Commerce Departmental and Census 

Working Capital Funds Should Better Reflect Key Operating Principles, GAO-12-56

(Washington, D.C.: Nov. 18, 2011). Also see GAO, Air Force Working Capital Fund:

Budgeting and Management of Carryover Work and Funding Could Be Improved, 

GAO-11-539 (Washington, D.C.: July 7, 2011).

What Mission and Goals Is 

the Account or Program 

Supporting?

Examples of specific questions to understand how the mission affects balances 

include

• What are the primary mission and goals the account or program is intended to 

achieve?

• What is the nature and purpose of the balance and how does it support the 

mission and goals (e.g., counter economic crisis, sustain business-like activities, 

emergency funding needs)?

• Have there been changes to the program or mission that may affect balances 

(e.g., additional responsibilities, major reorganization)?

• What type of activity (e.g., grants, procurement, direct services) is the account 

used for to achieve the agency’s mission and goals? What are the implications 

of carryover balances?

• What programs are funded by the account and how much does each contribute, 

if at all, to the carryover balance (i.e., does a large portion of the balance result 

from any particular programs)?

• Is it a new account or program or have the program goals and objectives 

changed? How has this affected the agency’s ability to obligate funds?
Page 9 GAO-13-798 Budget Issues

The sources and fiscal characteristics of the funding influence what 

opportunities may exist for budgetary savings. Discretionary and 

mandatory funds present different issues in changing the size of any 

balance. Since discretionary accounts are controlled by the annual 

appropriations process, the size of any carryover balance can also be 

controlled through that process. Mandatory funding is budget authority 

provided in laws other than appropriations acts, such as authorizing acts. 

In such cases, to change or reduce the size of carryover balances, 

changes need to be made to authorizing language affecting program or 

eligibility requirements, for example. Moreover, since mandatory funds 

are often provided in “such sums as may be necessary” to make 

payments to those eligible, reducing the balance in such an account may 

have no practical or economic benefit and instead could impose 

unnecessary administrative costs. In other words, the action or effort to 

rescind a portion of mandatory balances would be countered by the 

action or effort to restore those funds because individuals are entitled to 

payments.

The time limits imposed upon the funds (period of availability for new 

obligation) are important to evaluating carryover balances. If an account 

receives multi-year or no-year appropriations, some accounts or 

programs should be expected to have carryover balances. Similarly, if an 

account receives multi-year supplemental appropriations late in the fiscal 

year or for long-term projects, there is an increased likelihood, and 

perhaps expectation, for a carryover balance in the account. 

Nevertheless, a growing carryover balance over a number of years may 

indicate challenges in executing a program as planned.

Accounts that receive funding primarily from outside sources, such as 

fees, have their own unique considerations. For example, an account that 

is fully funded through user fees that are available without further 

Congressional action may retain an unobligated balance to mitigate 

cyclical changes in fee revenue, thereby increasing assurance that 

sufficient funds will be available to support related mission activities. We 

are separately reporting on agencies’ management of user fees and the 

What Are the Sources and 

Fiscal Characteristics of 

the Funding?
Page 10 GAO-13-798 Budget Issues

identification and management of unobligated balances in fee-funded 

agencies.8

Some factors are within an agency’s control and some are not. The rate 

at which obligations are incurred and subsequently liquidated in a fiscal 

year—that is, the rate at which budget authority becomes outlays—can 

vary with the nature of the activity. Understanding what drives this 

“spendout rate” provides information on the size of the unobligated 

portion of the balance versus the obligated portion; this in turn provides 

insight into the composition of the carryover balance as a whole. For 

example, for an account that funds procurement or grant activities, if the 

timing of the procurement cycle or grant award cycle differs from the fiscal 

year, the account is likely to have a slower spendout rate. As a result, the 

account may have a larger share of unobligated funds reported at the end 

of the fiscal year, which are then quickly obligated early in the following 

fiscal year. Alternatively, it could have a large obligated portion of the 

balance, which is expended over time.

 8 GAO, Federal User Fees: A Design Guide, GAO-08-386SP (Washington, D.C.: May 29, 

2008). Also see Federal User Fees: Fee Design Options and Implications for Managing 

Revenue Instability, GAO-13-820 (Washington, D.C.: Sept. 30, 2013).

What Factors Affect the 

Size or Composition of the 

Carryover Balance?

Examples of specific questions to understand how the sources and fiscal 

characteristics of the funding affect balances include

• Are the account or program funds mandatory, discretionary, or a combination of 

both? 

o In accounts or programs that receive both mandatory and discretionary 

funds, what portion of each are unobligated each year?

• What is the expected period over which funds will be obligated and liquidated 

(i.e., multiple years versus single year)?

o If multiple years, what drives the timing of the obligation and liquidation of 

funds (e.g., contract award period, grant cycle)?

• Did the account receive supplemental appropriations? 

o If so, when were the supplemental appropriations acts enacted? How much 

of the balance is attributed to supplemental appropriations?

• To what extent is the activity funded by fees or dedicated taxes versus general 

revenues? 

o Does the account or program have the authority to use the fees or taxes 

without additional congressional action?
Page 11 GAO-13-798 Budget Issues

External events beyond agencies’ control—such as natural disasters or 

economic crises—can dramatically affect carryover balances. For 

example, if an agency receives a sudden inflow of funds late in the fiscal 

year from an emergency supplemental appropriation, the size of the 

unobligated balance carried forward to the next fiscal year may be greater 

than otherwise estimated.

Understanding an agency’s processes for estimating and managing 

carryover balances provides information to assess how effectively 

agencies anticipate program needs and ensure the most efficient use of 

resources. If an agency does not have a robust strategy in place to 

manage carryover balances, or is unable to adequately explain or support 

the reported carryover balance, then a more in-depth review is warranted. 

In those cases, balances may either fall too low to efficiently manage 

operations or rise to unnecessarily high levels, producing potential 

opportunities for those funds to be used more efficiently elsewhere.

How Does the Agency 

Estimate and Manage 

Carryover Balances?

Examples of specific questions to understand what affects the size and 

composition of balances include 

• How has the account’s balance changed over time? How has the composition of 

the carryover balance (i.e., the unobligated and obligated portions) changed over 

time?

o Has the agency’s rate of obligation significantly slowed or increased as a 

result of certain factors (e.g., application or review periods, regulatory 

issuance)?

• What portion of unobligated funds has the agency labeled as committed for 

specific uses?

• What conditions or external events have occurred outside the agency’s control 

(e.g., events that led to changes in program demand)?

o Were there any changes to accounting, regulatory, or statutory requirements 

related to the account’s balance (e.g., bid protests, receipt of supplemental 

appropriations, continuing resolutions)?

• Are there questions about the agency’s ability or capacity to carry out the program 

due to previously reported weaknesses (e.g., excessive risks, poor performance, 

unmet objectives)?

• Are interim milestones being met to ensure projects are carried out on schedule? 

o Are there known production issues that could lead to delays?

• What opportunities exist to deobligate unliquidated balances (e.g., up-front 

obligations to contractors, grants to states)?
Page 12 GAO-13-798 Budget Issues

To provide context and perspective in terms of an individual account or 

program, we selected a nongeneralizable sample of eight accounts and 

conducted further analysis of their carryover balances (see table 2). Our 

analysis is framed in the context of the four key overarching questions 

presented in the previous section. For the purpose of this report, we did 

not seek to identify specific savings related to the selected accounts. 

Detailed information on our analysis of each of the eight accounts is 

presented in appendix III.

Table 2: Eight Selected Accounts for Further Review

Account name (department) Designation

Government Sponsored Enterprise Preferred Stock Purchase Agreements (Dept. of the Treasury) Mandatory

Exchange Stabilization Fund (Dept. of the Treasury) Mandatory

Federal Housing Administration-Mutual Mortgage Insurance Capital Reserve (Dept. of Housing and Urban 

Development)

Mandatory

Community Development Fund (Dept. of Housing and Urban Development) Split 

U.S. Army Corps of Engineers Civil Works-Construction (Dept. of Defense) Discretionary

Public Health and Social Services Emergency Fund (Dept. of Health and Human Services) Discretionary

Army Aircraft Procurement (Dept. of Defense) Discretionary

Homeless Assistance Grants (Dept. of Housing and Urban Development) Discretionary

Source: GAO analysis of OMB MAX data.

Note: Split accounts contain both mandatory and discretionary funds.

Selected Agencies 

Managed Balances 

According to Mission, 

Funding, Operations, 

and Estimated 

Demand for Services

Examples of specific questions to understand how agency estimation and 

management practices affect balances include

• What assumptions or factors did the agency incorporate into its estimate of the 

account’s carryover balance (e.g., historical experience, demand models)?

• To what extent and how often does the agency revisit or adjust estimates of 

unobligated balances to reflect historical data or other information?

• Does the agency have a routine mechanism for reviewing its obligations and 

determining whether there are opportunities to deobligate funds (e.g., written 

procedures or ad hoc processes)?

• What is the agency’s timeline for obligating and expending funds in the account?

o Does the agency or program tend to under-execute its budget?

o What is the spendout rate after funds have been obligated?

• Has the agency followed its own procedures for ensuring fiscally responsible 

management of balances?
Page 13 GAO-13-798 Budget Issues

The accounts in our review contained carryover balances so that they 

could support the agency’s ability to carry out its mission. The eight 

accounts we reviewed received multi-year or no-year funds and 

supported a wide variety of missions, such as homeless assistance, 

aquatic ecosystem restoration, disaster recovery, financial market 

stability, and military readiness. Accordingly, the specific types of 

activities funded through the accounts varied as well, including 

construction projects, procurement, grants, and emergency 

preparedness.9

For example, the Mutual Mortgage Insurance Capital Reserve account 

maintains a balance for unexpected insurance claim expenses and was 

established to hold reserve funds to meet Federal Housing 

Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund) 

statutory capital reserve requirement. Under the MMI Fund, FHA insures 

a variety of mortgages for home purchases and refinancing to meet the 

housing needs of traditionally underserved borrowers.

Over the fiscal year 2007 through 2012 period, each of 

the accounts had a carryover balance that was tied to the manner in 

which the agency went about fulfilling its related mission responsibilities.

10

Alternatively, the Government Sponsored Enterprise (GSE) Preferred 

Stock Purchase Agreements account was established to preserve 

liquidity in the housing market through two GSEs: (1) the Federal National 

Mortgage Association (Fannie Mae) and (2) the Federal Home Loan 

Mortgage Corporation (Freddie Mac). The account maintains a carryover 

balance composed entirely of unobligated funds, which is designed such 

The carryover 

balance in the capital reserve account is composed entirely of 

unobligated funds and is affected by changes in the anticipated 

performance of FHA-insured mortgages. Consequently, the housing crisis 

that started in 2007 had a significant effect on the size of the account’s 

unobligated balance. During the housing crisis, the balance was drawn 

down as more pessimistic forecasts of economic conditions—house 

prices, in particular—resulted in higher projected insurance claims. In 

fiscal year 2007, the unobligated balance was approximately $21 billion, 

but the balance had decreased to $3.3 billion by fiscal year 2012.

 9 An individual account may support an entire program, a portion of a program, or multiple 

programs.

10FHA also insures reverse mortgages that permit persons 62 and older to convert their 

home equity into cash advances.

Carryover Balances 

Supported Programmatic 

Mission
Page 14 GAO-13-798 Budget Issues

that the Department of the Treasury (Treasury) has the authority to 

transfer sums as needed to the GSEs to ensure their positive net worth; 

that is, when the two GSEs’ liabilities exceed assets. Such payments are 

made on a quarterly basis if needed and decrease the account balance 

accordingly. Created in 2008, the account’s unobligated balance peaked 

in 2009 at $304 billion, after Congress authorized an increase to the 

allowable funding commitment Treasury could provide to the GSEs. 

Subsequently, the balance gradually declined through 2012.11

The sources of funding and their fiscal characteristics across our sample 

of accounts varied. Three accounts were made up of solely mandatory 

amounts, four consisted solely of discretionary funds, and one account 

was split: it had a combination of both mandatory and discretionary funds.

Accounts in our review that received discretionary funds were funded by 

annual appropriations and supplemental appropriations. The period of 

availability of funds included multi-year and no-year money provided 

through annual or supplemental appropriations, or both.

The sources and fiscal characteristics of funding for an account or 

program affect the timing of when funds are obligated and disbursed, and 

provide insight into why amounts may be carried forward from one fiscal 

year to the next. For example, in some cases where an account received 

supplemental appropriations, the level of carryover funds was significantly 

affected by the timing of that supplemental appropriation. For example, 

the Community Development Fund (CDF) account, which primarily 

supports the Community Development Block Grant (CDBG) program, 

received a large supplemental appropriation on September 30, 2008, to 

provide disaster relief to areas affected by hurricanes, floods, and other 

natural disasters. The receipt of supplemental funds at the end of the 

fiscal year caused a significant spike in the account’s carryover balance 

for that year.

Additionally, the timing of final appropriations decisions had a significant 

effect on the size of unobligated balances in certain accounts. When 

continuing resolutions (CR) are enacted in lieu of annual appropriations 

bills, it creates uncertainty about both the timing and level of funding that 

ultimately will be available. For example, agencies are directed to operate 

 11 As part of the purchase agreements with the GSEs, Treasury was entitled to receive 

cumulative cash dividends on the senior preferred stock from the date of initial issuance 

through December 31, 2012. These amounts were deposited in the General Fund.

Sources and Fiscal 

Characteristics of Funding 

Affected Timing and Use 

of Balances
Page 15 GAO-13-798 Budget Issues

at a conservative rate of spending while CRs are in effect, thus 

compressing the time period to obligate funds once final appropriations 

decisions are made. We have previously reported that this also limits an 

agency’s management options.12

For each of the accounts in our review, the way an agency or program 

operates affected the size and composition of carryover balances. During 

fiscal years 2007 through 2012, the size of the carryover balances in each 

of the eight accounts we reviewed ranged from a low of $2.5 billion in the 

U.S. Army Corps of Engineers-Civil Works Construction account to $304 

billion in Treasury’s GSE Preferred Stock Purchase Agreements account. 

Depending on the needs of the program and the way the agency 

managed the funding, the portion of the carryover balance attributed to 

unobligated versus obligated also varied across the eight accounts. For 

example, the GSE purchase agreement account, which was created in 

2008, had a large unobligated balance and no obligated balance. The 

account made direct quarterly payments to Fannie Mae and Freddie Mac 

as needed. The spendout rate was very quick—that is, funds were 

disbursed soon after obligation—which resulted in the agency reporting 

no obligated balance in the account by year end. Accordingly, the 

remaining unobligated balance represents the cash balance in the 

account.

In addition to affecting the rate of 

obligations, agencies may be uncertain how Congress will ultimately 

choose to direct funds until final appropriations decisions are made. For 

example, the U.S. Army Corps of Engineers develops and presents 

construction plans for specific projects as part of its annual budget 

request. Corps officials reported that in some cases, committee reports 

accompanying appropriations acts included language directing the Corps 

to carry out additional construction projects than those which already had 

work plans developed. Consequently, Corps officials said obligating the 

funds to support these additional priorities was delayed while they 

developed the necessary work plans.

In contrast, the carryover balance in Army’s Aircraft Procurement account 

was largely made up of unliquidated obligations. This was due, in part, to 

the nature of the procurement cycle, which results in a slower spendout 

rate. As the agency entered into a contract, funds were obligated up front 

 12 GAO, Continuing Resolutions: Uncertainty Limited Management Options and Increased 

Workload in Selected Agencies, GAO-09-879 (Washington, D.C.: Sept. 24, 2009).

Agency Operations 

Affected the Size and 

Composition of Carryover 

Balances
Page 16 GAO-13-798 Budget Issues

to reflect the government’s liability. However, funds were disbursed only 

as work was completed according to the terms of the contract.

In the case of the grant accounts we reviewed, the size of the carryover 

balance depended on the particular grant cycle. For example, the 

carryover balance in the Department of Housing and Urban 

Development’s (HUD) Homeless Assistance Grants account contained a 

relatively smaller portion of unobligated funds compared to obligated 

funds. The unobligated balance resulted from the timing of the grant 

award process, which is done on a calendar year rather than fiscal year 

basis. Consequently, while a portion of funds are unobligated at the end 

of the fiscal year, the agency plans to award grants at a later date during 

the current or next calendar year, likely during a new fiscal year, at which 

point the available multi-year funds will be obligated. The size of the 

obligated but unliquidated balance depends on the rate at which the 

grantees draw down, or spend, the funds.

Some accounts experienced a dramatic spike in their balances while 

others remained relatively steady. For example, when the Exchange 

Stabilization Fund (ESF) received almost $50 billion in allocations from 

the International Monetary Fund (IMF) over a one-month period late in 

fiscal year 2009, the unobligated balance spiked. Treasury officials said 

the new allocations were an important element of the response to the 

global economic crisis. In addition, beginning in fiscal year 2010, the size 

of the obligated portion of the balance in the account grew dramatically 

after Treasury implemented a budgetary reporting change that resulted in 

significant adjustments to ESF account balances for fiscal years 2010 

through 2012.

The methods by which agencies in our sample estimated future carryover 

balances depended, in part, on whether the account was mandatory or 

discretionary. In the case of mandatory accounts, agencies focused on 

future needs of the account and relied on economic indicators as well as 

historical trends to estimate future balances of the account, including 

carryover balances. For example, budget-year estimates of carryover 

balances in the GSE Preferred Stock Purchase Agreements account are 

derived from the projected draws—payments to the two GSEs—from year

to year. To do this, Treasury annually prepares a series of long-range 

forecasts to determine the estimated amount of contingent liability to the 

GSEs under the purchase agreements. Based on the size of the 

projected payments, Treasury estimates the amount of budget authority 

that will be carried over into the next fiscal year.

Estimation and 

Management of Carryover 

Balances Differed between 

Mandatory and 

Discretionary Accounts
Page 17 GAO-13-798 Budget Issues

Similarly, estimated future carryover balances for the Exchange 

Stabilization Fund (ESF) represent projected net interest earnings on 

investments. The estimates are subject to considerable variation, 

depending on changes in the amount and composition of assets and the 

interest rates applied to investments.

Among the eight accounts we reviewed, the discretionary accounts used 

historical data combined with current variables to estimate carryover 

balances. For example, when estimating the carryover amounts in HUD’s

Homeless Assistance Grants (HAG) account, officials said they look at 

the composition of the balance over recent years, including factors such 

as historical rates of obligations and outlays. Additionally, officials 

estimate balances based on experience of which programs are likely to 

request renewals. Estimating the use of the program based on historical 

trends helps officials estimate both the unobligated and obligated portion

of carryover balances.

Given the fiscal pressures facing the nation, examination of carryover 

balances provides an opportunity for enhanced oversight of agencies’

management of federal funds. It also may help identify areas where the 

federal government can improve and maximize the use of resources. The 

increase in the size of total end-of-year carryover balances across the 

federal government between fiscal years 2007 through 2012 may raise 

questions. Is the balance in an account or program appropriate? Does an 

account or program with a significant or growing balance need these 

funds? Do the balances indicate there are opportunities to reduce or 

rescind balances and direct those resources towards other programs or 

priorities?

There is no single answer to these questions—they depend on the 

characteristics of the specific account or program in question. The answer 

requires an analysis of the mission, funding, composition, and agency 

management of carryover balances. Understanding the mission activities 

and goals supported by the account or program in question enhances the 

ability of decision makers and reviewers to see the trade-offs or risks 

involved in deciding to reduce a carryover balance and the consequential 

effect on the agency’s ability to achieve its mission. Understanding the 

details of the fiscal characteristics and source of funding for the account 

or program can highlight the boundaries where real savings opportunities 

exist versus those that would have no real economic benefit.

Concluding 

Observations
Page 18 GAO-13-798 Budget Issues

Careful examination can also provide information about changes in 

factors affecting budget execution in the relevant area. Not all factors 

affecting the size and composition of balances are within an agency’s 

control. Nevertheless, taking into consideration the agency’s processes 

for estimating carryover balances and its ability to effectively manage 

balances throughout the year can draw attention to good practices as well 

as areas where execution could be improved. Given the complex 

characteristics of the various accounts and programs that constitute the 

federal budget, the most effective way to identify real opportunities for 

savings from carryover balances is to analyze them on an account-byaccount or program-by-program basis.

We provided a draft of this report to the Secretaries of Defense, Health 

and Human Services, Housing and Urban Development, and the 

Treasury for review and comment. All four departments generally agreed 

with our findings and provided technical comments that were incorporated 

as appropriate. HHS provided comments that are discussed below and 

reprinted in appendix IV.

The comments submitted by the HHS Assistant Secretary for Legislation 

stressed the need to recognize that our audit focused on a select number 

of federal accounts, which may or may not be representative of all 

government accounts with carryover balances. Furthermore, HHS said 

that any conclusions drawn from the report may not apply across the 

board to all accounts with multi-year or no-year funds. As stated in 

multiple sections of our report, including the objectives, scope, and 

methodology section, we selected a nongeneralizable sample of eight 

accounts with multi-year or no-year funds to use as case illustrations to 

answer the four key overarching questions we identified in this report. Our 

draft report called attention to the varied and unique characteristics 

among the many accounts that make up the federal budget and the need 

to analyze balances on an account-by-account or program-by-program 

basis. Furthermore, we state that the list of evaluative questions we 

identified is not intended to represent all of the questions that could be 

considered when evaluating carryover balances.

HHS emphasized that the Public Health and Social Services Emergency 

Fund has complexities and authorities that may differ from other federal 

accounts. The agency stated that looking at trends over time in an 

account may not be the correct approach to overcome these complexities 

when trying to determine spend rates or reasons for fluctuations in spend 

rates. As noted above, multiple sections of the report cite the variety and 

Agency Comments 

and Our Evaluation
Page 19 GAO-13-798 Budget Issues

uniqueness of the many accounts in the federal budget. Furthermore, as

stated in the report, we deliberately chose a selection of accounts 

representing a variety of characteristics to give a sense of the range of 

issues that may be involved when evaluating carryover balances. We also 

emphasize that reviewing the carryover balance in an account for just a 

single year may reflect events particular to that year and so present an 

incomplete or possibly misleading view of what is happening in a given 

account or program. We still consider a longer view—that is, reviewing 

balances over multiple years—to be the more preferable approach.

We are sending copies of this report to the Secretaries of Defense, Health 

and Human Services, Housing and Urban Development, and the 

Treasury. We are also sending copies of this report to relevant 

congressional committees. In addition, the report is available at no charge 

on GAO’s website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

Susan J. Irving at (202) 512-6806 or irvings@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who have made contributions to 

this report are listed in appendix VI.

Sincerely,

Susan J. Irving

Director for Federal Budget Analysis

Strategic Issues
Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012

Page 20 GAO-13-798 Budget Issues

The size of the overall carryover balances in the federal budget increased 

significantly from 2007 through 2012 with the unobligated portion 

representing approximately one-third of that total balance throughout the 

period. Specifically, the sum of total carryover balances across the federal 

government was $1.5 trillion in fiscal year 2007, of which $471 billion—

approximately 30 percent—was unobligated. At the end of fiscal year 

2012, the sum of total carryover balances across all accounts was $2.2 

trillion, of which $788 billion—approximately 35 percent—was 

unobligated.1

The number of accounts with carryover balances also increased from 

fiscal years 2007 through 2012 with the majority of them reporting 

unobligated balances each year. Specifically, the number of accounts that 

reported carryover balances in fiscal year 2007 was 1,178, of which 895 

reported unobligated balances, or approximately 76 percent. At the end of 

fiscal year 2012, the number of accounts that reported carryover balances 

was 1,274, of which nearly 1,000 reported unobligated balances, or 

approximately 78 percent.2 Included in these numbers are some newly 

established accounts that were created by significant legislation during 

the federal government’s response to the economic downturn and the 

housing crisis, such as the Housing and Economic Recovery Act of 2008, 

the Emergency Economic Stabilization Act of 2008,3

The nature of the funds—whether they are mandatory, discretionary, or 

split

and the 2009 

American Recovery and Reinvestment Act.

4

 1 We analyzed the size, composition, and distribution of carryover balances across all 

accounts in the federal budget and how they changed during fiscal years 2007 through

2012. To do this, we collected and compared agencies’ end-of-year actual unobligated 

balances plus their obligated balances for which payment had not yet been made. These 

data were queried from the Office of Management and Budget’s (OMB) MAX database. To 

determine the reliability of the data, we cross-checked the MAX data against the numbers 

reported in the corresponding President’s Budget Appendices. Data reported in MAX and 

the Budget Appendix are subject to rigorous review and checks through OMB to help 

ensure consistency of the data. Accordingly, such data were considered reliable for the 

purpose of this report.

—influences what opportunities may exist for budgetary savings. For 

2 According to the President’s Fiscal Year 2014 Budget Appendix, there were roughly 

2,000 accounts that comprised the federal budget.

3 Enactment of the Emergency Economic Stabilization Act authorized the establishment of 

the Troubled Asset Relief Program (TARP).

4 Split accounts contain both mandatory and discretionary funds.

Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012
Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012

Page 21 GAO-13-798 Budget Issues

example, if the funds are primarily mandatory, programmatic changes are 

often necessary to change or reduce the size of carryover balances. 

Focusing only on the unobligated portion of carryover balances, figure 1 

shows that mandatory accounts represented an increasing share of the 

federal government’s unobligated balances.5

The 10 largest unobligated balances reported at the end of fiscal year 

2012 were in accounts with mandatory or split funding (see table 3). The 

combined balances in those 10 accounts represented 58 percent of the 

total unobligated balances government-wide that year.

Specifically, in fiscal year 

2007, 23 percent of the total unobligated funds in federal accounts were 

attributed to mandatory accounts. By the end of fiscal year 2012, almost 

48 percent of unobligated balances resided in mandatory accounts.

Table 3: Top Ten Largest Unobligated Balances, Fiscal Year 2012

Account name (department) Designation

Amount

(millions)

1. Government Sponsored Enterprise (GSE) Preferred Stock Purchase Agreements 

 (Treasury)

Mandatory $212,515

2. Exchange Stabilization Fund (Treasury) Mandatory 44,092

3. Employees Life Insurance Fund (OPM) Split 40,326

4. Deposit Insurance Fund (FDIC) Split 37,455

5. Federal-aid Highways (Dept. of Transportation) Split 30,018

6. U.S. Quota, International Monetary Fund (Treasury) Mandatory 21,921

7. Grants to States for Medicaid (Dept. of Health and Human Services) Mandatory 21,091

8. Employees and Retired Employees Health Benefits Fund (OPM) Split 18,510

9. Pension Benefit Guaranty Corporation Fund (Dept. of Labor) Split 15,582

10. Aircraft Procurement, Air Force (Dept. of Defense) Split 14,876

Total $456,386

Source: GAO analysis of OMB MAX data.

Note: Split accounts contain both mandatory and discretionary funds.

 5 Federal accounts are designated as mandatory, discretionary, or split. As defined earlier, 

mandatory refers to budget authority that is provided in laws other than appropriations 

acts. This includes funding for entitlement programs such as Medicare and veterans’

pension programs. Discretionary refers to budget authority that is provided in and 

controlled by annual appropriations acts. Split accounts include both mandatory and 

discretionary funds. 
Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012

Page 22 GAO-13-798 Budget Issues

As shown in figures that follow, during fiscal years 2007 through 2012, 

unobligated balances were concentrated in mandatory accounts and 

centered on three national priorities and eight agencies. The GSE 

Preferred Stock Purchase Agreements account, which was created in 

2008,6

Figure 2: Mandatory Accounts Represented an Increasing Share of Unobligated 

Balances, Fiscal Years 2007-2012

held by far the largest unobligated balance and affected the 

composition of balances across the federal government accordingly.

Note: Split accounts contain both mandatory and discretionary funds. During this period there were 

14 additional accounts with reported unobligated balances. We do not include them here because the 

sum of the balances in those 14 accounts represented less than 0.01 percent of the total unobligated 

balances government-wide.

 6 Enactment of the Housing and Economic Recovery Act (HERA) placed two GSEs—(1) 

the Federal National Mortgage Association (Fannie Mae) and (2) the Federal Home Loan 

Mortgage Corporation (Freddie Mac)—into conservatorship and authorized the 

Department of Treasury to provide necessary funding to maintain liquidity.
Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012

Page 23 GAO-13-798 Budget Issues

The three largest mandatory accounts on average were Treasury’s

• GSE Preferred Stock Purchase Agreement account,

• Exchange Stabilization Fund, and

• Troubled Asset Relief Program (TARP) Housing Programs.

Split accounts with both mandatory and discretionary funds made up 

roughly half of the unobligated balances government-wide in fiscal year 

2007, but decreased to one-third by fiscal year 2012. The three largest 

split accounts on average were the

• Office of Personnel Management’s Employee Life Insurance Fund,

• Federal Deposit Insurance Corporation’s (FDIC) Deposit Insurance 

Fund, and

• Department of Transportation’s (DOT) Federal-aid Highways account.

Discretionary accounts made up the smallest portion of unobligated 

balances across the federal budget. The three largest discretionary 

accounts on average were the

• Department of Education’s State Fiscal Stabilization Fund established 

under the American Recovery and Reinvestment Act,

• Department of Defense’s (DOD) Navy Shipbuilding and Conversion 

account, and

• DOT’s Capital Assistance for High Speed Rail Corridors and Intercity 

Rail Service, established under the American Recovery and 

Reinvestment Act.

Each federal account is assigned to a budget function, which identifies 

the national priority supported by the account.7

 7 Budget function is a classification according to national priority or major purpose served 

(e.g. agriculture, transportation, income security). Each federal activity is placed into a 

single functional classification that best defines the activity’s most important purpose, even 

though many activities serve more than one purpose. Major functions are further divided 

into subfunctions. 

As shown in figure 3, the 

majority of unobligated balances were attributed to three national 

priorities: commerce and housing credit (function 370), national defense 

(function 050), and international affairs (function 150). In general 

throughout this period, commerce and housing credit accounted for the 

largest share of unobligated balances government-wide, growing from 21 

percent in fiscal year 2007 to 37 percent at the end of fiscal year 2012. 
Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012

Page 24 GAO-13-798 Budget Issues

Three accounts contributed significantly to the share of unobligated 

balances attributed to commerce and housing credit: the GSE Preferred 

Stock Purchase Agreements account (newly created in fiscal year 2008), 

the Deposit Insurance Fund account, and the MMI Capital Reserve 

account.

Figure 3: Three National Priorities Accounted for the Largest Share of Unobligated 

Balances, Fiscal Years 2007-2012

Note: “All other” is composed of 12 other budget functions. Budget functions are coded with a threedigit number that directly correlates to a specific national priority.

The economic downturn and housing crisis and the government’s 

response to it was also a major determinant of which agencies accounted 

for the majority of unobligated balances in fiscal years 2007 through

2012. As shown in figure 4, the share of unobligated balances held by 

Treasury, which manages the GSE Preferred Stock Purchase Agreement 

account, grew from 8 percent in fiscal year 2007 to 33 percent in fiscal 

year 2012. For most of the period, Treasury held the largest share of 
Appendix I: Overview of Carryover Balances 

across Federal Accounts in Fiscal Years

2007 through 2012

Page 25 GAO-13-798 Budget Issues

unobligated balances. DOD held the second largest share of unobligated 

balances over the period. Together these two (plus six other agencies 

that accounted for considerably smaller shares) represented 

approximately 80 percent of unobligated balances throughout the period.

If the GSE Preferred Stock Purchase Agreement account was excluded 

from the breakdown shown in figure 4, DOD would represent the largest 

share of unobligated balances during the period.

Figure 4: Unobligated Balances Were Concentrated around Eight Agencies, Fiscal 

Years 2007-2012

Note: “All other” is composed of more than 100 departments/agencies such as the Department of 

Homeland Security and Social Security Administration. The Department of State and International 

Assistance Programs category includes other entities such as the U.S. Agency for International 

Development, the Millennium Challenge Corporation, and the Peace Corps.
Appendix II: Guide for Evaluating

Carryover Balances

Page 26 GAO-13-798 Budget Issues

We developed four key overarching questions to consider in evaluating 

both obligated and unobligated balances. Each of these leads to a set of 

second-tier, more specific questions to help frame the analysis of 

carryover balances. We developed this list of questions from our analysis 

of government-wide guidance on budget preparation, budget execution, 

and internal controls. In addition, we met with federal budget specialists, 

agency officials responsible for managing the eight accounts selected as 

part of our review, and staff within the Office of Management and Budget 

(OMB) to obtain their views on the use of these questions to guide the 

examination of carryover balances. Our prior work on federal budgeting, 

user fees, budget triggers, and managing under continuing resolutions 

also informed the development of these key questions.

Answering each of the four overarching questions provides insight into 

why the balance exists, what size balance is appropriate, and what 

opportunities, if any, for savings exist. In addition, it may provide 

opportunities for enhanced oversight of agencies’ management of federal 

funds and identify areas where the federal government can improve and 

maximize its use of resources. These questions can be applied when 

evaluating carryover balances at either the account or program level. A 

single account may support a single program or multiple programs. 

Conversely a single program may be supported by multiple accounts. 

Further, the balance in a single year may reflect events particular to that 

year and so present an incomplete or possibly misleading view of what is 

happening in a given account or program. Therefore, a longer view is 

preferable.

Since the many accounts that make up the federal budget vary greatly 

and individual accounts have their own unique characteristics, we do not 

suggest that the following set of questions represents all the questions 

that could be considered when evaluating carryover balances. As 

congressional committees, managers, and other reviewers apply these 

evaluative questions, additional questions may arise. In some cases, 

however, a few of the questions may provide sufficient information to 

understand the nature of the balance.

Appendix II: Guide for Evaluating

Carryover Balances
Appendix II: Guide for Evaluating

Carryover Balances

Page 27 GAO-13-798 Budget Issues

Key question Subset of questions

What mission and goals is the account or 

program supporting?

Understanding the mission activities, goals, 

and programs the account supports provides 

insight into whether a program needs to 

maintain a balance to operate smoothly, what 

size balance is appropriate, and whether 

opportunities for savings exist. Such context 

can inform assessments of whether and how to 

reduce carryover balances, and what effect this 

would have on the agency’s ability to carry out 

its mission. For example, an account 

established to provide stability in the financial 

or housing market needs a balance to ensure 

the agency has sufficient resources to respond

quickly to adverse events.

What are the primary mission and goals the account or program is intended to 

achieve?

What is the nature and purpose of the balance and how does it support the mission 

and goals (e.g., counter economic crises, sustain business-like activities, meet 

emergency funding needs)?

Have there been changes to the program or mission that may affect balances (e.g., 

additional responsibilities, major reorganization)?

What type of activity (e.g., grants, procurement, direct services) is the account used 

for to achieve the agency’s mission and goals? What are the implications of 

carryover balances? 

What programs are funded by the account and how much does each contribute, if at 

all, to the carryover balance (e.g., does a large portion of the balance result from any 

particular programs)?

Is it a new account or program or have the program goals and objectives changed?

• How has this affected the ability to obligate funds?

What are the sources and fiscal 

characteristics of the funding?

The sources and fiscal characteristics of the 

funds influence what opportunities may exist 

for savings. If funds are primarily mandatory, 

opportunities are more limited as programmatic 

changes would generally be required to reduce 

balances. In such cases, reducing an account’s 

balance may have no economic benefit and 

instead could impose unnecessary 

administrative costs. If funds are discretionary, 

balances can be controlled by the annual 

appropriations process.

Some accounts or programs may be expected 

to have carryover balances if the agency has 

multi-year or no-year funds. Supplemental 

appropriations enacted late in the fiscal year 

(or for long-term projects) may also increase 

the likelihood, and perhaps expectation, for a 

carryover balance. However, a growing 

carryover balance over a number of years may 

indicate problems executing a program as 

planned.

Accounts that receive funding primarily from 

outside sources, such as fees, have their own 

unique considerations.1

Are the account or program funds mandatory, discretionary or a combination of both?

• In accounts or programs that receive both mandatory and discretionary 

funds, what portion of each are unobligated each year?

For unobligated funds, what is the expected period over which funds will be obligated 

and liquidated (i.e., multiple years versus single year)?

• If over multiple years, what drives the timing of the obligation and liquidation 

of funds (e.g., contract award period, grant cycle)?

Did the account receive supplemental appropriations?

• If so, when were the supplemental appropriations acts enacted? How much 

of the balance is attributed to supplemental appropriations?

To what extent is the activity funded by fees or taxes (e.g., fuel taxes) versus general 

revenues?

• Does the account or program have the authority to use the fees or taxes 

without additional congressional action?

 1 If fees are the primary source of funding, see questions to consider in GAO, Federal 

User Fees: Fee Design Options and Implications for Managing Revenue Instability, 

GAO-13-820 (Washington, D.C.: Sept. 30, 2013).
Appendix II: Guide for Evaluating

Carryover Balances

Page 28 GAO-13-798 Budget Issues

Key question Subset of questions

What factors affect the size or composition 

of the carryover balance?

It is important to consider which factors were 

within the agency’s control and which were not. 

Agencies or programs may operate in a way 

that contributes to a faster or slower spendout 

rate for a particular account. Understanding the 

spendout rate can help to identify what drives 

the size of the unobligated and obligated 

portions of the balance.

In addition, external events beyond agencies’

control—such as natural disasters or economic 

crises—can dramatically affect carryover 

balances. For example, if an agency receives a 

sudden inflow of funds late in the fiscal year 

from a supplemental appropriation, the size of 

the unobligated balance carried forward to the 

next fiscal year may be greater than otherwise 

estimated.

How has the account’s balance changed over time? How has the composition of the 

carryover balance (i.e., the unobligated and obligated portions) changed over time?

• Has the agency’s rate of obligation significantly slowed or increased as a 

result of certain factors (e.g., application or review periods, regulatory 

issuance)?

What portion of unobligated funds has the agency labeled as committed for specific 

uses? 

What conditions or external events have occurred outside the agency’s control (e.g., 

events that led to changes in program demand)?

• Were there any changes to accounting, regulatory, or statutory 

requirements related to the account’s balance (e.g., bid protests, receipt of 

supplemental appropriations, continuing resolutions)?

Are there questions about the agency’s ability or capacity to carry out the program 

due to previously reported weaknesses (e.g., excessive risks, poor performance, 

unmet objectives)?

Are interim milestones being met to ensure projects are carried out on schedule?

• Are there known production issues that could lead to delays?

What opportunities exist to deobligate unliquidated balances (e.g., up-front 

obligations to contractors, grants to states)?

How does the agency estimate and manage 

carryover balances?

Understanding an agency’s processes for 

estimating and managing carryover balances 

provides information to assess how effective 

agencies are in anticipating program needs 

and ensuring the most efficient use of 

resources. If an agency does not have a robust 

strategy in place to manage carryover balances 

or is unable to adequately explain or support 

the reported carryover balance, then a more indepth review is warranted with the potential to 

identify opportunities for budgetary savings.

What assumptions or factors did the agency incorporate into its estimate of the 

account’s carryover balance (e.g., historical experience, demand models)?

To what extent and how often does the agency revisit or adjust estimates of 

unobligated balances to reflect historical data or other information?

Does the agency have a routine mechanism for reviewing its obligations and 

determining whether there are opportunities to deobligate funds (e.g., written 

procedures or ad hoc processes)?

What is the agency’s timeline for obligating and expending funds in the account?

• Does the agency or program tend to under-execute its budget?

• What is the spendout rate after funds have been obligated?

Has the agency followed its own procedures for ensuring fiscally responsible 

management of balances?

Source: GAO analysis.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 29 GAO-13-798 Budget Issues

As part of our review, we selected a nongeneralizable sample of eight 

accounts and analyzed their end-of-year carryover balances for fiscal 

years 2007 through 2012. These eight accounts serve as case 

illustrations to better understand why carryover balances existed and the 

types of factors that affected the size of the balances. We selected 

accounts based on several characteristics including the size of the 

average unobligated balance, budget function, type of account, agency, 

and whether the account was composed of mandatory or discretionary 

funds.

Our analysis is presented in terms of the four overarching key questions 

we developed in our evaluative guide outlined in appendix II. Because of 

the variation in the size of the accounts, the graphics depicted in each 

case illustration are scaled to the size of the individual account; as a 

result, the graphics cannot be directly compared to one another. Further, 

the second figure in each case illustration includes both actual 

unobligated balances as well as two sets of estimates: budget year and 

current year. The budget year (BY) is a term used in the budget 

formulation process to refer to the fiscal year for which the budget is 

being considered. For example, estimates for the fiscal year 2012 budget 

year were reported during fiscal year 2011. Current year (CY) is a term 

used in the budget formulation process to refer to the fiscal year 

immediately preceding the budget year under consideration; such that for 

fiscal year 2012, current year estimates were reported part way through 

2012.

The eight accounts we reviewed as case illustrations were:

• Department of Defense: Army Aircraft Procurement

• Department of Defense: U.S. Army Corps of Engineers-Civil Works, 

Construction

• Department of Health and Human Services: Public Health and Social 

Services Emergency Fund

• Department of Housing and Urban Development: Community 

Development Fund

• Department of Housing and Urban Development: Federal Housing 

Administration-Mutual Mortgage Insurance Capital Reserve

• Department of Housing and Urban Development: Homeless 

Assistance Grants

• Department of the Treasury: Exchange Stabilization Fund

• Department of the Treasury: Government Sponsored Enterprise 

(GSE) Preferred Stock Purchase Agreements

Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 30 GAO-13-798 Budget Issues

Account Name: Aircraft Procurement, Army (APA)

Agency: Department of Defense

National Priority: Department of Defense-Military 

(Budget Subfunction 051)

What Mission and Goals Is the Account or Program Supporting?

The Army uses the Aircraft Procurement account for construction, 

procurement, production, modification, and modernization of aircraft 

equipment. The Army purchases and maintains aircraft in order to support 

activities such as combat missions and operations. For example, the 

Army has a contract to develop an unmanned aircraft system, which will 

be able to carry four aircraft as well as other necessary equipment.

What Are the Sources and Fiscal Characteristics of the Funding?

APA receives annual and supplemental appropriations that are available 

for obligation for three years. All funds in the account are discretionary.

What Factors Affect the Size or Composition of the Carryover 

Balance?

As shown in figure 5, carryover balances increased steadily from 

approximately $7 billion in fiscal year 2007 to $13 billion in fiscal year 

2011 before then decreasing slightly at the end of fiscal year 2012. The 

majority of the carryover balance was composed of unliquidated 

obligations.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 31 GAO-13-798 Budget Issues

Figure 5: Carryover Balances in the Army’s Aircraft Procurement Account, Fiscal 

Years 2007-2012

Note: Balances shown here are end-of-year.

According to DOD officials, the majority of the carryover balance is 

obligated but unliquidated due to the nature of the procurement process 

for aircraft, which can take many years. Once the Army identifies a 

requirement and receives appropriations to fund that requirement, it 

issues a request for proposals to develop a product to meet the 

requirement. After the request for proposal is issued, awarding a contract 

generally takes three to nine months. Once a contract is in place and 

funds are obligated, the agency periodically disburses funds to the 

contractor as milestones are reached. The majority of the payment is 

made upon delivery.

DOD officials said a portion of unobligated funds are committed 

(reserved) for specific projects. However, balances that are considered 

“committed” are not officially obligated until a contract is awarded. For 

example, in 2011 the subaccount dedicated to modifications of aircraft 

had an unobligated balance of about $420,000, of which approximately 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 32 GAO-13-798 Budget Issues

$355,000, or about 85 percent, was already “committed” to specific 

projects.

In 2009, several events contributed to a delay in the contracting cycle that 

resulted in higher unobligated balances for 2010 and 2011. A 2009 

executive policy memo directed DOD to issue new guidance regarding 

sole-source contracting. In anticipation of the guidance, APA officials 

chose to wait to award any further contracts. Additionally that year, we

identified issues with the Defense Contract Audit Agency, including with 

the independence of their auditors.1

How Does the Agency Estimate and Manage Carryover Balances?

As a result of these two factors, APA 

reviewed and revised its processes, which delayed the contracting 

timeline that year from approximately 3 to 9 months to 9 to 18 months.

DOD estimates carryover balances for the Army Aircraft Procurement 

account using a formula based on historical data. The agency first 

determines the average obligation rate over the previous five years. Using 

this weighted average, officials then apply that rate against current 

obligated balances in the account to estimate the amount of unobligated 

funds and unliquidated obligations that will carry forward to the next fiscal 

year.

As shown in figure 6, actual unobligated balances have steadily risen, 

while estimates have remained fairly steady. Further, actual unobligated 

balances were higher than estimates for all years, with the greatest 

differences occurring in 2010 through 2012. This suggests that the 

agency’s model for estimating unobligated balances was fairly accurate 

for 2007 and 2008, and generally underestimated unobligated balances 

for years 2009 through 2012.

 1 GAO, DCAA Audits: Widespread Problems with Audit Quality Require Significant 

Reform. GAO-09-468 (Washington, D.C.: Sept. 23, 2009). 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 33 GAO-13-798 Budget Issues

Figure 6: Estimated vs. Actual Unobligated Balances in the Army’s Aircraft 

Procurement Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 34 GAO-13-798 Budget Issues

Account Name: Construction

Agency: U.S. Army Corps of Engineers-Civil Works

National Priority: Water Resources (Budget Subfunction 301)

What Mission and Goals Is the Account or Program Supporting?

The U.S. Army Corps of Engineers’ (Corps) Construction account funds 

three main mission areas: flood and storm damage reduction, commercial 

navigation, and aquatic ecosystem restoration within the United States. 

The Corps engages in projects in waterways throughout the nation, such 

as in Ohio, Pennsylvania, Illinois, and Kentucky. While some projects are 

short term, others are long term and may involve a series of steps, such 

as rehabilitating a dam over time. The account allocates funding by 

project based on Congressional direction generally provided in committee 

reports accompanying the Corps’ appropriations, as well as various 

performance-based guidelines, including projects with very high economic 

and environmental returns and those close to completion.

What Are the Sources and Fiscal Characteristics of the Funding?

The Construction account receives funding through both annual and 

supplemental appropriations. Annual appropriations are allocated by 

projects. All funds in the account are discretionary and are typically 

available until expended. In addition, the account receives transfers from 

other sources including the Inland Waterways Trust Fund and the Harbor 

Maintenance Trust Fund. The account also receives funds from other 

federal agencies including the Department of Homeland Security and the 

Department of Veterans’ Affairs for specific construction projects.

What Factors Affect the Size or Composition of the Carryover 

Balance?

As shown in figure 7, during fiscal years 2007 through 2012 carryover 

balances peaked at nearly $10 billion in fiscal year 2009 before gradually 

decreasing to $5 billion in fiscal year 2012. The majority of the carryover 

balance was unobligated funds.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 35 GAO-13-798 Budget Issues

Figure 7: Carryover Balances in U.S. Army Corps of Engineers-Civil Works 

Construction Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.

A portion of the carryover balance is a result of no-year supplemental 

appropriations. Corps officials said that, in some cases, supplemental 

funds were not intended to be obligated immediately because they fund 

long-term projects. For example, between fiscal years 2006 and 2009, the 

Construction account received approximately $5 billion to aid in disaster 

recovery following Hurricane Katrina, a portion of which had still not been 

expended in 2012. In fiscal years 2009 through 2012, the size of the 

obligated portion of the balance was larger than in previous years as the 

Corps had the opportunity to obligate funds from supplemental 

appropriations it received.

Further, officials cited delays in final appropriations execution decisions 

as a contributing factor to increased unobligated balances at the end of 

each fiscal year. The Corps develops and presents construction plans for 

specific projects as part of its annual budget request. In some cases, 

committee reports accompanying appropriations acts included language 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 36 GAO-13-798 Budget Issues

directing the Corps to carry out additional construction work beyond that 

for which the agency had already developed work plans. Consequently, 

Corps officials said obligating the funds to support this additional work 

was delayed until they developed the necessary work plans.

How Does the Agency Estimate and Manage Carryover Balances?

Corps officials said that carryover on individual projects is influenced by 

factors such as real estate and environmental considerations, including 

whether a project will affect local water quality. Officials also use ten-year 

historical averages of the account’s obligations and outlays to identify 

possible trends that may affect balances going forward. To manage 

carryover balances, officials said they adjust work plans consistent with 

Congressional direction.

As shown in figure 8, the actual unobligated balance was larger than what 

the agency initially estimated each year during fiscal years 2007 through

2012. While in some cases, current year estimates were closer to actuals, 

the graph of estimated balances below suggests that the agency’s 

estimation process generally underestimated the amount of unobligated 

funds that would be carried over each year. Agency officials said that in 

some cases, this was due to supplemental appropriations that were 

received after budget estimates were reported.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 37 GAO-13-798 Budget Issues

Figure 8: Estimated vs. Actual Unobligated Balances in the U.S. Army Corps of 

Engineers-Civil Works Construction Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 38 GAO-13-798 Budget Issues

Account Name: Public Health and Social Services 

Emergency Fund (PHSSEF)

Agency: Department of Health and Human Services

National Priority: Health Care Services (Budget Subfunction 551)

What Mission and Goals Is the Account or Program Supporting?

The Department of Health and Human Services’ (HHS) Public Health and 

Social Services Emergency Fund (PHSSEF) provides resources to 

support a comprehensive program to prepare for the public health and 

medical consequences of bioterrorism or other public health 

emergencies. Funds in this account support several offices and programs 

tasked with emergency preparedness including the Office of the Assistant 

Secretary for Preparedness and Response (ASPR), which receives the 

largest share of appropriations in the account. Within ASPR, the largest 

programs are the Hospital Preparedness Program and the Biomedical 

Advanced Research and Development Authority. Other programs and 

offices that PHSSEF supports include HHS’ Cybersecurity program, the 

Medical Reserve Corps, and Pandemic Influenza. In addition, the account 

includes the balance of the Special Reserve Fund, which supports the 

procurement of biodefense countermeasures as part of the Project 

BioShield Act.2

What Are the Sources and Fiscal Characteristics of the Funding?

The account receives annual appropriations, supplemental 

appropriations, and transfers from other accounts outside of HHS. Annual 

appropriations primarily support ASPR and consist of a mix of both oneyear and multi-year funds. Supplemental appropriations were provided for 

 2 In 2004, Congress passed the Project BioShield Act (Pub. L. No. 108-276) to provide the 

federal government with new authorities related to the development, procurement, and

use of medical countermeasures against chemical, biological, radiological, and nuclear 

(CBRN) terrorism agents. The act has three main provisions: (1) the creation of a 

government-market guarantee by permitting the HHS Secretary to obligate funds to 

purchase countermeasures while they still need several more years of development, (2) 

the establishment of a process through which the HHS Secretary may temporarily allow 

the emergency use of countermeasures that lack Food and Drug Administration (FDA) 

approval, and (3) the provision of expedited procedures for HHS to spend CBRN 

terrorism-related funds, including procuring products, hiring experts, and awarding 

research grants. The balance in the Special Reserve Fund from fiscal year 2004 

appropriations will no longer be available for obligation after September 30, 2013.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 39 GAO-13-798 Budget Issues

preparedness and response to pandemic influenza in 2009 and 

emergency relief and reconstruction aid related to the earthquake in Haiti 

in 2010. Those funds are available until expended (no-year funds). In 

addition, the account received a transfer of funds from the Department of 

Homeland Security for Project BioShield activities and reimbursements 

from the Federal Emergency Management Agency. All funds in the 

account are discretionary.

What Factors Affect the Size or Composition of Carryover 

Balances?

As shown in figure 9, the actual carryover balance dramatically increased 

in fiscal year 2009, to approximately $11 billion, and subsequently 

declined through 2012. In most years, the obligated portion of the balance 

was greater than the unobligated portion. However, in fiscal year 2010, 

with the receipt of supplemental appropriations, the unobligated balance 

was almost twice as large as the obligated portion of the balance.

Figure 9: Carryover Balances in the Public Health and Social Services Emergency 

Fund, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 40 GAO-13-798 Budget Issues

Agency officials said that carryover balances in the account were 

primarily the result of no-year supplemental appropriations. For example, 

in fiscal years 2009 and 2010, balances reflect supplemental 

appropriations to address the H1N1 pandemic influenza outbreak and

emergency relief after the 2010 earthquake in Haiti. In addition, funds 

transferred from DHS for Project BioShield activities contributed to the 

carryover balance.

In addition, some of the multiple programs that PHSSEF supports have 

slower spendout rates than others. For example, agency officials 

explained that funds supporting Project BioShield activities were available 

for obligation at intervals over a ten-year period during fiscal years 2004 

to 2013. They said the intent of the funding method was to provide 

procurement funds with availability over a long period of time to 

encourage industry to engage in the advanced development of 

countermeasures. As a result, some portion of unobligated funds would 

be carried forward each year. Once HHS has entered into a contract for 

the procurement of a specific countermeasure, agency officials said it 

may take years to progress through contractual milestones, thereby 

contributing to the size of the obligated portion of the carryover balance in 

any given year.

In contrast, agency officials said the spendout rate of PHSSEF funds 

supporting National Special Security Events (NSSE) is relatively shorter. 

Planned events which require HHS support include the Presidential 

Inauguration and July 4th celebrations on the National Mall. An example 

of an unplanned event is when HHS used PHSSEF funds to provide 

mental health response teams to Sandy Hook Elementary students, 

families, and staff after the school shooting in December 2012. HHS 

officials said the obligation of these funds for NSSE purposes is 

somewhat sporadic, but once obligated, funds are quickly disbursed.

How Does the Agency Estimate and Manage Carryover Balances?

Agency officials said the Office of Budget works with program and budget 

offices to obtain information to incorporate into budget year estimates of 

carryover balances. These balances are informed by prior year actuals 

and take into account any planned procurement, other contract actions, 

and grant awards.

As shown in figure 10, during fiscal years 2007 through 2012, actual 

unobligated balances in the account were higher than budget-year

estimates in most years with the largest differences occurring in fiscal 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 41 GAO-13-798 Budget Issues

years 2009 and 2010. Agency officials said emergency supplemental 

appropriations contributed to higher than expected unobligated balances 

in 2009 and 2010. Specifically, supplemental appropriations were 

provided to address the influenza pandemic in 2009 and to respond to the 

earthquake in Haiti in 2010. Both events were unexpected and 

accordingly, were not included in the agency’s initial estimates of the 

unobligated balance. In addition, HHS officials said obligations slowed in 

fiscal year 2010 when the influenza pandemic proved to be less severe 

than originally anticipated. In both 2011 and 2012 unobligated balances 

were lower than budget-year estimates.

Figure 10: Estimated vs. Actual Unobligated Balances in the Public Health and 

Social Services Emergency Fund, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 42 GAO-13-798 Budget Issues

Account Name: Community Development Fund (CDF)

Agency: Department of Housing and Urban Development

National Priority: Community Development 

(Budget Subunction 451)

What Mission and Goals Is the Account or Program Supporting?

The Community Development Fund (CDF) primarily supports programs 

targeted for low to moderate income individuals and families that include 

activities such as job creation. The Department of Housing and Urban 

Development (HUD) uses the funds in this account to distribute grant 

assistance through several programs, the largest of which is the 

Community Development Block Grant (CDBG). CDBG provides formula 

grants to units of general local government and states to support activities 

such as public infrastructure improvements, housing, rehabilitation, and 

public service activities including child care.

CDF also supports other programs such as Section 108 loan 

guarantees,3 the Neighborhood Stabilization Program (NSP)4

What Are the Sources and Fiscal Characteristics of the Funding?

and 

disaster recovery programs. CDF has received large supplemental 

appropriations for various disaster recovery efforts such as those 

following Hurricane Katrina and Hurricane Wilma.

CDF receives annual CDBG appropriations for grants to state and local 

governments which are available for obligation for three years. HUD 

officials said that CDBG funds are distributed through formulas, with 

approximately 70 percent allocated to entitlement communities and 30 

percent to non-entitlement communities. According to HUD, entitlement 

 3 The Section 108 Loan Guarantee Program provides communities with a source of 

financing for economic development, housing rehabilitation, public facilities, and largescale physical development projects.

4 The Neighborhood Stabilization Program was established for the purpose of stabilizing 

communities that have suffered from housing foreclosures and abandonment. The first 

phase of this program (NSP1) provided $3.92 billion in grant funds. The American 

Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) provided an additional $2 

billion in NSP funds (referred to as NSP2) and changed several aspects of the program. 

Later, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-

203) provided an additional $1 billion in funding for the program (referred to as NSP3).
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 43 GAO-13-798 Budget Issues

communities are defined by statute, as cities with populations greater 

than 50,000 people or urban counties with populations of 200,000 or 

more. 

CDF also receives supplemental appropriations for its disaster recovery 

programs, which have varying periods of availability depending on the 

legislation. In addition, HUD officials said funds supporting NSP1 and 

NSP3 are mandatory and all CDBG funds are discretionary.

What Factors Affect the Size or Composition of the Carryover 

Balance?

During fiscal years 2007 through 2012, the size of the carryover balance 

in the CDF account ranged from approximately $16 billion to about $29 

billion. As shown in figure 11, the obligated but unexpended portion of the 

balance remained fairly steady over the six year period. The unobligated 

portion peaked in 2008 and subsequently decreased for the remainder of 

the period.

Figure 11: Carryover Balances in the Community Development Fund, Fiscal Years 

2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 44 GAO-13-798 Budget Issues

Supplemental appropriations contributed to larger than anticipated 

unobligated balances in fiscal years 2008 and 2009. Although officials 

said they make an effort to obligate supplemental appropriations quickly, 

if funds are received late in the fiscal year, it is more likely that a portion 

of the unobligated funds will carry over into the next fiscal year. For 

example, in 2008, HUD received a supplemental appropriation on 

September 30th to provide disaster relief to areas affected by hurricanes, 

floods, and other natural disasters. The timing of the appropriation led to 

a large increase in the unobligated balance carried over into the next 

fiscal year. In 2009, additional supplemental appropriations were enacted.

HUD officials said they typically obligate funds quickly; however, the rate 

of expenditure may be slow, resulting in a large obligated, unexpended 

balance from year to year. This is because once funds are obligated, the 

time it takes to expend funds depends on the rate at which grantees are 

drawing down their grant money. In the case of supplemental funds, the 

increased amount of grants may be a challenge for grantees to disburse.

For example, HUD officials said that in one instance, a grantee that 

typically received a couple hundred thousand dollars per year received 

approximately $18 million in grant funds. Such a dramatic increase in the 

amount of grant funding posed administrative challenges for the grantee, 

which contributed to a slower spendout rate.

How Does the Agency Estimate and Manage Carryover Balances?

Estimates of carryover balances are determined through a review of prior 

year balances in the account. For example, when estimating the portion 

of the balance attributed to the traditional CDBG program, officials said 

they look at the composition of carryover balances from recent years, 

including whether the balances are composed of funds in their first year, 

second year, or third year of availability. They also consider historical 

rates of obligations and outlays. For the portion of the balance attributed 

to disaster recovery grants, it is more difficult to estimate carryover 

because estimating the timing and size of supplemental appropriations for 

disaster recovery are beyond the agency’s control.

As shown in figure 12, actual unobligated balances were larger than 

estimated during fiscal years 2007 through 2012, with the largest 

difference occurring in 2008. Although the budget-year estimate of the 

unobligated balance for fiscal year 2007 was fairly close to the actual, the 

agency generally underestimated the amount of unobligated funds that 

would be carried over each year. For example, in 2008 and 2009, as 

discussed above, the agency unexpectedly received supplemental 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 45 GAO-13-798 Budget Issues

appropriations that caused the actual balance to be considerably higher 

than the previous estimates.

Figure 12: Estimated vs. Actual Unobligated Balances in the Community 

Development Fund, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 46 GAO-13-798 Budget Issues

Account Name: Federal Housing Administration 

Mutual Mortgage Insurance (MMI) Capital 

Reserve Account

Agency: Department of Housing and Urban Development

National Priority: Mortgage Credit (Budget Subfunction 371)

What Mission and Goals Is the Account or Program Supporting?

The MMI Capital Reserve account supports the Federal Housing 

Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund). 

Under the MMI Fund, FHA insures a variety of mortgages for home 

purchases and refinancing to meet the housing needs of traditionally 

underserved borrowers.5

Like other federal credit agencies, FHA estimates and re-estimates the 

net lifetime costs—known as credit subsidy costs—of the mortgages it 

insures. When the present value of estimated cash inflows (such as 

borrower insurance premiums) exceed the present value of expected 

cash outflows (such as insurance claims), negative subsidies are 

generated. These negative subsidies are held in the MMI Capital Reserve 

account as an unobligated balance. When FHA experiences 

unanticipated increases in estimated credit subsidy costs (upward reestimates), balances in the MMI Capital Reserve account help to cover 

these increases.

FHA has played a prominent role in the singlefamily mortgage market and accounted for more than 25 percent of the 

home purchase mortgages originated in fiscal year 2012.

What Are the Sources and Fiscal Characteristics of the Funding?

The MMI Capital Reserve account accumulates negative subsidies 

resulting from FHA’s single-family mortgage insurance activities. It also 

earns interest and realizes gains on investment in nonmarketable 

Treasury securities. In the event the MMI Capital Reserve account is 

depleted, FHA is authorized to draw on permanent and indefinite budget 

authority to cover additional increases in estimated credit subsidy costs.

 5 FHA also insures reverse mortgages that permit persons 62 and older to convert their 

home equity into cash advances.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 47 GAO-13-798 Budget Issues

The MMI Capital Reserve account contains only mandatory funds, and 

those funds are available until expended.

What Factors Affect the Size or Composition of the Carryover 

Balance?

As shown in figure 13, carryover balances declined during the 6 years we 

reviewed, with a steep decline in 2009 and 2010. Because the spendout 

rate in this account is very quick, and in effect obligations are equivalent 

to outlays, nearly all of the carryover balances are unobligated.

Figure 13: Carryover Balance in the FHA-Mutual Mortgage Insurance Capital 

Reserve Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year. In fiscal years 2007 through 2012, HUD reported 

negative obligated balances for the account. HUD officials said the negative balance represented 

outstanding receipts that had not yet been collected or fully processed by the end of the fiscal year. 

For presentation purposes, we do not show the obligated balance here.

The MMI Capital Reserve account maintains balances to cover 

unexpected insurance claim expenses, so when FHA experiences 

financial stress, the account balance decreases. For example, when the 

MMI Fund experiences higher-than-expected mortgage defaults (resulting 

in higher claims), there will be an upward re-estimate of credit subsidy 

costs. When there is an upward re-estimate, the MMI Capital Reserve 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 48 GAO-13-798 Budget Issues

account is the first source of funds used to cover the higher costs, thus 

lowering balances in the account. During the housing crisis that began in 

2007, more pessimistic forecasts of economic conditions—house prices, 

in particular—resulted in higher projected insurance claims. As a result, 

balances in the MMI Capital Reserve account fell dramatically. From 2009

through 2012, FHA has submitted upward credit subsidy re-estimates 

ranging from about $6.8 to $10.5 billion annually. If upward re-estimates 

were to deplete the balance in the MMI Capital Reserve Account, FHA 

would need to draw on permanent, indefinite budget authority to have 

sufficient reserves for all future insurance claims on its existing portfolio.

How Does the Agency Estimate and Manage Carryover Balances?

The MMI Fund is reviewed from actuarial, financial and budgetary 

perspectives each year, which helps officials estimate carryover 

balances. From the actuarial perspective, FHA is statutorily required to 

ensure that the MMI Fund maintains a 2-percent capital ratio (discussed 

in more detail below). For its financial statements, FHA calculates the 

liability for loan guarantees, which represents the net present value of 

future cash flows on FHA’s existing portfolio. From a budgetary 

perspective, FHA must follow the Federal Credit Reform Act of 1990, 

which requires the agency to estimate and re-estimate the net lifetime 

costs of the mortgages it insures.

The MMI Capital Reserve account holds funds to help FHA meet the 

statutory 2-percent capital ratio requirement for the MMI Fund and, as 

previously noted, maintains balances for unexpected claim expenses.6

The capital ratio is defined as the MMI Fund’s economic value divided by 

the total insurance-in-force.7

 6 The Omnibus Budget Reconciliation Act of 1990 (Pub. L. No. 101-508) required the 

Secretary of Housing and Urban Development to take steps to ensure that the MMI Fund 

attained a capital ratio of at least 2 percent by November 2000 and maintained at least a 2 

percent ratio at all times thereafter.

The balance in the MMI Capital Reserve 

account is one component of the economic value, along with the balance 

in the MMI Financing Account (which maintains balances to cover 

7 The economic value of the fund is the sum of existing capital resources plus the net 

present value of future cash flows. The unamortized insurance-in-force is generally 

understood as the initial insured loan balances. However, a legislative provision defines 

unamortized insurance-in-force as the remaining obligation on outstanding mortgages, a 

definition generally understood to mean the amortized insurance-in-force.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 49 GAO-13-798 Budget Issues

estimated credit subsidy costs) and the net present value of future cash 

flows. However, as a result of the economic downturn and housing crisis, 

the fund did not meet this requirement from 2009 through 2012. To help 

increase balances in the MMI Capital Reserve account and bring the MMI 

Fund back into compliance, FHA has implemented policy changes, 

including increases in borrower insurance premiums and enhanced

underwriting requirements.

As shown in figure 14, actual unobligated balances were lower than 

originally estimated for all years. Current year estimates were very close 

for almost all years during the period. This shows that the agency’s 

process for estimating unobligated balances assumed an accurate trend 

in most years, but tended to overestimate future balances, especially in 

fiscal year 2012.

Figure 14: Estimated vs. Actual Unobligated Balances in the FHA-Mutual Mortgage 

Insurance Capital Reserve Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 50 GAO-13-798 Budget Issues

Account Name: Homeless Assistance Grants (HAG)

Agency: Department of Housing and Urban Development

National Priority: Housing Assistance (Budget Subfunction 604)

What Mission and Goals Is the Account or Program Supporting?

The Homeless Assistance Grants (HAG) account funds two primary grant 

programs: the Continuum of Care program and the Emergency Solutions 

Grant program. The Continuum of Care program is HUD’s largest and 

broadest targeted program to provide funds to address homelessness 

and the Emergency Solutions Grant Program includes funds for a variety 

of activities such as rapid re-housing. Grants through the Continuum of 

Care program are awarded through a national competition. An average of 

87 percent of those funds per year goes to renew existing projects. The 

process to register, compete, and award grants is done on a calendar 

year basis and generally takes about seven months. The grant 

competition cycle begins after the agency receives a final annual 

appropriation. Once grants are awarded, funds are obligated and 

disbursed to grantees.

The 2009 Homeless Emergency Assistance and Rapid Transition to 

Rehousing Act (HEARTH)8 resulted in several changes to HAG, including 

the consolidation of three grant programs9

What are the Sources and Fiscal Characteristics of the Funding?

into the Continuum of Care 

program and allocation of funds to specific grant programs.

Funds in the HAG account are discretionary, provided through annual 

appropriations, and available for obligation for three years. In addition, in 

June 2008, the account received one multi-year supplemental 

appropriation of $50 million for aid to the State of Louisiana for the 

provision of 3,000 units of permanent supportive housing.10

 8 Pub. L. No. 111-22.

9 The Continuum of Care program is currently composed of the (1) Shelter Plus Care, (2) 

Supportive Housing, and (3) Section 8 Moderate Rehabilitation Single Room Occupancy 

programs.

10 Pub. L. No. 110-252.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 51 GAO-13-798 Budget Issues

What Factors Affect the Size or Composition of the Carryover 

Balance?

The carryover balance in the HAG account ranged from $4 billion to $5.6

billion during fiscal years 2007 through 2012. As shown in figure 15, 

unobligated balances remained steady over the six year period. In 2009, 

there was an increase in the obligated balance that subsequently 

decreased in later years.

Figure 15: Carryover Balances in the Homeless Assistance Grants Account, Fiscal 

Years 2007-2012

Note: Balances shown here are end-of-year.

A portion of the unobligated balance results from the timing of the grant 

competition and award process, which is done by calendar year rather 

than fiscal year. For HAG, the typical grant competition cycle involves 

several phases. First, once the agency has received its annual 

appropriations, it then opens a program registration period. After the 

agency reviews registrations, it opens the grant application process. 

Following the final application review, grants are awarded at a later date 

during the current or next calendar year (likely during a new fiscal year). 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 52 GAO-13-798 Budget Issues

At that point the available multi-year funds will be obligated. Because 

grant awards are typically made after the end of the fiscal year, 

unobligated balances are carried over from one fiscal year to the next.

Officials said the increase in the obligated, unexpended balance that 

occurred in 2009 and 2010 was the result of two events. In 2009, the 

account received $1.5 billion for HUD’s Homelessness Prevention and 

Rapid Re-housing Program, which contributed to the increase in the 

obligated balance. In addition, the agency implemented a change in its

process to review renewal grants. This change in process, which started 

in 2008, involved transitioning from a paper-based system to an 

electronic-based system. Officials said launching the new system caused 

a delay in awarding and disbursing grants, which resulted in an increased 

carryover balance.

How Does the Agency Estimate and Manage Carryover Balances?

Renewal grants account for the largest share of grant funding in the 

account and are typically funded before new grant applications are 

considered. Accordingly, HUD officials develop estimates of the account’s 

carryover balance based on the historical rate of grant renewal from 

previous years. This helps the agency project the number of grants that 

will likely be renewed in the future, thereby informing HUD’s estimate of 

the amount of funds that will be carried forward from one fiscal year to the 

next.

As shown in figure 16, from 2007 through 2010 actual unobligated 

balances were slightly higher than initial estimates. From 2009 through

2012, the actual unobligated balance remained fairly steady while agency 

estimates predicted more fluctuation. The largest difference between the 

estimated and actual unobligated balance was in 2012. Generally 

speaking, it appears that the agency’s process for estimating unobligated 

balances was fairly accurate during the time period.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 53 GAO-13-798 Budget Issues

Figure 16: Estimated vs. Actual Unobligated Balances in the Homeless Assistance 

Grants Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 54 GAO-13-798 Budget Issues

Account Name: Exchange Stabilization Fund (ESF)

Agency: Department of the Treasury

National Priority: International Financial Programs 

(Budget Subfunction 155)

What Mission and Goals Is the Account or Program Supporting?

The Exchange Stabilization Fund (ESF) account was established by the 

Gold Reserve Act of 1934, to be operated under the exclusive control of 

the Secretary of the Treasury with approval of the President. The primary 

purpose of the fund is to stabilize international financial markets, 

consistent with U.S. obligations in the International Monetary Fund (IMF).

To carry out this purpose, the Secretary is authorized to purchase, sell, or 

deal in gold, foreign currencies, and other instruments of credit and 

securities. The ESF holds international reserve assets of the United 

States, including U.S. dollars, foreign exchange, and Special Drawing 

Rights (SDR).11

What Are the Sources and Fiscal Characteristics of the Funding?

If the maturity on an ESF loan or credit to a foreign entity

or government will extend beyond six months, the President must give 

Congress a written statement that unique or emergency circumstances 

exist.

The account received a $2 billion appropriation in 1934 when the fund 

was created. The Bretton Woods Agreements Act of 1945 directed the 

Treasury Secretary to pay $1.8 billion from the ESF to the IMF for the 

initial U.S. quota subscription in the IMF, thereby reducing ESF’s 

appropriated amount to $200 million. Since that time, the major sources 

of the fund’s income have been (1) gains (or losses) due to changes in 

exchange rates, (2) SDR allocations, and (3) earnings on investments 

held by the fund including interest earned on fund holdings of U.S. 

Government securities or interest on loans or credits to foreign 

governments. Amounts in the ESF, which is a public enterprise revolving 

 11 The SDR is an international reserve asset and the unit of account of the IMF. Its value 

comprises a weighted average of the value of a basket of four currencies, of which the 

U.S. dollar has the largest share. Under the Special Drawing Rights Act of 1968, the 

Secretary of the Treasury may engage in SDR-related transactions including SDR 

allocations from the IMF, purchases of SDRs from other IMF member countries, and 

monetizations. 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 55 GAO-13-798 Budget Issues

fund,12

What Factors Affect the Size or Composition of the Carryover 

Balance?

are available until expended and may not be used to pay 

administrative expenses.

As shown in figure 17, the actual total carryover balance increased 

dramatically in fiscal year 2009 and remained at that level through fiscal 

year 2012. The obligated portion of the balance held steady in fiscal years 

2007 through 2009. By the end of fiscal year 2010, the obligated portion 

of the total carryover balance had grown significantly. The unobligated 

balance stayed fairly steady throughout fiscal years 2007 to 2012 with the 

exception of a dramatic spike in fiscal year 2009.

 12 A public enterprise revolving fund is a type of revolving fund that conducts cycles of 

businesslike operations, mainly with the public, in which it charges for the sale of products 

or services and uses the proceeds to finance its spending, usually without requirement for 

annual appropriations. Most government corporations are financed by public enterprise 

funds.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 56 GAO-13-798 Budget Issues

Figure 17: Carryover Balances in the Exchange Stabilization Fund, Fiscal Years 

2007-2012

Note: Balances shown here are end-of-year.

Treasury officials said the largest single factor affecting the obligated 

balance is attributed to changes made to ESF’s budgetary reporting in 

fiscal year 2010. According to Treasury officials, prior to fiscal year 2010, 

the U.S. Standard General Ledger (USSGL) did not support the 

budgetary transactions of the ESF, thereby making it impossible to do 

ESF reporting using government-wide automated standards. The USSGL 

Board established a standard ledger account specifically for the ESF as a 

step toward correcting the budgetary reporting. Treasury’s 

implementation of this reporting change resulted in significant 

adjustments to ESF account balances and caused the size of the 

obligated balance to grow as a share of the total carryover balance in 

fiscal years 2010 through 2012.

The spike in the unobligated balance in 2009 is almost entirely attributed 

to approximately $50 billion of new SDR allocations and one transaction 

that occurred over a one-month period. Pursuant to decisions made by 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 57 GAO-13-798 Budget Issues

the IMF membership, the IMF provided general and special SDR 

allocations13 to its members, including approximately $47.3 billion to the 

United States. As noted earlier, SDRs are held in the ESF. Treasury 

officials said the general allocation was an important element of the 

response to the global economic crisis. Further, they said the IMF general 

allocation provided an additional reserve buffer for IMF member countries 

that was critical to stopping the capital drain from emerging market 

countries and restoring global market confidence. In addition, Treasury 

monetized $3 billion of its ESF SDRs in a transaction authorized under 

the Special Drawing Rights Act.14

How Does the Agency Estimate and Manage Carryover Balances?

Treasury officials said they do not estimate carryover or unobligated 

balances for the ESF as they do in other accounts (e.g., salaries and 

expenses). The balances represent investments and the unobligated 

balance is calculated from ESF’s balance sheet: assets minus liabilities.

Account estimates reported in the President’s Budget each fiscal year are 

based on projected net interest earnings on ESF assets. The estimates 

are subject to considerable variance, depending on changes in the 

amount and composition of assets and the interest rates applied to 

investments. The estimates make no attempt to forecast gains or losses 

on SDR valuation or foreign currency valuation.

As shown in figure 18, the nearly $50 billion of SDR-related transactions 

in fiscal year 2009 led to an actual unobligated balance in the ESF that 

was much larger than was estimated in fiscal year 2007 when the 

President’s fiscal year 2009 budget was developed. Moreover, these 

 13 Under its Articles of Agreement, the IMF may allocate SDRs to member countries in 

proportion to their IMF quotas. General allocations of SDRs have to be based on a longterm global need to supplement existing reserve assets. An amendment to the Articles of 

Agreement in August 2009 provided for a one-time special allocation. The purpose of the 

amendment was to enable all IMF members to participate in the SDR system on an 

equitable basis.

14 When the Secretary of the Treasury monetizes SDRs, he is converting SDRs (an 

international reserve asset) into more readily usable US dollars. The Secretary issues 

SDR certificates to the Federal Reserve banks against SDRs held by the ESF. In turn, the 

Federal Reserve banks purchase these SDR certificates with US dollars. The US dollar 

proceeds of the monetization are held in the ESF and may be used only for financing the 

acquisition of more SDRs or for other statutorily authorized purposes of the ESF.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 58 GAO-13-798 Budget Issues

transactions had a direct impact on Treasury’s estimates of the 

unobligated balance in subsequent years. Treasury officials said the 

general timing of those transactions was concurrent with the agency’s 

development of its fiscal year 2010 mid-year estimate and fiscal year 

2011 budget-year estimate for the account. Generally, in proportion to the 

size of the account, Treasury’s process for estimating the unobligated 

balance was relatively accurate.

Figure 18: Estimated vs. Actual Unobligated Balances in the Exchange Stabilization 

Fund, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 59 GAO-13-798 Budget Issues

Account Name: Government Sponsored Enterprise (GSE) 

Preferred Stock Purchase Agreements

Agency: Department of the Treasury

National Priority: Mortgage Credit (Budget Subfunction 371)

What Mission and Goals Is the Account or Program Supporting?

In 2008, the Housing and Economic Recovery Act (HERA)15 established 

the Federal Housing Finance Agency (FHFA). FHFA placed two 

Government Sponsored Enterprises (GSE)16

Amendments to the agreements in 2009 changed the maximum allowable 

funding commitment, which is reflected in the unobligated balances. 

Initially in 2008, Treasury was authorized to purchase up to $100 billion of 

securities and investments in each GSE for a total of $200 billion. The 

first amendment in May 2009 increased the allowable investment level to 

$200 billion for each GSE. In December 2009, the second amendment 

changed the investment level so it was based on a formulaic cap that 

would automatically adjust upwards quarterly by the cumulative amount of 

any losses realized by either GSE and downward by the cumulative 

amount of any gains, but not below $200 billion.

—the Federal National 

Mortgage Association (Fannie Mae) and the Federal Home Loan 

Mortgage Corporation (Freddie Mac)—into conservatorship. Treasury 

then entered into agreements with Fannie Mae and Freddie Mac to 

provide capital through investments in senior preferred stock to ensure 

that each company maintained a positive net worth. Treasury disburses 

funds to the GSEs if, at the end of any quarter, the liabilities of either GSE 

exceed its assets.

17

 15 Pub. L. No. 110-289.

16 GSEs are federally chartered, privately owned financial institutions designed to facilitate 

the flow of investment funds to specific economic sectors. GSEs typically receive financing 

from private investment, and the credit markets perceive that GSEs have implied federal 

financial backing. GSEs issue capital stock and short- and long-term debt instruments, 

issue mortgage-backed securities, fund designated activities, and collect fees for 

guarantees and other services.

17 Beginning on January 1, 2013, the remaining funding commitment is fixed and will 

remain available to be drawn per the terms of the agreement.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 60 GAO-13-798 Budget Issues

What Are the Sources and Fiscal Characteristics of the Funding?

HERA established temporary authority for the GSE Purchase Agreements 

account and granted the Treasury Secretary temporary authority to 

purchase obligations and securities. The Secretary has complete 

discretion over the terms, conditions, and amounts of the purchases, 

provided that he or she (1) designates the actions as necessary, (2) takes 

specific considerations into account, and (3) reports on these matters to 

Congress. Any funds expended under this authority are deemed as 

appropriated in such sums as needed.18

What Factors Affect the Size or Composition of the Carryover 

Balance?

As shown in figure 19, the actual total carryover balance in the account 

grew significantly from fiscal years 2007 through 2009 and subsequently 

declined through fiscal year 2012.

The spendout rate in this account is very quick, which results in the 

agency reporting no obligated balance in the account by year-end. In 

effect, the actual payments to the GSEs are equal to the amount of 

obligations incurred and outlays reported in the President’s Budget 

Appendix. Treasury officials said the unobligated portion of the balance 

represents the cash balance in the account.

 18 As part of the purchase agreements with the GSEs, Treasury was entitled to receive 

cumulative cash dividends on the senior preferred stock from the date of initial issuance 

through December 31, 2012. These amounts were deposited in the General Fund.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 61 GAO-13-798 Budget Issues

Figure 19: Carryover Balances in the GSE Purchase Agreements Account, Fiscal 

Years 2007-2012

Note: Balances shown here are end-of-year. The account was established in 2008 under HERA, 

which means that there were no balances to report prior to 2008. 

The carryover balance is generally driven by the size of the 

apportionment19

 19 Apportionment is the action by which the Office of Management and Budget (OMB) 

distributes amounts available for obligation, including budgetary reserves established 

pursuant to law, in an appropriation or fund account. An apportionment divides amounts 

available for obligation by specific time periods (usually quarters), activities, projects, 

objects, or a combination thereof. The amounts so apportioned limit the amount of 

obligations that may be incurred.

to the account and the amount of purchases made by the 

account. For example, the account started with a $200 billion balance in 

budget authority when it was created under HERA in 2008. In 2009, the 

maximum allowable funding commitment was increased by an additional 

$200 billion for the account. Treasury also made its first payments to the 

GSEs equal to $95.6 billion. As shown in figure 19, this translated into an 

unobligated balance of $304.4 billion at the end of fiscal year 2009. Prior 
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 62 GAO-13-798 Budget Issues

to making payments to the GSEs, Treasury received an apportionment of 

its budget authority from OMB at the beginning of the fiscal year for the 

unobligated balance brought forward in the account.

The gradual decline in the unobligated balance reflects Treasury’s 

subsequent payments to the GSEs in fiscal years 2010 through 2012, 

bringing the balance down to $212.5 billion by the close of fiscal year 

2012.20

How Does the Agency Estimate and Manage Carryover Balances?

Budget year estimates of the unobligated balance are derived from the 

estimated draws on the account from year to year. To do this, Treasury 

annually prepares a series of long-range forecasts to determine the 

estimated amount of contingent liability to the GSEs under the purchase 

agreements. These projections inform the agency’s estimation of 

payments to the GSEs for a given year. Based on the size of the 

estimated payments, Treasury estimates the amount of budget authority 

that will be carried over into the next year. By the time the agency 

develops current year estimates, agency officials said they typically know 

what the size of the payment request will be, thereby contributing to a 

more accurate estimate of the unobligated balance that is carried forward. 

This informs apportionment decisions to ensure there are sufficient funds 

to cover the payments to the GSEs.

As shown in figure 20, there were no estimated unobligated balances in 

fiscal years 2007 through 2009. This is attributed to the timing of the 

President’s budget preparation for each of those years, and to the 

creation of the Purchase Agreement account. The account was 

established after the enactment of HERA in 2008, which meant that the 

account’s estimates were issued for the first time in the President’s fiscal 

year 2010 budget. Similarly, there were no actual unobligated balances to 

report prior to 2008. During fiscal years 2010 through 2012, Treasury’s 

estimates of the unobligated balance in the account were slightly lower 

than, but fairly close to, the actual balance at year-end. In proportion to 

the size of this account, this suggests that the agency’s estimation 

process for this account was relatively accurate in those years.

 20 Subsequent to 2009, payments to the GSEs were smaller: $52.6 billion in 2010, $20.8 

billion in 2011, and $18.5 billion in 2012.
Appendix III: Case Illustrations of Federal 

Accounts with Carryover Balances

Page 63 GAO-13-798 Budget Issues

Figure 20: Estimated vs. Actual Unobligated Balances in the GSE Purchase 

Agreements Account, Fiscal Years 2007-2012

Note: Balances shown here are end-of-year. Because the account was created in 2008, its budget 

estimates were issued for the first time in the President’s fiscal year 2010 budget. 
Appendix IV: Comments from the Department 

of Health and Human Services

Page 64 GAO-13-798 Budget Issues

Appendix IV: Comments from the 

Department of Health and Human Services
Appendix IV: Comments from the Department 

of Health and Human Services

Page 65 GAO-13-798 Budget Issues
Appendix V: Glossary of Budget Terms

Page 66 GAO-13-798 Budget Issues

Appropriation: Budget authority to incur obligations and to make 

payments from the Treasury for specified purposes. An appropriation act 

is the most common means of providing appropriations; however, 

authorizing and other legislation itself may provide appropriations.

Annual appropriation: An act appropriating funds enacted 

annually by Congress to provide budget authority to incur 

obligations and make payments from the Treasury for specified 

purposes.

Supplemental appropriation: An act appropriating funds in 

addition to those already enacted in an annual appropriation act. 

Supplemental appropriations provide additional budget authority 

usually in cases where the need for funds is too urgent to be 

postponed until enactment of the regular appropriation bill.

Supplemental appropriations may sometimes include items not 

appropriated in the regular bills due to a lack of timely 

authorizations.

Availability: Budget authority that is available for incurring new 

obligations.

Budget authority: Authority provided by federal law to enter into financial 

obligations that will result in immediate or future outlays involving federal 

government funds.

Budget function: The functional classification system is a way of 

grouping budgetary resources so that all budget authority and outlays of 

on-budget and off-budget federal entities and tax expenditures can be 

presented according to the national needs being addressed. National 

needs are grouped in 17 broad areas to provide a coherent and 

comprehensive basis for analyzing and understanding the budget.

Budget year: A term used in the budget formulation process to refer to 

the fiscal year for which the budget is being considered, that is, with 

respect to a session of Congress, the fiscal year of the government that

starts on October 1 of the calendar year in which that session of 

Congress begins.

Carryover balance (unexpended balance): The sum of the obligated 

and unobligated balances.

Appendix V: Glossary of Budget Terms
Appendix V: Glossary of Budget Terms

Page 67 GAO-13-798 Budget Issues

Commitment: An administrative reservation of allotted funds, or of other 

funds, in anticipation of their obligation.

Continuing resolution: An appropriation act that provides budget 

authority for federal agencies, specific activities (or both) to continue in 

operation when Congress and the President have not completed action 

on the regular appropriation acts by the beginning of the fiscal year.

Current year: A term used in the budget formulation process to refer to 

the fiscal year immediately preceding the budget year under 

consideration.

Deobligate: A cancellation or downward adjustment of previously 

incurred obligations made by an agency. Deobligated funds may be 

reobligated within the period of availability of the appropriation.

Discretionary spending: Outlays from budget authority that is provided 

in, and controlled by, appropriations acts.

Expended funds: Funds that have actually been disbursed or outlaid.

Mandatory spending: Budget authority that is provided in laws other 

than appropriation acts and the outlays that result from such budget 

authority. Mandatory spending includes entitlement authority (for 

example, Food Stamp, Medicare and veterans’ pension programs), 

payment of interest on the public debt, and nonentitlements such as 

payments to states from Forest Service receipts.

Obligated balance (obligated funds): The amount of obligations already 

incurred for which payment has not yet been made. Technically, the 

obligated balance is the unliquidated obligations. Budget authority that is 

available for a fixed period expires at the end of its period of availability, 

but the obligated balance of the budget authority remains available to 

liquidate obligations for five additional fiscal years. At the end of the fiscal 

year, the account is closed and any remaining balance is canceled.

Budget authority available for an indefinite period may be canceled, and 

its account closed if (1) it is specifically rescinded by law or (2) the head 

of the agency concerned (or the President) determines that the purposes 

for which the appropriation was made have been carried out and 

disbursements have not been made from the appropriation for 2 

consecutive years.
Appendix V: Glossary of Budget Terms

Page 68 GAO-13-798 Budget Issues

Obligation: An obligation is a definite commitment that creates a legal 

liability of the government for the payment of goods and services ordered 

or received, or a legal duty on the part of the United States that could 

mature into a legal liability by virtue of actions of another party. 

Spendout rate: The rate at which budget authority becomes outlays in a 

fiscal year. It is usually presented as an annual percentage.

Unexpended balance: The sum of the obligated and unobligated 

balances.

Unobligated balance (unobligated funds): The portion of obligational 

authority that has not yet been obligated. For an appropriation account 

that is available for a fixed period, the budget authority expires after the 

period of availability ends but its unobligated balance remains available 

for 5 additional fiscal years for recording and adjusting obligations 

properly chargeable to the appropriations period of availability. For 

example, an expired, unobligated balance remains available until the 

account is closed to record previously unrecorded obligations or to make 

upward adjustments in previously under recorded obligations (such as 

contract modifications properly within scope of the original contract). At 

the end of the fifth fiscal year, the account is closed and any remaining 

balance is canceled. For a no-year account, the unobligated balance is 

carried forward indefinitely until (1) specifically rescinded by law or (2) the 

head of the agency concerned (or the President) determines that the 

purposes for which the appropriation was made have been carried out 

and disbursements have not been made from the appropriation for 2 

consecutive years.
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 69 GAO-13-798 Budget Issues

Susan J. Irving, (202) 512-6806 or irvings@gao.gov.

In addition to the contact named above, Carol M. Henn, Assistant 

Director, Leah Q. Nash and Mary C. Diop made major contributions to 

this report. Also contributing to this report were Rob Gebhart,Tara Jayant, 

Kate Lenane, Felicia Lopez, John Mingus Jr., Robert Robinson, and 

Cindy Saunders. In addition, the following individuals provided 

programmatic expertise: Marcia Crosse, Shana R. Deitch, Cheryl 

Goodman, Marshall Hamlett, Vondalee R. Hunt, Thomas Melito, Paul 

Schmidt, Mathew J. Scire, William B. Shear, Andrea P. Smith, Bruce 

Thomas, and Steve Westley.

Appendix VI: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(451015)
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