The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) established sequestration to enforce discretionary spending limits and control the deficit. In August 2011, Congress and the President enacted the Budget Control Act of 2011 (BCA), amending BBEDCA. Among other things, the BCA established the Joint Select Committee on Deficit Reduction (Joint Committee), which was tasked with proposing legislation to reduce the deficit by $1.2 trillion or more through fiscal year 2021. The absence of such legislation triggered the sequestration process in section 251A of BBEDCA, known as the Joint Committee sequestration, which is the subject of this report. During fiscal year 2013, several laws changed the timing and amount of sequestration. As a result of those changes, the President ultimately ordered a sequestration on March 1, 2013, to achieve $85.3 billion in budget reductions. Consistent with BBEDCA, the Office of Management and Budget (OMB) calculated the following percentage sequestration reductions based on the funding level set by the CR in effect at that time: 7.9 percent for defense direct spending, 7.8 percent for defense discretionary spending, 5.1 percent for nondefense direct spending—other than Medicare payments and certain health programs, which are limited to 2 percent under BBEDCA, and 5 percent for nondefense discretionary spending. BBEDCA required that the sequestration reductions ordered on March 1, 2013, be applied uniformly, across the board, to nonexempt accounts and their sub-units, known as PPAs. BBEDCA provides that PPAs are identified by appropriation acts or accompanying reports for the relevant fiscal year or, for accounts not included in appropriation acts, with reference to the most recently submitted President’s budget. On March 26, 2013, Congress and the President enacted the Consolidated and Further Continuing Appropriations Act, which provided full-year appropriations to federal agencies and had the effect of reducing the sequestered amount for fiscal year 2013 from $85.3 billion to $80.5 billion.on total sequestered amounts for programs that are funded by permanent The final sequestered amount for fiscal year 2013 is dependent indefinite budget authority, such as entitlement programs like Medicare payments where obligations depend on the number of eligible beneficiaries receiving benefits. Our March 2014 report found that one of the ways agencies responded to sequestration was by using funding flexibilities to mitigate the effects of sequestration where available. These funding flexibilities include reprogramming and transferring funds and using unobligated balances. Reprogramming is the shifting of funds from one program activity to another within an appropriation account for purposes other than those contemplated at the time of appropriation, while transferring is the shifting of funds between appropriation accounts. remain legally available from prior year appropriations could provide agencies with funding flexibility to respond to sequestration. If a multiyear or no-year appropriation is not fully obligated by the end of the fiscal year, the unobligated balance may be carried forward into the next fiscal year and may remain available for obligation. For more information on reprogrammings and transfers, see the glossary of budget terms in appendix VI. enacted on January 17, 2014, did not exceed defense or nondefense spending limits, and therefore did not trigger a sequestration of discretionary appropriations. Nonexempt direct spending, including Medicare payments, will continue to be sequestered automatically for fiscal years 2014 through 2024, as it was in fiscal year 2013. The selected components and their partners reduced or delayed some services to the public and operations in 2013 as a result of sequestration. For example, components of federal agencies reported that their actions included the following: Due in part to personnel actions taken in response to sequestration, international passenger wait times for CBP inspections increased at some airports, and CBP delayed some air cargo inspections. For example, CBP officials reported that sequestration reductions did not leave them with sufficient funds to provide the overtime necessary to fully staff inspection booths, which resulted in increased average wait time for international passengers. From fiscal years 2012 to 2013, wait times increased from 19.7 minutes to 22.8 minutes at one airport and from 20.9 minutes to 26.8 minutes at another. Meanwhile, officials at one CBP field office stated that in some instances, officers could not inspect all cargo in the queue during their normal shift, which meant that some cargo was not inspected until the next shift began, which delayed the release of cargo for shipment. CMS reduced the frequency of certain medical facility inspections. For example, to implement sequestration reductions, CMS reported reducing the frequency of surveys to determine the quality of care and compliance with federal standards at psychiatric hospitals from once every 3 years to once every 4 to 5 years. Surveys of specialized organ transplant centers were reduced from once every 3 years to once every 4 to 6 years. We do not know the effect of the reduced oversight on patient safety or the quality of care provided by the health care facilities. Impact Aid and Title I school districts reduced some services to students. For example, three of the Impact Aid districts reported having to increase class sizes. Officials from one of the districts specifically reported an average increase of two or three students per elementary school class from the prior school year. Meanwhile, officials from one district that received Title I funding told us that the loss of funding contributed to the decision to reduce the number of reading and math specialists who provide extra instruction to students and assist teachers in improving their teaching methods. PIH reduced funding for the Housing Choice Voucher program. As a result, the number of very low-income households receiving rental housing assistance through the program at the end of calendar year 2013 declined by about 41,000 (2.2 percent) compared to the end of calendar year 2012 primarily due to sequestration. DOD reduced military training and readiness activities, such as canceling or limiting training, which the agency reported could increase the number of non-deployable units, decrease surge capacity to meet additional requirements with ready forces, and lead to skills gaps. In some instances, the effects of sequestration compounded other reductions in federal, state, and local funding sources. Representatives of a medical provider association have reported that the 2 percent reductions to Medicare payments required by sequestration compounded other reductions in payments. Payment reductions can result from the annual rate setting process for providers or specific legislative actions. Further, all of the seven Title I and Impact Aid school districts we spoke to told us that cuts to state funding in prior years had already reduced their budgets, which were further cut as a result of sequestration. In other cases, program partners supplied resources, where available, to mitigate the effects of sequestration. Officials at certain state survey agencies that we spoke to, which carry out health care facility safety inspections and investigations on behalf of CMS, said they would use additional state funds when necessary to compensate for lower federal funding levels and complete high-priority inspections.reserves accumulated from prior years to avoid terminating housing vouchers. In addition, officials at one of the four PHAs we interviewed told us their local government provided funding for public housing—which it does not usually do—to mitigate the effects of sequestration. Similarly, some PHAs used funding However, we found that in some cases the effects of sequestration were unknown because it is difficult to isolate the effects for some programs and activities that receive funding from multiple sources. For example, the effects of the 2 percent sequestration of Medicare payments are difficult to quantify due to difficulty in isolating the effects of sequestration from other factors that increased or decreased payments to providers, as well as possible changes in provider behavior to compensate for the sequestration reductions. Similarly, it is difficult to isolate the specific effects of sequestration on Title I school districts because Title I funding typically makes up a small portion of the school district’s total funding compared to state and local sources. In addition, because of the statutory formula for Title I, a reduced Title I allocation could be a result of factors other than sequestration, such as decreases in the formula count of children or reduced state per pupil expenditures. Planning for sequestration varied among the selected federal components. Some planning efforts were more centralized and occurred primarily at the agency level. For example, OESE and PIH largely followed sequestration plans set by Education and HUD, respectively. By contrast, CMS planned for sequestration primarily at the component level by identifying certain activities as spending priorities, in consultation with the HHS budget office. CBP headquarters generally managed planning for the required budgetary reductions and delegated implementation decisions affecting operations to program offices. In some cases where sequestration planning primarily occurred at the component level, technical questions posed challenges. CMS faced technical challenges in applying sequestration in accordance with the law and changing budget parameters. Specifically, CMS had difficulty determining all of the types of provider payments that would need to be cut and which funding was subject to special sequestration rules. Similarly, CBP budget officials told us that applying sequestration to fee accounts was more difficult than other accounts due to uncertainty over whether fee accounts would be exempt from sequestration, as well as uncertainty about how to apply sequestration cuts to fee accounts. Our March 2014 report similarly found that many agencies faced challenges in applying sequestration to certain programs, such as those funded through user fees and trust funds. We made two recommendations that could help alleviate some of the uncertainty for potential future sequestrations. Specifically, we recommended that OMB document and make publicly available its decisions regarding how sequestration was implemented and issue guidance directing agencies to formally document the decisions and principles used to implement sequestration for potential future application. OMB agreed with our recommendation and plans to publish its criteria used for making determinations about how sequestration was implemented in its guidance to agencies, OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, but did not specify when this guidance would be available.