The end of the 2023 Fiscal Year (FY2023) is upon us. As Congress looks to create budgets for next year, government entities need to be wary of their spending habits and plan ahead to optimize spending of entrusted budgetary dollars to ensure dollars are spent on the highest priority items
Expiring budgets can lead to a multitude of issues, from wasteful year-end purchases to scraping the bottom of the barrel waiting for renewal. The good news is that there are tools out there to ensure not only budget dollars are used but also that they are used to meet the missions of government entities best.
Another fiscal year closes
In 1974, Congress passed the Congressional Budget and Impoundment Control Act that established a budget process and dates for the federal government’s fiscal year, an act that government leaders hoped would make the yearly federal spending plans easier to agree on. Now, the federal budget is more challenging to understand than ever.
Government entities use the fiscal year to determine the following year’s spending plans. As it closes, it is pertinent for government entities to be transparent about how budget dollars are spent to best prepare for the following year. This allows organizations to review the year’s accounting numbers and avoid volatile end-of-year spending by trying to use up the remaining budget.
According to a study by the American Economic Review, spending in the last week of the year is almost five times higher than the rest of the year. And, year-end IT projects have substantially lower quality ratings when compared to the ones executed at the beginning of the year.
So, why is the federal budget more challenging to understand than ever? Well, a key criticism of the U.S. government budgetary process is its lack of agility, which, in the DoD world, is paramount for keeping up with adversaries. An agile organization can adapt to the ever-changing business landscape by flexing and responding to internal and external business needs.
Business agility is negatively impacted when government entities rely on historical data to determine their budget requests for the following year, and as unexpected shifts and fewer funds dampen budget dreams, historical data is no longer an accurate depiction of future needs.
Use it or lose it
In the United States, the budget provided to government agencies must be spent by the end of the fiscal year. Those extra dollars may not return if the federal government does not see it being spent helpfully, and failure to proactively manage a budget could lead to underutilized resources. Even if a government budget is executed at 95%, millions of dollars are still not spent. When government organizations and enterprises use lagging indicator solutions based on historical data to execute budgets, they risk sacrificing 5% or more of their budget.
Today, a 5 per cent margin can have a massive impact on constrained budgets and lead to efficiency shortfalls and reductions in capability. Implementing purpose-built leading indicator solutions virtually eliminates manual errors, saves time and money and allows for 100 per cent of allocated budgets to be used confidently, efficiently and effectively.
For example, the House and Senate Armed Services committees recently wrapped up their tasks on the 2024 defence authorization bill, swiftly approving funding levels that closely align with the Biden administration’s 2024 discretionary Department of Defense (DoD) spending request of $842 billion. With this increased budget, the DoD must solve a wide spectrum of digital transformation difficulties and move to centralize and streamline data. Real-time informed spending and budgetary decisions are more complex than ever and face more scrutiny.
If the defence sector does not modernize its data product, it will lose significant portions of the budget it just won.
Investing in the right tools
A recent Gartner report forecasted that worldwide government IT and digital spending is expected to hit $589 billion this year, an 8% increase from 2022. This increase in IT investment stems from global issues such as inflation, labour shortages and cybersecurity risks, with software being the highest spending segment. This is not a coincidence.
As the budget gets resolved, business intelligence and government IT can help organizations ask better questions and make informed budgetary decisions. Through centralized and aggregating data, decision-makers can make real-time spending decisions for a productive and profitable company.
As budgeting programs evolve, there are key requirements that need to be met to make a program agile enough for government use, including increased transparency on how money is spent, those making buying decisions being held accountable for their choices and providing the adaptability required to shift funding to meet the highest priority mission items.
Supplemental programs like these can assist government entities in allocating future funds, making confident spending decisions, and generating deliverables for Congressional and Presidential budget activities.
The end game: Improved mission readiness
No one in any business can “build the plane while flying it”, especially if the mechanic wasn’t paid or a fuel cost overrun emerges. Even minor discrepancies can throw off the corporation’s entire spending trajectory and, in turn, its budget allocation. Planning is essential to aligning budget dollars with organizational core objectives, and minor errors can be detrimental to yearly outcomes.
The good news is that government entities that invest in agile public sector software to manage and track their yearly budgets can improve preparedness for mission-critical tasks and better decision-making, all while making the most of evolving budgets.
This piece was written and provided by Kristin Walker, senior program manager at Infinite Technologies Inc. (ITI)
