Pentagon’s Unspent Billions Loom Large as Biden Eyes Flat Budget

The Pentagon returned almost $128 billion in unspent cash to the U.S. Treasury in the 11 years ending in 2019, according to a first-of-its-kind audit by Congress’s watchdog agency.

The returned money represented nearly half of the $263 billion in government-wide “canceled funds” during those years, according to the Government Accountability Office report released Tuesday. The 1.8% cancellation rate for the Defense Department was lower than that of some other Cabinet agencies, including Treasury, Agriculture and Labor.

The GAO report, required by the fiscal year 2020 defense policy bill, may be the first official summary of a little-understood aspect of federal budgeting that’s likely to receive scrutiny this year as President Joe Biden seeks to increase domestic discretionary spending while keeping Pentagon defense spending essentially flat.

“About 1.6% of the total available budget authority government-wide was canceled from fiscal year 2009 to fiscal year 2019, averaging $23.9 billion per year,” the GAO said in the report. “The variations in canceled appropriations from year to year can be explained largely by trends in four departments,” according to the audit: the Pentagon, Treasury, Agriculture and Health and Human Services.

Defense spending is typically the largest portion of discretionary spending in the federal budget, funding that’s used for everything from paying soldiers’ salaries and health care to buying advanced weapons systems. The U.S. spends the most on defense of any nation, with the Biden administration seeking about $715 billion for the next fiscal year.

Under the arcane rules of congressional appropriations, the military services have one to three years to spend appropriated dollars in new expenditures, depending on the account. After those thresholds “expire,” the services have an additional five years to spend the dollars on existing programs related to the original request. If the timeframe passes with no expenditure, or obligation, the funds are considered “canceled” and returned to the U.S. Treasury.

Unspent Pentagon funds have drawn fire from congressional critics as an symptom of a bloated war-machine that needs taming.

Sanders’ Criticism

“Congress has appropriated so much money for the Defense Department that the Pentagon does not know what to do with it,” Senate Budget Committee Chairman Bernie Sanders said this month, referring to older GAO figures that indicated there were about $80 billion in canceled funds between 2013 and 2018.

Mandy Smithberger, director of the Center for Defense Information at the Project on Government Oversight, told the Senate Budget Committee on May 12 that it was “clear that the department’s cost forecasting greatly overestimates the department’s real needs, as evidenced by the billions of dollars the department has in excess unobligated balances.”

Smithberger urged the committee to require the GAO to provide a report on unobligated balances, expired funds and canceled funds annually.

The GAO report doesn’t render any conclusions or raise alarm bells, noting that “canceled appropriations are a small part of government-wide budget authority.”

“The report does not indicate the rate of unused funds is cause for concern,” former Acting Pentagon Comptroller Elaine McCusker, who was familiar with the audit, said in an email. “Some level of expiration and cancellation will likely always occur,” said McCusker, who is now an analyst with the American Enterprise Institute.

According to the GAO, there’s no singular reason why the Pentagon or other agencies accumulate unspent funds. The possibilities include actual program cost needs falling short of cost expectations, sometimes in programs whose costs are more unpredictable than others, said GAO.

From 2013-2018, The Pentagon canceled $49 billion in operations and maintenance funds, according to internal figures. That’s in contrast to $14.1 billion in procurement and $8.6 billion in personnel dollars.

The Pentagon “started to take steps to address this in 2015 in response to the rise in canceled appropriations,” GAO lead analyst Jeff Arkin said in an email. “While these steps are encouraging, it is too soon to fully assess their progress.”

The steps have included an Army “Command Accountability and Execution Review” started in 2017. Similarly, in 2019 the Pentagon created a “Dormant Account Review” policy because of “the lost buying power of expiring” or canceled funds, Chris Sherwood, a spokesman for the Defense Department’s comptroller, said in an email.

Although it’s not part of the latest report, the total amount of canceled Pentagon dollars returned to the Treasury dropped to $12.7 billion in fiscal 2020 from about $18 billion in fiscal 2019, Sherwood said.

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