December 15, 2020

Bad Idea: The “Use-It-Or-Lose-It” Law for DoD Spending

By: Robert F. Hale

Year-end spending sprees. Increased violations of federal financial laws. Bad press for the Department of Defense (DoD). All these unfortunate events stem in part from a law requiring that DoD’s operating funds be spent in the year they are appropriated. Congress can significantly improve the effectiveness of defense spending by changing this “use it or lose it” law.

Congress can significantly improve the effectiveness of defense spending by changing this “use it or lose it” law.

Specifically, funding for operation and maintenance (O&M) and military personnel (MILPERS) accounts must be spent in the year they are appropriated, or, with rare exceptions, they are no longer available to pay bills and instead revert to the Treasury. (To be technically correct, by “spending,” I am referring to obligating the funds by entering into a contract or by other means.) Accordingly, at the end of each year, most defense organizations take extraordinary steps to spend all funds in these appropriations, resulting in sharp year-end spending spikes. A 2010 study by researchers from Harvard and Stanford showed that, in fiscal years from 2004 to 2009, DoD spending in the final week of the fiscal year soared to more than four times the average weekly level during the rest of the year. The same result occurred in most other federal agencies.

Read the full article from the Center for Strategic and International Studies.

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