Honors Thesis Spotlight: End of Year Spending: The Use-It or Lose-It Dilemma: A Case Study of the U.S. Department of State’s Costly Habit

Use-it or Lose-it spending is a tendency that is widespread in many forms of government that utilize the expiring budget fiscal year model to handle finances. From the immense U.S. Government to the relatively small Florida State University Student Government, we can observe this trend in spending behavior occurring at the end of the fiscal year. For many years now, professionals in the fields of economics, finance, accounting, and even health have attempted to measure and observe this phenomenon. Many academics who study similar policy understand Use-it or Lose-it spending tend to have similar feelings about this policy: “we know it occurs, but we lack hard evidence to prove when exactly it is appropriate to label an expenditure as [wasteful], consequently stagnating any progress towards a solution. Governments are aware of it, but no one has stepped up to provide realistic solutions due to the lack of quantifiable evidence and incentive to function frugally.”

Knowing that there is a measurable spike in federal spending at the end of the fiscal year, the most highly active month for spending being September, and that according to previous research the Department of State is consistently an outstanding last-minute spender, what are most of these expenditures attributed to and what trends can be observed? Do they vary by type of contract?

This research project incorporates thousands of federal contracts that have been made public from the U.S. Department of State thanks to the efforts of OpenTheBooks.com. By submitting countless Freedom of Information Act requests, the organization has compiled this data for general distribution. This study focuses on the expenditures incurred by the U. S. Department of State to observe, recognize, and highlight the trends that most commonly occur as the fiscal year comes to a close.

At the macro level, OpenTheBooks was able to highlight the general direction agencies in our federal government are heading in regards to end of year spending. There was, and continues to be, a steady increase in expenditures as the fiscal year comes to a close and this phenomenon continues to augment every year. This phenomenon was analyzed to measure the “usefulness” of the expenditures that occur at the end of the fiscal year. It was true that an increase and condensing of expenditures occurred as the budget cycle expired, but did this rush to spend utilized funds lead to waste? The thesis shows found that indeed it did and a possible solution was for rollover to occur. This was observed in the Department of Justice (only agency to experiment with rollover) and put it to the test in other agencies through his predictive model.

This post was based on Omar Jose Pimentel Marte’s honors thesis.

The feature image is from Pexels.

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