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Posted by on Jun 9, 2010

OMB Tells Agencies To Cut 5 Percent From FY 12 Budgets

President Obama’s themes of tying performance to funding, and tightening the discretionary budget belt will carry forward into fiscal year 2012 and beyond. In June 2010, OMB issued budget guidance to federal agencies that are now working to develop their FY 12 budget requests for submission to OMB. The guidance, which came in the form of two memos, directs agencies to “identify the programs and subprograms that have the lowest impact on your agency’s mission and constitute at least five percent of your agency’s [FY 10] discretionary budget.” 

In Memo M-10-19, OMB noted that agencies should not simply reduce spending across the board. Instead, agencies should aim to restructure their operations strategically. This should include eliminating low-priority programs and activities, re-engineering staffing plans, improving procurement and grants management processes, and strengthening IT and financial management.

 A follow-up memo, M-10-20, gave more insight into how these reductions are to be achieved. Agencies are to evaluate programs based on their impact on the agency’s mission and relevant administration initiatives. Agencies should consider whether the program has an unclear or duplicative purpose, uncertain federal role, a completed mission, or lack of demonstrated effectiveness, according to the June guidance. The intent is to identify those programs with the lowest impact. OMB emphasized that agencies were not to meet the five-percent low-priority program target with across-the-board reductions or incremental savings in administrative costs.

You can view both of the memos on OMB’s website. Also, remember that these and other recent developments in grants administration will be covered in our Federal Grants Update 2010 seminar which is currently running in locations around the country.


[1]      OMB Memo 10-19, Fiscal Year 2012 Budget Guidance, 8 June 2010.

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