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Sequestration Report: Notable Exemptions and Sequester Totals for Treasury, Justice, and State

On Friday (9/14), the White House released its report regarding the impact of potential sequestration at the budget account level for each agency as required by the Sequestration Transparency Act of 2012. Although, the report provides little detail about each budget account, when cross referenced with each agency’s detailed FY2013 budget request we can glean tidbits of the potential impact to some areas involving IT.
In this blog, I will point out notable exemptions as specified in the White House report, as well as notable sequestration amounts for the Department of Treasury, Department of Justice, and the Department of State.
Notable Exemptions:
The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) as amended, identifies programs exempt from sequestration and subject to special rules. The percentage cuts in OMB’s sequestration report, and the identification of exempt and non-exempt accounts, reflect the requirements set forth in the BBEDCA. The administration cannot choose which programs to exempt, or what percentage cuts to apply.
Notable exemptions (>$200m) to budget accounts for Treasury, Justice, and State are shown below:  

The most notable and highest dollar value exemptions for Department of Justice include Salaries and Expenses for the US Marshals Service and the FBI. With exemptions of $1.6 billion and $1.4 billion respectively in these budget accounts, 58% of the US Marshals and 29% of FBI’s Salary and Expense funding will be protected. 
Department of State shows an exemption of its entire Administration of Foreign Affairs Working Capital Fund of $4.2 billion. The Working Capital Fund finances, on a reimbursable basis, certain administrative services, such as printing and reproduction, editorial material, motor pool operations, inter-agency cooperative administrative support services, acquisition services, information technology desktop support, and aviation services.
Notable Sequester Amounts:
Notable sequestration amounts per budget account (>$200m) for Treasury, Justice, and State are shown below:
The most notable and highest dollar value sequestration amounts for Treasury include the IRS’ Enforcement, and Operations and Support budget accounts. 
The Enforcement account sequester amount of $436 million equates to 8% of the total requested budget authority for this account for FY2013. This budget account provides for necessary expenses for tax enforcement activities of the IRS to determine and collect taxes, to provide legal and litigation support, to conduct criminal investigations, and to enforce criminal statutes related to violations of internal revenue laws and other financial crimes. The Enforcement program also protects federal revenue by identifying fraud and preventing the issuance of erroneous refund payments. Information technology contracts and tools are used by the IRS under this budget account, especially in the area of identifying improper payments. 
The IRS Operations and Support budget account supports taxpayer enforcement and services by providing funds for rent payments, facilities services, printing, postage, physical security, administration activities, telecommunications, and information technology development, enhancement, operations, maintenance, and security. The Operations and Support account sequester amount of $325 million equates to 8% of the total requested budget authority for this account for FY2013. Sequester in this account will likely cause some reductions in IRS IT spending.
The most notable and highest dollar value sequestration amount for Justice includes the Federal Prison System’s Non-Defense Salaries and Expenses budget account with a sequester amount of $537 million. The Federal Prison System employs approximately 37,000 people according to OPM. Only 1.2% of these employees are classified as IT. So, the reduction in the Salaries and Expense area is likely to have minimal impact on the Federal Prisons Systems’ IT employees.
The State Department Administration of Foreign Affairs Diplomatic and Consular Affairs Programs Non-Defense budget account will be hit the hardest by sequestration at $1.1 billion out of a total gross budget of $15.9 billion. The Diplomatic and Consular Affairs Programs budget account provides funding for human resources, including training, human resources management, and salaries. The account also includes funding for overseas programs, diplomatic policy and support, and security programs. The relative amount of IT included in this program is difficult to decipher.
Determining the specific impact to federal IT contracts from sequestration action is difficult at best, given the information in the current report.   How agencies will implement these budget cuts remains to be seen. OMB stated that they will need more time to provide details regarding sequestration impact for each account at the program, project, and activity (PPA) level. In the meantime, contractors are bracing for the worst.



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