Budgeting for Contingencies

• While unexpected events may require a response not anticipated during the regular budget process, some provision for recognizing the likelihood of emergencies is appropriate. Shifting the timing to recognize emergency costs up front during the regular budget process may promote a more comprehensive and transparent debate over federal budgetary priorities.


• For some programs, such as the Commodity Credit Corporation’s Crop Disaster Assistance, the budget includes no funding; all funds are provided through supplemental appropriations. For others, such as the global war on terrorism and the Federal Emergency Management Agency’s Disaster Relief account, most funds are provided through supplementals. Since the amount included in the budget and through regular appropriations does not include all known costs, supplemental appropriations are used not only for sudden, unforeseen events but also for known costs from prior disasters.

  Highlights of GAO-08-68 (PDF), Full Report of GAO/AIMD-99-250 (PDF, 59 pages)

• Federal insurance programs represent another example under which the federal government undertakes significant risks—including flood and crop insurance programs to cover natural disasters, and deposit and pension insurance programs to cover bank and employer bankruptcies. Current budget reporting that focuses on annual cash flows generally does not adequately reflect the government’s cost because the time between the extension of the insurance, the receipt of premiums and other collections, the occurrence of an insured event, and the payment of claims may extend over several budget periods.


• A different measure of cost may be more appropriate for insurance programs—for example, measuring the expected net cost to the government of the risk assumed by extending the insurance commitment (i.e., the “missing premium”), which is the difference between the full premium that would be charged based on expected losses and the actual premium charged to the insured.

  Full Report of GAO/AIMD-97-16 (PDF, 224 pages)

^ Back to topWhat Needs to Be Done

• To promote more informed debate about budget priorities and trade-offs, OMB should work with Congress and relevant agencies to improve reporting on budgetary costs of ongoing, recurring, and potential federal activities. This should include
• the development of risk-assumed cost estimation methods for potential losses under various federal insurance programs;

  Full Report GAO/AIMD-97-16 (PDF, 224 pages)

• historical information on federal costs for natural disasters and the potential for similar spending on an ongoing basis; and

  Highlights of GAO-08-301 (PDF), Full Report of GAO/AIMD-97-250 (PDF, 59 pages)

• improved transparency and fiscal responsibility related to funding the global war on terrorism that would include reporting ongoing costs in the budget—this would allow Congress and the administration to establish priorities and make trade-offs among priorities in defense funding.

  Highlights of GAO-08-68 (PDF)

^ Back to topKey Reports

Disaster Cost Estimates: FEMA Can Improve Its Learning from Past Experience and Management of Disaster-Related Resources

GAO-08-301, February 22, 2008

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 35 pages)   Accessible Text   Recommendations (HTML)

Global War on Terrorism: DOD Needs to Take Action to Encourage Fiscal Discipline and Optimize the Use of Tools Intended to Improve GWOT Cost Reporting

GAO-08-68, November 6, 2007

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 64 pages)   Accessible Text   Recommendations (HTML)