Original Broadcast 4/13/25
Sponsored by KPMG
Federal Agencies Face CR Constraints Through September
With the risk of a government shutdown temporarily averted, agencies across the federal government now face a different kind of challenge: navigating the constraints of a full-year continuing resolution (CR) that leaves little room for budget maneuvering. Though funding has been locked in through September 30, 2025, the CR limits agencies to prior-year funding levels and restricts their ability to pursue new initiatives. Tom Harker, former Assistant Secretary of the Navy for Financial Management and Comptroller, and Dave Mader, former Controller at the Office of Management and Budget (OMB) and current Director at the Partnership for Public Service, joined Francis Rose on Fed Gov Today to examine the implications.
Strategizing Without Certainty
According to Mader, many agency leaders are accustomed to the dynamics of CRs—especially those who have spent decades in government—but this year’s situation is particularly complicated by the political transition and shifting priorities. “Agencies have been sort of frozen in place,” he said, awaiting direction from both the fiscal 2025 CR and the anticipated 2026 presidential budget.
While the CR does not provide program-specific detail, Harker noted it grants considerable flexibility within broader categories. For instance, the Navy’s operations and maintenance budget is presented as a lump sum, offering room to adjust internally. Congress provided $8 billion in reprogramming authority—essentially allowing agencies to shift up to 1% of their budgets as needed. However, executing those changes requires a formal “baseline” spending plan within 30 days of the CR’s passage, a milestone that isn’t always met.
Balancing Short-Term Needs and Long-Term Vision
Harker and Mader agreed that CFOs and agency leadership now face a dual challenge: meeting immediate operational needs while aligning with a future budget that could bring substantial cuts, especially for civilian agencies. The recent CR shifted $18 billion in discretionary funds away from civilian agencies toward the Department of Defense and Border Protection, creating even tighter constraints.
“One of the biggest roles of a CFO now is to model potential outcomes,” Mader said, particularly in preparation for executive orders that could mandate workforce reductions or restructured programs. These decisions must be carefully budgeted—especially if agencies plan to offer incentives for voluntary separation (VSIP) or early retirement (VERA).
Executive Orders as Budget Clues
Executive orders (EOs), while not accompanied by immediate funding, are often an early indication of an administration’s policy direction. Harker cited a recent EO on revitalizing shipbuilding as an example. “It names six cabinet agencies,” he said, noting that implementation will require cross-agency coordination and could be partially funded through new port fees levied on foreign vessels. “You’ll see if the money follows the sentiment in the FY26 budget,” he added.
Forecasting for Q4 and Beyond
Both Mader and Harker emphasized that agencies need to plan now for what could be the busiest fourth quarter in recent history. With hiring freezes, contract cancellations, and organizational reshuffling already underway, there is pressure to execute major shifts in spending before the fiscal year ends.
“If I were in my old job, I’d be advising agencies to start redirecting funds right now,” Harker said, particularly toward areas like shipbuilding and border security that are likely to receive additional attention in the new budget.
Mader echoed that urgency: “We’re going to see an enormous amount of activity—not just in finance but in human capital. Agencies need to reduce full-time equivalents before October 1.”
Giving Money Back? A Shift in Philosophy
Perhaps most striking, both guests suggested that for the first time in recent memory, agency leadership may be encouraged to return unused funds to help reduce the deficit. That marks a significant shift from the traditional “use-it-or-lose-it” mindset that drives much of the September spending rush.
Conclusion: Planning, Flexibility, and Real-Time Responsiveness
In an environment defined by uncertainty, agency CFOs are being asked to remain nimble, strategic, and closely aligned with both OMB and political leadership. Their ability to interpret executive orders, model scenarios, and act quickly could determine whether agencies meet mission goals—or fall behind.