June 30 marks the end of the fiscal year for 46 state agencies, according to the National Conference of State Legislatures (NCSL). Many cities and counties, likewise, have fiscal year-ends on June 30. International City and County Management Association (ICMA) surveys show 43% of cities and 36% of counties end their fiscal years on June 30.
Additionally, analysts at Onvia have determined that 86% of school district fiscal year-ends align with the end of the school year in June. Go here for an infographic that outlines the most common fiscal year-end months for state, local and education (SLED) government agencies.
Agencies Typically Increase Spending at the Fiscal Year End
At the end of the fiscal year, much spending occurs, and agencies may face use it or lose it budget decisions. Purchase orders are being created at this time, so it’s important for vendors and suppliers to engage with agency buyers.Carol Wilson, Director of Procurement, Connecticut Department of Administrative Services
“Purchasing agencies are always scrutinizing their budgets, but between mid-March and the fiscal year-end [June 30], this is when the bulk of the unplanned purchasing accelerates, if there are dollars available,” says Carol Wilson, C.P.M., Director of Procurement for the Connecticut Department of Administrative Services.
At all levels of government, “It’s quite common for agencies to accelerate spending as the end of the fiscal year draws near,” says Adrian Moore, Vice President of Policy at the Reason Foundation, a public policy think tank that promotes choice, competition and a dynamic market economy.
“No government agency wants to finish the year with money left in their budget; they fear that the surplus will be taken by the elected officials (who set the budgets) as a signal that the agency can get by with less money,” says Moore. He adds that instead of being viewed positively — as saving taxpayers' money — cuts in the next year's budget are almost certain to follow if agencies have any money left at the end of the fiscal year.
Government agencies, explains Moore, have no incentive to get by with less money. “The pressure on the budget is always up, not down — to seek more funding.”
Saving for a Rainy Day or a Special Buy
Some state agencies may delay or pace spending to ensure that there are enough resources available to cover all expenses throughout the year.DeLaine Bender, NASPO Executive Director
Arizona’s former Chief Procurement Officer of 10 years says, “Government agencies ‘save’ their dollars for potential unexpected requirements or expenditures that may occur during the year, as it’s very difficult to obtain additional funds.” When agencies know the size of their remaining budget capacity, they usually buy off a list of goods and services that the agency needs; those buys may have been delayed because of budget limits.
The former CPO says that the majority of the items purchased at the end of the fiscal year are commodity-based that typically are on supply contracts, with a limited lead-time such as: Multi-function devices, computers, laptops, printers, office supplies, chairs, tables, systems furniture, laboratory supplies and equipment, medical supplies and inventory replenishment items.
They add that there can be some very specific kinds of fiscal-year-end purchases of goods and services as well including the demolition of buildings, training materials or marketing brochures, lawnmowers, weed eaters and vehicles.
Government Vendors Agree: Have a Strong Fiscal Year End Strategy
Local and state government budgets have use-it-or-lose-it spending policies as the fiscal year ends, along with different kinds of federal grants that may have different constraints on how and when they are used.David Smith, State and Local Government Sales IT Director, Citrix
With the fiscal year winding down, suppliers need to provide a complete offering to government buyers. Smith urges, “Work with state and local customers and partners to identify the proper solution components, prepare product quotes, and identify available procurement vehicles— essentially preparing the entire package. The goal is to enable the customer to execute as easily and quickly as possible, which is important in that last rush to procure.”
The Potential for Policy Changes and Performance-Based Budgeting
The Reason Foundation’s Adrian Moore says policy changes may help reduce the upward pressure on government spending near the end of the fiscal year. “Some governments have rules against spending more than average amounts in the last quarter of the fiscal year without a waiver from higher up,” says Moore.
A performance-based budgeting system, where agency budgets are regularly examined, is another possible solution. In a performance-based setup, the budgets increase if the agencies reach performance metrics and decrease if they are failing to produce results.
“With performance-based budgeting, agencies that innovate can be rewarded, and spending levels in one year don't directly drive the next year's budget. This protects taxpayers from throwing more and more money into failing programs,” says Moore. He offers this conclusion: “Good government agencies should be focused on delivering value and quality services to taxpayers, not simply seeking more and more money from them."
Track Fiscal Year Ends -- and Consistently Reach Out to Agencies
Vendors should continually communicate year-round with procurement officials when on a state contract so they can fully understand the contract and the state’s regulatory requirements. This is not limited to one specific time of year.NASPO Executive Director Blaine Bender
Carol Wilson adds that, “At any time during the year, contracts are being let, and the first step to gaining more business in government is being awarded a contract. Once that happens, it’s your ticket to sell yourself through that contract and educate the buyers at the agencies of your wares or services included on the contract.”
Onvia recommends that government contractors not only track fiscal year end dates of their targeted agencies but that they also reach out to agencies throughout the fiscal year, go here for outreach tips throughout the fiscal year.
Learn how Onvia’s comprehensive solutions to discover, qualify and manage government sales leads can help your business win throughout the fiscal year here.