Happy New (Fiscal) Year Government Contractors
The federal government’s fiscal year-end is September 30th, and the new year has already begun for FY2023 spending. Budgets are reset, and it’s time to build relationships with agency buyers.
Why doesn’t the federal government end its fiscal year (“FY”) on December 31 to follow the calendar? The short answer is the government budget cycle and politics factor into the equation.
A fiscal year is defined as a 12-month accounting period. The 12 months do not have to coincide with the calendar year-end and may be selected for budgetary or financial reporting purposes.
Initially the federal government fiscal year-end matched with the calendar year-end December 31. In 1842, the federal government first changed its fiscal year to July 1 – June 30.
In 1974, Congress passed the Congressional Budget and Impoundment Control Act to establish new budget processes and moved the fiscal year from October 1 – September 30. The hope was that these new dates would make it easier for Congress and the President to agree on the annual federal budget and spending plans.
The budget process begins in the Executive Branch at least one year in advance for the next year’s fiscal budget. Federal Agencies create budget requests and submit them to the White House Office of Management and Budget (“OMB”).
The OMB reviews each agency’s request and develops the President’s annual budget. The President’s FY 2023 Budget was submitted to Congress on March 28, 2022.
Congress then has the Constitutional responsibility to review and approve all federal spending and borrowing.
In both instances when the fiscal year-end dates were moved back, the intent was to provide Congress with more time to process appropriations legislation. Despite the changes in dates, consensus on federal spending plans remains elusive.
Congress must pass continuing resolutions that maintain government spending in the case of disagreements to the budget if not passed through Congress and signed by the President before September 30.
Most recently on September 30, 2022, Congress agreed to extend funding for the federal government through December 16, 2022, giving lawmakers time to reach an agreement on the fiscal year 2023 budget or threaten a government shutdown.
It should be noted that it is not uncommon to have a fiscal year not tied to the calendar year-end. Sometimes fiscal year-ends are chosen based on the nature of the business. An example of an off-calendar fiscal year-end includes universities, which often have year-ends of June 30 to correspond more closely with the school year. Also, seasonal business such as retailers often have their fiscal year-end on January 31, after the busy holiday season has ended.
September is the last month of the fiscal year, and the largest federal spending month of the year, as agencies try to use up their remaining budgets with a use-it-or-lose-it mentality. However, October is when the federal budgets reset with the beginning of the new fiscal year, and it is important to develop relationships with the agencies that buy what you sell.
The key to government contracting is connections. Government buyers purchase from businesses that they know, they have their Capability Statement on file, and experience proves they can be a reliable source.
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