Old Money Isn't Always the Best Money.

Parts of the General Services Administration's two government-wide procurement organizations are losing money, according to agency documents and officials. Losses are greatest within the Federal Technology Service. This fiscal year, operating expenses and overhead costs for the technology service's Regional IT Solutions organization could exceed revenue by $45.7 million.

One reason the FTS lost business is that it cracked down on a practice dear to the hearts of federal departments and agencies: holding over money that hasn't been spent in one fiscal year so that it can be spent in the next one. Agencies saw the IT fund as a convenient way to stash unspent information-technology money that otherwise would have been returned to the Treasury at the end of the year. Agencies and departments had stored between $1 billion and $2 billion in the FTS's IT fund when then-GSA Administrator Stephen Perry decided to end the practice in fiscal 2005. Returning that money to the agencies "upset a lot of people, because now the money could no longer be used; it was old money," said Sandra Bates, a former FTS commissioner. The Defense Department, in particular, had stored a large amount of money in the IT fund, most of which it could no longer use, according to government and industry sources.

Business lines within the Federal Supply Service are also losing money, confirmed Kathleen Turco, GSA's acting deputy administrator and chief financial officer. GSA, which procures goods and services for other federal agencies, has experienced several years of turmoil that began with revelations of contracting abuse in 2003.

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By David Perera, Government Executive