Agency layoffs do not constitute illegal impoundments, GAO rules

Federal agencies are not inherently violating spending laws by laying off employees for budgetary savings, the government’s top watchdog has ruled, clearing the Trump administration of one potential legal pitfall as it continues to scale back the federal workforce. 

The administration has violated the federal statute that prevents presidents from unilaterally withholding congressionally approved spending, the Government Accountability Office also found on Thursday, its fourth such finding since President Trump took office in January. The White House has repeatedly quarreled with GAO and cast aside its findings, saying it is not bound by the statute or Supreme Court precedent. 

In one of its two reports issued on Thursday, GAO found the Homeland Security Department’s mass layoffs in March at its Office of Civil Rights and Civil Liberties, Office of the Citizenship and Immigration Services Ombudsman and Office of the Immigration Detention Ombudsman did not violate the 1974 Impoundment Control Act. The finding upheld a decades-old GAO precedent that agency reductions in force did not automatically constitute an illegal impoundment, updating it to note agencies can not simply pocket any resulting savings. 

“A RIF to achieve savings does not run afoul of the ICA as long as any net savings generated from the RIF are offset by other allowable expenses,” GAO said. “An agency can demonstrate that it is offsetting net savings by showing that it is continuing to obligate and expend all funds provided to the affected account(s).”

DHS officials have stated they are continuing to expend their full appropriation for the impacted offices for fiscal 2025, which GAO said seemed to be supported by the documents it has reviewed. Additionally, Congress provided the specific DHS offices that were subject to RIFs ]with lump-sum appropriations and did not mandate any specific staffing level. 

GAO noted it could not confirm whether the layoffs resulted in any savings or if impacted employees are still on paid administrative leave as DHS declined to cooperate with GAO’s investigation. 

The White House’s Office of Management and Budget told GAO in May it would only cooperate with the watchdog’s impoundment probes when doing so did not impede its ability to carry out President Trump’s agenda. GAO at the time had around 50 such open investigations, which OMB called “voluminous, burdensome and inappropriately invasive.” 

While GAO cleared DHS of an illegal impoundment on Thursday, it found the Energy Department had flouted the law. Energy has delayed disbursements under the Renew America’s Schools program, an initiative created by the 2021 Infrastructure Investment and Jobs Act to help schools make energy upgrades, to determine their alignment with Trump’s agenda. The department has so far obligated just 17% of its fiscal 2025 appropriation for the program and expended none of it, GAO found. 

“We find that DOE violated the ICA,” the watchdog said. “Considering that the funds were withheld for policy reasons and the uncertainty of whether DOE has or will resume obligating FY 2025 funds for the Schools Program, we conclude DOE violated the ICA when it delayed the obligation of FY 2025 Schools Program funds.”

GAO emphasized it was only acting in support of Congress and the exercising of the legislative branch’s power of the purse, and its finding should not be interpreted as a stance on the underlying policy. Enforcement of the impoundment law, which prohibits the executive branch from withholding congressionally appropriated funds for policy reasons, falls under GAO’s jurisdiction.The watchdog previously found the Trump administration had unlawfully withheld funding at the Transportation Department, Health and Human Services Department and the Institute of Museum and Library Services. 

“The ICA was enacted to ensure that legislation passed by Congress and signed by the President is faithfully executed,” GAO said in finding the Trump administration failed to do so. 

Sen. Patty Murray, D-Wash., the top Democrat on the Senate Appropriations Committee, said “it’s a day that ends in y” and therefore Trump was illegally holding up federal funding. 

“Denying schools funding for energy efficiency upgrades that save them money isn’t just illegal, it’s stupid and harmful,” Murray said, “and it’s time President Trump stop blocking this funding alongside all the other key investments he’s holding up.”

The Trump administration, however, is looking to continue unwinding congressionally appropriated funding. Trump has already signed into law a measure to claw back more than $9 billion in spending on foreign aid and public broadcasting and the White House has said it may ask for additional rescissions. OMB Director Russ Vought has repeatedly stated the White House may invoke “pocket rescissions,” a process through which it can unilaterally withhold funding at the end of the fiscal year. GAO found in Trump’s first term that the president does not have the authority to implement pocket rescissions. 

Last month, when GAO had only made two determinations of illegal impoundments, Vought told lawmakers he expected the auditors to make many additional such findings and would not agree to spend the money they have identified as improperly held up. The administration has “a lot of tools that are on the table for the purposes of those funds,” Vought said. He suggested the funding is merely being reviewed. 

“We're not ready here to say that we're done with our programmatic review,” Vought said. “And GAO, quite frankly, is improper to continue to call it an impoundment.”