Under the Continuing Resolution for Fiscal Year (FY) 2011, the Office of Environmental Management (EM) was appropriated $5.7 billion, representing approximately $358 million in cuts from the Department of Energy's (Department) FY 2011 budget request and a $317 million reduction from the Department's FY 2010 enacted budget, reductions of about 5 percent of the base amount. Given the current budget uncertainties and increasingly scarce funding resources, we initiated this audit to determine whether EM was effectively managing and planning for declining budget allocations. Our review found that EM had implemented a risk-based process to manage and plan for declining budget allocations that incorporated the myriad factors that must be considered in making difficult budgetary decisions. We believe that although EM's current annual budget planning process appeared to be adequate to address the nearly five percent decline in budget allocations that we tested, more extensive reductions could put future regulatory and agreement milestones at risk. Given the current widespread calls for dramatic reductions in Federal spending, it is possible that the process currently in place that is based on site needs and requirements may lead to an increase in missed regulatory and agreement milestones as budget allocations are further reduced across the complex. We noted that to address such shortfalls, our report on Management Challenges at the Department of Energy – Fiscal Year 2012 (DOE/IG-0858, November 2011), suggested that the Department may need to revise its current environmental remediation strategy and instead address environmental concerns on a national, complex-wide risk-driven basis. No recommendations were made in this report.