Basic Fiscal Law
Keith M. Dunn
Counsel to the Navy Surgeon General
Navy Bureau of Medicine and Surgery
keith.dunn@med.navy.mil
202.762.3299
www.twitter.com/TheFiscalLawyer
The Power of the Purse
• “No money shall
be drawn from the
Treasury, but in
Consequence of
Appropriations
made by law . . . “
– Constitution, Article I,
section 9, clause 7
what does it mean?
“The established rule is
that the expenditure of
public funds is proper
only when established
by Congress, not that
public funds may be
expended unless
prohibited by
Congress.”
United States v. MacCollom, 426 US 317 (1976)
Sources of Law
• US CODE
• AUTHORIZATION ACTS
– AUTHORIZE PROJECTS - 10 USC 2802
– AUTHORIZE APPROPRIATIONS - 10 USC 114
– ENACT PERMANENT LEGISLATION
• APPROPRIATION ACTS
– 31 USC 1301(d)
– GENERALLY TEMPORARY
• OTHER PUBLIC LAWS
• OPINIONS
Authorization Act
•
“ No
funds may be
appropriated for any fiscal
year to or for the use of any
armed force or obligated or
expended … unless funds
therefore have been
specifically authorized by
law.” 10 U.S.C. 114(a)
• “The Secretary of Defense and
the Secretaries of the military
departments may carry out
such military construction
projects as are authorized by
law...” 10 USC 2802
Appropriations Act
 An act of Congress that permits Federal agencies to
incur obligations and to make payments out of the
Treasury for specified purposes.
 A law must contain express language that it is making an
appropriation. §1301(d).
 Authority to obligate or expend collections without further
action by Congress is a continuing appropriation of the
collections.
DoD Appropriations Act
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•
•
•
•
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Title I - Military Personnel
Title II - Operations and Maintenance
Title III - Procurement
Title IV - Research & Development
Title V - Revolving Funds
Title VI - Other DoD Programs
Title VII - Related Agencies
Title VIII - General Provisions
How Congress Gives Us Our
Money
Remember the Bank
of Mom -- Don’t mix
those envelopes!
Other Laws
(why having money is not always enough)
• T.V.A. v. Hill: notwithstanding Appropriation Act legislative history,
lump sum appropriation for the Tellico dam did not repeal
application of Endangered Species Act protecting snail darters 437 U.S. 153
Legal Opinions
• Opinions from Attorney General
• Opinions from Comptroller General
– Who may seek
decisions/opinions?
– DOD Policy:
• All requests go through OSD first
• 22 Nov 1991 OSD(GC) Memo
– Navy Policy:
• All requests go through
AGC(FM&C)
• 5 May 2003 DON GC/ASN(FM&C)
Memo
THE BOX:
PURPOSE
– Funds may be obligated
and expended only for
specified purposes
TIME
– Funds are available for
obligation only for specified
time limits
AMOUNT
– Agencies may not spend
more than appropriated
PURPOSE
• USE ONLY FOR
INTENDED PURPOSES
“…only for the objects for
which the appropriation is
made…”
31 USC § 1301(a)
PURPOSE
• What is the Navy’s
“purpose”?
• Within the Navy’s
various
appropriations, there
are separate
purposes.
• Necessary Expenses
Purpose[less]
•
•
•
•
Food
Clothing
Bottled Water
Gifts & trinkets
Personal Expenses
• Questions to ask:
– Is there a reasonable relationship
between the proposed expenditure
and the purpose for which the funds
were appropriated?
– What is the benefit to the agency?
– What is the benefit to the individual?
– Is there a more cost effective way to
achieve the agency mission or
program goals?
• Examples:
–
–
–
–
Registered traveler programs
Health promotion items
Recruiting items
Gifts and other giveaway items
TIME
• Unless defined otherwise, every
appropriation has a time limit
• Funds are available for obligation
only during availability of
appropriation
– Annual Presumption (31 U.S.C.
§1301(c) & §8003 of each
Appropriations Act
– Also multiple, no year, and indefinite
accounts
• Do not obligate or expend in
advance of appropriation.
– 31 USC §1341(a)(1)(B)
Bona Fide Needs Rule
31 USC 1502(a)
The balance of an appropriation
limited for obligation to a definite
period is available ONLY for:
- payment of expenses
properly incurred during the
period of availability or
- to complete contracts
properly made within that period
of availability.
* The appropriation is not
available for expenditure for a
period beyond the period
otherwise authorized by law.
Application of the bona fide needs rule
• Inventory
• Training
• Subscriptions
Continuing Needs/Future Years’ Needs
Current FY funds may be obligated
to satisfy a need which arose in a
prior FY where:
- need was not previously met for
legitimate reasons
- need continues into the
subsequent FY AND
- incurring obligation was
discretionary with the agency
Funds appropriated for a specific
fiscal year are not legally available
for the needs of a future fiscal year.
The Life of a Definite Account
CURRENT
EXPIRED
5 YEARS
CLOSED
FOREVER
The Life of an Indefinite Account
CURRENT
CLOSED*
* NO EXPENDITURES 2 YEARS
AND NO LONGER NEEDED
31 USC 1555
Adjustments to Expired Accounts
• 31 USC 1553(a)
• Retains identity
• Available for
– Recording
– Adjusting
– Liquidating obligations
properly chargeable
Closed Accounts
• 31 USC 1552
• All Balances
Cancelled
• Not Available for
Obligation or
Expenditure for ANY
Purpose!
• Existing Bill?
• Receipt?
AMOUNT
• The rules revolve around
two concepts:
– do not spend your money
too quickly (i.e., make it
last the entire fiscal year);
– do not spend more than
you have available at the
time
(you cannot hoard money,
either – sec. 8004)
Apportionment
“ . . . [A]n appropriation available for obligation for a definite period
shall be apportioned to prevent obligation or expenditure at a rate
that would indicate a necessity for a deficiency or supplemental
appropriation for the period.”
31 U.S.C. 1512(a)
. . . An appropriation shall be apportioned not later than the later of the
following:
(1) 30 days before the beginning of the fiscal year for which the
appropriation is available; or
(2) 30 days after the date of enactment of the law by which the
appropriation is made available.”
31 U.S.C. 1513(a)
Earmarks
• The designation of a part of a lump sum
appropriation for a particular purpose
– must be in the statute itself to be binding
– limitations on legislative history
• can illuminate
• cannot provide that which is not there
DoD memo dtd 10 Feb 2006
OMB memo dtd 15 Feb 2007
Executive Oder, Protecting American Taxpayers From
Government Spending on Wasteful Earmarks, 29 Jan 08
Augmentation
• No agency may augment its
appropriations from outside
sources or from improper
internal sources unless
statutorily authorized to do so.
• Amounts appropriated for a
purpose represent a limitation
Congress has fixed for that
purpose and all expenditures
for that purpose must come
from that appropriation and
may not exceed that amount
absent express statutory
authority.
. . . an official or agent
of the Government
receiving money for the
Government from any
source shall deposit the
money in the Treasury
as soon as practicable
without deduction for
any charge or claim.”
31 U.S.C. §3302(b)
Repayment Exception
• Authorized “repayments” are either “reimbursements” or
“refunds.”
• “Reimbursements” are amounts collected which may, by
law, be credited directly to appropriations.
• “Refunds” are amounts collected for payments made in
error, overpayments, or adjustments for previous
amounts disbursed, including returns of authorized
advances.
Gifts
10 USC 2601 – general
gift statute
10 USC 7220 – gifts for
welfare of enlisted
members
The Antideficiency Act
•
The ADA is codified at Title 31 United States Code:
31 U.S.C. § 1341 (prohibiting obligations or expenditures
in excess of appropriations and contracting in advance of
an appropriation)
31 U.S.C. § 1342 (prohibiting government employees from
accepting voluntary services)
31 U.S.C. §§ 1511-1517 (requiring apportionment/
administrative subdivision of funds and prohibiting
obligations or expenditures in excess of apportionment or
administrative subdivision of funds)
31 U.S.C. § 1344 (prohibiting the unofficial use of
passenger carriers)
Types of Violations
• Purpose
• Time
• Amount
Reports
• 31 USC 1517 &
1351
• President,
Congress, and
GAO
• OMB Circular A-34
• FMR vol. 14
Sanctions & Penalties
• Administrative
– Up to removal
• Criminal
– If knowing & willful
– 2 years in jail
– $5000
– Or both