Cdfm Module 3 Competency 1: Fiscal Law

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Basic Axiom of Fiscal Law

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Established rule is that expenditure of public funds is proper only when authorized by Congress

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Fiscal Law

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Body of law which governs availability and use of public funds with Sources from: Constitution, Authorization Acts, Appropriations Acts, General Statutes, CD Decisions & Courts

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Common Law

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Interpreted differently then fiscal law; as long as there is no law prohibiting … one has legal rights

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To Obligate Funds

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Must be authorized by law

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Constitutional Authority

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Article 1, Section 7, Article 1, Section 8, and Article 1, Section 9

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Article 1, Section 7

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Empowers Congress to pass bills for raising revenues, and delineates how bills will pass from Congress to President for signature or vote

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Article 1, Section 8

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Clause 1, empowers Congress to collect taxes

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Article 1, Section 9

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Clause 7, requires appropriations in law before $$ may be spent from Treasury

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Appropriation

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Purpose, Time and Amount Overview: Three Pillars of Federal Appropriation Law

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Redbook (GAO)

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Principles of Federal Appropriation Law; contains guidance of proper and improper uses of funds

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Improper Use of Funds

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Do not do indirectly what you cannot do directly

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Budget & Acctg 1921

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Act that: Required President to submit an annual budget to Congress for all 3 branches of Federal Govt; Created budget office for President (Bureau of Budget, 1970 became OMB); Established GAO

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Congressional Budget 1974

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Act that: Governs congressional budget process; Defines budget authority; Establishes House and Senate budget committees & Congressional Budget Office (CBO)

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Balanced Budget 1985

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and Emergency Deficit Control Act; Law prescribes rules and procedures, including sequestration, to constrain spending; commonly known as Gramm-Rudman-Hollings Act; Budget Enforcement Act (BEA) Significantly amended this act

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USC 31, Sect 13 & 15

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Prescribe rules and procedures for budget execution; Overarching statutory requirement for use, control, and accountability of funds; OMB Circular A-11 and GAO Federal Appropriations Law, Vol II, Ch. 6 summarize and restate requirements of this law

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Impoundment Control 1974

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Act: Contained same act as Congressional Budget Act; prescribes rules and procedures under which President may withhold appropriated amounts from obligations (deferrals and rescissions)

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OMB Circular A-11

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Issued pursuant to Chapters 13 & 15 of 31 USC; Incorporates GPRA; Provides instructions on budget execution; Appendix A crosswalk between provisions of ADA and revised provisions in 31 USC

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U.S. Constitution

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Basic authority for use of public monies; Article 1: Congress under this authority can generate revenue bills to run government and to establish taxes to fund it

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Law

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Appropriations Acts passed by Congress and signed by the President of USA

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Decisions of Comptroller General

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amplify and clarify legislative authorities

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Basis of Body of Law

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Federal Appropriation Law: Congressional actions to generate revenue and passed into law by President signature with Court and Comptroller General decisions amplifying and clarifying authorities

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Fiduciary Certifier

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Responsible for use of appropriated funds as to the proper purpose, time and amount, and for those US Codes pertaining thereto

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Fiduciary Certification

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Conveys a confidence or trust. As federal officials, have responsibility to hold public’s funds in trust and confidence, ensuring used for purpose Congress intended (purpose, time, and amount)

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May lead to Anti-Deficiency Act Violation

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An erroroneous, willful or knowing violation of fiduciary responsibility may lead to this; No relief from this violation

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Pecuniary Certifier

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Responsible for accuracy of disbursement of funds; Responsible for repayment of any disbursement no in accordance with proper Purpose, Time or Amount

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Pecuniary Responsibility

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Responsible of physical control of the monies entrusted to the care of an accountable official of the government

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Disbursing officers, cashiers, and collecting officers

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Have pecuniary responsibility for monies entrusted to them and will be held personally liable for any loss or theft of funds

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Certifying officers

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Held personally liable for any erroroneous payments, resulting from their miscertification

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Relief

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Can be granted for either loss of cash or miscertification, when certain conditions are met. Accountable official has to prove own innocence

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Availability of Budgetary Resource

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Three Dimensions; Limit by Purpose, Time, and Amount

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Purpose

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Funds may be obligated and expended only for the authorized _________ in appropriations acts or other laws

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Time

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Period during which budgetary resources may be used to incur NEW obligations

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Annual Authority

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Budgetary resources available for incurring new obligations for one fiscal year or less

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Multi-year Authority

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Budgetary resources that are available for new obligation in excess of one fiscal year

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No-year Authority

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Budgetary resources available for new obligations for an indefinite period (until purposes are carried out); Does not expire

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Amount

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Obligations and expenditures may not exceed the __________ established in law

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Definite Authority

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Most DoD appropriations are this; law specifies an amount of budget authority available

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Indefinite Authority

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Law does not specify an amount of available budget authority (examples: interest, social security, and federal retirement

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Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law

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Purpose; 31 USC 1301; Simple, Concise, and Direct

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Purpose

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Although simple, concise, and direct yet leads t the greatest number of ADA violations

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Provides primary control that Congress has over Executive branch

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31 USC 1301, Purpose

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Forms cornerstone of congressional control over federal purse

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Constitution Article 1, section 9, clause 7

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Violation of Purpose Code

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May result in ADA

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General Operating Expenses

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Training , travel, postage, books & periodicals, miscellaneous items incident to Federal work place; for day-to-day operations; using general appropriations

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5 USC 41 Training

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Government Employees Training Act

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5 USC 5702

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Travel, now authorized

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39 USC 3206

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Postage, available to be paid by any available appropriation as necessary expense of fund

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Specific Purpose Authorities

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Source of Spending Restrictions (Authorization Acts, Appropriations Acts, CG Decisions)

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Purpose –Necessary Expense Doctrine

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3 Tests: Logical Relationship, Not Prohibited by law, and Not funded elsewhere

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31 USC 1502, Time

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“Congress has the right to limit its appropriations to particular times as well as particular objects, and when it has clearly done so, its will expressed in the law should be implicitly followed.”

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Two basic uses of appropriations

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Obligations and Expenditures

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Obligations

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legal reservations of funds

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Commitments

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administrative reservations of funds

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Expenditures

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Cash payments made to liquidate an obligation

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Violation of the time code

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May results in an ADA

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Bona fide needs Rule –Time, occurs in year order is placed

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test to determine when to obligate and for how much consumption or effort the obligation should cover; permits obligation in one fiscal year and delivery in a subsequent fiscal year if production lead-time of material requires obligation in one fiscal year in order for the material to be available for installation in later fiscal year

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Material

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Bona Fide Needs Rule to maintain inventory level so as to avoid disruption of operations

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Services –Severable

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Government receives something useful immediately upon the expenditure of funds (or FYE), example: housekeeping; can cross fiscal years as long as it is for no more than 12 months; codified in for DoD 10 USC 2410a

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Services –Non-Severable

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Cannot be separated into increments that will provide something useful at FYE, example software development

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Services –Multi-year

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Contracting authority that is an exception to the Bona Fide Need Rule; Permits contracting up to 5 years of severable service

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DoD FMR

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Requires funding year-by-year

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Change in Contract Scope

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Change in: quantity; mission; contract time period; other controllables (example: Warranty); Chargeable in current year obligations for modification;

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Change did not give rise to new liability

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renders fixed and certain amount of the government’s pre-existing liability to adjust contract price

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Permissable Actions

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Before the start of fiscal year; subject to availability clause

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Contractor Default

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necessary to terminate contract, funds obligated under original contract are available beyond original period of availability, for purpose of engaging another replacement contractor 1. Bona fide need still exists 2. Replacement contract not to exceed scope of original contract 3. Replacement contract is awarded in reasonable (90 days or less) time after termination of original contract

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Convenience of Govt

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Voluntary act to reduce scope of contract or terminate contract for its own convenience will not entitle an agency to obligate expired funds to isse a replacement contract. Unless directed by courts

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Appropriation Life

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Single year, Multi-year, No year; Congress applies time limits to appropriation acts to reserve to itself the continuation of programs and projects. Funds therefore made available by Congress remain available for obligation only until the last hour of the last day of the appropriation. Appropriations are said to expire for obligational purposes after the last day of the specified time period.

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Single year Appropriation

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MILPERS; Operation & Maintenance (O&M), includes minor construction up to $750K or up to $1.5M for health or safety requirements with congressional approval

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Multi-year Appropriation, 2 years

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RDT&E

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Multi-year Appropriation, 3 years

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Procurement

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Multi-year Appropriation, 5 years

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SCN; MILCON

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No-year Appropriation

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31 USC 1555; to be closed if: Agency head determines purpose fulfilled & no disbursements have been made for 2 consecutive fiscal years, example: BRAC

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Remain available until fully expended or without fiscal-year limitation; Bona Fide Rule does not apply

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No-year Appropriation

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“M” Account

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Merged surplus authority was cancelled as of 5 December 1990

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Title 31, USC Section 1553 (regarding closed account)

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Obligations and adjustments to obligations that would have properly been chargeable to original appropriation account , both as purpose and amount before account closed are to be charged to any current appropriation account of Agency available for the same purpose. However, may not exceed 1% of total amount appropriated for that account.

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Appropriations Life Cycle (Ex. Annual Appropriation)

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Fiscal Year 1: Available for New Obligations; Fiscal Years 2 -6: Expired Status, available for payments of delivered orders formerly obligated or upward adjustments for price changes; After that: Cancelled, unliquidated /unobligated amounts to be returned to Treasury general fund. Any adjustments or payments will be charged to unexpired appropriations for same purpose (to 1% maximum).

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Anti-Deficiency Act (31 USC 1341, 31 USC 1342, 31 USC 1517)

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Form the cornerstone of Anti-Deficiency Act (ADA); Congress can control Executive Branch obligation and expenditure limits in these codes. USC 1341: Obligating or expending in advance or excess of appropriation USC 1342: Accepting voluntary services for USA USC 1517: Obligating or expending in excess of apportionment or reapportionment to extent provided in agency’s fund control regulations prescribed under section 1514

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Forms of Budget Authority

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Appropriations (to incur new obligations), Contract Authority, Borrowing Authority, Offsetting Receipts,

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Earmarking- Fiscal Law Term

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Not to Exceed; Not Less Than; Exclusively For; Congress limiting executive branch’s authority by designating part of a more general lump sum of an appropriation designated for particular purpose

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Not to Exceed

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Legal maximum that an agency may obligate

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Maximum Earmark

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May not be augmented with funds from general appropriation, but any unobligated amounts may be used for other objects in general appropriation.

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Monies available in general appropriation may be transferred to earmarked line

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Any funds not needed in earmark may not be transferred into general appropriation

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“Exclusively for”

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Connotes both a floor and ceiling, and rules of each apply to this type of earmark

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Voluntary services, 31 USC 1342, ADA Violation

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“An officer of US may not accept voluntary services for either govt or employ services for either govt or employ services exceeding that authorized by law except for emergencies involving safety of human life or protection of property.”

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If compensation is fixed by law –voluntary

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Appointee may not agree to serve without compensation

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Panels/Boards

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If level of compensation is discretionary, AND compensation can be set at zero, Then appointee without compensation is permissible

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Apportionment, USC 1517, ADA applicable

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May not make or authorize an expenditure or obligation exceeding an apportionment; Agencies may establish ADA at any level below allotment level

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Funding Flow

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Appropriation (from Congress)
Apportionment (from OMB)
Allotment (from OSD)
Commitment
Obligation
Outlay

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Augmentation, 31 USC 3302(b) –misc receipts statute, 31 USC 1301(a) purpose statute, 18 USC 209 Employee

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Compensation Prohibition from outside sources; Example of Augmentation- agency receives and retains funds from others for vehicle destruction (should be sent to Treasury)

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Gifts and Donations, 18 USC 209, 31 USC 3302, 10 USC 2601

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Gifts/donations accepted by agency or employee must be deposited to misc. receipts account in Treasury unless hold authority to keep

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DoD is one of few agencies that can keep gifts if

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$$ or real property from any person, foreign govt or international org. Proceeds from sale redited to CDA in Treasury. Funds available for obligation following appropriation acts. Under mutual defense agreement.

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National Defense Authorization Act- Travel perks

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Allowed Federal employees to retain travel promotional items (frequent flyer miles)

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ADA penalties

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Administrative – up to and including when circumstances warrant, suspension from duty w/o pay or office removal. Criminal- $5K fine, 2 yrs prison or both

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ADA Reporting Requirements

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FMR Vol 14, requires notice of suspected Anti-Deficiency Act violation to be sent to higher HQ with 10 days of discovery. Due to Deputy CFO by 5th business day of following month. Include Means of Discovery. Red Book: who, what actions to person to prevent future occurrences.

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ADA Relief

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Explicit provisions of 31 USC 1351, …no private right of action for declaratory, mandatory or injunctive relief under ADA

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Commitment Accounting for Annual Appropriation

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Safer; Nothing in law that requires us to do commitment accounting.; Required for RDT&E (multi-year funds)

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Criteria for Recording Obligations 31 USC 1501

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Contracts, Loans, Interagency Orders, Orders without Advertising, Grants & Subsidies, Pending Liquidation, Employment & Travel, Public Utilities, Other Legal Liabilities

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Obligations - Recording Principles

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An obligation is a legal duty on part of US which constitutes a legal liability or which could mature into legal liability by virtue of actions on part of other party beyond control of US; Overrecording and underrecording are equally improper; Recroding only evidences the obligation but does not create it.

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Continuing Resolutions (CRs)

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Temporary Appropriation Acts; Stop-Gap Funding Measure; Goes back to 1880's; Enacted as Joint Resolutions (House/Senate, President likely signs); appropriation act, limited in time only.

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Congress can extend availability of funds under this by amending fixed cutoff date . After regular appropriation is enacted, it supersedes this and governs period of availability and amount.

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Continuing Resolution (CR)

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CR, Rate of Operations

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Current rate of operations carried on within appropriation during prior year. Equivalent to 'total funds' that were available for obligation for an activity during prior fiscal year. Funds transferred from account during fiscal year should not be deducted or added in determining current rate.

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CR, Current Rate, "Rate not Exceeding Current Rate"

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Under CR, if there is a balance of unobligated funds that can be carried over into current fiscal year, this balance must be deducted from current rate in determining the amount of funds appropriated under CR. Note: Rate exceeds final appropriation - Funds made available by CR must remain available to pay these obligations.

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CR, Spending Pattern

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Agency may determine its pattern of obligations under continuing resolution so long as it operates Under a plan that keeps within rate of operations set by resolution. Ex. usually obligates most of annual budget in 1st month, it may continue that pattern in CR.

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Law in Lieu of Appropriation

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Continuing Resolution, CR

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Projects, Activities and New Starts

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CR, most Continuing Resolutions contain provisions restricting "New Starts"

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Accountable Individuals - responsible for or has custody of government funds.

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Departmental Accountable Officer (DAO), Certifying Officer (CO), Disbursing Officer (DO), Others

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Disbursing Officer

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Accountable Individual; designated to disburse monies

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Certifying Officer

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Govt Officer or Employee whose certifies vouchers for payment, responsible for legality of proposed payments, liable for amount of illegal or improper payments; Certifies ACCURACY; personably liable from moment an improper payment is made as result of erroneous certification

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Advance Decisions, Certifying or Disbursing officer Right

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From DoD General Counsel regarding lawfulness of any payment (certified or paid)
Insulates against liability
DoD FMR, Volume 5, Appendix E

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Relief of Accountable Individuals, 31 USC 3527 & 3528 (Certifying and Disbursing Officers)
Loss was Not the result of Physical Loss, Illegal, or Incorrect, or Improper Payment

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CG must grant relief is SecDef (granted to DFAS) determines that relief is appropriate given the criteria specified in these codes.

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Comptroller General must grant relief & cannot overrule DoD determination

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If SecDef (delegated to DFAS) determines all criteria have been met (regarding physical loss or improper payment)

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Statute of Limitations

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For Error: 3 Years
For Fraud: No time limit

Accountable officer must be settled by GAO within 3 years, then CG receives account.

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Rule: Expenditure of public funds is proper only when authorized by Congress

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Basic Axiom of Fiscal Law

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Feed and Forage Act 41, USC 11

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Authorized DoD to incur obligations in excess of available appropriations in procuring or furnishing clothing, subsistence, forage, fuel, quarters, transportation or medical/hospital supplies not to exceed necessities of current FY.

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Sequestration - OMB Circular A-11

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Reduction or cancellation of new budget authority, unobligated balances, new loan guarantee commitments or limitations; new direct loan obligations, commitments, or limitations; spending authority; and obligation limitations,

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Treasury Warrant

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Official document Sec of Treasury issues pursuant to law and that establishes the amount of monies authorized to be withdrawn from central accounts that the Treasury maintains.