1. Fiscal Law
ACQ 370

2. What is Fiscal Law? U.S. Constitution
“Congress shall have the power to lay and collect Taxes, Duties, Imports, and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States ”
-- U.S. CONST., art. I, § 8, cl. 1

3. What is Fiscal Law? U.S. Constitution
“No Money shall be drawn from the Treasury but in Consequence of an Appropriation made by Law….”
-- U.S. CONST., art. I, § 9, cl. 7

4. What is Fiscal Law?
The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress.
-- United States v. MacCollom, 426 U.S. 317 (1976)

5. Congress (Power of the Purse)
What is Fiscal Law?
U.S. Constitution
Congress (Power of the Purse)
TIME
Bona Fide Needs
31 U.S.C. 1552, 1344
AMOUNT
Antideficiency Act
31 U.S.C ,
PURPOSE
Necessary Expense
D. Limitations Based upon Amount.
The Antideficiency Act, 31 U.S.C. §§ , , prohibits any government officer or employee from:
a. Making or authorizing an expenditure or obligation in excess of the amount available in an appropriation. 31 U.S.C. § 1341(a)(1)(A).
b. Making or authorizing expenditures or incurring obligations in excess of formal subdivisions of funds; or in excess of amounts permitted by regulations prescribed under 31 U.S.C. § 1514(a). See 31 U.S.C. § 1517(a)(2).
c. Incurring an obligation in advance of an appropriation, unless authorized by law. 31 U.S.C. § 1341(a)(1)(B).
Accepting voluntary services, unless otherwise authorized by law. 31 U.S.C. § 1342.
Limitations Based Upon Purpose.
The “Purpose Statute,” (31 U.S.C. § 1301(a)) provides that agencies shall apply appropriations only to the objects for which the appropriations were made, except as otherwise provided by law.
Limitations Based upon Time. 31 U.S.C. § 1502(a).
1. Appropriations are available for limited periods. An agency must incur a legal obligation to pay money within the period of availability. If an agency fails to obligate funds before they expire, they are no longer available for new obligations.
31 U.S.C. 1301(a)

6. PURPOSE

7. Purpose
Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law.
31 U.S.C. § 1301

8. Purpose Types of Appropriations
DoD has about 100 different appropriations for different purposes
Major DoD Appropriations
Military Personnel
Ammunition Procurement
Other Procurement
Research, Development, Test and Evaluation
Military Construction
Operations and Maintenance
Types of Appropriations
You may have heard people say that money was available, but it was the "wrong color." What they mean, of course, is that the money was from the wrong appropriation.
If you use the wrong color of money, you violate the Purpose Statute and potentially the Antideficiency Act.
Currently, DoD has nearly 100 different appropriations available for different purposes. Appropriations are differentiated by branch of service as well as by purpose (Procurement, Research and Development, etc.) and time. Reserve Components also get separate appropriations.
DoD also receives smaller appropriations for other specific purposes, such as Humanitarian, Disaster, and Civic Aid, as well as Chemical Agents and Munitions Destruction and even
Environmental Restoration.
If you have questions about which appropriation should be used for a particular purpose the GAO has an excellent document, Principles of Federal Appropriation Law, commonly called The Red Book, that provides real world examples of the types of items that can be purchased with the various appropriations

9. Purpose
DoD Comptroller
Feb 2016

10. Purpose Major Appropriation Categories Category Scope of Work Effort
Funding Policy
Obligation Period
RDT&E
RDT&E Activities and Expenses
INCREMENTAL
2 years
Procurement
End items >= $250K system unit cost, All Centrally managed items, Initial Spares, Labor for certain production-related functions (e.g., item assembly, quality assurance)
FULL
3 years
O&M
Replenishment Spares, Fuel, Civilian Salaries, Construction Projects <=$1M, Travel, Non-centrally managed end items <=$100K system unit cost
ANNUAL
1 year
MILPER
Military Personnel Expenses
MILCON
Unspecified Minor >$1M to $3M
Specified >$3M
5 years
FY 15 Appropriations Act changes O&M threshold requirement from $750K to $1M. Sec Section 2802(c).

11. Purpose Necessary Expense Doctrine Three-part test:
Must be for a particular statutory purpose or necessary and incident to execution of the general purpose of the appropriation
Expenditure must not be prohibited by law
Expenditure must not fall within the scope of some other appropriation
NECESSARY EXPENSE.
A. The Purpose Statute does not require Congress to specify every item of expenditure in an appropriations act. An appropriation for a specific purpose is available to pay expenses necessarily incident to accomplishing that purpose. Secretary of State, B , 42 Comp. Gen. 226, 228 (1962); Major General Anton Stephan, A-17673, 6 Comp. Gen. 619 (1927).
B. In some instances, Congress has specifically authorized expenditures as “necessary expenses” of an existing appropriation. See e.g., 10 U.S.C. § 2241(b) (authorizing DOD to use its appropriated funds for “all necessary expenses, at the seat of the Government and elsewhere, in connection with communication and other services and supplies that may be necessary for the national defense); 10 U.S.C. § 1124 (authorizing the Secretary of Defense to “incur necessary expense for the honorary recognition of a member of the armed forces” who increases the efficiency or improves operations); 5 U.S.C. §§ 4503­4504 (authorizing same for civilian employees).
C. The GAO applies a three-part test to determine whether an expenditure is a “necessary expense” of a particular appropriation:
1. The expenditure must bear a logical relationship to the appropriation sought to be charged. In other words, it must make a direct contribution to carryout out either a specific appropriation or an authorized agency function for which more general appropriations are available.
2. The expenditure must not be prohibited by law.
3. The expenditure must not be otherwise provided for; that is, it must not be an item that falls within the scope of some other appropriation or statutory funding scheme.
Principles of Fed. Appropriations Law, vol. I, ch. 4, 4-21, GAO SP (3d ed. 2004). See Presidio Trust—Use of Appropriated Funds for Audio Equipment Rental Fees and Services, B , 2006 U.S. Comp. Gen. LEXIS 57 (Mar. 24, 2006).

12. Purpose Necessary Expense Doctrine Necessary and Incident? Food
Is it logically related to the appropriation’s purpose?
Will it make a direct contribution to carrying out an authorized function?
Necessary?
Food
Clothing
Bottled Water
Entertainment
Gifts

13. Purpose Prohibitions: FY 2015 National Defense Appropriations Act:
SEC. 1033
Prohibition on the use of funds for the transfer or release of individuals detained at United States Naval Station, Guantanamo Bay, Cuba.
Within Title 10, United States Code:
NECESSARY EXPENSE.
A. The Purpose Statute does not require Congress to specify every item of expenditure in an appropriations act. An appropriation for a specific purpose is available to pay expenses necessarily incident to accomplishing that purpose. Secretary of State, B , 42 Comp. Gen. 226, 228 (1962); Major General Anton Stephan, A-17673, 6 Comp. Gen. 619 (1927).
B. In some instances, Congress has specifically authorized expenditures as “necessary expenses” of an existing appropriation. See e.g., 10 U.S.C. § 2241(b) (authorizing DOD to use its appropriated funds for “all necessary expenses, at the seat of the Government and elsewhere, in connection with communication and other services and supplies that may be necessary for the national defense); 10 U.S.C. § 1124 (authorizing the Secretary of Defense to “incur necessary expense for the honorary recognition of a member of the armed forces” who increases the efficiency or improves operations); 5 U.S.C. §§ 4503­4504 (authorizing same for civilian employees).
C. The GAO applies a three-part test to determine whether an expenditure is a “necessary expense” of a particular appropriation:
1. The expenditure must bear a logical relationship to the appropriation sought to be charged. In other words, it must make a direct contribution to carryout out either a specific appropriation or an authorized agency function for which more general appropriations are available.
2. The expenditure must not be prohibited by law.
3. The expenditure must not be otherwise provided for; that is, it must not be an item that falls within the scope of some other appropriation or statutory funding scheme.
Principles of Fed. Appropriations Law, vol. I, ch. 4, 4-21, GAO SP (3d ed. 2004). See Presidio Trust—Use of Appropriated Funds for Audio Equipment Rental Fees and Services, B , 2006 U.S. Comp. Gen. LEXIS 57 (Mar. 24, 2006).
…Funds appropriated to the Department of Defense may not be used to equip, operate, or maintain a golf course… 13

14. Purpose “Otherwise provided for”
If two or more appropriations are available, you must use the more specific of the two
If neither is more specific, the agency chooses, but is then bound by that choice

15. Purpose Expense Investment
All DoD costs are classified as either expense or investment
Costs incurred to operate and maintain the organization (O&M funding)
Services, supplies consumed in current period, civilian labor, equipment rental, fuel, equipment maintenance, utilities, etc.
Expense
Costs resulting in the acquisition of, or an addition to, end items (Procurement funding)
The costs benefit future periods and generally are of a long-term character, such as real property and personal property
Investment

16. Purpose Expense or Investment?
Operation and Maintenance and Military Personnel appropriations are considered expenses
Procurement and Military Construction appropriations are considered investments
Research, Development, Test and Evaluation, Base Realignment and Closure (BRAC), and Family Housing appropriations include both expenses and investments
DOD Financial Management Regulation, Vol 2, Ch. 1 para (C)(3)

17. Purpose Expense/Investment Threshold
Systems (what is the primary function)?
The 2014 Defense appropriation bill:
Section 8030 provides authority to use operation and maintenance appropriations to purchase items having an investment item unit cost of not more than $250,000

18. Time

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

20. “Current year funds for
Time
Basic Limitations:
Funds must be obligated during their period of availability
And
The obligation must be for a bona fide need of that period
“Current year funds for
current year needs”

21. Time Period of Availability
If not specified otherwise, funds are available for obligation for one fiscal year
Operation and Maintenance
Military Personnel
Some typical multiple year funds
RDT&E – 2 years
Procurement – 3 years
Military Construction – 5 years

22. Time Availability of Funds
Current Years + Expired Years = Availability of Funds for Obligation and Expenditure

23. Time Availability of Funds Current Years Expired Years Cancelled Years
Uses:
Any regular obligation of funds
New work, in-scope adjustments/ settlements
Available for expenditure
Constraints:
Proper use of funds
Full/incremental
Purpose/amount
Bona Fide Need
Settlements of previous obligations
Adjustments to in-scope efforts
No new work
No increase in scope or quantity
After 5th year of Expired Phase funds are cancelled
No longer available for settlements or adjustments (obligations)
No longer for expenditures
Unliquidated funds returned to US Treasury
Unpaid bills expended from current year funds

24. Time Bona Fide Needs Rule
The balance of an appropriation or fund 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 and obligated consistent with section 1501 of this title.
31 U.S.C. § 1502(a)

25. Time Bona Fide Needs Rule When is it needed?
Differs depending upon the type of requirement
Supplies
Services
Training
Construction
Exceptions to every rule

26. Time Bona Fide Need: Supplies General rule Exceptions
Supplies are the bona fide need of the period in which they will be used
Exceptions
Lead Time exception
Stock Level exception

27. Production or Delivery
Time
Bona Fide Need: Supplies
Exceptions
Production or Delivery
Lead Time
We really need it now. But for reasons beyond our control, we can’t get it this FY
Time between contracting and delivery not excessive
Not standard commercial items readily available
Stock Level
May use current year funds to replace stock used, even if you know it won’t be used until next FY
But only up to the normal stock level
No stockpiling

28. Time Bona Fide Need: Services
Services are the bona fide need of the FY in which we receive them
But are the services Severable or Nonseverable?
Office paint job?
Mowing services?
Survey?
Vehicle repair?
Vehicle maintenance?

29. Entire K funded with FY 18 funds
Time
Bona Fide Need: Services
Nonseverable Services: Entire effort is the bona fide need of the FY of contract award
Entire K funded with FY 18 funds
Award
Dec 11, 2X17
Finish
Dec 10, 2X18
SEPT 30
OCT 1

30. Bona Fide Need: Services
Time
Bona Fide Need: Services
Severable services are the bona fide need of the FY in which services are performed
FY 18 funds
FY19
OCT 1
Award
Feb 1, 2X18
SEPT 30
Finish
Jan 31, 2X19

31. Note: This only applies to 1-year appropriations
Time
Bona Fide Need: Services
Exception: Up to 12 months of severable services starting any time
FY18 funds
OCT 1
Award
Feb 1, 2X18
SEPT 30
Finish
Jan 31, 2X19
10 U.S.C. § 2410a
Note: This only applies to 1-year appropriations

32. Time Bona Fide Need: Training General rule Exception
A single training course is considered to be a nonseverable service
The training is a Bona Fide Need of the FY in which the training begins
Exception
Similar to Lead Time exception
It is a narrow exception

33. Time Bona Fide Need: Construction General rule Exception
Construction is a bona fide need of the FY in which we need construction to begin
Exception
Contractor fails to begin by end of FY, but mitigating factors
When site made available
Weather conditions
Construction lead time

34. Time Bona Fide Need: Construction Maintenance and Repair
Current year funds may be used for projects near end of FY, as long as:
It is a Bona Fide Need of the current FY
Contract must specify that work must begin before January 1st

35. Time Contract Modifications Apply Bona Fide Needs rule
Is the modification a new requirement?
Is it a pre-existing liability?
Is the modification within the scope of the original contract?

36. Time Protests Protests generally stop contracting process
If protest crosses fiscal years while waiting for resolution
Funds available at time of protest remain available for 100 days after protest is resolved
Applies to all protests, any forum

37. Time Terminations Default Convenience
Original (but now expired) funds remain available to reprocure if:
We still have that need
Reprocurement contract is similar in scope and size
We reprocure without delay
Convenience
Generally extinguishes use of expired prior year funds unless:
Original award was made in good faith but was legally improper, example: violates CICA (i.e., Krygoski)
Need still exists
Re-procurement contract is similar in scope and size
Re-procure without delay

38. Amount

39. Amount Antideficiency Act
Prohibits federal employees from making or authorizing an expenditure
in excess of the amount available in the appropriation or fund unless authorized by law
31 U.S.C. § 1341(a)(1)(A).

40. The ADA is not a single statute, but a combination of several
Amount
Antideficiency Act
Don’t obligate before funds have been appropriated for that purpose, unless otherwise allowed by law
Don’t accept voluntary services for the United States
Don’t make obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations
The ADA is not a single statute, but a combination of several

41. Amount Exceptions You can obligate in advance: Feed and Forage Act
Certain activities during a funding gap
Certain emergencies
Certain multi-year contracts for continuing services that have substantial start-up costs

42. Amount Awarding Prior To Availability
The Subject to Availability clause
Does not let you obligate funds in advance of funds (the clause says that the Government has no obligation unless/until funds become available)
FAR

43. Amount Voluntary Services Can accept if:
Authorized by law, e.g., soldier/family support activities
Emergencies or imminent threat to property
Gratuitous services with written agreement of no compensation
The statute prohibits the acceptance of services rendered in the hope that Congress will subsequently recognize a moral
obligation to pay for the benefits conferred. While section 665(b) (previous version of ADA)
has been interpreted to prohibit any voluntary service, except in the
emergencies specified, the terms "voluntary" and "gratuitous" have
been distinguished.
"The voluntary service referred to in r31 U.S.C.
S 665(b)) is not necessarily synonymous with gratuitous
service, but contemplates service furnished on the initiative
of the party rendering the same without request
from, or agreement with, the United States therefor,
Services furnished pursuant to a formal contract are
not voluntary within the meaning of said section. B

44. Amount Not an Antideficiency Act violation if proper funds:
Were available at time of obligation
Available at time of correction
Available continuously in-between

45. Sources Fiscal Law Deskbook
Department of Defense Financial Management Regulation
Principles of Federal Appropriations Law (Red Book)