1. ESSENTIAL PRINCIPLES OF FISCAL LAW
Mike McGregor
Office of the General Counsel

2. What to Take Away:
AFFIRMATIVE AUTHORITY - PARADIGM SHIFT – “What gives me the authority to spend these public funds?”
PTA ANALYSIS
Purpose – 31 U.S.C. 1301
Time – 31 U.S.C & 1502
Amount – 31 U.S.C. 1341, 1517 & 3302
ANTIDEFICIENCY ACT - Do not spend, or commit to spend, in advance of or in excess of appropriations - 31 U.S.C. 1341
MISCELLANEOUS RECEIPTS - Need authority to retain proceeds from sources other than congressional appropriations 31 U.S.C. 3302(b)
FOR OFFICIAL USE ONLY

3. Sources of Law U.S. CONSTITUTION PUBLIC LAWS - U.S. CODE
AUTHORIZATION ACTS
APPROPRIATION ACTS
COURT, DOJ and GAO OPINIONS
ADMINISTRATIVE REGULATION
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4. Congressional Power of the Purse
Congress shall “make all laws which shall be necessary and proper for carrying into Execution the foregoing Powers . . .”
“No money shall be drawn from the Treasury, but in Consequence of Appropriations made by law “
U.S. Constitution, Article I, section 9, clause 7
“…[T]he expenditure of public funds is proper only when
established by Congress, not that public funds may be
expended unless prohibited by Congress.”
U.S. v. MacCollom, 426 US 317 (1976)
Affirmative Authority
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5. Sources of Law: U.S. Code Purpose Statute - 31 USC 1301(a)
Antideficiency Act
- 31 USC 1341, 1342, ,
Adequacy of Appropriations Act
- 41 USC 11
Miscellaneous Receipts Statute
- 1 USC 3302
Bona Fide Needs Statute
- 31 USC 1502(a)
Account Closing Statutes
- 31 USC
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6. Sources of Law: Authorization Acts
An Act of Congress that authorizes the appropriation of funds to implement programs
- Not an appropriation of public funds
- Enacts permanent legislation
- House and Senate Armed Services Committee (HASC and SASC)
- National Defense Authorization Act (NDAA FYXX)
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7. Sources of Law: Appropriations Acts
An Act of Congress that permits Federal agencies to incur obligations and to make payments out of the Treasury for specified purposes
- An appropriation of public funds – provides budget authority
- Generally temporary in nature (for FY in which it is enacted)
- House and Senate Appropriations Committee (HAC and SAC)
- Defense Appropriations Act for FYXX
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8. The Structure of the DoD Appropriations Act
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
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9. Continuing Resolutions
LEGISLATION PERMITTING OPERATIONS IN THE ABSENCE OF AN APPROPRIATION
- GENERALLY AT CURRENT OR LOWER RATE
- GENERAL PROVISIONS OF PRIOR YEAR CONTINUE TO APPLY
- NO NEW STARTS
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10. PURPOSE – time - amount Purpose Statute
Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law
31 USC 1301(a)
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11. The Necessary Expense Rule:
Congress can’t anticipate every necessary expense
Appropriations Acts often contain broad categories (i.e., Operations and Maintenance)
- Defense Health Program: “For expenses, not otherwise provided for, $30.5 B shall be for the operation and maintenance…” (FY12 Appropriations Act)
FOR OFFICIAL USE ONLY

12. The Necessary Expense Rule:
An appropriation is available for those expenses which are necessary or incident to the proper execution or achievement of the object of the appropriation
Test:
Is there a logical relationship between the proposed expenditure and the appropriation?
Is the expenditure prohibited by law?
Is the expenditure otherwise provided for?
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13. Necessary Expense Test: Logical Relationship
Extent to which the expenditure will contribute to accomplishing the purposes of the appropriation
- Agency discretion/determination given considerable
deference
- Consider authorized mission/responsibilities of agency
- Must be reasonable
- Not just desirable/good idea/someone else is doing it
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14. GOVERNMENT FUNDS FOR GOVERNMENT PURPOSES
CAUTION – CAUTION - when expending agency funds for items of a personal nature
Examples: food, bottled water, clothing, trinkets, command coins, ceremonies, and decorations
What is authority: Appropriations Act, U.S. Code, Regulation, Necessary Expense Rule
Benefit to the agency versus benefit to the individual
FOR OFFICIAL USE ONLY

15. FOOD - PERSONAL EXPENSE
Exceptions:
- emergencies - imminent danger to human life or destruction to government property
- training, conferences - necessary to obtain full benefit of the training event; non-segregable portion of registration fee; no internal meetings
- cultural awareness ceremonies - samples
- awards ceremonies - refreshments as part of public recognition ceremony
- travel
FOR OFFICIAL USE ONLY

16. BOTTLED WATER – PERSONAL EXPENSE
Appropriated funds may be used only upon a showing of necessity; i.e., there is no potable water available.
FOR OFFICIAL USE ONLY

17. CLOTHING – PERSONAL EXPENSE
Official Civilian DOD Uniforms: 10 U.S.C. § 1593
Administrative Expenses Act: 5 U.S.C. § 7903
- Special/unusual clothing
- Item must be for the benefit of the government, essential to the safe and successful accomplishment of the work, and not solely for the protection/comfort of employee
- Must involve hazardous duty
OSHA Compliance: 29 U.S.C. § 668
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18. TRINKET - GIVEAWAY ITEMS PERSONAL EXPENSE
Permissible in some limited circumstances:
- Approved awards programs
- Items of nominal or modest value for recruitment/retention (10 USC 2261)
- Direct connection to agency mission
- No intrinsic value and item assists achieving an internal management objective
FOR OFFICIAL USE ONLY

19. COMMANDER’S COINS PROPER USE DETERMINED BY FUNDING
Appropriated funds (O&M)
Awards pursuant to approved awards program
Recognition for reenlistment/retention
Appropriated funds (ORF)
IAW SECNAVINST K
PERSONAL FUNDS
All others
Cautions
Be wary of bona fide need
Policy strongly discourages personalization - increases risk of obsolete stock upon departure
FOR OFFICIAL USE ONLY

20. TRADITIONAL CEREMONIES (i.e., Retirement, Change of Command)
Authorized to use appropriated funds, government personnel, and other resources
Includes cost of printing/addressing/sending reasonable number of invitations, as appropriate
Does not include cost of food, beverages, or other entertainment
Presentation of award during a traditional ceremony does not permit use of appropriated funds to purchase food at follow-on reception or ceremony
Traditional ceremonies are considered official events
FOR OFFICIAL USE ONLY

21. Decorations
Permissible where consistent with work-related objectives (such as enhancement of morale), agency or other applicable regulations, and the agency mission, and is not primarily for the personal convenience or satisfaction of a government employee. 67 Comp. Gen. 87 (1987)
Agencies should be appropriately sensitive with respect to display of religious symbols
Does not apply to Christmas cards, which remain considered a personal expense. B , December 11, 1996
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22. Purpose, TIME, amount AVAILABILITY OF APPROPRIATIONS
Annual – 1 October to 30 September
- Annual assumed unless specified otherwise
- Definite period of availability
- Example: O&M
Multiple Year
- More than 1 Fiscal Year
- Example: RDT&E funds 2 FYs; Procurement 3 FYs; MILCON 5 FYs
No Year
- Available until expended
- Indefinite
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23. THE LIFE OF A DEFINITE ACCOUNT (Annual / Multiple Year)
EXPIRED
5 YEARS
CLOSED
FOREVER
CURRENT
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24. BONA FIDE NEEDS (BFN) RULE
Appropriation is available for:
- Payment of expenses properly incurred during the period of availability (needs of the agency that arise during the period of availability); and,
- Complete contracts properly made within the period of availability (even if appropriation has expired – not closed)
- Period of availability is the time period during which appropriation is current – available to incur new obligations
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25. GENERAL RULES OF AVAILABILITY
Future Year’s Needs: appropriations are not available for needs in fiscal years beyond availability.
Continuing Need: unfulfilled BFN of one FY may be carried forward to the next FY.
Severable Services: BFN of FY when service performed (10 USC 2410a exception).
Non-severable: BFN of FY of contract execution.
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26. GENERAL RULES OF AVAILABILITY
Multiyear Contracts: only if multiyear or no year appropriations or specific statutory authority exists.
Lead Time: item is BFN of current FY but cannot be delivered until future FY (not a standard commercial item).
Inventory: replacement of stock inventory is BFN of current FY (no stockpiling).
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27. EXPIRED ACCOUNTS Funds retain identify. No new obligations.
Available Only for:
- Recording, adjusting, liquidating obligations properly chargeable,
- Settlements,
- Re-procurement actions.
FOR OFFICIAL USE ONLY

28. CLOSED ACCOUNTS Account closed after 5 years. All balances cancelled.
No longer available for obligation or expenditure for any purpose.
Current appropriation of same purpose may be used to liquidate properly chargeable bills.
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29. Purpose, Time, AMOUNT Basic Concept
Whether sufficient budgetary authority from the proper fiscal year and appropriation is available at the time of obligation or expenditure to pay the liability.
Obligating or expending in excess of amounts available violates the Anti-Deficiency Act (ADA). 31 USC §§ 1341 & 1517
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30. DETERMINING AMOUNT APPROPRIATION - Congress APPORTIONMENT – OMB
ALLOCATION - Agency
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31. THE APPROPRIATION THE ACT STATUTORY SUBDIVISIONS OF THE ACT
EARMARKS (in the act or incorporated into the act)
REDUCTIONS/RESCISSIONS
OTHER STATUTORY RESTRICTIONS
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32. APPORTIONMENT Apportionment is required by 31 USC 1512.
Concept is to prevent expenditures at rates that will cause a deficiency.
OMB apportions funds to DoD.
Obligation in excess of apportionment is an Anti-deficiency Act (ADA) violation.
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33. ALLOCATION Allocation is required by 31 U.S.C. 1514.
Designed to restrict obligations from exceeding appropriation, apportionment, or amounts permitted under agency administrative controls.
Obligation in excess of allocation is an ADA violation.
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34. AUGMENTATION
Amounts appropriated for a purpose represent a limitation Congress has fixed for that purpose; may not exceed that amount absent express statutory authority.
No agency may augment its appropriations from outside sources or from improper internal sources unless statutorily authorized to do so.
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35. AUGMENTATION: GENERAL RULES
31 U.S.C. § 3302(b)— “Miscellaneous Receipts”
- Funds received by Agency from outside sources must be deposited into General Fund of the Treasury unless receipt constitutes authorized by law
Economy Act, Project Orders, Gift statute
Funds from the “wrong” appropriation may not be used to augment the “right” appropriation
- Can’t use O&M for Procurement
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36. Voluntary Services
Voluntary Services are a form of augmentation of resources and may not be accepted without authority.
31 USC 1342 allows accepting voluntary services in emergencies involving human life and property.
10 USC 1588 and 10 USC 2601 provide authority to accept certain voluntary services (see SECNAVINST ).
Voluntary services are different from gratuitous services.
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37. ANTIDEFICIENCY ACT (ADA)
31 U.S.C. § 1341: prohibits obligations or expenditures in excess of appropriations and contracting in advance of an appropriation
31 U.S.C. § 1342: prohibits government employees from accepting voluntary services
31 U.S.C. §§ : requiring apportionment/ administrative subdivision of funds and prohibits obligations or expenditures in excess of apportionment or administrative subdivision of funds
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38. Reporting Suspected ADA Violations Preliminary Investigation
Purpose is to gather basic facts and determine whether a violation appears likely. Completion of the review is usually required within 14 weeks of the date of discovery.
Focus is on the potential violation, not possible corrective actions.
In all cases, the reviewer shall request and obtain advice of legal counsel on legal issues raised during the preliminary review and legal office reviews for legal sufficiency.
Preliminary Report must be forwarded to the Assistant Secretary (Financial Management & Comptroller) of the Military Department or the equivalent for DoD activities.
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39. Formal Investigation
If the preliminary report determines that a violation occurred, an Investigating Officer must be appointed and a formal investigation must be initiated within 2 weeks of approval of the preliminary investigation.
Purpose is to determine the relevant facts and circumstances of the potential violation, assign responsibility and discipline/corrective action.
Final report must reach the office of USD (Comptroller) within 12 months 2 weeks from the date the preliminary review ended.
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40. Reports to the President and Congress
The Secretary of Defense must report violations to the President and Congress (31 U.S.C. §1351, 1517(b)). The report must also be transmitted to the Comptroller General and Office of Management and Budget.
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41. Criminal Penalties
A knowing and willful violation of the Antideficiency Act is a Class E felony (18 U.S.C. § 3559(a)(5).
Punishment may include a $5,000 fine, confinement for up to two years, or both.
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42. ADA CASES
The Naval Observatory (USNO) received $842, from private parties for astronomical data and related services, credited those funds to the USNO O&M(N) account, and then used the funds for USNO purposes without statutory authority. The result was an ADA violation for the improper augmentation of USNO’s O&M(N) account. Discipline included a letter of caution and required fiscal law training.
FOR OFFICIAL USE ONLY

43. ADA CASES (cont)
The Marine Corps Logistics Command used $87, to purchase future training. No specific content or dates for the training were established and the training subsequently took place in the following fiscal year. The result was an ADA violation for an expenditure that failed to meet the bona fide needs rule. Discipline included letters of caution.
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44. ADA CASES (cont)
The AF Air Warfare College used $21, of O&M(AF) between FY99 and FY05 to purchase light refreshments in relation to the hosting of regional studies events. The result was an ADA violation for using O&M(AF) funds for an unauthorized purpose. Discipline included a letter of counseling.
FOR OFFICIAL USE ONLY

45. What to Take Away:
AFFIRMATIVE AUTHORITY - PARADIGM SHIFT – “What gives me the authority to spend these public funds?”
PTA ANALYSIS
Purpose – 31 U.S.C. 1301
Time – 31 U.S.C & 1502
Amount – 31 U.S.C. 1341, 1517 & 3302
ANTIDEFICIENCY ACT - Do not spend, or commit to spend, in advance of or in excess of appropriations - 31 U.S.C. 1341
MISCELLANEOUS RECEIPTS - Need authority to retain proceeds from sources other than congressional appropriations 31 U.S.C. 3302(b)
FOR OFFICIAL USE ONLY

46. Counsel to the Surgeon General of the Navy Office of General Counsel
Michael McGregor
Counsel to the Surgeon General of the Navy
Office of General Counsel