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The Basics ofThe Basics of
Federal Fiscal LawFederal Fiscal Law
Presenters:Presenters:
Mr. DANA SMITHMr. DANA SMITH
Counsel, FISC NorfolkCounsel, FISC Norfolk
Ms. LORI CHOFNASMs. LORI CHOFNAS
Counsel, FISC Norfolk,Counsel, FISC Norfolk,
Philadelphia SitePhiladelphia Site20 August 2007
I want to learn federal fiscal Law
and I don't care if it takes allafternoon.
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Where It All BeginsWhere It All Begins
No money shall be drawn
from the Treasury, but in
consequence of
appropriations made by
law
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The Half Empty Glass RuleThe Half Empty Glass Rule
You dont need to be a
pessimist to
understand fiscal law,
but it helps.
The established rule is
that the expenditure of
public funds is properonly when established
by Congress, not that
public funds may be
expended unlessprohibited by Congress.
U.S. v. MacCollom, 426 U.S.
317 (1976)
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Sources of Law
United States Code
Authorization Acts
Authorize ProjectsAuthorize Appropriations
Enact Permanent Legislation
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Appropriation ProcessAppropriation Process
Authorization Act
Appropriation Act
Apportionment-OMB
Rate of Obligation SECDEF
Allocation - DEPT COMP
Suballocation MACOM
Allotment - SUBORD CMD
Suballotment INSTALLATION
Allowances (Targets)
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Appropriations Act
Appropriations Acts
31 U.S.C. 1301 (d)
Other Public Laws Opinions
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Legislative History
Provides clarity and context to legislation
Assists in understanding Congressionalintent
Cannot fill in gaps, add or detract
Useful when contemporaneous
when the legislative history is doubtful,go to the statute. (Felix Frankfurter, 350U.S. 366, 374); LTV, 55CG 307
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Continuing Resolutions
Legislation that permits continuingoperations in absence of an Appropriation
Act
Generally at current or lower rate
General provisions of prior year apply
No new programs may start
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Handy Fiscal TermsHandy Fiscal Terms
Commitment
Obligation
Expenditure
Funding:
Available
Expired
Closed
Reprogramming
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PTAPTA
PURPOSE: Obligation for purposefor which money was appropriatedby Congress
TIME: Obligation during period ofavailability
AMOUNT: Sum of money
appropriated to support obligation
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PurposePurpose31 U.S.C. 1301
Based upon specific authority
Example: budget line items
Implied authority
Example: Necessary Expense Rule
No authority
Examples:
Purchases prohibited by statutory foreign sourcerestrictions
Items identified as improper by GAO
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31 U.S.C. 1301(a)
Appropriations shall be applied only to theobjects for which appropriations weremade except as otherwise authorized bylaw.
Determining purpose
Necessary expense
Not provided for elsewhere Not prohibited
Stated purpose
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Necessary Expense
Logical relationship
Within a reasonable range of discretion
Pass the smirk test
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TimeTime
Funds must be obligated before expiration
Every account has a shelf life
Varies according to fund
O & M 1 year/annualfund
Military Personnel 1
year/annual fund
Procurement - 3 Years
RDT&E - Normally 2Years
Major Military Construction- 5 Years
Shipbuilding - 5 Years
Stock/Industrial/WorkingCapital Funds - Indefinite
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Bona Fide Needs Rule
The balance of an appropriation limited forobligation to a definite period of time isavailable only for:
payment of expenses properly incurred during the period of availability or
to complete contracts properly made
within that period of availability
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Bona Fide Needs RuleBona Fide Needs Rule
May expend fiscal year funds only forthe bona fide needs of that same fiscalyear.
31 U.S.C. 1502(a)
So, just what constitutes a bona fideneed on 30 September?
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Defining a Bona Fide Need
The determination of a bona fide needdepends largely on the facts andcircumstances, such as
agency mission nature of the requirement
types of services/supplies
type of contract/agreement
timing of contract/agreement
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Continuing Needs
Current fiscal year funds may be obligatedto satisfy a need that arose in a prior fiscalyear if:
the need was not previously met forlegitimate reasons
the need continues into the subsequentfiscal year and
incurring obligations was discretionarywith the agency
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Future Years Needs vice Continuing Needs
Funds appropriated for a specific year arenot legally available to meet the needs of afuture year.
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Crossing Fiscal Years - Supplies
If supplies cannot be acquired in the samefiscal year in which a bona fide need forthose supplies arises, delivery in asubsequent fiscal year is OK when:
Time between contract execution andrecording the obligation and delivery isnot excessive, and
Supplies are not standard commercialitems readily available elsewhere
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Crossing Fiscal Years: Contracted Services
10 U.S.C. 2410a
Obligation of funds:
Funds available for a fiscal year may beobligated for the total amount of a contract forthe procurement of severable services or thelease of real or personal property for a periodthat begins in one fiscal year and ends in thenext if the total contract period does notexceed 12 months.
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Amount
The lack of money is the root of all evil.
Mark Twain
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Amount
31 U.S.C. 1341
do not make or authorize an obligationor expenditure in excess or in advance
of the amount in an appropriation offund
31 U.S.C. 1517
do not make or authorize an obligationor expenditure in excess of anapportionment or allocation
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AmountAmount
Contracting Officer may only obligatemonies that are available (and in hand).
Bad things to do:
Exceed Congressional Appropriation
Exceed Administrative Subdivision
Exceed funding limitation provided byrequiring activity
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The False CommitmentThe False Commitment
(Gee, You Mean the Computer Doesnt Think For Me?)(Gee, You Mean the Computer Doesnt Think For Me?)
One Touch Financial (OTF) commits butdoes not obligatefederal funds! In order
to obligate funds, you must place anorder or sign a contract with a vendor.Take note of this, particularly at the endof the fiscal year.
Get those orders placed /contractsawarded before the end of 30 September!
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The AntiThe Anti--Deficiency ActDeficiency Act
It is a violation of law to eitherspend orobligate funds:
in advance of appropriations, or
after the expiration of appropriations, or
in excess of appropriations
31 U.S.C. 1341Administrative Penalties
Criminal Penalties
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Not obeying the basics
PTA
Violation of foreign source restrictions
Multi-year contracting
With annual appropriations
Via automatic options
Expense/Investment threshold violation
Funding large construction projects with OMN
Ignoring funding cutoff provisions
Example: A-76 Program time limitations
GreatWays to Violate the ADAGreatWays to Violate the ADA
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Unauthorized CommitmentUnauthorized Commitmentvs. ADA Violationvs. ADA Violation
DOD FMR, DOD
7000.14R, Volume 14
NAVSO P-1000-3
Federal Acquisition
Regulations (FAR)Subpart 1.602-3
NAVSUPINST 4200.81B,
Enclosure 7
UAC:Wholly unauthorized individual entered into
contractGovernment not bound by agreement.
ADA: Authorized (e.g. warranted) official
overstepped their authority in regard to P-T-or A
UAC-RatificationADA-Investigation
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Before You Buy...Before You Buy...
Think and analyze:
Do the basic rules of fiscal law allow or prohibitthese purchases?
Never forget PTA
Does the FAR/DFARS/DOD & Navy Instructionsallow/prohibit these purchases?
Does the GPC/SAP Instruction/policy guidanceallow/prohibit these purchases?
NAVSUPINST 4200.99, Enclosure 1
NAVSUPINST 4200.85, Enclosure 2
Are paperwork and procedures correct?
Dont forget to ask for legal advice.
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Lets Be Careful Out There!Lets Be Careful Out There!
When in doubt: Ask your OGC Attorney.When in doubt: Ask your OGC Attorney.
Whennot in doubt: Ask your OGC Attorney anyway.Whennot in doubt: Ask your OGC Attorney anyway.
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This is LOCAL training provided to FISC Norfolk employees.This training is not intended to be widely distributedthroughout the Department of the Navy, Department ofDefense, or the United States Government.
The comments, observations, and opinions of thepresenter are not intended to represent the official positionof the Department of the Navy or the Department ofDefense.
Care must be taken to examine each situation according toits specific and peculiar facts. In addition, the rules
applicable to the obligation and expenditure ofappropriated funds are subject to change at any time. Thistraining is not a substitute for individualized legal advice.
DisclaimerDisclaimer
This presentation is part of a visual information (VI) mixed mediapackage and has no assigned Production Approval Number (PAN).
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