Fiscal Law Overview

Fiscal Law

• Fiscal law is the foundation of the Finance career field
• It is important for Financial Managers (FM) as it deals with: the availability of appropriations, the United States Constitution, Purpose, Time, and Amount (PTA), and the Anti-Deficiency Act (ADA).
• Fiscal law originated from Article I, Section 9 of the US Constitution which states "No money shall be drawn from the Treasury, but in consequence of Appropriations made by law."
• Congress authorizes money through authorization bills and appropriates funding through appropriation bills, both are needed for spending.
• The expenditure of public funds is only proper when established by Congress.

Purpose Statute

• This Statute dictates that funds may only be spent for purposes expressly authorized by Congress.
• It is one of the most violated ADA statutes.
• Determines if an appropriation expenditure is:
  • For a particular statutory purpose, necessary and incident to the proper execution of the general purpose of the appropriation
  • Not prohibited by law
  • Not otherwise provided for

Necessary Expense Rule

• This is the foundation of the Purpose Statute.
• Applies to all purchases and requires the following tests:
  • Logical relationship: Is the purchase connected to completing the mission?
  • Not prohibited by law: Is the purchase explicitly prohibited by law?
  • Not funded elsewhere: Is something else already funding this purchase?
• Examples
  • Tuxedos for Secret Service agents, as it passes all three tests.
  • Seasonal decorations for office areas, are acceptable as long as they are consistent with work-related objectives.

Time Statute

• Dictates the time period appropriations are available for new obligations.
• There are three types of appropriations based on availability time:
  • Annual
  • Multiple-year
  • No-year

Annual Appropriations

• Available for new obligations during a specific fiscal year.
• O&M and Personnel appropriations are annual.
• All appropriations are assumed to be annual unless stated otherwise.

Multiple-Year Appropriations

• Available for new obligations over a period longer than one fiscal year.
• Examples:
  • Research, Development, Test, & Evaluation (RDT&E) funds (2 years).
  • Procurement funds (3 years).
  • Military Construction funds (5 years).

No-Year Appropriations

• Available for new obligations without fiscal year limitation.
• The appropriating language must expressly state "to remain available until expended" or similar language.
• Examples: DoD Working Capital and Base Realignment and Closure (BRAC) funds.

Bona Fide Need Rule

• A fiscal year appropriation may be obligated only to meet a legitimate, or bona fide need arising in the fiscal year the appropriation was made.
• Examples of exceptions to the rule:
  • Lead-time exception - Agencies can purchase something in one FY and deliver it in the next FY if it takes a long time to receive the item.
  • Training - Training is an authorized expense, as long as it is deemed necessary regardless of when it is delivered.
  • Stock-level exception - Allows agencies to purchase enough items to keep a sufficient stock level.

Amount Statute

• Congress sets limits on the amount of available funds.
• Goverened by the Anti-Deficiency Act (ADA).

Anti-Deficiency Act (ADA)

• The ADA ensures the government does not spend more than what is appropriated.
• Main parts of the ADA: 31 USC 1341, 1342, and 1517.
• Title 31 USC 1341: Prohibits obligating or expending funds in advance or exceeding the appropriation.

Fiscal Law

• Fiscal law governs the spending of federal funds.
• No money can be spent unless Congress authorizes it first.
• The authorization bill grants budget authority, but not money.
• Appropriation bills determine the amount of money that can be spent.
• The US Constitution, Article I, Section 9 states "No money shall be drawn from the Treasury, but in consequence of Appropriations made by law."
• The Necessary Expense Rule states that spending must be:
  • Logically related to the purpose for which the funds were appropriated.
  • Not prohibited by law.
  • Not funded elsewhere.

Time Statute

• The Time Statute states that Congress appropriates funds for a specific period of time.
• Agencies must obligate their appropriations within this time frame.
• There are three types of appropriations based on availability:
  • Annual Appropriations: Available for one fiscal year.
  • Multiple-Year Appropriations: Available for a period longer than one fiscal year.
  • No-Year Appropriations: Available for an unlimited time period.
• Multiple-Year Defense Appropriations:
  • Research, Development, Test, & Evaluation (RDT&E) funds: 2 years.
  • Procurement funds: 3 years.
  • Military Construction funds: 5 years.
• Bona Fide Need Rule: Funds can only be obligated to meet a legitimate need arising within the fiscal year for which the appropriation was made.

Exceptions to the Bona Fide Need Rule:

• Lead-time exception: Allows agencies to purchase items in one fiscal year but receive them in the next if it takes an extended time to receive the item.
• Training: Authorized expense if an approving official deems the required training necessary, regardless of when it will be delivered.
• Stock-level exception: Allows agencies to purchase enough items to maintain a sufficient stock level to avoid delays in operations.

Amount Statute

• Congress limits not only the purposes and timeframe for spending but also the amount of available funds.
• The Anti-Deficiency Act (ADA) governs the amount statute.
• The ADA prohibits obligating or expending funds before the appropriated amount or beyond the appropriated amount.

Standard Financial Information Structure (SFIS)

• SFIS is a common language for data elements used for budgeting, financial reporting, accounting, and interoperability across the DoD.
• It standardizes financial reporting at the DoD level.
• Guidance on SFIS can be found in DAFMAN 65-604, DoD FMR Volume 1, Chapter 4 and the SFIS webpage.
• The SFIS includes flex fields, symbols, and codes used in accounting systems and budget management.

This quiz covers the essentials of fiscal law, crucial for Financial Managers. It explores appropriations, the Anti-Deficiency Act, and the legal foundation laid by the US Constitution. Understanding these principles is vital for effective public fund management.