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Understanding the legal time limits for appropriated federal funds * is is integral to proper and efficient award managementmanagement of financial assistance (hereafter, 'FA') awards. A substantial percentage of funding used by the U.S. Fish and Wildlife Service's financial assistance FA programs is from the annual Resource Management appropriation set by Congress, so a good grasp of this concept is important.
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Each year Congress passes an appropriations bill which authorizes the federal government to expend public funds in specified ways. This is a constitutional requirement, often referred to as the ‘power of the purse’, which means the federal government cannot spend federal funding funds without express congressional approval. Within
Included in the annual appropriations bill are is the time limits limit Congress establishes for expenditure of the specified funds. This is referred to as the ‘period of availability’***** [1] or 'period of obligational availability'.****[2]
Unless otherwise stated in the bill, appropriations are good available for one federal fiscal year. That This means those funds must be properly expended by the relevant governmental entity by the end of the current federal fiscal year. Some appropriations have longer or shorter periods of availability, specifically determined in the bill. For example, Resource Management funds appropriated to FWS are authorized for two-year periods of availability.
Excerpt from the FY2017 Appropriations Bill (1):
For necessary expenses of the United States Fish and Wildlife Service, as authorized by law, and for scientific and economic studies, general administration, and for the performance of other authorized functions related to such resources, $1,255,004,000 (reduced by $1,000,000) (increased by $1,000,000), to remain available until September 30, 2018. [3]
Two separate fund time limits to consider
Concerning appropriated funds, the The Service's program offices that award financial assistance awards need to be aware of two separate both the expiration and cancellation time limits related to federal appropriations: Expiration and cancellation of funds.
Expiration
Appropriated funds expire following their period of availability (or, period of obligational availability) as established in the Appropriations Bill.
An appropriation account expires “[a]t midnight on the last day of an appropriation’s period of availability” and is “no longer available for incurring new obligations.”**
Spending appropriated funding beyond its period of availability is a violation of the ADA and is monitored closely by OMB. Within the context of federal financial assistance awards, an appropriation is properly spent at the time of the award obligation:
From the Red Book (p.10-39):
Funds must be obligated by the grantor agency within their period of availability. 31 The period of availability of appropriated funds is the period of time provided by law in which the administering agency has to obligate the funds. B-271607, June 3, 1996. The statutory requirement for recording obligations extends to all actions necessary to constitute a valid obligation, and includes, of course, grant obligations (31 U.S.C. § 150l(a)(5)).
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Those funds which remain unobligated following their period of availability Appropriated funds which remain unobligated after this date are considered expired. Deobligated funds after their period of availability are also considered expired. How In each case, those expired funds are recovered depends on the bill that authorized them. no longer available for use by the program office. The only expired funds that are "protected" are those which have been obligated to FA awards within their period of availability. These funds remain available to the recipient for drawdown ("liquidation") for eligible expenses for the period of performance of the award, or the appropriation's cancellation deadline (see below), whichever is earlier.
In practical terms, this means that FY2017 appropriated resource management Resource Management funds are available for obligation on financial assistance awards until September 30, 2018. Any funds not obligated by then are expired. If , or any portion of those obligated funds that are deobligated after midnight on September 30, 2018 (e.g. closeout of an FA award with a remaining balance) are expired. expire. In both cases, expired resource management funds unobligated Resource Management funds are lost to the program , though are recovered by FWS for future disbursement. (??)Let's look at cancellation next[5].
Cancellation
Appropriated funds that are obligated prior to the expiration remain available for liquidation for five (5) federal fiscal years following the period of availabilityFollowing their expiration, obligated appropriations remain available for five federal fiscal years for liquidation. Any remaining obligations left unliquidated after the fifth year are cancelled and returned to the U.S. Treasury.
Continuing our “life cycle” analogy, an appropriation “dies” in a sense at the end of its period of obligational availability. There is, however, an afterlife to the extent of any unexpended balances. Unexpended balances, both obligated and unobligated, retain a limited availability for five fiscal years following expiration of the period for which the source appropriation was made. At midnight on the last day of an appropriation’s period of availability, the appropriation account expires and is no longer available for incurring new obligations. The expired appropriation remains available for 5 years for the purpose of paying obligations incurred prior to the account’s expiration and adjusting obligations that were previously unrecorded or under recorded. 31 U.S.C. § 1553(a). After 5 years, the expired account is closed and the balances remaining are canceled. 31 U.S.C. § 1552(a).******[6]
Looking back to our example above, the FY2017 Resource Management funds that have been obligated on to FA awards , have a five-year period following the appropriation's expiration before being cancelled, which means they . This means that these funds are available to the recipient to liquidate project costs until September 30, 2023. After thatthis date, however, those funds are canceled, even though obligated, and the Program Office must program office must then take steps to backfill the cancelled funds on the FA award, ; typically with newer appropriations. This, as you can see, is not good. It means the Program Office is program office is essentially paying a portion of the project twice.
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Federal Awarding
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Agency compliance with appropriation time limits
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Federal awarding agencies are directed by congressional law to expend appropriated funds properly and within the legally set time-frame.
Spending appropriated funding outside of its period of availability is a violation of the Anti-Deficiency Act (ADA) and is monitored closely by the Office of Management and Budget (OMB). Federal agencies spend appropriated funds properly via application of what is know as "the bona fide need rule", which establishes that an appropriation is available for obligation only to fulfill a genuine, or bona fide, need of the period of availability for which it was made. (2)[7]
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this
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works with grants and cooperative agreements
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With financial assistance FA awards, the obligation requirement bona fide need rule is met at the time of the award's obligation.
An agency's compliance with the bona fide need rule is measured at the time the agency incurs an obligation. In the grant context, the obligation occurs at the time of award. Bona fide need pdf, p2.
From the Red Book (p.10-39):
Funds must be obligated by the grantor agency within their period of availability. 31 The period of availability of appropriated funds is the period of time provided by law in which the administering agency has to obligate the funds. B-271607, June 3, 1996. The statutory requirement for recording obligations extends to all actions necessary to constitute a valid obligation, and includes, of course, grant obligations (31 U.S.C. § 150l(a)(5))
This remains true with FA awards that have periods of performances for multiple years. This is slightly different from contracts, which has caused some confusion in the past among those with contracting backgrounds working with FA.
(MCI quote on obligation being the expenditure)
[8]
With FA awards, expenditures against the obligation, even though after the appropriation expiration itself, are valid for the award’s entire period of performance (which could be more than one year), or the cancellation of the appropriation, whichever is earlier. Unless, of course, a specific legislation states otherwise.
Briefly stated,
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the "obligational event" for a grant generally occurs at the time of grant award. Therefore, this is when the grantor agency must record an obligation under 31 U.S.C. § 1501(a)(5), not when the grantee draws down the funds or when the grantee incurs its own obligations. See B-300480, Apr. 9, 2003, affd, B-300480.2, June 6, 2003.[9]
An appropriation account expires “[a]t midnight on the last day of an appropriation’s period of availability” and is “no longer available for incurring new obligations.”41 ” However, an expired appropriation “remains available for 5 years for the purpose of paying obligations incurred prior to the account’s expiration and adjusting obligations that were previously unrecorded or under recorded.”42 ” Following the five-year period, the account is closed, and “[a]ny remaining balance (whether obligated or unobligated) in the account shall be cancelled and shall thereafter not be available for obligation or expenditure for any purpose.”43 ” This means that the funds are “returned to the general fund of the Treasury.”44 ” “Collections authorized or required to be credited to ... [the] appropriation account, but not received before closing of the account ... shall be deposited in the Treasury as miscellaneous receipts.”45 ” In the event that obligations or adjustments to obligations that should have been charged to an account are discovered after the account is closed, they “may be charged to any current appropriation account of the agency available for the same purpose” as the closed account as long as they are “not chargeable to any current appropriation account of the agency.”46 ” Congress may exempt appropriations from these rules through specific legislation.47
- appropriated annually within the Appropriations Bills passed by Congress
. [10]
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Visual Aids
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HT: https://www.adr.gov/adrguide/afmc.html
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Frequently Asked Questions
How does this apply to Inter-/Intra-Agency Agreements (IAAs) and the Economy Act?
The Economy Act (31 U.S.C. § 1535-1536) gives broad authority to Federal government-wide engagement in inter- and intra-agency reimbursable agreements, which result in a more economical or convenient transaction for the customer agency over the use of commercial services. Under these agreements, the bona fide need rule, as explained above, still exists. In other words, the appropriation year time limits on the funds is still in place within these agreements, and the bona fide need is met at the time the requesting agency obligates those funds in a financial assistance award
For example, if NOAA issues appropriated funds to a FWS program via an IAA, and the FWS program issues an FA award with those funds, the FWS program must obligate the funds prior to the expiration date of the appropriation for NOAA funds obligated from the IAA.
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References
[1] Principles of Federal Appropriations Law, Vol. II, p.10-39 (Feb. 2006).
[2] Ibid., Vol. I, p.1-37 (Jan. 2004).
[3] H.R.5538 - Department of the Interior, Environment, and Related Agencies Appropriations Act, 2017. (n.d.). Retrieved from (1) https://www.congress.gov/bill/114th-congress/house-bill/5538/text.
[4] Congressional Research Service. (2010). Interagency Contracting: An Overview of Federal Procurement and Appropriations Law, 5-6. (Publication No. R40810). Retrieved from https://ntrl.ntis.gov/NTRL/dashboard/searchResults/titleDetail/ADA529123.xhtml.
[5] In special situations, the Service may request from DOI's Division of Financial Management (DFM) a special exception to use expired funds.
[6]Ibid., Vol I, p.1-37.
[7] (2) "The BFN Rule "which establishes that an appropriation is available for obligation only to fulfill a genuine or bona fide need of the period of availability for which it was made." Bona Fide Need Rule pdf, p1.
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*** CRS “Interagency Contracting: An Overview of Federal Procurement and Appropriations Law”, pp. 5-6. Cf Principles of Federal Appropriations Law, Volume I, at 1-37, and 31 U.S.C. 1552(a); 1553(a).
**** Principles of Federal Appropriations Law, Volume I, at 1-37
***** Red Book (p.10-39)
. Office of the Assistant General Counsel for Finance and Litigation (2004). Financial Assistance and The Bona fide Need Rule: Severability No Longer An Issue, 1 (Federal Assistance Law Division: It's the Law, Vol. 16). Retrieved from http://2010-2014.commerce.gov/sites/default/files/documents/2012/march/financial_assistance_and_the_bona_fide_need_rule_severability_no_longer_an_issue.pdf.
[8] Ibid., p. 2.
[9] Principles, Vol. II, p.10-107.
[10] CRS "Interagency Contracting", pp.5-6****** Principles, Vol I, p. 1-37.
