Appropriated fund time limits fall into two categories: expiration and cancellation. Each has unique restrictions, so understanding these time limits is integral to proper and efficient management of financial assistance awards.
This information applies to:
Discretionary financial assistance programs
Background
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 funds without express congressional approval.
Included in the annual appropriations bill is the time 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 available for one federal fiscal year. 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:
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]
Time Limit Categories
The Service's program offices that award financial assistance awards need to be aware of both the expiration and cancellation time limits related to federal appropriations.
Expiration
Appropriated funds expire following their period of 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.” [4]
Those funds which remain unobligated following their period of availability are considered expired. Deobligated funds after their period of availability are also considered expired. In each case, those expired funds are 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 funds are available for obligation on financial assistance awards until September 30, 2018. Any funds not obligated, or any portion of those obligated funds that are deobligated after midnight on September 30, 2018 expire. In both cases, expired unobligated Resource Management funds are lost to the program [5].
Cancellation
Following 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.
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 obligated to FA awards have a five-year period following the appropriation's expiration before being cancelled. This means that these funds are available to the recipient to liquidate project costs until September 30, 2023. After this date, however, those funds are canceled, even though obligated, and the 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 essentially paying a portion of the project twice.
Federal Awarding Agency compliance with appropriation time limits
Federal awarding agencies are directed by congressional law to expend appropriated funds properly and within the legally set time-frame.
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. [7]
