Understanding the legal time limits for appropriated federal funds* is integral to proper and efficient award management. A substantial percentage of funding used by the U.S. Fish and Wildlife Service's financial assistance programs is from the annual Resource Management appropriation set by Congress, so a good grasp of this concept is important.
Each year Congress passes an appropriations bill which authorizes the federal government to expend public funds in specified ways. This a constitutional requirement, often referred to as the ‘power of the purse’, which means the federal government cannot spend federal funding without express congressional approval. Within the annual appropriations bill are the time limits Congress establishes for expenditure of the specified funds. This is referred to as the ‘period of availability’***** or 'period of obligational availability'.****
Unless otherwise stated in the bill, appropriations are good for one federal fiscal year. That 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.
Concerning appropriated funds, the Service's program offices that award financial assistance awards need to be aware of two separate time limits related to federal appropriations: Expiration and cancellation of funds.
Appropriated funds expire following their period of availability (or, period of obligational availability) 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)).
Appropriated funds which remain unobligated after this date are considered expired. Deobligated funds after their period of availability are also considered expired. How expired funds are recovered depends on the bill that authorized them.
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 by then are expired. If any portion of those obligated funds are deobligated after September 30, 2018 (e.g. closeout of an FA award with a remaining balance) are expired. In both cases, expired resource management funds are lost to the program, though are recovered by FWS for future disbursement. (??)
Let's look at cancellation next.
Appropriated funds that are obligated prior to the expiration remain available for liquidation for five (5) federal fiscal years following the period of availability. 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).******
Looking back to our example above, the FY2017 Resource Management funds that have been obligated on FA awards, have a five year period before being cancelled, which means they are available to the recipient until September 30, 2023. After that, 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 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)
With financial assistance awards,the obligation requirement is met at the time of award.
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)
With FA awards, expenditures against the obligation, even though after the appropriation expiration itself, are valid for the award’s entire period of performance, or the cancellation of the appropriation, whichever is earlier. Unless a specific legislation states otherwise, 31 USC 150 (Name?) expressly limits an apporpriaton’s life for no longer than five (5) years AFTER the appropriation’s period of availability (expiration).
From CRS “Interagency Contracting: An Overview of Federal Procurement and Appropriations Law”, pp. 5-6)
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
(1) https://www.congress.gov/bill/114th-congress/house-bill/5538/text
(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.
**
*** 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)
****** Principles, Vol I, p. 1-37.