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The Government Manager's Guide to Appropriations Law
William G. Arnold (Author)
Publication date: 05/01/2013
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William G. Arnold, CDFM-A, worked with the Department of Defense for 34 years, over 25 of which he spent in financial management. He has held positions as budget officer, director of resource management, director of disbursing, and entitlements director with the Air Force and the Defense Finance and Accounting Service. He is the author of The Appropriations Law Answer Book , The Antideficiency Act Answer Book, The Prompt Payment Act Answer Book, and Performance Budgeting: What Works, What Doesn't.
The
Government
Manager’s Guide to
Appropriations Law
WILLIAM G. ARNOLD, CDFM-A
Chapter 1
OVERVIEW OF APPROPRIATIONS LAW
This chapter defines terms and concepts important to the understanding of appropriations law. Managers unfamiliar with appropriations and their use, as well as those who have a basic familiarity with these terms and concepts, will be well served to read this chapter in its entirety. It sets the stage for the more specific rules and requirements that come later in the book.
APPROPRIATIONS LAW BASICS
The terms federal appropriations law and federal fiscal law refer to the body of law that governs the availability and use of federal funds. 1 The two terms are used synonymously.
Federal funds are made available for obligation and expenditure by means of an appropriations act (or occasionally by other legislation) and subsequent administrative actions that release appropriations to the spending agencies. The use—or availability—of appropriations once enacted and released—that is, the rules governing the purpose, amounts, manner, and timing of obligations and expenditures—is controlled by various authorities: the terms of the appropriations act itself; any authorizing legislation; organic or enabling legislation, which prescribes a function or creates a program (also called program legislation); general statutory provisions that allow or prohibit certain uses of appropriated funds; and case law that has developed over time through decisions of the comptroller general and the courts. These sources, together with provisions of the U.S. Constitution, form the basis of appropriations law. 2
Uninitiated managers often search for specific statutory prohibitions against a particular use of funds, on the premise that if an action isn’t prohibited, it’s authorized. That approach is not correct. A federal agency is a creature of law and can function only to the extent authorized by law. The Supreme Court has expressed what is perhaps the quintessential axiom of appropriations: “The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress.” 3 When a use of funds is proposed, the question should be: What legal authority do I have to make this transaction?
This is not to say that specific prohibitions do not exist. Congress specifically prohibits hundreds, if not thousands, of kinds of transactions in legislation it passes each year. Agencies must comply with such prohibitions. Absent a prohibition, however, agencies must still have positive legal authority to obligate and expend federal funds in a specific manner.
Power of the Purse
Congress, not the President, has the power of the purse. Congress appropriates funds and prescribes the conditions governing the use of those funds. This authority stems from the Constitution, most specifically from the Appropriations Clause, the first part of Article I, Section 9, Clause 7, which states: “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law ….” 4
The Appropriations Clause is the most important tool Congress possesses to rein in presidential power. Regardless of the nature of the payment—salaries, payments promised under a contract, payments ordered by a court, and so on—a federal agency may not make a payment from the U.S. Treasury unless Congress has made the funds available. Thus it is up to Congress to decide whether to provide funds for a particular program or activity, to put time limits on the use of such funds, and to fix the level of funding.
The President and agencies do have administrative discretion in the use of appropriated funds, but such discretion is limited by the restrictions of the law. Agencies are free to operate as they choose as long as they stay within the boundaries established by Congress. (See “A Final Thought,” an additional discussion on agency discretion, at the end of this chapter.)
Appropriations Process Phases
GAO describes five phases in the life cycle of an appropriation:
• Executive budget formulation and transmittal
• Congressional action
• Budget execution and control
• Audit and review
• Account closing. 11
Evolution of the Federal Budget and Appropriations Processes
The first appropriations act, passed in 1789, illustrates how uncomplicated the process once was. The act contained only 141 words and just four appropriations for a total of $639,000. As the size and scope of the federal government grew, so did the complexity of the appropriations process. 5
Until 1842 the calendar year and the government’s fiscal year were identical. From 1842 until 1976, the fiscal year ran from July 1 to the following June 30. Since fiscal year 1977, it has run from October 1 to September 30. 6
Appropriations committees first appeared in the House and Senate during the Civil War. These committees took over appropriations responsibilities from the House Ways and Means Committee and Senate Finance Committee. 7 After World War I, Congress passed the Budget and Accounting Act of 1921. 8 Before that law, agencies made individual requests for appropriations. The act required the President to submit a national budget each year and restricted the authority of agencies to present their own proposals. It also established the Bureau of the Budget (now called the Office of Management and Budget, or OMB) and provided Congress additional oversight capability over fiscal matters by creating the General Accounting Office (now called the Government Accountability Office, or GAO). 9
As the federal budget became more complex, it became apparent that Congress was deeply involved in the appropriations process but had little involvement in the budget process. In response to this realization, Congress passed the Congressional Budget Act of 1974. One objective of the act was to establish a process through which Congress could systematically study and evaluate the total federal budget and determine priorities for allocating budget resources. The act set up a detailed calendar for the phases of the congressional budget and appropriations processes. It created the House and Senate Budget Committees and the Congressional Budget Office (CBO). The law also changed the fiscal year to its current time frame of October 1 through September 30. 10
Executive Budget Formulation and Transmittal
This process often begins years before a budget is ready to be submitted to Congress. Executive branch agencies, with oversight by OMB, develop estimates to satisfy operational requirements for a given fiscal year. OMB consolidates all the executive branch budgets, along with budgets submitted by the legislative and judicial branches, into the Budget of the United States Government. 12 This is normally called the President’s Budget, and it must be submitted to Congress by the first Monday in February, for the fiscal year beginning the following October 1. 13
Congressional Action
After receiving the President’s budget, the CBO submits to the House and Senate Budget Committees a report containing its analysis of fiscal policy and budget priorities. The Budget Committees then hold hearings and prepare their versions of a concurrent resolution, which is the overall budget plan against which individual appropriation bills are to be evaluated. Congress then passes a concurrent budget resolution (supposedly by April 15) that includes a breakdown for each major budget function. 14
Meanwhile, the House Appropriations Committee studies the appropriation requests, and the Committee’s 12 subcommittees evaluate the performance of the agencies under their purview. Each subcommittee conducts hearings at which federal officials give testimony concerning the costs and achievements of the various programs administered by their agencies and provide detailed justifications for their funding requests. Eventually, each subcommittee reports a single appropriation bill for consideration by the entire committee and then the full House membership. 15
After individual appropriation bills are passed by the House, they are sent to the Senate, where a similar process then takes place in the Senate, culminating with passage by the full Senate. If the House and Senate version are different, which is almost always the case, a conference committee composed of selected members from the House and Senate Appropriations Committees is formed to resolve all differences. The conference committee produces a conference report, which must then be passed by the full House and Senate. 16
After passage by Congress, the bill, called an enrolled bill, is presented to the President for signature. Upon his signature the bill becomes an appropriations act, and the appropriations contained therein become, in legislative parlance, “available.” 17
The Congressional Budget Act envisioned this congressional process to be completed by October 1, the beginning of the new fiscal year. 18
Budget Execution and Control
During this phase, an agency spends the money Congress has given it to carry out the objectives of its program legislation. OMB apportions budgeted amounts to the executive branch agencies, thereby making funds in appropriations accounts (held at the Department of the Treasury) available for obligation. Budget authority is normally apportioned by time periods (quarterly is most common) and is intended to achieve an effective and orderly use of available budget authority and to reduce the need for supplemental or deficiency appropriations. 19
Each agency then makes allotments of its apportioned authority. An allotment is a delegation of authority to agency officials that allows them to incur obligations. 20
Agency officials then obligate the funds allotted to them to carry out their assigned duties. An obligation is a legally binding agreement between the government and another party that promises payment to the other party in exchange for the provision of goods or services. 21
Ultimately, payment is made to liquidate obligations. Such payments made to entities external to the federal government are called outlays. 22
Audit and Review
To ensure that funds are spent in accordance with the appropriations law, each agency undergoes audit and review. The audit and review has several requirements:
• Every federal agency is responsible for ensuring that its use of public funds complies with appropriations acts and other laws. An internal audit program helps agencies comply with this requirement.
• Ensuring the legality of proposed payments is the responsibility of agency certifying officers.
• The Chief Financial Officers Act of 1990 provides for the preparation and audit of financial statements by the largest agencies.
• The Department of the Treasury is required to submit an annual financial statement for the executive branch that has been audited by GAO.
• GAO also regularly audits selected federal programs. 23
Account Closing
At midnight on the last day of an appropriation’s period of availability, the appropriation account expires and is no longer available for new obligations. However, unexpended balances, both obligated and unobligated, retain limited availability for an additional five years to pay obligations incurred before to the account’s expiration and to adjust obligations that were previously unrecorded or underrecorded. After five years, the expired account is closed, and the balances remaining are canceled. 24
Appropriations Acts Versus Appropriations
Each year, Congress passes 12 appropriations acts:
• Agriculture
• Commerce, Justice, and Science
• Defense
• Energy and Water
• Financial Services
• Homeland Security
• Labor, Health and Human Services, and Education
• Legislative Branch
• Military Construction, Veterans Affairs
• State/Foreign Operations
• Transportation and Housing and Urban Development (HUD). 25
Because each act contains multiple appropriations, hundreds of appropriations are contained within the 12 appropriations acts. Smaller agencies not listed show up in various acts as independent and related agencies. As an example, the Federal Maritime Commission receives its appropriations in the Transportation/HUD appropriations act.
Government Accountability Office and the Office of Legal Counsel
GAO, part of the legislative branch, was created by the Budget and Accounting Act of 1921. It abolished the offices of the Comptroller of the Treasury and six auditors and transferred their functions to GAO. Under the act, one of the key functions of the comptroller general, who heads GAO, is to is to issue legal decisions to agency officials concerning the availability and use of appropriated funds. 26
There is a long-standing debate over whether GAO decisions are binding on the executive branch. The answer depends on whom you ask. GAO certainly thinks they are binding. GAO’s Principles of Federal Appropriations Law states, “A decision regarding an account of the government is binding on the executive branch and on the Comptroller General himself, but is not binding on a private party who, if dissatisfied, retains whatever recourse to the courts he would otherwise have had.” Congress clearly intended its decisions to be binding. 31 U.S.C. 3526(d) states that “on settling an account of the Government, the balance certified by the Comptroller General is conclusive on the executive branch of the Government.” 27
The Department of Justice’s Office of Legal Counsel (OLC) disagrees. The OLC has a “longstanding precedent that GAO’s decisions are not binding on the Executive Branch.” In a 2009 memorandum the deputy assistant attorney general cited several previous memoranda and OLC decisions on the subject. Among other things, the memorandum asserted
The Comptroller General is an officer of the Legislative Branch. Because GAO is part of the Legislative Branch, Executive Branch agencies are not bound by GAO’s legal advice.
Our Office has on many occasions issued opinions and memoranda concluding that GAO decisions are not binding on the Executive Branch agencies and that the opinions of the Attorney General and this Office are controlling.
Although the opinions and legal interpretations of the GAO and the Comptroller General often provide helpful guidance on appropriations matters and related issues, they are not binding upon departments, agencies, or officers of the executive branch.
This Office has never regarded the legal opinions of the Comptroller General as binding upon the Executive. 28
In sum, OLC considers GAO’s assertion that its decisions are binding on the executive branch to be an infringement on the constitutional separation of the executive and legislative branches.
Happily, GAO and OLC are in agreement most of the time. In fact, OLC often seeks or cites GAO’s opinions. However, when OLC specifically disagrees with GAO and issues its own decision, agency heads need to remember whom they work for—the executive branch. Certifying officers, who make the final certification of a payment voucher before disbursement of funds are in a more precarious position. GAO grants or denies relief of liability for all certifying officers, except for the armed forces. Therefore the safest course of action for such certifying officers not part of the armed forces is to follow GAO guidance.
Should an agency happen to ignore a GAO decision, the comptroller general has no power to enforce decisions but does have the ear of Congress. Agency officials who act contrary to comptroller general decisions might have to answer to congressional appropriations and oversight committees. 29 Congress might also pass clarifying legislation reiterating GAO’s position, perhaps including some onerous reporting requirements. Remember that agencies disregard GAO, appropriations committees, and oversight committees at their peril. The power of the purse is a mighty weapon that Congress is not reluctant to use.
Appropriations Law References and Annotations
Often, an agency official must perform research to know if statutes and guidelines are being followed. The most-used sources are decisions of the comptroller general, public laws, the U.S. Code, and the Code of Federal Regulations.
Comptroller General Decisions
Researching comptroller general decisions is a straightforward process. Normally the first place to look is in the relevant chapter of GAO’s Principles of Federal Appropriations Law (known as the Red Book).
Another option is to use GAO’s website (www.gao.gov), which has a search engine for comptroller general decisions. If you have the reference number—for example, “B-312477, April 15, 2007”—type it into the search engine, and the decision will be displayed. If you don’t have the reference number, enter some key words about the topic at hand, and decisions containing those words will be displayed.
GAO decisions use two basic styles of annotation. Older decisions that were published in Decisions of the Comptroller General (about 10% of all decisions) through 1994 are cited by volume, page number on which the decision begins, and year—for example, “31 Comp. Gen. 350 (1952).” 30 This means you go to volume 31 of the Decisions and open to page 350. Unpublished decisions before 1994 and all decisions thereafter are cited by a file number and date. They take the form “B-123456, [date].” Whenever you see a “B” followed by a six-digit number and a date, you know you are looking at a reference to a comptroller general decision.
Public Laws
Public laws are the acts passed by Congress, Their annotation takes the form “P.L. 109–155.” In this example, the 109 represents the number of the Congress that passed the law, and the 155 means this was the 155th law passed by the 109th Congress. Each Congress lasts two years, beginning with the first Congress back in 1789–1790. At the time of this writing, the 113th Congress (2013–2014) is sitting.
Some of these laws contain provisions that are permanent in nature. Permanent provisions are extracted from the Public Laws and codified into the U.S. Code.
U.S. Code
The U.S. Code is a compilation of all permanent provisions of public laws, thus constituting the full body of permanent federal law. In congressional parlance, “permanent” means that the provision stays in effect forever or until some future Congress changes it. Permanent provisions typically contain some words of futurity to indicate that Congress intends them to be permanent; such words include “hereafter,” “thereafter,” “henceforth,” and “after the effective date of this act.”
The U.S. Code is broken up into 51 titles, or chapters, each dealing with a different activity of the government. 31 For example, Title 5 covers administration and personnel, Title 10 contains laws about the armed forces, and Title 31 is about money and finance. Annotation takes the form of 31 U.S.C. 1341—Section 1341 of Title 31. The section number is merely a placeholder that allows one to find it within the specified title.
Code of Federal Regulations
Regulations are written by agencies 32 and published, as prescribed by the Administrative Procedures Act, in the Code of Federal Regulation (CFR). The CFR has a form of annotation similar to the U.S. Code. For example, 5 C.F.R 1315 refers to Part 1315 of Title 5 of the Code. There is not a one-to-one correlation between USC and CFR title numbers, so one needs a separate list to determine the content of each of the titles.
Budget Authority and Obligation Authority
Congress finances federal programs and activities by providing budget authority, which refers to various forms of authority provided by law to enter into financial obligations that will result in immediate or future outlays of government funds. Budget authority flows from Congress to an agency.
Obligation authority, on the other hand, is created when an agency provides an individual the authority to enter into obligations that will result in outlays. Most of the time the dividing line between budget authority and obligation authority is the issuance of an allotment. So an agency receives budget authority from OMB in the form of an apportionment, and the agency then uses an allotment to pass on obligation authority to the responsible funds holder.
While there is a difference between budget authority and obligation authority, most of the time there won’t be any confusion if the terms are used interchangeably.
GAO describes six categories of budget authority 33 :
• Appropriations are the most common form of budget authority. An appropriation is defined as the authority given to federal agencies to incur obligations and to make payments from Treasury for specified purposes. While other forms of budget authority may authorize the incurring of obligations, the authority to incur obligations by itself is not sufficient to authorize payments from the Treasury. The Appropriations Clause in the Constitution requires an appropriation to support all payments. Thus when obligations are ultimately paid, they must be paid from an appropriation.
• Contract authority is a form of budget authority that permits obligations to be incurred in advance of appropriations. It is not to be confused with the inherent authority that each agency possesses to enter into contracts; rather, it is an authority that depends on the availability of funds.
Contract authority itself is not an appropriation. It provides the authority to enter into binding contracts but not the funds to make payments under those contracts. Therefore, obligations made under contract authority must be liquidated, or paid, from a subsequent appropriation.
• Borrowing authority permits agencies to incur obligations and make payments to liquidate the obligations out of borrowed moneys. The authority may allow borrowing from the Treasury, the public, the Federal Financing Bank, or some combination of these sources. Borrowing from the Treasury is the most common form and is also known as public debt financing.
• Monetary credits are a seldom-used form of budget authority that allow the government to use monetary credits, rather than money, to acquire property such as land or mineral rights. The seller is given credits that represent the selling price, which may then be used pay the government amounts owed—for example, income taxes.
• Loan and loan guarantee authority is a form of budget authority where by an agency is granted the authority to incur direct loan obligations or to incur loan guarantee commitments.
The concept of direct loans is familiar to everyone; a loan guarantee, on the other hand, needs further explanation. A loan guarantee is any guarantee, insurance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obligation of a nonfederal borrower to a nonfederal lender. For example, the government guarantees student loans and some small business loans, but the loans themselves are issued by commercial banks. The government does not know whether or to what extent it may be required to honor its guarantee until the borrower defaults. Loan guarantees are therefore contingent liabilities that may not be recorded as obligations until the contingency occurs. During the interim, the amount of the loan guarantee is carried in the accounting records as a commitment.
• Offsetting receipts are a form of budget authority with a broader scope than its name suggests. The federal government receives money from many sources in a variety of contexts. Moneys received are called collections, and they are broken into two major categories—governmental receipts and offsetting collections.
Government receipts (also called budget receipts) are collections resulting from the government’s exercise of its sovereign or regulatory powers. Examples are tax receipts, customs duties, and court fines.
Offsetting collections are the funds resulting from business-type or market-oriented activities, such as the sale of goods or services to the public, and from intragovernmental transactions. Offsetting collections are divided into two categories.
— Offsetting collections credited to appropriation or fund accounts may be deposited in an appropriation or fund account under the control of the agency and are then available for obligation by the agency, subject to the purpose and time limitations of the receiving account.
— Offsetting receipts are offsetting collections that are deposited into a receipt account. These funds are not available to the agency that collected them.
Appropriations
There are many ways to look at appropriations (or other forms of budget authority, for that matter), and the result is a large number of terms that can be quite daunting. The terminology falls into four classifications, each with subordinate elements.
Duration
Duration refers to the length of time an appropriation is available for incurring new obligations 34 :
1. A one-year appropriation (also known as a fiscal year or annual appropriation) is available for obligation only during a specific fiscal year. This is the most common type of appropriation.
2. A multiple-year appropriation is available for obligation for a definite period of time in excess of one fiscal year.
(Note: One-year and multiple-year appropriations are collectively known as fixed-term appropriations.)
3. A no-year appropriation is available for obligation for an indefinite period. It is usually identified by appropriation language such as “to remain available until expended.”
Presence or absence of monetary limits
This category is based on whether or not a specific amount of money is appropriated 35 :
1. A definite appropriation is for a specific amount of money.
2. An indefinite appropriation is for an unspecified amount of money. It might appropriate future receipts, the amount of which is unknown until some future date. In other cases, it might appropriate “such sums as may be necessary” for a given purpose.
Permanency
Permanency refers to whether the appropriation is temporary or permanent 36 :
1. A current appropriation is made by Congress in, or immediately prior to, the fiscal year or years during which it is available for obligation.
2. A permanent appropriation is a “standing” appropriation. Once made, it is always available for specified purposes and does not require repeated action by Congress to authorize its use. Legislation authorizing an agency to retain and use off-setting receipts is a common form of a permanent appropriation.
Availability for new obligations
This category concerns the appropriation’s status during its life cycle 37 :
1. An unexpired appropriation (also referred to as a current appropriation or an available appropriation) is available for incurring new obligations.
2. An expired appropriation is no longer available to incur new obligations. However, it is still available for liquidations of and adjustments to obligations properly incurred before the period of availability expired.
3. A canceled appropriation is one whose account has closed. It is no longer available for obligation, adjustment, or expenditure for any purpose.
AGENCY FLEXIBILITY: TRANSFERS AND REPROGRAMMING
When funds are short in one appropriation, managers are tempted to move money from a better-funded appropriation. Such an action is described as a transfer. The word transfer is quite often preceded by the word illegal. The prohibition against transfer is in 31 U.S.C. 1532, which states, “An amount available under law may be withdrawn from one appropriation account and credited to another or to a working fund only when authorized by law.” 38
The reason that Congress would prohibit transfers seems obvious. If agencies were allowed to transfer funds between appropriations at will, there would be no point in Congress breaking out funds into appropriations as it does. Congress often does provide agencies limited transfer authority. When this is done, it is normally spelled out in the general provisions of the agency’s annual appropriations act. Such legal transfer authority is normally held at a very high level within an agency, and approval at that level must precede a transfer.
Manager Alert
Unauthorized transfers result in purpose law violations and augmentation of the receiving appropriation. Ultimately, they can mean violations of the Antideficiency Act. All of these negative outcomes are discussed in detail in later chapters.
Still, agencies routinely move money from one account to another within an appropriation. Reprogramming is the use of funds in an appropriation account for purposes other than those contemplated at the time of appropriation. An example would be moving funds from payroll to travel within an agency’s operating expenses appropriation. The authority to reprogram is implicit in an agency’s responsibility to manage its funds; 39 no statutory authority is needed. However, an appropriations act often places limits or thresholds on the amount an agency may reprogram and may require that reprogramming actions be reported to an oversight committee.
RESOLVING CONFLICTS BETWEEN AUTHORIZATIONS AND APPROPRIATIONS
Two kinds of authorization legislation underlie the creation and rationale for any government activity, and must be distinguished from appropriations acts. The first is organic or enabling legislation, which creates an agency, establishes a program, or prescribes a function. This legislation provides the legal basis for a program or activity, but it does not provide budget authority to do so. The second is appropriation authorization legislation, which authorizes the appropriation of funds to implement the organic legislation. The authorization language may be part of the organic legislation, or it may be separate. 40 An authorization act’s “authority to appropriate” language is basically a directive by Congress to itself, which Congress is free to follow or alter (up or down) in the subsequent appropriations act. 41 Most agencies routinely receive authorization acts, some annually, others less frequently. With very rare exceptions, authorization acts do not provide any money. 42
There is no Constitutional or general statutory requirement that an appropriations act be preceded by an authorization act. The rules are set by each house of Congress, and there are a limited number of statutory requirements for authorizations in specific situations. However, the rules of the House of Representatives prohibit appropriations for an expenditure not previously authorized by law. The effect of such rules subjects an offending appropriation to a legislative point of order during debate but does not prohibit passage and implementation if no point of order is raised.
Authorizing committees and appropriations committees work closely to avoid conflicts, but it is not unusual for differences to occur and for authorization and appropriations acts to be in conflict. That raises the question of which act to follow. The first thing an agency does is try to harmonize the acts—to give maximum effect to both whenever possible. 43 If that is not possible, a good rule to follow is this: If the difference between an authorization and appropriations act involves purpose, time, or amount, the appropriations act trumps the authorization act. 44 For example, suppose an authorization act permits the appropriation of $50,000 to be available for obligation for three years to buy three trucks. The corresponding appropriations act appropriates $35,000 to be available for two years to buy two trucks. The appropriation has changed the scope of the buy—the purpose, the time limit for the money’s availability, and the amount. The agency is limited to spending $35,000, can buy only two trucks, and has two years to obligate the funds.
If the conflict is not a matter of purpose, time, or amount, then the answer isn’t quite so simple. Suppose an authorization act allows the appropriation of $5 million, to be available for obligation for five years, to build a new brick headquarters building in Silver Spring, Maryland. But the appropriations act later appropriates $5 million, to be available for five years, to build a new headquarters building in Arlington, Virginia, and it is to be blue in color.
In this case, the purpose (headquarters building), time (five years), and amount ($5 million) are not in conflict. However, three aspects of the building—its materials, color, and location—are in apparent conflict. The agency can give effect to both laws by building the new headquarters out of blue bricks, thus harmonizing those differences in the language. The location, on the other hand, is irreconcilable; it can’t be in both Maryland and Virginia. In this case, the more recent statute, as the latest expression of Congress, governs, so the headquarters must be in Virginia. The logic is simple: The same 535 members of Congress who passed the first law also passed the second law. If the first law placed the building in Maryland and the second law in Virginia, we can only conclude that Congress changed its mind. Remember that this “last in line” principle is applied only when two statutes cannot be reconciled in any reasonable manner, and then only to the extent of the conflict. 45
INTERPRETING LEGISLATION
Sometimes a law is incomplete or unclear. In such cases, determining whether an action is authorized and lawful becomes a matter of interpretation. A voluminous amount of literature is devoted to the area of statutory construction—analysis of a law to determine and give effect to the intent of the legislation. Although the goal is simple, the process can be complex and often controversial. 46
The primary vehicle for determining legislative intent is the language of the statute itself. 47 Secondarily, legislative history is often consulted. Chances are good that Congress never contemplated the particular issues an agency is confronted with and formed no intent about them. Congress sometimes deliberately leaves issues ambiguous because it lacks a sufficient consensus to resolve them in the law.
Interpreting legislation is a very complex subject, but there are a few basic canons of statutory construction.
Plain Meaning Rule
To apply this rule, you start with the language of the statute. 48 If the meaning is clear from the language, there is no need to resort to legislative history or other extraneous sources. In other words, we apply the common meaning of words and normal rules of sentence construction and grammar to arrive at a meaning. But we don’t apply some creative meaning to words or construction because it better suits our purposes.
Examples abound:
• An appropriation for topographical surveys in the United States was not available for topographical surveys in Puerto Rico. By definition, the United
States does not include Puerto Rico. If Congress had intended to include Puerto Rico and other locations, it would have specified “in the United States, territories, and commonwealths.”
• An appropriation to install an electrical generating plant in the custom house building in Baltimore could not be used to install the plant in a nearby Post Office building, even though the plant would serve both buildings and thereby reduce operating expenses. Remember, saving money is not an excuse to violate statutory language.
• An appropriation for the replacement of state roads could not be used to make improvements on them.
• Funds provided for the modification of existing dams for safety purposes could not be used to construct a new dam, even as part of an overall safety strategy.
Consulting a dictionary is the commonsense starting point for determining the plain meaning of a word. 49 Further, when Congress uses the same term in more than one place in the statute, apply the same meaning to that word in each instance unless there is clear evidence Congress intended a different meaning. 50 In other words, don’t apply different definitions to the same word in different contexts just because doing so better suits your desire.
Errors in Statutes
Sometimes what is clearly a technical or typographical error occurs in a statute. If the intent is obvious, such errors are usually ignored or repaired. For example, an appropriation provided funds for payments in conjunction with an election held on “November fifth, 1890.” The election actually was held on November 4. Recognizing the “evident intention of Congress,” the Comptroller of the Treasury decision held that the appropriation was available for the payments associated with the November 4 election. 51
If the error is in an amount appropriated, however, the rule above generally does not apply. A 1979 appropriations act (for the Department of Health, Education, and Welfare) included $36 million for a specific purpose. Both the House and Senate bills and various committee reports specified only $35 million. The comptroller general held that despite being an apparent typographical error, the number is the number, and $36 million had been appropriated. 52
Avoiding Absurd Consequences
The generally accepted principle is that the literal language of a statute will not be followed if it would produce a result inconsistent with clearly expressed congressional intent, that is, an “absurd consequence.” 53
A statute making it a criminal offense to obstruct or retard a mail carrier does not apply to a sheriff arresting a mail carrier who has been indicted for murder. 54 It would be an absurd consequence to require the sheriff to wait until the carrier had completed his rounds before making the arrest. Likewise, a statute making it a felony to break out of jail does not apply to a prisoner who broke out because the jail was on fire.
The absurd consequence test should be used sparingly and is not always easy to apply. What strikes one person as absurd might be good law to another. 55
Legislative History
If reading and dissecting the language of the statute doesn’t provide an answer to the question at hand, the next step is to examine the legislative history of the statute. Legislative history is the body of congressionally generated written documents relating to a bill from the time of introduction to the time of enactment. There are two ways to use these documents. One is to examine them, searching for the meaning and intent of the legislation. The other is to examine the evolution of the bill’s language through the legislative process. Changes made to a bill during its consideration are often instructive in determining its final meaning.
There is a hierarchy, or order of persuasiveness, to use as a guideline when resorting to legislative history.
• Conference committee reports. The most authoritative single source of legislative history is the conference report. 56 The reason the conference report occupies the highest rung on the ladder is that it must be voted on and adopted by both houses of Congress and thus is the only legislative history document that can be said to reflect the will of both houses.
• Committee reports. Next in line are the reports of the legislative committees that considered the bill and reported it out to their respective houses. 57 For appropriations bills, these would be the Appropriations Committee reports.
• Floor debates. Proceeding downward on the ladder, after committee reports come floor debates. 58 However, statements made in the course of floor debates are regarded as suspect because they reflect only the views and motives of the individual members making them.
• Hearings. Hearings occupy the bottom rung of the legislative history ladder. 59 They can be valuable in defining the problem Congress is addressing and presenting opposing points of view. As legislative history, they are the least persuasive form because they reflect only the personal opinions of the witnesses. It is generally impossible to attribute those opinions to anyone in Congress, let alone Congress as a whole. If it can be shown that the language of a bill was revised in direct response to the testimony, its value as legislative history increases.
• Post-enactment statements. Not even on the ladder of legislative history are post-enactment statements. The Supreme Court, other courts, and GAO follow the principle that post-enactment statements do not constitute legislative history. 60 For example, they will not be persuaded by statements by a bill’s sponsor made on a talk show after the law has been passed.
A FINAL THOUGHT: HOW FAR SHOULD YOU STRETCH THE LAW?
Managers often face situations in which they need to take some extraordinary actions to accomplish the mission. Sometimes these actions involve pressing the very limits of appropriations law. But how far should you go?
In Figure 1-1 the circle represents the outer limits of what the law allows for a given situation. These limits may be prescribed in the Constitution, statutes passed by Congress, or case law consisting of decisions issued by GAO, OLC, or the courts. Clearly, any activity within the circle, right up to the very circle itself, is within the law. But equally apparent, crossing the line takes the manager into the realm of the illegal and unauthorized and must be avoided.
Figure 1-1: Limits of the Law
Figure 1-2 illustrates that agencies, as a general rule, have the discretion to draw the circle smaller in size (but not larger), meaning they are being more restrictive than what the law allows. Agencies redraw the circle through regulations, policies, and procedures. Agency personnel are expected to follow agency guidance. Further, individual managers normally have the authority to exercise even more discretion than that imposed by the agency. Most of the time you may be more restrictive than the law or your agency allows—but not more expansive.
Figure 1-2: Agency Discretion
While it is clear no one should ever operate outside the relevant circle, it is not always clear where the proper place to operate within the circle really is. As seen in Figure 1-3, for every situation there are trade-offs in terms of both risk and effectiveness.
The closer the manager operates to the very limit of the law (or agency regulation), the more risk he or she accepts. Reducing the size of the circle by being more restrictive lessens risk. However, there is a trade-off with effectiveness. The most effective managers operate close to the edge, taking advantage of everything the law or agency regulation allows. Being completely restrictive by prohibiting a transaction that would otherwise be lawful can severely limit the effectiveness of the organization.
Each transaction must be evaluated by the manager on a situational basis to best determine how far to push the envelope. For example, if you have an appropriation (or other subdivision of funds allocated to you) for $1 million for the fiscal year, you will be most effective if you try to spend every dollar of that budget authority. The closer you try to get to the $1 million mark, the more your risk increases, because upward adjustments of obligations or human error could potentially put you into a deficit position. On the other hand, you could be perfectly safe and expose yourself to no risk by obligating only $800,000, or $700,000, or $600,000, or nothing at all—but the effectiveness of your operation will suffer because you did not take advantage of available resources. In this example, most managers will try to obligate all of their available funds, making sure they have sufficient internal controls to avoid overobligation and a violation of the Antideficiency Act (discussed in detail later in the book).
Figure 1-3: Trade-off Between Risk and Effectiveness
In some situations it is better to be more restrictive than the law allows. The Government Employees Incentive Awards Act (found at 5 U.SC. Chapter 45) authorizes agencies to give employees performance-based awards of up to 10 percent of their salary, without consultation with the Office of Personnel Management. Theoretically, if funds were available, an agency (or an individual agency manager) could decide to give every employee the maximum award—10 percent of salary. Case law also has approved the purchase with appropriated funds of food, to include full meals, at incentive awards ceremonies. So the agency (or individual manager) could decide to include a steak and lobster feast as part of the awards ceremony honoring all employees (who are also getting 10 percent of salary as an award). While this scenario might be legal and authorized under the law, it doesn’t stand up in the court of public opinion. Extravagance, although technically legal, will catch the eye of inspectors general, congressional committees, and the media, and will make managers rue their decisions. Witness the recent public outcry over training conferences put on by two large government agencies. While a few of the expenses targeted in those inspector general, media, and congressional reports were outside the circle, most of them were legal—but still considered excessive, wasteful, or extravagant. People lost their jobs as a result.
Before committing to approval of an expense, managers should give it the 60 Minutes or Washington Post sniff test. Would you be comfortable answering questions about a particular purchase with a microphone stuck in your face? If not, don’t approve it.
Manager Alert
Just because something is considered legal doesn’t necessarily make it a good idea!
NOTES
1. U.S. Government Accountability Office, Principles of Federal Appropriations Law, 3rd ed., vol. I (Washington, D.C.: Government Printing Office, 2004), 1-2.
2. Ibid.
3. Ibid.
4. Ibid., 1-3.
5. Ibid., 1-14.
6. Ibid., 1-15.
7. Ibid.
8. Ibid.
9. Ibid., 1-16.
10. Ibid., 1-17.
11. Ibid., 1-24.
12. Ibid., 1-25.
13. Ibid., 1-27.
14. Ibid., 1-28.
15. Ibid.
16. Ibid., 1-29.
17. Ibid.
18. Ibid.
19. Ibid., 1-31.
20. Ibid.
21. U.S. Government Accountability Office, A Glossary of Terms Used in the Federal Budget Process (Washington, D.C.: Government Printing Office, 2005).
22. Ibid.
23. U.S. Government Accountability Office, Principles, 1-35.
24. Ibid., 1-37.
25. http://thomas.loc.gov/home/approp/app12.html.
26. U.S. Government Accountability Office, Principles, 1-39.
27. Ibid., 1-40.
28. www.justice.gov/olc/2009/sba-hubzone-opinion082109.pdf.
29. U.S. Government Accountability Office, Principles, 1-40.
30. Ibid., 1-45.
31. http://uscode.house.gov/about/info.shtml.
32. Ibid.
33. U.S. Government Accountability Office, Principles, 2-4.
34. Ibid., 2-13.
35. Ibid., 2-14.
36. Ibid.
37. Ibid., 2-15.
38. Ibid., 2-25.
39. Ibid., 2-30.
40. Ibid., 2-40.
41. Ibid.
42. Ibid., 2-41.
43. Ibid., 2-44.
44. Ibid., 2-46–2-56.
45. Ibid., 2-57.
46. Ibid., 2-72.
47. Ibid.
48. Ibid., 2-74.
49. Ibid., 2-89.
50. Ibid.
51. Ibid., 2-79.
52. Ibid., 2-80.
53. Ibid.
54. Ibid., 2-81.
55. Ibid.
56. Ibid., 2-98.
57. Ibid., 2-99.
58. Ibid., 2-100.
59. Ibid., 2-102.
60. Ibid., 2-104.
