Unraveling the Federal Budget Process By Laura A. Logan, CPA, CGFM Assistant to the Chief Accountant Commodity Credit Corporation/Farm Services Agency May 20, 2015 1
Constitution Article 1, Section 9, Clause 7 “No Money Shall Be Drawn from Treasury, but in Consequence of an Appropriation”. 2
Significant Legislation 1921 Budget & Accounting Act • Created Bureau of the Budget – later changed to OMB • Created GAO • Provided for Preparation and Approval of a Comprehensive National Budget for the Federal Government 3
Significant Legislation, con’t 1950 Budget & Accounting Act • Strengthened the 1921 Act • Provided for Accrual Accounting • Required Program Budgets 1955 Anti Deficiency Act (amendment to 1906 Act Originally passed) • Defined Obligations • Established Specific Fund Control Responsibilities 4
Significant Legislation, con’t 1982 Federal Managers Financial Integrity Act • Statement of Adequacy of Internal Controls 1985, 1988, 1990 Gramm-Rudman–Hollings • Capped Discretionary Spending • Divided Spending into Discretionary and Direct Categories • Established Budget Levels for 5 Year Periods Budget Control Act of 2011 (BCA) • Goal to reduce deficit by at least $1.5 Trillion by 2021 • Caps Discretionary Spending • Sequestration—automatic spending reductions in place if budget is not passed 5
Untying The Budgetary Process • The 4 Phases of Federal Budget Process – Budget Formulation – Congressional Action – Budget Execution – Reporting, Audit & Compliance 6
Who, What, When, Why, How 7
Budget Formulation • What is Budget Formulation? • Who is involved? • Why formulate? • When and How? 8
President • Submission of Budget Request for upcoming fiscal year. – Provides the President’s overall recommendation for federal fiscal policy. – Provides the relative priorities for federal programs. – Includes long range budget forecast and historical information. • Signs the Appropriation Bills to enact them into Law. 9
Office of Management and Budget (OMB) • The core mission of OMB is to serve the President of the United States in implementing his vision across the Executive Branch. OMB is the largest component of the Executive Office of the President. It reports directly to the President and helps a wide range of executive departments and agencies across the Federal Government to implement the commitments and priorities of the President. • Provides direction to the Executive Offices for the formulation of the President’s Budget. Publishes OMB Circular A-11 Preparati on, Submission and Execution of • the Budget: https://www.whitehouse.gov/omb/circulars_a11_current_year_a11_toc • President is responsible for presenting the Presidential Budget Request to Congress following the State of the Union address. 10
Congress • Congressional Budget Resolution – Not Law it does not enact spending or tax law. – Sets targets for congressional committees. – Targets total revenue and spending in 19 categories. • Budget Legislation – Appropriation Bills – Passed by both House and Senate 11
12
Federal Funding • Federal Fiscal Year is October 1 to September 30. • Each year the United States Congress is responsible for writing, passing, reconciling and submitting to the President a series of appropriation bills to allow the Federal Government to operate in the next fiscal year. • The appropriation bills can be of 3 types, Regular, Continuing Resolutions and Supplemental. – There are 12 regular appropriation bills to be passed each year. – Continuing Resolutions are enacted if the regular appropriations are not passed before Oct 1. Usually allows operations at the same level as prior year for a set period of time. – Supplemental bills add additional funding above and beyond the original regular appropriation bill. 13
Anti Deficiency Act (ADA) • Cannot spend what you don’t have – $$ – Time – Purpose • Must be reported to the President • May have financial consequences to responsible party 14
SHUTDOWN • Last one 16 days October 2013. Approximately 800,000 employees were on indefinite unpaid leave. • Since 1976 there has been 18 “funding gaps”. • Prior to 1980 funding gaps did not normally lead to a government shutdown. • Only essential government services continue – Such as active duty military – Post Office – Air Traffic control – Law Enforcement Officers – Doctors, Nurses and other Patient Care staff at Federal Hospitals 15
Congress takes Action Spending and Revenue • Mandatory/Entitlement Spending – Must Haves – Majority of all Federal Spending • Discretionary Spending – Congressionally authorized – Funded by appropriation bills • Revenue Sources – Taxes – Fees – More Taxes – Donations 16
17
Legislative Mandates • Type of funding – Definite—Exact $$, time, purpose – Indefinite—Such sums as necessary for a purpose • How long is funding good? It Depends! – Congress sets timeframe and/or purpose – Unexpired funds are available for obligations – Expired funds not available obligations, may pay obligations made while unexpired. Lasts 5 years. – Cancelled funds all budgetary accounts, receivables and payables withdrawn and transferred to Treasury – Indefinite funding cancelled when executive branch determines purpose has been met and no disbursements made for two consecutive fiscal years 18
Types of “Funding” • Appropriation – One year – Multi-year – No Year • Reimbursable Authority • Working Capital/Revolving • Borrowing Authority • Contract Authority 19
20
Revenue • Taxes – Individual – Payroll – Corporate – Other • Borrowing – Major source of revenue – Treasury issues bonds – Must Pay Back 21
22
Spending • Mandatory/Entitlement (2/3 of total budget) – Determined by eligibility rules rather than appropriation process. – Social Security largest mandatory program (1/3 of of mandatory and 23% of total budget). • Discretionary – Annual appropriations process. – Congress directly sets the level of spending • Tax Breaks – Classified as tax expenditures 23
24
25
Borrowing and Debt • National Debt – Borrows when spending is greater than tax collections. – January 2015-- $18,097,814,959,110. • Public—bonds and notes – Individuals – State and Local Governments – Financial institutions – Foreign Governments – Foreign institutions • Treasury—Borrows from itself---trust funds 26
Debt Ceiling • Legal limit set by Congress on the total amount U.S. Treasury can borrow. – Congress can raise the debt ceiling. • Initial legislation passed in 1917, first overall debt ceiling passed in 1939. – Since inception raised more than 100 times. • Does not authorize more spending when raised, only allows Treasury to make payments. 27
28
Budget Execution • Budget Execution is defined as executing the purpose of an Appropriation. Remember an Appropriation in it’s fundamental form is public law. All Appropriations have PL # and PL…means…Public Law. • Spending money in accordance with the law. • Congress must authorize the use or program/activity before funds can be spent. 29
Budget Execution Funds Available • Congress Enacts Legislation or mandatory programs—Purpose of spending • Congress appropriates/authorizes budget authority—revenue and expenditures • OMB allocates the appropriations for specific programs or actions • Departments and Agencies allot the funds to start the execution of Congressional mandates and manage Federal programs. 30
Apportionment • In considering what may and may not be done before the start of a fiscal year, it is necessary to keep in mind the Antideficiency Act , which prohibits obligations or expenditures in advance of appropriations, 31 U.S.C. § 1341(a), and apportionments, 31 U.S.C. § 1517(a).5 By virtue of this law, certainly no obligations may be incurred before the appropriation act is enacted and amounts apportioned to the agency, unless specifically authorized by law. – Accounts 4610 (Allotted)/4620 (Exempt from Apportionment) should not be abnormal. 31
Apportionment per GAO • The apportionment system through which budget authority is distributed by time periods (usually quarterly) or by activities is intended to achieve an effective and orderly use of available budget authority, and to reduce the need for supplemental or deficiency appropriations. • Note the distinction in terminology: Congress appropriates , OMB apportions , and the receiving agency allots (or allocates) within the apportionment. 32
Budgetary Cycle Unapportioned Apportionment Allotment Commitment Undelivered Order Delivered Order 33
USSGL • United States Standard General Ledger http://www.fiscal.treasury.gov/fsreports/ref/ussgl/ussgl_home.htm • Maintained by Treasury • Provides uniform chart of accounts— budgetary and proprietary • Demonstrates accounting transactions for business events—rules for GL recordation • Supports preparation of financial reports by providing account crosswalks to reports 34
Budgetary Accounting Equation 35
Recommend
More recommend
