Unraveling the Federal Budget Process By Laura A. Logan, CPA, CGFM - - PowerPoint PPT Presentation

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

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Constitution Article 1, Section 9, Clause 7 “No Money Shall Be Drawn from Treasury, but in Consequence of an Appropriation”.

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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

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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

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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

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Untying The Budgetary Process

• The 4 Phases of Federal Budget Process

–Budget Formulation –Congressional Action –Budget Execution –Reporting, Audit & Compliance

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Who, What, When, Why, How

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Budget Formulation

• What is Budget Formulation?
• Who is involved?
• Why formulate?
• When and How?

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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.

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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 Preparation, 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.

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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

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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

• riginal regular appropriation bill.

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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

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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

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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

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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

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Types of “Funding”

• Appropriation

– One year – Multi-year – No Year

• Reimbursable Authority
• Working Capital/Revolving
• Borrowing Authority
• Contract Authority

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Revenue

• Taxes

– Individual – Payroll – Corporate – Other

• Borrowing

– Major source of revenue – Treasury issues bonds – Must Pay Back

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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

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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

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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.

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• 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.

Budget Execution

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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.

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• 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

• f appropriations, 31 U.S.C. § 1341(a), and

apportionments, 31 U.S.C. § 1517(a).5 By virtue

• f 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.

Apportionment

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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.

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Budgetary Cycle

Unapportioned Apportionment Allotment Commitment Undelivered Order Delivered Order

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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

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Budgetary Accounting Equation

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Budget Accounts 4000 Series

• Resources

– Appropriations – Reimbursable Authority – Funds Collected – Resources from Borrowing – Transfers from other Entities

• Status

– Apportionment – Allotment – Commitment – Undelivered Orders – Delivered Orders

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Proprietary Accounts

• Assets -1000 series
• Liabilities - 2000 series
• Capital and Cumulative Results of Operations -

3000 series

• Revenue - 5000 series
• Expenses - 6000 series
• Gains/Losses - 7000 series

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Budgetary vs Proprietary

Budgetary

• Appropriation –warrant

issue

• Funds apportioned
• Funds alloted
• Purchase Request—

Commitment

• Purchase Order—

Undelivered Order

• Receipt and Bill Received
• Funds Expended

Proprietary

• Agency receives cash from

Treasury

• No Entry
• No Entry
• No Entry
• No Entry
• Payable Established
• Cash Paid

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What is an obligation?

• Use of Government resources—Federal entity

has a future liability to pay.

• Undelivered Order - Unpaid

– Amount of goods and services ordered and

• bligated which have not been actually or

constructively received and have not been prepaid

• r advanced

– Budget entry only!

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More Obligations

• Undelivered Order – Prepaid/Advanced

– Payment made generally to another Govt entity for program expenses – Proprietary Entry made – Receivable from other entity

• Delivered Order - Unpaid

– Goods and Services received and accepted – Proprietary entry – Payable created

• Delivered Order- Paid

– Payment made for goods and services received and accepted – Proprietary entry – Cash Payment

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Budgetary Cycle

Direct

Unapportioned Apportionment Allotment Commitment Undelivered Order Delivered Order Appropriations Resources Status of Resources 4119 4450 4510 4610 4700 4801 4802 4901 4902

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Budgetary Accounting for Execution

Obligation 4801 4901 4902 4802

Prepayment or Advance Receipt Of Goods/ Services Payment Receipt Of Goods/ Services

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Analytics, Reporting, Audit

• Trial Balance
• General Ledger Tie-Points/Relationships
• Abnormal Balances
• Variances
• Financial Statements and Reporting—

Budgetary and Proprietary

• Internal Controls
• Audit

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Financial Statements

• Presents the financial position and results of
• perations
• Audits completed—internal and external

auditors—statements fairly present …..

• Audits also for compliance with laws and

management controls

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