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The Antideficiency Act Answer Book

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Avoid Violations of the Antideficiency Act!

Antideficiency Act (ADA) violations within both the financial and audit communities are now at an all-time high. Violations often result from a lack of knowledge about what is and what is not permissible under the law. The Antideficiency Act Answer Book is an easy-to-understand question-and-answer tool that guides you through all the rules associated with the Antideficiency Act and helps you detect and report violations in a timely manner.
• Covers all aspects of the Antideficiency Act, from its history to common violations, penalties for violation, and reporting requirements
• Includes the tools you need to help avoid Antideficiency Act violations
• Plus! Includes an analysis of all the ADA reports collected by the Government Accountability Office, summarized by agency, appropriation, amount, and type of violation.

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15 Chapters

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Chapter 1 - Introduction to the Antideficiency Act

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Being named in a report to the President of the United States, the Office of Management and Budget, the House of Representatives, the Senate, and the Government Accountability Office (GAO) as someone who violated the Antideficiency Act is never a career-enhancing event. Such reports have haunted many government officials and have ended many promising careers. Most of the time such violations were not intentional; the employee was trying to do the best job possible to support agency missions and programs. But pure motives and a lack of intent do not keep someone’s name off a violation report. Usually, the violation resulted from a lack of knowledge about what was and what was not permissible.

I wrote this book to serve as a guide to anyone who is interested in using government funds properly and legally and who wants to avoid running afoul of the Antideficiency Act. Such readers include federal government and District of Columbia government personnel, including program managers, contracting personnel, funds certifiers, entitlement and certifying officials in paying offices, and auditors. Recipients of grants and anyone else who may at times control federal funds will also find it of interest.

 

Chapter 2 - The History of the Antideficiency Act

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The Antideficiency Act is more than 100 years old. An understanding of the circumstances under which Congress decided it was necessary will help the reader recognize its intent and its applications in today’s world.

Congress needed the Antideficiency Act to exert the power of the purse granted to it by the U.S. Constitution. Article I, Section 9, says, “No money shall be drawn from the treasury, but in consequence of appropriations made by law….” This constitutional provision gives Congress the final say on how public funds may be spent. It is the greatest curb on executive branch power that the Congress possesses.

However, as late as the post–Civil War period, agencies often created obligations in advance or in excess of their appropriations. Even worse, some agencies routinely spent all of their money during the first several months of the fiscal year, then continued to incur additional obligations before finally asking Congress for more funds to cover these deficiencies in their accounts. Congress felt it had no choice but to satisfy these commitments that had been made, but it also realized it had lost some of its power. Congress responded by passing what we now refer to as the Antideficiency Act.1.

 

Chapter 3 - The Basics

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The following overview of the Antideficiency Act provides a highlevel view of the act’s major requirements. Later chapters break down each of these basic requirements in detail.

The General Accounting Office (GAO) issued a decision in 1962 (42 Comp. Gen. 272, 275) that summarizes the requirements in one paragraph.

These statutes evidence a plain intent on the part of the Congress to prohibit executive officers, unless otherwise authorized by law, from making contracts involving the Government in obligations for expenditures or liabilities beyond those contemplated and authorized for the period of availability of and within the amount of the appropriation under which they are made; to keep all the departments of the Government, in the matter of incurring obligations for expenditures, within the limits and purposes of appropriations annually provided for conducting their lawful function, and to prohibit any officer or employee of the Government from involving the Government in any contract or other obligation for the payment of money for any purpose, in advance of appropriations made for such purpose; and to restrict the use of annual appropriation to expenditures required for the service of the particular fiscal year for which they are made.1

 

Chapter 4 - 31 USC 1341—Obligation or Disbursement in Advance or Excess of Appropriation

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This chapter details the language, meaning, and decisions associated with the first major element of the Antideficiency Act (ADA). Simply stated, federal government officials are prohibited from obligating or disbursing government funds before an appropriation has been enacted into law, or in excess of the amount specified by Congress in an appropriation. Though this section of the U.S. Code is simple in concept, there have been many decisions interpreting its meaning, making its application in some real-life situations less than straightforward.

8. What is the key provision of the Antideficiency Act?

The central provision of the ADA is 31 USC 1341(a)(1). It states:

(a)(1) An officer or employee of the United States Government or of the District of Columbia government may not–

(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; or

(b) involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.

 

Chapter 5 - Other 31 USC 1341 Violations

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The previous chapter explained the basic provisions of 31 USC 1341, in particular the prohibition against agencies obligating or disbursing funds in excess of or in advance of an appropriation. This prohibition has other related ramifications. This chapter will discuss some of them, such as the prohibitions against unlimited indemnification and exceeding specific limitations and earmarks. Notable exceptions to the Antideficiency Act also will be discussed in this chapter.

Under an indemnification agreement, one party to the agreement—the government, for Antideficiency Act purposes—promises to cover another party’s losses. The federal government has very deep pockets, so it is not surprising that contractors and state or local governments frequently ask that their risk of loss be covered.1

The problem is that if the amount of the government’s liability is indefinite, indeterminate, or potentially unlimited, the Antideficiency Act will be violated because appropriations are finite sums. Thus, the potential liability is greater than any appropriation ever passed. Therefore, both the Government Accountability Office (GAO) and the courts have consistently ruled that without specific statutory authority, the government may not enter into such an unlimited agreement and that doing so automatically constitutes a violation of the ADA.2

 

Chapter 6 - 31 USC 1517—Obligation or Disbursement in Advance or Excess of Apportionment

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Chapter 4 discussed in detail the first part of the Antideficiency Act (ADA), the restriction against obligating or disbursing in advance or excess of an appropriation (31 USC 1341). This chapter explores 31 USC 1517, which applies the same restrictions to apportionments and other administrative subdivisions of funds (31 USC 1514). While these violations are more easily fixed by the agency or the Office of Management and Budget (OMB) than are violations of 1341, they are violations of the act nevertheless and carry the same reporting requirements.

Apportionment is a process by which, as the name suggests, appropriated funds are distributed to agencies in portions over the period of availability. OMB apportions funds for executive branch agencies. Appropriations for the legislative branch, the judiciary, the District of Columbia, and the International Trade Commission are apportioned by officials having administrative control of those funds.1 The term apportionment is officially defined as follows:

 

Chapter 7 - 31 USC 1342—The Prohibition against Voluntary Services

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Chapters 4, 5, and 6 dealt with the first two provisions of the Antideficiency Act (ADA): the prohibitions against obligating or disbursing funds in advance or excess of an appropriation, apportionment, or other administrative subdivision of funds.

This chapter covers the third major section of the Antideficiency Act: the prohibition against voluntary services. This is the most difficult of the three sections for most people to understand. They often ask how accepting voluntary services could create a deficiency. We will discuss the background of this prohibition and its practical applications, and the rationale for making this part of the ADA will become clear.

Section 1342 of Title 31 reads:

An officer or employee of the United States Government or of the District of Columbia government may not accept voluntary services for either government or employ personal services exceeding that authorized by law except for emergencies involving the safety of human life or the protection of property… .

 

Chapter 8 - Supplemental and Deficiency Appropriations

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Federal financial managers are often confused about the relationship and differences between supplemental appropriations and deficiency appropriations. This chapter clearly defines each and explains their relationship. The chapter also covers the carryover of the rules and limitations of a regular appropriation to a supplemental appropriation.

A supplemental appropriation is an act appropriating funds in addition to those already provided by an annual appropriations act. Supplemental appropriations provide additional budget authority in situations in which the need for funds is too urgent to be postponed until the next regular appropriation bill is enacted. Supplementals may sometimes include items that were not appropriated in the regular bills because they were not authorized in time.1

A deficiency appropriation is an act appropriating funds to pay obligations for which sufficient funds are not available.2

Yes. Deficiency appropriations are often needed after violations of the Antideficiency Act. They are often the only way to fix a violation. They provide the legal basis for making payment from the Treasury against obligations incurred.

 

Chapter 9 - Augmentation of Appropriations

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Congress has control of the public purse and closely guards this control through its appropriations process. When Congress makes an appropriation, it is setting an upper limit on an agency’s level of operations. If an agency were to also use funds from some other source, Congress would lose some of its prerogative. Thus, an agency may not augment its appropriations with outside funding without specific statutory authority. This chapter explores the prohibition against augmentation and its relationship to the Antideficiency Act.

The objective of the rule against augmentation of appropriations is to prevent an agency from undercutting congressional power by circuitously exceeding the amount Congress has appropriated for that activity. A recent decision (B-300248, January 15, 2004) put it this way:

When Congress establishes a new program or activity, it also must decide how to finance it. Typically it does this by appropriating funds from the U.S. Treasury. In addition to providing necessary funds, a congressional appropriation establishes a maximum authorized program level, meaning that an agency cannot, absent statutory authorization, operate beyond the level that can be paid for by its appropriations. An agency may not circumvent these limitations by augmenting its appropriations from sources outside the government. One of the objectives of these limitations is to prevent agencies from avoiding or usurping Congress’ “power of the purse.”1

 

Chapter 10 - Penalties for Violations

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The preceding chapters are designed to help the reader understand what constitutes a violation of the Antideficiency Act (ADA) and how to avoid such violations. Occasionally, however, despite employees’ best efforts, violations do occur. This chapter describes the types and range of penalties that may be levied on persons found responsible for violating the act.

Violations of the Antideficiency Act are subject to penalties of two types: administrative and criminal. The Antideficiency Act is the only one of the 31 U.S. Code fiscal statutes to prescribe penalties of both types, which underscores congressional perception of the act’s importance.1

Sections 1349(a) and 1518 of Title 31 state that an officer or employee who violates 31 USC 1341(a), 1342, or 1517(a) “shall be subject to appropriate administrative discipline including, when circumstances warrant, suspension from duty without pay or removal from office.” Employees have in fact been suspended, reduced in grade, or removed from government service for violating the act.

 

Chapter 11 - Reporting Requirements

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When an agency suspects it has violated the Antideficiency Act, there are procedural steps and time limits it must adhere to in reporting such violations. This chapter discusses the reporting requirements levied on agencies both by the act and by OMB Circular A-11.

The first step is to determine whether a violation has actually occurred. In some cases—for example, purchasing a prohibited item for which there is no appropriation available—it is obvious that a violation has occurred. Not every situation is so clear-cut, however. For example, if your accounting records indicate that you overobligated your apportionment by several thousand dollars during a particular period, the prudent course of action is to review the obligations that are recorded in the records to ensure they are in fact valid obligations and were actually obligated during the period of apparent shortfall. It is not uncommon for obligations to be posted before they are true obligations, and the level of obligations is often overstated. Refer to 31 USC 1501 for guidance in determining whether the documentary evidence requirement for obligations has been met.

 

Chapter 12 - Analysis of Antideficiency Act Violations, Fiscal Years 2005-2008

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The previous chapters have discussed the history of the Antideficiency Act (ADA), the theories behind it, the laws it includes, and the rules about what constitutes an Antideficiency Act violation. This chapter examines some recent actual violations. When Congress passed the Consolidated Appropriations Act for 2005, it included a requirement that all reports of ADA violations be sent to the comptroller general, in addition to the requirement already in place to send the reports to the president and Congress.

The Government Accountability Office (GAO) has compiled the reports it has received into a database that is published on its website (http://www.gao.gov/ada/antideficiencyrpts.htm). The database summarizes the facts of each violation: the agency and appropriation involved, the dollar amount, the date of occurrence, the type of violation, a description of what happened, and any remedial action taken. The entire database from fiscal years 2005–2008 can be found in Appendix 1 of this book. This chapter analyzes and summarizes this data and discusses specific violations that illustrate the lessons learned from the preceding chapters.

 

Chapter 13 - How to Avoid Antideficiency Act Violations

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In the preceding chapters, I have attempted to provide a comprehensive overview of what the Antideficiency Act is about, what constitutes a violation of the act, possible penalties, and reporting requirements. Now you know how to recognize an Antideficiency Act violation when you see one—but it’s even more important to know how to avoid a violation in the first place. This chapter suggests specific actions you can take in your agency.

While there is no way to be absolutely certain a violation will not occur, there are a number of actions you can take to minimize the likelihood of a violation. Many fall under the umbrella of internal controls. You should have a robust internal control program that complies with the Government Accountability Office (GAO) Standards for Internal Control, Office of Management and Budget (OMB) Circular A-123, and your own agency regulations. Your internal control risk assessments, vulnerability assessments, and annual reviews should include a specific focus on Antideficiency Act compliance.

 

Appendix 1: GAO Database: Antideficiency Act Reports, Fiscal Years 2005-2008

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Appendix 2: Antideficiency Act Violation Sample Letters to OMB and the President

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EXHIBIT 145A          REQUIREMENTS FOR REPORTING ANTIDEFICIENCY ACT VIOLATIONS

Antideficiency Act Violation
Sample Letter to the Director

REQUIREMENTS FOR REPORTING ANTIDEFICIENCY ACT VIOLATIONS EXHIBIT 145B

Antideficiency Act Violation
Sample Letter to the President

 

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