The Antideficiency Act Answer Book

By William G. Arnold CCFM-A, CCA

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.

• Language: English
• Publisher: Berrett-Koehler Publishers, Inc.
• Release date: Sep 1, 2009
• ISBN: 9781567263343

William G. Arnold CCFM-A, CCA

William G. Arnold, CDFM-A, CCA, 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. Mr. Arnold is also the author of Performance Budgeting: What Works, What Doesn’t and The Prompt Payment Act Answer Book.

Book preview

The Antideficiency Act

Answer Book

William G.Arnold

8230 Leesburg Pike, Suite 800

Vienna, VA 22182

[phone]

Fax: [phone]

www.managementconcepts.com

Copyright © 2009 by Management Concepts, Inc.

All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by an information storage and retrieval system, without permission in writing from the publisher, except for brief quotations in review articles.

Printed in the United States of America

Library of Congress Cataloging-in-Publication Data

Arnold, William G.

    The Antideficiency Act answer book / William G. Arnold.

        p. cm.

    ISBN 978-1-56726-244-5

    1. United States. Government Accountability Office. 2. United States—Appropriations and expenditures—Criminal provisions. 3. Government property—United States. 4. Government spending policy—United States—Evaluation. 5. Government accountability—United States. 6. Government purchasing—United States—Evaluation. 7. Waste in government spending—United States. 8. Administrative responsibility—United States. I. Title.

KF6225.A76 2009

343.73’034—dc22

2009024847

10    9    8    7    6    5    4    3    2    1

About the Author

William G. Arnold worked with the Department of Defense for 34 years, over 25 of which he spent in financial management. He has held positions as director of resource management, director of disbursing, and entitlements director with the Air Force and Defense Finance and Accounting Service. He is a certified defense financial manager with acquisition specialty (CDFM-A) from the American Society of Military Comptrollers, and in 1984 he was awarded the designation of certified cost analyst (CCA) by the Institute of Cost Analysis.

Mr. Arnold holds a Master of Arts degree in financial management from Central Michigan University. For many years he taught undergraduate classes in economics and finance at Park College.

Mr. Arnold is currently an instructor with Management Concepts. Course topics include the Prompt Payment Act, voucher examination, an appropriations law seminar, appropriations law for business operations, the Antideficiency Act, budget execution, performance budgeting, and enhanced defense financial management. Mr. Arnold is the author of Performance Budgeting: What Works, What Doesn’t, published in 2008 by Management Concepts.

To the men and women of the United States Armed Forces, who risk their lives to protect the freedom of the citizens of our great nation.

Contents

Preface

Acknowledgments

Chapter 1: Introduction to the Antideficiency Act

A Few Words about Citations

Chapter 2: The History of the Antideficiency Act

Chapter 3: The Basics

Chapter 4: 31 USC 1341—Obligation or Disbursement in

Advance or Excess of Appropriation

Chapter 5: Other 31 USC 1341 Violations

Indemnification Agreements

Purpose Law Violations, Prohibitions, and

Specific Limitations

Amount Available in an Appropriation or Fund

Good Intentions and Factors beyond Agency Control

Exceptions

Chapter 6: 31 USC 1517—Obligation or Disbursement in

Advance or Excess of Apportionment

About Apportionment

Methods of Apportionment

Control of Apportionments

Administrative Subdivision of Apportionments

Violation of Section 1517

Chapter 7: 31 USC 1342—The Prohibition against

Voluntary Services

Chapter 8: Supplemental and Deficiency Appropriations

Chapter 9: Augmentation of Appropriations

The Prohibition of Augmentation

Miscellaneous Receipts

Reimbursements and Refunds

Excess Reprocurement Costs and Liquidated Damages

Refund of Deposits

Loss of or Damage to Government Property

Fees, Fines, and Penalties

Economy Act Reimbursements and Revolving Funds

Gifts and Donations to the Government

Gifts and Donations to Individual Employees

Chapter 10: Penalties for Violations

Chapter 11: Reporting Requirements

Chapter 12: Analysis of Antideficiency Act Violations,

Fiscal Years 2005-2008

Chapter 13: How to Avoid Antideficiency Act Violations

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

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

Glossary

Index

Preface

The Antideficiency Act (ADA) prohibits government officials from making payments or committing the United States to make payments for goods and services unless there is enough money in the proper appropriation or apportionment to cover the cost in full. In the past few years the Antideficiency Act has received unprecedented levels of attention. Before 2005, violations of the act mostly went unnoticed. Certainly it was embarrassing to be named as the culprit when the report of the violation worked its way up through the agency chain, ultimately to be reported to the Office of Management and Budget, the president, and Congress. But these reports were by and large a private matter, the information kept quite closely held within the agency. The public, other federal agencies, and even other organizations within the same agency, including internal auditors, were generally not privy to violations that had been reported.

That all changed when Congress passed the Consolidated Appropriations Act for 2005, requiring that all ADA violation reports also be submitted to the Government Accountability Office (GAO), which was then tasked with publishing an annual database of all violations. Suddenly, beginning in fiscal year 2005 and thereafter, everyone had access to all the reports of violation. Agency auditors found the database to be a helpful tool for conducting performance audits, which covered compliance with the act. These performance audits often detected violations that had occurred in years past. As a result, the responsible parties not only had to report their violation but also had to try to explain why they had not detected and reported the violation earlier without the help of the auditors.

GAO has now published four years of data on reported violations. Visibility within both the financial and audit communities is at an all-time high. This book gives government officials responsible for the proper use of federal funds information and tools to help prevent violations of the Antideficiency Act. It also provides information on detecting and reporting in a timely manner any violations that do occur, before they become fodder for audit findings.

This book should be of interest to budget, finance, and contracting personnel. It will also help government purchase card holders and approvers, as well as all federal supervisors, to understand the situations in which they may be at risk of violating the act. Auditors will find this book to be a valuable resource when conducting both financial and performance audits.

The following chapters are a comprehensive discussion of all aspects of the Antideficiency Act, presented in question-and-answer format. Included in the discussion are the history of the act, how violations occur, penalties for violations, reporting requirements, and how to avoid violations. There is also an analysis of the reports submitted to GAO from fiscal years 2005 through 2008, which offers insight into problems encountered by others and is intended to help the reader avoid similar mistakes.

I hope you will find this book informative, helpful, thought-provoking, and at least occasionally entertaining.

William G. Arnold

Heath, Ohio

Acknowledgments

First, I thank Margaret Linsday, who brought me into the Management Concepts family seven years ago. It has been a wonderful experience working with Margaret and her outstanding staff.

Next to be recognized is Tom Cablk, the appropriations law guru who has guided my thinking with his steel-trap reasoning and amused me with his wicked, dry humor.

Finally, this book and the ones before it would not have been possible without the expertise of Courtney Chiaparas, managing editor at Management Concepts. Her editorial skill and management of the publication process have turned a pile of ideas scattered across reams of paper into books I am proud to have authored. She put up with my inane questions on style and usage, always remaining professional while steering me toward the proper solution to every dilemma. I am most grateful for having the opportunity to work with Courtney.

Chapter 1

Introduction to the Antideficiency Act

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.

The book is designed as a reference, enabling the reader to find the answer to a specific question. It is not designed to be read cover to cover. However, certain issues require several questions and answers to fully explore the topic. Care has been taken to group related questions or questions that depend on one another in a logical flow. The reader is cautioned to read the entire section devoted to the issue at hand to get a complete answer.

While the questions and answers have been thoroughly researched and are as accurate and current as possible, do not rely on this book as a legal reference. Consult both your agency internal regulations and your legal counsel about specific issues. Furthermore, Congress from time to time passes legislation that benefits a particular agency. Except where noted, the questions and answers within are based upon the generic laws and rules. It is possible your agency has specific statutory authority not covered in the book. Although the Antideficiency Act itself has not changed recently, the reader should check to see if any new decisions or interpretations have been issued since the publication of this book.

The text relies heavily on GAO’s Principles of Federal Appropriations Law, Volume II, chapter 6, available at http://www.gao.gov/legal/redbook.html. This is the so-called Red Book, which is considered the authoritative source on the proper use of government funds. The Red Book describes existing legal authorities to illustrate the principles discussed and their application, as well as exceptions.

While the Red Book is very well written, finding an answer to a specific question can be quite challenging. The discussion of many issues begins with a complete history of the subject, which may include several pages of decisions in chronological order, showing the evolution of the decisions up to the present date. The history is often fascinating, but most readers are interested in the current status of the policy on a given subject. That is what I have attempted to provide in this book. Historical references are included only when they are germane to understanding the current status.

A FEW WORDS ABOUT CITATIONS

In this book, you will find abundant references to resources that use what may appear to be odd citations or annotations. The following discussion should help explain them.

Public Laws

When Congress passes a bill or joint resolution, and the president signs it into law (or lets it become law after ten business days without his signature), the legislation is called a public law. In this book, public laws are annotated as follows: P.L. 111-25. The meaning of the P.L. is obvious. The 111 refers to the number of the Congress that passed the legislation. The first Congress was in session in 1789 and 1790. Each Congress lasts two years, so the 111th Congress is the one in session in 2009 and 2010. The 25 means this was the 25th public law passed by the 111th Congress.

U.S. Code

When Congress passes public laws that contain permanent provisions, such permanent provisions are consolidated and codified into the U.S. Code. The U.S. Code is, in essence, a compendium of our body of federal laws. A typical annotation would appear as 31 USC 1341. The 31 is the title number. The U.S. Code contains 50 titles, each dealing with a different subject. Think of the titles as chapters in a book. In this case, Title 31 is about money and finance. The 1341 means section 1341 of Title 31. The section number is merely a placeholder or locator and has no relationship to the order in which provisions were enacted into law, unlike the public law annotation.

Code of Federal Regulations (CFR)

The Code of Federal Regulations is the codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the federal government. It is divided into 50 titles that represent broad areas subject to federal regulation. Each title is divided into chapters, which usually bear the name of the issuing agency. Each chapter is further subdivided into parts that cover specific regulatory areas. Large parts may be subdivided into subparts. All parts are organized in sections, and most citations in the CFR are provided at the section level. For example, 5 CFR 1315.4 means section 1315.4 of Title 5.

Comptroller General Decisions

The head of GAO is the comptroller general (CG) of the United States. (Note: GAO was known as the General Accounting Office from its creation in 1921 until 2004, when it changed its name.) The CG renders and publishes decisions on the proper use of government funds. These decisions form the basis for much of our understanding of what is and is not permissible when using federal dollars.

CG decisions are annotated in two ways. An example of the older method is 54 Comp. Gen. 356. This means that the decision can be found in volume 54 of the comptroller general decisions, starting on page 356.

More frequently cited in this book are the later CG decisions, which take the form of B-123456, date. These are simply file numbers for the decisions, which start with a B, then contain a six-digit number, and end with the date of publication of the decision.

Comptroller of the Treasury Decisions

GAO was created in 1921. Before 1921, the comptroller of the U.S. Treasury issued decisions on the proper use of appropriated funds. They took the form 22 Comp. Dec. 379. These follow the same scheme as the Comp. Gen. decisions mentioned above, so this decision can be found in volume 22 of the Comp. Dec. decisions, starting on page 379.

Finally, you will find occasional reference to U.S. attorney general decisions and court decisions. These will be obvious from the context of the discussion.

Chapter 2

The History of the Antideficiency Act

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.

1. Why did Congress pass the Antideficiency Act?

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