B-201110.OM, DEC 30, 1980

B-201110.OM, DEC 30, 1980

SUBJECT: "M" ACCOUNTS AND RELATED SURPLUS FUND ACCOUNTS, B-201110-O.M.

DIRECTOR, AFMD:

THIS MEMORANDUM IS IN RESPONSE TO AN INQUIRY FROM KEN GEORGE AND JOE MALACAVAGE OF YOUR STAFF AS A RESULT OF QUESTIONS BY MR. LENNON AND MR. RIVES OF SENATOR LEVIN'S STAFF PERTAINING TO THE USE AND CONTROL OF THE $17.1 BILLION IN MERGED SURPLUS AUTHORITY REPORTED BY THE DEPARTMENT OF DEFENSE (DOD) AS OF SEPTEMBER 30, 1979. (SEE CONTACT MEMORANDA FROM MR. DONLON, SUBJECT AS ABOVE, AUGUST 21, 1980, AND MR. ALAMILLA, SUBJECT AS ABOVE, NOVEMBER 24, 1980.)

MR. LENNON INDICATED THAT THIS AMOUNT APPEARED TO BE FAR IN EXCESS OF NEEDS AND ASKED IF SOME OF THE MERGED SURPLUS AUTHORITY COULD BE USED BY THE CONGRESS TO MEET DOD'S CURRENT BUDGET REQUESTS. THE PURPOSE WOULD BE TO REDUCE DOD'S NEED FOR NEW BUDGET AUTHORITY AND TO LESSEN THE POSSIBILITY OF MISUSE OF THE EXPIRED UNOBLIGATED BALANCES OF APPROPRIATION ACCOUNTS FOR PURPOSES OTHER THAN THOSE INTENDED BY THE CONGRESS. CONSEQUENTLY, WE HAVE BEEN ASKED WHETHER THERE ARE ANY LEGAL RESTRICTIONS ON THIS TYPE OF ACTION. WE HAVE ALSO BEEN ASKED TO RESPOND TO MR. RIVES' QUESTION ASKING WHETHER TREASURY IS REQUIRED BY LAW TO MAINTAIN AN ACCOUNT OF THE UNOBLIGATED BALANCES OF EXPIRED APPROPRIATIONS.

THE PROCEDURES FOR ACCOUNTING FOR APPROPRIATIONS AFTER THEY HAVE EXPIRED ARE SET FORTH IN 31 U.S.C. SECS. 701-708. ONCE AN APPROPRIATION HAS EXPIRED, IT IS NO LONGER AVAILABLE FOR OBLIGATION. ANY UNOBLIGATED BALANCE IN SUCH AN APPROPRIATION IS THEN "WITHDRAWN" AND REVERTS TO ITS SOURCE, EITHER THE GENERAL FUND OF THE TREASURY OR A SPECIAL OR TRUST FUND. 31 U.S.C. SEC. 701(A)(2). THESE WITHDRAWN BALANCES CONSTITUTE THE MERGED SURPLUS AS OPPOSED TO THE MERGED OBLIGATED BALANCES WHICH ARE RETAINED IN SEPARATE ACCOUNTS FOR THE PURPOSE OF LIQUIDATING OBLIGATIONS PROPERLY MADE BEFORE THE APPROPRIATION'S EXPIRATION - THE SO-CALLED "M" ACCOUNTS.

ONCE THE UNOBLIGATED BALANCE OF AN EXPIRED APPROPRIATION IS WITHDRAWN, IT IS LEGALLY AVAILABLE ONLY FOR THE PURPOSE OF RESTORATION TO THE "M" ACCOUNT TO LIQUIDATE OBLIGATIONS OR EFFECT ADJUSTMENTS PROPERLY ATTRIBUTABLE TO AN EARLIER FISCAL YEAR. 31 U.S.C. SEC. 701(A)(2). UNDERSTAND THAT TREASURY CURRENTLY DETERMINES THE AMOUNT OF UNOBLIGATED BALANCES OF EXPIRED APPROPRIATION ACCOUNTS ONLY WHEN IT IS NECESSARY TO RESTORE FUNDS FROM THESE UNOBLIGATED BALANCES IN ORDER TO LIQUIDATE PREVIOUSLY MADE OBLIGATIONS. TREASURY DOES THIS BY ADDING WITHDRAWALS PREVIOUSLY MADE FROM EXPIRED APPROPRIATION ACCOUNTS AND SUBTRACTING FROM THE TOTAL ALL PREVIOUS RESTORATIONS TO OBLIGATED BALANCE "M" ACCOUNTS.

TO MAKE THE EXPIRED UNOBLIGATED BALANCES ONCE AGAIN AVAILABLE TO MAKE NEW OBLIGATIONS IS GENERALLY PROHIBITED. 2 U.S.C. SEC. 190FC). AT THE LEAST, IT REQUIRES AN ACT OF CONGRESS. SEE, FOR EXAMPLE, THE OPERATION AND MAINTENANCE APPROPRIATIONS FOR THE ARMY, NAVY, AND AIR FORCE IN THE DOD APPROPRIATION ACT, 1976, PUB. L. NO. 94-212, FEBRUARY 9, 1976, 90 STAT. 155-156.

SHOULD THE CONGRESS AUTHORIZE THE USE OF THE EXPIRED UNOBLIGATED BALANCES OF APPROPRIATIONS TO MEET CURRENT NEEDS, IT WOULD BE CONSIDERED NEW BUDGET AUTHORITY. SINCE THE ACCUMULATED WITHDRAWALS REVERT EITHER TO THE GENERAL FUND OF THE TREASURY OR THE SPECIAL OR TRUST FUNDS FROM WHICH THEY WERE DERIVED, THEY ARE NO LONGER AVAILABLE FOR OBLIGATION. THEREFORE, THERE IS NO PRESENT "BUDGET AUTHORITY" WITHIN THE MEANING OF SECTION 3(A)(2) OF THE CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT OF 1974, (31 U.S.C. SEC. 1302(A)(2)), WHICH DEFINES BUDGET AUTHORITY AS "AUTHORITY PROVIDED BY LAW TO ENTER INTO OBLIGATIONS WHICH WILL RESULT IN IMMEDIATE OF FUTURE OUTLAYS INVOLVING GOVERNMENT FUNDS." IT FOLLOWS THAT ANY ACT OF CONGRESS WHICH PROVIDES LEGAL AUTHORITY WHICH DOES NOT NOW EXIST TO OBLIGATE EXPIRED UNUSED OBLIGATIONAL AUTHORITY RESULTS IN NEW BUDGET AUTHORITY FOR THE FISCAL YEAR FOR WHICH IT IS AUTHORIZED. B-77406, JANUARY 20, 1976. FURTHERMORE, IT MAKES NO DIFFERENCE WHETHER THE ACTION ON THE PART OF THE CONGRESS TO EXTEND THE PERIOD OF AVAILABILITY OF OBLIGATIONAL AUTHORITY TAKES PLACE BEFORE RATHER THAN AFTER ITS ORIGINAL EXPIRATION DATE, SINCE IN EITHER CASE THE ACTION CREATES NEW BUDGET AUTHORITY FOR THE PARTICULAR FISCAL YEAR FOR WHICH IT IS MADE AVAILABLE WHICH WOULD NOT EXIST BUT FOR CONGRESSIONAL ACTION. SEE B-115398, JANUARY 3, 1978 AND B-115398-O.M., DECEMBER 15, 1977.

THIS IS NOT ONLY THE POSITION OF THIS OFFICE BUT THAT OF THE HOUSE AND SENATE BUDGET COMMITTEE, WHICH HAVE INDICATED THAT THEY WILL TREAT CONGRESSIONAL ACTION EXTENDING THE PERIOD OF AVAILABILITY OF OBLIGATIONAL AUTHORITY EITHER BEFORE OR AFTER IT EXPIRES AS NEW BUDGET AUTHORITY FOR THE YEAR IT IS MADE AVAILABLE. SEE: REPORT OF THE CONFERENCE COMMITTEE ON THE SECOND CONCURRENT RESOLUTION ON THE BUDGET, FISCAL YEAR 1978 (H. CON. RES. 341), H. R. REP. NO. 95-601, 5-6 (1977); REPORT OF THE HOUSE BUDGET COMMITTEE ON H. CON. RES. 341, H. R. REP. NO. 95-582, AT 14 (1977).

FURTHERMORE, FOR THE SAME REASONS WE WOULD CONSIDER ANY ACT BY THE CONGRESS WHICH PROVIDES LEGAL AUTHORITY TO USE ANY EXCESS OBLIGATIONAL AUTHORITY APPEARING IN THE "M" ACCOUNT BEFORE IT IS WITHDRAWN TO RESULT IN NEW BUDGET AUTHORITY FOR THE FISCAL YEAR FOR WHICH IT IS AUTHORIZED. OBLIGATED BALANCES IN THE "M" ACCOUNT MAY BE USED ONLY TO LIQUIDATE OBLIGATIONS CHARGEABLE TO THE EXPIRED APPROPRIATIONS FROM WHICH THE "M" ACCOUNT WAS DERIVED. 31 U.S.C. SEC. 702. IF AS A RESULT OF ADJUSTMENTS OR DEOBLIGATIONS OF OBLIGATIONAL AUTHORITY IN THE "M" ACCOUNT, THE AMOUNT THEREIN EXCEEDS THE AMOUNT NECESSARY TO LIQUIDATE ACTUAL OBLIGATIONS, THEN CURRENT OBLIGATIONS CANNOT BE RECORDED AGAINST THIS EXCESS. INSTEAD, THE LAW REQUIRES THE WITHDRAWAL OF THIS EXCESS AND IT REVERTS TO THE GENERAL FUND OR ANY SPECIAL OR TRUST FUND FROM WHICH DERIVED (THEREBY BECOMING A PART OF THE MERGED SURPLUS AUTHORITY). 31 U.S.C. SEC. 703. THUS, ANY EXCESS BALANCE WHICH MAY BE IN THE "M" ACCOUNT DOES NOT REPRESENT PRESENT "BUDGET AUTHORITY" WITHIN THE MEANING OF 31 U.S.C. SEC. 1302(A)(2).

THUS, UNLESS THE LAW IS AMENDED TO SPECIFICALLY EXCLUDE FROM THE DEFINITION OF "BUDGET AUTHORITY" CONGRESSIONAL ACTION TAKEN TO MAKE APPROPRIATIONS AVAILABLE FOR OBLIGATION BEYOND THEIR DATE OF EXPIRATION, OR TO MAKE AVAILABLE EXCESS BALANCES IN THE "M" ACCOUNT NO LONGER NEEDED TO LIQUIDATE OBLIGATIONS BUT WHICH HAVE YET TO BE WITHDRAWN, ANY SUCH ACTIONS WOULD CONSTITUTE NEW BUDGET AUTHORITY FOR PURPOSES OF THE BUDGET RESOLUTIONS REQUIRED BY THE 1974 ACT. COPIES OF THE DECISIONS CITED IN THIS MEMORANDUM ARE ATTACHED FOR POSSIBLE INCLUSION IN YOUR RESPONSE TO SENATOR LEVIN.

ADDITIONALLY, WE ARE UNAWARE OF ANY LAW REQUIRING TREASURY TO MAINTAIN A RUNNING ACCOUNT FOR THE UNOBLIGATED BALANCES OF EXPIRED APPROPRIATIONS. HOWEVER, IF THE PRESENT METHOD OF COMPUTING THE AMOUNT OF THE UNOBLIGATED BALANCES AVAILABLE FOR RESTORATION PURPOSES IS CONSIDERED INADEQUATE, THEN A RECOMMENDATION TO CORRECT THIS DEFICIENCY WOULD BE APPROPRIATE. WHETHER OR NOT THIS WOULD INCLUDE MAINTAINING AN ACCOUNT FOR THE UNOBLIGATED BALANCES OF EXPIRED APPROPRIATIONS IS A POLICY CONSIDERATION ON WHICH WE EXPRESS NO OPINION.

FINALLY, WE WISH TO ADDRESS ONE OTHER MATTER NOT SPECIFICALLY RAISED IN YOUR QUESTIONS BUT WHICH WE FEEL IS IMPORTANT IN VIEW OF THE NATURE AND PURPOSE OF THE SENATOR'S INQUIRY. IT IS OUR BELIEF THAT ANY COMMENTS WE FURNISH TO THE SENATOR SHOULD MAKE IT CLEAR THAT WHEN THE CONGRESS MAKES AN APPROPRIATION IT IS ONLY AUTHORIZING AN AGENCY TO INCUR OBLIGATIONS FOR SPECIFIED PURPOSES DURING THE SPECIFIED PERIOD OF TIME. HOWEVER, APPROPRIATIONS DO NOT REPRESENT CASH ACTUALLY SET ASIDE IN THE TREASURY FOR PURPOSES SPECIFIED IN THE APPROPRIATION. THUS WHEN AN APPROPRIATION EXPIRES AND THE UNOBLIGATED BALANCES OF OBLIGATIONAL AUTHORITY ARE WITHDRAWN, THIS DOES NOT CONSTITUTE A PRESERVATION OF AN EVER INCREASING AMOUNT OF FUNDS SET ASIDE BY THE TREASURY WHICH WILL SIT IDLE UNTIL NEEDED FOR RESTORATION PURPOSES. THUS NO MONETARY RESOURCE OF THE GOVERNMENT IS BEING WASTED SIMPLY BECAUSE THE UNOBLIGATED BALANCES OF EXPIRED APPROPRIATION ACCOUNTS ARE AVAILABLE FOR RESTORATION PURPOSES.

THE RESTORATION AUTHORITY MERELY AUTHORIZES AN AGENCY TO ADJUST UPWARD PREVIOUSLY UNDER-RECORDED OBLIGATIONS OR TO INITIALLY RECORD OBLIGATIONS THAT SHOULD HAVE BEEN RECORDED AGAINST AN EXPIRED APPROPRIATION BEFORE ITS EXPIRATION (BUT WERE NOT) WITHOUT SEEKING AN ADDITIONAL APPROPRIATION. NEW APPROPRIATION WOULD OTHERWISE BE NECESSARY SINCE THE AGENCY'S CURRENT APPROPRIATION WOULD NOT BE AVAILABLE FOR THIS PURPOSE.) CONSEQUENTLY, REDUCTION OF THE AMOUNT OF UNOBLIGATED BALANCES IN EXPIRED APPROPRIATION ACCOUNTS WOULD MERELY LIMIT THE AMOUNT OF OBLIGATIONAL AUTHORITY AVAILABLE FOR RESTORATION PURPOSES BUT WOULD NOT RESULT IN THE FREEING UP OF MONEY FOR A NEW PURPOSE WHICH MIGHT OTHERWISE GO UNUSED.