Fiscal Law Q&A Corner.

Author:Arnold, William

Welcome back to the Fiscal Law Q&A Corner. Each issue includes questions and answers about fiscal law. Some of them are be based on this author's book, The Appropriations Low Answer Book: A Q&A Guide to Fiscal Law. That book relies heavily on the Government Accountability Office's (GAO) Principles of Federal Appropriations Law, usually referred to as the Red Book. Other Q&As will be based on more recent GAO decisions and other authoritative sources.

Q: "Budget authority" and "obligation authority" are often used interchangeably. Is there a difference between the two?

A: There is a difference, but generally there won't be confusion if either of the two terms is used.

Congress finances the operation of agencies and programs by providing budget authority. Budget authority is a general term referring to forms of statutory authority to enter into financial transactions that will result in outlays of government funds. Budget authority flows from Congress, through OMB, to agencies. Obligation authority is created when an agency provides an individual funds holder the authority to enter into obligations that will result in outlays. Normally, issuance of an allotment is the dividing line between budget and obligation authority.

Q: Are there different types of budget authority?

A: There are several.

* Appropriations are the most common form. Appropriations give federal agencies the authority to incur obligations and liquidate those obligations through payments from the Treasury.

* Contract authority permits obligations to occur prior to an appropriation. Do not confuse contract authority with the authority each agency has to enter into contracts; it is, rather, an authority that depends on the availability of funds. Contract authority allows an agency to make binding contracts, but those obligations must be liquidated from a subsequent appropriation. Working capital funds often receive contract authority to finance the purchase of inventory. The obligations are then liquidated from funds received from the sale of that inventory.

* Borrowing authority, and loan and loan guarantee authority let an agency borrow funds to finance operations, or make direct loans or loan guarantees to outside parties.

* Offsetting collections refers to the authority to incur obligations and make payments as a result of reimbursable transactions, revolving funds, and user fees. Offsetting receipts are collections deposited into a receipt account of the Treasury, and are...

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