Keeping up with the "new" fiscal law: the GAO redefines fiscal laws--and puts a human face on some decisions.
This article examines three recent fiscal law developments with which all Department of Defense (DoD) resource, financial, and program managers should be familiar--both to pass the exam and to inform their work.
The first development regards important recent updates to the Government Accountability Office (GAO) Red Book, or Principles of Federal Appropriations Law. Second, both the Congress and the GAO have recognized that to recruit and keep quality professionals, the government must compete with the private sector. Consequently, agencies have been given more flexibility in underwriting employee-related costs and benefits. Third, the DoD will soon designate a large number of departmental accountable officials as holding pecuniary (monetary) liability for data or information that leads to an illegal, improper, or incorrect payment.
Before we cover those developments in more detail, let's begin with a basic refresher--Fiscal Law 101--using a familiar personal analogy to review the purpose, time, and amount fund limitation "rules" that govern all legal obligations and expenditures. Remember, these rules and the example used in the following scenario must support the basic axiom of fiscal law: Expenditure of public funds is proper only when authorized by the Congress (not, as many would believe, that public funds may be expended unless prohibited by the Congress).
Fiscal Law 101: A Quick Refresher
Let's assume the time has finally arrived to send your first son oft to college. Since the "Bank of Mom and Dad" will be acting as the treasury, you provide your son with three envelopes, each containing a debit card for a definite amount of financing authority for his first semester. Knowing your son well, you decide to place some provisos, or "rules," on each envelope.
In the first envelope you put $600 on the card and label the envelope "For necessary school supplies, including textbooks." In the second envelope the card is loaded with $300, and the envelope is labeled "For necessary clothing expenses." The final envelope contains $500 for "Necessary social expenses, including late-night pizzas and beverages."
You further stipulate that all funds must be used by the end of the semester. Additionally, if your son overdraws on any debit card, he will violate the limitations placed on that card and will have to pay overage amounts himself, along with other likely "administrative" penalties to be determined, depending on the severity and circumstances of the deficiency amount.
Naturally, your son has some questions and concerns about this financing arrangement. First, he asks Mom and Dad (since, after all, they control the power of the purse) if he can leave some money remaining on any given card and use it as an "unobligated" amount to carry over into the next semester. You promptly answer no, explaining that if balances are left on the card, it means that he really didn't need all the money for that purpose and, therefore, should expect a reduction in the amount in that envelope next semester. Your son begins to question your logic, but you are quick to remind him that if he persists in this argument he may anger you and, after all, you do control the funds allocation.
Having lost this argument, your son tries another approach. This time he asks if he may "transfer" funds from one envelope to the other. He points out that there may be too much authority in the clothing envelope, authority that could be better applied to the dwindling balance in the social envelope. Somehow you are not surprised. Your answer this time is equally swift and authoritative: If he wants to transfer funds, he must have previous authority from both Mom and Dad, representing both "chambers of authority."
Persisting, your son asks that if he delivers pizza or washes cars on the side, may he keep this money himself or augment any one of the funds in the three envelopes? Once again you explain the rules--that all of the money in the envelopes came from the general fund of Mom and Dad and, therefore, any miscellaneous receipts must be given back to this fund as soon as practical without a deduction of any kind.
As your son begins executing the funds at college, you notice that there are several late-night charges to a beverage store that predominately sells beer. Suspecting foul play, you place an additional proviso in writing on the social appropriation envelope that says, "None of the funds provided herein shall be used to buy beer."
You also note social charges of over $50 for movie theater charges. Your son explains that the questionable charge was for him and four of his friends who forgot to bring their wallets to the movie theater but promised to pay him back. Explaining your displeasure with this arrangement, you write yet another rule on the social envelope stating that no funds may be used to pay for expenses of any kind for anyone other than your son.
As time progresses, you and your spouse discuss concerns over where the money seems to be going within the social expense envelope. The monthly college expense reports furnished by the debit card company indicate that a disproportionate amount seems to be spent in the beverage category (or program). Meeting in conference, you and your spouse decide to provide verbal instructions over the phone regarding how much your son can spend for various programs or categories within an envelope.
However, recognizing arguments that he does need some funding flexibility, you describe a process where he may ask to "reprogram" between categories within the envelope. Specific amounts must be approved beforehand, with other "informal agreements" specified verbally. You further state that if perceived abuses occur, stringent rules will be made crystal clear in the written "law" on the envelope so that there is no misunderstanding.
This analogy could obviously be carried further but, by now, I'm sure you get the point. As your son tested the boundaries of each appropriation envelope, you felt the need to add new provisos and rules to control and prevent what you perceived as misuse of your funds.
These funds limitation "rules" with respect to purpose, time, and amount have evolved over many years as cumulative perceived abuses that led to new congressional restrictions in the form of enacted laws and provisos in agency appropriation and authorization acts. In addition, the GAO continues to redefine fiscal law with many new case law decisions.
Finally, the courts may become involved when there seem to be inconsistencies between (or holes in) the laws and GAO decisions. The overriding themes of control and mistrust seem to be the primary drivers of fund limitations and are directly analogous to the perennial struggle between parents and children ... and, yes, between the Congress and the Executive Branch (which one is the child is often debatable!).
New Developments in Fiscal Law
Let's now shift our attention back to those three recent fiscal law developments that Defense resource, financial, and program managers need to be aware of: updated GAO resources for appropriations law principles and decisions, the trend toward relaxation of personal-related expenses, and the pecuniary liability assigned to newly designated departmental accountable officials.
New GAO Red Book Updates and Improved Research Aids
This basic reference and research aid for fiscal law has been updated and expanded. The new Volume I (Third Edition), Principles of Federal Appropriations Law, published early in 2004, updates and expands the previous 1991 edition by some 130 pages, or approximately 25 percent.
Many GAO case decisions rendered over the past 13 years have been included, along with new laws and relevant court decisions. Numerous principles and decisions are explained in greater detail than in the previous edition, with several new sections added. Many of the newer decisions reflect an analytical construct that is more tolerant of expenses that agencies must now incur to remain competitive in view of current market forces. The first annual electronic update of this volume is now available on the GAO Web site (www.gao.gov).
Key new areas of focus and additions include those in chapters 4 and 5. Chapter 4 addresses purpose limitations concerning food, gifts and awards, lobbying, personal expenses, and telephones. The GAO plans to publish a much requested food decision tree (the number one area of employee interest) on its Web site this spring.
New developments concerning the time element of fiscal law are addressed in Chapter 5. Several new authorities provide additional flexibility regarding the year in which funds should be obligated for annual and multiyear service contracts. The volume as a whole has also been enhanced with a new section on grants and cooperative agreements.
More importantly, the electronic copy of this volume found on the GAO Web site now includes links to virtually all of the GAO decisions that are cited. This helpful research tool will also be included in future volumes that likely will be issued on an annual basis.
The third edition of Volume II, covering amount availability limitations and associated provisions of the Antideficiency Act, is expected later this year, to be followed by Volume III in 2006.
The GAO has also updated portions of Volume 5, the so-called silent (and underutilized) volume of the Red Book. This volume currently includes a detailed index and a table of authorities (TOA). A useful new navigation tool has been added to the Volume 1 portion of the index/TOA. Once you find a word in the index or a case in the TOA, click on the word or case of interest, and you will be taken automatically to the applicable page in the third-edition volume where the word or case is mentioned. All of these tools and downloads are available online and are invaluable for ready reference and research.
There is even a new section on the GAO Web page (click on Legal Products) where anyone can e-mail a question to the GAO regarding the Red Book. Make sure you include your phone number in the e-mail because the GAO generally will not respond to "unofficial" requests in writing, preferring for legal reasons to make their contact via phone.
The Newer, Kinder GAO
The second development is the continuing trend by the Congress and the GAO to allow agencies more flexibility to recruit and retain quality employees. Specifically, there have been subtle shifts to increase the less tangible benefits associated with government employment. A prime example of this is GAO decision B-302993 of June 2004.
That decision granted the Navy authority to use appropriated funds to purchase refrigerators, microwaves, and commercial coffee makers in central kitchen areas for 1,100 military and civilian personnel working in the new U.S. Pacific Command (USPACOM) headquarters building. The GAO departed from prior relevant case law by stating that the availability of this kitchen equipment would contribute to the efficient operations of the agency and to the health of personnel and would help support valuable human capital policies.
In its request for decision, the USPACOM had argued that such equipment would increase employee productivity and improve morale. Implicit in the GAO's decision is that evolving societal expectations and market forces affecting government employees will likely be considered in future GAO opinions.
Another example of the shift to support for a friendlier, more comfortable workplace for the government worker is the June 2001 (B-286026) GAO reassessment of training opportunities that allows on-the-job study time and funds for employees to attend professional examination review courses.
This authority was greatly expanded by a recent law (5 USC 5757) that provides government-wide authority to use appropriated funds to pay expenses incurred by employees to obtain professional accreditations, certifications, and credentials, including the costs of examinations. The DoD's implementing policy reimburses employees for their exam expenses once they pass approved professional certification exams, such as those for the American Society of Military Comptrollers-sponsored CDFM. Even mandatory fees associated with practicing and using a professional certification may be paid for with appropriated funds (B-289219, October 2002).
The "New" Departmental Accountable Official
The final area of change concerns the recently created departmental accountable official. Some readers of this article likely are already serving in such positions. What you probably didn't know is the potential monetary liability related to such positions. The Fiscal Year 2003 Defense Authorization Act (codified at 10 USC 2773a) permanently established pecuniary liability for accountable officials throughout the DoD. An accountable official is defined in Volume 5, Chapter 33, of the "DoD Financial Management Regulation" (DoDFMR) as military and civilian personnel who supply "timely and accurate data, information, and/or service to ensure proper payments, i.e., payments that are supportable, legal, and computed correctly."
Some specific functional areas involve accountable individuals working in support of a purchase card program, temporary duty travel, contract and vendor pay, and military and civilian pay, to name a few. Representative job titles include Program Coordinators/Managers, Resource Managers/Fund Holders, Administrative Contract and Contract Officers, and Automated Information System Administrators.
The DoD soon intends to implement this law fully through pending changes to Volume 5, Chapter 33, of the DoDFMR. An accountable official, designated as such in writing, would be liable for improper or erroneous payments resulting from information, data, or service that he or she provides negligently to other responsible officials. Pecuniary liability is determined by the responsible commander or director and can be assessed up to one month's compensation.
Erroneous payments also may result from the improper act of a budget or resource official responsible under the rules of fiscal law for the proper assignment of funding on an obligation document before the obligation is incurred. Relief of liability for an accountable official rests with the Defense Finance and Accounting Service's Director, Accounting Services (DFASDAS) (1) in accordance with Volume 5, Chapter 6, of the DoDFMR.
Needless to say, proper training on internal controls and fiscal law will be extremely valuable to the potential thousands of newly identified accountable officials designated in writing over the following months and years.
Implications for Defense Financial Managers
We all recognize the importance of the rules and restrictions inherent in obligating and expending appropriated fund "envelopes." A basic understanding of fiscal law purpose, time, and amount rules is not only important for becoming a CDFM, but also for understanding personal liability issues. The Red Book includes thousands of cases where government employees and agencies encounter potential liability issues that, one would hope, are determined before appropriated funds are expended. Ignorance of the rules and the restrictions inherent within fiscal law will not relieve anyone from liability. Nor will the excuse that "my boss said it was OK" be an acceptable response.
Ultimately, everyone is responsible for the proper and legal expenditure of public funds. In this age of financial accountability, it is more important than ever to embrace the principle that an ounce of prior knowledge and understanding is worth a pound of aggravation caused by the improper obligation and/or expenditure of funds. All government employees should, at a minimum, raise their level of fiscal law awareness to the point where they do not become the next case included in the Red Book!
(1) Although the current DoDFMR Volume 5, Chapter 6, refers to the Defense Finance and Accounting Service's Director, Accounting (DF AS-DA) as the relief official, the office of the DFAS-DAS confirmed to the author that, in fact, this authority lies with the DAS.
Richard L. Hurley, CDFM, CGFM, PMP, is senior instructor and consultant with Management Concepts of Vienna, Virginia. In his 21-year career with the U.S. Navy, he held various aviation flying and resource management positions. Hurley is a member of the Fort Belvoir Chapter.
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|Title Annotation:||Government Accountability Office|
|Author:||Hurley, Richard L.|
|Publication:||Armed Forces Comptroller|
|Article Type:||Cover Story|
|Date:||Mar 22, 2005|
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