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The antideficiency act: Antideficiency Act 101: a tidy summary of the act's history and its process and types-and a brief discussion of how to avoid violations.

The Antideficiency Act (ADA) is a series of statutes designed to prevent government officials from spending beyond their means by prohibiting the obligation or expenditure of funds beyond those provided. Specifically, government officials are prohibited from authorizing or making an expenditure in excess of an appropriation or a fund (Title 31, United States Code (U.S.C.), section 1341(a)(1)(A)) or an apportionment or an allocation (31 U.S.C. 1517(a)). Likewise, government officials are prohibited from involving the government in a contract or an obligation for the payment of money before an appropriation is made, unless otherwise authorized by law (31 U.S.C. 1341(a)(1)(B)). Also prohibited is the acceptance of voluntary services without statutory authorization, except in emergencies involving human life and property (31 U.S.C. 1342).

Evolution of the Antideficiency Act

The ADA has a long history. Among the powers of the Congress stipulated in the Constitution is the so-called "power of the purse," which grants to the Congress the sole authority to authorize the expenditure of money from the United States Treasury. Many believe this to be the Congress's greatest check on the power of the Executive Branch.

Executive Branch agencies, through post-Civil War years, had a long history of incurring obligations well in excess of appropriations granted by the Congress, sometimes spending their entire appropriation within a matter of months and then returning to the Congress additional funding. Such behavior was unacceptable to the Congress; which responded in 1870 by passing a statute that simply stated: "[I]t shall not be lawful for any department of the government to expend in any one fiscal year any sum in excess of appropriations made by Congress for that fiscal year, or to involve the government for the future payment of money in excess of such appropriations" (16 Stat. 251 ). This statute has evolved into what we now refer to as the ADA

Violations of the ADA can result in administrative sanctions ranging from a written admonishment or reprimand up to and including removal from federal employment. If it is shown that the violation was knowing and willful, criminal sanctions may be imposed in the form of imprisonment of up to two years and fines of up to $5,000. To date, no person has been convicted of violating the ADA.

In addition to administrative and possible criminal penalties, the ADA contains reporting requirements. Violations of the ADA are reported, via the Department of Defense (DoD), to the President and to the leaders of both Houses of the Congress, as well as to the Government Accountability Office (GAO). The GAO publishes on its Web site a database of ADA violations, which includes a copy of the underlying agency report.

The ADA Process

Potential ADA violations are discovered through a variety of sources. Audits by agencies-such as the Office of the Inspector General, DoD, a military department's audit service, or the GAO--may uncover facts that would indicate a possible ADA violation. Questions asked of a DoD component's senior financial manager (often after the fact) may lead to the conclusion that a potential violation has occurred. Finally, individuals familiar with the facts of a particular transaction may conclude on their own that a potential problem exists and call that problem to the attention of senior leadership.

If an activity believes a potential ADA violation has occurred, it will submit an initial report to the DoD component's senior financial manager. This initial report is informal and merely sets forth the factual circumstances that led to the belief that an ADA violation may have occurred. If the receiving senior financial manager determines that a further factual inquiry is warranted, he or she will ask the activity to perform a preliminary ADA review in accordance with the procedures set forth in the DoD Financial Management Regulation (DoDFMR), volume 14, chapter 3. The preliminary report resulting from this review is submitted to the requesting senior financial manager, who, in consultation with counsel, determines whether a formal investigation is required.

Where a formal investigation is warranted, the component's senior financial manager formally assigns an ADA investigator who has been trained in conducting ADA investigations and who typically is from outside the activity being investigated. The investigator's role is to gather facts and determine whether a violation occurred, in accordance with procedures set forth in volume 14 of the DoDFMR. During the time of the investigation, the investigator reports progress on a regular basis. Typically, it is expected that the investigator will conclude his or her investigation within 90 days.

The formal investigation is intended to provide the investigator with the necessary facts in order to write the formal report. Using the preliminary report as a starting point, the investigator will determine what information is missing or what areas require a more in-depth examination in order to accomplish that task. The investigator will interview those involved in the transaction and carefully review the documentary evidence in order to trace and document the transactions, decisions, and circumstances that may have led to the violation. During this time, careful coordination with the component's senior financial manager's office, as well as with counsel, will help the investigator to maintain focus and not to be drawn into unproductive lines of inquiry.

As part of this process, in those cases where the investigator concludes that a violation of the ADA has occurred, the individual or individuals named as being responsible for the violation are given the opportunity to review the report and submit a written statement, which is included in the formal report.

The formal report is submitted to the component's senior financial manager. At this point, the component's counsel coordinates with the DoD Deputy General Counsel (Fiscal) (DGC(F)) for a final determination on whether a violation occurred. If the DGC(F) agrees, the report is returned to the component to exercise appropriate discipline, after which the final report is submitted to the Under Secretary of Defense (Comptroller), who then submits the final report to the President, the Director or the Office of Management and Budget, the President of the Senate, the Speaker of the House of Representatives, and the Comptroller General (GAO).

If, at any time during this process, it appears that a criminal violation may have occurred, the investigation is stopped and the matter is referred to the appropriate component's criminal investigative service (CIS). While rare, such referrals do occur. It then is up to the CIS to determine whether, in its opinion, the facts warrant referring the case to the Department of Justice (or the appropriate United States attorney) for possible prosecution.

The DoDFMR requires that the person or persons who are named as being responsible for the violation be administratively disciplined. This discipline is administered on a case-by-case basis, taking into account the nature and seriousness of the offense and the record and experience and the degree and level of responsibility of the person or persons responsible. For civilian employees, administrative discipline may range from a written reprimand or admonishment to removal from office; military personnel may be subject to appropriate administrative discipline or to action under the Uniform Code of Military Justice.

Types of ADA Violations

The Congress maintains its power of the purse, in part, by placing limitations on how the Executive Branch can spend money. These limitations fall into three categories: limitations on the purpose for which appropriated funds may be spent; limitations on the time such funds are available for obligation; and limitations on the amount available to be obligated. Not surprisingly, ADA violations may fall into any of these three categories.

Purpose Violations

Purpose violations perhaps are the most common type of violation. 31 U.S.C. 1301(a), commonly known as the Purpose Statute, states: "Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law." The obligation of funds for a purpose other than that for which the funds were appropriated is a violation of the Purpose Statute. In addition, a violation of the ADA (specifically, section 1341) may result because the official may have incurred an obligation in an amount that exceeds the amount available.

In this case, it is important to distinguish between two types of purpose violations. As an example, suppose an activity places a number of purchase orders for certain ADP equipment, each of which would properly be paid for with operating funds. However, having obtained all of the equipment under each of these purchase orders, the agency then ties the equipment together into a local area network (LAN), the creation of which is required to be funded using a procurement appropriation. The activity thereby has violated the Purpose Statute, because it has used its operating funds for an unauthorized purpose.

The activity also may have committed a second violation of the ADA. On its face, section 1341 is violated because it exceeds the amount available in the operation and maintenance account--zero--for the procurement of a LAN. That activity, however, would be permitted to adjust its books, if possible, to charge the correct procurement appropriation for the expenditure. To make that adjustment, the activity must show that the correct funds were available at the time of the improper obligation, at the time the correction was made, and at all times in between. The theory is that there never can be a time at which the correct account would be driven to a negative balance had the charge been made properly. An ADA violation occurs only if an expenditure was improperly charged and the correct appropriation does not have a sufficient balance, or is otherwise unavailable, to make the adjustment.

The second kind of purpose violation occurs when an activity incurs an obligation for a purpose where there is no proper funding source. For example, if an activity decides it would be a nice gesture to buy its employees driving moccasins and matching caps and key chains so that employees would have warm thoughts of the agency as they drove to work each morning, then an unavoidable violation of the ADA would occur because there is no money available to any DoD activity to buy such gifts for its employees.

Time Violations

Time violations are the next type of ADA violations. On its face, a time violation would seem easy to identify. With a few exceptions, funds appropriated by the Congress are available for obligation for a fixed period of time, and any attempt to obligate these funds either before or after they are available for obligation results in a violation of the ADA.

There are, however, other kinds of time violations. Suppose that an activity enters into a three-year contract for the provision of certain goods or services, properly funded with one-year operation and maintenance funds. Absent specific multiyear contracting authority, such a contract would result in a violation of the ADA because operation and maintenance funds for the second and third years of the contract have not yet been appropriated.

Another illustration is the practice (declining, one would hope) of "banking" money via interagency agreements, the Economy Act, or other mechanisms, under which the receiving agency agrees to hold funds for the activity for use sometime in the future when the obligating activity can further "define" its needs. The character of an activity's money does not change simply by sending it to another agency for execution, and such mechanisms cannot be used to extend the life of an appropriation.

Amount Violations

Amount violations are the third type of ADA violations. Again, many of these are intuitively obvious. An activity cannot spend more money than has been provided to it in an allocation or an apportionment. So, for example, an activity cannot agree to an open-ended indemnification agreement because, generally, activities do not have available to them unlimited funds to make good on such indemnification agreements, should that be necessary.

Some amount violations may be less obvious and thus require care on the part of funds holders. An example cited in the DoDFMR is that of a funds holder who erroneously distributes more funds than are available to that funds holder. If the receiving activities incur obligations and expenditures in excess of the amount available to the funds holder, then the funds holder has violated the ADA because he or she was responsible for exceeding the total fund availability

Avoid ADA Violation

Our goal, of course, is to comply with the statutory restrictions within which we work, and not to violate the ADA. How do we do that?

First, become knowledgeable on what is prohibited by the ADA, as well as common scenarios leading to ADA violations, so that these situations may be avoided There are a number of educational resources available through which one can become knowledgeable about the ADA and fiscal law in general, some of which are listed in the sidebar on page 17.

Second, avoid those actions that the individual knows likely will lead to a violation of the ADA. In reviewing formal reports, it is surprising how often persons named as responsible parties will acknowledge that they believed their actions not to be appropriate, but they took those actions anyway for any variety of reasons. Whether because of command pressure, the desire to "get the job done," or whatever else, individuals should avoid taking those actions that they know to be improper.

Third, ask for help if necessary. If an individual is uncertain whether a particular action will result in an ADA violation or needs to know how to structure a transaction in order to avoid a violation, he or she should seek help from his or her supporting comptroller or legal counsel.

Fourth, take action to deal with the situation as soon as possible if a potential violation is discovered. If dealt with early enough, it is possible in many cases to take corrective action and eliminate the potential violation.

Finally, cooperate with the investigator if there is a violation that results in a formal investigation. Part of the purpose of the formal investigation is to establish what action needs to be taken to mitigate or correct the violation, and the investigator will need all the help the individual can give to work through the issue so that corrective action can be taken.

(Editor's note: Recently, a Lean Six Sigma project resulted in a streamlined process for handling ADAs within the DoD, providing a consistent process throughout the DoD components. See the Winter 2006 issue of Armed Forces Comptroller for a discussion of the process changes.)

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Avoiding Antideficiency Act Violations

* Become knowledgeable about what is prohibited.

* Avoid actions known to be likely causes of ADAs.

* Ask for help.

* If a violation is discovered, act quickly and attempt corrective action.

* If an investigation occurs, cooperate with the investigator.

Sources of Additional Antideficiency Act Information

Army fiscal law and ADA information:

Navy information (limited access): (Click on Policy, then on Antideficiency Act information.)

Air Force online primer on fiscal law:

Under Secand thus require care on the part of funds

Sources of Additional Antideficiency Act Information

Army fiscal law and ADA information:

Navy information (limited access): (Click on Policy, then on Antideficiency Act information.)

Air Force online primer on fiscal law:

Under Secretary of Defense (Comptroller) memo on ADAs posted on the ASMC Web site:

Government Accountability Office provides ADA statistics: (Go to Legal Products and click on Antideficiency Act violations.)

* This information was made available to participants in an ADA audio conference, July 18, 2006.
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Author:Dunn, Keith M.
Publication:Armed Forces Comptroller
Geographic Code:1USA
Date:Sep 22, 2006
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