Expired and Cancelled Appropriations 111.1. Background. This part provides instructions on the procedures to be followed for expired and cancelled appropriations, as prescribed in 31 U.S.C. 1551-1557. The requirements for appropriations available for fixed periods (i.e., annual and multi-year) differ from those available indefinitely (i.e., no-year). The general requirements that pertain to appropriations with fixed availability are described in sections 111.2. The general requirements that pertain to appropriations with indefinite availability are discussed in section 111.3. Instructions in the following sections indicate whether they apply to fixed or indefinite appropriations. 111.2. The life cycle of appropriations. The life-cycle of appropriations with fixed periods of availability consists of three sequential phases. The availability of balances of appropriations to incur, adjust, or pay obligations differs in each phase. Under the Antideficiency Act, the total cumulative obligations are limited to the amount originally appropriated. The phases are: (a) The Unexpired Phase.--During this phase, the appropriation may be used to incur new obligations and to liquidate (pay) properly incurred existing obligations. Balances in this phase are unexpired and uncancelled. (b) The Expired Phase.--The expired phase begins when the authority to incur new obligations against appropriations expires. For annual appropriations this occurs at the end of the fiscal year for which the funds are appropriated. For multi-year appropriations this occurs at the end of the last fiscal year for which the funds are appropriated. During the expired phase, no new obligations can be incurred against the appropriation, but the balances of an appropriation are available as follows: o Expired obligated balances are available to liquidate obligations properly incurred during the period when the appropriation was unexpired. o Expired unobligated balances are available only for upward adjustments of existing obligations (but not new obligations). In turn, the expired obligated balances that result from upward adjustments are available to liquidate properly incurred existing obligations. Balances in the expired phase are uncancelled. Unless otherwise specified by law, this phase lasts for five years after the period for which the appropriation is available for new obligations. All audit requirements, limitations on obligations, and reporting requirements applicable to an appropriation in the unexpired phase continue to apply to it in the expired phase. (c) The Cancelled Phase.--At the end of the expired phase, all obligated and unobligated balances must be cancelled, and the account is closed. Cancelled balances may not be used to incur or pay obligations. See section 111.10 for instructions on paying bills. Collections authorized or required to be credited to a cancelled appropriation that are received after the account is closed are required to be deposited in the Treasury as miscellaneous receipts. Exhibit 111 provides an illustration of a life cycle of an appropriation. 111.3. Authority for closing indefinite appropriations. An appropriation available for an indefinite period may be cancelled if no disbursement has been made against it in two years and the President or agency head determines that the purposes for which the appropriation was made have been carried out. 111.4. Treatment of unrecorded obligations. A commitment, obligation, or expenditure that was properly incurred prior to the expiration of an appropriation, but not recorded, should be treated as an upward adjustment of an obligation. For cancelled appropriations, the upward adjustment may be paid from the one percent of unexpired funds, as prescribed in section 111.11. Such an adjustment is still subject to the limitations of section 111.10. An upward adjustment may not exceed the cancelled unobligated balance of the cancelled appropriation. 111.5. Treatment of repayments: reporting procedures for reports of budget execution. This section covers the life cycle of repayments to appropriations of the Federal Government. Repayments consist of refunds and reimbursements. The table that follows this section provides a summary of the treatment of refunds and reimbursements. (a) Refunds are the repayments of excess payments. The amounts are directly related to previous obligations incurred and outlays made against the appropriation. Refunds are to be deposited to the credit of the appropriation charged with the original obligation and treated in the following manner. (1) Refunds collected by unexpired annual and multi-year appropriations and uncancelled no-year appropriations. --Refunds received in the same year in which the obligations are incurred are netted against obligations incurred (line 8) without further identification because these amounts have already been apportioned to the current year. --Refunds receivable from non-Federal sources, or from Federal sources where a refund payable has not been obligated by the refunding account, are not budgetary resources available for obligation until the refund is collected. These receivables should not be reported on line 3A, Reimbursement and other income earned, until they are collected. Neither should these receivables be factored into line 13, Net unpaid obligations nor should these receivables create unobligated balances. --Refunds receivable from Federal sources that pertain to obligations incurred in prior years, and where a refund payable was obligated by the refunding account, were budgetary resources available for obligation in that prior year. The receivables were reported on line 3A and are already factored into line 13 or the unobligated balances of that prior year. These should not be reported again when the refund is collected. (2) Refunds collected by expired annual and multi-year appropriations. --Valid refunds receivable are collections from Federal sources that pertain to obligations incurred in prior years and are already factored into the unobligated or obligated balances. These amounts should not be reported again when the cash is collected. --Refunds from collections that pertain to obligations incurred in prior years from (a) non-Federal sources, and (b) Federal sources where a refund payable was not obligated by the refunding account in the prior year, are recorded as offsetting collections on line 3.A, Reimbursements and other income, earned, in the expired column of the report of budget execution. These amounts are available only for upward adjustments of obligations--see section 111.6(c) (Note: No-year appropriations do not "expire" however, they may be cancelled.) (3) Refunds collected by cancelled appropriations.--Refunds to annual, multi-year, or no-year appropriations that have been cancelled are required to be deposited in miscellaneous receipts in the Treasury. (b) Reimbursements for providing goods and services to others are required to be deposited to the credit of miscellaneous receipts by 31 U.S.C. 3302(b), unless they are specifically authorized by law to be credited to the expenditure account. The following are the major exceptions: (1) Reimbursable work between Federal appropriations under the Economy Act.--The Economy Act (31 U.S.C. 1535) authorizes the head of an agency or major organizational unit within an agency to place an order with a major organizational unit within the same agency or another agency for goods or services. Transactions authorized by the Economy Act are limited by the statutory requirement that the amount obligated by the ordering appropriation is required to be de-obligated to the extent that the agency or unit filling the order has not incurred obligations, before the end of the period of availability of the ordering appropriation. Repayments (in the form of advance payments or reimbursements) from other Federal government appropriations are available for obligation when the ordering appropriation records a valid obligation to cover the order. For annual and multi-year appropriations accounts performing reimbursable work.--The advances or unearned reimbursements will be recorded as offsetting collections on line 3.B, Change in unfilled customer's orders, of the budget execution reports. When the goods have been produced or the services performed, reimbursements earned should be reported on line 3.A, Reimbursements and other income, earned, and removed from line 3.B, Change in unfilled customer's orders. If the repayment for a filled order is received after the period of obligational authority of the performing annual or multi-year appropriation has expired, the repayment shall be credited to the expired appropriation, unless other procedures are expressly prescribed by statute. If the period of disbursing authority of the performing annual or multi-year appropriations is cancelled before the repayment is received, the amounts are required to be sent to miscellaneous receipts in the Treasury. For annual and multi-year appropriations ordering reimbursable work.--The period of time during which the ordering appropriation is available for obligation is fixed. If the period of obligational authority of the performing annual or multi-year appropriation expires before the order is filled, the ordering appropriation should not be affected, provided that the performing agency has recorded a valid obligation against the order. In the event that the performing agency has not recorded a valid obligation against the order, the ordering agency should de-obligate funds for the order and record the corresponding adjustments on either line 4.A, Recoveries of prior year obligations, actual, for obligations in prior fiscal years, or net the amount against line 8, Obligations incurred, for obligations incurred in the current year. If the period of disbursement of the ordering appropriation is cancelled before the reimbursement is made to the appropriation that performed the work, the repayment can only be paid from an unexpired appropriation that is available for the same purpose as the closed account. (2) Revolving funds.--Statutes establishing revolving funds normally authorize repayments to be credited to the revolving fund that performs the work. Revolving funds operate on a reimbursable basis when working capital (undisbursed cash) is available. Otherwise, advance payments must accompany the order. The types of working capital are (1) appropriated amounts; (2) contract authority; (3) borrowing authority; and (4) orders from other Federal appropriations when the ordering appropriation records a valid obligation to cover the order. Revolving funds may not disburse into a negative cash position in anticipation of Federal or non-Federal reimbursements. (3) Advances from the public.--Obligations may be incurred against "orders" from the public provided that the order is accompanied by an advance. The budgetary resources provided by the order is denominated by the cash advance accompanying the order. The advance, per se, is not available for obligation. If both the order and the advance were to be available for obligation, budgetary resources would be double-counted. Advances that are not accompanied by an order may be shown temporarily as an anticipated order on line 3.C, Reimbursements and other income, anticipated, of the budget execution report, provided that the order is anticipated to be received before the fiscal year ends. Advances from the public for which an order is not anticipated before the end of the fiscal year will be placed in a deposit fund. All repayments (i.e., reimbursements and refunds) to appropriations that are received after the appropriation has been cancelled are required to be sent to miscellaneous receipts in the Treasury. The following table summarizes the treatment of refunds and reimbursements in unexpired, expired, and cancelled annual and multi-year appropriations. TREATMENT OF REIMBURSEMENTS ------------------------------------------------------------------------------------------- Reimbursements authorized to be credited to the account --------------------------------------------- Other reimbursements Performing account Ordering account ------------------------------------------------------------------------------------------- Unexpired Orders from other The period of time Reimbursements for appropriation. Federal government during which the providing goods and accounts will be account can order services are required recorded as a goods and services is to be deposited in reimbursement or limited to the period miscellaneous other income, (i.e., of obligational receipts in the offsetting collection availability of the Treasury, unless a credited to the ordering law, such as the account), on line 3B. appropriation, unless Economy Act, Orders from the otherwise specifies otherwise. public that are specifically accompanied by an authorized by law. advance are included on line 3B. When the work is performed, the reimbursement or other income will move to line 3.A. ------------------------------------------------------------------------------------------- Expired If the account expires If the account expires Required to be annual/multi-year before the order is before the order is deposited in appropriation. filled (e.g., before filled, the miscellaneous the performing agency performing account receipts in the incurs the related must return the Treasury. obligation), the portion of the order unobligated portion for which the will be recorded as a performing account, reduction in unfilled in turn, has not customer's orders on incurred a valid line 3B and advance obligation. payments, if any, will be returned to The ordering agency is the ordering account, not affected if the or to a deposit fund performing agency has pending transfer to recorded a valid the ordering account. obligation against the Repayment for a order. If the filled order received performing agency has after the account not recorded a valid expires, will be obligation, the credited to the ordering agency will expired account. de-obligate funds for the order and record the adjustments on lines 4A or 8. ------------------------------------------------------------------------------------------- Cancelled If the account is If the account is Required to be appropriation cancelled before cancelled before deposited in (annual, multi-year, reimbursement is reimbursement is made miscellaneous or no-year). received, amounts to the performing receipts in the will be deposited in account, payment can Treasury. miscellaneous only be made as receipts in the prescribed in section Treasury. 111.8. ------------------------------------------------------------------------------------------- 111.6. The expired phase: budget execution reporting procedures. Beginning with appropriations that expire on or after September 30, 1992, obligated and unobligated balances must be accounted for on separate reports of budget execution (S.F. 133/143) for each expired appropriation. (a) Expired unobligated balances.--At the beginning of the first expired year, place the expired unobligated balance on line 2.A, Unobligated balance: Brought forward October 1. This amount should equal the sum of the lines in the unobligated balances available section of the final report of budget execution for the unexpired phase, i.e., the sum of lines 9.A, 9.B and 9.C, Unobligated balances available. These unobligated balances are now expired budgetary resources. They are available only for valid upward adjustments of obligations that were properly incurred against the account during the unexpired phase. (Note: The balances on line 9, Unobligated balances, should not include receivables from outside the Federal Government or receivables from Federal sources in which the Federal agency has not incurred a valid obligation for the payable, as these receivables are not budgetary resources.) Since the expired resources are no longer available for new obligations, place the amounts not used for valid adjustments on line 10.E, Other balances not available. In each succeeding expired year, the amount on line 2.A, Unobligated balance brought forward October 1, should be the same as the amount on line 10.E, Other balances not available, of the final report of budget execution for the prior year. (b) Downward adjustments.--Place downward adjustments of unpaid obligations previously incurred on line 4.A, Recoveries of prior year obligations. The amount should be entered as a positive number because it increases the expired resources available only for future adjustments. Downward adjustments do not include previously paid obligations which require a refund. These refunds will be recorded on line 3.A, Reimbursements and other income, earned, when received. Refunds receivable from non-Federal sources, and from Federal sources where a refund payable has not be obligated, should not be factored into line 13.C, Obligated balance, end of year. The amount of the downward adjustment should represent the cumulative recoveries made since the beginning of the fiscal year for which the report is submitted. Recoveries made during previous fiscal years should not be included because either the amounts were used for valid upward adjustments in previous fiscal years or the amounts are part of the expired unobligated balances carried forward on line 2.A, Unobligated balance brought forward October 1. The phrase "recoveries of prior year obligations" is synonymous with "downward adjustments of obligations". Place the amounts not used for valid adjustments during the current fiscal year for which the report is submitted on line 10.E, Other balances not available. (c) Upward adjustments.--Place upward adjustments of obligations previously incurred on line 8, Obligations incurred. Upward adjustments of obligations reduce unobligated balances. Subtract upward adjustments from the expired unobligated balances on line 10.E, Other balances not available. The amount should represent the upward adjustments made during the fiscal year for which the report is submitted. Upward adjustments made during previous fiscal years should not be included because the amounts on line 10.E, Other balances not available, have already been adjusted downward. Upward adjustments are limited in at least two ways: (1) Upward adjustments are limited by the amount available for adjustments on line 10.E, Other balances not available, of the expired account. (2) No new obligations may be shown in the expired account columns. Only upward adjustments of obligations that were incurred in the year in which the amount was available for obligation are valid, i.e., recording obligations that were incurred previously but reported in a different amount or erroneously not reported. 111.7. The expired phase: obligation adjustments for contract changes. Upward adjustments to obligations in expired appropriation accounts caused by "contract changes" that exceed certain thresholds are subject to additional reporting and approval requirements. A "contract change" means an order relating to an existing contract under which a contractor is required to perform additional work. A contract change does not include adjustments related to an escalation clause. An agency head or a designated officer in his immediate office must approve contract changes that will cause cumulative obligational increases to an appropriation to exceed $4 million during a fiscal year. If cumulative obligational increases in an appropriation for contract changes exceed $25 million in a fiscal year, certain requirements must be met before obligations for contract changes are made. In these cases, obligations for contract changes must be reported to the appropriate authorizing committees of Congress and to the House and Senate Committees on Appropriations in writing by the agency head in advance of the obligation. The report must include a description of the legal basis for the obligation and the policy reasons for the proposed obligation. The obligation may not be made or recorded in the agency's accounting records until 30 days after the report has been submitted. For the Department of Defense, obligational increases for contract changes are cumulative at the program, project, and activity level; for civilian agencies, such increases are cumulative at the appropriation level. 111.8. The expired phase: alternatives for payment of old obligations. The length of the expired phase of accounts may be changed by law. When an agency requires the payment of obligations beyond the normal five year expired phase, the agency's budget office should submit proposed changes to appropriation language for the budget year to the agency's OMB representative for approval. This authority may be requested only when historical outlay data indicate that the payment of old balances from unexpired funds would regularly exceed the one percent limitation or when such payments would severely affect the current program. Without this authority, agencies must seek reappropriation of cancelled balances and defer payment until the appropriation is available, or pay from current appropriations as described in section 111.10. Normally, payment of cancelled balances will not be eligible for funding from Treasury's general claims fund. 111.9. Cancelled accounts: procedures for reports of budget execution. Expired obligated and unobligated balances are treated differently on the final report of budget execution (S.F. 133/143) in the year in which an account will be closed because the remaining balances must be cancelled. Once an account is reported as cancelled, it should not be reported again. (a) Cancellations of unobligated balances.--All reports on budget execution, other than the final S.F. 133/143 in the year in which an account will be closed, should show recoveries of prior year obligations on line 4.A, Recoveries of prior year obligations, actual, as an expired resource. Any part of a recovery that is not used to adjust obligations should be added to any expired unobligated balance shown on line 10.E, Other balances not available. On the final report of budget execution in the year in which an account will be closed, all unobligated balances must be presented as cancelled, i.e. as a negative (-) on line 6, Restorations and write-offs. (b) Cancellations of obligated balances.--When an appropriation is required to be cancelled, any remaining obligated balance is cancelled by listing it as a cancellation (a positive number) on line 4.A, Recoveries of prior year obligations, actual including it as a writeoff (a negative number) on line 6, Restorations and write-offs, and reducing the obligated balance, line 13.C, Obligated balance--end of year, to zero. 111.10. The cancelled phase: payments. Legitimately incurred obligations that have not been paid at the time an appropriation is cancelled cannot be paid from the cancelled obligated or unobligated balances of the cancelled appropriation. After an appropriation is cancelled, any obligations or adjustments to obligations that would have been properly chargeable to that appropriation may be paid from an unexpired appropriation that is available for the same purpose as the closed account, provided that: (a) The obligation or adjustment is not already chargeable to another unexpired account. (b) Payment of obligations against cancelled appropriations from unexpired appropriations is limited to one percent of an unexpired appropriation. No more than one percent of an unexpired appropriation may be used to pay any combination of cancelled obligations. This is a single, cumulative limit. It applies to one percent of the annual appropriation (not total budgetary resources) for annual accounts and to unexpired appropriations for multi-year accounts. For example, assume there is a multi-year account with an appropriation of $10 million that covers fiscal year 1994 through 1996 that was enacted in fiscal year 1994. In fiscal year 1994, the one percent limitation is equal to $100,000. At the end of fiscal year 1994, $90,000 was used. In fiscal year 1995, the unused, unexpired portion ($10,000) of the limitation is available to be used. (c) Antideficiency provisions continue to apply to cancelled appropriations. The authority to pay obligations against closed accounts from one percent of current appropriations cannot be used to exceed the original appropriation. When agencies cancel obligations under the provisions of Public Law 101-510 (31 U.S.C. 1551-1557), a tracking process should be maintained. Agencies should also maintain proper general ledger controls for obligations pertaining to cancelled appropriations to prevent overpayment. General ledger accounting instructions are provided by the Department of Treasury, Financial Management Service. 111.11. The cancelled phase: one percent apportionment requirement. Unless otherwise provided by OMB, a footnote should be appended to each apportionment containing appropriations realized as follows: "Pursuant to 31 U.S.C. 1553(b), not to exceed 1% of the total appropriations for this account is apportioned for the purpose of paying legitimate obligations related to cancelled appropriations." 111.12. Antideficiency Act violations. Agencies are required to report violations of the Antideficiency Act when the following conditions occur: (Note: See section 32 of this Circular for instructions on reporting Antideficiency violations.) (a) New obligations and expenditures or adjustments to obligations and expenditures exceed the original appropriations. This is any case where an officer or employee of the United States has made or authorized an expenditure from or created or authorized an obligation against any appropriation or fund account in excess of the amount available in the original appropriation or fund account. (b) New obligations or any expenditures in cancelled accounts. This is any case where an officer or employee of the United States has made or authorized an expenditure from or created or authorized an obligation against an account that was closed pursuant to 31 U.S.C. 1552-1557. (c) New obligations and expenditures or adjustments to obligations and expenditures that exceed the amount apportioned or allotted. This is any case where an officer or employee of the United States has made or authorized an expenditure from or created or authorized an obligation against any appropriation or fund account in excess of the amount apportioned or allotted to the original appropriation or fund account.