Government Accounting Appropriation

[Gabelo Camphire]

TheCongress can also supplement regular appropriations that have already been enacted. In 2020, for example, lawmakers enacted four laws that provided supplemental appropriations in response to the coronavirus pandemic to give financial assistance to individuals, businesses, and other entities.

The labels discretionary and mandatory identify the process by which the Congress provides funds for federal programs or activities. The distinction is generally made at the time a law creates a program or provides authority to undertake an activity. The Congressional rules and statutory procedures that govern budget enforcement differ for those two types of spending.

As a share of all federal outlays, discretionary spending has dropped from 60 percent in the early 1970s to 30 percent in recent years. Almost all defense spending is discretionary, and about 15 percent of pandemic-related spending was classified as discretionary.

Although statutory limits (often referred to as caps) on most types of discretionary budget authority were in place in many years, none are in effect now. The Budget Control Act of 2011 established caps for fiscal years 2012 to 2021; no caps were established for subsequent years.

Mandatory spending (also called direct spending) consists of outlays for certain federal benefit programs and other payments to individuals, businesses, nonprofit institutions, and state and local governments. That spending is generally governed by statutory criteria and, in most cases, is not constrained by the annual appropriation process. Social Security, Medicare, and Medicaid are the three largest mandatory programs.

Under the Statutory Pay-As-You-Go Act of 2010 (often called S-PAYGO), the Congress established budgetary reporting and enforcement procedures for legislation that affects mandatory spending or revenues. That act can trigger across-the-board cuts in funding (known as sequestration) for mandatory programs. (For more information, see The Statutory Pay-As-You-Go Act and the Role of the Congress.)

Reappropriations extend the originally specified period of availability for unused budget authority that has expired or that would otherwise expire. Generally, that reappropriated budget authority is for the originally stated purpose, but sometimes it can be used for a different purpose.

Accrual accounting records costs when goods are received or services are performed (rather than when they are paid for) and revenues when they are earned (rather than when actual payments are received). Under that accounting method, the estimated cost of budgetary activities is the sum of all cash flows associated with that activity, expressed in a single number called a present value. The present value depends on the rate of interest, known as the discount rate, that is used to translate future cash flows into current dollars. (Interest on the public debt is recorded on an accrual basis but not as a discounted present value.)

Revenues, offsetting collections, and offsetting receipts are funds received by the federal government for various purposes and activities. Those funds are designated in the budget either as governmental receipts (revenues) or as reductions in spending (offsetting collections and offsetting receipts). The implications of those designations for legislative and budget processes differ.

Revenues are funds that the federal government collects from the public using its sovereign power. About 90 percent of federal revenues come from individual income taxes, corporate income taxes, and social insurance taxes (which fund Social Security, Medicare, and other social insurance programs). Other sources include excise taxes, estate and gift taxes, duties on imported goods, remittances from the Federal Reserve, and various fees and fines.

Offsetting collections and offsetting receipts are funds that government agencies receive from the public and from other federal agencies (in what are known as intragovernmental transactions) for businesslike or market-oriented activities. Both are shown in the budget as offsets to spending (that is, as negative budget authority and outlays).

Offsetting collections are used for specific spending programs and are credited to the accounts that record outlays for such programs. For example, the U.S. Fish and Wildlife Service issues permits to import or export some species of game animals. The fees for the permits are considered offsetting collections because they cover program costs. (The authority for the agency to spend the fees is granted in annual appropriation acts.) Similarly, the money that the Department of Defense collects from sales at military commissaries is used to cover operating expenses.

Federal debt can be defined in several different ways. Two common measures of the amount that the federal government owes are debt held by the public and gross debt. (For more information, see Federal Debt: A Primer.)

Debt held by the public is the amount that the government has borrowed over time to finance the costs of programs and activities that revenues were insufficient to cover. Thus, it largely reflects the total cumulative deficit that the government has incurred. (To a lesser degree, that debt reflects other factors, such as the cumulative net cash disbursements for credit programs and the cash balances held by the government.)

CBO is required by law to produce a formal cost estimate for nearly every bill that is approved by a full committee of either the House or the Senate. The agency may, on occasion, produce estimates at other points in the legislative process. Cost estimates are advisory only. The Congress can use them to enforce budgetary rules and targets. (For more information, see How CBO Prepares Cost Estimates.)

The terms calendar year and federal fiscal year describe periods in which funds are made available or spent, changes are made to certain benefit amounts, and taxes are assessed or collected.

Calendar years begin on January 1 and end on December 31. Although most federal programs operate on a fiscal year basis, some aspects of programs are set to the calendar year. Cost-of-living adjustments for Social Security and other programs, for example, are set on a calendar year basis. In addition, individual income taxes are levied on a calendar year basis, and economic data are typically reported for calendar years.

Kathleen FitzGerald, Ann E. Futrell, Susanne Mehlman, and Emily Stern prepared the report with assistance from Avi Lerner and with guidance from Theresa Gullo, Leo Lex, and Sam Papenfuss. Kate Kelly provided technical assistance. Nathaniel Frentz, Kathleen Gramp, John McClelland, and David Torregrosa of CBO offered comments, as did Kim P. Cawley and Jim Hearn, both formerly of CBO.

Jeffrey Kling and Robert Sunshine reviewed the report. Bo Peery edited it, and R. L. Rebach designed the layout and prepared the text for publication. This document is available at www.cbo.gov/publication/57420.

The Constitution, Legislation and Circulars provide the framework in which the financial information of the Central Government area is to be accounted for and reported on. The Public Financial Procedures (Blue Book) is a comprehensive, though not exhaustive, summary of public financial management.

Appropriation accounts, showing the financial transactions of central Government Departments, Offices and other Vote holders responsible for Vote management and accounting, are prepared in accordance with the Exchequer and Audit Departments Act, 1866 (as amended by the Comptroller and Auditor General (Amendment) Act, 1993) and with accounting rules and procedures laid down by the Minister for Public Expenditure, National Development Plan Delivery and Reform.

The appropriation account itself is a cash based record of the receipts and payments in the year compared with the amounts provided under the Appropriation Act. The financial statements also include information prepared on an accruals basis in the Statement of Financial Position and other notes. Throughout, the financial statements show prior year amounts for comparison purposes.

Circular 23/2023 brings the first series of Central Government Accounting Standards (CGAS) into effect for accounting periods commencing on or after 1 January 2024. The reporting boundary of the CGAS applies to all Government Departments, Offices (Votes), the National Training Fund and the Social Insurance Fund.

This chapter describes the processes to request warrant transactions via the Budget Appropriation and Analysis Section (BAAS) and to process Non-Expenditure Transfers (NETs) transactions within the Centralized Accounting and Reporting System (CARS). Additionally, this chapter includes how to retrieve posted warrant and NET transactions as well as entity guidance to follow if any corrections are necessary to either a warrant or NET transaction after posting to CARS.

Annually, Congress passes various appropriation acts (omnibus, supplemental, emergency) to fund the federal government. These appropriation acts provide budget authority to entities to incur obligations and expend funds from the General Fund of the U.S. Government for specific purposes. Treasury prepares and issues the Fiscal Service (FS) Form 6200: Department of the Treasury Appropriation Warrant via the CARS ATM Appropriation Warrant Application.

The appropriation warrant is evidence of Congressional action to fund programs. In addition, an appropriation warrant serves to establish the amount and period of availability of monies the entity is authorized to withdraw from the General Fund of the U.S. Government.

When enacted legislation provides budget authority in the form of an appropriation, the Budget Appropriation and Analysis Section reads and analyzes the enacted appropriation and acts independently from the Office of Management and Budget (OMB).

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