Section 2- Part 6-7 Flashcards
Legal and Other Budgetary Controls
Appropriations
Account Structure
Apportionments and Allotments
Accounting
Auditing
Appropriations
A legislative enactment (law, statute or ordinance) that creates spending authority; the legal authority to incur expenses and spend money.
Appropriation Language
The appropriation language serves as a legal constraint on government sovereignty:
* The purpose must be authorized and must not be prohibited by law or constitutions.
* Time limits for government spending are set in the appropriation; limits could be one-year, multiple-year, or no-year.
* Amounts are set in appropriations; government officials may not spend beyond the amounts authorized.
Appropriation language, like the separation of powers and checks and balances, is a fundamental constraint on government budgeting and finance. But a number of more precise controls exist.
Authorizations vs Appropriations (National Government)
An authorization is a bill that approves programs; it prescribes what an agency will do if funding is available. An appropriation is the budget bill that actually makes funds available.
An appropriation can take the place of a missing authorization (the language of the appropriation may establish and authorize the program). Although an authorization may not take the place of a missing appropriation, some authorization bills provide permanent indefinite spending authority.
Account Structure
Limit and classify government spending.
Includes Special funds, separate budget resources from the general fund.
Object Class
A budget or accounting category that defines the resources to be applied to specific types of inputs, such as personnel, travel, tools or supplies.
Account Structure (2)
Account structures limit and classify government spending. They may be based upon program or object class, or both. “Program” refers to the purpose of the spending. “Object class” refers to the specific goods or services (such as salaries, equipment, supplies, and capital investments) that may be acquired. Object class is sometimes referred to as line-item.
When a budget dictates that funds must be spent for specific purposes, such as juvenile corrections or community health clinics, it is controlling spending by program. When a budget dictates that the funds may only be spent on specific types of goods or services, such as tools, supplies or temporary workers, it is controlling spending by object class.
Apportionments
Definitions may vary at different levels of government. At the federal level, this is OMB’s approval to use a portion of the legislatively approved budgetary authority.
Allotments
In the federal government, an agency’s distribution of apportioned budgetary authority to various components within the agency. After the executive agency receives its apportionment, it allots budgetary authority to specific components within the agency.
Apportionment and Allotment - State/Fed
Definitions may vary at different levels of government. At the national level, apportionment is the dispersal of budgetary authority to an agency or program by the central management agency—the OMB—to support approved programs. After the agency receives the apportionment, it allots budgetary authority to specific components within the agency.
For example, Congress passes an appropriation to fund public transportation. The OMB then apportions budgetary authority to the U.S. Department of Transportation, and the Department allots a portion of its internal budgetary authority to the Highway Safety Program.
Apportionments and allotments are typically distributed by fiscal quarter to prevent spending government funds too rapidly and to allow for mid-year reprogramming.
Accounting
Accounting practices are also a means of control. Examples include creating requisitions or commitments; recording encumbrances or obligations for those requisitions or commitments; and linking invoices and expenditures to both the previous controls. These practices inhibit fraud and ensure funds are available when the bills come due.
Auditing
Internal and external auditing provide further controls. Internal auditors test the various internal controls on budget and financial management procedures. For example, they ensure that employees are following proper accounting practices and that fraud is discouraged through separation of duties.
External auditors provide an objective, third-party review of government financial reports and practices. The annual agency-wide financial statements must undergo external audits. Governments seek the coveted “unmodified opinion” (previously known as an “unqualified opinion”) on their financial repo
Internal Controls
Organization and activities designed to ensure programs achieve their intended results; resources are used efficiently and effectively; programs and resources are protected from waste, fraud and mismanagement; laws and regulations are followed; and reliable and timely information is obtained, maintained and reported
Appropriation language
The appropriation language serves as a legal constraint on government sovereignty:
* The purpose must be authorized and must not be prohibited by law or constitutions.
* Time limits for government spending are set in the appropriation; limits could be one-year, multiple-year, or no-year.
* Amounts are set in appropriations; government officials may not spend beyond the amounts authorized.
Controlling a budget
Controlling a budget by program and object class increases accountability, but also creates (intentional) inflexibility. The results may seem cumbersome to officials administering the program. For instance, object class controls do not allow managers to simply use excess travel funds to cover a shortfall in supplies or salaries. Rather, a reprogramming request must be submitted and approved to move funds from one object class to another
