CDFM Fiscal Law Principles 3 — Questions and Answers
Question 1: Under the Economy Act, what is a prerequisite for a DoD agency to order goods or services from another federal agency?
- It must be more economical or in the best interest of the government, and the receiving agency must have authority to provide the service (Correct answer)
- The receiving agency must be within the same department
- A formal appropriation transfer must be approved by Congress
- The ordering agency must exhaust all commercial options first
Correct answer: It must be more economical or in the best interest of the government, and the receiving agency must have authority to provide the service
The Economy Act (31 U.S.C. § 1535) requires a determination that the order is in the best interest of the government and that the servicing agency has authority to provide the goods or services.
Question 2: Which type of DoD appropriation is specifically authorized for acquiring major weapons systems and long-lead procurement items?
- Procurement appropriations (Correct answer)
- Operations and Maintenance (O&M) appropriations
- Research, Development, Test and Evaluation (RDT&E) appropriations
- Military Personnel (MILPERS) appropriations
Correct answer: Procurement appropriations
Procurement appropriations fund the acquisition of major end items, systems, and investment-level equipment for DoD.
Question 3: What happens to annual appropriation funds that were properly obligated before their expiration date but not yet disbursed?
- They remain available for disbursement for five additional years in expired status (Correct answer)
- They are immediately returned to the Treasury upon expiration of the obligation period
- They convert to no-year funds for disbursement purposes
- They require a new appropriation to cover the disbursement
Correct answer: They remain available for disbursement for five additional years in expired status
After the period of availability for obligation ends, funds enter a five-year expired phase during which they remain available only to adjust or liquidate prior valid obligations.
Question 4: A program manager wants to use RDT&E appropriations to purchase 500 units of a fully developed, production-ready component. This would likely violate which principle?
- The Purpose Statute, because RDT&E funds are restricted to research and development activities (Correct answer)
- The Bona Fide Needs Rule, because the need arose before the RDT&E appropriation period
- The Antideficiency Act, because RDT&E ceilings would be breached
- The Economy Act, because a servicing agreement is required for production purchases
Correct answer: The Purpose Statute, because RDT&E funds are restricted to research and development activities
RDT&E funds are appropriated for research, development, test, and evaluation activities, not for production-quantity procurement of completed items.
Question 5: Which of the following is an example of a lawful augmentation of an appropriation?
- Retaining and using proceeds from the sale of government property when specifically authorized by statute (Correct answer)
- Accepting voluntary services from a contractor who agrees to defer payment
- Depositing civil fines collected by the agency into its operating account
- Using reimbursements from a non-federal entity without statutory authority
Correct answer: Retaining and using proceeds from the sale of government property when specifically authorized by statute
Augmentation is lawful only when a specific statute authorizes the agency to retain and use receipts or collections to supplement its appropriation.
Question 6: In DoD fiscal law, what is the significance of a 'valid obligation'?
- It legally commits appropriated funds and must be supported by a written, binding agreement (Correct answer)
- It transfers budget authority from one program to another
- It authorizes an agency to exceed its apportionment
- It provides authority to incur costs after an appropriation has expired
Correct answer: It legally commits appropriated funds and must be supported by a written, binding agreement
A valid obligation requires a binding commitment supported by documentary evidence such as a contract, order, or written agreement that creates a legal liability for the government.
Question 7: Which fiscal law concept prevents a DoD agency from stockpiling consumable supplies beyond its immediate and foreseeable needs using annual O&M funds?
- Bona Fide Needs Rule (Correct answer)
- Necessary Expense Doctrine
- Antideficiency Act
- Augmentation Prohibition
Correct answer: Bona Fide Needs Rule
The Bona Fide Needs Rule prohibits using current-year funds to purchase supplies in quantities beyond what is genuinely needed in the current fiscal year.
CDFM Fiscal Law Principles 3
Under the Economy Act, what is a prerequisite for a DoD agency to order goods or services from another federal agency?