CDFM Fiscal Law Principles 5 — Questions and Answers
Question 1: Which of the following is NOT a required element of the three-part Necessary Expense Doctrine test?
- The expense must be the lowest-cost alternative available (Correct answer)
- The expense must be necessary and incident to the appropriation's purpose
- The expense must not be prohibited by law
- The expense must not be otherwise provided for by another appropriation
Correct answer: The expense must be the lowest-cost alternative available
The Necessary Expense Doctrine requires that an expense be (1) necessary and incident to the purpose, (2) not prohibited by law, and (3) not otherwise provided for — cost is not a formal element of the test.
Question 2: What is the consequence when an appropriation account reaches its 'cancellation' date after the five-year expired period?
- The remaining unobligated and unliquidated balances are permanently canceled and returned to the Treasury (Correct answer)
- The account converts to a no-year account for continued use
- The agency must request a new appropriation to cover any remaining obligations
- The GAO assumes control of the account for audit purposes
Correct answer: The remaining unobligated and unliquidated balances are permanently canceled and returned to the Treasury
After five years in expired status, any remaining balances (both unobligated and unliquidated) are canceled and returned to the Treasury, and the account ceases to exist.
Question 3: A DoD component transfers funds from one appropriation account to another without statutory authority. This action violates which fiscal law?
- 31 U.S.C. § 1301 (Purpose Statute), because transfers require specific statutory authority (Correct answer)
- The Antideficiency Act, because the receiving account will be overobligated
- The Economy Act, because a reimbursable agreement was not executed
- The Bona Fide Needs Rule, because the need did not exist in the current year
Correct answer: 31 U.S.C. § 1301 (Purpose Statute), because transfers require specific statutory authority
Inter-account transfers require specific statutory authority; without it, using funds from one account for another account's purposes violates the Purpose Statute.
Question 4: Which statement correctly describes the relationship between an authorization act and an appropriations act?
- An authorization act establishes a program and may set spending limits, while an appropriations act actually provides the budget authority to spend (Correct answer)
- An appropriations act creates the legal program, while an authorization act provides the money
- Both acts must be passed simultaneously or neither has legal effect
- An authorization act supersedes an appropriations act when they conflict
Correct answer: An authorization act establishes a program and may set spending limits, while an appropriations act actually provides the budget authority to spend
Authorization acts create or continue programs and may authorize spending levels, but only appropriations acts actually provide the legal authority (budget authority) to incur obligations.
Question 5: Under fiscal law, what is the primary distinction between a 'transfer' and a 'reprogramming' of funds?
- A transfer moves funds between separate appropriation accounts; reprogramming shifts funds within a single appropriation account (Correct answer)
- A transfer requires no congressional approval; reprogramming always requires prior congressional approval
- A transfer is limited to $1 million; reprogramming has no dollar ceiling
- A transfer is initiated by OMB; reprogramming is initiated by the agency
Correct answer: A transfer moves funds between separate appropriation accounts; reprogramming shifts funds within a single appropriation account
Transfers cross appropriation account lines and always require statutory authority, while reprogrammings are within-account realignments subject to congressional notification thresholds.
Question 6: A DoD financial manager discovers that a contractor was paid $80,000 from the wrong appropriation account due to a coding error. What is the required corrective action?
- Correct the accounting records and reimburse the proper appropriation from the account that was erroneously charged (Correct answer)
- Report the error to the Inspector General and await further guidance
- Request a supplemental appropriation to cover the shortfall in the proper account
- Write off the error if it occurred in a prior fiscal year
Correct answer: Correct the accounting records and reimburse the proper appropriation from the account that was erroneously charged
When funds are disbursed from the wrong account, the error must be corrected by adjusting accounting records and transferring the charge to the proper appropriation to maintain purpose compliance.
Question 7: Which of the following scenarios correctly applies the 'administrative subdivision of funds' (allotment) concept?
- A comptroller divides an Army O&M apportionment into separate allotments for each major command to control spending (Correct answer)
- Congress subdivides an appropriation into line items through a conference report
- OMB issues quarterly allotments based on agency cash flow needs
- An agency head transfers funds to a working capital fund for centralized purchases
Correct answer: A comptroller divides an Army O&M apportionment into separate allotments for each major command to control spending
Allotments are internal agency subdivisions of apportioned funds granted to subordinate managers to incur obligations within defined limits, creating an additional internal control below the apportionment level.
CDFM Fiscal Law Principles 5
Which of the following is NOT a required element of the three-part Necessary Expense Doctrine test?