SPR Petroleum Account

Federal Financing Bank

Postal Service fund

United States Railway Association 3

United States Synthetic Fuels Corporation'

The off-budget Federal entities listed above are discussed in Part 6 of this volume. Schedules and financial statements are presented in Part III of the Budget Appendix. Except for the Federal Reserve Board, these data are also presented in selected tables throughout the budget documents.

The budget totals do not include transactions of privately owned, Government-sponsored enterprises, such as the Federal land banks and Federal home loan banks. However, these enterprises are discussed in Part 6 of this volume and Special Analyses E and F, and financial statements are presented in Part V of the Budget Appendix.

Functional classification.5-The functional classification arrays budgetary data according to the major purpose served by the unit being classified. In accordance with the Congressional Budget Act of 1974, the Congressional budget resolutions establish budget targets by these functional categories.

The following criteria are used in establishing and in assigning activities to functional categories:

• A function must have a common end or ultimate purpose addressed to an important national need. (The emphasis is on what the Federal Government seeks to accomplish rather than the means of accomplishment, what is purchased, or the clientele or geographic area served.)

• A function must be of continuing national importance and the amounts attributable must be significant.

• Each basic unit of classification (generally the appropriation or fund account) is classified into the single best or predominant purpose and assigned to only one subfunction. However, when an account is large and serves more than one major purpose, it may be subdivided into two or more subfunctions. • Activities and programs are normally classified by common purpose (or function) regardless of which agencies conduct the activities.

National needs presentation.-Section 601 of the Congressional Budget Act of 1974 requires that the budget for each fiscal year

Amounts made available for investments in Conrail securities, which comprise almost all of the Association's activity after 1977, are included in the budget totals.

'Cash requirements of the Corporation are met by borrowing from the Secretary of the Treasury. Such borrowing is financed by appropriations to the Secretary, and thus is reflected as budget authority and outlays within the budget totals.

"A discussion of this subject is also found in Part 5 of this volume.

shall contain a presentation of budget authority, proposed budget authority, outlays, proposed outlays, and descriptive information in terms of

(1) a detailed structure of national needs, which shall be used to reference all agency missions and programs;

(2) agency missions; and

(3) basic programs.

To meet that requirement of law, the functional classification was refined to focus more sharply on end purposes and accomplishments. Each major function is described in the context of national needs being served, and subfunctions are described in the context of major missions devoted to serving national needs. A statement of national needs to be met by each major function, except net interest, can be found in Part 5 ("Meeting National Needs: the Federal Program by Function").

Types of funds.--Agency activities are financed through Federal funds and trust funds.

Federal funds are of several types. The general fund is credited with receipts not earmarked by law for a specific purpose and with the proceeds of general borrowing. It is charged with payments from appropriations. Special funds contain Federal receipts earmarked for specific purposes, other than for carrying out a cycle of operations. Public enterprise (revolving) funds finance a cycle of business-type operations in which outlays generate collections, primarily from the public. Intragovernmental funds, including revolving and management funds, finance operations within and between Government agencies and are credited with collections primarily from other Government accounts. Intragovernmental revolving funds are credited with collections earmarked by law to carry out a cycle of business-type operations within and between Government agencies.

Trust funds are established to account for the receipt and expenditure of monies by the Government for carrying out specific purposes and programs in accordance with the terms of a statute or trust agreement. These monies are not available for the general purposes of the Government. Trust revolving funds are credited with trust-type collections earmarked by law to carry out a cycle of business-type operations.

Current expense and capital investment.-The budget includes spending for both current operating expenses and capital investment, such as the purchase of lands, structures, and equipment. It also includes capital investment in the form of lending and the purchase of investments."

• These categories of outlays are discussed in Special Analysis D, "Investment, Operating, and Other Federal Outlays."

BUDGET AUTHORITY AND RELATED TRANSACTIONS

Budget authority.-Government agencies-whether or not they are included in the budget totals-are permitted to enter into obligations requiring either immediate or future payment of money only when they have been granted authority to do so by law. This authority is usually provided as budget authority. Collections specifically authorized to be credited to appropriation and fund accounts, while not scored as budget authority, are also available for obligation. Budget authority, and in some cases the use of other resources, usually requires the approval of both authorizing committees and Appropriations Committees. The availability or use of budgetary resources may be further restrained by the imposition of legally binding limitations on direct loans or other obligation levels. 7 Budget authority permits obligations to be incurred. The amounts of budget authority requested are determined by the nature of the programs or projects being financed and the amount of other resources available for the purpose.

For activities such as operations and maintenance, entitlement programs, and continuing research programs, for which the cost depends upon the program level planned for a fiscal year, the amount of budget authority requested covers the obligations expected to be incurred during the year.

For most projects that are separate and distinct units, particularly direct Federal major procurement and construction projects, "full funding" is requested. That is, budget authority is requested in sufficient amounts at the time the project is initiated to complete it, regardless of the expected time of completion.

Budget authority usually takes the form of appropriations, which permit obligations to be incurred and payments to be made. Some budget authority is in the form of contract authority, which permits obligations in advance of appropriations but requires a subsequent appropriation or the collection of revenues to liquidate (pay) these obligations. There is also authority to borrow; such budget authority permits obligations to be incurred and liquidated by using funds that are borrowed, generally from the Treasury.

It is not in order for either House of the Congress to consider any bill, with certain exceptions, that provides new borrowing or contract authority unless that bill also provides that such new spending authority will be effective only to the extent or in such amounts as provided in appropriations acts.

Most appropriations for current operations are made available for obligation only during a specified fiscal year (annual appropriations). Some are for a specified longer period (multiple-year appropriations). Others, including most of those for construction, some

'See "Limitations on the Availability of Funds," Part 6.

for research, and many for trust funds are made available for obligation until the amount appropriated has been expended or until the objectives have been attained (no-year appropriations). Budget authority can be made available by the Congress for obligation and disbursement during a fiscal year from a succeeding year's appropriation (advance funding). For many education programs, Congress provides forward funding-budget authority made available for obligation in one fiscal year for the financing of ongoing grant programs during the succeeding fiscal year. When advantageous to the Federal Government, an appropriation is provided by the Congress for use in a fiscal year, or more, beyond the fiscal year for which the appropriation act is passed (advance appropriations). Accounts in which budget authority is made available on these bases are listed in Part IV of the Budget Appendix. When budget authority is made available by the Congress for a specific period of time, any part that is not obligated during that period expires and cannot be used later. Congressional actions that continue the availability of unobligated amounts that have expired or would otherwise expire are known as reappropriations. The amounts involved are counted as new budget authority in the fiscal year of the legislation in which the reappropriation action is included, regardless of when the amounts were originally appropriated or when they would otherwise lapse.

A rescission is a legislative action that cancels new budget authority or the availability of unobligated balances, prior to the time the authority would otherwise have expired. Rescissions are offset against new budget authority becoming available in arriving at the total of budget authority for each year. A deferral is an executive branch action or inaction-including the establishment of reserves under the Antideficiency Act-that delays the obligation and expenditure of funds within the year that the action is taken. Deferrals are not separately identified in the budget.

Most authority to obligate funds is enacted by the Congress during or immediately preceding the fiscal year in which it becomes available (current authority). Most current authority is granted year by year. Some budget authority in Federal funds and most budget authority in trust funds becomes available as the result of previously enacted legislation and does not require current action by the Congress (permanent authority). Such authority is presented as "current" in the year in which the legislation is enacted and "permanent" in succeeding years.

The amount of budget authority is usually stated specifically or in an amount stated as "not to exceed" a specific aggregate sum in the legislation that makes it available (definite authority). In some cases the legislation permits the amount to be determined by subsequent circumstances (indefinite authority). Examples of the latter

type are authority to borrow that is limited only to the amount of debt that may be outstanding at any time, the appropriation for interest on the public debt, and the trust fund appropriation equal to receipts under the Federal Insurance Contributions Act (social security). Indefinite budget authority is recorded in the amount of receipts collected or estimated to be collected each year in the case of many special and trust funds, and in the amount needed to finance obligations incurred or estimated to be incurred in the case of certain appropriations, contract authority, and authority to borrow.

Obligations incurred.-Following the enactment of budget authority and the completion of required apportionment action, obligations are incurred by Government agencies. Such obligations include the current liabilities for salaries, wages, and interest; agreements to make loans; contracts for the purchase of supplies and equipment, construction, and the acquisition of land; and other arrangements requiring the payment of money.

Outlays.—Obligations generally are liquidated by the issuance of checks or the disbursement of cash; such payments are called outlays. In lieu of issuing checks, obligations may also be liquidated (and outlays recorded) by the accrual of interest on Treasury debt securities held by the public; or by the issuance of bonds, debentures, notes (or by increases in the redemption value of bonds or debentures outstanding), or monetary credits. Payments for tax credits in excess of tax liabilities are treated as outlays rather than as an adjustment to budget receipts. Outlays during a fiscal year may be for payment of obligations incurred in prior years or in the same year. Outlays, therefore, flow in part from unexpended balances of prior year budget authority and in part from budget authority provided for the year in which the money is spent. Total budget outlays are stated net of offsetting collections and exclude outlays of off-budget Federal entities.

Balances of authority."-Not all budget authority enacted for a fiscal year is obligated and paid out in the same year. In multipleyear or no-year accounts, budget authority that is still available for obligation (unobligated balances) may be carried forward for obligation in the following year. The obligated balance is that portion of the budget authority that has been obligated but not yet liquidated (paid). For example, in the case of salaries and wages, 1 to 3 weeks elapse between the time of obligation and the time of payment. In the case of major procurement and construction, payment may

See "Relationship of Budget Authority to Outlays", Part 6.

• These balances may also include collections credited directly to appropriation or fund accounts.