AGENCY OPERATIONS

Agencies Must Continue to 

Comply with Fiscal Laws 

Despite the Possibility of 

Sequestration 

Statement of Susan A. Poling

Deputy General Counsel

Testimony 

Before the Committee on the Budget, 

House of Representatives

For Release on Delivery 

Expected at 10:00 a.m. EDT

Wednesday, April 25, 2012

GAO-12-675T

United States Government Accountability Office

GAO
 United States Government Accountability Office

Highlights of GAO-12-675T, a testimony 

before the Committee on the Budget, House of 

Representatives. 

April 2012 

AGENCY OPERATIONS

Agencies Must Continue to Comply with Fiscal Laws

Despite the Possibility of Sequestration

Why GAO Did This Study

This testimony addresses two issues: 

(1) the application of the Antideficiency 

Act and the Impoundment Control Act 

as agencies prepare for a possible 

sequestration under the Budget 

Control Act; and (2) the meaning of 

“program, project, and activity,” under 

the Budget Control Act. 

GAO has an oversight role with respect 

to both the Antideficiency Act and the 

Impoundment Control Act. GAO 

provides legal decisions and opinions 

to Congress and federal officials on the

application of the Antideficiency Act. 

Agencies that violate the Antideficiency 

Act must report the violation to the 

President, Congress, and the 

Comptroller General. GAO compiles 

and presents certain unaudited data 

from Antideficiency Act reports filed 

each fiscal year. 

GAO also reviews and reports on each 

special message made pursuant to the 

Impoundment Control Act. The 

Comptroller General must report to 

Congress any impoundment that the 

President has failed to report. GAO 

monitors the status of affected funds 

as well as prepares statistical 

summaries and analyses for Congress. 

In addition, GAO is statutorily 

responsible for publishing and 

maintaining standard terms related to 

the federal budget process. GAO has 

previously looked at various definitions 

of “program, project, and activity” 

under an earlier iteration of the 

Balanced Budget and Emergency 

Deficit Control Act. 

What GAO Found

The Budget Control Act of 2011, amending the Balanced Budget and Emergency 

Deficit Control Act of 1985, establishes limits on discretionary spending for fiscal 

years 2012 through 2021. In addition, the Act specifies additional limits on 

discretionary spending and automatic reductions in direct spending because 

legislation was not enacted that would reduce projected deficits by at least 

$1.2 trillion by the end of fiscal year 2021. Among other things, the Budget 

Control Act requires the Office of Management and Budget (OMB) to calculate, 

and the President to order, a sequestration of discretionary and direct spending 

on January 2, 2013, to achieve reductions for that fiscal year. 

Despite the possible impact of any sequestration, agencies must continue to 

comply with the requirements of the Antideficiency Act and the Impoundment 

Control Act. The Budget Control Act does not waive the application of these two 

important fiscal laws, both of which underscore Congress’ constitutional power of 

the purse. These two laws act in concert: the Antideficiency Act prohibits 

agencies from spending in excess or in advance of available appropriations or 

apportionments, while the Impoundment Control Act bars agencies from refusing 

to obligate the amounts that Congress has appropriated. Agencies must carry 

out their appropriations in accordance with both the Antideficiency Act and the 

Impoundment Control Act regardless of the possibility of spending reductions 

beginning in the second quarter of fiscal year 2013. 

The Budget Control Act provides that sequestration for fiscal year 2013 will 

reduce each nonexempt account by a uniform percentage necessary to achieve 

the calculated reduction for that fiscal year. OMB is required to implement 

sequestration such that the same percentage reduction applies across all

programs, projects, and activities within a budget account. Programs, projects, 

and activities are to be identified with reference to the relevant appropriation act 

or accompanying report for the relevant fiscal year or, for accounts not included 

in appropriation acts, with reference to the most recently submitted President’s 

budget. 

The Budget Control Act vests in OMB the authority to implement sequestration. 

The execution and impact of any spending reductions will depend on the legal 

interpretations and actions taken by OMB. To date, OMB has not issued any 

guidance to agencies on preparing for implementation of the Budget Control Act 

or how it would construe “program, project, and activity.” 

Under this framework, each budget account must be analyzed 

separately to determine its component programs, projects, and activities, and

such a determination may require reference to the original appropriation act, to 

accompanying reports, or to the President’s budget. In that regard, GAO’s 

definition of “program, project, or activity” in the Budget Glossary may be useful 

to this analysis.

View GAO-12-675T. For more information, 

contact Susan A. Poling at (202) 512-5207 or 

polings@gao.gov. 
 

Page 1 GAO-12-675T 

Chairman Ryan, Ranking Member Van Hollen, and Members of the 

Committee:

Good morning. Thank you for inviting us here to speak with you today. My 

name is Susan Poling, and I am Deputy General Counsel of the 

Government Accountability Office. Prior to assuming this position, I was 

responsible for GAO’s appropriations law decisions and opinions, the Red 

Book,1

You asked GAO to talk about two topics today. First, you asked us to 

discuss the application of two fiscal laws – the Antideficiency Act and the 

Impoundment Control Act – as agencies prepare for a possible 

sequestration under the Budget Control Act. You will hear that GAO has 

an oversight role with respect to both the Antideficiency Act and the 

Impoundment Control Act. Second, you asked us to discuss the meaning 

of “program, project, and activity,” or “PPA,” under the Budget Control 

Act. GAO is statutorily responsible for publishing and maintaining 

standard terms related to the federal budget process.

and legal support for our budget issues group.

2

As you know, the Budget Control Act of 2011, amending the Balanced 

Budget and Emergency Deficit Control Act of 19853

, establishes limits on 

discretionary spending for fiscal years 2012 through 2021. In addition the 

Act specifies additional limits on discretionary spending and automatic 

reductions in direct spending because legislation was not enacted that 

would reduce projected deficits by at least $1.2 trillion by the end of fiscal 

year 2021.4

 

1

The Principles of Federal Appropriations Law, commonly referred to as the Red Book, is 

a multi-volume treatise published by GAO on federal fiscal law. 

 Among other things, the Budget Control Act requires the 

Office of Management and Budget (OMB) to calculate, and the President 

2

31 U.S.C. § 1112(c). See GAO, A Glossary of Terms Used in the Federal Budget 

Process, GAO-05-734SP (Washington, D.C.: Sept. 2005) (published in cooperation with 

the Secretary of the Treasury and the Directors of the OMB and the Congressional Budget 

Office).

3

Pub. L. No. 99-177, title II, 99 Stat. 1037, 1038 (Dec. 12, 1985).

4

Budget Control Act (BCA), Pub. L. No. 112-25, § 302, 125 Stat. 240, 256-59 

(Aug. 2, 2011). 

 

Application of the 

Antideficiency Act and 

Impoundment Control Act
 

Page 2 GAO-12-675T 

to order, a sequestration of discretionary and direct spending on 

January 2, 2013, to achieve reductions for that fiscal year.5

Regardless of the possible effects of any sequestration, agencies must 

continue to comply with the requirements of the Antideficiency Act and 

the Impoundment Control Act. The Budget Control Act neither explicitly 

nor implicitly waives the application of these two important fiscal laws.

The Antideficiency Act and the Impoundment Control Act are two of the 

major laws in the statutory scheme by which Congress exercises its 

constitutional control of the public purse. These two acts go hand-in-hand: 

the Antideficiency Act bars agencies from spending in excess of available 

appropriations or apportionments,6

First, let me provide you with a bit of background on the Antideficiency 

Act. During the 19th century, agencies often abused their power by 

incurring obligations that exceeded available appropriations, entering into 

obligations prior to receiving an appropriation, encouraging employees 

and others to “volunteer” their services to the agency, and depleting their 

appropriation early in the fiscal year. As a result, Congress felt compelled 

to enact appropriations to cover deficiencies in budget authority.

Congress enacted a series of statutes to regain control over federal 

spending. Together, these laws make up the Antideficiency Act.

while the Impoundment Control Act 

generally bars agencies from refusing to obligate the amounts that 

Congress has appropriated. Thus, these two laws in concert require that 

agencies may spend neither more nor less than what Congress has 

appropriated for their use. Instead, agencies must carry out the 

appropriations that Congress has enacted. I will discuss each of these 

laws in turn.

 

5

Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), § 251A, added 

by BCA, § 302.

6

An apportionment is the action by which OMB (for the Executive Branch) distributes 

amounts available for obligation in an appropriation or fund account. An apportionment 

divides amounts available for obligation by specific time periods (usually quarters), 

projects, activities, objects, or a combination thereof. An apportionment may be further 

subdivided by an agency into allotments, suballotments, and allocations. Glossary, at 12. 
 

Page 3 GAO-12-675T 

The Antideficiency Act includes two main prohibitions:

• First, agencies cannot obligate or expend federal funds in excess or in 

advance of an appropriation, apportionment, or allotment.7

• Second, agencies cannot accept voluntary services.

In other 

words, agencies cannot spend more money than they have or spend 

money before they have it.

8

GAO regularly provides legal decisions and opinions to Congress, its 

committees and Members, and federal officials on the application of the 

Antideficiency Act.9 The Antideficiency Act requires agencies violating its 

proscriptions to report to the President and Congress all relevant facts 

and a statement of actions taken, and transmit a copy of each report to 

the Comptroller General on the same date the report is transmitted to the 

President and Congress.10 GAO compiles and presents certain unaudited 

information from reports filed each fiscal year.11

Agencies must continue to comply with the Antideficiency Act even as 

they prepare for a possible sequestration. In anticipation of sequestration, 

an agency may not overobligate its first-quarter apportionment, enter into 

contracts without available appropriations, or ask its employees to 

volunteer their time or waive compensation. An agency must continue to 

operate within the confines of its appropriations despite the possibility of 

sequestration.

The Impoundment Control Act, on the other hand, requires that agencies 

obligate the amounts that Congress has appropriated. At various times in 

 

7

31 U.S.C. §§ 1341, 1517(a). See also OMB Circular No. A-11, Instructions on Budget 

Execution, pt. 4, § 145 (Aug. 18, 2011).

8

31 U.S.C. § 1342. 

9

Congress authorizes the Comptroller General to settle the accounts of the United States.

31 U.S.C. § 3526. Our authority to issue appropriations law decisions and opinions is 

drawn from this authority and a statutory direction to issue decisions upon the request of 

certain federal officials in advance of a payment of appropriated funds. 31 U.S.C. 

§§ 3527–3529.

1031 U.S.C. §§ 1351, 1517(b).

11GAO, Antideficiency Act Resources, available at 

www.gao.gov/legal/lawresources/antideficiency.html (last visited Apr. 20, 2012). 
 

Page 4 GAO-12-675T 

history, Presidents have occasionally refused to spend money that 

Congress appropriated for policy reasons, i.e., because they disagreed 

with the need for the expenditure or the amount of the expenditure. For 

instance, in 1972, President Nixon directed the Environmental Protection 

Agency to disburse to the States only about half of the funds appropriated 

for water pollution assistance. The Supreme Court found that the 

President did not have the authority to withhold the funds.12

Congress enacted the Impoundment Control Act of 1974 to tighten 

congressional control over presidential impoundments and to establish a 

procedure under which Congress could consider the merits of 

impoundments proposed by the President.13 An impoundment is any 

action or inaction by an officer or employee of the federal government that 

precludes obligation or expenditure of budget authority.14 The 

Impoundment Control Act separates impoundments into two categories: 

deferrals and proposed rescissions. Under the Act, if the President 

wishes to defer or temporarily postpone the obligation of any budget 

authority provided for a specific purpose or project, he must transmit a 

special message to Congress proposing such a deferral.15 The special 

message must describe, among other things, the amount of budget 

authority proposed for deferral, the reasons for the deferral, and the 

period of time during which the budget authority will be deferred.16

Deferrals are permissible only to provide for contingencies, to achieve 

savings made possible by or through changes in requirements or greater 

efficiency of operations, or as specifically provided by law.17

 

12Train v. City of New York, 420 U.S. 35 (1975). 

Deferrals are 

132 U.S.C. §§ 681–688. See also B-320091, July 23, 2010; GAO, Impoundment Control 

Act: Use and Impact of Rescission Procedures, GAO-10-320T (Washington, D.C.: 

Dec. 16, 2009), at 1. 

14Glossary, at 61.

152 U.S.C. § 684(a).

16Id. 

17Id. § 684(b). Programmatic delays are not impoundments and therefore do not need to 

be reported. Programmatic delays arise because of factors outside the exclusive control of 

the agency, such as a lengthy procurement. GAO, Impoundment Control: Deferral of DOD 

Budget Authority Not Reported, GAO/OGC-91-8 (Washington, D.C.: May 7, 1991), at 3-4.
 

Page 5 GAO-12-675T 

not authorized for policy reasons, i.e., just because the agency disagrees 

with Congress’ priorities.18

Under the other category of impoundments, proposed rescissions, the 

President must transmit a special message to Congress whenever the 

President determines that all or part of any budget authority will not be 

required to carry out the full objectives or scope of the programs for which 

it is provided, or that the budget authority should be rescinded for fiscal 

policy or other reasons.19 The special message must describe, among 

other things, the amount of budget authority proposed for rescission and 

the reasons it should be rescinded.20 Any amount of budget authority 

proposed to be rescinded must be made available for obligation unless 

Congress, within 45 legislative days, completes action on a bill rescinding 

all or part of the amount proposed for rescission.21

GAO also has a role with respect to the Impoundment Control Act. The 

Comptroller General is required to review each special message and 

report his findings to Congress as soon as practicable.

Unless Congress 

rescinds the budget authority in a public law, the agency must make the 

funds available for obligation to carry out the purposes of the 

appropriation.

22 The 

Impoundment Control Act also requires the Comptroller General to report 

to Congress any impoundment which the President has failed to report.23

GAO monitors the status of affected funds as well as prepares statistical 

summaries and analyses for Congress.24

 

18GAO, President’s Third Special Impoundment Message for FY 1990, GAO/OGC-90-4

(Washington, D.C.: Mar. 6, 1990) (“Deferrals intended to further executive branch policies 

or priorities in place of those policies established in the legislative process are, absent 

specific statutory authority, unauthorized deferrals.”). 

19 2 U.S.C. § 683(a).

20Id. 

21Id. § 683(b).

22Id. § 685(b). 

23Id. § 686(a). 

24See, e.g., B-321125, June 23, 2011. 
 

Page 6 GAO-12-675T 

Agencies must also continue to comply with the Impoundment Control Act 

as they prepare for a possible sequestration. We have previously 

concluded that an agency may not set aside funds25 or intentionally slow 

down spending26 in anticipation of proposed cancellations or rescissions 

of previously appropriated funds. If an agency proposes to defer the 

obligation of funds in the wake of a possible sequestration, it would need 

to show that the deferral met a statutory exception and it would need to 

send a special message to Congress.27

Agencies do have some experience in maintaining operations in uncertain 

budget times. In the past decade, agencies have continued to carry out 

their missions with temporary appropriations under continuing resolutions 

for many months into the fiscal year. While continuing resolutions allow 

agencies to continue operations at a certain rate, the agencies cannot 

predict the amount of their final appropriation, which may be lower than 

anticipated.28 Similarly, if OMB implements sequestration for fiscal year 

2013, agencies will have to absorb reductions beginning in the second 

quarter of the fiscal year.

 

25B-307122, B-307122.2, Mar. 2, 2006. In October 2005, the President transmitted to 

Congress a proposal to rescind $2.3 billion of available funding to offset the cost of 

Hurricane Katrina relief. According to the President, the proposal called for cancellations, 

not rescissions. GAO contacted each affected agency to determine whether it was 

withholding budget authority in response to the President’s proposal. GAO found that 

agencies withheld over $470 million in budget authority, affecting 12 programs, for 

approximately two months. These withholdings constituted impoundments that should 

have been reported to Congress under the Impoundment Control Act. 

26B-320091, July 23, 2010. President Obama proposed the cancellation of the National 

Aeronautic and Space Administration’s (NASA) Constellation program in his fiscal year 

2011 budget request. In response to a congressional request, GAO determined that NASA 

had not violated the Impoundment Control Act in its obligation of Constellation funds after 

the release of the President’s budget request. NASA had not withheld funds from 

obligation or slowed down its rate of spending in fiscal year 2010 in response to the policy 

proposal. 

27See 2 U.S.C. § 684(a).

28GAO has found that continuing resolutions limit management choices and result in 

inefficiencies. GAO, Continuing Resolutions: Uncertainty Limited Management Options 

and Increased Workload in Selected Agencies, GAO-09-879 (Washington, D.C.: Sept. 24, 

2009). 
 

Page 7 GAO-12-675T 

The Budget Control Act provides that sequestration for fiscal year 2013 

will reduce each nonexempt account by a uniform percentage necessary 

to achieve the calculated reduction for that fiscal year.29 “Account” is 

defined as “an item for which appropriations are made in any 

appropriation Act and, for items not provided for in appropriation Acts, 

such term means an item for which there is a designated budget account 

identification code number in the President’s budget.”30 The Budget 

Control Act also instructs OMB to implement sequestration in accordance 

with section 256(k) of the Balanced Budget and Emergency Deficit 

Control Act.31

“to all programs, projects, and activities within a budget account (with programs, 

projects, and activities as delineated in the appropriation Act or accompanying 

report for the relevant fiscal year covering that account, or for accounts not 

included in appropriation Acts, as delineated in the most recently submitted 

President’s budget).”

This section states that except as otherwise provided, the 

same percentage sequestration shall apply:

32

Under this framework, each budget account must be analyzed separately 

to determine its component programs, projects, and activities, as such a 

determination may require reference to the original appropriation act, to 

accompanying reports, or to the President’s budget.

 

29BBEDCA, § 251A(7)(A), added by BCA, § 302. Some programs are exempt from 

sequestration or subject to a limited sequestration. The BBEDCA provides a list of 

exemptions in section 255 and a list of special rules in section 256. These two BBEDCA 

sections were most recently updated by the Statutory Pay-As-You-Go Act of 2010. Pub. L. 

No. 111-139, title I, § 11, 123 Stat. 8, 23-29 (Feb. 12, 2010). For instance, a number of 

mandatory programs are exempt from sequestration, including Social Security benefits 

and Supplemental Nutrition Assistance Program (formerly known as the Food Stamp 

Program). BBEDCA, §§ 255(a), 255(h). Additionally, funding for Medicare payments 

cannot be cut by more than two percent. BBEDCA, § 251A(9), added by BCA, § 302. 

30BBEDCA, § 250(c)(11). 

31Id. § 251A(10), added by BCA, § 302. 

32BBEDCA, § 256(k).

“Program, Project, and

Activity” (PPA) under the 

Budget Control Act
 

Page 8 GAO-12-675T 

In that regard, GAO’s definition of “program, project, or activity” in the 

Budget Glossary may be useful to this analysis. The Budget Glossary

provides that a “program, project, or activity (PPA)” is:

“an element within a budget account. For annually appropriated accounts, [OMB] 

and agencies identify PPAs by reference to committee reports and budget 

justifications; for permanent appropriations, OMB and agencies identify PPAs by 

the program and financing schedules that the President provides in the ‘Detailed 

Budget Estimates’ in the budget submission for the relevant fiscal year.”

33

For example, where Congress barred the National Aeronautics and

Space Administration (NASA) from using an appropriation for the 

“termination or elimination of any program, project, or activity” of a 

particular program, GAO found the relevant programs, projects, and 

activities in NASA’s budget request.34

History can also provide some insight into understanding definitions of 

“programs, projects, and activities.” In 1986, the Balanced Budget and 

Emergency Deficit Control Act required that the President sequester 

funds in accordance with definitions of “program, project, and activity” 

provided by the committees on appropriations. The fiscal year 1986 

“program, project, and activity” definitions varied from agency to agency 

and sometime within agencies from account to account. The definitions 

were separated into categories corresponding to the different 

appropriations acts, which generally tied them back to specific language 

in the appropriations act and committee reports, similar to the Budget 

Control Act provision. We noted in our review that despite the variety of 

definitions, “most agencies had little difficulty in identifying information 

sources needed to determine what programs, projects and activities 

existed within a given account.”

 

35

 

33Glossary, at 80.

We did identify ambiguities in various 

definitions and some oversights and omissions in the way agencies 

carried out the sequestration. In addition, some difficulties arose when the 

language in the appropriations acts and committee reports did not 

coincide with functional program or project information used by agency 

budget officials for actual program execution and when the committee 

34B-320091, July 23, 2010.

35GAO, Compliance Report for FY 1986: Balanced Budget and Emergency Deficit Control 

Act of 1985, GAO/OCG-86-2 (Washington, D.C.: Mar. 31, 1986), at 4.
 

Page 9 GAO-12-675T 

reports did not reflect current programs and activities financed within the 

account in question.

In the final analysis, the Budget Control Act vests in OMB the authority to 

implement sequestration. The execution and impact of any spending 

reductions will depend on the legal interpretations and actions taken by 

OMB. To date, OMB has not issued any guidance to agencies on 

preparing for implementation of the Budget Control Act or how it would 

construe “program, project, and activity.” 

If you or your staff have any questions about this testimony, please 

contact me at (202) 512-5207 or polings@gao.gov. Contact points for our 

Office of Congressional Relations and Office of Public Affairs are on the 

last page of this statement. Susan J. Irving, Director for Federal Budget 

Analysis, Julia C. Matta, Assistant General Counsel, Lauren Grossman, 

Senior Staff Attorney, and Omari Norman, Senior Attorney, made key 

contributions to this statement.

Thank you, Mr. Chairman. This concludes my prepared statement. I 

would be happy to answer any questions that you or other members of 

the Committee have at this time.
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