The Congress generally provides budget authority to an agency for use during a specific period, referred to as the period of availability. During this period of availability, the agency may incur new obligations, for example, those for goods and services, and charge them against the appropriation. At the end of the period of availability, the appropriation expires, meaning that it may not be used to incur new obligations. Prior to fiscal year 1991, an appropriation account maintained its fiscal year identity for 2 years after its period of availability expired. After the 2- year period, the remaining obligated balance and unobligated balance were transferred and merged into “M” accounts and merged surplus authority, respectively, with the obligated and unobligated balances of previously expired appropriation accounts available for the same general purpose. The M accounts and merged surplus authority were available to pay and adjust valid obligations incurred prior to expiration. However, because M accounts and merged surplus authority had no fiscal year identity, upward adjustments were not limited to the balances from any particular appropriation. From 1956, when the Congress established the M accounts and merged surplus authority, through December 1990, federal agencies’ reported that M accounts and merged surplus authority had grown to over $70 billion, with DOD reported to have about $50 billion, over 70 percent, of this total. In addition, the use of the merged surplus authority to fund upward adjustments to M accounts increased dramatically. For example, DOD’s use of large amounts from the merged surplus authority to cover upward adjustments to M accounts and other expired surplus accounts increased each year over a 5-year period from about $57 million in fiscal year 1985 to $560 million in fiscal year 1989. DOD’s use of large amounts from the merged surplus authority to cover upward adjustments to obligations prompted the Congress to pass legislation in 1990 to strengthen its oversight and control over expired appropriations. Among other things, the 1990 law eliminated the merged surplus authority and M accounts. Instead, under the 1990 law, an expired appropriation account remains available for 5 years, during which it may be used for recording, adjusting, and making disbursements to liquidate obligations that were properly chargeable to the account. At the end of the 5-year period, the appropriation account closes, and any remaining obligated and unobligated balances are canceled. The closed appropriation account may not be used for obligation or expenditure for any purpose. After an account closes, obligations and adjustments to obligations that would have been properly chargeable to the account before closing may be charged to currently available appropriations subject to certain limitations. Even in those cases in which current appropriations must be used to make payments after appropriation accounts close, the closed appropriation accounts are still subject to the provisions of the Antideficiency Act. Among other things, the act prohibits officers or employees of the government from making or authorizing obligations or expenditures that exceed the amounts available in appropriations or funds. Therefore, agencies must continue to maintain current and accurate records of disbursements attributable to the canceled appropriations to ensure that payments do not exceed the originally appropriated amounts. If a violation of the Antideficiency Act occurs, section 1351 of title 31 requires the head of the agency to immediately report to the President and the Congress all relevant facts and a statement of actions taken. Also, under section 1349 of title 31, the officer or employee who violates the act is subject to administrative discipline. The Office of Management and Budget (OMB) issues guidelines for budget execution for executive branch agencies in OMB Circular A-34. Section 40 of that circular sets forth the requirements for reporting Antideficiency Act violations. Section 40.6 requires that an agency head transmit a report to the President, through OMB, providing information about the violation, including the appropriation involved, the date and amount of the violation, the identity of the person(s) responsible for the violation, a statement of administrative discipline taken, a statement regarding the sufficiency of the agency’s fund control regulations, and a statement of any actions taken to prevent similar future violations. Section 40.6 also requires the agency head to send an identical report to the Speaker of the House of Representatives and the President of the Senate. DOD implements the provisions of the Antideficiency Act and OMB’s Circular A-34 guidance in Volume 14 of its Financial Management Regulation. Chapters 4 through 7 of that volume contain detailed instructions on investigating and reporting on possible Antideficiency Act violations. Chapter 9 contains instructions on discipline for violations. As stated previously, because of the need to keep accurate records, agencies may, in limited circumstances, adjust their records pertaining to closed appropriation accounts. For example, if an agency determines that the balances reflected in the records of a closed account are erroneous because of reporting and clerical errors, it may adjust those records to correct the errors. An agency may also adjust its records if it discovers that a disbursement actually made before an appropriation account closed and properly chargeable to an obligation incurred during the appropriation’s period of availability was either not recorded at all or was charged to the wrong appropriation. Neither of these types of adjustments constitutes charging obligations against or disbursing funds from the closed appropriation accounts. They represent corrections of the accounting records. Since the appropriations, in effect, no longer exist, these adjustments affect only the agency’s records. They have no effect on the availability or use of obligated or unobligated balances formerly contained in those appropriation accounts. According to DFAS headquarters officials, DFAS Columbus makes about 99 percent of DOD’s annual closed appropriation account adjustments. DFAS Columbus relies on the Mechanization of Contract Administration Services (MOCAS) system to process DOD contract payment transactions and CRS for performing and processing reconciliation transactions. MOCAS and CRS transactions are recorded in various DFAS accounting systems used for the military services and other DOD organizations that maintain the official accounting records, including the status of canceled funds. During fiscal years 1997 through 2000, DFAS Columbus’ records showed that it made about $10 billion of adjustments affecting closed appropriation accounts. DFAS Columbus conducts two types of contract reconciliations—limited and full scope. Limited scope reconciliations are usually performed to resolve problems that require immediate action, such as when there are insufficient funds on the cited accounting classification reference number (ACRN) to pay a contractor’s invoice. These reconciliations generally result in making only those adjustments necessary to resolve the problems that are preventing payment of the invoice. A full scope reconciliation is generally performed if a limited scope reconciliation failed to adequately resolve a problem or a contract is being prepared for final close-out due to contract completion. Depending on the size of the contracts, these type of reconciliations can result in large numbers of adjustments since they involve identifying and correcting all errors made over the life of the contract. DFAS Columbus uses CRS to help identify discrepancies between a contract’s hard copy documentation and information recorded in MOCAS. To complete this process, reconciliation staff re-enters into CRS all hard copy documents pertaining to the contract. These include documentation for obligations, invoices, disbursements, shipments, and modifications. After all the hard copy information has been entered into CRS, it reconstructs the payments in accordance with the payment instructions input by the reconciliation staff. For example, if the contract payment terms specified that certain payments were to be applied to specific ACRNs in the contract and the reconciliation staff input these data into CRS, it would apply the payments accordingly. However, if the staff failed to instruct CRS to apply the payments as specified in the contract, CRS’ default program would redistribute the payments on an “oldest funds first” basis. Either way, after redistributing the payments, CRS generates accounting transactions to adjust MOCAS’ contract obligation and payment history so that it will agree with CRS. Before the adjustments to the closed appropriation account records can be made, however, reconciliation staffs are required to request approval from the appropriate fund holder. Once DFAS Columbus has provided the appropriate fund holder with the request for approval, the fund holder has 45 days to accept or reject the proposed adjustments. DOD procedures provide that if DFAS Columbus does not receive a response to the request for approval within 45 days of notification, the adjustment will be considered approved and processed accordingly. Our review of $2.2 billion of the fiscal year 2000 closed appropriation account adjustments found that $615 million (28 percent) were either illegal ($146 million) or otherwise improper ($469 million). These adjustments should not have been made because the initial disbursements (1) occurred after the appropriation being charged had already canceled, (2) occurred before the appropriation being charged was enacted, or (3) were charged to the correct appropriation in the first place and no adjustment was necessary. Also included in the $615 million were $105 million of adjustments that were not sufficiently documented to establish that they were proper. These were considered to be improper because agencies must be able to provide documentation to show that adjustments are legal and that they changed an incorrect charge to a correct one. Table 1 provides additional details on the $615 million of adjustments that should not have been made. See appendix II for a detailed list of illegal or otherwise improper adjustments. The 1990 account closing law specifically provides that closed appropriation accounts are not available for expenditures. We found that about $108 million of the adjustments resulted in charging appropriation accounts that had closed before the disbursements were made. These adjustments produced the same result as if DOD had made expenditures from and charged closed appropriation accounts at the time the disbursements were made. Therefore, these adjustments violated the 1990 account closing law. Following are several examples in which the adjustments had the effect of spending canceled funds from the closed accounts.