I. The Budget Process

2. In general. The fiscal problems relating to Navy procurement arise long before the appropriations for procurement are made by Congress, and they continue long after such appropriations are obligated. These problems are first encountered in the budget process, which is concerned not only with the steps leading up to the enactment of the appropriation act each year, but also with the execution of the budget or use of the money appropriated by the several departments and agencies. The budget process affords a striking illustration of the division of power between the Executive Branch of the Government and the Congress. Preparation of the budget, is, of course, the sole responsibility of the Executive Branch. When a government-wide budget has been developed by the President and presented to the Congress, it is then the responsibility of the Congress to decide how much money is to be appropriated for each of the Government's activities. When the appropriations have been made, the control of obligations and expenditures shifts back to the executive agencies, which are responsible for obligating and spending the appropriations according to law and subject to the general control exercised by the President through the Bureau of the Budget. The conduct of the fiscal affairs of the Government is controlled by the same tools of management that are commonly found in large business organizations, that is, the budgeting, accounting, auditing, and statistical reporting systems, by which both the Congress and the President are enabled to provide for the legal and efficient use of appropriated funds. In the Navy, as in many business organizations, these tools of financial management are the responsibility of a comptroller. A review of the budget process in the Navy,

The Bureau of the Budget was created by section 207 of the Budget and Accounting Act of 1921, 42 Stat. 22, 31 U.S.C. § 16 (1958), to assist the President in discharging his executive responsibility for the national budget. The Bureau was transferred to the Executive Office of the President by Reorganization Plan No. 1 (effective July 1, 1939), 53 Stat. 1423, 5 U.S.C. § 133s (1958). The Director is appointed directly by, and is, of course, responsible to, the President. Unlike the heads of the executive departments, his appointment is not required to be confirmed by the Senate. The Office of the Comptroller of the Navy was authorized in 1949 by Title IV of the National Security Act of 1947, as amended, 10 U.S.C. § 5061 (1958). The Office of the Comptroller of the Army is provided for by 70A Stat. 158 (1956), 10 U.S.C. § 3014 (1958). The duties performed by this office, as specified by this law, include budgeting, accounting, progress and statistical reporting, internal audit, administrative organization structure, and managerial procedures relating to the foregoing duties. The Comptroller and Deputy Comptroller of the Navy and the Comptroller and Deputy Comptroller of the Army are appointed by the Secretary of the Navy and the Secretary of the Army, respectively; and while they may appoint civilian or military personnel to either of these offices, they must appoint a civilian to one of them if the other is held by a military officer. 10 U.S.C. §§ 3014(b), 5061(b) (1958).

By 2 of the Act of Aug. 3, 1954, Congress required that one of the Assistant Secretaries of the Navy "authorized herein shall be designated as the Assistant Secretary of the Navy for Financial Management, and may also act as Comptroller of the Navy, if so designated by the Secretary of the Navy." This requirement was subsequently codified in 10 U.S.C. § 5034(b) (Supp. V, 1958). However, by § 8(b) (1) of the Department of Defense Reorganization Act of 1958, 72 Stat. 519, the number of Assist

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then, necessarily involves all of the devices for insuring fiscal control. Since this process has a counterpart in all agencies of the Government, there is a standard fiscal terminology prescribed by the Bureau of the Budget which the newcomer to this field should master in order to deal adequately with the subject matter of this chapter. The basic fiscal terms will be introduced in the text and defined in the footnotes as the subject matter requires.

3. Preparation of the Navy's budget. The Navy's budget is based upon planned programs and objectives developed each year by the Chief of Naval Operations within the framework of the strategic concepts and force levels prescribed by the Joint Chiefs of Staff. After the Secretary of Defense has stated the general policies and guidelines covering the preparation of the budget, budget estimates based on these policies and guidelines are submitted by the Navy Bureaus and Offices to the Comptroller of the Navy for his review. When this review is completed and a budget satisfactory to the Secretary of the Navy has been worked out, the budget is transmitted to the Assistant Secretary of Defense (Comptroller) who holds hearings on it in order to weigh the Navy's budget request with those of the Army and the Air Force. Thereafter, a single budget for the Department of Defense is approved and submitted by the Secretary of Defense to the Bureau of the Budget. That agency reviews the estimates and justifications and balances the proposed budget for the Department of Defense against the competing claims of other agencies of the Government. After the Bureau of the Budget has completed this process of reconciliation, it incorporates all the executive agencies' budgets, including the Navy's, into the President's budget document for presentation to the Congress. Fully three-quarters of a year is consumed during this stage of the budget process, and another half year at least is required for the succeeding stage which culminates in the enactment of the appropriation act. Thus, since a given budget relates to only one fiscal year, it frequently happens that two budgets are in preparation at the same time, in addition to

ant Secretaries of the Navy was reduced from four to three and the requirement that one of them be designated as Assistant Secretary of the Navy for Financial Management was repealed. But 8(b)(1) of the act did, in effect, authorize the Secretary of the Navy to detail one of the remaining Assistant Secretaries to duties in the financial management field by providing that "The Assistant Secretaries shall perform such duties as the Secretary of the Navy prescribes." 10 U.S.C. 5034(b) (1958). The comparable Army statute reads, "The Secretary may assign such of his duties as he considers appropriate to the Undersecretary of the Army and to the Assistant Secretaries of the Army." 10 U.S.C. 3012 (1958).

See Part II of Bureau of the Budget Circular No. A-34 (July 1957).

The budget estimates represent the need, expressed in terms of dollars, anticipated by the Navy Bureaus and Offices to carry out the programs for which they will be responsible during the period covered by the budget. The estimates are accompanied by supporting schedules and justifications which develop in more detail the data on which they are founded.

6 Similar budget estimates are prepared in the offices of Army operating agencies and forwarded to the Comptroller of the Army for review and approval.

the budget that has been incorporated in an appropriation act and which is being executed.

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4. The appropriation of funds to support the Navy: congressional hearings. The President's budget document contains a detailed statement of the estimates of the appropriations, with supporting data, which each of the agencies of the Executive Branch will require for one fiscal year. Since this document has both the physical proportions and fine print of a rather large metropolitan telephone directory, it is transmitted to the Congress by a budget message in January of each year to afford the President an opportunity to outline its scope and highlight its salient features. At this point, the "DOD" Subcommittee of the Appropriations Committee of the House of Representatives begins its consideration of the Navy's budget as the first step in the appropriation of funds for the Navy for the ensuing fiscal year beginning on 1 July. In order to obtain a detailed knowledge of the Navy's budget estimates as a basis for recommending appropriations to the full Committee, the Subcommittee schedules hearings for representatives of the Navy, or witnesses as they are called, who appear before it with narrative justification, charts, statistical data and any other information which will be helpful to understanding the program which the President has decided upon for the Navy. Traditionally, the first Navy witnesses include the Secretary and the Chief of Naval Operations, who explain the Navy's budget in terms of anticipated accomplishments within the context of the nation's strategic planning. They are followed by witnesses from the Bureaus and Offices, who go over their programs in detail with the Subcommittee. During these hearings, Navy witnesses are governed by the estimates for their activities as contained in the President's budget document. To insure an orderly and uniform presentation to the Appropriations Committees of both Houses, the Office of the Comptroller of the Navy coordinates the estimates and written justifications of the Bureaus and Offices and serves as the principal point of contact for the Navy with the Committees. Since appropriation bills by custom originate in the House

The fiscal year of the federal government begins on 1 July and ends on 30 June of the following calendar year. Each fiscal year is designated by the calendar year in which it ends. Thus, the fiscal year ending June 30, 1958, is called fiscal year 1958. Appropriations have been made on this fiscal year basis since 1843; prior to that time they were made on a calendar year basis. See Act of Aug. 26, 1842, 5 Stat. 536.

6 The Subcommittee also considers the Army budget, holding hearings, calling witnesses, etc.

of Representatives,' full justifications are made before the Appropriations Committee of that body. The Senate Appropriations Committee, on the other hand, usually limits its hearings to reclamas, or appeals for increases by the various agencies over the amounts and programs contained in the bill as passed by the House, up to the amounts and programs contained in the President's budget.

5. The appropriation bill. In drafting the Navy's appropriation bill, Counsel for the Office of the Comptroller of the Navy takes the previous year's appropriation act as a starting point and incorporates any changes which may be either desired by the Navy or directed by higher authority. The appropriation language thus framed appears in the President's budget document, together with the estimates and related justifications. In the nature of things, this process assures a basic continuity in the Navy's appropriation structure. Before a new item may be included in the Navy's appropriation bill, it is required by House Rule XXI to be otherwise authorized by law unless it has the effect of retrenching expenditures. This rule was first adopted in 1837 in order to prevent delay of appropriation bills on the floor of the House because of contention over propositions of legislation that had not theretofore been considered.10 It also has the effect of maintaining a proper distribution of legislative responsibility among the standing committees.11 For

U.S. Const. art. I, §7 cl. 1 provides that "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments, as on other Bills." The question whether "raising Revenue" includes making appropriations has been debated but not finally resolved. See the discussion setting forth the constitutional arguments on both sides of the question at 2 Hinds' Precedents §§ 1500, 1501 (1907). While there has been dispute as to the theory, there has been no deviation from the practice that the general appropriation bills originate in the House. See also 1 Sutherland, Statutory Construction § 806 (3d ed. 1943), for a brief discussion of the tendency of the courts to give this kind of constitutional provision a limited application.

"Reclama" is a colloquialism originating in the Philippine Islands which has the same general meaning for budget purposes as the word "appeal." By extension, any such appeal made during the successive administrative and congressional reviews of the Navy's budget during the budget process is designated a reclama.

Ba All references to the Navy in this paragraph are equally applicable to the Army. Clause 2 of House Rule XXI provides, in pertinent part, that "No appropriation shall be reported in any general appropriation bill, or be in order, as an amendment thereto, for any expenditure not previously authorized by law, unless in continuation of appropriations for such public works and objects as are already in progress. Nor shall any provision in any such bill or amendment thereto changing existing law be in order except such as being germane to the subject matter of the bill shall retrench expenditures. Rules and Manual, U.S. House of Representatives, H.R. Doc. No. 474, 84th Cong., 2d Sess. 426 (1957). The second sentence in the rule permitting legislation tending to retrench expenditures is known as the "Holman Rule." It is this exception which justifies the inclusion of most of the legislative riders, or general provisions, in the Department of Defense appropriation acts each year. For application of this rule by the House Parliamentarian, see Hinds' and Cannon's Precedents, Vols. IV and VII, respectively.

10 Rules and Manual, U.S. House of Representatives, op. cit. supra at 427.

Clause 4 of House Rule XXI provides "No bill or joint resolution carrying appropriations shall be reported by any committee not having jurisdiction to report appropriations, nor shall an amendment proposing an appropriation be in order during the consideration of a bill or joint resolution reported by a committee not having that Jurisdiction. ." Id. at 439.

example, a new Navy program such as the construction of a new shipyard is properly the subject of legislation developed by the Armed Services Committees while the provision of funds necessary to carry out the program after it is authorized is a matter for the Appropriations Committees. The nature of this rule is, of course, procedural; therefore, if points of order under the rule are waived in advance of the consideration of an appropriation bill, or if no member during debate should raise an objection under the rule, or if such an objection is raised and sustained by the Chair but then voted down, an otherwise unauthorized legislative item in a duly enacted appropriation bill will be as fully effective as any other legislation.12 The Senate has a similar rule of procedure."

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The drafting of appropriation language consummates the preparation of the budget estimates. The language of an appropriation is important not only as a source of information to the Congress and the public with respect to the programs for which the appropriation is made, but also because it determines the legal availability of the funds appropriated. In this latter connection, it should be noted that budget estimates and related justifications are not controlling in deciding questions of availability or restrictions on the use of appropriations, unless they are incorporated either directly or by reference in the act making the appropriation.1a

6. Execution of the Navy's budget: the administrative machinery.14 The Navy's appropriations are made in the Department of Defense appropriation act each year.15 In the appropriation act for fiscal year 1958, these appropriations were made under 19 separate appropriation heads, each of which has a title and language describing the purposes as well as the time period for which the appropriation made thereunder is available.16 These separate appropriation heads are phrased in terms of broad functional purposes, and as a general rule there is no machinery provided for in the appropriation act for controlling the use of these appropriations. In effect, the legislative function is complete when the funds have been appropriated; thereafter, it remains for the Navy to use the appropriation for the purposes and within the time limit of the appropriation as specified by the Congress in the appropriation act.

13 Syphax's Case, 7 Ct. Cl. 529 (1871).

13 Rule XVI Senate Manual, S. Doc. No. 19, 85th Cong., 1st Sess. 23 (1957).

24 Amounts of individual items in budget estimates, on the basis of which a lump sum appropriation is made, are not binding on administrative officers unless carried into the appropriation act. 17 Comp. Gen. 147 (1937). And where appropriation language makes no reference to an item in the estimates which is not affirmatively authorized by law, there is no authority to use the appropriation for such items. 18 Comp. Gen. 533 (1938).

14 The administrative machinery of the Army parallels that of the Navy and appropriations are handled in the same manner.

15 See, e.g., the Department of Defense Appropriation Act, 1959, 72 Stat. 711 (1958). 20 Ibid.