rived in a great measure from the principles and examples of our English ancestors. In England, the King possessed the power of raising armies in the time of peace according to his own good pleasure. And this prerogative was justly esteemed dangerous to the public liberties. Upon the revolution of 1688, Parliament wisely insisted upon a bill of rights, which should furnish an adequate security for the future. But how was this done? Not by prohibiting standing armies altogether in time of peace, but (as has already been seen) by prohibiting them without the consent of Parliament. This is the very proposition contained in the Constitution; for Congress can alone raise armies; and may put them down, whenever they choose." 40

9. The requirement for appropriations.40 Article I, Section 9, Clause 7 of the Constitution provides that:

No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

This provision epitomizes the constitutional concept of the legislative control of the purse; it is, in effect, a limitation upon the powers of the Executive Branch and does not restrict Congress in appropriating monies from the Treasury. For example, the Supreme Court has held that no officer of the federal government is authorized to pay a debt due from the United States, whether reduced to judgment or not, until an appropriation has been made for that purpose.42 In addition to the power to appropriate money, Congress has the concomitant power to regulate the making, spending and accounting for appropriations.13 The purpose of an appropriation, as well as the terms and conditions on which it is made, are matters solely within

40 2 Story, Commentaries § 1187 (4th ed. 1873). Prompted by the fear of standing armies to which Story alluded, the framers inserted the limitation that "no Appropriation of Money to that Use [i.e. to raise and support armies] shall be for a longer Term than two Years." In 1904 the question arose whether this provision would be violated if the Government contracted to pay a royalty for use of a patent in constructing guns and other equipment where the payments were likely to continue for more than two years. Solicitor General Hoyt ruled that such a contract would be lawful; that the appropriations limited by the Constitution "are those only which are to raise and support armies in the strict sense of the word 'support,' and that the inhibition of that clause does not extend to appropriations for the various means which an army may use in military operations, or which are deemed necessary for the common defense. .." 25 Ops. Att'y Gen. 105, 108 (1904). Relying on this earlier opinion, Attorney General Clark ruled in 1948 that there was "no legal objection to a request to the Congress to appropriate funds to the Air Force for the procurement of aircraft and aeronautical equipment to remain available until expended." 40 Ops. Att'y Gen. 555 (1948). The two-year limitation, of course, does not relate to the Navy.

40 All references to the Navy in pars. 9, 10, 11 and 12 herein apply equally to the Army.

Cincinnati Soap Company v. United States, 301 U.S. 308, 321 (1937).

Reeside v. Walker, 52 U.S. (11 How.) 271 (1850).

Hart v. United States, 16 Ct. Cl. 459, 484 (1880), aff'd, 118 U.S. 62 (1886).

45

the discretion of Congress." These terms and conditions may be expressed in provisos attached to the appropriation, or in general provisions separately stated at the end of the appropriation act.10 In pursuance of this power, Congress has also enacted many permanent statutes which are applicable to all appropriations. The Constitutional provisions, the related regulatory statutes, and the appropriation acts, together with the decisions of the courts and the Comptroller General construing them, constitute the body of law governing the use of Navy appropriations.

10. The legislative framework for the use of appropriations. Before any officer in the Executive Branch can spend public money of the United States, there must have been an Act of Congress appropriating the money and defining the purpose for which the appropriation was made. Accordingly, an appropriation has been defined as a statutory authorization to make payments out of the Treasury for specified purposes.47 In addition, an appropriation carries with it the authority to enter into contracts for goods or services, or, in other words, to obligate the Government to make future payments within the amounts provided and for the purposes specified in the appropriation act.48

The legislative framework governing the use of funds appropriated for the Navy is found in part in the annual Department of Defense appropriation acts and in part in permanent legislation. A glance at some of the more salient items of this permanent legislative framework will illustrate the manner in which Congress has exercised its control over the purse.

"Spaulding v. Douglas Aircraft Co., 60 F. Supp. 985 (S.D. Cal. 1945), aff'd, 154 F.2d 419 (9th Cir. 1946). In 1840 the principle was expressed in these terms: "To permit an interference of the courts of justice with the accounts and affairs of the treasury, would soon sap its very foundations; money would not be drawn out according to its own rules, nor could the Secretary of the Treasury ever inform Congress of the amount needed. Congress would, of necessity, be compelled to consult the court, not the Secretary, when making appropriations." Decatur v. Paulding, 39 U.S. (14 Pet.) 497,

522 (1840).

See, e.g., Minis v. United States, 40 U.S. (15 Pet.) 423 (1841); Lafitte v. United States, 43 Ct. Cl. 166 (1908).

40 See, e.g., Title VI of the Department of Defense Appropriation Act, 1958, 71 Stat. 312, 322 (1957).

47 Section 21 of BUREAU OF THE BUDGET CIRCULAR No. A-34 (July 1957). The statutory definition of the term "appropriation" appearing in legislation related to the budget and the administrative control of appropriations includes funds, authorizations to create obligations by contract in advance of appropriations, and any authority making funds available for obligation or expenditure, since such coverage is necessary to afford that control over total programs which it was the legislative purpose to secure. See section 2 of the Budget and Accounting Act of 1921, 42 Stat. 20, 31 U.S.C. 2 (1958); REV. STAT. § 3679 (c) (1) (1875), as amended, 31 U.S.C. § 665(c) (1) (1958).

An "obligation" represents amounts of orders placed, contracts awarded, services received, and similar transactions during a given period requiring disbursement of money. Section 21 of BUREAU OF THE BUDGET CIRCULAR NO. A-34 (July 1957). Section 22 develops the concept of obligations in somewhat more detail, in accordance with the statutory definition provided in §1311 of the Supplemental Appropriation Act, 1955, 68 Stat. 830 (1954), 31 U.S.C. § 200 (1958). See pars. 27–30 infra.

a. Specific language necessary to make an appropriation, 31 U.S.C. § 627. For example, Congress has provided that no act "shall be construed to make an appropriation out of the Treasury of the United States, or to authorize the execution of a contract involving the payment of money in excess of appropriations made by law, unless such act shall in specific terms declare an appropriation to be made or that a contract may be executed." 49 This provision has been relied on by the Comptroller General to deny proposals of government agencies to enter into contracts under a statute that authorizes, but does not appropriate, the funds necessary for its fulfillment. "The mere authorization of an appropriation does not authorize expenditures on the faith thereof or the making of contracts obligating the money authorized to be appropriated." 50

b. Construction of appropriation acts, Rev. Stat. § 3678. Another basic statutory rule for construing appropriation acts is that "except as otherwise provided by law, sums appropriated for the various branches of expenditure in the public service shall be applied solely to the objects for which they are respectively made, and for no others." 51

c. The Anti-Deficiency Act, Rev. Stat. § 3679. Again, the opening subsection of the Anti-Deficiency Act prohibits any officer or employee of the United States from making or authorizing an expenditure or obligation under any appropriation or fund in excess of the amount available therein or in advance of an appropriation, unless the contract or obligation is authorized by law.52

d. Adequacy of appropriations, Rev. Stat. § 3732. The prohibition in the opening subsection of the Anti-Deficiency Act is paralleled by a provision to the effect that "no contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the Departments of the Army, Navy, and Air Force, for clothing, subsistence, forage, fuel, quarters, transportation, or medical and hospital supplies, which, however, shall not exceed the necessities of the current year." 53 This provision takes Navy contracts for the procurement of the excepted items out of the operation of the basic prohibitions expressed here and in the Anti-Deficiency Act. And both of these provisions have been relied on by the Comptroller General in decisions holding that indemnification provisions of a contract establishing an indefinite obligation against the Government are objectionable.54

9 of the Act of June 30, 1906, 34 Stat. 764, 31 U.S.C. § 627 (1958).

BO 16 COMP. GEN. 1007, 1008 (1937); see also 35 COMP. GEN. 306 (1955).

REV. STAT. § 3678 (1875), 31 U.S.C. § 628 (1958).

Rev. Stat. § 3679 (a) (1875), 31 U.S.C. § 665 (a) (1958).

REV. STAT. § 3732 (1875), 41 U.S.C. § 11 (1958). See Department of Defense Directive 7220.8 (Aug. 16, 1956).

35 COMP. GEN. 85 (1955) and cases cited.

e. The miscellaneous receipts rule, Rev. Stat. § 3617. Another general rule has been established to govern the disposition of the Government's revenues and to prevent the development of self-perpetuating activities in the Executive Branch: specifically, "The gross amount of all monies received from whatever source for the use of the United States . . . shall be paid by the officer or agent receiving the same into the Treasury." 55

f. Proceeds from sales of Government property, Rev. Stat. § 3618. A rule relating to the proceeds from the sales of "old material, condemned stores, supplies, or other public property of any kind," with certain enumerated exceptions, requires such proceeds to be "deposited and covered into the Treasury as miscellaneous receipts . . . and shall not be withdrawn or applied, except in consequence of a subsequent appropriation made by law." 56 The effect of Rev. Stat. §§ 3617 and 3618 is to secure to the Congress the necessary control over the use of revenues coming into the hands of government officers. Before any government department may use such revenues, it must seek and justify an appropriation in the usual manner. Only the Congress can grant exceptions to this general rule." An exception was granted in 1953, when authority was given to credit the proceeds of sales of supplies, goods and material not financed by working capital funds to the current applicable appropriations of the Department of Defense.58 However, this exception is carefully limited by regulations so as not to enlarge or expand the purposes or programs for which Congress has made appropriations to the Navy.59 Thus, for example, when personal property is sold for replacement the proceeds are credited to the appropriation that is otherwise available for the procurement of the replacement item; 60 but if the property is not sold for replacement the net proceeds will ordinarily be covered into the Treasury as miscellaneous receipts and the administrative costs of conducting the sale will be deducted from the gross

65 REV. STAT. § 3617 (1875), 31 U.S.C. § 484 (1958). 50 REV. STAT. § 3618 (1875), 31 U.S.C. § 487 (1958).

In the military departments, important exceptions to this general rule are the revolving funds, i.e., Army, Air Force, Navy and Marine Corps Stock Funds, and the Army, Air Force and Navy Industrial Funds covering such industrial activities as Shipyards, Ordnance Plants and the Military Sea Transportation Service. These révolving or working capital funds are authorized under section 405 of the National Security Act of 1947, as amended, 63 Stat. 585, 5 U.S.C. § 172d (1958). DoD Directives 7410.4, 17 July 1958, 7420.1, 19 December 1956. Under the revolving fund concept, receipts from operations and from the disposal of surplus property under the fund are appropriations which are credited to the fund to avoid its depletion, and an annual business-type accounting is made to the Congress. Congressional control over these funds is exercised through appropriation legislation, which adds to or subtracts from the corpus of the funds. See par. 26 infra.

58645 of the Department of Defense Appropriation Act, 1954, 67 Stat. 357, 5 U.S.C. 172d-1 (1958).

See generally Navy Comptroller Manual pars. 043000-043100 (June 18, 1958). o Id. at par. 043107-4.

proceeds and credited to the applicable maintenance and operations appropriation.61

65

64

11. Fiscal management. Over the past several years, there has been an unusual amount of concern, both in Congress and in the Executive Branch, for the improvement of fiscal management in the Government.62 This concern undoubtedly reflects the increased size and scope of government operations that have continued after World War II. The basic laws providing a framework for fiscal management are the Budget and Accounting Act of 1921 63 and the Budget and Accounting Procedures Act of 1950. These two laws relate to the budget process, which is the process by which the executive agencies plan their requests for appropriations and carry out their programs after the money has been appropriated. The recommendations of the First Hoover Commission prompted the enactment of Title IV of the National Security Act Amendments of 1949,68 which established a Comptroller in each of the military departments as well as in the Office of the Secretary of Defense, and provided for a more flexible and up-to-date system of financial management throughout the Department of Defense. In this connection, Title IV among other things called for the adoption of performance budgets,67 and authorized the establishment of working capital funds 68 for financing inventories of supplies as well as certain industrial operations in the military departments, and management funds. More recently, the Second Hoover Commission has made suggestions for further improvements in the fiscal management of the Government. The most significant items of legislation resulting from the recommendations of this group are laws calling for the development and use of cost information in government budgeting and accounting 70 and authorizing limits to be placed in future appropriations on the amount of annual accrued expenditures thereunder."1

69

Because the law authorizing accrued expenditure limitations may have a considerable effect on the Navy's ability to make payments to its contractors, its mechanics should be briefly noted. The purported purpose of this law is to provide for greater congressional control over the amount of annual government spending. Very substantial government expenditures each year are made in liquidation of obligaa See 611 of the Department of Defense Appropriation Act, 1959, 72 Stat. 725 (1958).

See, e.g., the legislation cited in n. 1 supra.

42 Stat. 20, 31 U.S.C. §§ 1-60 (1958).

04 64 Stat. 832, 31 U.S.C. §§ 1-67 (1958).

See pars. 2-7 supra.

063 Stat. 585, 5 U.S.C. § 172 (1958).

See the description of the Navy's performance budget in par. 21 infra.

See n. 57 supra.

406 of the National Security Act of 1947, as amended, 63 Stat. 585, 5 U.S.C. 172e (1958).

TO The Act of Aug. 1, 1956, 70 Stat. 782, 31 U.S.C. §§ 24, 66a (c) (1958).

The Act of Aug. 25, 1958, 72 Stat. 852, 31 U.S.C. § 11(b)-(f) (1958).