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January 28, 2002
District's Fiscal Year 2001 Comprehensive Annual Financial Report Released
(Washington, DC) Chief Financial Officer Natwar M. Gandhi announced today that the District of Columbia received an unqualified or "clean opinion"
from the city's independent auditors on its Comprehensive Annual Financial Report (CAFR). The financial statements also reveal that the District
ended Fiscal Year 2001 with a general fund operating surplus of $77.6 million. This audit is a milestone for the District because it is the first clean bill
of health the city has received outside the congressionally-mandated control period. A clean opinion indicates that the city's financial books are in
order. It also means that the CAFR fairly presents the District's financials and the results of its Fiscal Year 2001 operations in accordance with
generally accepted accounting principles.
"This reasserts the fact that the city's elected leaders are responsibly taking care of the District and its finances without the need of a control board
to oversee our financial operations," said Dr. Gandhi, who was joined by Mayor Anthony A. Williams, Council Chairman Linda W. Cropp, and Council
member Jack Evans. "As chief financial officer, it is my responsibility to be the guardian of the District's financial viability. I will continue to keep the
lines of communication open with every key stakeholder and citizen, and alert them early and often of the District's financial posture."
Mayor Williams said, "I am proud of the District's financial recovery. With the help of the Control Board, the Council and the CFO, we have moved
from financial crisis to financial stability. And we did it in just five years' time. For citizens, this means that the District is able to invest in strong
schools, safe streets, clean communities, affordable housing, reliable transportation, and health care. And we have been able to attract new
investment to our city in direct response to strong fiscal management."
Despite the successful end of Fiscal Year 2001, Dr. Gandhi foresees fiscal challenges ahead as the District continues to respond to the economic
impact of the September 11 attacks, works to close spending pressures for Fiscal Year 2002, and finds remedies to the District's structural
imbalance issue.
"There is a structural imbalance inherent in the city's budget, which, if not addressed, may eventually precipitate spending in excess of revenues or
serious cuts in city services," Dr. Gandhi explained. The city is prohibited from taxing federal real property, which comprises 42 percent of the
District's property value, while other non-municipal tax-exempt property, such as universities, comprise an additional 11 percent. Further constraining
the District's tax base are restrictions on taxing income at source, which means that the District can tax just 34 percent of the income earned within
its borders. The District also provides state-like functions such as human services, mental health, and higher education estimated at $500 million
annually.
KPMG Peat Marwick, LLP conducted this year's independent audit under the auspices of the District's Inspector General.
Back to top of page
COUNCIL
BRIEFING AND PRESS CONFERENCE ON
THE DISTRICT OF
COLUMBIA'S FY 2001 COMPREHENSIVE
ANNUAL FINANCIAL REPORT (CAFR)
Monday,
January 28, 2002
John A. Wilson Building
Remarks of
Natwar M. Gandhi
Chief Financial Officer
Government of the District of Columbia
Good day, everyone. I am Natwar M. Gandhi, Chief Financial Officer of
the District of Columbia. I am here to brief you on the results of the
District's FY 2001 Comprehensive Annual Financial Report, or CAFR.
I am very pleased to report that the District of Columbia received its
fifth consecutive unqualified (or clean) opinion from the city's
independent auditors, with our CAFR completed ahead of time and with a
balanced budget. A clean opinion indicates that the city's financial
books are in order, and means that those books present fairly the city's
financial information and results of its financial operations in
accordance with generally accepted accounting principles.
Overall, the District ended FY 2001 with a surplus of $77.6 million, and
a positive fund balance of $562.2 million. In FY 1996, there was a
negative fund balance of $518 million, so we have witnessed a turnaround
of over a billion dollars since then. The District's unrestricted fund
balance is $91.3 million, and we now have emergency cash reserves of
$100.8 million.
This year's results add another milestone to the financial turnaround
that began in the 1997 CAFR, and is a fitting beginning for the
District's recent return to Home Rule. It proves that the elected
leadership of the District is prepared to manage the financial affairs
of the city on its own, without the need for a control board.
I believe we are in a good position to continue this progress. We have
instituted several changes in financial systems that give us a much
better picture of our financial posture as we go through the year. With
regard to financial management, we have increased the flexibility of the
city's reserves and at the end of FY 2001 had $100.8 million in cash
reserves available. We estimate this amount will grow to about $250
million by the end of FY 2002. Along with our ending fund balance of
$562.2 million, these steps should solidify the District's improved bond
ratings, and contribute to lower borrowing costs in the future.
Two studies are underway that may also contribute to this progress. In
the District's FY 2002 Appropriations Act, the Congressional Research
Service was directed to study the way ten national capitals and the
District are treated by their supporting jurisdictions. And recently,
the chair of the Senate's Appropriations Subcommittee on the District of
Columbia requested that the General Accounting Office study the
District's structural imbalance and recommend solutions.
As you know, there is a structural imbalance inherent in the city's
budget, which, if not addressed, may eventually precipitate spending in
excess of revenues or serious cuts in the city services. The District is
prohibited from taxing federal real property, which comprises 42 percent
of the District property value, while other non-municipal tax exempt
property, such as universities, comprise an additional 11 percent.
Further constraining the District's tax base are restrictions on taxing
income at source, which means that the District can tax just 34 percent
of the income earned within its borders. The District also provides
state-like functions such as human services, mental health, and higher
education estimated at $500 million annually.
In addition, there are a few concerns. For FY 2002, we already have
identified approximately $240 million in budget problems, including some
$39 million in lower revenues even after assuming the implementation of
the Tax Parity trigger that automatically postpones income tax rate
reductions until next year. The balance of $201 million is spending
pressures, the largest of which are $81 million for DCPS and $62 million
for projected Medicaid shortfalls across all-programs. We believe we can
manage these issues, but only by using all of the District's uncommitted
funds and by some form of congressional action, including a supplemental
appropriation for our uncommitted funds. This means that balancing the
FY 2003 budget will require tough analyses of issues and even tougher
decisions on programs. But none of these concerns should detract from
today's accomplishment.
I want to take this opportunity to thank the many employees, from
financial and program areas, who have worked so long and so hard to
ensure both the successful closure of the District's books and that our
records meet the high standards required for an unqualified audit
opinion. In particular, I want to commend Tony Pompa, my deputy for
financial operations and systems, and his staff for their hard work and
dedication. The city owes them its gratitude.
I want to also thank the accounting firm of KPMG, whose highly
professional staff worked equally long and hard during the past few
months to successfully complete this complex audit. In particular, I
want to commend Karyn Molnar, Jack Reagan, and Andrew Lewis for their
efforts.
Let me also take this opportunity to thank the Mayor, Mrs. Cropp, Mr.
Evans, and the Council and the Inspector General for their guidance,
support, and oversight of the process over the last few months. Their
leadership and commitment to fiscal prudence was an essential part of
this successful CAFR.
As we continue to refine our financial systems and processes, it is my
expectation that the annual CAFR process will become a routine event in
the overall financial management of the District of Columbia.
Now if you will turn to the financial charts, I will briefly walk you
through them, and then answer any questions you may have. Thank you.
Back to top of page
Back to top of page
GOVERNMENT OF THE DISTRICT OF
COLUMBIA
Office of the Corporation Counsel
1350 Pennsylvania Avenue, N.W., Room 409, Washington, D.C. 20004 (202)
724-1520 (202) 724-6577 (FAX)
Corporation Counsel
January 24, 2002
OPINION OF THE CORPORATION COUNSEL
SUBJECT: Whether the District of Columbia Public Schools may have violated
the District of Columbia Home Rule Act and federal Anti-Deficiency Act by
obligating and/or spending funds in excess of an authorized appropriation
during fiscal year 2001.
Dr. Natwar M. Gandhi
Chief Financial Officer of the District of Columbia
John A. Wilson Building, Suite 209
1350 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Dear Dr. Gandhi:
This responds to your oral request to my staff this morning for an
opinion regarding the above-noted issue.
Your staff has provided this Office with information concerning the
specific amount of the congressionally-approved appropriation for the
District of Columbia Public Schools ("DCPS") in FY 2001, as well
as later local and congressional actions that increased the specific
amount originally approved by Congress (hereafter "DCPS's modified
appropriation"). Your staff also provided this Office with
information concerning the aggregate amount of all obligations and
expenditures by DCPS during FY 2001. I understand that, based on this
information, you conclude that the amount of all obligations and
expenditures by DCPS exceeded DCPS's modified appropriation. Assuming this
to be true, and for the reasons discussed below, I conclude that DCPS may
have violated the District of Columbia Home Rule Act and the federal
Anti-Deficiency Act with respect to DCPS's modified appropriation.
BACKGROUND
Your staff has provided this Office with an exhibit that shows: (1) the
specific amount that Congress appropriated for DCPS in FY 2001; (2) the
net of all local and congressional modifications during FY 2001 to that
amount; and (3) the aggregate amount of all obligations and expenditures
by DCPS during FY 2001 that count against DCPS's modified appropriation. A
copy of that exhibit is attached.
The exhibit shows that the specific amount that Congress appropriated
for DCPS in FY 2001 was $769,943,000. The exhibit shows, in the column
labeled "Revised Budget," that the net increase in that amount
resulting from local and congressional modifications was $36,366,000, for
a total authorized appropriation of $806,309,000. I understand that this
increase resulted from three kinds of budget actions. First,
reprogrammings. Second, your certification of funds from the carry-over of
unexpended Reserve money from FY 2000, as described in the "FY 2001
Proposed Operating Budget and Financial Plan, Making the Vision a
Reality," prepared by the Mayor, Council, and Financial Authority for
Congress, dated June 9, 2000, pp. H-18 and H-19 (hereafter "FY 2001
Budget Book"). Third, use of workforce investment and other funds
made available in the supplemental FY 2001 appropriations act for the
District government, approved July 24, 2001, Pub. L. 107-20 (hereafter
"FY 2001. Supplemental Appropriations Act").
The exhibit also reflects, in the column marked "Actual
Expenditures," your conclusion that the total of all obligations and
expenditures by DCPS in FY 2001 was $817,227,000. The column marked
"Variance" reflects your conclusion that this total exceeded
DCPS's modified appropriation, $806,309,000, by $10,918,000 (i.e., the
difference between $817,227,000 and $806,309,000).
DISCUSSION
Section 446 of the District of Columbia Home Rule Act ("Home Rule
Act"), approved December 24, 1973, Pub. L. 93-198, 87 Stat. 801, D.C.
Official Code § 1-204.46 (2001), generally prohibits District government
employees, including employees of the DCPS, from obligating or spending
funds under District control, no matter where these funds come from,
unless the obligation or expenditure has been authorized by Congress.1
Congress authorizes obligations and expenditures by the District
government by means of an appropriation - an act passed by Congress and
signed by the President that expressly authorizes the government to
obligate and spend money.
The federal Anti-Deficiency Act is a series of laws (now codified at 31
U.S.C. §§ 1341, 1342, 13491351, and 1511-1519) that were initially
enacted in the 1800's and amended over the years to address various
financial abuses by government officials. By its terms, the
Anti-Deficiency Act is applicable to both the federal and District
governments. Section 603(e) of the Home Rule Act, D.C. Official Code
§1-206.03(e), confirms the continued applicability of the Anti-Deficiency
Act to the District government.2 In addition,
pursuant to section 603(a) of the Home Rule Act, D.C. Official Code
§1-206.03(a), the U.S. Comptroller General continues to have a role in
interpreting the congressional appropriations acts for the District; thus,
the Comptroller General's opinions under the Anti-Deficiency Act are
guiding precedent in deciding your question.
For purposes of your question, the key provision of the Anti-Deficiency
Act is 31 U.S.C. § 1341, which states:
An officer or employee of the United States Government or of the
District government may not
(A) make or authorize an expenditure or obligation exceeding an
amount available in an appropriation or fund for the expenditure or
obligation; or
(B) involve either government in a contract or obligation for the
payment of money before an appropriation is made unless authorized by
law.
Any violation of this prohibition may subject the responsible employee or
official to disciplinary action and criminal penalties. See 31 U.S.C. §§
1349 and 1350.
The plain language in 31 U.S.C. § 1341 prohibits making or authorizing
an expenditure or obligation in excess of an "amount available in an
appropriation," unless authorized by law. The "amount available
in an appropriation," in turn, depends on the language of the
appropriation. Historically, some appropriations for the District
government have been in the form of a lump sum, without further earmarking
of amounts within that sum. For example, with respect to the District of
Columbia Appropriations Act, 2001 ("FY 2001 Appropriations
Act"), approved November 22, 2000, Pub. L. 106-522, 114 Stat. 2453,
there is at least one dollar limit in each appropriation title under the
heading, "District of Columbia Funds." Certain of these titles,
e.g., "Sports and Entertainment Commission," are confined to a
single agency and contain only a lump sum appropriation for that agency.
For example, Congress enacted a lump sum appropriation of $10,968,000 for
the Sports and Entertainment Commission, without further statutory
earmarking. On the other hand, the title for the "Public Education
System," which covers a cluster of agencies, contains not only a lump
sum appropriation for public education in the amount of $998,918,000, but
also statutory earmarking of line item amounts within the lump sum for
specific agencies, such as the line item amount of $769,943,000 for DCPS.3
It is well-settled in opinions of the Comptroller General that a lump
sum appropriation for a specified purpose, without other language,
represents the maximum amount that Congress has authorized for that
purpose. See, e.g., 17 Comp. Gen. 147 (1937) (recognizing the
enforceability of a lump sum appropriation for the D.C. Board of
Education, but not of individual budget items within the sum that were not
contained in the statutory appropriation); Office of the General Counsel,
U.S. General Accounting Office, Principles of Federal Appropriations
Law (hereafter "Principles of Federal Appropriations Law"),
Vol. I (July 1991), pp. 2-39 and 2-40. Therefore, the lump sum
appropriation of $998, 918,000, absent other language, would represent the
maximum amount that Congress has authorized for public education in the
District for FY 2001.4
It is also well-settled that, absent language to the contrary,
statutory earmarking within a lump sum appropriation represents the
maximum amount that Congress has authorized for the item so earmarked. See
Principles of Federal Appropriations Law, Vol. II (December 1992),
pp. 6-4 and 6-5. Hence, absent other language, the earmarked line item of
$769,943,800 for DCPS under the "Public Education System" title
of the FY 2001 Appropriations Act represents the maximum amount that
Congress authorized for DCPS. These conclusions are reinforced by section
101 of the FY 2001 Appropriations Act, which reiterates the general
principle in the Comptroller General's opinions that, absent other
language, a specified amount is to be considered the maximum amount
available.5
I have reviewed the Anti-Deficiency Act and the FY 2001 Appropriations
Act for the purpose of identifying any provisions that might allow the
line item of $769,943,000 for DCPS to be exceeded. I have considered the
grounds that were used to increase this appropriation to $806,309,000, as
shown in your exhibit. I conclude that, in theory, the grounds used --
i.e., reprogramming, certification under the FY 2001 Budget Book, and
appropriation for workforce investment and other objects under the FY 2001
Supplemental Appropriations Act - are appropriate. I lack information as
to whether these actions were properly carried out. For purposes of this
expedited opinion, I will assume that the reprogrammings, the
certification under the FY 2001 Budget Book, and the use of funds under
the FY 2001 Supplemental Appropriations Act; were, in fact, properly
carried out.6 If the reprograrnmings, the
certification under the FY 2001 Budget Book, and the use of funds under
the FY 2001 Supplemental Appropriations Act were properly carried out,
then, according to the exhibit, DCPS's modified appropriation was
$806,309,000. This would have been the maximum amount available for DCPS
obligations and expenditures during FY 2001.
Also, according to the exhibit, you have concluded that the aggregate
amount of all obligations and expenditures by DCPS that count against its
modified appropriation is $817,227,000. As shown in the exhibit, this
amount exceeds DCPS's modified appropriation by $10,918,000. The Home Rule
Act and the Anti-Deficiency Act prohibit any District government agency
from obligating and spending in excess of an appropriation. Consequently,
it is my opinion that, if DCPS's total obligations and expenditures
exceeded its modified appropriation as shown in the exhibit, then DCPS may
have violated the Home Rule Act and the Anti-Deficiency Act with respect
to its appropriation for FY 2001.
If you have any questions concerning this opinion, please don't
hesitate to call me at 724-5524.
Sincerely,
ROBERT R. RIGSBY
Corporation Counsel
RRR/wcw
Attachment
D.C. Public Schools
FY 2001 Budget Versus Actual Expenditures
|
|
FY 2001 Approved Budget, (P.L. 106-522) |
FY 2001 Revised Budget |
FY 2001 Actual Expenditures |
FY 2001 Revised Budget vs. Actual
Variance |
Local |
$629,309 |
$664,880* |
$727,360 |
($62,480) |
Federal |
133,490 |
130,336** |
82,498 |
$47,838 |
Private/Other |
7,144 |
11,093** |
7,369 |
$3,724 |
TOTAL |
$769,943 |
$806,309 |
$817,227 |
($10,918) |
Note:
*Includes:
Additional appropriation (special education and non-public tuition
payments), $12.1 million
Supplemental appropriation (P.L. 107-20), $12.0 million
Reprogrammings and other adjustments, $11.5 million
**Reflects modifications to federal grants and private and other
revenue budgets approved by the Control Board
1. Section 446 provides, in relevant part, that
"no amount may be obligated or expended by any officer or employee of
the District of Columbia government unless such amount has been approved
by Act of Congress, and then only according to such Act."
2. Section 603(e) provides: "Nothing in this Act
shall be construed as affecting the applicability to the District
government of the provisions of section 3679 of the Revised Statutes of
the United States . . ., the so-called Anti-Deficiency Act."
3. Other agencies covered by the lump sum of
$998,918,000, to which Congress has allocated specific line item amounts
within that sum, are the University of the District of Columbia, the State
Education Office, the District of Columbia Public Library, the District of
Columbia Public Charter School Board, and the Commission on the Arts and
Humanities.
4. Whether there is additional language that would
allow the lump sum of $998,918,000 to be exceeded is beyond the scope of
your question or this opinion.
5. Section l 101 states: "Whenever in this Act, an
amount is specified within an appropriation for particular purposes or
objects of expenditure, such amount, unless otherwise specified, shall be
considered as the maximum amount that may be expended for said
purpose or object rather than an amount set apart exclusively
therefor." (Emphasis added.)
6. For example, section 111(a) of the FY 2001
Appropriations Act contains requirements for reprogramming, i.e., the
shifting of funds within an appropriations title for an object in an
amount that is different than the amount considered for that object when
the budget was being enacted into law. Other requirements for
reprogramming are set out in the Reprogramming Policy Act of 1980;
effective September 16, 1980, D.C. Law 3-100, D.C. Official Code § 47-361
et seq. If these reprogramming requirements were followed, then the
line item of $769,943,000 for DCPS could have been increased through the
shifting of funds to DCPS from other purposes that were appropriated
within the $998,918,000 lump sum for public education. Similarly, if the
requirements for carry-over of unexpended Reserve money from FY 2000 were
met as described in the FY 2001 Budget Book, then up to $12,079,000 of
that money could have been added to the line item of $769,943,000 for
DCPS. |