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    When cancelling funds are deobligated from a contract where is the money appropriated back to?? The buying command it came from or do the funds go back to a general fund which congress reallocates the following year? If the funds cancel on there own without being deobligated is the allocation treated differently? MANY THANKS


    Answer

    The short answer is once funds are in closed (canceled) status, they are no longer available for the adjustment or payment of obligations [see DOD Financial Management Regulation (FMR) vol. 2A, Ch. 1, para. 010107.B.14 (pg 1-10)].
    http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_02a.pdf
    The funds are returned to the General Treasury and unavailable.
     
    The Normal Life Cycle for Appropriations is dependent upon the type of appropriation.  The chart below, also to be found at para. 010107.B.25 (pg 1-12) (same link as above), outlines by appropriation type, the life cycle.  First let’s define a couple of terms.
     
    An appropriation is “a provision of legal authority by an act of the Congress that permits Federal agencies to incur obligations and to make payments out of the Treasury for specified purposes...”  (para. 010107.B.5 (pg 1-9).
    An obligation is “a binding agreement that will result in outlays immediately or in the future” (para. 010107.B.38 (pg 1-14).  Think of it as incurring an obligation to buy.

    An expired appropriation is “an appropriation whose period of availability for incurring new obligations has expired but the appropriation is not closed (canceled). During this period, the appropriation is available for adjustment to, or payment of, existing obligations. Appropriations remain in an expired status for 5-years as shown in the table below. At the end of the five-year expiration period, the appropriation is closed (canceled) and is no longer available for the payment of unliquidated obligations.” (para.010107.B.25 pg 1-12) (Emphasis added.)
     
     
     

     
      Years For
      New
    Obliga-
    tions
    Obligation
    Adjust. &
    Disburse.
    Closed
    End of
    Year
    Approp Unexpired Expired Canceled
    MilPers 1 2-6 6
    O&M. 1 2-6 6
    RDT&E 2 3-7 7
    Proc. 3 4-8 8
    Mil. Con. 5 6-10 10

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