APPROPRIATIONS – PURPOSE AND REQUIREMENTS - 8320

Purpose

An appropriation is a legal authority granted to a state agency/department to make disbursements or incur liabilities from a specific fund for a specified purpose, period and amount. Unless stated otherwise, an appropriation is available for expenditure only during a limited period of time.   Appropriations are not interchangeable and must be used only for the particular purpose defined in the act making the appropriation.  Appropriations are made by law in the Budget Act, the State Constitution, legislation (for ongoing continuous appropriations) and ballot measures such as bond authorizations. The Budget Act is the predominant method by which appropriations are made. See California Code of Regulations, Title 2, Division 2, Chapter 1, Article 2, Section 613.

Agency/Department Requirements

Every agency/department should have in place a system of accounting that provides adequate and effective processes to ensure that:

1. Appropriations are maintained to the same degree as shown in the Budget Act and constitutional, statutory and other provisions. Agencies/departments, however, may maintain appropriations at the degree necessary to meet their budgetary control requirements.
2. Appropriations are established in their accounting system in the fiscal year in which the funds are appropriated by law.
3. Disbursements and claims for payment are prepared and posted using the proper appropriation codes to identify the authorization for disbursements.
4. Appropriation adjustments (Budget Revisions) and Executive Orders are recorded at the same time as they are recorded in the Controller’s accounts.
5. The appropriation availability period is monitored to determine when the appropriation spending authority expires.
6. The status of each appropriation is monitored and reconciled to the Controller’s records. The State Controller is required to establish separate accounts for each appropriation.  At the end of the availability period for liquidation of encumbrances, the unliquidated balance remaining in an appropriation reverts to the unappropriated balance of the fund from which it was made.
7. Unobligated balances of budget authority are carried over and used in the next year when permitted.
8. A uniform appropriation coding structure is used which includes a series of codes:

• Business Unit (Organization Code in Legacy)
• Reference code to indicate if the item is a Budget or non-Budget Act item and the category of expenditure (e.g., State Operations, Local Assistance, or Capital Outlay).
• Fund code