Authorization and Appropriation – What’s the Difference?

Each year, the House and Senate authorize each federal agency, department, or program to spend a specific amount of money, and the President signs the bill into law. But this money may not be spent until Congress also has explicitly appropriated it for a given purpose. An agency may, for example, be authorized to spend $4 billion on a specific program, but it cannot actually spend that money until the funds are appropriated for that program.

An authorizing act is one that establishes a federal agency or program and the terms and conditions under which it operates, and authorizes the enactment of appropriations for that agency or program.  An authorization for a discretionary spending program is only a “license” to enact an appropriation—not an actual appropriation.  Because many agencies and programs have only temporary authorizations that must be renewed annually or every few years, action on appropriations measures sometimes is delayed by Congress’s failure to enact the necessary authorizing or reauthorizing legislation.

An appropriations act is one that gives federal agencies the legal authority to incur obligations and the Treasury Department authority to make payments.  An agency may spend no more than the amount appropriated to it, and the standard appropriation is for a single fiscal year, although Congress sometimes makes multiyear appropriations.

Jumping the gun by assuming that authorized funds will be appropriated can get an agency into trouble.  The SEC, for example, found itself in hot water in July 2010, when it signed a new lease based on the understanding that—because Congress had authorized a doubling of its budget—it would need additional space for as many as 800 new employees.  Congress later failed to appropriate the funds, and the agency had to pull out of the lease agreement.