Changes

When this section was enacted, it was assumed that old spending authority would be used up at some time in the future. Thus, the use of contract and borrowing authority as backdoor financing mechanisms would be eliminated.

When this section was enacted, it was assumed that old spending authority would be used up at some time in the future. Thus, the use of contract and borrowing authority as backdoor financing mechanisms would be eliminated.

But insured and guaranteed loans were not included.  Section 401(c) provides that the term "spending authority, "... does not include authority to ''insure or guarantee'' the repayment of indebtedness incurred by another person or government."  

But insured and guaranteed loans were not included.  Section 401(c) provides that the term "spending authority, ... does not include authority to ''insure or guarantee'' the repayment of indebtedness incurred by another person or government."  

Therefore, revolving fund programs which conduct their operations through insured or guaranteed loans, or are converted from making direct loans to this mechanism, were not subject to the required appropriations action on new spending authority. The reasoning is that insuring or guaranteeing loans does not require the immediate use of budget authority to carry out program objectives and that budget authority is only needed to cover losses from program operations, such as defaults on loans which are accounted for when the loss occurs.

Therefore, revolving fund programs which conduct their operations through insured or guaranteed loans, or are converted from making direct loans to this mechanism, were not subject to the required appropriations action on new spending authority. The reasoning is that insuring or guaranteeing loans does not require the immediate use of budget authority to carry out program objectives and that budget authority is only needed to cover losses from program operations, such as defaults on loans which are accounted for when the loss occurs.