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About the Budget Process

Budget processes may vary by agency. The notional process below represents the Department of State and USAID’s budget process.

Budget Formulation

Budget requests are initially formulated by each agency on an annual basis for the upcoming year for which the Congress needs to make appropriations. Budget requests can include data for the previous fiscal year, the current year, and at least one year forward (out years) to reflect the effect of the budget decisions over the longer term. The budget may also include proposed changes to appropriations for the current year.

Budget requests are usually initiated two years prior to the start of a fiscal year (FY); for example, in February 2010 the field prepared the FY 2012 request. The U.S. government's fiscal year begins on October 1 of the previous calendar year and ends on September 30 of the year with which it is numbered.

Agency budgets are then compiled and analyzed and the complete agency request is developed and submitted to the Office of Management and Budget (OMB) in mid-September.

OMB Budget Review

From mid-September to late November, OMB analyzes each agency submission within the context of the overall federal budget. OMB staff may conduct hearings on specific issues, countries, sectors, or initiatives as part of its analysis.

After this detailed review, OMB sends a “Passback” to each agency describing certain assumptions and recommending what level of funding agencies can request from Congress. After budget settlement, the “President’s Mark” is set, determining each agency’s request to Congress.

Congressional Budget Justification

The President submits the overall budget request to Congress on the first Monday of February although this date may change under certain circumstances, such as the start of a new administration. Each agency produces a more detailed justification called the Congressional Budget Justification (CBJ) to accompany the President’s Budget which includes materials they need to explain their budget requests to the responsible congressional subcommittees. OMB reviews the CBJs upon receipt.

Congressional Budget Resolutions

After the President’s Budget is submitted to Congress, agency principals appear before Congressional committees, where they explain and defend the budget request.

During the Congressional hearing process, Congress prepares a Congressional Budget Resolution, which outlines a budget plan for at least five years and sets limits for annual discretionary spending. The budget resolutions are non-binding, fiscal blueprints that guide the Appropriations Committees as they undertake their work.

Congressional Appropriations

Congress must pass appropriations bills each year to fund the federal government for the next fiscal year. The U.S. government is funded through 12 separate appropriations measures, one from each of the 12 House and Senate appropriations subcommittees:

  • Agriculture
  • Commerce - Justice - Science
  • Defense
  • Energy and Water
  • Financial Services
  • Homeland Security
  • Interior and Environment
  • Labor - Health and Human Services - Education
  • Legislative Branch
  • Military Construction - Veterans
  • State - Foreign Operations
  • Transportation - Housing and Urban Development

The House and Senate each pass its own version of an appropriation. To complete the appropriation process, the two houses must reach agreement on a single version of the appropriation and the President must sign the bill. Congress strives to pass each of the 12 appropriations bills by the end of the fiscal year on September 30. However, historically, Congress has rarely enacted all appropriations on time, and oftentimes two or more individual appropriations are rolled together to create an Omnibus Appropriation.

When the House and Senate fail to reach agreement on one or more of the 12 appropriations bills by the beginning of the fiscal year, Congress passes Continuing Resolutions (CRs) to fund the agencies whose measures have not been enacted. CRs are stop-gap funding laws that permit continued spending, usually at prior-year levels, until regular appropriations bills are enacted.


At the beginning of the fiscal year or once Congress passes the budget funds, OMB appropriates, or specifies, the amount of funds that an agency may use according to a time period, program, project, or activity. Actions taken by agencies in order to carry out their programs, projects, or activities make use of these appropriated funds. The funds which have been applied to those activities are referred to as obligations because they obligate the federal government to make outlays either immediately or in the future. Outlays refer to checks issued, cash disbursed, interest accrued, or other payments, net of refunds and reimbursements. ForeignAssistance.gov captures disbursed, outlaid, and spent data.

Other agencies’ requirements vary in line with their respective authorizing and appropriating legislation.


Once OMB appropriates, or specifies, the amount of funds that an agency may use according to a time period, program, project, or activity, agencies begin to take actions to implement their programs, projects, or activities to make use of their appropriated funds.

Agencies engage in partnerships with organizations through one of three award types:

  • Contracts (Acquisition): Direct purchase of goods or services by the federal government.
  • Grants (Assistance):Transfer of funds to another party for the implementation of programs that contribute to the public good and further the objectives of the Foreign Assistance Act. A grant is distinguished from a contract, which is used to acquire property or services for the federal government's direct benefit or use.
  • Cooperative Agreement (Assistance): Similar to a grant, but with substantial involvement from the agency. A cooperative agreement is distinguished from a grant in that it provides for substantial involvement between the federal agency and the recipient in carrying out the activity contemplated by the award.

The type of award depends on the type of work, purpose of the funding, and nature of the relationship between the agency and the implementing partner. More in-depth information about each award type may be found in OMB Circulars.

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For more information about the federal budget process please see the following website:

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