What is 'Appropriation'
Appropriation is the act of setting aside money for a specific purpose. A company or a government appropriates funds in order to delegate cash for the necessities of its business operations. This may occur for any of the functions of a business, including setting aside funds for employee salaries, research and development, dividends and all other uses of cash.
BREAKING DOWN 'Appropriation'Governments appropriate federal funds each year for various programs. In business use, appropriations may also be known as "capital allocation." Appropriation may also refer to the process of claiming of land or intellectual property by a company or organization or otherwise marking ownership of previously unclaimed or contested property.
Appropriations in Business
Corporate appropriations give investors an idea of a company's future prospects. By getting a clear picture of how a company allocates its funds, an investor may have a better idea of how it manages cash. This is important in figuring out whether a company uses cash in order to build shareholder value or whether the company's frivolous use of cash may lead to the destruction of shareholder value.
Investors can also see a slowdown in corporate spending as a sign of declining growth prospects for a company. For example, as of May 2016, technology sector giants Microsoft Corporation and Oracle Corporation ranked among the top five U.S. corporate cash hoarders. The companies saw a declining trend in their stock for the first half of 2016 because many investors prefer growth stocks to value stocks.
In the United States, appropriations bills for federal government spending are passed by Congress. The government fiscal year runs from October 1 through September 30 of each calendar year. Each fiscal year, the president submits a budget proposal to Congress. Budget committees in the House and Senate then determine how the discretionary portion of the budget will be spent on specific federal government agencies, departments and programs. Federal programs such as Social Security and Medicare fall under the mandatory expenditures category and receive funding through an automatic formula rather than through the appropriations process.
Congress also passes supplemental appropriations bills for instances when special funding is needed for natural disasters and other emergencies. For example, in December 2014, Congress approved the Consolidated and Further Continuing Appropriations Act, 2015. The act approved $5.2 billion dollars to fight the Ebola virus in West Africa and for domestic emergency responses to the disease. The act also allocated funding to controlling the virus and developing treatments for the disease.