Blanket Appropriation

What Is Blanket Appropriation?

A blanket appropriation authorizes expenditures on a blanket basis without the individual using the funds having to specify individual projects the funds are being allocated towards. Blanket appropriation is often used in connection with government-level finances. Managers that have blanket appropriation are afforded discretion over how to use the funds.

Key Takeaways

  • A blanket appropriation authorizes spending without the need to specify where the funds are being allocated.
  • Blanket appropriation is often used in connection with government-level finances.
  • Managers that have blanket appropriation are afforded discretion over how to use the funds.
  • However, blanket appropriations should be monitored closely to ensure that there is no misuse of funds.

Understanding Blanket Appropriation

Appropriation is the process of setting aside money for a particular purpose. Companies and governments often appropriate funds to be used for projects and day-to-day business operations. For example, a company might appropriate funds for the purchase or upgrade of an asset, such as a piece of equipment. Also, funds could be appropriated for short-term measures, such as cash allocated to pay shareholders via dividends in the upcoming quarter.

Blanket appropriations allow people with access to a budget to use funds on a blanket basis without having to specify the specific projects towards which the funds are being applied. Blanket appropriations are also used in the private sector for smaller projects with lower capital outlays. Such projects may be delegated to middle management for speedy action.

Benefits of Blanket Appropriation

One of the main benefits of blanket appropriation is that it helps to improve efficiency by reducing the time lag between a proposal and its implementation since project funding approval is not required on a case-by-case basis. For example, a manager might be given blanket appropriation of funds to be used to increase sales and revenue for a particular product line. The allocation of the money would be at the discretion of the manager, which might include spending on marketing initiatives, or adding sales staff, or approving overtime pay to boost product output to meet sales demand.

The blanket appropriation would avoid the need to obtain approval for spending on each portion of the revenue growth strategy. Without the blanket approval, there could be delays in production to meet sales demand or missed opportunities because the appropriate amount of staff couldn't be added, leading to canceled sales.

As a result, a blanket appropriation would not only improve the effectiveness of a production line but also enhance sales and revenue by allowing a manager to be nimble and make adjustments in spending, where necessary, to achieve the desired objectives.

Monitoring Blanket Appropriations

Blanket appropriations may need to be monitored closely to ensure that there is no misuse of funds and that the allocated funds are being spent only for authorized purposes. Effective auditing procedures should be considered to ensure proper monitoring of how the money was spent. The process might include establishing internal controls and record-keeping of receipts from any purchases.

For example, in the U.S. federal government, the Government Accountability Office (GAO) is charged with examining how taxpayer dollars are spent by the government. The GAO reports to Congress on its findings and has often been called the "congressional watchdog."

For corporations, the cash flow statement is used to record any appropriations of cash by a company, including both inflows and outflows of cash during an accounting period. Typically, cash payments that are appropriated to the needs of the company would be recorded in one of the three sections of the CFS.

For example, blanket appropriations spent on the day-to-day business operations would be recorded in the operating activities section. Any cash spent to purchase assets, such as equipment, would be recorded in the investing activities section. Any money appropriated and spent on reducing debt, for example, would be recorded in the financing activities section of the CFS.

Example of Blanket Appropriation

An example of blanket appropriation may be an amount of $10 million earmarked to upgrade major highways in a state, with the actual amount to be spent per highway not specified. The manager, in this case the state secretary of transportation, has total discretion over how to appropriate the funds, which might include prioritizing the roads that need the most repairs. The manager could also decide to prioritize the funds based on the population of an area or the amount of traffic that travels on a particular highway or road.