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Lesson 2.1 Flow of Federal Funds

Learning Objective 1:
Explain the flow of money in the Federal government in lay terms.

The basic flow of money goes through 4 key processes - Creation, Authorization, Appropriation and Obligation - before money can be given out.


A bill is drafted by Members of Congress. The bill is introduced in both the House and Senate and assigned to a respective committee. The committees consider the bill and upon approval send it to the Rules Committee. The Rules Committee issues a rule to govern debate on the bill. When agreement is reached by both the Senate and House, the bill is compared for differences. If there is a difference, a conference committee is called. If there are no differences and/or when the conference committee reaches agreement, the bill is sent to the President for signing.


The National Scenic Byways Program is currently authorized through our nation's current surface transportation bill, the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users (2005), commonly referred to SAFETEA-LU.

The National Scenic Byways Program was originally established with the passage of the Intermodal Surface Transportation Efficiency Act (1991), commonly referred to ISTEA. In addition to establishing an Interim National Scenic Byways Program, ISTEA authorized $80 million (over the life of the bill) in discretionary grant funds to eligible byways projects. The ensuing surface transportation bill, the Transportation Equity Act for the 21st Century (1998), commonly referred to as TEA-21, established the National Scenic Byways Program in Title 23 United States Code, Section 162. This is the current statutory structure of the Program. TEA-21 also authorized $148 million (over the life of the bill) for discretionary grant funds to byways and technical assistance for byways.

The current surface transportation bill, SAFETEA-LU, continued the Program and amended it to allow Indian tribes the authority to nominate byways and receive grants directly from FHWA. SAFETEA-LU authorized $175 million in grants and technical assistance over the life of the bill.


Just because a bill has been authorized, it does not mean the funds are available.

Congress must appropriate funds on an annual basis to all transportation programs which have been authorized, through the Departments of Transportation, and Housing and Urban Development, and Related Agencies Appropriations Act, or an Omnibus or Consolidated Appropriations Act. The amount appropriated does not always equal the amount authorized. An appropriation is basically the provision of cash to liquidate Federal commitments. Therefore, actual reimbursements for National Scenic Byways Program projects cannot be made without an appropriation


Obligation is the Federal government's promise to pay. The total amount of funding available to be obligated for the entire Federal-aid Highway Program (which includes the National Scenic Byways Program), is limited by Congress by what is called an obligation limitation. For example, in fiscal year 2009, only $40.7 million was made available to the National Scenic Byways Program through appropriations and reflective of the obligation limitation set by Congress, even though $43.5 million was authorized in SAFETEA-LU.

Updated: 9/3/2013
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