An obscure agency with outsized sway over federal spending is at the center of the House’s impeachment inquiry into an alleged “quid pro quo” orchestrated by President Donald Trump trading domestic political aid for security assistance against a common foe.
The White House Office of Management and Budget gave the order to withhold aid to Ukraine intended to combat Russian aggression for almost two months. The decision came directly from the top, catching some administration officials as well as bipartisan majorities on Capitol Hill by surprise.
The episode highlights the intricacies of how federal spending is ultimately parceled out, as well as the circumstances surrounding the Ukraine aid in particular that appear to have little precedent — including an unusually high level of involvement by political appointees rather than career civil servants.
Lawmakers didn’t get the chance last week to hear from the officials who suspended the funds.
Acting OMB Director Russell Vought tweeted Oct. 21 that neither he nor Michael P. Duffey, OMB’s associate director for national security programs, would show up for closed-door depositions. The two were subpoenaed on Friday. Last month, two House committees wrote to OMB seeking information on the withholding of foreign aid to Ukraine and other State Department accounts, and related documents called apportionments that would show decisions about the timing of expenditures. OMB has provided some of the information, but it hasn’t been made public.
In the July 25 phone call at the center of the impeachment inquiry, Trump urged Ukraine President Volodymyr Zelenskiy to “look into” the actions of former Vice President Joe Biden, who at one point said he helped orchestrate the firing of a Ukrainian prosecutor who had been widely criticized. Biden’s son Hunter served on the board of a Ukrainian natural gas company that had been under investigation. Trump has denied he withheld aid in exchange for a probe of the Bidens.
Nevertheless, beginning in July, OMB put a hold on $391.5 million in foreign aid to Ukraine at Trump’s request. That included $250 million for the Ukraine Security Assistance Initiative run through the Defense Department, and $141.5 million in Foreign Military Financing overseen by the State Department.
The budget office did not release the aid until mid-September.
Putting the pieces together
Trump later said he froze the aid because of concerns about corruption in Ukraine and that European allies were not contributing their fair share to the country’s aid. The former Soviet satellite has been a leading recipient of U.S. assistance since it declared independence in 1991, and aid increased after Russia’s annexation of Crimea in 2014. The Pentagon told Congress in late February that Ukraine had met conditions to receive the initial batch of fiscal 2019 security assistance, and followed up in late May confirming the remaining amount. Two months later, on July 18, OMB placed a verbal hold on that $250 million as well as $141.5 million in Foreign Military Financing funds. The hold was formalized a week later, the same day as the phone call between Trump and Zelenskiy that triggered the impeachment inquiry.
The Ukraine Security Assistance Initiative was first established in fiscal 2016, and over its first three years received $600 million in appropriations from Congress.
The Trump administration requested $200 million more in fiscal 2019 — ultimately increased by $50 million — and, interestingly, in March requested another $250 million for the current fiscal year.
In budget documents submitted to Capitol Hill earlier this year, the Pentagon wrote that funding provided in fiscal 2018 — about $195.5 million — has “significantly enhanced” Ukaine’s ability to protect its troops and care for wounded soldiers.
Officials wrote that the fiscal 2019 money will fund similar expenses.
The fiscal 2020 request, Pentagon officials wrote, would “continue to contribute to the effort of developing a sustainable and effective Ukrainian capacity to generate and deploy appropriately manned, trained, and equipped forces.”
Both House and Senate fiscal 2020 Defense appropriations bills would provide the requested $250 million.
While the hold on the fiscal 2019 funds caused delays, administration officials said they were told most of the funding could not be obligated until near the end of the fiscal year anyway. That’s not entirely unusual, and OMB told Pentagon officials to continue planning for how to obligate the funds during the freeze.
A senior administration official, who agreed to speak candidly on the condition of anonymity, says OMB put the hold on the Ukraine aid on Trump’s order. A subsequent review by top White House officials including then-National Security Adviser John Bolton took longer than expected, and the hold was extended several times, according to the official.
After money is appropriated by Congress, OMB provides agencies with direction on how quickly to spend it, in a process called apportionment.
The purpose is to avoid spending too quickly and running out of money, or not spending all the funds that Congress has intended. In the past, apportionments were almost always written and signed by the agency’s career officials, who remain in the job from one administration to the next.
However, Duffey, a former Wisconsin Republican Party executive director who has headed the National Security Programs section at OMB since May, began signing apportionments Aug. 3.
Congress raises concerns
In a letter to OMB Sept. 27, House Budget Chairman John Yarmuth, D-Ky., and Appropriations Chairwoman Nita M. Lowey, D-N.Y., wrote they had “serious concerns that recent apportionment actions” by OMB “to withhold military aid for Ukraine and other foreign assistance constitute unlawful impoundments in violation of” the 1974 budget law. They wrote OMB “took the unusual and seemingly unprecedented step of delegating the authority to execute these apportionments to a political appointee.”
Former OMB officials said while political appointees were sometimes involved in apportionment in the past, they rarely signed apportionments.
“In five years, I only ever got involved in one apportionment decision that I can remember,” said Gordon Adams, a political appointee who oversaw national security programs under President Bill Clinton. “In no case did I ever sign an apportionment letter.”
He said political appointees in general “don’t know enough about the whole breadth of programs to accurately make a judgment about what an apportionment should be. And the staff people have been doing it for decades.”
Senior administration officials say apportionment is a delegated authority, and that the OMB director can delegate it to political appointees.
Administration officials say Duffey was not trying to evade potential objections from career officials by signing apportionments.
Rather, the officials said Duffey took an interest in apportionment to become a more hands-on leader of the organization.
Prior to joining OMB, Duffey served as deputy chief of staff at the Pentagon, the last in a series of Pentagon appointments that stretched over a dozen years. He also served as the GOP’s 2016 state party director in Wisconsin, a state where Trump beat Hillary Clinton by 0.8 percentage point.
Though Duffey signs apportionments, administration officials said career officials continue to review, amend and recommend for approval every apportionment he signs. They said the July 25 apportionment of Ukraine aid and subsequent apportionments all were approved by top OMB lawyers.
The release of the funds Sept. 12 followed pressure from Congress.
Earlier in September, senators, including Ohio Republican Rob Portman, and Illinois Democrat Richard J. Durbin, wrote to White House acting Chief of Staff Mick Mulvaney, saying the aid was “necessary to ensure the protection of the sovereign territory of this young country, going forward.”
Key events in the administration’s blocking of aid to Ukraine
- Feb. 28: The Pentagon notifies Congress that Ukraine has met the conditions to receive the first batch of fiscal 2019 security assistance, $125 million. The aid includes sniper rifles, rocket-propelled grenade launchers and counter-artillery radars.
- May 23: In a follow-up to the earlier notification, the Pentagon tells Congress that Ukraine has met the requirements for the remaining $125 million in assistance, including taking action “to make defense institutional reforms for the purposes of decreasing corruption, increasing accountability, and sustaining improvements of combat capability enabled by U.S. assistance.”
- July 18: OMB places a verbal hold on $391.5 million in Ukraine aid, including the $250 million in security assistance and $141.5 million in Foreign Military Financing funds. FMF aid comes in the form of grants or loans that are used to purchase U.S. weapons, equipment or training. An unnamed OMB staffer informs a group of administration officials on a call that day that the aid would be held up, with no explanation given other than the order came from the White House, former U.S. envoy to Ukraine Bill Taylor tells House investigators Oct. 22.
- July 25: The hold on the $250 million in security assistance is formalized through what is known as apportionment that freezes the funds, approved by a career official. On the same day, Trump and Zelenskiy have the phone call that launches the impeachment inquiry.
- Aug. 3: Duffey signs his first apportionment, a separate process that freezes 10 State Department and U.S. Agency for International Development accounts. A portion of the Ukraine FMF funds — $26.5 million — is included in the freeze. Officials at the time and in recent interviews say the holdup is due to a broader concern about wasted foreign aid dollars and the propensity of program managers to sit on appropriated funds until the end of the fiscal year before making grants or signing contracts, a process known as obligating the money.
- Aug. 5: The initial hold on the $250 million security assistance expires and is renewed by Duffey.
- Aug. 9: The OMB releases the State Department and USAID funds — but not the Ukraine money — after receiving information from the agencies about unobligated balances remaining in the accounts. The White House at this time is considering a rescission of unspent funds, but ultimately backs off due to heavy opposition within Congress and parts of the administration. The OMB continues to slow the obligation of funds, however, in a manner that makes it more difficult for State and USAID to get the money out the door before the end of fiscal 2019.
- Sept. 11: State notifies Congress the $141.5 million in FMF money for Ukraine is ready to be obligated.
- Sept. 12: OMB lifts the holds on the $141.5 million in FMF and the $250 million in security assistance.
- Sept. 27: The House Budget and Appropriations committees write to OMB requesting answers and documents related to the withholding of Ukraine aid, State and USAID funds and changes in apportionment procedure. On the same day, Trump signs a measure to temporarily extend fiscal 2019 funding to Nov. 21, which also extends the deadline to obligate the $250 million in security assistance to Sept. 30, 2020.
- Sept. 30: The full $141.5 million in FMF has been obligated by the end of the fiscal year deadline. Most of the $250 million security assistance also had been obligated.
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