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Transcript highlights Ukraine concerns among career OMB staff

Two officials left the agency after the withholding of aid came to light

A quote is displayed on a monitor from a phone call between President Donald Trump and Ukrainian President Volodymyr Zelenskiy during the House Intelligence Committee hearing on the impeachment inquiry of Trump in the Longworth Building on Nov. 19, 2019. (Caroline Brehman/CQ Roll Call)
A quote is displayed on a monitor from a phone call between President Donald Trump and Ukrainian President Volodymyr Zelenskiy during the House Intelligence Committee hearing on the impeachment inquiry of Trump in the Longworth Building on Nov. 19, 2019. (Caroline Brehman/CQ Roll Call)

Two Office of Management and Budget officials grew frustrated with the hold on Ukraine military aid ordered by President Donald Trump and resigned from the agency, according to newly released impeachment inquiry testimony.

Mark Sandy, deputy associate director for national security programs at OMB, testified behind closed doors on Nov. 16 that the two officials left the budget office after the hold on some $391 million in aid became known. House Democrats leading the impeachment inquiry released a transcript of Sandy’s testimony Tuesday.

One of those officials, an employee in OMB’s legal division, expressed concern about potential violations of the 1974 budget law that prevents so-called impoundments, or the ability of a president to withhold funds appropriated by Congress. 

“I’m aware of one colleague who left in September,” Sandy said of another colleague in his deposition. “As I recall, he expressed some frustrations about not understanding the reason for the hold. That’s my recollection.”

The legal division employee, Sandy said, “expressed to me concerns about actions vis-a-vis the Impoundment Control Act” as it related to Ukraine aid. The individual, who wasn’t named in the transcript, “did note a disagreement on this topic,” said Sandy, the only OMB official to testify in the impeachment inquiry. 

While he did not offer a detailed explanation, Sandy said, “I think the best way to characterize it would be a dissenting opinion vis-a-vis the Impoundment Control Act provisions.”

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The White House budget office generally has authority to execute “apportionments,” or guidelines for how and when agencies can spend appropriated funds. But at issue with the Ukraine aid funds was that the money would have otherwise expired at the end of the fiscal year on Sept. 30 and been unavailable for obligation.

That led to concerns among Sandy and other career OMB officials that the freeze was a backdoor impoundment that would prevent the Defense and State departments from spending the money in time.

Sandy himself became concerned that withholding Ukraine security funds could be a violation of the impoundment law when he learned about the verbal hold on July 18.

“And so I advised that we would want to consult with our office of General Counsel on those questions first,” he said, according to his transcript. Administration officials have said OMB counsel advised that the holds were legal, which Sandy confirmed in his testimony.

Sandy signed the first formal hold on the $250 million in Ukraine security assistance on July 25. He said officials were assured by the Defense Department that the hold, originally set to last until Aug. 5, would not result in a problem obligating the funds before they expired at the end of the fiscal year.

“That gets to the heart of that issue about ensuring that we don’t run afoul of the Impoundment Control Act, which means that you have to allow for the timely execution,” he said.

‘Executive risk’

But the hold was extended and around mid-August, Sandy said Defense officials took the position that continued holds could imperil the ability to obligate the money in time.

“They were concerned about executive risk associated with an ongoing hold and how it might affect their ability to fully obligate by the end of the fiscal year,” he said, adding it again raised concerns about a potential violation of impoundment law.

Sandy said he and his staff were given no explanation for the hold until September. “It was an open question over the course of late July and pretty much all of August, as I recall,” he said.

In September, Sandy said, he received an email from Michael Duffey, the associate director for national security programs, “that attributed the hold to the President’s concern about other countries not contributing more to Ukraine.”

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The three Democratic House committee chairs leading the impeachment inquiry suggested the belated explanation of the hold on aid amounted to a cover-up.

Given other information that had come to light about a pressure campaign to get Ukrainian officials to open up investigations sought by Trump, “this constitutes powerful evidence that this justification was concocted as an after-the-fact rationalization to justify the hold,” Intelligence Chairman Adam B. Schiff, D-Calif., Foreign Affairs Chairman Eliot L. Engel, D-N.Y., and Oversight Chairwoman Carolyn B. Maloney, D-N.Y., said in a joint statement.

Impoundment law changes?

Earlier Tuesday, House Democratic budget leaders, citing OMB documents obtained in the investigation, doubled down on their accusation that budget officials abused their authority when it temporarily withheld security assistance to Ukraine. 

Budget and Appropriations Committee Democrats said they have “become more concerned” that the agency abused the apportionment process to “undermine Congress’s constitutional power of the purse.”

In what they called a “summary” of the OMB documents written by the House Budget Committee majority, Democrats said they were exploring “legislative proposals and reforms to rein in OMB’s abuse of its apportionment responsibilities” in the context of the landmark 1974 budget law and annual appropriations bills.

“Although the committees only received a partial production of the requested materials, OMB’s responses and documentation to date confirm that the apportionment process has been misused to withhold Congressionally enacted appropriations,” reads the summary, which was not publicly released. “Increased transparency and accountability for the apportionment process would serve both Congress and the public.”

Democratic aides did not provide any details of what specific changes House Budget Chairman John Yarmuth, D-Ky., and Appropriations Chairwoman Nita M. Lowey, D-N.Y., are considering. But with only weeks left in the current legislative session, the House committees would not be able to hold hearings or take any action until next year.

‘Same old spin’

In a statement, an OMB spokesperson said the agency “has and will continue to use its apportionment authority to ensure taxpayer dollars are properly spent consistent with the President’s priorities and with the law. This is the same old spin from Democrats.”

While Democrats complained that OMB did not turn over all the information they requested, an OMB official said the agency voluntarily provided the committees with “hundreds” of documents.

In the summary, Democrats complained OMB “took the seemingly unprecedented step of stripping career officials” of their usual role in signing apportionments, giving a political appointee — namely Duffey — that authority. OMB has defended the signing of security-related apportionments by a higher ranking political appointee rather than career officials as within its authority.

Democrats also charged that withholding the funds “may have hindered agencies’ ability to prudently obligate funds by the end of the fiscal year in violation” of the 1974 budget law, “possibly creating backdoor rescissions.”

Most but not all of the security funds were obligated before the fiscal year ended Sept. 30, administration officials said. Democrats said $35.2 million of the $250 million in defense funds was not obligated by the end of fiscal 2019.

The leftover money can still be obligated this year because Congress included a provision in a stopgap funding bill that extended the deadline for obligating it to Sept. 30, 2020.

Democrats also charged OMB with what they said was a possibly illegal impoundment for halting the obligation of millions of dollars in various State Department and U.S. Agency for International Development accounts on Aug. 3 — including $26.5 million in Ukraine Foreign Military Financing funds — in what turned out to be preparation for a possible special rescission action by Trump. The president ultimately decided not to go through with the rescission request.

OMB ended the hold on Aug. 9, but the agency initially restricted the agencies to spending 2 percent of remaining funding each day for the remainder of the fiscal year, which Democrats said prevented the “normal spending” of the funds. The agency later modified the apportionment to allow spending 25 percent of the funds each week.

The White House lifted its hold on the Ukraine aid on Sept. 12.

However, the $141.5 million in State Department funds could not be obligated right away because of a 15-day “notification” period, which gives Congress a chance to weigh in on the funding before it is obligated. Administration officials said all of the $141.5 million was obligated just before the end of the fiscal year.

David Lerman contributed to this report.