When a South Carolina state agency has both general-fund appropriations and federal funds for the same program, which money has to be spent first?

Plain-English summary

The director of South Carolina's Department on Aging asked whether a state agency may spend general-fund money before federal funds when both support the same programs and objectives.

The AG quotes S.C. Code § 11-9-125 and concludes that available federal or other funds must be spent before state general-fund appropriations. The statute says agencies must draw down and spend federal and other funds first “whenever possible.” The AG adds that state general funds may be used when no federal or other funds are available.

The opinion does not impose a special documentation condition before state funds can be used. The statute separately requires accounting records for each grant, year-end reconciliation, and federal reports as required by the grantor.

What this means for you

If you manage state agency funds

The AG's answer is a funding-order rule: available federal and other funds come before general-fund appropriations. § 11-9-125 also requires separate grant accounting, annual reconciliation of federal and other fund accounts, and required reports to federal grantors. The opinion does not decide how a particular expenditure should be charged or specify additional evidence that an agency must create before using state funds.

If you oversee a matching-fund program

The statute quoted in the opinion requires excess balances resulting from matching-fund programs to be remitted to the state general fund. It also describes treatment of federal or other funds generated by expenditure of state funds, subject to any specific federal or state requirement on their use.

If you review agency budgets

Research and student aid grants, including indirect cost recoveries, are expressly exempt from § 11-9-125. The Comptroller General must report amounts credited to the general fund under this section at each official state revenue forecast.

Common questions

Which source does an agency spend first?

Federal and other available funds, before state general-fund appropriations. The AG reads both the statute's opening sentence and subsection (1) that way.

May the agency spend state funds if no federal or other funds are available?

Yes. The AG says the quoted clauses do not prohibit use of state general funds when no federal or other funds are available.

Must the agency document why federal funds could not be used before spending state funds?

The opinion imposes no such condition. § 11-9-125 does require separate grant accounting, fiscal-year reconciliation, and required federal financial reports.

Which grants are exempt?

The statute exempts research and student aid grants, including indirect cost recoveries.

Background and statutory framework

S.C. Code § 11-9-125 states the funding order, directs remittance of specified excess balances and generated funds to the state general fund, and prescribes accounting and reporting steps. It also provides an appeal process under §§ 2-65-30 and 2-65-40 if an agency believes funds were incorrectly identified for remittance.

The AG's analysis is brief. It reads the statute's first sentence and subsection (1) together and concludes that federal and other funds must be spent first when available. It adds that general funds may be used when those other sources are not available.

Citations and references

• S.C. Code Ann. § 11-9-125: funding order, remittance, accounting, reporting, and grant exemption.
• S.C. Code Ann. §§ 2-65-30, 2-65-40: appeal process referenced in the quoted statute.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-regarding-the-order-in-which-state-and-federal-funds-must-be-expended/
• Original PDF: https://www.scag.gov/media/w5emshkd/munnc-os-11072-final-opinion-10-15-2025.pdf

Original opinion text

ALAN WILSON
ATTORNEY GENERAL

October 15, 2025

Connie D. Munn, MSW
Director
Department on Aging
1301 Gervais Street
Suite 350
Columbia, SC 29201

Dear Director Munn:

Attorney General Alan Wilson referred your letter to the Opinions section for a response. You seek an opinion on whether there are circumstances under which state general funds may be expended prior to federal funds, particularly when both funding sources are designated for the same programs and objectives.

South Carolina Code Ann. § 11-9-125 governs the order of use for funds when there are both appropriations from the state general fund and a federal source which may be expended by a state entity. It reads:

Federal and other funds must be expended before funds appropriated from the general fund of the State, to the extent possible, and any excess balances in accounts resulting from matching fund programs must be remitted to the general fund of the State. Federal or other funds generated by the expenditure of state funds, including refunds from prior year general fund expenditures, must be remitted to the general fund of the State if there is no federal or state requirement governing the specific use of the funds. In order to permit identification of these funds, state agencies shall:

(1) draw down and expend federal and other funds before spending state general fund appropriations whenever possible;

(2) maintain separate accounting records for each grant for cash, revenues, and expenditures to insure a proper audit trail;

(3) reconcile federal and other fund accounts at the end of each state fiscal year and maintain those records for audit purposes;

(4) submit federal financial reports to the grantor agency as required.

State agencies shall remit to the general fund of the State any funds found to exist in agency accounts. If an agency believes funds have been inappropriately identified as the funds defined in this section, the agency may appeal through the process provided in Sections 2-65-30 and 2-65-40. A report of the amount of funds credited to the general fund of the State pursuant to this section must be made by the Comptroller General at the time of each official state revenue forecast. This report must be provided to the Executive Budget Office and the Revenue and Fiscal Affairs Office, the Senate Finance Committee, and the House Ways and Means Committee. Research and student aid grants, including indirect cost recoveries, are exempt from this provision.

S.C. Code Ann. § 11-9-125 (Rev. 2011 & Supp. 2025) (emphasis added).

The first sentence of § 11-9-125 provides that federal and other funds must be expended before state general fund appropriations. Id. Additionally, subsection (1) specifies that federal and other funds must be drawn down and expended before spending state general fund appropriations whenever possible. Id. § 11-9-125(1). Thus, if there are federal or other funds available, they must be expended prior to using state general fund appropriations. Notably, these clauses do not restrict funding to only federal sources, so if there are no federal or other funds available, state general funds may be used.

Sincerely,

Robert D. Cook
Solicitor General Emeritus