Business, Legal & Accounting Glossary
Back door financing is a method used by U.S. government agencies to bypass congressional appropriations (the conventional way of obtaining funds) and borrowing directly from the U.S. Treasury referred to as the “back door”. Back door financing avoids the discipline and controls of the budget process. Back door financing is also used by state government agencies and is commonly issued by public authorities. On a state level, back door financing bypasses any necessary voter approval, even though tax dollars are used to repay back door financing debt. There are often two primary types of back door financing used at the state level: lease-purchase arrangements and contractual obligation arrangements. Back door financing is not viewed favourably among lawmakers. As a result, back door financing has been banned in some areas of government.
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This glossary post was last updated: 4th February, 2020