D.C. Council Chairman Phil Mendelson (D) said the District’s chief financial officer has “overreached” by refusing to certify the city’s budget. (Astrid Riecken/For The Washington Post)

D.C. lawmakers are refusing demands from the city’s chief financial officer to modify their recently passed budget, setting up a test of wills between the District’s legislative branch and its top fiscal official that observers say is without precedent.

On Monday, CFO Jeffrey S. DeWitt told the D.C. Council in a letter that he would not certify its $15.5 billion budget, saying it improperly diverted money from the Washington Convention and Sports Authority. The council wants to use those funds for nearly $25 million in urgent repairs to decrepit public housing units, among other things.

But after a closed-door meeting with their general counsel on Tuesday, lawmakers continue to argue DeWitt’s decision is flawed and are not yet inclined to change course, council Chairman Phil Mendelson (D) said.

Mendelson said the option of suing the CFO was briefly brought up but that members had little appetite for it, and would prefer to continue negotiating with DeWitt’s office. However, he said lawmakers were concerned that the CFO had strayed into the realm of policymaking instead of offering disinterested financial guidance.

“There’s clearly a view among members that they want the budget certified,” Mendelson said in an interview after the meeting. “And there clearly is a sense of the council that the CFO has overreached.”

David Umansky, DeWitt’s spokesman, said the CFO “does not engage in policymaking” and “is following District law” in determining how the authority’s money can be used.

In his Monday letter, the CFO asserted that the council’s plan to transfer $49 million from the reserves of the convention and sports authority — half for public housing renovations and half to eliminate the need for an increase in hotel room taxes — would violate the city’s obligations to bondholders whose investments funded the construction of Walter E. Washington Convention Center in 1998 and its hotel in 2010.

That is because the bondholders “are protected with certain guaranteed levels of reserves in the event of an economic downturn or financial difficult,” De­Witt wrote, arguing that the council’s proposed use of the money could even trigger a credit downgrade for the city.

DeWitt said it was permissible to transfer money out of the convention authority’s reserves after they had reached a certain level. He also acknowledged that — because of an accounting oversight — nearly $47 million that should have been transferred to the city’s general fund since the 2017 fiscal year was mistakenly kept by the authority.

Mendelson and D.C. Attorney General Karl A. Racine (D), in a meeting with DeWitt on May 24, presented documents showing that the convention authority’s reserves were improperly being kept at a higher level than that dictated in a 2007 agreement between the authority and then-CFO Natwar Gandhi.

The dispute between DeWitt and Mendelson now revolves around what to do with the previously misplaced $47 million. In his Monday letter, DeWitt said he had channeled it to the city’s own reserves. Under District law, when the reserves are full any extra money goes into funds dedicated to capital costs and affordable housing; about $10 million has gone into each of those accounts, DeWitt said.

Umansky said the city is legally required to correct its books by transferring the excess convention authority money to reserve funds that offer a cushion of operating cash for emergencies and are viewed by credit agencies as one sign of fiscal health.

But Mendelson disputed that, saying the decision about how to reprogram the money is not DeWitt’s.

“I think that he has knowingly and deliberately worked against the council’s intent, when he didn’t need to,” Mendelson said. “And I think he has stepped into the area of policy by blocking the council’s intent.”

The CFO and council have in prior years found themselves at odds late in the budget process. In 2014, DeWitt said he could not certify the budget approved by lawmakers because elements of a package of tax cuts could throw the city’s long-term budget out of balance. That dispute was ultimately resolved.

However, longtime city officials said they could not remember a previous episode where the CFO and council chairman were so sharply divided — and where legislators questioned whether the CFO was encroaching on their authority.

Jack Evans (D-Ward 2), who was elected 28 years ago and is the council’s longest-serving member, said Monday that the conflict took the city into “uncharted territory.”

If DeWitt does not certify the budget, it cannot be sent to Mayor Muriel E. Bowser (D) or Congress for final approval. Council members are scheduled to vote for a final time on budget-related legislation next week, but that could be delayed if the dispute with DeWitt is not yet resolved.